Feds Enforce First Crude By Rail Regulations

In the first case of its kind, federal regulators fined three oil companies for allegedly either failing to test, or improperly testing crude from the Bakken Shale in N.D., resulting in rail companies not knowing which type of oil tanker cars to use.
February 6, 2014, 11am PST | Irvin Dawid
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Crude from the Bakken Shale formation in North Dakota and surrounding areas has been found to be more flammable than conventional and heavier crudes. Four recent explosions (noted here) beginning last summer of oil unit trains originating in this region resulted in an investigation dubbed the Bakken Blitz by the Pipeline and Hazardous Materials Safety Administration (PHMSA) and the Federal Railroad Administration, both divisions of the U.S. Department of Transportation (DOT).

"The fines, while small, are the first penalties to emerge from a widening investigation into how the oil industry is testing the flammability of crude pumped from the Bakken Shale of North Dakota, and whether it is using tank cars strong enough to keep oil cargoes from exploding in case of a derailment," writes Russell Gold, senior energy reporter for The Wall Street Journal.

The companies allegedly either didn't test—or improperly tested—crude oil bound for railcars. As a result, a combustible type of oil could have been loaded into railcars not designed to handle such volatile liquids, regulators said. (PHMSA) said 11 of 18 crude samples destined for tank cars weren't properly classified.

What is particularly significant is that existing regulations were enforced. We recently described new, voluntary regulations that the DOT was able to broker and "urgent recommendations" proposed by the National Transportation Safety Board (NTSB), an independent safety investigation agency charged by Congress.

Shipping oil involves several parties, "railroads, energy companies, refiners and shippers (who) have been at odds over how to solve the safety issues that have arisen from surging oil production in the Bakken Shale," wrote Gold's co-workers earlier (and posted here). These fines clearly indicate who is at fault. Gold was unable to obtain comments from Hess Corp, Whiting Petroleum Corp. and Marathon Oil Corp.

In PHMSA's press release (PDF), DOT Secretary Anthony Fox warned, The fines we are proposing today should send a message to everyone involved in the shipment of crude oil: You must test and classify this material properly if you want to use our transportation system to ship it.”

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Published on Wednesday, February 5, 2014 in The Wall Street Journal
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