In the first month of 2016, a pair of fledgling oil-by-rail projects abruptly collapsed in Oregon and Washington. One on the Columbia River, which had been operating since 2012, abruptly laid off more than half its workforce as it pivoted away from crude. The other, a proposal on the Pacific Coast that was still seeking permits, suddenly abandoned its intentions of handling oil.

The strange history of these projects serves as both a case study for the volatility of the industry and a red flag for communities pinning their economic hopes on oil development.

Grays Harbor, Washington

2016 began with big news for oil-by-rail development in Washington. On January 6, Iowa-based biofuels producer Renewable Energy Group (REG) announced that it would no longer pursue permits for crude oil storage at its biodiesel facility at the Port of Grays Harbor.

Local opposition groups cheered the announcement as a major victory for protecting the local fishing industry and community safety. Fawn Sharp, president of the Quinault Indian Nation, told the Everett Herald, “The company took to heart the concerns of thousands of people who spoke out about the dangers of crude oil storage and transport to our communities and waterways.”

Grays Harbor is not yet in the clear. Two other oil-by-rail terminal projects are still pending there.
Tweet This

When REG purchased local company Imperium Renewables in the summer of 2015, it also acquired the biodiesel producer’s Grays Harbor terminal and its plans to convert the site to handle crude oil. Prior to the purchase, Imperium had been having trouble gathering enough money to fund its full operations, which prevented the firm from producing at more than a small fraction of the facility’s capacity. So to break its financial stagnation, Imperium had been seeking permits to store and ship crude oil, even though the firm’s sole mission was to provide an alternative to conventional petroleum product. That saga came to an end when REG announced that crude would not be part of its plans going forward.

Unfortunately, Grays Harbor is not yet in the clear. Two other oil-by-rail terminal projects are still pending there. Westway Terminals is seeking permits to expand its methanol facility to store and ship up to 49,000 barrels of crude oil per day, while US Development is seeking permits to handle 45,000 barrels of crude oil per day.

Read more: What oil trains threaten in Grays Harbor.

Port Westward, Oregon

A few weeks after the Grays Harbor news, on January 28, Boston-based Global Partners announced that it would lay off 28 of the 47 workers at its Columbia River facility near Clatskanie, Oregon. The layoffs presaged a transition away from oil. The firm announced it would spend the following six to eight months converting the facility to handle ethanol. It was a curious twist of fate given the site’s history.

Originally touted as “an environmental success story,” the facility had been built in 2008 by Cascade Grain for $200 million to operate as an ethanol plant. The project garnered $36 million in state loans and tax credits, but it never once operated with renewable fuels. Instead, in 2009, the company filed for chapter 11 bankruptcy as it fell victim to the same downturn that claimed many domestic biofuels producers: a souring of the market driven by rising commodity prices and skittish investors.

  • Two years later, Massachusetts-based Global Partners purchased the facility. Then, on June 22, 2012, just 22 days after applying for permits, Oregon regulators approved Global Partners’ plans to switch to crude oil. The company breezed through permitting, in stark contrast to the proposed coal export terminals in Oregon and Washington that were meanwhile facing years-long environmental reviews.

    Even so, the company did not abide by the terms of its permits. State regulators had allowed Global Partners to ship 50 million gallons of oil annually, but between December 2012 and November 2013, the company moved a whopping 297 million gallons—nearly six times the permitted quantity—into its facility alongside the Columbia River. Oregon’s Department of Environmental Quality called it a violation of the “highest level.” Yet despite Global Partners’ egregious abuse, the state simply granted the company a new permit, allowing it to move as much as 1.8 billion gallons of crude annually, or the equivalent of 50 mile-long trains per month.

    The facility continued to operate as an oil depot, moving crude from trains to storage tanks to marine vessels, until early 2016, when dismal economic conditions forced Global Partners to abandon oil in favor of ethanol.

    Global oil downturn felt in Northwest

    Over the last two years, global oil prices have tanked. A host of factors have contributed to the drop-off, but among them are over-production and a decoupling of energy consumption from economic growth. Together, these trends have so rocked the industry that it appears no one, from the smallest producers to the world’s largest oil companies, is insulated from layoffs and even bankruptcy. Extracting fuel from many of the newest and most expensive deposits, like the Canadian tar sands, undersea Arctic crude, and Bakken shale oil, no longer makes economic sense.

    In the Northwest, projects like those backed by Global Partners and Imperium that were rushed forward to take advantage of the domestic oil boom have gone belly-up just as quickly. Although it may seem surprising, the pattern is consistent with the oil industry’s notorious history of volatility. It was not the first time (nor probably the last) that such a rapid shift occurred. And it’s a cautionary tale for Northwest residents and regulators who are deciding whether to permit a number of large-scale oil distribution projects in their own communities.

    Listen in: Oil trains in the Northwest, explained.