The reasons, and risks, behind shipping crude oil by rail

McClatchy Washington BureauApril 25, 2014 

— Domestic oil production is literally rolling across the country.

The country’s vast rail network has become, in effect, the pipeline for newer sources of crude oil unlocked by hydraulic fracturing, particularly in North Dakota’s Bakken region.

But along with prosperity, the oil shipments have brought worry to communities along the rail lines. Since last summer, deadly and destructive derailments in Quebec, Alabama and North Dakota have created anxiety among community leaders from coast to coast.

Here are the answers to some common questions about shipping crude oil by rail:

Q: Why use rail?

A: A pipeline can take years to approve and build, and can cost billions of dollars. Rail uses an existing network that can handle the product with relatively minor modifications. Because the federal government regulates rail transportation, there’s less state and local oversight and fewer options for environmental and community groups to block new crude-by-rail operations.

A pipeline also goes only from point A to point B, whereas the rail system goes just about everywhere. While more expensive, it’s faster and more flexible. Shipping in unit trains, where every car contains the same product, helps bring the costs down.

Q: Are pipelines safer?

A: Not necessarily. Pipeline failures have resulted in large spills, fires and fatalities, too. An Enbridge oil pipeline ruptured in Michigan in 2010, spilling nearly 850,000 gallons of gunky Canadian tar sands into the Kalamazoo River, and it’s still being cleaned up. That same year, a Pacific Gas and Electric Co. natural gas pipeline exploded in San Bruno, Calif., killing eight people and destroying more than 100 homes. An Olympic pipeline ruptured in Bellingham, Wash., in 1999, spilling 237,000 gallons of gasoline and igniting a fire that killed three people.

Q: Will building the Keystone XL pipeline help move crude oil off the rails?

A: Probably not. The 1,700-mile pipeline from western Canada to the Gulf Coast, if approved and built, would be completed long after energy, pipeline and rail companies made major investments in rail infrastructure, including loading and unloading terminals, tank cars, locomotives and track. North Dakota is producing a million barrels a day, nearly three-quarters of which move by rail, and could produce 2 million barrels a day in a few years. At most, Keystone would move 100,000 barrels of Bakken crude a day, barely a dent in the production. What’s more, it would reach only Gulf Coast refineries, not the ones on the East and West coasts, which have become increasingly reliant on unit trains.

Q: Why are railroads shipping oil in unsafe tank cars?

A: They have no other choice. Tank car manufacturers can’t build new ones fast enough to meet the demand. Domestic crude oil shipments surged from fewer than 10,000 barrels a day in 2008 to more than 400,000 last year. It happened so fast that oil producers turned to the only rail cars that were available, ones that puncture easily in derailments.

The rail industry took voluntary steps to improve tank car design in 2011, and all the tank cars built since meet the new standard. But even when 55,000 newer cars are in service by 2015, there will still be 45,000 older ones hauling crude oil and ethanol. The Canadian government this week required the industry to phase out the older cars within three years, but the U.S. Department of Transportation has yet to make a similar move.

Q: What’s taking the DOT so long?

A: It’s complicated. The regulatory process is slow, and there are a lot of concerns to address. For example, regulators concluded in January that Bakken crude oil is more flammable than more conventional kinds. They’ve been testing it to see what’s really in it, and the results might affect tank car design in the future.

Any proposed regulation must be reviewed by the White House Office of Management and Budget, a process that could take months. While the DOT hasn’t committed to an exact date for a new rule to take effect, Secretary Anthony Foxx told a Senate committee earlier this month, “We are not going to wait until 2015.”

Q: Aren’t railroads required to tell communities where they’re shipping crude oil?

A: No. Railroads do not make that information public, and they provide limited information on hazardous materials shipments to emergency response agencies by request. Even then, they disclose only what hazardous products they’re shipping, not how much or when.

However, state and local officials are beginning to demand that railroads offer more details about hazardous shipments. Some railroads are cooperating, while still falling short of full transparency. They don’t want to disclose the information to the public, citing security and competitive concerns that critics consider overblown.

Q: Can’t railroads just route this cargo around populated areas?

A: Not really. In Philadelphia, for example, the only way to deliver crude oil to refineries in the area is on aging rail infrastructure in densely populated neighborhoods. And simply moving the traffic away from cities shifts the risk to rural communities, which often lack the emergency response capabilities required for a major disaster.

Q: Railroads say they’re forced to haul crude oil. Is that true?

A: Yes. Under their common carrier obligations, they can’t turn it away. However, that’s not to suggest they’re not making money from it. Crude oil is very profitable for railroads, which like other sectors took a hit from the recent recession. It helps make up for the decline in their old mainstay, coal, caused by an abundance of cheaper natural gas.

They’re spending hundreds of millions of dollars buying new locomotives and laying new track. The largest hauler of crude oil in trains, BNSF Railway, recently announced it would buy 5,000 tank cars, which is unusual because railroads don’t typically own tank cars. On its website, CSX promotes its fast, double-track “Water Level Route” for crude oil trains with language borrowed from passenger train advertisements of the 1950s.

Email: ctate@mcclatchydc.com; Twitter: @tatecurtis

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