The U.S. Department of Transportation issued an emergency order on February 25 to address the safety of transporting crude oil by rail. According to the order, all shippers moving crude from the Bakken must test their product to ensure it is properly classified before transit.
The order came in response to the series of crude oil train derailments, some of which led to explosions and injuries. Effective immediately, shippers will have to test their oil for a range of characteristics, and will be required to use more robust tank cars if the oil falls into certain categories. There is evidence that crude oil from the Bakken is more flammable than typical oil. The order also forbids the use of rail cars that are usually only used for less hazardous materials.
Related Article: Oil Train Derailments Reaching Crisis Point
"Today we are raising the bar for shipping crude oil on behalf of the families and communities along rail lines nationwide -if you intend to move crude oil by rail, then you must test and classify the material appropriately," said DOT Secretary Anthony Foxx in a press release. "And when you do ship it, you must follow the requirements for the two strongest safety packing groups. From emergency orders to voluntary agreements, we are using every tool at our disposal to ensure the safe transportation of crude."
DOT said that it will issue penalties of $175,000 per incident per day for noncompliance.
Separately, Bloomberg is reporting that several refiners in California are looking to bring Bakken oil to the West Coast by rail, due to declining production in California and Alaska. The West Coast is not well connected to the rest of the country by pipeline, leaving rail as the next best option to bring oil to refineries in California. An executive at Tesoro estimates that 500,000 barrels of oil per day could begin running to the West Coast by rail by 2015.
By James Burgess of Oilprice.com
James Burgess studied Business Management at the University of Nottingham. He has worked in property development, chartered surveying, marketing, law, and accounts. He has also… More