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A crude proposal: The pros and cons of a controversial Phillips 66 oil-by-rail project

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When viewed from the proper angle, the central conflict here bears a peculiar type of poetic symmetry: A local refinery would like to transport much of its crude oil into San Luis Obispo County via train, while opponents would prefer such plans to be driven out of the county on a rail.

Many stakeholders adamantly support the project, while many locals virulently oppose the proposed rail spur that would allow this transportation method to materialize. There are plenty of lawyers involved and lots of money tied up in each side of the issue, and the project itself reaches far beyond the borders of SLO County.

Originally proposed in mid-2013, the Phillips 66 rail spur extension project has remained largely unchanged: Succinctly put, the company wants to begin construction of a rail spur at its Santa Maria Refinery in Nipomo, thereby giving the facility the newfound ability to receive oil via rail.

It’s a project that appears simple on the surface, but gains layers of complexity the closer one looks. It also touches on several national issues: railroad safety, energy independence, and regulation vs. free enterprise, to name a few.

Ultimately, SLO County officials will likely be making vital yea or nay decisions about the Phillips 66 rail spur extension project in the next few months.

New Times spoke with many stakeholders and experts; examined documents, reports, and public comments; and traveled to Nipomo, all in the interest of answering the basics: What is this project, and why should SLO County residents support or oppose it?

The project

The primary thrust of the rail spur project is fairly simple: construction of a rail spur facility that would allow the refinery in Nipomo to receive crude oil via rail. Currently, the facility receives oil only by pipeline.

NIPOMO JUNCTION:  The rousing debate over a proposal to bring crude oil by rail to the Phillips 66 Santa Maria Refinery in - Nipomo (pictured) looms large on the national and local political stages. - PHOTO BY KAORI FUNAHASHI
  • PHOTO BY KAORI FUNAHASHI
  • NIPOMO JUNCTION: The rousing debate over a proposal to bring crude oil by rail to the Phillips 66 Santa Maria Refinery in Nipomo (pictured) looms large on the national and local political stages.

According to the most recent environmental impact report (EIR) for the project, the trains arriving at the refinery would be capped at five per week, or 250 per year. Each train would consist of three locomotives, two buffer cars, and 80 tank cars, and total oil capacity per train would be between 49,670 and 53,532 barrels.

Averaged out over seven-day weeks, the daily oil delivery by rail would be between 35,478 and 38,237 barrels. To contextualize, each barrel of oil is equivalent to 42 gallons.

Precisely how this oil would arrive to SLO County is anyone’s guess. The EIR posits that the oil trains could enter California at any one of five different locations, and could arrive at the refinery from the north or the south on Union Pacific’s Coast Line (which runs from the Bay Area to Los Angeles).

“With this Phillips 66 project, we would deliver crude oil because—as a common carrier—if a customer wants us to move that kind of product, we are federally required to do so,” said Aaron Hunt, a UP spokesman based in Omaha. “It’s a ‘wait and see’ about how we move the oil, though. Nothing is stationary.”

Currently, there’s only one crude oil train that moves through (but doesn’t stop in) SLO County, running from San Ardo to Los Angeles two to three times per week.

“Rail traffic on the UPRR Coast Line through San Luis Obispo County is relatively light,” the project EIR notes. “The average number of freight trains running the length of the Coastal Route is about two per day.”

Another significant component of the project is the physical spur itself. Proposed in the project is the construction of five parallel tracks and an unloading rack extending eastward from the facility, but staying entirely within the boundaries of the refinery property.

The project EIR estimates that the process of arriving, unloading, and departing from the refinery would take between 10 and 12 hours per train, contingent upon Union Pacific scheduling.

Although a great deal of oil would arrive at the refinery via rail were this project approved, the refined product would continue to leave the facility as it currently does—by pipeline to Phillips 66’s linked Rodeo facility in the Bay Area.

In addition, the total amount of material processed at the refinery would remain the same, as that level is capped by county authorities.

“Phillips 66 is working to ensure the long-term viability of the Santa Maria Refinery and the many jobs it provides,” said Houston-based company spokesman Dennis Nuss. “Our plans for this project reflect our company’s commitment to operational excellence and safety while enhancing the competitiveness of the facility.”

The review process

Despite an initial push for a speedy turnaround by Phillips 66, the rail spur project has encountered several significant obstacles and delays as it’s rolled through SLO County’s review process.

The project’s initial draft EIR (DEIR) was released on Nov. 27, 2013, to relatively little fanfare, but word spread quickly in environmental activist circles, as well as among Nipomo residents. Soon enough, hundreds of public comments critiquing the project from near and far flooded the SLO County Planning and Building Department.

Murry Wilson—an environmental resource specialist and the planning department’s point man on the project—told New Times in March 2014 that his department was overwhelmed by the roughly 800 public comments that had come in regarding the project’s DEIR.

“Many of the comments were really substantive, and the nature of the project has changed enough as a result of those comments that the DEIR could no longer provide an appropriate review for the project,” Wilson said at the time. “Making sure the public has access and a chance to respond to new information is the key thing here.”

Under Wilson’s advisement, the county pushed for recirculating the DEIR to adequately respond to those “substantive” comments, and Phillips 66 (which is funding the review process) agreed to the additional expense and subsequent elongation of the review process on March 24.

At 708 dense pages, that initial 2013 DEIR was no lightweight, but the re-circulated DEIR—which debuted on Oct. 10—weighed in at an even heftier 889 pages.

The public comment period for that second report closed on Nov. 24, and the county and the DEIR consultants have since been sifting through, organizing, and bracketing the nearly 11,000 comments they received on their second go-round.

THE PROPOSAL:  This is an aerial map of the rail spur extension project and environs. Outlined in yellow is the boundary of Phillips 66’s property, in black is the Union Pacific mainline railroad, in blue is the outline of the proposed rail spur, and in red is where a pipeline would - run from the spur to the refinery. - PHOTO COURTESY OF SLO COUNTY PLANNING DEPARTMENT
  • PHOTO COURTESY OF SLO COUNTY PLANNING DEPARTMENT
  • THE PROPOSAL: This is an aerial map of the rail spur extension project and environs. Outlined in yellow is the boundary of Phillips 66’s property, in black is the Union Pacific mainline railroad, in blue is the outline of the proposed rail spur, and in red is where a pipeline would run from the spur to the refinery.

Though the vast majority of the comments came in as individually signed form letters from about five different environmental activist groups, several hundred unique comments from individuals, governmental agencies, organizations, schools, and even Phillips 66 poured in.

The majority of the comments are critical of the project, but there are also many letters that are either neutral or in support of the proposal.

The review process, as Wilson explained to New Times, is in its final stages. Essentially, the project consultants need to adequately respond to all public comments and draft a final EIR including those responses. Wilson had set a mid-January goal for completion of that process, and he said everyone involved is still striving to hit that target.

The first public hearing for the rail spur project—at the SLO County Planning Commission, where public officials will finally get the chance to vote yes or no on Phillips 66’s project—had been slated for Feb. 5, but Wilson said that hearing will likely be bumped.

“The sheer volume of comments we received is probably going to delay the hearing date,” he explained. “Feb. 19 would be the next possible Planning Commission date, and that’s possible; it just all depends on the depth in which our consultants may need to do their responses and/or additional analysis.”

Asked about the potential for yet another DEIR recirculation, Wilson said he’s “pretty confident we’re not going down that path,” adding that he wants to set this project for a hearing and wrap up the review process ASAP.

Pros

So, now that you have a pretty good idea about the nature of this project and what’s happened up until now, you’re probably still wondering why you should—or shouldn’t—support it.

Seeking to understand why many people support the project, New Times reached out to Phillips 66 to get their point of view.

Though New Times requested a tour of the refinery and access to speak with a variety of Phillips 66 employees, the company—working with SLO-based PR firm Barnett Cox & Associates—declined to provide either, instead offering a presentation and interview with two company spokespeople.

In a roughly 90-minute conversation between two reporters, refinery Maintenance Superintendant Jim Anderson, a Barnett Cox rep, and company spokesman Nuss via telephone, Phillips 66 laid out its case for project approval.

Essentially, Nuss and Anderson argued that oil production in Santa Barbara County (the refinery’s predominant current source of oil at about 65 to 80 percent of total sourcing) is in decline. Anticipating further falloff, the company wants to diversify how it receives oil and where it receives it from.

This rail spur project and receiving oil by rail, they posit, will allow the Santa Maria Refinery (and the 135 or so local jobs it provides) to stay viable for decades to come.

When asked if Phillips 66 has ever considered shutting down the refinery or if the company would abandon the refinery if the rail spur wasn’t approved, Nuss said such discussions hadn’t occurred, adding that the company “will not speculate about the project.”

Anderson added that “our options would start to become really limited” if the rail spur project doesn’t move forward.

Oil by rail, Nuss and Anderson argued, is already a reality across the nation and even in SLO County (with the established San Ardo to L.A. train), and they pointed out that Union Pacific is doing quite a bit to make sure its tracks are safe for crude oil trains.

Lastly, Nuss and Anderson added that residents have raised legitimate concerns about environmental impacts (noise, lights, emissions, and the potential for spills), but they opined that such impacts will be adequately mitigated wherever they can be.

“The refinery is good for us. It provides high-paying jobs, is a great neighbor, and is a longtime business that needs to keep operating,” Anderson wrote in a letter supporting the project. “The draft EIR spells out the way issues like noise, lights, and particulate emissions can be managed, and with these points taken care of, there is no reason to deny the application.”

“Protecting our people, our environment, and our communities guides everything we do, and those values will be applied to this project as well,” Nuss wrote in a follow-up email to New Times.

It’s worth noting that Phillips 66 employees are not the only ones supporting the company’s endeavor.

“The Phillips 66 Santa Maria Refinery has been quietly doing its job for 60 years, and what I have observed is a business that operates safely and with respect for our community,” Cuesta College President Gil Stork wrote in a Nov. 19 letter supporting the project. “We all have to adapt to changing market conditions to survive, not every one’s changes are subject to the scrutiny the refinery is managing. The draft EIR is long and thorough and addresses every detail of the project.”

This is the crux of the pro-rail spur argument: shouldering a few additional (mitigated) environmental impacts for the sake of keeping well-paying refinery jobs in SLO County and respecting a longstanding community-member.

Cons

If Phillips 66’s measured, cautious, and calculated approach to supporting its own project is at one end of the proverbial spectrum, then the aggressive, kinetic, and fiery opposition to the project is its natural polar opposite.

Project adversaries include prominent environmental groups (the Sierra Club, ForestEthics, and Communities for a Better Environment among them) and city councils as far-spread as Berkeley, Richmond, and Moorpark. But perhaps the most representative group of all is a small, local assembly of project opponents: the Mesa Refinery Watch Group (MRWG).

During a December trip to Nipomo, MRWG steering committee members Martin Akel, Gary McKible, and Laurance Shinderman (as well as MRWG member Paul Stolpman) met with New Times to demonstrate and explain exactly why they’re opposed to the project.

“I think of it in terms of the baseball field in Iowa: If you build it, they will come,” Stolpman said. “In this case, if you don’t build it, they can’t come.

INFORMED DISSENT:  Gary McKible (left) and Laurance Shinderman (right) are steering committee members of the Mesa Refinery Watch Group (MRWG), an assembly of local residents opposed to the rail spur extension project. - PHOTO BY KAORI FUNAHASHI
  • PHOTO BY KAORI FUNAHASHI
  • INFORMED DISSENT: Gary McKible (left) and Laurance Shinderman (right) are steering committee members of the Mesa Refinery Watch Group (MRWG), an assembly of local residents opposed to the rail spur extension project.

“If you don’t give them a place to park the trains at the end of the line, they won’t be coming down the line at all,” he added.

In conversations and emails with New Times, MRWG members expounded on the multifarious reasons they think the rail spur is ill-advised. Rationales ranged from visual blight to noise pollution to air pollution to the risk of a catastrophic derailment and/or oil spill at any point on the tracks.

Unsurprisingly, MRWG members also disagreed with what they see as “specious” arguments from Phillips 66. They feel that the company has not been a good neighbor and is pursuing the crude-by-rail strategy primarily to enhance profits, not because any refinery jobs or the local oil supply are truly at risk. In fact, they view those rationales as red herrings.

“Phillips wants to make the Central Coast a hub for crude by rail, and I feel like that’s pretty obvious,” Akel said. “That said, our worst enemy isn’t Phillips, it’s an uninformed public. People need to know.”

One larger group working toward that same end is the Sierra Club. Andrew Christie, director of the local Santa Lucia Chapter, told New Times that his organization emphatically objects to the rail spur project.

“There are just no grounds on which to support this project,” he told New Times. “The impacts are understated, the EIR has been deficient from the start, and there are still 11 ‘significant and unavoidable’ impacts in a defective EIR.”

The 11 “significant and unavoidable” project impacts Christie refers to are a touchstone for the MRWG as well—five in the “air quality and greenhouse gases” category and one each in “biological resources,” “cultural resources,” “hazards and hazardous materials,” “public services and utilities,” and “water resources” categories.

All of these impacts are essentially due to the potential for high levels of toxic emissions from the oil trains or the mushrooming consequences of a possible crude oil spill and/or derailment.

Driving a New Times photographer and reporter around Nipomo, McKible and Shinderman—when not kibitzing back and forth—were adept at pointing out which neighborhoods and homes would potentially bear the brunt of noise, light, and pollutant impacts from the spur.

Eventually, they pulled over to the side of Highway 1 near the Mesa Fire Station, where the metallic frame of the refinery can be seen looming over the dunes.

“There is no benefit with this project—we are all subject to collateral damage with what they’ll be doing up and down the rail line,” McKible said, shaking his head. “We derive no benefit, and we take on all the risk.”

The battle for support

As the rail spur project review process wraps up and actual yea or nay votes are looming, indications are everywhere that the war for public opinion (and the favor of elected officials) has kicked into high gear on both sides—but especially on Phillips 66’s behalf.

On Oct. 24, Union Pacific scheduled two “invitation-only” sessions to see a “state-of-the-art interactive training car that will travel the U.S. teaching safety and emergency preparedness.”

In an email sent to many SLO County officials advertising the event, organizers noted that “Phillips 66 Santa Maria Refinery is delighted to invite you to tour the training car, and see a crude oil railcar that we are bringing to San Luis Obispo to help educate community leaders about our proposed rail project.”

On a separate note, in a Dec. 15 letter in the Tribune, SLO resident Amber Johnson took aim at the multitude of form letters from environmental groups responding to the DEIR, castigating them as “out-of-town special interest groups who clearly have their own agenda.

“The only special interest I pay attention to is that of the health and prosperity of San Luis Obispo County by supporting responsible businesses such as Phillips who wish to continue to contribute to our local economy,” Johnson concluded. “This decision needs to be based on what is best for our county, not what outsiders think is best.”

Johnson is herself a political strategist who was a regional field director for the oil company-sponsored “No on P” campaign in Santa Barbara County, a former campaign manager for newly-elected SLO County District 4 Supervisor Lynn Compton, and a former executive director of the Republican Party of SLO County.

Lastly, on Dec. 19, Phillips 66 made a splash with a $30,000 donation to the fledgling San Luis Obispo Railroad Museum.

The Paso Robles Daily News quotes Bill Schroll, manager of the Santa Maria Refinery, as saying that, “All of us involved in the oil industry are aware of the role the local railroad played—and continues to play—in keeping our product moving.

“We are delighted to help educate residents and areas visitors about the rich history of the railroads and their role on the Central Coast, including the dynamic partnership that continues between our industries,” he concluded.

Unsurprisingly for a project of this magnitude, many politicos polled by New Times said they saw the rail spur project likely being appealed by one side or the other—from the Planning Commission, to the Board of Supervisors, to the California Coastal Commission (the refinery is in the coastal zone)—and then likely being settled in court in a years-long struggle.

What remains to be seen, however, is precisely which arguments will emerge, and which side of the issue will be fighting an uphill battle.

“Ultimately, it comes down to this: Is what they’re proposing appropriate for the community, or are the impacts just too great?,” said District 3 Supervisor Adam Hill. “It will be interesting to see how that question is answered.”

 

Staff Writer Rhys Heyden can be reached at rheyden@newtimesslo.com.

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