• State Regulators Are On Track To Improve Oil Train Safety
  • February 20, 2015
  • Law Firm: Obermayer Rebmann Maxwell Hippel LLP - Philadelphia Office
  • Our November 13 post noted that most of the crude oil from the Bakken Formation in North Dakota is shipped to ports and refineries throughout the United States by rail, typically in unit trains with one hundred cars or more. Fully twenty percent of all production from the Bakken is shipped through Pennsylvania to refineries in Philadelphia.

    Over the last two years, there have been several accidents involving the movement of large volumes of Bakken crude by rail. Serious adverse public health and environmental consequences have resulted. The most tragic incident was the July 2013 explosion and fire following derailment of an oil train at Lac-Magantic, Quebec. Forty seven people died and half the town was destroyed. Investigators have concluded that the volatility of the Bakken crude itself was a significant causative factor in the death and destruction at Lac-Magantic.

    Fearing another catastrophe, the North Dakota Industrial Commission, which is the entity that regulates oil and gas in the state, acted last week to reduce the risks associated with transporting Bakken crude. The Commission proposed a regulation that would require oil companies to strip explosive gasses from the oil before they are loaded into tank cars. The process would render Bakken crude less explosive than it is when it comes out of the well head.

    Bakken crude is, in fact, a mixture of oil, ethane, propane and other gaseous liquids. It typically has higher vapor pressure than virtually all other domestic crudes, making it more likely to emit combustible gases under a variety of conditions common in rail transportation, e.g., changes in temperature, pressure, excessive jostling, etc. The released gasses, in turn, cause Bakken crude to be more explosive and more flammable than other types of crude, which explains why trains carrying Bakken crude tend to explode when they derail.

    Stakeholders in the safety debate each bring their own perspective as to how best to stop oil trains from exploding. Railroads argue that the problem would be alleviated by shippers using improved tank cars; oil companies urge railroads to improve operations and track maintenance. It’s an important issue, given that over one million barrels of Bakken crude are shipped through major population centers in the United States daily.

    The proposed regulation would require well operators to use a thermal process to stabilize the crude by forcing gases from the liquid, or to submit test results showing production from their wells does not exceed the state’s vapor pressure limit of 13.7 pounds per square inch. Laboratory analyses have shown wide variability in samples of Bakken crude, with vapor pressures ranging from 15 to 19 pounds per square inch. The greater the vapor pressure, the more quickly a liquid fuel evaporates and emits gasses. National standards characterize crude oil at or below 14.7 pounds per square inch as “stable.”

    The regulation would also require rail loading terminals to inform regulators of any oil received for shipment exceeding the state’s vapor pressure limit. Finally, the regulation would prohibit blending condensate or natural gas liquids back into crude. (Oil containing gaseous liquids brings a higher price than oil purged of gasses.) Penalties for non-compliance with the proposed regulation include fines of up to $12,500 per day.

    The petroleum industry has criticized the proposed regulation as an example of “micromanagement” of the industry, and asserted it could lead to unintended consequences, including increased “flaring” at well sites and increased pollution. The oil industry generally supports safety measures that focus on transportation systems, not the commodity.

    The Commission is considering public comments on the proposal and will announce the terms of the final regulation by mid-December.