Crude By Rail & Emerging Quality Issues. Stephen Weinzapfel Director of Facilities

Transcription

1 Crude By Rail & Emerging Quality Issues Stephen Weinzapfel Director of Facilities June 5, 2014

2 Plains All American Current Profile (NYSE: PAA & PAGP) Pipelines (active miles) Liquids Storage Natural Gas Storage Fractionation Facilities (2) Natural Gas Processing (3) Crude & NGL Rail Facilities 24 18,150 miles 120 MMBbls 97 Bcf 235,000 Bbl/d 8.5 Bcf/d Crude & NGL Railcars 7,400 Truck Fleet Barge Fleet Crude, Product & NGL Volumes: PAA Assets (1) 1,700 Trailers 840 Trucks 130 Barges 60 Tugs >3.5 MMBbl/d (1) Assets as of 12/31/13. All amounts are approximate (2) Amount represents gross capacity. (3) Amount represents net capacity. Natural gas processing capacity also includes approximately 2.5 Bcf per day for a long-term liquid supply contract. -2-

3 PAA s Integrated Assets Are Located Throughout North America in Major Crude Oil Production & Liquids Rich Areas as well as Inland and Coastal Terminal & Interchange Locations PAA Handles >3.5 MMBLS/day of Crude Oil & NGLs -3-

4 MMBbls/d US & Canadian Production Growth Expected to Continue Majority of Increase is Light / Medium Sweet & Condensate US & Canada Expected to Continue to Lead the World in Crude Oil Production Growth Historical & Projected Crude Oil Production Growth (1) but, variations in crude quality & economics due to differentials and well costs will impact regional supply ~3.5 mmb/d ~2.9 mmb/d Rockies Mid-Continent Williston Basin (Bakken) Permian Basin Heavy Sour Light & Medium Sour ~1.0 MMBbls/d Eagle Ford Gulf of Mexico Western Canada Light & Medium Sweet ~1.9 MMBbls/d 0.0 U.S. Crude Production Q2013 YE2017 Canadian Crude Production 4Q2013 U.S. & Canada imported ~5.4 mmb/d, but quality of imports do not match quality of expected production increases (1) PAA s estimates as of December Condensate resulting in volatility, production fluctuations and possibly extended time period to achieve targeted production levels

5 PAA is a Top Provider of Flexible Midstream Assets In Substantially All Major N.A. Crude Oil Resource Plays Volume Growth Driving Increased Infrastructure Requirements Western Canada:+900 MBbls/d (+25%) Williston Basin (Bakken):+450 MBbls/d (+50%) Projected North American Crude Oil Production Growth 4Q2013 YE2017 ~2.9 MMBbls/d ( +25%) Rockies Mid-Continent Williston Basin (Bakken) Permian Basin Rockies: +175 MBbls/d (+40%) Mid-Continent: +125 MBbls/d (+15%) Eagle Ford Gulf of Mexico Western Canada Permian Basin: +450 MBbls/d (+30%) Eagle Ford: +425 MBbls/d (+35%) Note: Crude amounts shown represent the change in production in these areas from 4Q2013 YE2017 based on PAA s estimates as of December All amounts are approximate. Map only includes PAA s most significant assets. Some assets shown are not yet in-service. GOM: +375 MBbls/d (+20%) -5-

6 PAA Uses Its Crude Oil Rail Assets In Conjunction With Its North American Crude Oil Pipeline and Terminal Network To Bridge Regional Supply/Demand & Volume/Quality Imbalances Kerrobert, SK* Manitou, ND Van Hook, ND* Carr, CO* Bakersfield, CA* Tampa, CO Yorktown, VA McCamey, TX* St. James, LA Gardendale, TX *Indicates facility is under construction/being expanded. -6- Combined Capacity (Bbls/d) Loading Unloading Current Future Current Future ~210,000 ~370,000 ~280,000 Up to 400,000+

7 Crude Oil Quality in Rail

8 Crude Oil Rail Developments Lac Megantic Event July 6, Fatalities Although cause of accident was an unattended / improperly secured train, Crude oil packing group was misclassified (Group III) for the oil transported PHMSA & FRA Launch Bakken Blitz August 2013 Unannounced inspections & sample requests of the transported crude oil to determine it is properly classified Aliceville, Alabama Nov 8, cars derailed, 11 ignited Casselton, North Dakota Dec 30, cars derailed, 18 ignited -8-

9 Timeline Recent Developments DOT Emergency Order Feb 25, 2014 Applies to proper Crude oil classification All Crude oil would be classified as Packing Group I or II Included language on testing prior to transportation that is challenging to interpret at a minimum, tests shall be capable of determining the petroleum crude oil s flash point, boiling point, corrosivity to steel and aluminum, presence and content of compounds such as sulfur/hydrogen sulfide, percentage of flammable gases, and the vapor pressure at 50C. Real-time implementation of all these tests on every train before leaving the origin station was not practical -9-

10 Timeline Recent Developments DOT Amended Emergency Order March 6, 2014 Clarified the Feb 25, 2014 order If an offeror has existing test data that the offeror knows with a reasonable degree of certainty is representative and continues to be representative of the petroleum crude oil to be offered for shipment by rail, the offeror may rely on that test data for purposes of satisfying the testing requirement of this Amended Order Compliance with the amended order is practical and achievable Reflects an example of industry working with regulators towards practical rules. -10-

11 Crude Oil Classification Packing Group Packing Group Flash Point (Closed-Cup) Initial Boiling Point I 35 C (95 F) II <23 C (73 F) >35 C (95 F) III 23 C, 60 C ( 73 F, 140 F) >35 C (95 F) Source: PHMSA -11-

12 Initial Boiling point Under current rules, all crude oil transported is Packing Group I or II Only determining Packing Group criteria is Initial Boiling Point (ASTM D86) Round Robin Testing of ASTM D86 NDPC Study (1) Results for the same sample in each case fall on either side of the 95F level, using three different labs Underscores shortcomings of D86 test for Crude Oil D86 works well on homogenous products, but not designed for wide boiling range materials like crude oil (1) BKN Quality and Safety Initiative, North Dakota Petroleum Council May 20,

13 Is Bakken Crude Oil Unique? # of Samples Basin Field Eagle Ford Test Method WTI Bakken Pipeline API ASTM D RVPe ASTM D Flash ASTM D56, D93 <50 <50 <50 IBP ASTM D

14 Authorized Tank Cars by Rail Petroleum crude oil, PG I, Class 3 Petroleum crude oil, PG II and III Class 3 Petroleum crude oil, PG III, Combustible Petroleum sour crude, PG I Petroleum sour crude, PG III Gasoline, PG II, Class 3 DOT 103 DOT 103 DOT 103 DOT 103 DOT 103 DOT 103 DOT 104 DOT 104 DOT 104 DOT 104 DOT 104 DOT 104 DOT 105 DOT 105 DOT 105 DOT 105 DOT 105 DOT 105 DOT 109 DOT 109 DOT 109 DOT 109 DOT 109 DOT 109 DOT 111 DOT 111 DOT 111 DOT 111 DOT 111 DOT 111 DOT 112 DOT 112 DOT 112 DOT 112 DOT 112 DOT 112 DOT 114 DOT 114 DOT 114 DOT 114 DOT 114 DOT 114 DOT 115 DOT 115 DOT 115 DOT 115 DOT 115 DOT 115 DOT 120 DOT 120 DOT 120 DOT 120 DOT 120 DOT 120 AAR 206W AAR 206W AAR 206W AAR 206W AAR 203W AAR 211W Source: PHMSA -14-

15 How is a Packing Group Used? Plackarding & Rail Tank Car markings do not communicate packing group The 2012 Emergency Response Guidebook does not take Packing Group into account when advising emergency responders on immediate first response measures Today, when crude oil is transported on DOT 111 cars the difference in shipping paper descriptions is the only regulatory difference distinguishing Packing Group I,II, or III materials Potential to enhance the use of Packing Group Source: Survey of Bakken Crude Oil Characteristics Assembled for the US Department of Transportation, prepared by Dangerous Goods Transport Consulting, Inc. -15-

16 Questions for the Industry Can we develop a better method for measuring initial boiling point of crude oil? Can we develop criteria for measuring crude oil that ultimately results in improved safety? -16-

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