Category Archives: Crude By Rail

Crude By Rail, Emergency Readiness & Response, Federal Regulation (U.S.), Insurance Industry, Rail industry

DOT: Rail insurance inadequate for oil train accidents

Repost from Politico
[Editor: Significant quote: “For ‘higher-consequence events’ — such as the one in Lac-Mégantic — ‘it appears that no amount of coverage is adequate,’ the analysis says. That’s because the maximum amount of coverage available on the market is $1 billion per carrier, per incident….’You should know the railroads are used to running bare — without adequate insurance,’ said Fred Millar, an independent rail consultant who has criticized the government’s oversight of oil trains.”  – RS]

DOT: Rail insurance inadequate for oil train accidents

By Kathryn A. Wolfe | 8/6/14
Several CSX tanker cars carrying crude oil in flames after derailing in downtown Lynchburg, Va. | AP Photo
The maximum amount of coverage available is $1 billion per carrier, per incident. | AP Photo

Most freight railroad insurance policies couldn’t begin to cover damage from a moderate oil train accident, much less a major disaster. And the Department of Transportation’s own database of oil train incidents is flawed because some railroads and shippers provide incomplete information that far understates property damage.

Those conclusions come from a DOT analysis of its own rule proposed to address the series of troubling derailments across North America as shipments of oil by rail surge.

The department issued the analysis Aug. 1, the same day it published its proposed oil train safety rule that is meant to create what Transportation Secretary Anthony Foxx calls a “New World Order” in oil trains regulations, including by requiring sturdier tank cars, tightened speed limits and improved brakes for the trains carrying an ever-greater amount of crude oil through communities from Southern California to Albany, N.Y.

The rule would not expressly address the insurance issue, except to cite the general liability landscape as part of the need for the rule, which seeks to prevent the worst disasters from happening and mitigate damages from those that do.

Gaps in insurance coverage became an issue after the July 2013 disaster in Lac-Mégantic, Quebec, which occurred when a train that had been left unattended careened down an incline, derailed and charred much of the downtown area, killing 47 people. The damages from that wreck could stretch into the billions of dollars, but the railroad responsible for the derailment carried only $25 million of insurance and wound up declaring bankruptcy.

DOT’s analysis says most of the largest railroads commonly carry around $25 million in insurance, though that can rise to as much as $50 million for trains hauling certain kinds of hazardous chemicals. Smaller railroads — such as the one in the Lac-Mégantic disaster — often carry much less than that.

But the agency’s Pipeline and Hazardous Materials Safety Administration estimated that the average derailment that spills crude oil will mean $25 million in total costs — bumping up against most of even the largest railroads’ current insurance limits.

For “higher-consequence events” — such as the one in Lac-Mégantic — “it appears that no amount of coverage is adequate,” the analysis says. That’s because the maximum amount of coverage available on the market is $1 billion per carrier, per incident.

“You should know the railroads are used to running bare — without adequate insurance,” said Fred Millar, an independent rail consultant who has criticized the government’s oversight of oil trains. “And the situation that is described in the [analysis] from Lac-Mégantic is only just the tip of the iceberg. The railroads basically know that they have cargoes that can cause massive, enormously greater death and destruction than what happened in Lac-Mégantic.”

Devorah Ancel, an attorney for the Sierra Club, said insurance coverage “needs to catch up with the heightened risk that is part of this industry now,” because otherwise “taxpayers end up covering it.”

The Association of American Railroads declined to comment, saying the group is still reviewing the pending rule and its supporting documents, including the regulatory analysis, and the American Petroleum Institute said it would file its comments as part of the public comment period.

“We are working closely with regulators and the rail industry in a comprehensive effort to enhance safety through accident prevention, mitigation and response,” API said.

But railroads know they’re underinsured and have groused about the status quo, particularly considering the fact that energy companies that ship oil and ethanol largely do not bear any liability for an incident once their product is loaded onto a train. And under “common carrier” regulations, railroads cannot refuse a shipment any kind of material assuming it meets proper regulations.

Warren Buffett’s BNSF railroad, the pioneer in the oil train industry, has been requesting that railroads get some of the same protections now afforded to the nuclear power industry, using the Price-Anderson Act as a model. That law requires power companies to contribute to an insurance fund that would be used in the event of an accident, and it also partially indemnifies the nuclear power industry.

The DOT analysis also points to a systemic weakness in the way the federal government collects data on derailments of crude oil and ethanol trains. In the section dealing with the probability of major rail accidents, the analysis observes that it’s “impossible to isolate the derailment rate of only crude oil and ethanol trains” due to “limitations in the reported data.”

That’s because PHMSA requires an incident report to be filed only if the incident led to the release of a hazardous material — so derailments that did not result in a spill aren’t included. As a result, even some dramatic accidents aren’t included in the database — for instance, one earlier this year that resulted in a crude oil train dangling over Philadelphia’s Schuylkill River.

Separately, DOT’s Federal Railroad Administration maintains data on derailments, including how much hazardous material was released — but doesn’t identify what type of substance it was. “As a result, it is impossible to use FRA data to identify crude and ethanol derailments,” the department said.

And the data that is reported, particularly to PHMSA, is often inaccurate, largely because it is self-reported by railroads or shippers, according to the analysis. And these self-reports often underestimate the damages done in spill incidents.

According to the analysis, damage information reported to PHMSA is typically “only the most basic costs” such as the value of spilled petroleum and damage to tracks and cars.

“PHMSA believes that response costs and basic cleanup costs, when they are reported, do not represent the full costs of an accident of the response,” the report said.

Underreporting damages, particularly for environmental cleanup costs, ends up hiding the true impact of a spill from policymakers, Sierra Club’s Ancel said. She hopes the pending rule will address the issue.

“It is extremely important that the industry is required to adequately report — and there should be some sort of mechanism in the rule where the agency has inspectors that are ensuring that they are,” she said. “So not only should the industry be on the hook for reporting, but the agency needs to be able to have the resources to ensure that they are.”

Bakken Shale, Crude By Rail, Emergency Readiness & Response, Evacuation, Explosion, Fire, Smoke

King Co., Washington worriedly preps for oil train fire

Repost from Crosscut – News of the Great Nearby, Seattle, WA
[Editor: – Emergency training is going on all across North America.  Two examples: see Missouri firefighters train to handle fires, and Norfolk Southern Brings 40 Emergency Responders from Nine States to World-class Training Center for Crude-by-Rail Safety Class, not including California.  Where are the stories about training of Northern California emergency responders?  – RS]

King County worriedly preps for oil train fire

Executive Dow Constantine says a training exercise helps but the region needs a reduction or elimination of the dangerous trains.
August 7, 2014
Tank cars hours after they derailed under the Magnolia Bridge in Interbay.
Tank cars hours after they derailed under the Magnolia Bridge in Interbay. Bill Lucia

Five rail cars carrying petroleum crude oil derail and catch fire near Boeing Field, about five miles south of downtown Seattle. That was the scenario during a tabletop exercise King County held Tuesday.

The planning exercise took place less than two weeks after three tank cars carrying highly flammable crude oil from North Dakota derailed in Seattle’s Interbay neighborhood. That incident was relatively benign. None of the cars leaked or caught fire. The mock scenario discussed on Tuesday was designed to be far more precarious.

“This is an emerging public safety threat,” said King County Executive Dow Constantine at a press conference on Wednesday. “And we need to have our emergency preparedness folks really up to speed on it and well-coordinated. And that’s what yesterday’s exercise was all about.”

The exercise highlighted some of the complications responders might face when dealing with burning tank cars of crude oil, such as monitoring toxic smoke, transporting evacuated people and delivering information to the public.

Between eight and 13 trains operated by BNSF Railway Co. pass through King County each week carrying crude oil, according to information the railroad released in June to the Washington Military Department.

A local fire chief involved in the exercise acknowledged on Wednesday that responders would most likely have to let some of the fuel burn off if one of those trains crashed and five tank cars were ablaze.

The cars commonly used to transport petroleum crude oil have a capacity of about 30,000 gallons apiece. In past wrecks, un-breached cars, heated by surrounding flames, have ruptured in dramatic explosions.

“We’ll want to probably suppress the fire enough to assess the integrity and exposure to the other tank cars. We’d certainly want to minimize life risks,” said Mark Chubb, Fire Chief of King County Fire District 20.

“It’s unusual for all five tank cars to breach,” he also said.

Battling flames would not be the only problem that burning tank cars of crude oil would present for responders.

“We have to be mindful of the impact of the smoke column on aviation,” Chubb said. He also noted that a large oil train fire could create problems on Interstate 5, even if the smoke and flames do not reach the highway. “The distraction of an event of this scale,” he said, “is going to be highly disruptive.”

Chubb added: “After you grapple with the fact that it’s a fire and it’s going to go on a while, it’s all about logistics.”

Walt Hubbard, director the King County Office of Emergency Management, viewed Tuesday’s exercise as helpful, because it got people from different agencies together in the same place, talking about how they would coordinate and communicate if there were a serious crude oil train accident.

In addition to emergency responders, staff from local transportation and public health departments attended, as did officials from federal agencies, such as the Federal Emergency Management Administration, the U.S. Coast Guard and the Environmental Protection Agency.

Representatives from BNSF were also on hand. The company operated the train that derailed in Interbay.

For Hubbard, having the railroad representatives at the exercise was important.

“We want to keep them engaged,” he said. Hubbard specifically pointed to dialogue that took place between BNSF representatives and fire officials about what kinds of equipment and people the railroad could deploy after an accident.

“That was a very good exchange,” he said.

Another topic that came up during the exercise was evacuations. If a rail car of crude oil is on fire, U.S. Department of Transportation guidelines recommend that responders consider evacuating people within a half-mile of the accident scene.

The risk of an explosion would be one immediate reason to evacuate the area around the fire. But Chubb, the King County fire chief, also noted that toxic smoke is a hazard, and said that responders would consult with officials from public health agencies and the EPA when considering whether to tell people to leave the area.

Bakken Crude, Crude By Rail, DEIR, Derailment, DOT-111, Explosion, Valero Benicia Refinery

Sacramento leaders: Risk of oil train explosions must be acknowledged

Repost from The Sacramento Bee

Sacramento leaders: Risk of oil train explosions needs to be acknowledged

By Tony Bizjak, Aug. 5, 2014
G472MO6JN.6SUB
An oil train derailment and explosion in Quebec last July prompted Canadian officials to impose tougher safety regulations. | Paul Chiasson / AP/Canadian Press

Sacramento area leaders say the city of Benicia is failing to acknowledge the risks of explosions and fires that could happen if the Bay Area city approves Valero’s plan to run crude oil trains through Northern California to its refinery.

The accusation, in a draft letter released Tuesday by the Sacramento Area Council of Governments, comes in response to a Benicia report that said twice-daily rail shipments of 70,000 barrels of crude will pose no significant threat to cities on the rail line, such as Roseville, Sacramento and Davis.

The Sacramento group is calling that finding “fundamentally flawed,” and points out that the federal government issued an emergency order in May saying new volatile crude oil shipments are an “imminent hazard” along rail lines.

“I don’t know how you can conclude there is not a significant hazard,” said Kirk Trost, an attorney for SACOG, a planning agency of the region’s six counties and 22 cities. “The (environmental report) never looks at the risk of fire and explosion in one of these situations.”

Trost said the letter has not yet been endorsed by the SACOG, but was written by SACOG staff in consultation with regional leaders.

It urges Benicia to redo its analysis and provide a clearer picture of the risks the project imposes on up-rail cities. It also says the project, proposed by Valero Refining Co., should not be approved without new funding to train firefighters to deal with oil spills and for rail safety improvements.

It also calls for limits on the amount of time crude oil tank cars are stopped or stored in cities. “Our view is they should not be stored in any of our communities along the line,” Trost said.

Valero, which receives most oil at its Benicia refinery via ship, plans to begin taking deliveries by train from various sites in North America, including potentially from the Bakken fields of North Dakota. Bakken trains have been involved in several recent explosive fires, including a derailment in the Canadian town of Lac-Megantic that killed 47 residents. Federal officials said last month that studies show Bakken oil is more volatile than other crude oils. The oil industry disputes that assertion.

The Benicia report concluded that an oil spill between Roseville and Benicia can be expected to happen once every 111 years. It acknowledges “if a release in an urban area were to ignite and/or explode, depending on the specific circumstances, the release could result in property damage and/or injury and/or loss of life,” but doesn’t expand on that statement. Instead, it says rail transport is becoming safer.

The SACOG letter challenges the once-in-111-years figure, noting it was calculated using data from 2005 to 2009, and disregards a dramatic surge in crude oil rail spills and fires in the last two years. Benicia city planners did not respond to a Bee request for comment.

Benicia’s analysis stops at Roseville. Several local officials, including Plumas County supervisor Kevin Goss, say they want it to include likely routes to the north and east, including the Feather River Canyon and the Dunsmuir areas, both of which have been designated by the state as high-hazard areas for train derailments.

“I think it should be studied all the way out to where (the shipments) originate,” Goss said.

Benicia officials have said they did not study beyond Roseville because they do not know which route crude oil trains might take beyond that point.

Several attorneys, unassociated with the case, say state environmental law lays out what cities should study, but has gray areas.

Environmental law attorney Andrea Matarazzo, a partner with the Pioneer Law Group in Sacramento, says case law makes it clear that a city can’t draw a line around its project and study only local impacts. But she said the city can make a judgment call on where to stop, if it has a reasonable explanation.

Another environmental law attorney, Jim Moose, partner at Remy, Moose, Manley in Sacramento, said that CEQA does not require a city to look at the “Armageddon” or worst-case scenario, but cities are obligated to look at reasonably foreseeable impacts. “It seems to me a good EIR would lay out the consequences and not just say the probability of it, especially since the time frame in question is not all that long” from a legal perspective. “But it is a gray area of the law.”

SACOG attorney Trost said the draft letter will be reviewed by the SACOG board later this month. Benicia has set a Sept. 15 deadline for receiving comments and questions to its environmental analysis. Yolo County sent Benicia a similar complaint letter last month.

Bakken Crude, Crude By Rail, DOT-111, Tank car identification

Oil industry recommends: use “highest-danger” labeling on bakken oil tank cars

Repost from Reuters
[Editor: The oil industry recommends highest-danger labeling on Bakken crude oil tank cars despite its misleading claim that Bakken is no different from other light sweet crudes.  This stance puts pressure on the rail industry to come up with stronger tank cars sooner.  Um… follow the money?  – RS]

Oil group wants highest-danger label for Bakken rail shipments

New York, Aug 5, 2014

Aug 5 (Reuters) – A U.S. oil industry group is recommending that all crude shipped by rail from North Dakota’s Bakken fields be labeled as the most-dangerous type of oil cargo, a designation that could hasten the use of new or upgraded tank cars.

On Monday, the North Dakota Petroleum Council (NDPC) released the final results of a wide-scale study on the quality characteristics of Bakken crude, which has been involved in several fiery oil-train derailments over the past year.

The study confirmed preliminary findings released in May suggesting that Bakken was little different from other forms of light, sweet U.S. crude and posed no greater threat versus other fuels when transported by rail.

The NDPC also issued a series of recommendations following the study, however, including one urging oil-by-rail shippers to classify all Bakken crude oil as “Packing Group I” hazardous materials.

That is the highest-risk level of a three-tiered danger assessment, and the NDPC said it was recommended “even though the majority of samples tested for the study would fall within specifications for PG (Packing Group) II.”

Current methods for testing boiling point, the key criteria for differentiating PG I and II classifications, can be inconsistent, the NDPC said. Because it typically contains a high proportion of very light hydrocarbons and petroleum gases, Bakken crude tends to boil at lower temperatures.

“The margin of error for the test methodology can result in different labs testing the same sample with values meeting both PGs. PG I has the more stringent standards and is therefore recommended to avoid further confusion,” said the NDPC report, which was prepared by industry consultants Turner, Mason & Co.

Historically the Packing Group label has made no material difference in how oil is handled on trains; its only purpose was to inform emergency responders about the cargo. The DOT-111 tank car, the model used almost exclusively to ship oil by rail, is able to transport any Packing Group. Many oil companies have been using PG I routinely simply to ensure they were compliant.

But under new regulations proposed last month by the U.S. Department of Transportation, the Packing Group determination could become a pivotal factor in determining how quickly shippers use new or upgraded tank cars that will gradually replace older-model DOT-111s long seen as flawed.

The NDPC represents major producers in the Bakken including Marathon Oil Corp, ConocoPhillips, Continental Resources and Hess.

Authorities had already begun to crack down on misclassified oil shipments after the Lac Megantic tragedy in Canada last year, when a runaway oil-train with cargo from the Bakken energy patch derailed and killed 47 people in the center of a Quebec town.

In February, the DOT’s Pipeline and Hazardous Materials Safety Administration (PHMSA) fined three companies for using incorrect Packing Group labels for their Bakken cargoes. Two of them had mislabeled shipments as PG II, when in fact they should have been labeled PG I. A third company had used a PG III label rather than PG II.

The DOT rules last month said older model DOT-111 cars would not be allowed to carry Packing Group I crudes within two years, while less dangerous crudes that fall into PGs II and III could still be shipped in the older cars for three and five years.

The rules are open to public comment and may not be finalized for several months.

[Editor: To send a comment, see Two-month comment period starts for new federal oil train rules. -RS]

In its own study released last month, the PHMSA said most crude from the Bakken tested as PG I or II material – “with a predominance to PG I”. It also said the oil was “more volatile than most other types of crude,” a finding disputed by both the American Petroleum Institute and NDPC.

(Reporting by Jonathan Leff; Editing by Tom Brown)