Feds Issue New Order, Test Crude Before Shipping Or Pay $175,000 Per Day

Feds Issue New Order, Test Crude Before Shipping Or Pay $175,000 Per Day

Feds say Bakken crude is more dangerous and must be identified
by John Pendleton  |   Wednesday, February 26, 2014
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While President Obama considers whether or not to approve the final stage of the Keystone XL pipeline, oil keeps on moving across the U.S. and Canada. What doesn't move by pipeline travels in a railroad tanker car or even a barge. This week's collision involving a barge carrying oil, that closed a 65-mile stretch of the Mississippi River for two days, demonstrated that there is always some level of risk involved. The last two years have seen the amount of crude traveling by rail skyrocket. Trains with 100 or more cars laden with crude oil criss-cross North America on a daily basis, rolling across barren plains and grinding through the core of major cities.

Back in 2008, a train of 100 tankers loaded with crude left a terminal in North Dakota on an average of once every four days. By 2013, a train was departing every 2.5 hours.

A spate of derailments, some resulting in fiery explosions, has drawn the attention of government regulators and legislators.

U.S. and Canadian railroad companies, tank car owners and regulators are looking into ways to move crude by rail more safely. The initial focus is on phasing out older tank cars, those built prior to 2011 and commonly known as DOT-111s, that do not meet the latest safety standards. Several major refiners are moving to entirely replace their rolling stock with new, purpose-built cars that represent a safer alternative.

One specific issue that has been difficult to address is the nature of crude oil from North Dakota's Bakken play. Although all oil is classified as a hazardous material, it isn't usually linked to explosions in the event of a train derailment. However Bakken crude is demonstrably more volatile than other types of crude and is more prone to emitting flammable gases.

On Tuesday, the U.S. Department Of Transportation (DOT) issued an emergency order requiring shippers to test and classify crude oil from the Bakken region prior to loading it onto freight trains. It was the fourth emergency order or safety advisory issued in the last seven months related to tanker-car transport.

The new order will require companies to test each load of crude oil for a wide variety of characteristics, ranging from the temperature at which it boils to the amount of flammable gases trapped within in the oil and the expected vapor pressure, which is generated when crude oil emits gases inside railcars.

Hazardous materials are supposed to be classified as being in one of nine specific categories, depending on the risk involved. If materials are incorrectly classified, they might end up being shipped in improperly protected rail cars and emergency personnel might follow the wrong protocols when responding to an accident.

Any shipper that fails to comply with the new order is subject to fines of up to $175,000 per day and criminal penalties that carry jail terms of as much as 10 years.

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