Oil by rail shipments to the West Coast ramping up

Future growth of oil by rail shipments to West Coast depends on regulatory approvals, competition with imports

Oil by rail shipments to the West Coast are up sharply as domestic production continues its long-term decline, according to the US Energy Information Administration.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Note: 2015 reflects the average of January-March 2015.

While total U.S. crude oil production increased by nearly 3.2 million barrels per day (b/d) from 2010 to 2014, production in the West Coast region (PADD 5) decreased by 0.1 million b/d.

With no major crude oil pipelines connecting the West Coast to other parts of the country, refineries adjusted by increasing imports of foreign crude oil (reaching an average of 1.1 million b/d over the past five years), but also by shipping more oil by rail.

Shipments of domestic oil by rail to the West Coast increased from an average of 23,000 b/d in 2012 to 157,000 b/d in 2014. In the first quarter of 2015, shipments averaged 191,000 b/d.

Bakken crude oil production from the Midwest (PADD 2) is the major source of oil by rail shipments to the West Coast (PADD 5), accounting for nearly 90% of receipts in 2014.

Relatively small shipments from other domestic regions have also increased. Shipments from the Gulf Coast (PADD 3) tripled from 2013 to 2014, and Rocky Mountain (PADD 4) shipments quintupled. These increases in crude-by-rail movements occurred only after West Coast crude-by-rail unloading infrastructure was significantly expanded.

Source: U.S. Energy Information Administration, Petroleum Supply Monthly
Note: 2015 reflects the average of January-March 2015.

Oil by rail is moved to unloading facilities at refineries in Washington and terminals in California, Washington, and Oregon. Coast-wise compliant vessels and pipelines then transport the crude to refineries without oil by rail unloading facilities.

In California, regulatory and permitting problems have delayed construction of some crude oil unloading facilities and forced the closure of operations at others.

Despite permitting delays, refineries in California receive some domestic oil by rail from other PADDs. California Energy Commission (CEC) data indicate that California receives oil by rail from Rocky Mountain states, specifically Utah and Wyoming.

Future increases in shipments of oil by rail to West Coast refineries will depend on the economic viability of oil by rail vs. imported crude, the type of crude refineries are able to process, and the regulatory outcomes for new or existing oil by rail facilities.