Port Manchac targets rail-to-barge oil business

Port Manchac could serve as a low-cost facility for unloading crude oil from trains and transferring it to barges headed for area refineries, a study shows.

Patrick Dufresne, executive director/CEO of the South Tangipahoa Parish Port Commission, said Port Manchac began handling small shipments of Canadian tar sands crude in 2013 and wants to expand on that, relying on a marketing report based on research by Southeastern Louisiana University and engineering firm URS.

This year, the port is set to begin $3 million worth of improvements that include dredging the harbor to 10 feet, adding a new bulk liquid dock and some roadway improvements.

“So we’re looking to expand that (rail-to-barge) operation to other companies that are looking to make the investment for more rail track and more storage tank facilities,” Dufresne said.

Stone Oil was unloading around 30 tank cars a week, he said. The port hopes to land a tenant who will build a facility capable of unloading 100 tank cars a day. The facility would join a number of others that have been built in the past few years.

The cost would be $24.6 million at Port Manchac, with a permit time of 90 days, the report says. The typical Mississippi River terminal can cost as much as $150 million and can take up to two years to permit.

The port already has some of the infrastructure needed, such as 6,000 feet of railroad track and barge-loading equipment.

The port could also serve as a logical shipping point for oil production from the Tuscaloosa Marine Shale, which stretches across the middle of Louisiana, Dufresne said. The oil could be trucked to the port today and then moved by barge.

Port Manchac’s rail-to-barge plans face some challenges.

Crude rail shipments to Louisiana may decrease alongside Louisiana’s price advantage. At one time, energy companies could get $20 more per barrel by shipping their shale oil to Louisiana instead of a hub at Cushing, Oklahoma. But the huge increase in shale oil production has left Gulf Coast refineries awash in crude, and the premium has shrunk.

It costs around $11 a barrel to ship oil from North Dakota to Louisiana by rail, compared to $5 per barrel via pipeline, according to RBN Energy LLC. When the Louisiana price advantage falls below $11, as it did in March and April, producers look to send the oil elsewhere. The falling price helps explain why the amount of oil unloaded at a terminal in St. James fell by about 50,000 barrels per day in April.

The oil congregating on the Gulf Coast is going to have to sit in storage for a long time before refiners need it, or it will have to move to other refineries around the country, said David Dismukes, executive director of the LSU Center for Energy Studies. The more likely destinations include refineries in the upper Midwest, in Ohio and around the Great Lakes.

Meanwhile, growing at Port Manchac from a couple of dozen rail cars that are part of a train that might also include grain or container cars up to a “unit train” of 100 tank cars of crude oil increases the impact of a derailment, said Lorne Stockman, research director for clean energy advocates Oil Change International.

“What we’ve found across the country is that the impact from a unit train derailment is much more severe. … You’ve got more velocity. You’ve got more cars involved. You’ve just got a hell of a lot more crude oil involved,” Stockman said. “Those big accidents where we’ve seen those big fireballs … those have involved unit trains.”

Transloading facilities like the one Port Manchac is considering also encounter air quality issues, because volatile compounds can escape when the oil is transferred from trains to barges, Stockman said. The risk of barge accidents also increases as traffic does; already this year, there have been spills from barge collisions near St. Charles and in Galveston Bay, Texas.

Dufresne said these sorts of incidents draw lots of negative attention, while no one notices the tremendous amount of oil that is transported safely.

Port Manchac’s tenants and the shipping industry have safety measures in place and experience moving oil as efficiently and safely as possible, he said.

Follow Ted Griggs on Twitter, @tedgriggsbr.