A study touted by the oil industry as one that will end the debate over delivering Bakken crude oil by rail may be as much a push to keep the shale boom from busting as an effort to ensure safe transport.
"It is essential to separate fact from fiction as we work to enhance the safe transportation of crude oil,” said Jack Gerard, president of the American Petroleum Institute (API). "Multiple studies have now debunked the idea that Bakken crude is meaningfully different than other crudes."
API, which represents the interests of more than 600 members of the U.S. energy sector, says a study commissioned by the North Dakota Petroleum Council (NPDC) directly contradicts what federal officials have said about issues surrounding the delivery of Bakken crude oil by rail.
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In January, the Transportation Safety Board (TSB) of Canada said the amount of crude oil travelling by rail was "staggering." In its investigation into the deadly July 2013 oil train derailment in Lac-Megantic, Quebec, TSB said there were "critical weaknesses" in the North American rail system that is taking up the slack from the shortage of pipeline capacity.
Last year, the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration started monitoring Bakken crude transport in response to increased deliveries from North Dakota, the state at the center of the U.S. shale boom. In a January safety alert, PHMSA said the light sweet crude oil coming from the Bakken region may pose a "significant fire risk" if it escaped during shipping.
NDPC commissioned oil consultant group Turner Mason & Co. to carry out the study. Their work found the DOT's tests for flammable liquids aren't optimal and instead sided with API, which it said was working on a more "precise" determination for Bakken crude.
"Bakken crude does not significantly differ from other crude oils and poses no greater risks than other flammable liquids authorized for rail transport," said Kari Cutting, vice president of the NDPC.
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Two years ago, Turner Mason & Co. found the "onslaught" of crude oil like Bakken presents challenges to a downstream sector dealing with different types of oil, from the heavier Canadian oil sands to lighter shales. Refinery capacity could decline by as much as 10 percent because the U.S. refining sector didn't anticipate the boom, their study found.
But the boom is upon us and it's leaning on rail. In 2009, only 500 carloads of crude oil were delivered by rail. In 2013, that number soared to 160,000. The traffic increase was more pronounced in the United States, with carloads increasing from 10,800 in 2009 to 400,000 last year.
Oil production from North Dakota is on pace to reach 1 million barrels per day this year, according to the U.S. Energy Information Administration (EIA). North Dakota's Gov. Jack Dalrymple told an energy conference sponsored by NPDC that the oil boom was "contributing to our state’s strong economy and to our nation’s energy independence."
State officials told Oilprice.com last month that the Bakken play "is still a relatively new oil field," so it's reasonable to assume studies of the oil aren't yet ideal. But while the industry says it has safety in mind, the safety they're ensuring may be in the financial numbers.
By Daniel J. Graeber of Oilprice.com