Crude by Rail: Industries Await Regulation That Will Affect Bakken Shipments
Posted at 9:35 a.m. on June 30, 2014
The one-year anniversary of the Lac Mégantic, Quebec, crash is Sunday. (François Laplante-Delagrave/AFP/Getty Images)
Amid a boom in rail shipments of crude oil from North Dakota’s Bakken formation, and after a series of fiery accidents, oil companies, railroads, and people living in communities along rail lines are waiting for an Obama administration rule likely to have a big impact on the crude-by-rail business.
The rule is under review by the Office of Information and Regulatory Affairs, part of Office of Management and Budget. Since May 19, OIRA officials have held a dozen meetings with representatives from the oil industry, railroads, grain companies, and others to discuss the proposed rule coming from the Pipeline and Hazardous Materials Safety Administration.
It will address operating requirements for trains transporting flammable materials, as well as new standards for tank cars.
At a meeting with administration officials on June 10, BNSF Railway was prepared to make the case against a 30-mile-per-hour speed restriction on trains carrying crude oil, according to a BNSF document on the OIRA web site.
The railroad said if such a restriction were imposed, “BNSF will have to invest in substantial added track in the form of otherwise unneeded sidings or additional mainline tracks. … This is essentially an unfunded investment mandate, and would absorb capital that we (like other railroads) would prefer to spend on expanding our capacity to handle more trains with better performance.”
BNSF said it would need to invest $2.8 billion to respond to a 30-mile-per-hour limit on oil trains.
Bakken crude is being shipped to refineries on the East Coast and Gulf Coast as well as to refiners and terminals in California, Oregon, and Washington.
While new pipelines are being planned and built most Bakken crude is being moved by rail, which can be dangerous.
It was a year ago – on July 6, 2013 — a tank car carrying Bakken crude exploded in Lac Mégantic, Quebec, killing 47 people, while an explosion last December forced evacuation of Casselton, N.D., and an April 30 derailment in Lynchburg, Va., caused a fire and led to evacuation of the surrounding area.
A week after the Lynchburg incident, Transportation Secretary Anthony Foxx issued an emergency order requiring railroads operating trains with 1 million gallons or more of Bakken crude to inform state officials of where and how frequently such shipments are passing through their states.
The state of Washington’s Emergency Management Division posted a BNSF notification on its web site which detailed the oil train shipments from May 29 to June 4 in that state.
BNSF sent 19 trains with Bakken crude through Klickitat County, Wash., in the central part of the state bordering the Columbia River along which a BNSF line runs, as well 18 trains though Clark County, directly across the Columbia River from Portland, Ore., and 11 trains through King County, the state’s most heavily populated county in which Seattle is located.
The railroads say they’ve already taken steps such as increased training for emergency responders and they want the oil shippers — who lease or own tank cars — to do more.
“Railroads believe that federal tank car standards should be raised to ensure crude oil and other flammable liquids are moving in the safest car possible based on the product they are moving,” Edward Hamberger, president of the Association of American Railroads told a recent industry conference. “The industry also wants the existing crude oil fleet upgraded through retrofits, or older cars to be phased out as quickly as possible.”
A recent report from the Energy and National Security Program at the Center for Strategic and International Studies notes that if the voluntary railroad industry standard known as “CPC-1232” is adopted as the standard for new cars, 66,000 noncompliant cars would need to be retrofitted or replaced.
The industry “estimates that it has the capacity to produce 33,800 new CPC-1232 compliant tank cars per year.” But if the new Obama administration standard goes beyond the CPC-1232 requirements “approximately 95,000 cars would require retrofits or need to be phased out.”
Last week Oregon senators Ron Wyden and Jeff Merkley, both Democrats, urged Foxx to widen his May 7 emergency order to include all crude shipped by rail, contending “non-Bakken oil shipments of crude, and crude trains carrying less than 1,000,000 gallons pose an imminent hazard.”