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John Daly

John Daly

Dr. John C.K. Daly is the chief analyst for Oilprice.com, Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European…

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Canada’s Largest Refiner’s Records Seized in Investigation

Canada’s Largest Refiner’s Records Seized in Investigation

On 6 July a Montreal, Maine & Atlantic train carrying 72 tank cars filled with oil exploded after its brakes apparently failed, sending it rolling into Lac-Mégantic, where it derailed and subsequently exploded, igniting a conflagration that leveled the center of town and killed 47 people. In Canada’s fourth worst railway accident, more than 30 buildings in Lac-Mégantic's center, roughly half of the downtown area, were destroyed. The investigation into causes of the disaster have now focused on whether Irving Oil, which purchased the Montreal, Maine & Atlantic train’s crude oil cargo for refining, knowingly filed misleading documents contravening the Transportation of Dangerous Goods Act.

The case is significant, as on 11 December inspectors from Transport Canada executed a search warrant on Irving Oil’s Saint John, New Brunswick headquarters in an ongoing investigation of the accident, seizing corporate records.

Irving Oil, a private company owned by the Irving family, operates Canada’s largest refinery, capable of processing up to 320,000 barrels of crude daily. The cargo of the train that exploded Lac-Mégantic consisted of North Dakota Bakken oil, and the heart of the investigation is whether Irving Oil knowingly underreported its explosive qualities. The Bakken crude oil in the Montreal, Maine & Atlantic train that derailed in Quebec had been carrying Class 3 hazardous materials listed as packing group three, the least hazardous on the scale. The oil actually had the properties of a packing group two substance, which also includes goods like gasoline, that have a lower flash point and will therefore ignite more quickly.

Three months ago the independent Transportation Safety Board said its preliminary investigation had found that the rail cars may have been mislabeled and were carrying crude oil from Bakken that was more combustible than what was indicated on the tankers. The TSB's investigation is also ongoing.

Currently railways haul more than two-thirds of the nearly 700,000 barrels per day of crude from the Bakken shale oil formation. Pipeline shortage have led to an upsurge of trains loaded with as many as 120 cars of oil –“unit trains” of crude that didn’t exist five years ago. In November 2013 alone, more than 400,000 tank cars were carrying crude oil through Canadian and U.S. towns and cities. In contrast, four years ago, the number was 8,000.

Canadian federal rail safety regulations have been revised in the wake of the Lac-Mégantic disaster. Such reform is needed, as while currently only about three percent of Canadian crude is transported by rail, industry analysts predict that with the development of new energy deposits, including Alberta’s oil sands, combined with the stalled construction of new pipelines such as Keystone XL, railway carriage of oil products could rising as high as 25 percent within the next two decades. Rail companies currently disclose their cargo to emergency responders, but not to communities.

Clearly on the defensive in the wake of the Lac-Megantic tragedy, the Railway Association of Canada asserts that “99.9977” percent of all hazardous goods shipped by rail reach their destination without a release caused by a train accident, adding that the railway oil spillage rate is lower than for pipelines. Under the new regulations Canadian Class 1 railway companies, including CN and CP, will have to report that information every three months, while other companies will have to do so each year.

In light of Lac-Mégantic Canada’s government has ordered Transport Canada to crack down hard on crude oil shippers continuing to evade a directive that they test the contents of tank cars before classifying them as hazardous materials for crude by rail (CBR) transportation. Confidence in the industry’s willingness to comply with stricter regulation is undermined by the fact that shippers are attempting to sidestep the testing requirement by simply classifying all crude in the most volatile packing group 1 instead of specifically grading the crude according to flash point, corrosiveness, and chemical composition.

Accordingly, the outcome of the Irving Oil court case will have enormous implications on both sides of the U.S.-Canadian border.

By. John C.K. Daly of Oilprice.com

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Leave a comment
  • Joseph E Fasciani on December 28 2013 said:
    The great problem w/these kinds of mass accidents, especially typified first by airplanes and next by trains, is this: Yes, the stats ARE correct, these are low occurrence incidents. It's not uncommon to have ten million miles between incidents; but then 300 die.

    The great problem is that they inflict high numbers of deaths and disabilities at one time. When a car crashes we may get 1 to 3 deaths; when a plane or train goes down, we may get 300 or more in one fell swoop, and there's the rub.

    One to three killed in a Piper Cub is local news, but 300 dead in a 747 is a national tragedy, which of course, it isn't: it's 100 Piper Cubs in a day, however, and THAT is the problem.

    Now I do not wish to minimise the impact of death in any way: what I'm concerned for is the way in which these deaths are reported.

    I'm old enough [70] to recall the machines in airports which sold flight insurance. For a few dollars one could buy a million dollars death indemnity. These machines made a lot of money for the vendors, as people have fears that are not validated by air miles safety records, and this not taken into consideration at the time of purchase.

    I'm actually Gung Ho! for a complete overhaul of RR safety in shipping, as I know how overloaded the infrastructures are. Canada alone needs to spend C$ 10 billions to update our systems, and the USSA [not a typo], well God and Goldman Sachs only knows, but I think somewhere between US$ 30 and $100 billion should do it.

    Once the USSA & Canada stop creating foreign wars, they will be able to bring their RR systems into the 21st century. Until then, well, roll on Columbia, roll on!

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