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Western Cities Magazine: A Growing Risk – Oil Trains Raise Safety and Environmental Concerns

Repost from Western City Magazine

A Growing Risk: Oil Trains Raise Safety and Environmental Concerns

By Cory Golden, in the February 2015 issue of Western City
George Spade/Shutterstock.com
George Spade/Shutterstock.com

More and more often, trains snake down through California from its northern borders, with locomotives leading long lines of tank cars brimming with volatile crude oil.

Rail remains among the safest modes of transport, but the growing volume of crude being hauled to California refineries — coupled with televised images of fiery oil train accidents elsewhere — have ratcheted up the safety and environmental concerns of city officials and the residents they serve.

Local and state lawmakers have found that their hands are largely tied by federal laws and court rulings pre-empting new state and local regulation of rail traffic.

Growing Volume and an Increasing Number of Accidents

Until recently, California’s refineries were served almost entirely through ports. An oil boom in North Dakota and Canada from the Bakken shale formation and a lack of pipeline infrastructure have led to a dramatic increase in oil-by-rail shipments nationwide.

Oil imports to California by rail shot up 506 percent to 6.3 million barrels in 2013 (one barrel equals 42 gallons). That number will climb to 150 million barrels by 2016, according to the California Energy Commission.

The surge represents an “unanticipated, unacceptable risk posed to California,” said Paul King, deputy director for the California Public Utilities Commission’s Office of Oil Rail Safety, during a Senate hearing last year.

As the volume of oil being transported by rail has swelled, derailments in the United States and Canada have also increased. Despite $5 billion in industry spending on infrastructure and safety measures — with half of that for maintenance — railroads spilled more crude in the United States during 2013 than in the previous four decades combined, according to an analysis of federal data by McClatchy DC News.

Railroads continue to boast a better than 99 percent safety record, and most spills have been small, but with each tank car holding more than 25,000 gallons of oil, the exceptions — including eight mishaps in 2013 and early 2014 — have been dramatic and devastating, none more so than an accident in July 2013. That’s when 63 cars from a runaway train exploded, leveling much of Lac-Mégantic, Quebec, and killing 47 people.

So far, California has been spared a major crude oil accident, but the number of spills here is climbing: from 98 in 2010 to 182 in 2013, according to the California Office of Emergency Services (OES).

Trains carrying Bakken crude travel south through Northern California, turning from the western slope of the Sierra Nevada and rumbling through the hearts of cities large and small. The trains pass within blocks of the state Capitol, hospitals and schools and through sensitive ecological areas such as the Feather River Canyon and Suisun Marsh.

Lethal Accidents Spur a Push for Increased Safety Measures

The Lac-Mégantic accident and others that have followed have led to a push for change at the federal level. Two agencies of the U.S. Department of Transportation (DOT), the Federal Railroad Administration and Pipeline and Hazardous Materials Safety Administration, shoulder responsibility for writing and enforcing railroad safety regulations.

In early 2014, the DOT and railroad industry announced a series of voluntary steps to increase safety. The DOT released a comprehensive rule-making proposal in July 2014, calling for structurally stronger tank cars, new operating requirements, speed restrictions, enhanced braking controls and route risk assessments, and a classification and testing program for mined gases and liquids.

The DOT proposal calls for phasing out within two years older model tank cars, called DOT-111s, long known to be vulnerable to rupturing in a crash. The National Transportation Safety Board, which investigates accidents, first urged replacing or retrofitting them in 1991.

In September 2014, the American Petroleum Institute and Association of American Railroads jointly asked the DOT for more time — up to seven years to retrofit tank cars.

Another safety measure, called positive train control (PTC), makes use of global positioning systems. It is intended to prevent collisions, derailments due to high speeds and other movements that could cause accidents, like a train using track where maintenance is under way. PTC can alert train crews to danger and even stop a train remotely.

Following a 2008 Metrolink crash in Los Angeles that killed 25 people — caused when an engineer missed a stop signal and collided with a Union Pacific freight train — Congress mandated PTC implementation on 60,000 miles of track nationwide. Large railroads have spent $4.5 billion to implement the technology, but the industry says it cannot meet its 2015 deadline.

Among the members of California’s congressional delegation demanding stricter regulations are Senators Dianne Feinstein and Barbara Boxer, who have called for more information to be released to first responders on train movements.

Sen. Feinstein also wrote a letter that urged the DOT to include pneumatic brakes, which can greatly reduce stopping distances, in its planned review of tank car design, and to extend the PTC requirement to any route used by trains carrying flammable liquids near population centers or sensitive habitat.

Meanwhile, Industry Continues to Grow

The growth in domestic crude oil is reflected in projects that include seven proposed, completed or under-construction expansions that together would have a maximum oil-by-rail capacity of 561,000 barrels per day at Bakersfield, Benicia, Pittsburg, Santa Maria, Stockton and Desert Hot Springs (see “Increasing Refinery Capacity” below).

As of December 2014, the Kinder Morgan Inc. facility in Richmond was the only refinery that could receive unit trains, which are trains with 100 or more tank cars carrying a single commodity and bound for the same destination.

InterState Oil Co. had its permit to offload crude at McClellan Park, in Sacramento County, revoked in November 2014 by the Sacramento Metropolitan Air Quality Management District. The district said it had issued the permit in error and that it required a full review under the California Environmental Quality Act.

Refineries in Bakersfield, Vernon, Carson and Long Beach were receiving crude deliveries from manifest trains, which carry a mix of cargo.

Safety Efforts Focus on Planning, Preparedness and Response

The Federal Rail Safety Act of 1970 authorized the U.S. secretary of transportation to create uniform national safety regulations. States are allowed to adopt additional, compatible rules if they do not hinder interstate commerce and address a local safety hazard. Courts have consistently ruled against almost all attempts by states to use the local safety hazard exception, however.

Thus, unable to regulate train movements, California lawmakers and agencies have pursued three main courses of action: planning, preparedness and response.

In the Golden State, the California Public Utilities Commission (CPUC) shares authority with the federal government to enforce federal safety requirements, and OES and local agencies lead emergency response. In 2014, Gov. Jerry Brown expanded the Department of Fish and Wildlife’s Office of Spill Prevention and Response to include inland areas.

The Legislature approved a Senate Joint Resolution, SJR 27 (Padilla), urging the DOT to safeguard communities and habitat, strengthen the tank car fleet, mandate the earlier voluntary safety agreement with railroads and prioritize safety over cost effectiveness.

Recent legislation includes AB 380 (Dickinson, Chapter 533, Statutes of 2014), which calls for increased spill-response planning for state and local agencies and requires carriers to submit commodity flow data to OES, and SB 1064 (Hill, Chapter 557, Statutes of 2014), which seeks to improve accountability and transparency regarding CPUC’s responses to federal safety recommendations.

The FY 2014–15 state budget also allocated $10 million to the CPUC, which planned to add seven more track inspectors, and authorized the state oil spill prevention fund to be used for spills in inland areas. In addition, the budget expanded the 6.5 cent per-barrel fee to include all crude oil entering the state.

The 10 state agencies that have some hand in rail safety and accident response have formed the Interagency Rail Safety Working Group. It issued a report last June that called for, among other things, older tank cars to be removed from service, stronger cars, improved braking, PTC and better markings on cars so that firefighters know how to proceed in an accident.

Speaking to Richmond residents in December 2014, Gordon Schremp, senior fuels specialist for the California Energy Commission, welcomed the moves to increase safety at the federal level. All indications were that railroads were complying with new measures like lower speed limits, he said.

“Does it mean there will be zero derailments? No, but the goal is to get there,” said Schremp.

Local government officials face a daunting challenge when it comes to disaster response.

The Interagency Rail Safety Working Group also found that, as of June 2014, there were no hazardous materials response teams in rural areas of Northern California and units in other areas of the state lacked the training and equipment needed to take a lead role. Forty percent of the state’s firefighters are volunteers.

“Training is of the utmost importance,” said Deputy Chief Thomas Campbell, who oversees the Cal OES Hazardous Materials Programs. “We understand that local governments are limited in finances and that it’s difficult to get firefighters out of rural communities to train because they are volunteers.”

Some Local Communities Oppose Expansion

At the local level the proposed expansion of California refineries sometimes has run into heated opposition.

After news reports revealed that Bakken crude was being transported into the City of Richmond, City Manager Bill Lindsay wrote a letter to the Bay Area Air Quality Management District in November 2014 calling for it to revoke energy company Kinder Morgan’s permit to offload the crude there. That followed a lawsuit filed by environmental groups to revoke the permit — a suit tossed out by the judge because it was filed too late.

Elsewhere, a proposal by Valero Energy Corp. would bring 1.4 million gallons of crude daily to its Benicia refinery. The proposal has been met with letters questioning the city’s environmental and safety analysis from senders that have included the CPUC, Office of Spill Prevention and Response, the Sacramento Area Council of Governments, the Capitol Corridor Joint Powers Authority and cities along the rail line, including Davis and Sacramento. The Union Pacific Railroad has responded by stressing federal pre-emption of rail traffic.

Even as those proposals played out, a pair of derailments in Northern California underscored the importance of the debate. While neither spill involved crude oil or hazardous materials, both served as a warning of the need for California to improve its emergency response capability. Eleven cars carrying freight derailed and spilled into the Feather River Canyon near Belden on Nov. 25, 2014. Three days later, one car tumbled off the tracks near Richmond. The cars were loaded with corn in the first instance and refrigerated pork in the second.

What’s Ahead

The League continues to closely monitor developments in oil by rail. In September 2014 the League made recommendations to the DOT on the federal rule-making governing rail safety. The recommendations included providing more information and training to first responders, mandating speed limits and stronger tank cars, and using all available data to assess the risks and consequences of crude oil transport. Two months later, the National League of Cities passed a resolution stressing many of the same safety measures.

League of California Cities staff conducted a series of webinars during fall 2014 to better acquaint members with the oil-by-rail issue, and its Public Safety and Transportation policy committees took up the subject in January 2015 meetings.


Increasing Refinery Capacity

The California Energy Commission is tracking the following projects, which would dramatically increase the oil-by-rail capacity of refineries:

  • Plains All American Pipeline LP in Bakersfield, which took its first delivery in November 2014, has a capacity of 65,000 barrels per day (bpd);
  • Alon USA Energy Inc. in Bakersfield, under construction, will be able to receive 150,000 bpd;
  • Valero Energy Corp. in Benicia, which is presently undergoing permit review, would have a 70,000 bpd capacity;
  • WesPac Energy-Pittsburg LLC in Pittsburg, undergoing permit review, could receive up 50,000 bpd by rail and 192,000 bpd through its marine terminal; and
  • Phillips 66 in Santa Maria, undergoing permit review, could accept 41,000 bpd.

In addition, Targa Resources Corp. at the Port of Stockton is planning an expansion that would enable it to receive 65,000 bpd. And Questar Gas Corp. is planning a project that could see it offload 120,000 bpd near Desert Hot Springs, then send it through a repurposed 96-mile pipeline to Los Angeles.


Photo credits: Ksb/Shutterstock.com; Steven Frame/Shutterstock.com.

 

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    Groups Challenge Sacramento Air District’s Furtive Approvals of Crude Oil Project

    Repost from The Sacramento Bee
    [Editor: See also EarthJustice’s account, and a Public News Service brief that appeared in the Benicia Herald.  Significant quote: “It’s becoming increasingly clear in California that the oil industry is cozying up to decision-makers who are deliberately bypassing environmental and health laws to usher in perilous oil transport projects that put people in danger,” – EarthJustice attorney Suma Peesapati.  – RS]

    Sacramento air quality officials sued over crude oil trains

    By Tony Bizjak, Tuesday, Sep. 23, 2014

    A Bay Area environmental group has filed a lawsuit against the Sacramento Metropolitan Air Quality Management District for failing to require an environmental review of a crude oil transfer station at McClellan Business Park.

    The group, Earthjustice, accuses local air quality managers of quietly rubber-stamping permits for InterState Oil Company, allowing it to use McClellan as a site for transferring highly flammable crude oil from trains into tanker trucks headed to Bay Area refineries.

    Earthjustice filed the complaint Monday in Sacramento Superior Court on behalf of the Sierra Club. It charges that Sacramento air quality officials and InterState failed to review the potential hazards of running trains of inadequately designed tank cars full of crude oil through neighborhoods, and asks the court to halt the transfer operations until a full environmental review is conducted.

    InterState Oil Company has been making the transfers at McClellan since last year, initially without applying for a permit. Inspectors with the air quality district discovered the oil transfers and required InterState to file for a permit, but did not require the company to conduct any review of the environmental impact of the project. Permit documents allow InterState to unload an estimated 100 train cars every two weeks. Officials with InterState could not be reached for comment.

    Air district official Larry Greene told The Sacramento Bee last month that the oil company had an existing permit to transfer denatured alcohol and that the switch to crude oil transfers didn’t cause any emissions increases. The district issued a permit this year for crude-oil transfers but considered that action “ministerial,” meaning it did not trigger an environmental review, Greene said.

    Environmental groups said they see that stance as an abrogation of duty by local regulators.

    “It’s becoming increasingly clear in California that the oil industry is cozying up to decision-makers who are deliberately bypassing environmental and health laws to usher in perilous oil transport projects that put people in danger,” said Suma Peesapati, Earthjustice attorney. “We saw it in Richmond, we saw it in Kern County, and now we’re witnessing it in Sacramento. If we’re going to stem the flood of fossil fuels into California and protect the public from hastily approved, poorly planned projects, we demand transparent and law-abiding leadership.”

    “This is an example of a public agency skirting the law and failing to ensure that everything possible is done to protect the public,” said Terry Davis of the Mother Lode Chapter of the Sierra Club.

    Earthjustice recently sued a similar operation in the Bay Area city of Richmond, where the Kinder Morgan oil transportation company currently moves volatile Bakken crude oil from trains to trucks that take it to local refineries. That lawsuit was rejected a few weeks ago in court when a judge ruled the six-month statute of limitations for a lawsuit had expired. That project involves 100-car oil trains that come through midtown Sacramento.

    Attorney Peesapati of Earthjustice said she does not believe the statute of limitations issue applies in the Sacramento case because this week’s lawsuit is within six months of the air quality district’s initial permit issuance this year.

    A handful of recent derailments and explosions involving trains carrying crude oil, notably the lighter and more volatile Bakken crude oil from North Dakota, have prompted federal and state officials to push for more rail safety measures.

    Read more here: http://www.sacbee.com/2014/09/23/6729786/sacramento-air-quality-officials.html#storylink=cpy
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      Wall Street Journal: Dangers Aside, Railways Reshape Crude Market

      Repost from The Wall Street Journal [Editor: A good summary of recent history and market players in the emergence and future of crude by rail.  Interesting quote: “…if all the railcars loaded with crude on one day were hitched to a single locomotive, the resulting train would be about 29 miles long.” – RS]

      Dangers Aside, Railways Reshape Crude Market

      Shipping Crude by Rail Expands as New Pipelines Hit Headwinds and Train Companies Reap Revenue
      By Russell Gold and Chester Dawson, Sept. 21, 2014
      Railroad tank cars are filled with oil at the Musket Corp. Windsor Crude Terminal in Windsor, Colo. | Bloomberg

      In May 2008, a locomotive with a grizzly bear painted on its side pulled into a railroad siding next to an abandoned grain elevator in the ghost town of Dore, N.D. The engine, property of the Yellowstone Valley Railroad, hitched up a couple of tank cars of crude from nearby oil wells and set off on a thousand-mile journey to Oklahoma.

      Dore would never be the same—and neither would the U.S. energy industry. Until then, most oil pumped in North America moved around the continent in pipelines. Suddenly, and just as the oil industry began a period of unprecedented growth, there was an alternative: “crude by rail.”

      Today, 1.6 million barrels of oil a day are riding the rails, close to 20% of the total pumped in the U.S., according to the Energy Information Administration, chugging across plains and over bridges, rumbling through cities and towns on their way to refineries on the coasts and along the Gulf of Mexico. If all the railcars loaded with crude on one day were hitched to a single locomotive, the resulting train would be about 29 miles long.

      Initially conceived of as a stopgap measure until pipelines could be constructed, and plagued by high-profile safety problems, crude by rail has nevertheless become a permanent part of the nation’s energy infrastructure, experts say. Even pipeline companies have jumped into the rail business, building terminals to load and unload crude.

      Behind the new industry are powerful economics. While it costs a bit more to ship petroleum on trains than through pipelines, railroads have the flexibility to deliver it to wherever it will fetch the highest prices. And capital expenses are far lower. Major railroads’ revenue for hauling crude has jumped from $25.8 million in 2008 to $2.15 billion in 2013, according to federal data.

      The oil and rail industries have developed “a mutual dependence likely to continue for a long time,” said Ed Morse, global head of commodities research for Citigroup.

      It is a similar story in Canada: the amount of crude moving by rail has quadrupled since 2012, and is forecast to more than triple between now and 2016.

      The swift growth of crude by rail has been embraced by drillers in new oil fields in North Dakota, Texas and Colorado eager to move their product to the highest bidders. It was also welcomed, at least initially, by railroads looking for new customers after the recession sent traditional shipments tumbling.

      But it has frightened communities across the country where first responders fear the fireballs that have erupted in the past year after some oil-train derailments. Federal regulators recently proposed new rules to require sturdier cars to carry oil, lower speed limits on some shipments and testing of the volatility of the crude transported by train.

      Pipelines still carry most of the 8.5 million barrels of oil pumped every day in the U.S. And safety experts say pipelines have the best record of transporting crude without accident, despite a few big leaks like the one that left Mayflower, Ark., awash in heavy crude last year.

      But pipelines, especially new pipelines, face a lot of problems these days. They draw protests from communities worried about spills and unhappy with the use of eminent domain to take rights of way from local landowners.

      Activists opposed to the use of fossil fuels have focused on blocking pipelines in hopes of keeping oil in the ground. The Keystone XL pipeline, which requires federal approval because it crosses the U.S. border from Canada, has been seeking a permit since 2008 amid fierce political fighting, pro and con.

      Railroads, by contrast, already own 140,000 miles of track in the U.S., according federal statistics, in a system that can send cargo from coast to coast, north to Canada and south to Mexico. By law, railroads don’t have the ability to turn down cargo, even if they want to, so all oil shippers had to do is to figure out how to get oil on and off the trains.

      A big loading terminal might cost about $50 million—equal to the estimated cost of building just one mile of the Keystone pipeline.

      With a terminal, “You can build it and have it under contract in 12 months and pay it off in five years,” said Steve Kean, president and chief operating officer of Kinder Morgan Inc., the operator of 80,000 miles of pipeline in North America and a growing network of rail terminals. The company has spent $290 million to date building up a crude-by-rail business.

      To justify the massive investments needed for pipelines, their builders usually require drillers and refiners to sign long-term shipping contracts before they start laying pipe. That has been a problem for new oil fields without a track record, and for the mostly independent energy companies that developed those fields using hydraulic fracturing, said Adam Sieminski, who runs the federal government’s Energy Information Administration. Railroads don’t require such lengthy contracts.

      The new way of moving crude was born out of frustration and need. In 2006, North Dakota faced what it called, in a report, a “crude oil transportation crisis.” Oil production was rising, but the few pipelines that served the state were full.

      Enter Musket Corp., a privately held Houston company owned by the family that also owns Love’s Travel Stops & Country Stores. Musket bought inexpensive diesel from refineries along the Gulf Coast and moved it by rail to locations close to the Love’s service stations, developing and patenting a portable pump for loading and unloading the fuel.

      In 2007, Musket tried using its pump to load a couple of tank cars with crude oil rather than diesel. When that worked, the company sent employees driving around North Dakota with binoculars to find an unused railroad siding to lease. They spotted Dore.

      “Pretty soon, we knew it was going to be big,” said J.P. Fjeld-Hansen, a managing director of Musket. Trains could deliver Bakken crude to wherever it could fetch the highest prices, including Philadelphia, California, Louisiana or the giant Houston petrochemical complex.

      The first loads from Dore were carried to Oklahoma, home to a giant oil-trading hub, by BNSF Railway Co., now owned by Berkshire Hathaway Inc.  It picked up the cars from Yellowstone Valley Railroad, a so-called short line railroad that now operates on just one mile of track — specializing in hauling freight from shippers’ yards to connections with the bigger railroads. The company that owns the railroad, Watco Companies Inc., didn’t respond to requests for comment.

      “Crude is a growing part of our business,” said Michael Treviño, a spokesman for BNSF, which now moves more oil than any other major North American railroad and spent $200 million last year on crude-by-rail projects.

      The Dore project caught the attention of EOG Resources Inc., a big oil and gas company based in Houston. By the end of 2009, EOG had built an industrial-scale rail-loading terminal in Stanley, N.D., including a 1.3-mile loop of track where trains could be loaded with 60,000 barrels a day.

      “We brought the project to fruition in an eight-month period,” Mark Papa, the former chairman of the company, said in a conference call with analysts in 2010. The company declined to comment.

      The terminal cost $50 million, according to Wilson & Company Inc., an engineering firm involved in the project. Its chairman, Kenny Hancock, said his firm needed to work out kinks with this first-of-its-kind facility.

      One problem was that when tank cars were loaded, hydrocarbon fumes would leak out and, since they were heavier than air, settle in the long open-ended loading shed. “The first seal we tried didn’t work and our explosive limit alarms went off,” he said. New seals and ventilation fans eventually solved the problem, the company said.

      The relative ease and low cost of building loading and unloading terminals soon attracted a range of companies. Great Western Railroad, a Saskatchewan short line mostly owned by the province’s farmers in a cooperative agreement, hauled more carloads of crude last year than carloads of grain.

      In 2011, Dakota Plains Holding Co. built a loading terminal, acquired a Utah tanning salon business that traded on the OTC Bulletin Board, renamed the business and issued shares to raise funds to expand.

      By the end of 2013, there were 13 large rail loading facilities in the state, according to the North Dakota Pipeline Authority. The largest, the Bakken Oil Express outside Dickinson, N.D., can handle 200,000 barrels a day.

      There was also a surge in facilities for unloading oil and transferring it to refineries; such terminals are operating or planned in nearly two dozen states and Canadian provinces. Mile-long trains of oil tankers became familiar sights in cities across the country.

      The crude-by-rail phenomenon has spread beyond the Bakken Shale in North Dakota and Montana to the Permian Basin in Texas, the Niobrara in Colorado and to western Canada. In July, Global Partners said they planned to build a rail terminal in the heart of the Gulf Coast petrochemical complex that can handle more than 100,000 barrels a day of crude, including Canadian oil sands.

      “It is not a layup to build a pipeline to the Gulf Coast,” said Mark Romaine, chief operating officer of Global Partners, a Waltham, Mass., fuel logistics firm. “Look at the Keystone XL.”

      But a year ago, those strings of black train cars took on an ominous look after an unattended oil train in Lac-Mégantic, Quebec, derailed and exploded, killing 47 people. Several other derailments were followed by fireballs as Bakken crude burst into towering flames.

      Those accidents have given railroads second thoughts about hauling crude, said consultant Anthony Hatch. While companies don’t break out the data, hauling crude is believed to be very profitable for railroads, so “they were excited” at first, he said. But now that business, which makes up only about 3.5% of rail shipments, according to federal data, has attracted unwelcome attention in communities that previously ignored the freight trains rumbling through town. And even some of the largest North American railroads are concerned they might not survive the costs of cleanup and lawsuits if a train exploded in a crowded city.

      Regulators are imposing new rules that industry executives fear could slow the entire rail system, cut capacity and cause congestion. Federal regulators recently concluded that Bakken oil contains a high level of combustible compounds, known as light ends, as The Wall Street Journal reported earlier this year. The U.S. Department of Transportation’s proposed new rules on crude by rail will require companies to test crude before putting it into appropriately sturdy tank cars, among other measures being imposed on the little-regulated industry.

      Harold Hamm, chairman and chief executive of Continental Resources Inc., a leading exploration and production company in the Bakken, said that the problem isn’t with the oil, but with railroad safety. “There would not be any problems with oil movements in America as long as Mr. Buffett keeps the trains on the track,” said Mr. Hamm, referring to Warren Buffett, the chairman and chief executive of Berkshire Hathaway, the owner of BNSF.

      Mr. Treviño, the BNSF spokesman, said that “the facts are that 99.997% of rail industry shipments of hazardous materials reach their destination without a release caused by a train accident,” and that BNSF had a lower percentage of derailments last year than anytime in company history.

      Two BNSF trains were involved in a derailment near Casselton, N.D., in 2013 that released more than 400,000 gallons of crude and set off a several-story tall explosion, leading to the evacuation of 1,400 people from Casselton.

      The Association of American Railroads said it has increased inspections, decreased speeds and is using more technology to prevent derailments.

      But Mr. Hamm said he thinks the situation will be short lived. “Rail is still a temporary thing,” he said. “If rail hadn’t been available, there would have been pipelines built.”

      And some are in the works.  Enbridge Inc. recently received approval form North Dakota regulators to start construction on a $2.6 billion, 225,000-barrel a day and 600-mile project called the Sandpiper pipeline, which would move oil from Tioga, N.D., to Wisconsin.

      In Dore, Musket says it isn’t worried about business drying up with the addition of pipelines. The company’s terminal in the town can now handle 60,000 barrels a day and employs 50 people; the company has built another rail-loading facility in Dickinson, a two-hour drive to the south, and one in the Niobrara Shale in Colorado.

      “I don’t think it’s either/or,” Mr. Fjeld-Hansen said. “I think rail and pipe will coexist for a long time.”

      —Betsy Morris and David George-Cosh contributed to this article.
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