The North American oil boom is in high gear, but the government is putting on the brakes when it comes to some delivery standards of the global commodity by rail.
Advocated by the Association of American Railroads and implemented by the US Department of Transportation (DOT), the new regulations include:
- Classification and Characterization Program: Testing methods must be in place to more accurately classify, characterize and analyze mined liquids and gases. This will include frequent sampling to monitor quality and variability throughout the shipping supply chain.
- Phase Out Old Cars: All High Hazard Flammable Trains (HHFT) – those carrying 20 or more carloads of Class 3 flammable liquid – must upgrade older cars (DOT-111s) between 2017 and 2020. Starting in 2015, newly constructed cars must include thicker hulls, thermal protection systems, advanced braking mechanisms, and rollover protection.
- Route Selection Process: HHFT carriers must conduct a risk assessment, including the application of 27 security and safety measures, and determining population density and emergency response capabilities before selecting an appropriate transport route.
- Notification of Travel: All HHFT transporting greater than one million gallons of Bakken crude must give at least 30 days’ notice to State Emergency Response Commissions and any other necessary officials when travelling through their state.
- Speed Limits: Dependent upon age, braking systems and safety specifications, HHFT will be restricted to 30, 40 or 50 miles per hour in any given area.
An increasing number of incidents off the tracks have prompted the push for more stringent safety practices.
It was just one year ago that 47 people lost their lives in Lac-Megantic, Québec when a train carrying 1.5 million gallons of crude oil derailed and exploded.
According to the US Pipeline and Hazardous Materials Safety Administration, train derailments spilled an estimated 1.15 million gallons of crude in 2013. That is more than the previous 37 years combined which totaled 800,000 gallons. The tally also does not include the Québec disaster.
Significant change in any industry takes time and money. Since rail transport companies do not typically own the tank cars, tank car manufacturers and oil producers will foot the bill for the majority of the upgrades and replacements. This translates to higher costs at the pump for consumers.
It also raises concerns. Railroads are anxious about potential gridlocks due to slower speeds, oil companies worry about reduced shipping capacities and insurers are concerned about providing adequate coverage. And the American Fuel & Petrochemical Manufacturers is examining the possible fuel shortages and economic impact if shippers do not have sufficient time to make modifications.
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So, will producers start shipping by truck instead of rail? Even with these new regulations and raised concerns, we can’t overlook the reality of the bigger picture.
First, no mode of transportation is 100 percent safe. Rail may currently be the more efficient option – a tanker only holds about one third of a railcar and is significantly slower over long distances. But as we start to see the effects of the new regulations, will it still be more efficient? Even if this is the case and a producer did switch, there would still be added costs and risks associated with putting many more trucks on the road.
If the trend in shipping oil by rail is going to continue, infrastructure and protocol must change. As CEO of Canadian Pacific Railway E. Hunter Harrison states in an interview with the Wall Street Journal, “Can we do this safer? Yes. But who’s going to pay? If you decide this commodity must be moved in the public interest, then I think all of us have to pay”. The new regulations for rail will in all likelihood mean increased costs from manufacturer to consumer, but they’re in the interest of public safety.