Rail cars carrying crude oil extracted from Canadian oil sands sit in a Northwest Portland rail yard and adjacent to the Zenith Energy terminal on Thursday. Zenith stores the oil in its tanks and pumps it onto vessels that have sailed to China, South Korea and West Coast refineries. The oil Zenith is storing carries inhalation and environmental hazards that have alarmed regulators. Mark Graves/The Oregonian

BY GORDON R. FRIEDMAN | The Oregonian/OregonLive

Travel along the Willamette River’s edge a few miles northwest of downtown Portland and chances are they’ll be there: dozens of rail cars filled with Canadian tar sands crude oil.

Parked in a rail yard a stone’s throw from Forest Park, the tank cars got there by traveling through the Columbia River Gorge, then winding through Portland neighborhoods, sometimes just yards from homes.

Their destination is a terminal owned by Zenith Energy, where the crude is unloaded into massive storage tanks and later pumped onto seagoing vessels bound for refineries and factories.

With those operations, Zenith has, in little more than a year, transformed the riverside terminal in the heart of the city’s industrial district from a sleepy asphalt operation into Oregon’s multimillion-gallon crude oil spigot.

Though the diluted Canadian tar sands crude that Zenith handles is less explosive than some other forms of crude, it carries greater toxic inhalation hazards. A train derailment could spill sludgy oil onto private property or into a river. The oil is highly flammable and its toxic vapors are a danger to human lungs and eyes.

To understand the consequences of the changes at Zenith, a reporter for The Oregonian/OregonLive spent a month poring over thousands of pages of records from local, state and federal regulators. He interviewed officials working at nine oversight agencies, toured the Portland terminal and talked with Zenith Energy executives.

That analysis found regulators – and one in particular, Scott Smith, the Oregon Department of Environmental Quality official overseeing oil spills preparedness – are alarmed that Zenith Energy has singlehandedly and without advance notice dramatically increased crude-by-rail shipments to Oregon’s most populous city and turned the state into a crude oil exporter.

Portland Mayor Ted Wheeler and other city officials, who share many residents’ view that the transport of crude oil through and from the city is anathema to Portland’s eco-friendly ethos, oppose Zenith’s activities. But federal commerce protections and the state building code leave them powerless to stop it.

The Oregonian/OregonLive also found regulatory agencies operate largely in the dark when it comes to Canadian oil sands. That opacity is perfectly legal on Zenith’s part.

Zenith said in statements provided to The Oregonian/OregonLive that the company has a pristine safety record and takes health and environmental hazards seriously.

Company vice presidents said construction underway at the terminal, a multimillion-dollar project to build a new and bigger facility for unloading rail cars, is not an expansion, as characterized by activists and previous news reports, but a “modernization project.”

The construction, approved under permits the city granted five years ago, will allow Zenith to unload as many as 44 rail cars simultaneously – up from the current capability of 12. Grady Reamer, company vice president for U.S. operations, said that expansion has more to do with avoiding railyard usage fees as cars wait to unload than upping the terminal’s productivity.

Millions of barrels of crude oil are handled safely every day in the United States, and Zenith’s upgrades make the Portland terminal safer, the company said. Indeed, construction of the new unloading facility includes updated fire-suppression systems and worker safety measures.

During interviews, Shannon Caldwell, Zenith’s vice president of health, safety and regulatory compliance, and Reamer said they hope to eventually make the Portland terminal the Northwest’s premier biofuels hub. They acknowledged, however, that Zenith’s business today and for the foreseeable future is crude oil. They also downplayed or denied crude oil’s risks.

There have been no reported spills, leaks or other accidents at the terminal while under Zenith’s ownership, nor by trains transporting oil from Canada to Portland. Regulators say Zenith is abiding by all rules and laws they enforce.

Don't Edit

Crude oil tank cars pictured at Zenith Energy's terminal in Northwest Portland. The company is building a new unloading station, expected to be fully operational in several weeks, that will allow workers to unload as many as 44 tank cars at once. In the span of little more than a year, Zenith has transformed the Portland terminal from a mostly-dormant asphalt storage facility to Oregon's largest crude oil export terminal. Mark Graves/The Oregonian

ONCE A ‘GHOST TOWN’

Zenith’s terminal, situated among the so-called tank farms of Northwest Front Avenue, has been in service since the 1947, when it opened as the Willbridge Asphalt Refinery. The 48-acre facility changed hands half a dozen times over the decades and was purchased in 2014 by CorEnergy Infrastructure Trust for $40 million. CorEnergy leased the facility to a subsidiary of Arc Logistics.

Houston-based Zenith – which is owned by Warburg Pincus, a private equity firm run by ex-Treasury Secretary Timothy Geithner – bought the Arc subsidiary, giving Zenith the opening to also purchase the Portland terminal. It did so in December 2017, for $61 million.

Crucially, the site is Zenith’s only West Coast facility, giving it access to Asian oil markets and West Coast refineries.

Previous terminal operators had done a modest business leasing the facility’s 1.5 million barrels of tank space, business records show, but they weren’t exporting crude oil. In emails between regulators, a state air quality inspector named George Yun wrote that the last time he had inspected the facility, when still run by Arc Logistics, it was “practically a ghost town with everything shut down.”

Not anymore.

Once Zenith took over, regulators observed an uptick of crude oil “unit trains” – trains carrying a single commodity, sometimes a hundred cars long – in the Portland area.

“Full new crude oil unit train at Zenith and tanker at dock today,” Richard Franklin, the Environmental Protection Agency’s oil spills coordinator in Oregon, wrote in April 2018.

Officials with knowledge of railroad activities say the trains headed to Zenith chug southwest from Alberta, Canada through Montana and follow the Columbia River through Washington toward Portland. They most often come on BNSF line via the Washington side of the Columbia River Gorge, the officials said, and cross the river near Interstate 5, roll by the Smith & Bybee Wetlands and through the neighborhoods of St. Johns, Portsmouth and University Park before arriving at the BNSF railyard next to Zenith’s terminal. BNSF and Union Pacific representatives declined to detail routes traveled by their trains to The Oregonian/OregonLive.

Don't Edit

As the rail traffic increased so did tankship activity. In early 2018, regulators began tracking oil tanker berthings within the Port of Portland. They homed in on vessels that tied up at a dock owned by Chevron, which Zenith contracts with to load ships.

Once laden, the vessels sailed for places like Rizhao, China; Yeosu, South Korea; and Martinez, California, according to shipping data. The tankers generally hold about 200,000 barrels.

Zenith says it completed one marine shipment in 2017 and 10 in 2018. The pace is much faster this year, Zenith acknowledged, with five tankships filled in the first three months.

The activity essentially created Oregon’s crude oil export market. The value of crude exports from Oregon in 2017 reached just $2,523, according to U.S. Census Bureau data. In 2018, the figure topped $71 million. According to Smith, Zenith is the only business in Oregon facilitating crude oil exports.

Zenith representatives say the company is not an exporter but a “liquids storage company” with no control over products’ destination. Zenith cannot load tankships alone, and must pump crude oil from its storage tanks through pipes beneath Front Avenue to Chevron’s dock to fill ships and barges.

When oil-bearing rail cars first arrived at the terminal under Zenith’s ownership, they were loaded with raw bitumen oil sands, a peanut butter-like oil that must be heated or diluted with solvents to make it flow. Shipping vessel records indicate the bitumen oil likely ended up in China and South Korea.

Reamer said the bitumen exports were carried out under a contract entered into by the terminal’s previous owner, which Zenith did not renew because its business plan had changed.

Since then, the oil arriving on tank cars is processed bitumen, to which a solvent has been added in Canada. It’s known in the industry as “dilbit” – diluted bitumen.

‘ACUTE TOXICITY’

Zenith’s dilbit is extremely dangerous according to its manufacturer, MEG Energy.

A technical document prepared by MEG that describes its hazards, called a safety data sheet, explains the oil is “extremely flammable” and that its vapors “may form explosive mixtures with air.”

The oil also contains benzene, exposure to which can cause cancer, and hydrogen sulfide, a gas which if inhaled can cause breathing problems at low concentrations and, at higher intensities, loss of consciousness or respiratory failure.

Other kinds of crude commonly transported by rail, such as sweet crude drawn from wells in the Dakotas, are extremely flammable and may contain hydrogen sulfide.

But Smith, the spills regulator, said the chemical’s presence in dilbit oil presents a “unique” inhalation and exposure hazard. The technical safety document for sweet crude, for example, calls it an “aspiration hazard” and an “eye irritant.” The safety sheet for Zenith’s dilbit, by contrast, highlights its “acute toxicity” and the possibility of “serious eye damage.”

In a statement, Zenith said, “We disagree with the statement that there are additional hazards brought on by Canadian dilbit.” It said the hydrogen sulfide levels in its oil are below exposure limits, and that dangerous levels of the chemical have never been detected by sensors worn on all its workers’ lapels.

Caldwell said the chance of hydrogen sulfide in Zenith’s oil harming a bystander in the event of a spill is “minuscule.” “It’s not like it’s going to overcome a neighborhood,” he said. Caldwell likened the safety sheets to an insurance policy for oil manufacturers and said their recommendations are “subjective.”

Dan Serres, conservation director of Columbia Riverkeeper, is not reassured. He said the hydrogen sulfide risk is “really concerning” for people who live or work near railroads. “I don’t take solace in Zenith projecting overconfidence about who could be affected,” Serres said.

A Multnomah County analysis found that one in four county residents live within a half mile of an oil rail line, the distance generally thought to be the danger zone in the event of a fire. Large portions of those residents are people of color.

How exactly the oil traveling to Zenith would behave during a spill is unclear and would depend on where a spill were to take place, the amount of crude let loose and wind conditions. Hydrogen sulfide fumes emitted by the oil are heavier than air and are most dangerous in low areas unless whipped up by gusty winds.

Several real-life spills show what is possible if the worst were to happen to a train bound for Zenith.

In 2010, a pipeline carrying dilbit burst into a tributary of the Kalamazoo River in Michigan, spilling a million gallons and contaminating vast stretches of waterway. Because dilbit contains heavy tar sands particles, it can sink in water, complicating cleanups, and did so on the Kalamazoo. Remediation of the site took five years and cost more than $1.2 billion. More than 300 people reported effects of hydrogen sulfide inhalation, though none were hospitalized.

Don't Edit

Smoke billows from a Union Pacific train that derailed near Mosier, Ore., in the scenic Columbia River Gorge. KGW-TV via AP

Oregon had its most notable accident in 2016. A Union Pacific train carrying sweet crude derailed in the Columbia River Gorge town of Mosier, caught fire and sent noxious smoke clouds high into the air. No one was injured, but more than 10,000 gallons of oil spilled into the river and city sewers.

Hal Gard, railroad administrator at the Oregon Department of Transportation, said the accident could have been much worse. Most worrisome, he said, is the track which the Mosier train derailed from had been inspected shortly before the crash and appeared in good condition.

“That’s the part that keeps me up at night,” Gard said. “The things you just don’t know.”

The thought of a dilbit spill into the Columbia or Willamette makes him shudder.

“The crude, if it’s from Alberta, it sinks in the river,” Gard said. “My god, what happens to our fish?”

“I feel like they're playing Russian roulette,” said Serres, the river activist. “We've already seen what happens when we lose – in Mosier – and they seem willing to continue gambling.”

Don't Edit

ACCIDENTS HAPPEN

Freight train derailments are common in Oregon. In the last decade, locomotives and their hauls derailed 77 times in Multnomah County alone, federal data shows.

Those trains often carry hazardous materials, much of it traveling through Oregon rather than stopping here.

In June 2018, for example, a Union Pacific train with 56 hazmat cars derailed at a faulty switch in Portland. Three hazmat cars crashed, but none ruptured. The accident report does not say what substance was in the cars.

That train derailed while traveling 7 miles per hour. Oil trains thundering through the Columbia River Gorge approach 50 miles per hour.

Major accidents, though exceedingly rare, are devastating. In 2013, an oil train derailment in Lac-Mégantic, Quebec caused a fire and explosion that killed 47 people. That train was carrying sweet crude, which is more explosive than Zenith’s variety.

Transporting oil by rail is more dangerous than by pipeline, according to a 2018 report published by the International Association for Energy Economics. Its author found pipeline spills are more common but railway spills tend to be more disastrous. He concluded the risk of rail is “noticeably larger” than pipeline shipments.

Serres said it’s simple math: “Anything that makes oil trains more frequent makes the potential for derailments also more frequent.”

‘WE DON’T KNOW’

Regulators and first responders say they operate with little information about the movement of crude oil through Oregon. The state requires far less disclosure than some of its neighbors.

Railroads provide reports on crude shipments to the Oregon State Fire Marshal’s Office but they are “very generic and very basic,” said Chad Hawkins, an assistant chief deputy marshal. BNSF’s report, for example, shows it hauls zero to three trains carrying at least 1 million gallons of crude through Multnomah County each week.

The actual number of shipments is unknown, as are their origins and destinations, Hawkins said. No one verifies the companies’ reports.

Oil terminals in Washington, by contrast, must report rail shipments to regulators 24 hours in advance.

John Johnson, administrator of the Oregon Department of Transportation’s rail division, said his inspectors operate with almost no knowledge of oil-by-rail activities.

“We don’t know what a lot of the trains are carrying or where the cars come from,” Johnson said. “We don’t inquire into that.”

But the department does maintain figures showing crude-by-rail shipments. When pressed, Johnson provided data showing 2,836 crude oil tank cars, with a capacity of 84 million gallons, passed through the BNSF railyard next to Zenith in 2018.

Just two crude-bearing cars travelled there in 2016, according to additional data obtained by The Oregonian/OregonLive from other officials. That data gives a full accounting of the vast quantities of crude oil that passed through Oregon last year.

Don't Edit

Don't Edit

A view of the Vista House from Chanticleer Point in the Columbia River Gorge. Freight trains hauling crude oil travel toward Portland on tracks on both sides of the gorge. Mark Graves/The Oregonian

Union Pacific trains, for example, hauled more than 7,000 cars carrying 210 million gallons along the railroad’s route from the Columbia Gorge in Eastern Oregon to a junction in Portland’s Portsmouth neighborhood. BNSF trains took more than 170 million gallons along track beside the Deschutes and Klamath rivers.

Officials with knowledge of railroad activities said the shipments consist almost exclusively of Canadian dilbit.

Franklin, the EPA inspector, said an oil train barreling down its track at full speed is something to behold.

“When you see a whole unit train of oil cars it’s like, woah, look at that,” he said.

“If we know what they’re bringing in,” Franklin said, “that helps all of us.”

NOT PREPARED

Assessments by the city of Portland and Multnomah County say emergency personnel are underprepared for a major oil train fire.

A Multnomah County analyst, for example, found oil trains’ dangerousness has “eclipsed” local response capabilities. “Emergency responders do not have adequate equipment to respond to a large scale (oil-by-rail) event,” his report says.

Portland’s emergency action plan states, “Local capacity to fight fires and clean hazardous material spills is limited.”

First responders interviewed for this story said they feel ready.

Oil trains are “a big deal” for the environment and public safety, said Lt. Shon Christensen, hazmat coordinator for Portland Fire & Rescue.

“But am I nervous about responding to them? No,” Christensen said. “Am I sitting here saying we’re 100 percent prepared? No.”

“Everything keeps us up at night,” said Michael Heffner, an assistant chief deputy state fire marshal. “I don’t know that the trains would be different than any other area we deal with.”

Don't Edit

Mayor Ted Wheeler says he opposes any actions that expand fossil fuels infrastructure in Portland. But he is likely powerless to stop Zenith's activities. Gordon R. Friedman/The Oregonian

PORTLAND LIKELY POWERLESS

Word of Zenith’s activities rocked Portland City Hall.

After OPB published an article about Zenith in February, the mayor’s environmental policy adviser, Amy Rathfelder, emailed aides to say her email inbox was “overflowing” with constituents’ demands to oppose the company.

Rathfelder wrote that aides were figuring out “what the city can actually do.” She also wrote: “I think the mayor needs to issue a statement ASAP opposing this.”

Officials began drafting a press release for Wheeler’s approval. Sophia June, a press aide, emailed his chief of staff, “I think we should absolutely say we’re against it even if we don’t know what we can do to stop it.”

Government lawyers and officials at the city zoning and code enforcement departments told the aides it was impossible to revoke the permit allowing Zenith’s construction.

“Unless they’re doing something wrong, I have no grounds to revoke a permit,” Terry Whitehill, the building codes manager who approved Zenith’s permit in 2014, told The Oregonian/OregonLive. “In fact, we’d get in big trouble with the state if we did.”

Wheeler said in a statement that the city will monitor Zenith’s activity levels. He said that based on assurances his aides got in a meeting with Zenith representatives, he believes oil train operation is “not expanding.”

-- Gordon R. Friedman

GFriedman@Oregonian.com; 503-221-8209