As petroleum exports grow, so do the risks
Chemical blazes in Baytown, Deer Park underscore debate for tighter regulations
The Gulf Coast has, for the first time, become a net exporter of oil as the region rapidly expands its refining, pipeline and terminal networks to handle the flood of crude from Texas shale fields and ship petroleum around the world.
But the milestone, reported Monday by the Energy Department, was juxtaposed against fires at a refinery in Baytown and storage terminal in Deer Park as the price of economic growth again is measured in plumes of petrochemical smoke canvassing the sky, blotting out the sun and potentially affecting the health of nearby residents.
As the shale boom — led by the Permian Basin in West Texas — sends record amounts of oil, natural gas and chemical feedstock to the Houston area, observers say the expansion needs a corresponding increase in regulation, oversight and safety measures.
“With that growth comes increased risks with the transportation, storage and shipping,” said Ramanan Krishnamoorti, professor and chief energy officer for the University of Houston. “There’s always a balance of price and risks. We’re handling a lot more crude at our refineries and ports, and so we’re storing a lot more.”
Houston long has been the nation’s refining and petrochemical epicenter, but the scale has increased significantly in recent years as crude and natural gas have flowed to the Gulf Coast and tens of billions of dollars have been invested to process them and export them.
Crude exports alone tripled
from the Houston area last year. More than 35 percent of all U.S. oil bound for foreign markets moves through the Houston Ship Channel, an analysis by the financial research firm Morningstar shows.
That volume only is expected to increase as new and expanded pipelines come online this year and next to move more oil and gas from West Texas to Houston.
The expansion in tank farms, export terminals and refineries also should mean the expansion of protective barriers to prevent spills and leaks that could get into the air, water and soil, Krishnamoorti said. Inspections by regulators and public safety officials, as well as robotic drones, also should increase to help prevent fires, explosions, leaks and other potential disasters, he added.
Exxon Mobil completed a multibillion-dollar petrochemical expansion last year at its sprawling Baytown complex, where a fire broke out Saturday. The blaze was contained and extinguished within a few hours after spewing dark smoke across the Houston skyline. On Sunday, another fire broke out at Intercontinental Terminals Co. in Deer Park, which spread to at least eight tanks.
Price of growth
Such incidents are unfortunate, but the expansion of refining and storage terminals in the Houston area is necessary to move the record volumes of oil and gas produced in Texas — production that has lifted both the state and local economies, said Patrick Jankowski, senior economist with the Greater Houston Partnership.
“It’s all part of the global supply chain,” Jankowski said. “We need these facilities here because it’s how we get our products to market. We wouldn’t be producing all this oil if we didn’t have a way to get it to market.”
The Houston area’s exports of all petroleum products more than doubled in the past five years to about 150 million tons in 2018, the Commerce Department reports. Gulf Coast crude exports surged to a record of 2.3 million barrels a day in December.
In addition to the race to build oil export terminals — at least eight are proposed along the Texas Gulf Coast — companies authorized the construction of 16 major refining and petrochemical projects last year, the Greater Houston Partnership says.
That has raised concerns that regulators such as Texas Commission on Environmental Quality and the U.S. Environmental Protection Agency can’t keep up with the growth, said Elena Craft, senior director of health and climate at the Environmental Defense Fund in Texas.
“There’s this Goliath of an industrial network along the Houston Ship Channel, and the region is expecting serious growth,” Craft said. “It’s going to lead to more incidents.”
Craft added that the Baytown refinery and International Terminal Co. fires occurred during day-to-day activities.
“What about when there’s another Category 4 hurricane?” she asked.
The race heats up
Both Exxon Mobil and International Terminals Co. said in statements that the safety of their workers and the surrounding communities was their prime concern.
In the meantime, the race continues to build new oilexporting terminals near Houston, Corpus Christi and offshore. Crude exports are expected to top 4 million barrels a day in the coming years, according to the International Energy Agency, most shipping from the Gulf Coast.
Houston’s Enterprise Products Partners plans to build the Sea Port Oil Terminal, or SPOT, off the coast of Freeport and Galveston. A consortium led by Canada’s Enbridge and Houston’s Kinder Morgan proposes another offshore one, Texas Crude Oil Loading Terminal, or COLT, also off of Brazoria County. Global commodities trading firm Trafigura is pitching another, but smaller, offshore export terminal offshore of Corpus Christi.
Other planned projects would build or expand crude export terminals in Corpus Christi, Freeport and farther south in Brownsville. These proposals add up to about 4 million barrels a day of additional crude exporting capacity if they’re all built, said Sandy Fielden, director of oil and products research at Morningstar.
“The limit to world appetite for U.S. crude is unknown today,” Fielden said, “but current bets on export infrastructure assume it won’t be reached soon.”