More oil leaving Superior by rail

SUPERIOR, Wis. - It’s just a small piece of the North American oil bonanza pie, but Wisconsin’s only refinery quietly is moving more oil by rail.
In 2012, Calumet Superior LLC built a $10 million train-loading oil terminal across the street from its refinery on the south edge of Superior, adding 18,000 feet of new track.
Calumet now is loading about 5,000 barrels (210,000 gallons) of oil per day by rail, said refinery manager Kollin Schade.
“This was never intended to be a major part of our operations,” Schade said during a recent tour. “But if we have customers that have a need, we can help fill that.”
Calumet’s effort is part of a national trend spurred by oil production outpacing pipeline capacity. In 2008, 9,500 carloads of oil moved on major U.S. railroads. By 2013, that had risen to more than 400,000 carloads. Each car holds between 590 and 630 barrels of oil, about 25,000 gallons.
Nationwide, the increase in oil moving by rail has spurred increased problems, including derailments, oil spills and serious fires. More oil spilled from railroad cars in 2013 - 1.15 million gallons - than in the previous 37 years combined, according to the U.S. Pipeline and Hazardous Materials Safety Administration.
Calumet’s rail oil operation is helping provide cheaper North American oil to eastern U.S. and Canadian refineries that otherwise have to buy more expensive oil from overseas. Many of those eastern refineries are not served by major pipelines from the west.
“They’re looking to get some of those cheaper barrels into their refineries and, right now, without new pipelines, rail is the best option,” Schade said. North Dakota’s Bakken oil can be $10, even $20 cheaper per barrel than North Sea Brent, and that can make a big difference for the profit margins of eastern refineries.
That’s the same reason Calumet is eying moving oil by Great Lakes tanker to eastern refineries, to get those refineries cheaper western oil, at least until new pipelines are built.
At Calumet’s oil by rail operation, the crude comes into Superior in Enbridge Energy pipelines and can move out on either BN or CN rail lines. Indiana-based Calumet isn’t refining the oil, just transferring it from one kind of transport to another, and making a little money in the process.
Unlike the 100-car, all-oil unit trains that leave North Dakota oil terminals every day, oil cars usually make up part of the full trains leaving Superior.
Schade said Calumet takes extensive precautions to make sure the leased cars are loaded safely, with crews going through a two-page safety checklist with each loading.
While safety officials have criticized the age of the U.S. tanker car fleet as one safety hazard, Calumet is using newer rail cars with added safety features, including double walls. Most of the cars were built in 2012; all of the cars are 2010 or newer, Schade said. The company’s loading process has been reviewed by the Federal Railroad Administration.
“We spent two months just identifying and working with gasket manufacturers to determine the proper gaskets and for the railcars,” Schade said.
Schade also added that not all black rail cars leaving Calumet are filled with oil; about 60 cars per week are leaving Superior with Calumet’s asphalt products bound for road construction projects as far away as Arizona.
Calumet also has its own fire department, made up of refinery personnel, which can rapidly respond with foam and chemical retardants to battle any mishap.
Superior Fire Chief Steve Panger said his department meets regularly with Calumet officials to keep abreast of what’s going on. Two of Superior’s firetrucks are equipped to use B-foam to battle oil fires and the refinery has large tankers of foam ready to respond.
“They can actually handle most of their calls on their own, but we provide assistance. We respond as support, as backup,” Panger said. “We know we’re Wisconsin’s energy hub; that it all comes through here, so we take that into account when we purchase our new rigs and in our training. There’s a lot of oil moving through Superior.”
Superior an oil hub
Exactly how much oil moves might surprise some people.
The oil moving out of Superior by rail is a small part of Calumet’s business. The refinery handles about 40,000 barrels (1.7 million gallons) of oil per day, making gasoline, diesel fuel, asphalt and other refined petroleum products.
Yet Calumet’s operations are a small part of the millions of gallons of oil flow through Duluth-Superior each day. Most of that oil comes and goes in pipelines without notice, below ground, out of site and out of mind.
Just down the road from Calumet, Enbridge Energy currently brings 2.31 million barrels (more than 97 million gallons) into its Superior terminal each day - and pumps 1.87 million barrels out of Superior.
The difference, 438,600 barrels (18.4 million gallons) per day, goes to Calumet or Plains Midstream or is stored in Enbridge tanks.
And Enbridge has a lot of tanks.
Across the street from Calumet, Enbridge currently can store 8.5 million barrels (357 million gallons) in multiple tanks in Superior and is adding 1.28 million more barrels of storage capacity this summer.
“We also recently announced plans to construct another three 644,000-barrel tanks that will be constructed this summer and come into service in 2016,” Becky Haase, an Enbridge spokeswoman, said. That’s another 1.93 million barrels of storage.
That will enable Enbridge to store more than 11.7 million barrels (495 million gallons) of oil stored in Superior at a time.
Enbridge has so much storage capacity to keep different oil destined for different refineries separate, Haase said.
“We have oil batches coming into Superior, and these batches need to go on then to various destinations, whether it’s northern Indiana, Illinois or Michigan. We have a commitment to our shippers to maintain the quality of the oil in the batches we transport - lights can’t mix with heavies, for example - so additional tanks allow us to maintain separation of different commodities,” she said. “… think about the Superior Terminal as a transportation hub, similar to a major train station or airport. There are arrivals that come in, and then there’s a wait before getting onto a departing train or plane. In this case, the oil batches leave when there’s space in the appropriate pipeline.”
Meanwhile, Enbridge has two major pipeline expansions planned to bring even more oil into the Twin Ports.
The proposed Alberta Clipper expansion would increase oil flowing in to Superior from 450,000 barrels a day to 570,000 barrels a day in the first phase and to 800,000 barrels a day by 2016.
The all-new $2.5 billion, 610-mile Sandpiper pipeline would eventually carry another 375,000 barrels per day into Superior.
Pipelines also are on the drawing board to move more oil out of Duluth-Superior.