Shell's Washington rail project faces lengthy delay

[February 24, 2015]  By Kristen Hays

HOUSTON (Reuters) - Royal Dutch Shell's proposed crude-by-rail project in Washington state has been put on hold pending environmental review, just days after a pair of oil train derailments caused huge fires in Canada and West Virginia.

A Skagit County Office of Land Use Hearings examiner ruled Shell's proposal must undergo a full environmental review, which can take a year or more.

Shell's competitors have been railing in U.S. crudes since 2012 to displace more costly imports and declining Alaskan oil. But a spate of derailments and crashes since 2013 has raised safety questions, particularly with North Dakota Bakken crude.

"Catastrophes have occurred elsewhere. No one doubts that such a thing could occur here," the examiner, Wick Dufford, wrote in the order issued Monday.

Last week a CSX Corp train derailed in Mount Carbon, West Virginia, causing an explosion that set 19 cars ablaze and destroyed a house. Two days before that a Canadian National Railway Co train derailed in remote northern Ontario, spilling oil and causing several cars to burn.

The worst accident by far was in July 2013 when a runaway train carrying Bakken crude crashed and exploded in a small Quebec town, killing 47 people.

Shell said the proposal to move 70,000 barrels per day of inland U.S. crude is critical for its 145,000 bpd refinery in Anacortes, and the company has participated in an "exhaustive" permitting process for more than two years.

Nearly a year ago the county determined that Shell's project would not require a full review, and several environmental organizations appealed.

"We respect the hearing examiner’s decision and are determined to stay the course in this process," Shell said.

Tesoro Corp started railing Bakken crude to its 120,000 bpd refinery next to Shell's plant in 2012. BP Plc, Trailstone's U.S. Oil & Refining and Phillips 66 followed suit in 2013 and 2014.

Shell was the last of the state's refiners to seek crude-by-rail permits in late 2013. Opponents were largely unaware of the other projects during the permitting phases, but Shell's project caught their attention.

Dufford wrote that none of the previous approvals considered the "whole Northwest Washington scene."

"Unquestionably, the potential magnitude and duration of environmental and human harm from oil train operations in Northwest Washington could be very great," he wrote.

(Reporting by Kristen Hays; Editing by Cynthia Osterman)

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