Crude oil train derails in Va. as U.S., Canada try to improve tank car safety

Crude oil train derails in Va. as U.S., Canada try to improve tank car safety

Crude oil train derails in Va. as U.S., Canada try to improve tank car safety

 
About 15 tank cars carrying crude oil derailed and three of them ruptured and burst into flames in Lynchburg, Va., Wednesday afternoon, CSX Transportation, the railroad operating the train from Chicago, said.
    No injuries were reported, but city officials said oil spilled into the nearby James River. Some residents and businesses were evacuated.
    It’s the latest in a series of fiery accidents in the United States and Canada involving shale oil from the Bakken field in North Dakota and Montana that has regulators scrambling for ways to prevent and mitigate the impact of derailments of tank cars with hazardous materials. In July 2013, a runaway crude-oil train crashed into the Quebec town of Lac-Mégantic killing 47 people in a massive explosion.
    Crude oil is normally considered a stable, less flammable product, but the Bakken product is a light, sweet crude oil that has surprised industry officials by its level of volatility. At the same time, tens of thousands of older, non-pressure tank cars that meet DOT standards (known as DOT-111 cars) are used to haul flammable liquids, but they don’t have the structural strength to withstand forceful impacts.
    Crude by rail volume from the Bakken region is rapidly growing as domestic energy producers have mastered new technologies and techniques, such as hydraulic fracturing and horizontal drilling, to harvest oil from previously inaccessible reserves embedded in shale rock. Energy companies there are now producing 1.2 million barrels per day and production is expected to soon reach two million barrels per day, experts say. Railroads are the primary transportation option because an extensive pipeline network has yet to be built in the area and likely will remain popular because oil traders like the flexibility of quickly moving product to refineries where they can fetch top dollar. The fracking boom in the Bakken and other areas of the country has put the United States on the road to energy independence and is expected to revitalize the U.S. manufacturing sector through access to cheaper raw materials and feedstock for chemical production.
   Crude oil “will be the largest game-changer in terms of commodity flows for NAFTA over the next decade,” BSNF Railway Executive Chairman Matt Rose predicted in Chicago last week at the NAFTANEXT conference, organized to highlight the 20th anniversary of the North American Free Trade Agreement. BNSF Railway moves about 80 percent of the volume from the region to refineries on both coasts and in the Gulf, often interchanging cars with other railroads to reach the final destination.
    BNSF expects to haul 1 million barrels of oil per day on its network by the end of the year and 1.5 million barrels next year, up from 700,000 barrels per day now, Rose said. Nonetheless, crude oil still only represents 4 percent of the commodity volume transported by the railroad.
    PLG Consulting, a specialty firm that helps clients improve their energy-related supply chains, recently forecast that crude-by-rail from the Bakken will grow at a 12 to 13 percent compound annual growth rate through 2018 and that rail volumes for crude oil from western Canada will jump 40 to 50 percent per year on a compound basis through 2017.
    The Permian Basin and the Eagle Ford field in Texas are the other two primary areas for shale oil production in the United States.
    Last week, Transport Canada announced its response to recommendations from the Transportation Safety Board following the Lac-Mégantic accident. It ordered the least crash-resistant DOT-11 tank cars be immediately removed from service for transporting dangerous goods and that by May 1, 2017, all tank cars used to transport crude oil and ethanol be built to new standards it published in January. The older cars that don’t meet the standard have to be retrofitted, phased out or put in service carrying other commodities. Carriers are required to develop emergency response plans for higher risk flammable liquids and provide first responders immediate access to those plans, information about the contents and company experts in the event of an accident. Transport Canada also imposed stricter operating requirements on railroads, such as reducing speeds for trains carrying dangerous goods and conducting risk assessments of routes to take into consideration population density, proximity to drinking water supply or environmentally sensitive areas.
   The new operating practices are to remain in effect for at least six months, at which time the railroad industry is supposed to submit more permanent rules on operating practices to Transport Canada.
    Rail cars ordered since October 2011 have been built to a higher standard, voluntarily adopted by the railroad industry, car manufacturers and users. These new cars make up more than 40 percent of the crude oil tank car fleet and will constitute 60 percent of the fleet by the end of 2015, according to the American Association of Railroads.
    The AAR tank car standard has better leak prevention, puncture resistance and rollover protection, including a thicker shell and extra protective head shields at both ends of the tank car, and additional protection for top fittings.
    The Canadian government has essentially adopted the AAR standard.
    About 55,000 next-generation tank cars have already been ordered, according to Transport Canada.
   In February, freight railroads, at the urging of U.S. officials, announced a series of voluntary, operational steps to improve the safety of moving crude oil by rail. The railroads said they would increase track inspections on oil routes, improve braking capability of trains, lower speeds of oil unit trains in certain urban areas, and enhance emergency response capabilities and training.
    U.S. regulators are also stepping up enforcement of requirements for shippers to properly test, classify and label the oil before loading under one of nine hazardous material categories.
    The U.S. Department of Transportation is expected this week to announce stricter design standards and other accident-prevention measures for tank cars transporting hazardous materials. The railroad industry has called on the DOT to require that all tank cars used to carry crude oil and ethanol be retrofitted or phased out, and new cars built to a more stringent standard to decrease the likelihood of a release if a car is involved in an accident. The AAR also wants federal rules to go beyond its 2011 standard to include relief valves and design modifications to prevent bottom outlets from opening in the case of an accident.
    But the U.S. rulemaking will still have to go through a lengthy process, including a White House review and public comment period.
    Transport Canada is scheduled to formalize the updated DOT-111 standards this summer after it coordinates with stakeholders and U.S. officials to determine what additional requirements may be needed for the North American tank car fleet. Industry and government officials are keen to have similar standards and rules on both sides of the border because the oil industry functions in an integrated North American market. Class I railroads operate track in both countries and oil produced in each country is transported to refineries and storage facilities on both sides.
   Canada has the third-largest oil reserves in the world.
    Canada and the United States are going to end up with the same rules, but Canada had to act fast to address the immediate safety threat from crude train derailments, Transport Minister Lisa Raitt said at NAFTANEXT.
    “I recognize that we have two different systems, that my system in Canada is a lot more flexible than the U.S. system in terms of effecting change as it relates to tank cars, but we really felt that we had to move forward,” she said.
    “And, yeah, it’s going to cost the industry more. But that’s the cost associated with moving the goods.”
    BNSF’s Rose said there will be dramatic growth of heavy Canadian crude shipped by all modes to U.S. refineries, which are generally configured to process heavy, sour crude and turn it into middle distillate products such as kerosene, jet fuel and diesel. Those products are appealing to refiners because they generate higher margins than gasoline. The cross-border oil trade necessitates coordinated action by both governments, he insisted.
   “The Canadian and the U.S. governments have to stay together on this thing and not give us two different tank car standards because that will be a disaster,” he said. In the absence of a U.S. standard, all the newer CPC-1232 tank cars that meet the AAR standard will go to Canada, Rose warned.
    “What we’ve said to our customers and the regulators is extract the C1 through C4 gases from the light sweet and you can move this stuff almost like diesel. If you’re going to keep the gases and natural gas liquids, which is probably what is going to have to happen, then you’ve got to have a better tank car,” said Rose, who previously served as BNSF’s chief executive officer for 13 years.
    Last week, National Transportation Safety Board Chairman Deborah Hersman said, before stepping down Friday, that the U.S. government is not moving fast enough.
    The Obama administration needs to take immediate steps to protect the public from potentially catastrophic oil train accidents even if it has to use emergency authority to issue interim rules, she told reporters at the conclusion of a two-day forum the board held on rail transport of oil and ethanol, according to the Associated Press.
    “We are very clear that this issue needs to be acted on very quickly. There is a very high risk here that hasn’t been addressed,” she said.
   Hersman said that during her 10 years on the board, she had “seen a lot of difficulty when it comes to safety rules being implemented if we don’t have a high enough body count. That is a tombstone mentality. We know the steps that will prevent or mitigate these accidents. What is missing is the will to require people to do so.”
    In an interview with National Public Radio’s “Morning Edition,” Hersman said on her last day in office that the railroad and oil industries are reluctant to replace the older tank cars because of the estimated $3-billion cost to do so, she said. “But at the end of the day, when you have an event like Lac-Megantic, money should never be the issue.
    “It all comes back to the money. Making these heavier, stronger tank cars reduces the amount of product that can be put in the cars,” Hersman said.
    Regulators needs to get tougher, she said, because it is taking too long to reach consensus between railroads, petroleum companies and tank car manufacturers on tougher tank car standards as well as the possible phase out or retrofit of older tank cars.
    The AAR notes that 99.9 percent of tank cars with oil move without any accidental release and analysts say railroads have made significant progress in terms of hazardous material safety and reduction of incidents in recent years.
   “Unfortunately, the optics of crude-by-rail and some of the terrible tragedies that have occurred, completely overwhelms any statistical argument about the safety of the transportation mode,” PLG Consulting CEO Graham Brisben said at NAFTANEXT.
    Meanwhile, Global Partners, an oil distribution and marketing company, announced Wednesday that it will voluntarily begin requiring on June 1 that rail cars serving its terminals in Albany, N.Y., and Clatskanie, Ore., conform to the higher rail car design standard for crude oil unit trains adopted by the American Association of Railroads in October 2011.
    Global buys large quantities of domestic crude from the Upper Great Plains and Canada and transports it via rail to its receiving facilities for distribution to refiners. Oil from Albany is moved by barge to refineries in northern New Jersey.
    “Global is committed to safety, and as part of that commitment we have made the proactive decision to begin only accepting crude oil unit trains consisting entirely of CPC-1232 compliant cars,” Global CEO Eric Slifka said in a statement. “This initiative pertains to all crude oil rail cars received at the terminal, regardless of whether they are operated by a third party or leased by Global.”
    Global faces pressure from environmentalists, residents and politicians in Albany who are concerned about rail cars travelling close to residential areas.
   In March, Albany County officials issued a moratorium on Global’s expansion plan, which calls for facilities to heat thick crude from western Canada’s tar sands so it can be transferred to barges, until a health impact study is conducted.

One must wonder who the Trump administration is trying to punish with its growing enthusiasm for tariffs. The tariffs are offsetting much of the savings from tax cuts, and if this continues there could be tough months ahead.

The FBX, a global container freight index measuring spot rates on major global trades, had an overall reading of $1,342 per FEU as of June 14, down 1.5% from a week prior, but up 3.4% from a year prior.

Most Popular
Latest News
Social Media

Loading...

USDA accepts claims resulting from cotton fabric tariffs

USDA accepts claims resulting from cotton fabric tariffs

Embed this story

Share Code Version 1

This version will embed the story headline and includes HTML fallback protection, ensuring the story will display even if some users decide to disable javascript in their browsers.

Copy & Paste the following code to embed this story on your website:

Preview

Crude oil train derails in Va. as U.S., Canada try to improve tank car safety

on Apr 30, 2014AmericanShipper.com

Share Code Version 2

This version will embed the story headline without any styling applied. Use this version if you will use your own custom styling on your website. This version also includes HTML fallback protection.

Copy & Paste the following code to embed this story on your website:

Preview

Crude oil train derails in Va. as U.S., Canada try to improve tank car safety

on Apr 30, 2014AmericanShipper.com