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Rail operator KSU gets approval for Port Arthur, Texas, crude and product export facilities: regulator

Houston — Kansas City Southern has received the necessary permits from state regulators to go ahead with a long-planned project to export heavy and light crude as well as refined products from its Port Arthur, Texas, rail facilities, as it looks to capitalize on export opportunities for growing global demand for North American crude and refined products.

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The Wednesday approvals, revealed in documents posted by the Texas Commission on Environmental Quality, gives KSU the go ahead for the project, initially announced in 2014 in conjunction with Global Energy Partners, which subsequently turned the application over to KSU to bring the project to fruition.

Under the permit, KSU will be able to load heavy crude and light crude, as well as gasoline, ethanol and diesel railed into the terminal onto barges for export, including up to 600,000 b/d of heavy crude, giving beleaguered Western Canadian Select producers an additional outlet for their crude.

Crude from Western Canada and the Midcontinent railed into the facility will be loaded on marine vessels while refined products will be loaded on both marine vessels and rail cars.

KSU will have also have the capacity to load up to 600,000 b/d of light crude, gasoline, and diesel onto marine vessels for export from its Port Arthur rail yard.

KSU will also be able to move by rail up to 36,000 b/d of USGC gasoline and diesel to other regions.

With the project, KSU will add eight storage tanks at Port Arthur to store heavy and light crude as well as gasoline, diesel and ethanol. Two of those tanks will be dedicated to storing up to 350,000 barrels of heavy crude while the six remaining tanks will have 700,000 barrels of storage capacity for light crude, gasoline, diesel or ethanol.

No time frame was given for when operations would begin. Company spokeswoman Doniele Carlson said in an email that Kansas City Southern has no comment at this time.


For the first two weeks of 2019, the number KSU's carloads of petroleum and petroleum products are up 55% , compared with the same time period last year, according to research from Bernstein's David Vernon.

This puts KSU's petroleum and petroleum product movement well above the 25.8% year-on-year growth for major North American railroads for the week ended January 12, 2019, American Association of Railroads weekly data shows.

AAR data also shows a 47% year-on-year increase in Canadian crude and product movement so far in 2019, compared with the first two weeks of 2018.

Increased takeaway rail volumes, combined with the province's January 1 mandated 325,000 b/d production cut, is helping to narrow the discount WCS ex-Hardisty holds to front-month NYMEX light sweet crude futures calendar month average (WTI CMA) to average $9.33/b in Q1 2019, compared with the $37.88/b Q4 discount, S&P Global Platts assessments show.

This has increased the value of WCS closer to the WTI benchmark. So far in Q1 2019, WCS ex Nederland, Texas, has narrowed to 30 cents/b, compared with the $1.55/b average discount in Q4 2018.

-- Janet McGurty,

-- Edited by Derek Sands,