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DOT Releases Proposed Crude-by-Rail Rules; New Bakken Data

In what is a mixed bag for the oil and railroad industries, the U.S. Department of Transportation (DOT) on Wednesday unveiled proposed rules to improve the transport of crude oil via rail, proposing enhanced tank car design specifications, fuel classification and operational requirements for handling crude.

A notice of proposed rulemaking (NPR) and advanced notice of proposed rulemaking (ANPR) were released by DOT to improve the safe transport of large quantities of flammable materials by rail, which has escalated as an issue with the boom in U.S. shale oil/natural gas production (see Shale Daily, May 2).

Transportation Secretary Anthony Foxx said the rules are intended to address the "three dimensions" of the issue: tank cars, crude oil composition/classification, and operating guidelines for handling hazardous cargo.

"While we have made unprecedented progress through voluntary agreements and emergency orders [see Shale Daily, Feb. 28], today's proposal represents our most significant progress yet in developing and enforcing new rules to ensure that all flammable liquids, including Bakken crude and ethanol, are transported safely," Foxx said.

The NPR is based on an ANPR published last September by DOT's Pipeline and Hazardous Materials Safety Administration (PHMSA), and is supposed to reflect more than 152,000 comments received since then. PHMSA will seek comments on specific provisions in the months ahead, including:

  • Defining "high-hazard flammable train;"
  • Better classification of mined gases and liquids;   
  • Rail routing risk assessment;
  • Notification of state emergency response commissions; and
  • Reduced operating speeds and enhanced braking.

PHMSA separately has released a report summarizing the analysis of Bakken crude oil data that has been gathered by PHMSA and the Federal Railroad Administration (FRA) between last August and May this year, concluding that the crude supplies from the Bakken in North Dakota tend to be "more volatile and flammable than other crude oils."

In May the North Dakota Petroleum Council (NDPC) released results of an independent study it commissioned that found no major differences between Bakken and other U.S. crudes (see Shale Daily, May 21). An NDPC spokesperson expressed disappointment with part of the DOT proposal:

“While we are generally supportive of the new standards proposed by the DOT, we are disappointed that the agency has failed to follow sound science that proves Bakken crude is similar to other light sweet crudes. In fact, the information provided by the DOT and PHMSA in today’s report does not support the claim that Bakken crude is more volatile and flammable, lacks comparative analysis to other crude oils and is nearly identical to the data provided by the [NDPC-supported] Turner, Mason and Co. study presented in May."

In response to the DOT proposals and findings, North Dakota's chief oil/gas regulator, Lynn Helms, director of the Department of Mineral Resources, issued a statement reiterating that rail shipment of the state's booming crude oil production is an essential part of its emergence as the nation's second largest oil-producing state.

"It's too early at this point to determine what impacts this [200-page] document could have on [our] oil production; however, we will review the document and work with the [state] pipeline authority on how to best advise the Industrial Commission moving forward."

DOT officials said "the safety risk presented by transporting Bakken crude oil by rail is magnified both by an increasing volume of Bakken being shipped throughout the United States, and the long distances over which the product is shipped." In 2008, there were 9,500 rail-carloads of crude moved through the nation, compared to last year when there were 415,000 rail-carloads, DOT said.

In addition to updated standards for the design and operation of crude-carrying tank cars, which the rail industry has been urging for a number of years, the proposed rules are aimed at reducing operating speeds with a 40 mph maximum speed restriction in all areas, or in high-threat urban areas, or in areas of 100,000 population or more.

Earlier this month, Florida-based CSX Corp. senior executives during an earnings conference call underscored the continuing growth in the amount of crude oil being shipped by rail and voiced concerns about proposed federal regulations that they feared would drop speed restrictions to 30 mph (see Shale Daily, July 18).

"While we have not seen the proposals [as of July 16], we have heard that a 30 mph speed limitation is one of the options being considered, and we think that would severely limit our ability to provide freight service to our customers, and also provide passenger and commuter services," said CSX CEO Michael Ward said. "There are all kinds of corollary impacts of this."

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