I live in the San Francisco Bay Area and despite its well-deserved ‘tree hugger’ image the inland part of the Bay is home to a concentration of refineries essential to California’s economic vitality. These refineries produce the boutique blend of gasoline not available anywhere else. The EPA’s insistence on these unique regional gasoline blends is one reason fuel prices are higher here in California than elsewhere in the country.
When one of our California refineries burps or has any type of operating problem, gasoline prices skyrocket overnight until the problem is fixed. Why? We can’t get replacement fuel anywhere else because importing it into California is a violation of many regulations. One reason is the type of heavy crude used as the feedstock to produce our boutique fuels.
US Crude Oil Production from Shale is Growing
SOURCE: US Energy information Administration
Adding to the’ crude displacement’ of this situation is another crude irony. California refineries just like those along the Gulf of Mexico primarily rely upon imports of heavy ‘dirty’ crude oil from places like Venezuela or Alaska or elsewhere. In fact, we should expect to see more US refineries switch to light crude supplies.
Much of the onshore growth in crude oil production from shale is of the same light sweet crude type—we are awash in oil and with the current ban on US crude oil exports we must do something with it. So much light sweet crude is rushing toward the Gulf Coast refineries that pre-processing plants are being built at many refineries to divert much of this light oil before it adversely affects refinery operations still dependent upon those heavy crude oil types. Upstream in oil pipelines and in the field near oil extraction sites ‘package plants’ called splitters are being built to split out the light sweet crude oil from getting to market.
US Gulf Coast Crude Oil Inventories are at Record Levels
SOURCE: US Energy Information Administration
But switching to lighter crude oil feedstock reduces emissions and may ease the boutique fuel requirements over time. You see the poetic justice in this don’t you? California environmental advocates use the dirtiest, heaviest crude oil to fuel their cars even their hybrid Prius while they speed down the HOV lane with a feel good ‘low emission vehicle’ sticker on the their bumper.
So imagine my surprise when I pick up the Contra Costa Times to read that Shell Oil has decided to swap out that heavy, dirty crude at its Martinez California refinery with lighter crude oil produced in the US rather than import the old stuff. WOW! More correctly, Shell has filed its intent with Contra Costa County to shut down its coker operation in Martinez and replace it with updated refining equipment and processes able to process lighter crude oil types.
Shell was quick to point out it will not be using the light crude with high volatile properties from the Bakken shale in North Dakota. Much of the Bakken light crude is sent to market in rail shipments. Rail transport of light crude often called condensate are problematic because they contain more volatile and combustible properties that have cause rail tanker explosions.
Shell officials made the rounds of the editorial boards and community groups seeking praise for their decision. They said this crude displacement would result in a reduction of more than 700,000 metric tons per year of greenhouse gas emissions. That is the functional equivalent of taking 100,000 California vehicles off the road. No one—not even the most fervent environmentalist—has volunteered to park or sell their car to achieve such an impact. And I suspect few buy emissions credits under AB32 California’s Global Warming Solutions Act to offset their carbon footprint.
My tongue in cheek teasing here is not mean spirited. I applaud Shell. Their actions will also reduce the Shell refinery’s water use by 15%—and we Californians have plenty of alternative uses for that 1,000 gallons per minute of water.
So why is Shell doing this?
Because when the work retrofitting the refinery is completed in 2018, the Shell Refinery in Martinez will be in compliance with the looming regulatory requirements of AB32—two years ahead of the 2020 deadline.
But there is one more benefit from this action by Shell. One that is as sweet as the light crude it will process in its Martinez refinery. Shell will be in compliance with AB32 and thus deprive California politicians of a ton of revenue from carbon emissions payments the Governor and Legislature are siphoning off for pet spending projects.