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Corporate greed 

Phillips 66 should be more truthful in its arguments about why a rail spur is necessary

The Phillips 66 rail spur extension project, if approved, would add 1.3 miles of track to an existing rail spur for transporting a flammable and toxic mixture of crude oil, called bitumen, and a diluent from Alberta, Canada, to the Santa Maria Refinery on the Nipomo Mesa. The mixture is extremely explosive: A train transporting this mixture is often referred to as “bomb train.” In the case of a derailment, the rapid sequence of events is derailment, spill, explosion, fire (which burns for days). 

Any area within 1 mile of tracks is considered to be in the “blast zone.” Those who live or work in the blast zone have the highest risk of exposure. To get an idea, within a small area of San Luis Obispo, Cal Poly, Sierra Vista Hospital, and French Hospital are within the blast zone.

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The rail spur plan calls for five trains per week. Each train would be 1 mile long, carrying 2 million gallons of crude oil mixture in 80 tanker cars. The crude oil would be hauled through the county from San Miguel to Nipomo and 10 cities in-between: Paso Robles, Templeton, Atascadero, Santa Margarita, San Luis Obispo, Pismo Beach, Shell Beach, Arroyo Grande, Grover Beach, and Oceano. Annually, 265 trains would go through densely populated areas endangering lives and property of the residents.

Philips 66 and its proponents have made several disingenuous arguments, which are a mixture of misinformation and blatant lies:

• The company says the Nipomo refinery has been operating below full capacity due to the rising cost of crude. In reality, the cost of crude has fallen considerably and continues to fall. Currently, crude oil prices are the lowest since 2009. 

• Phillips says there are dwindling sources of crude that can be transported by pipeline. Actually, it is not the dwindling sources of crude but rather the industry’s failure to maintain and upgrade pipelines. A recent example of deterioration of pipelines is the 101,000 gallons Refugio State Beach oil spill from a corroded pipeline. California could supply needed crude if the pipelines were maintained.

• Proponents say without Canadian crude, Phillips may have to shut down the plant. According to a corporate spokesman, the question of shutting down the plant has never come up. Tactics like threatening to close the plant unless the project is approved is blackmail—pure and simple.

• Phillips says the United States cannot depend on foreign oil. According to reliable sources, as of today Canada is still a sovereign country; any oil imported from Canada would be considered foreign oil.

• Because Phillips 66 is not transporting the oil, the company says any concerns about transportation-related risks should be directed toward the transportation industry and not Phillips 66. It is incredible that someone would make such an irrational statement. The trains transporting the crude from Canada to the Nipomo plant are doing so because Phillips 66 ordered them.

• The project is on Phillips 66 property, and the company argues that no one has the right to tell Phillips 66 what it can or cannot do on its property. That’s true. However, to reach the Phillip 66 property the trains carrying combustible crude oil would be moving through densely populated areas, endangering lives and property of those living in the communities.

• Without expansion of a rail spur, the company claims there would be a loss of jobs. How can there be loss of jobs if the plant keeps on operating at its current level? On the contrary, “Whenever we import something that is plentiful locally, we inevitably export jobs—in this case Central Coast oil field jobs,” states Linda Reynolds, the founder of the Mesa Refinery Watch Group. 

• Phillips 66 says it has no choice but to import oil because California’s oil production has been declining since 2003. Oil production on the Central Coast (Oil and Gas District 3) has increased 60 percent since 2003. According to Linda Reynolds, “The region’s total oil production last year, including all onshore and offshore oil fields, was over 150 percent of the refinery’s capacity. In addition, major production increases are slated for Price Canyon, Cat Canyon, and Orcutt oil fields plus plans to explore 7,700 new well sites.”

This is a case where corporate greed unashamedly disregards public interest. The real reason for Phillips 66 to purchase crude oil from Canada and transport it by train to its Nipomo refinery is to maximize its own profit. 

According to an editorial in the San Jose Mercury News, “Accidents involving trains hauling crude oil have surged in the past three years—four within a one-month period in North America this year, causing fires and poisoning the air and ground.”

The decision-making process includes cost-benefit analysis. For a proposal to be acceptable, its benefits must exceed costs. A cost-benefit analysis can be time consuming if the decision involves a complex proposal. In this case, the cost-benefit analysis for Phillips 66 is rudimentary. Why? Because all the benefits are reaped by Phillips 66, and all the costs borne by the communities through which the trains transporting oil would travel. A few examples of the risk of exposure to the communities are:

• Deaths

• Toxic emissions

• Hazardous air, water, and soil contamination (with adverse impact on agriculture)

• Derailments (according to the Union Pacific Railroad, Cuesta Grade area is one of the highest risk areas for derailments)

• Oil Spills

• Explosions

• Fire (Cuesta Grade is rated by Cal Fire as being at extreme risk for wildfire)

• Train related chemical emissions

• Noise pollution

• Air pollution

• Accelerating the rate of climate change

• Economy

The Department of Transportation has estimated that an explosion in a densely populated area could kill hundreds of people and result in hundreds of millions of dollars in property damage. Since deaths and property damage occur so fast after the explosion, there is little to nothing first responders can do when they arrive. 

There has been a 400 percent increase in shipments of crude oil by train during the last decade. This has caused acute shortage of new tanker cars that have thicker walls and are less susceptible to puncture. Consequently, the industry continues to use older cars that puncture more easily. There were nine accidents in the U.S. in 2010 involving tanker cars; the number jumped to 143 in 2014. During the last two years, more than 48 fiery explosions from derailments occurred in the U.S. and Canada. In 2013, a derailment in Lac-Mégantic, Canada, killed 47 people and eradicated the whole downtown.

To add insult to injury, in case of a derailment-related disaster, it is the taxpayers who have to pay for firefighting, transporting the seriously injured to the hospitals, hazardous materials removal, cleanup, loss of property, damage to property and infrastructure repairs. We are singularly vulnerable due to a combination of factors. Just imagine what could possibly happen to a mile-long train transporting 2 million gallons of highly volatile crude oil over the Cuesta Grade in old tanker cars and rolling on aging tracks.

The Phillips 66 project cannot be allowed, should not be allowed, and must not be allowed. Otherwise the community might end up paying a very high price for nothing.


Zaf Iqbal contributes a commentary to New Times the first week of every month. He is past associate dean and professor emeritus of accounting at Cal Poly’s Orfalea College of Business. Zaf volunteers with several nonprofit organizations, including Wilshire Hospice, Good Neighbor Program, and Mentoring Program for At Risk Youth at the Pacific Beach High School. He is Partner for the Future at the Southern Poverty Law Center, and past president of the San Luis Obispo Democratic Club. Send comments to zafiqbalslo@gmail.com.

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