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U.S. Regulators Start Oil-by-Rail Probe

U.S. regulators said last year was the safest on record for the rail industry. In terms of volume, the Association of American Railroads said the cumulative volume of carloads carried on U.S. railroads for the first 34 weeks of this year was down 1.2 percent from the same time last year. Grain, metals and coal shipments by rail led the commodity groups witnessing a decline this year. Rail delivery of petroleum and petroleum products, however, increased dramatically. More than 10 percent of the crude oil produced in the United States was delivered by rail. In light of the deadly Lac-Megantic train disaster last month, U.S. regulators said maybe it's time to review some of the safety factors.

AAR said crude oil deliveries by rail were increasing at an exponential rate. The rail group said crude oil accounted for 1.5 percent of Class 1 carloads during the second quarter of the year and approximately 11 percent of the crude oil produced in the United States is now delivered by train. Overall, the volume of crude oil delivered on U.S. railways more than doubled from last year. AAR said that’s an increase "from virtually none a few years ago."

A train carrying Bakken crude oil from North Dakota, produced using hydraulic fracturing, crashed into the Quebec town of Lac-Megantic on its way to a New Brunswick refinery July 6. The accident set of an explosion that killed 47 people. Montreal, Maine and Atlantic Railway, the train's operator, said the locomotive of the oil train was shut down before the engineer left his duty station. That may have resulted in the release airbrakes holding the locomotive in place.

Related article: Pessimism and Optimism over Utica Shale

The Federal Railroad Administration's safety advisory committee held an emergency session last week to assess safety procedures in the wake of the Lac-Megantic disaster. FRA said it was reviewing a safety advisory issued with the Pipeline and Hazardous Materials Safety Administration that calls on railroads to review risks associated with transporting hazardous materials.

The MM&A train was carrying 72 tanker cars of crude oil, or approximately 50,000 barrels, from Bakken oil fields in North Dakota at the time of the spill. The state government said it produced a record high 821,415 barrels of crude oil in June.

PHMSA chief Cynthia Quarterman said inspectors were conducting spot checks of rail shipments carrying Bakken crude oil. It's rare for the Bakken grade to detonate but inspectors want to make sure rail companies are carrying what they say they're carrying. Regulators are also examining the design of rail cars carrying hazardous materials, something on the mind of safety officials since the 1990s. U.S. crude oil production from places like North Dakota has increased to the point that pipelines aren't enough to handle the volume. U.S. safety officials said their investigation was dubbed "Operation Classification," but in light of production gains, Quarterman said it was simply referred to as the "Bakken Blitz."

By. Daniel J. Graeber of Oilprice.com




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