North Dakota to Require Producers to Treat Crude Before Shipping
Move Comes Amid Growing Safety Concerns About Oil-Laden Trains
By Chester Dawson, The Wall Street Journal, Nov. 13, 2014
Reuters
North Dakota plans unprecedented steps to ensure crude pumped from the state’s Bakken Shale oil producing region is safe enough to be loaded into railroad tank cars and sent across the country.
In the first major move by regulators to address the role of gaseous, volatile crude in railroad accidents, the North Dakota Industrial Commission, which regulates energy production in the state, said it would require Bakken Shale well operators to strip gases from crudes that show high vapor pressures.
“We believe the vast majority of our Bakken oil will fall well below the standard,” Lynn Helms, director of the state’s Department of Mineral Resources, said at a news conference.
The proposed state rule will require all operators to run crude oil through equipment that heats up the crude and forces out gases from the liquid. An estimated 15% of current producers without such equipment will have to submit quarterly test results showing their wells don’t exceed the state’s proposed 13.7 pounds a square inch vapor pressure limit, Mr. Helms said.
Those changes could make the new rules more costly for the state’s smaller producers. Jack Ekstrom, vice president of government affairs for Whiting Petroleum Corp. said the rules don’t appear to be “a major material cost” he said. “This is perhaps more of a concern to a marginal or smaller operator.”
A representative for the North Dakota Petroleum Council, an industry lobbying group, criticized the proposed rules for “micromanaging the industry,” and said they could lead to unintended consequences such as increased burning of excess natural gas at well sites.
The proposal also would prohibit blending condensate or natural gas liquids back into crude and require rail loading terminals to inform state regulators of any oil received for shipment exceeding the vapor pressure limits, Mr. Helms said.
He said the new rules would cost industry, but not enough to make drilling Bakken oil uncompetitive.
Scott Skokos, an organizer with landowners’ group Dakota Resource Council, called the move by the regulator “a step in the right direction.”
The state’s decision follows months of officials’ playing down the possibility that Bakken crude was more volatile and could explode more readily than other North American crudes.
Several oil trains have derailed and exploded since 2013, spurring concern about the safety of growing numbers of oil-carrying trains delivering oil produced by the shale boom.
‘…a step in the right direction.’
—Scott Skokos, Dakota Resource Council
The Wall Street Journal reported in February that Bakken crude contained several times the amount of combustible gases as oil from elsewhere. Relying on an analysis of data collected at a pipeline in Louisiana, the Journal pointed out that oil from the Bakken Shale had a far higher vapor pressure, making it much more likely to emit combustible gases, than dozens of other crude oils.
The proposed rules specify how wells should treat the oil to ensure it is “in a stable state,” according to Mr. Helms.
Executives from the top oil companies working in the Bakken Shale told state regulators in a September hearing that their crude is safe to transport by train using existing treatment methods, opposing potentially costly requirements that they make the oil less volatile before shipping it.
But studies by the U.S. and Canada have indicated that Bakken crude is more volatile than other grades of oil. Industry-funded studies, including one commissioned by the NDPC, have said Bakken oil is no different than other types of light oil.
The state expects to issue final rules by December 11th.
Production of light shale oil through hydraulic fracturing has soared, accounting for most of the additional three million barrels a day of oil that the U.S. produces today compared with 2009. Much of that is shipped to refineries by railcars, especially crude produced from Bakken Shale due to the area’s few pipelines.
Repost from The Jamestown Sun, Jamestown, ND [Editor: Significant quote: “An oil conditioning standard must be framed in the broad context of public safety, not what might or might not inconvenience the industry. The ‘winners’ must be homeowners, businesspeople and others who live near oil train rail lines.” – RS
Flexibility in oil rule has limits
By Forum Editorial Board on Nov 5, 2014
“Flexibility” has emerged as the operative word in a proposed crude oil conditioning standard being developed by the North Dakota Department of Mineral Resources. Director Lynn Helms said he is summarizing some 1,200 pages of comment and testimony about how best to prepare volatile Bakken crude for transport. All well and good, but just how flexible “flexibility” will be should be a primary concern.
The drive to “condition” Bakken crude that is transported in rail tank cars accelerated following several derailments and explosions of oil trains, including a spectacular collision/derailment and explosion near Casselton, N.D., last December. Three reports about characteristics of Bakken crude are in the public record and will play a part in Helms’ work.
The aim is to remove certain volatile components of North Dakota’s light crude oil, thus making it less likely to flash to flame and explode in a train accident. Helms said his department will propose a standard to the Industrial Commission next month. The means by which the industry meets the standard likely will include various operating practices. The commission imposes the rule. Good, as far as it goes.
Helms added that his department’s flexibility approach is the best way to go because, “We certainly don’t want at this point … to pick a winner or loser in that discussion.” Really?
Once again, Helms and company are so focused on the industry’s priorities that his view of “winner or loser” is constricted. An oil conditioning standard must be framed in the broad context of public safety, not what might or might not inconvenience the industry. The “winners” must be homeowners, businesspeople and others who live near oil train rail lines. The means to achieve a meaningful oil safety standard could be flexible, but only if procedures can achieve the standard.
Transporting oil by rail can never be 100 percent safe. By its nature, oil on the rails entails risk. But if rail oil traffic is to be as safe as possible, anything that compromises that goal is unacceptable. North Dakota’s standard must be written with that in mind.
Repost from the Billings Gazette [Editor: This is not a fluffy human interest story, but an important offering on the oil industry and regulators in North Dakota. Significant quote: “‘If you want to fix a problem, you go to the source of the problem,’ he said. ‘You don’t prepare for something that doesn’t have to happen.’” Another good quote: “Pressure to make North Dakota crude oil safe for interstate shipment is mounting on several fronts.”– RS]
North Dakota man relentless in push for safer oil by rail shipping
November 02, 2014, by Patrick Springer, Forum News Service
Ron Schalow of Fargo has been an outspoken advocate of stabilizing Bakken oil to remove volatile gases before it is shipped by rail. | David Samson / Forum News Service
FARGO, N.D. — Ron Schalow isn’t bashful about expressing his caustic opinions. He once wrote a book scolding President George W. Bush for failing to prevent the 9/11 terrorist attacks.
Part of the title can’t be printed here, but the subtitle read, “The 9/11 Leadership Myth.”
More recently, the Fargo man, a frequent writer of letters to the editor, has focused his attention on explosive Bakken crude oil and rail safety – an issue that has drawn national attention after a series of fiery train derailments, including an accident that killed 47 people in Canada and one late last year near Casselton.
Schalow launched a petition drive originally called the “Bomb Train Buck Stops in North Dakota,” which he renamed the “Coalition for Bakken Crude Oil Stabilization,” a reference to the process for removing volatile gases.
Improbable activist
Schalow’s background makes him an improbable activist. His early career was spent managing restaurants and bars, with a stint as a minor league baseball manager.
More recently, he worked for software companies including Microsoft in Fargo, but said he grew weary of corporate culture and office politics and turned to freelance work.
He has assembled a loose network of people concerned about the crude oil stabilization issue, including local officials in Minnesota and other states, but laments he has found little support for his crusade in North Dakota.
Still, North Dakota leaders have been under pressure from the federal government and other states, including Minnesota, to treat crude oil before shipping it around the country by rail to refineries.
The North Dakota Industrial Commission is preparing new standards, likely to take effect Jan. 1, to “condition” crude oil before transport to address safety concerns. Separately, federal officials are drafting more stringent safety standards for tanker cars.
“I think we have to take some responsibility over what’s going over the tracks into Minnesota and the rest of the country,” Schalow said. “It has a lot to do with this is a product that’s coming out of my state.”
By his own admission, 59-year-old Schalow is not a consensus builder. A freelance writer for marketing clients, he isn’t a joiner by nature. Bespectacled, with a goatee, he is soft-spoken but adamant in expressing his views.
He has peppered North Dakota officials, including petroleum regulators and the three-member Industrial Commission, with emails calling for action and asking who is in charge of what he sees as a vital issue of public safety.
“I’ve badgered them relentlessly,” he said.
He is dismayed by what he regards as a sluggish state response, even after an official “tabletop exercise” last June that estimated 60 or more casualties if an oil train derailed and exploded in Fargo or Bismarck.
The exercise simulated a disaster similar to the blast that killed 47 and destroyed much of the town of Lac-Mégantic, Quebec, in July 2013.
For Schalow, the key to ensuring the oil is safe is to remove the volatile gases before shipping. Anything else, in his view, is passing along a potentially deadly problem for others to face.
“If you want to fix a problem, you go to the source of the problem,” he said. “You don’t prepare for something that doesn’t have to happen.”
Derailments costly
Dealing with an explosive derailment can be costly. New York officials estimated, for example, it would take $40,000 in foam to extinguish one tanker car.
In the rail accident near Casselton last December, 20 tanker cars derailed, 18 of which were breached, unleashing a series of explosions and an enormous fireball. Intense heat kept the firefighters far from the flames, which they had to allow to burn out.
No one was seriously injured or killed in the crash.
“They can’t be prepared for combat explosions,” Schalow said, referring to the explosive fires that Bakken crude derailments have produced. “What would they do?”
North Dakota officials in the governor’s office and Department of Mineral Resources declined to talk about Schalow’s advocacy, but said the state is moving ahead to improve the safety of crude oil transportation.
“Gov. (Jack) Dalrymple takes rail transportation safety very seriously and he believes it’s important to have the public weigh in on this important issue,” said Jeff Zent, a spokesman and policy aide for the governor, the highest-ranking member of the Industrial Commission.
“That’s why the Industrial Commission will announce further regulations aimed at improving the safety of oil rail transportation,” he added.
“Our goal has always been to make crude oil as safe as possible for transport, within our jurisdiction,” said Alison Ritter, a spokeswoman for the North Dakota Department of Mineral Resources, which regulates oil and gas production.
The department is also working with “the appropriate federal agencies to better communicate our role to make crude oil as safe as possible for transport,” Ritter said.
In contrast to North Dakota, most crude oil in Texas is stabilized before shipment. Pipeline companies routinely require stabilization before accepting shale oil.
“How hard is it to stand up and say I’m against trains blowing up in my town?” Schalow asked, referring to public officials’ initial reluctance to impose tougher standards.
A recent Forum Communications poll found that 60 percent of respondents were concerned about the safety of shipping crude oil by rail, but there has been no real clamor from residents, Schalow said.
“It’d be nice if someone stood up and defended me once or twice,” he said. As for holding a meeting of supporters, well, “Who would I call and who would dare show up? There’s no political will in this state except for that anonymous 60 percent.”
In Minnesota, Gov. Mark Dayton has urged North Dakota to stabilize oil before loading crude onto trains. An estimated 50 North Dakota oil trains roll through Minnesota each week, many with 100 tanker cars.
Pressure to make North Dakota crude oil safe for interstate shipment is mounting on several fronts.
Other states, including New York and California, where refineries take Bakken crude, are considering safety requirements.
“There’s a lot more angst across the country than there is here,” Schalow said, adding that most of his contacts are from other states, including New York, California and Washington state.
“I think he’s a pretty straight shooter,” said Tim Meehl, mayor of Perham, Minn., who is concerned about oil trains traveling through his town. “I think everything he says has a lot of merit to it.”
Meehl has not met Schalow, but saw him at a meeting in Moorhead earlier this fall attended by Dayton and local officials, and has exchanged emails with Schalow.
“They don’t want to step on toes out there,” Meehl, a native of Oakes, N.D., said of North Dakota officials’ deference to oil interests. “We need the oil. We just need to do it in a safer way.”
In North Dakota, residents and politicians seem reluctant to do anything that risks discouraging energy production, a powerful economic engine, Schalow said.
‘Quiet acceptance’
“You can’t say anything that might impact business, no matter what,” he said, describing what he regards as North Dakota’s curious culture of quiet acceptance.
Regulators aren’t alone in singling out oil tanker cars. BNSF announced last week that it will charge a $1,000 fee for each older crude oil tank car, more prone to puncture than newer models. By one estimate, that would add about $1.50 a barrel to the transportation cost.
In Texas, energy companies have invested hundreds of millions of dollars to make crude safer to handle. The cost of stabilizing crude oil could trim potential revenue by perhaps 2 percent, according to the estimate of an unidentified industry executive interviewed by The Wall Street Journal.
Schalow has been an outspoken critic of the Bush presidency and North Dakota leadership, but said he really has no allies in either political party.
A conservative blogger once described him as a “truther” for his criticisms of Bush, whom he castigated for failing to take pre-emptive action against al-Qaida despite warning signs of their terrorist ambitions. Schalow dismisses the “truther” label as unfair, saying he offered no conspiracy theories in his book.
He said the paperback sold 4,000 or 5,000 copies after it came out in 2006. No book is forthcoming on the issue of Bakken crude safety, but Schalow is unlikely to stop writing his letters, emails and Facebook posts.
“I don’t think it’s a political issue,” he said. “I think it’s a public safety issue.”
Repost from Reuters [Editor: Watch industry lobbying efforts as the scramble for power ensues. For instance … note the posturing in this article by Lynn Helms, director of the North Dakota Department of Mineral Resources, who reportedly said “dealings with Quarterman have improved in recent months as oil train hysteria has subsided.” Nice to know that our concern for safety and clean air is so easily dismissed as hysteria. – RS]
Quarterman, regulator for U.S. oil trains, to step down: sources
By Patrick Rucker, WASHINGTON, Sep 24, 2014
PHMSA Administrator Cynthia Quarterman, left, during House testimony (Photo by Scott J. Ferrell/Congressional Quarterly)
(Reuters) – Cynthia Quarterman, the federal regulator who oversaw expansion of the U.S. oil train sector and the fallout from several fiery derailments, will step down, two sources familiar with her intentions said on Wednesday.
As administrator of the Pipeline and Hazardous Materials Safety Administration (PHMSA) since November 2009, Quarterman has been a leading safety official as oil train deliveries from North Dakota neared 750,000 barrels a day and spectacular derailments in the United States and Canada raised concerns about such shipments.
PHMSA, an agency within the U.S. Department of Transportation, has been under scrutiny for more than a year as officials have tried to respond to the hazards posed by oil train cargoes, which have grown in volume along with a rise in domestic crude production.
PHMSA did not confirm Quarterman’s departure, which reportedly will come next week.
Quarterman, previously an attorney whose practice focused on the transportation and energy industries, was often the face of federal policy, defending government actions to lawmakers, industry and safety advocates.
“If you have upset everyone a little, you’re probably doing a good job,” said Brigham McCown, a former PHMSA head.
“The prevailing view is she’s done a good job in challenging times,” McCown said.
Among other things PHMSA has been tasked with writing new safety standards for oil trains and other hazardous cargo. Tuesday marks a deadline for public comment on the proposed safety rules.
Quarterman and other regulators have often been caught between energy interests who argue oil-by-rail safety concerns are inflated and political leaders who represent communities along the tracks.
Lynn Helms, director of the North Dakota Department of Mineral Resources, said dealings with Quarterman have improved in recent months as oil train hysteria has subsided.
“As we moved to more of a science-based approach, things smoothed out,” he said. “Our more recent work with Quarterman and (U.S. Transportation Secretary Anthony) Foxx has been very, very positive.”
Another major incident on Quarterman’s watch was the pipeline rupture in Mayflower, Arkansas, in March 2013. About 5,000 barrels of crude oil spilled from a line that is part of Exxon Mobil’s Pegasus pipeline from Illinois to Texas.
(Reporting by Patrick Rucker; additional reporting by Ernest Scheyder in North Dakota; Editing by Ros Krasny and Sandra Maler)
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