Category Archives: Federal Regulation (U.S.)

WALL STREET JOURNAL: Crude Slump, Pipeline Expansion Mark End of U.S. Oil-Train Boom

Repost from the Wall Street Journal

Crude Slump, Pipeline Expansion Mark End of U.S. Oil-Train Boom

As more pipelines reach shale regions, producers have a cheaper way to move their oil to market
By ALISON SIDER and LAURA STEVENS, July 25, 2016 6:00 p.m. ET
Even at its height in 2014, crude-by-rail accounted for less than 2% of total rail volumes.
Even at its height in 2014, crude-by-rail accounted for less than 2% of total rail volumes. PHOTO: DAVID PAUL MORRIS/BLOOMBERG NEWS

The oil-train boom is waning almost as quickly as it began.

Rail became a major way to move crude after companies began unlocking new bounties of oil from shale formations, with volumes rising from almost nothing in 2009 to more than one million barrels a day by 2014, according to the U.S. Energy Information Administration.

But those numbers began falling after oil prices started tumbling two years ago, and aren’t projected to recover anytime soon. In April, just 430,000 barrels of oil rode the rails each day, according to the latest federal figures.

Some of the decline came from a drop in U.S. oil production, but oil and rail executives say the drop-off may be permanent. “At least some portion, and it could be a pretty large portion,” of the rail business won’t return, said Union Pacific Corp. Chief ExecutiveLance Fritz.

More pipelines have begun reaching North Dakota and other shale regions, giving producers a cheaper way to move their oil to market.

Also, a string of fiery crude-freight-train derailments—including one in Lac Mégantic, Quebec, that killed 47 people in 2013—have prompted a host of new and expensive regulations, and fueled opposition that has helped delay major rail projects on the West Coast, where a dearth of pipelines makes rail useful. Regulators have mandated new safer tank cars, and older tank cars are being phased out—adding to future costs for transporting oil.

The changes are evident in North Dakota, once the epicenter of the crude-by-rail trend. Oil output from the state’s Bakken Shale formation has fallen by 180,000 barrels a day from its 2014 peak. Meanwhile, pipeline takeaway capacity has more than doubled since 2010.

EOG Resources Inc., one of the first oil companies to see the potential for trains to relieve pipelines, opened its first rail loading terminal in Stanley, N.D., in 2009. But that terminal hasn’t loaded a train in more than a year, according to Genscape, a data provider that tracks activity at U.S. rail terminals.

“New pipeline infrastructure has been put in place to move significant volumes of oil to market,” an EOG spokeswoman said.

Enough pipeline capacity is coming online to replace all of the current volume BNSF Railway Co. is shipping out of North Dakota, said David Garin, the railroad’s group vice president of industrial products.

BNSF used to transport as many as 12 trains daily filled with crude primarily from North Dakota’s Bakken Shale, carrying about 70% of all rail traffic out of the area. Now it is down to about five a day.

“Will this business be back to 12 trains a day? Probably not,” said Mr. Garin. “Will it be zero? Probably not.”

Even at its height in 2014, crude-by-rail accounted for less than 2% of total rail volumes, according to Association of American Railroads data. But its decline threatens what was once viewed as a sizable driver of growth for the railroad industry, one that many rail companies, along with oil and gas producers, made investments to support.

Between 2010 and 2015, 89 terminals were built or expanded in the U.S. and Canada to load crude on trains, and nearly as many to offload it, according to consulting firm RBN Energy LLC.

The oil pouring out of U.S. fields was so much cheaper—more than $20 a barrel below international benchmark prices at times—that refineries were eager to pay higher rail shipping costs in exchange for some of it.

New pipelines have helped shrink that price difference by allowing the landlocked oil to reach market. And the U.S. has lifted a ban on crude exports, which allows American crude to be sent abroad freely and is expected to help keep U.S. and international crude prices more closely aligned.

Now oil trains are competing against tanker ships carrying foreign crude. Analysts say rail deliveries are likely to fall even further once shipping contracts signed during the boom expire in the coming months.

There could soon be more than enough space to carry away all Bakken oil through pipelines now in the works. Phillips 66 is partnering with pipeline company Energy Transfer Partners LP to develop a pair of pipelines that will bring North Dakota crude to Illinois and then down to Texas.

The endeavor, which will cost close to $5 billion, is expected to take a major bite out of oil train traffic, even though the pipelines will ultimately bring oil to the Midwest and the Gulf of Mexico, rather than to the East and West coasts, where trains have primarily taken it.

Phillips 66 said earlier this year it may still be cheaper to take that oil and put it on a barge for delivery by sea to the coasts than to send it directly there by train.

Rail Industry Requests Massive Loophole in Oil-by-Rail Safety To Extend Bomb Trains Well Beyond 2025

Repost from DeSmogBlog

Rail Industry Requests Massive Loophole in Oil-by-Rail Safety To Extend Bomb Trains Well Beyond 2025

By Justin Mikulka, July 21, 2016 – 13:00

In the most recent oil-by-rail accident in Mosier, Oregon the Federal Rail Administration (FRA) concluded that the tank cars involved — the jacketed CPC-1232 type — “performed as expected.” So an oil train derailing at the relatively slow speed of 25 mph should be “expected” to have breached cars resulting in fiery explosions.

Current regulations allow those tank cars to continue rolling on the track carrying volatile Bakken crude oil and ethanol until 2025 with no modifications.

Yet industry lobbying group the Railway Supply Institute (RSI) has now requested the Federal Railroad Administration to essentially allow these jacketed CPC-1232 tank cars to remain on the tracks for decades beyond 2025.

This was just one of the troubling facts that came to light at the National Transportation Safety Board (NTSB) roundtable on tank car safety on July 13th, and perhaps the one of greatest concern to anyone living in an oil train blast zone like Mosier, Oregon.

Just Re-Stencil It and Call It a DOT 117

One of the biggest risks with Bakken oil train accidents is that often the only way to deal with the fires is to let them burn themselves out. This can result in full tank cars becoming engulfed in flames for hours or days in what is known as a pool fire. This can lead to a “thermal tear” in the tank and the signature mushroom cloud of fire so often seen with these derailments.

The new regulations address this issue by requiring tank cars to have a layer of ceramic insulation covering the entire tank car to prevent the oil from heating up to the point of creating a thermal tear (ceramic shown in pink in the image below.)


Image credit: NTSB

However, the RSI has requested the FRA to allow the existing jacketed CPC-1232 cars, like the ones in the Mosier accident, to not require the ceramic thermal protection.

The industry’s argument is that the current fiberglass insulation on the CPC-1232 is sufficient protection. However, the fact that the fiberglass insulation was not designed to protect the contents of a tank car from fire does not seem to bother the RSI.

At the same time the RSI is arguing against thermal protection for CPC-1232s, the RSI has helpful videos on its website explaining the new safety features for DOT-117 tank cars — including “thermal protection.”

The NTSB’s Robert Sumwalt summed up what this request would mean in one simple statement at the July 13 round table event saying, “the same type of cars as in Mosier can be re-stenciled as DOT-117R with nothing more than a new bottom outlet valve.” [R stands for retrofit.]

So, they are essentially asking to paint over the CPC-1232 label on the tank cars with a DOT-117 while doing nothing more than changing the bottom outlet valve. Which means we should expect many more accidents like Mosier in the future since most of these CPC-1232 cars are only a few years old and they have an expected working life of 30-40 years.

As Robert Sumwalt said in his opening statement explaining why we should expect many more fiery oil train derailments with the existing tank car fleet, “just do the math.”

Industry Arguments Laughable If Not For the Consequences

Would you believe that one of the arguments made at the roundtable in favor of not requiring thermal protection on these cars was that the oil itself acts as a heat sink? Which is true. Until the point where the oil absorbs so much heat from the fire that the tank car explodes.

However, the reason this argument is given credibility is that the regulations only require a tank car to endure sitting in a pool fire for 100 minutes without exploding. Forget the fact that many of the Bakken oil train accidents have involved fires that burned for days.

This 100-minute limit was the same reasoning used to justify the fiberglass insulation on the current jacketed CPC-1232 as offering sufficient protection, as per the industry request. Which led to the following exchange between the NTSB’s Sumwalt and RSI representative John Byrne.

Byrne: “In our own modeling the fiberglass insulation system met the federal requirement for thermal protection.”

Sumwalt: “But in reality in the fiberglass situation, doesn’t the fiberglass all just melt… doesn’t it also melt and all end up pooling down in the bottom in the void between the blanket and the shell?”

Byrne: “Basically yes…but at the same time, that whole system acts as a thermal protection system in that it meets the requirement based on the federal law.”

Sumwalt: “Ok, thanks. So it meets the requirements.”

So, along with the oil itself being offered as adequate thermal protection, we also get fiberglass that melts in a fire being offered as protection for anyone in the blast zone.

So what did the regulators have to say about this absurd argument?

FRA’s Karl Alexy made it clear that “industry” concerns were receiving serious consideration saying, “we’re not taking it lightly, we understand what it means to industry… be certain that we are taking this very seriously.”

Well, we do understand what it means to the industry. Adding ceramic thermal protection would cut into profits. And one thing that was made clear repeatedly during the day’s discussion was that this was all about the money and that safety was only for people worried about “risk.”

As usual when there is a discussion about oil train safety, the oil industry lobbying group the American Petroleum Institute had a seat at the table. API representative Susan Lemieux cut to the heart of the issue with some actual honesty.

“In the industry we don’t see transportation as a risk, it is just a function of business.”

Why try to improve the situation when you don’t see any risk?

The FRA and the Pipeline and Hazardous Materials Safety Administration have informed DeSmog that they will issue a formal response to the industry’s request to allow the fiberglass to qualify as thermal protection in the near future.

The Ground Rules – Profits Over Safety

In the above slide shown of the DOT-117, there is one other important thing to note. The shells on those tank cars are 9/16th of an inch thick. The shells of the jacketed CPC-1232 are 7/16th of an inch thick. This difference has safety implications as the thinner shells rupture more easily.  The RSI points out this fact in a video on its website about the advantages of the thicker shells on the DOT-117 which they say are “less prone to puncture.”

But the more important difference, as we have pointed out repeatedly at DeSmog, is that safer car designs are heavier, which means they can transport less oil per car. That lower capacity again cuts into profits. This point was made by ExxonMobil in a slide they presented to regulators arguing against thicker tank shells.

While Exxon was not at the roundtable, plenty of oil and rail industry representatives were, and they made this point very clear.

Gabe Claypool, President of oil train operators Dakota Plains, explained why it made economic sense to use CPC-1232s over DOT-117s.

“A lot of it’s economics as well…we were just having a conversation around the sizing of the car, the 1232 car type is very much in abundance and it is also a larger car. In the current category of still trying to be profitable, if I can get that extra volume in a larger car that is still regulatorally [sic] compliant, they’re [sic] gonna stick with that.”

Richard Kloster of rail consulting firm Alltranstek was one of the more vocal participants during the roundtable and he repeatedly made points about the economics of retrofitting the CPC-1232 over buying the new DOT-117 saying, “The retrofit is always going to win economically.”

Kloster also made it clear where the industry put its priorities when it came to safety versus profit saying, “There has got to be a balance between safety and the economic viability of moving these products by rail” and that there were a “lot of cases, you know, where economics wins all the time but risk trumps economics in some cases.”

Economics wins all the time.

There was one representative from labor at the roundtable who did not offer a comment until the final closing segment, but he also shared the reality of what was driving the decisionmaking when he discussed the need for safety but stated, “I know it’s about money.”

ExxonMobil Wins Again

So, in the end, ExxonMobil and the oil industry have won again. Watching this roundtable and the many congressional hearings and previous NTSB events in the past few years and seeing the lack of progress on real safety improvements, it almost seems like this all was orchestrated from the start.

In the years leading up to the latest tank car rulemaking, the industry essentially ordered a whole new fleet of CPC-1232 cars which they are currently using. The CPC-1232 cars have the thinner tank shells which makes them more prone to puncture and also more profitable. And they are ok to use, unchanged, until 2025. If the industry request is approved, those cars will just need new bottom outlet valves after 2025.

Regardless, they will always have the thinner tank shells, like Exxon wanted.

At the end of the July 13 event, Robert Sumwalt made an interesting statement. He said, “some of us met yesterday to go over the ground rules.”

The meeting where they went over the ground rules was not open to the public or media. If one were to hazard a guess as to what the first and foremost ground rule set was, it would be a safe bet to posit it was that “economics wins all the time.”

Blog Image Credit: Dawn Faught via NTSB

 

Feds Propose New Safety Oil Spill Response Plans and Information Sharing for High-Hazard Flammable Trains

By Roger Straw, July 20, 2016

Following are links to 4 sources with information about the PHMSA’s new proposed rules.  First from the PHMSA itself, then ThinkProgress, Bakken Magazine, and the California Association of Counties.

PHMSA Proposes New Safety Oil Spill Response Plans and Information Sharing for High-Hazard Flammable Trains

Pipeline and Hazardous Materials Safety Administration
By Artealia Gilliard, 7/13/16

WASHINGTON – The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), in coordination with the Federal Railroad Administration (FRA), today announced proposed regulations for Oil Spill Response Plans and Information Sharing for High-Hazard Flammable Trains (HHFTs) to improve oil spill response readiness and mitigate effects of rail incidents involving petroleum oil. The proposed rule would update and clarify the comprehensive oil spill response plan requirements for certain trains, and would require railroads to share information with state and tribal emergency response commissions to improve community preparedness for potential accidents. The rule would also incorporate a test method for initial boiling point for flammable liquids into the hazardous materials regulations. (continued…)


New Federal Rules Proposed for High-Hazard Flammable Trains

Calif. State Ass’n of Counties
By Karen Keene, Cara Martinson, 7/21/16

Two federal agencies are working on new regulations related to so-called “oil trains” that have become more common recently. The goal is to improve oil spill response readiness and mitigate effects of rail incidents involving petroleum oil.

The U.S. Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), in coordination with the Federal Railroad Administration (FRA) announced proposed regulations for Oil Spill Response Plans and Information Sharing for High-Hazard Flammable Trains (HHFTs).

The proposed rule would update and clarify the comprehensive oil spill response plan requirements for certain trains, and would require railroads to share information with state and tribal emergency response commissions to improve community preparedness for potential accidents.

According to the PHMSA announcement… (continued…)

New Oil Train Rules Would Force Railroad Companies To Plan For The Worst

ClimateProgress
By Natasha Geiling, 7/14/16 3:23 PM

A little over a month after a Union Pacific train carrying Bakken crude oil derailed outside of the tiny Oregon known of Mosier, the Department of Transportation has announced new rules aimed at ensuring that communities near oil train routes have adequate information and help in the event of an oil derailment.

The new rules would, among other things, require railroad companies that ship oil by rail to come up with response plans in case of a worst-case scenario oil spill — something that most railroad companies are not currently required to do.  (continued…)


PHMSA proposes new rules for high-hazard, flammable trains

The Bakken Magazine
By Patrick C. Miller, 7/20/16

In response to train derailments involving flammable oil, the Pipeline and Hazardous Materials Safety Administration (PHMSA) last week announced proposed regulations for oil spill response plans and the sharing of information with state and tribal governments.

PHMSA said the new regulations—aimed at high-hazard flammable trains (HHFT)—are intended to improve oil spill response readiness and mitigate effects of rail incidents involving petroleum oil. The effort is being coordinated with the Federal Railroad Administration.

“The substantial surge in our country’s production of crude oil is creating a serious need for improved response and communication between railroads and the communities through which they travel,” said Therese Dominguez, PHMSA administrator. “This rule would help to ensure that railroads provide vital information to first responders to help them prepare for and respond to a derailment involving crude.”  (continued…)

‘MOSIER’ Act demands derailment investigations and more

Repost from the Hood River News

‘MOSIER’ Act demands derailment investigations

July 19, 2016

DAMAGED Union Pacific oil train car is trucked away from town on June 8 during an anti-oil train rally at exit 69 in Mosier.
DAMAGED Union Pacific oil train car is trucked away from town on June 8 during an anti-oil train rally at exit 69 in Mosier. Photo by Kirby Neumann-Rea

Oregon Senators Jeff Merkley and Ron Wyden introduced a bill last Wednesday that would compel federal regulators to investigate every major oil train derailment.

The bill came in response to the June 3 fiery derailment in Mosier.

The Mandate Oil Spill Inspections and Emergency Rules (MOSIER) Act calls on the National Transportation Safety Board (NTSB) to clarify the Federal Rail Administration’s authority to place moratoriums on oil train traffic after major wrecks, and would require the Department of Transportation to reduce the amount of volatile gases in the crude oil those trains have been hauling.

“As Oregon has seen firsthand, these oil trains are rolling explosion hazards,” Merkley said in a statement. “That’s unacceptable. We need long-term solutions that will keep communities safe. Every accident needs to be fully and independently investigated.”

photo
U.S. Sen. Jeff Merkley

The NTSB declined to launch a formal investigation into the Mosier derailment because there were no injuries or fatalities, and they deemed the wreck didn’t bring to light any new significant safety issues.

In a July 15 letter, the board replied that the agency “decided not to launch on the Mosier derailment due to limited resources and the current investigative workload in the Office of Railroad, Pipeline and Hazardous Materials Investigations (RPH). This information indicated that the circumstances of this accident did not pose any new significant safety issues. The tank cars were breached in a manner similar to those that we have seen in other accident investigations. In addition, the derailment resulted in no injuries or fatalities.”

Merkley argued the Federal Rail Administration should have the power to enforce moratoriums until identified problems are fully resolved, and that the more volatile type of crude known as Bakken needs to be “stabilized before it rolls through our communities.”

“Oregonians deserve the strongest possible protections from oil train derailments,” Wyden said. “This bill ensures that federal authorities can stop trains after a major derailment until a thorough investigation has been completed, and that the NTSB has ample resources to closely examine the root causes of such a crash.”

photo
Sen. Ron Wyden | Photo by Kirby Neumann-Rea

The proposed Act would:

  • Require the NTSB to investigate every major oil train derailment and provide resources to hire additional investigators.
  • Clarify the Federal Rail Administration’s authority to put a moratorium on unit oil trains following an accident to allow for investigations to be completed and safety recommendations to be implemented.
  • Requires the Department of Transportation to establish and enforce a standard that reduces the amount of volatile gases in crude oil.

The MOSIER Act would supplement a 2015 rail safety bill, Hazardous Materials Rail Transportation Safety Improvement Act, which seeks to establish a fee on outdated tanker cars in order to get them off the tracks faster. Funds from the fee would pay for cleanup costs associated with railroad accidents, railroad staff cost, and training local first responders.

Merkley and Wyden were among 12 policymakers who signed that bill.