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Fatal Quebec rail disaster fuels pipeline vs. oil debate

Author : Alan Franck, Editor, HazardEx

18 July 2013

Authorities think that 50 were killed in the July 6 train disaster at Lac Mégantic in the Eastern Townships of Quebec, Canada. Police and investigators are trying to piece together what caused the release of the huge oil train from the yard above the town. The engineer had left the train earlier, and it was driverless when it rolled downhill 11 kilometres and derailed in the middle of Lac-Mégantic, blowing up dozens of buildings.

The inferno caused by the derailment in Lac Megantic is thought to have killed 50
The inferno caused by the derailment in Lac Megantic is thought to have killed 50

The train, operated and owned by Montreal Maine & Atlantic (MMA), was taking light crude oil from the Bakken Field in North Dakota to Irving Oil's refinery in Saint John, New Brunswick.

New shale oil sites in North Dakota and the oil-producing regions in Western Canada are increasingly reliant on rail, and the accident is bound to raise concern about this method of transport. The train 

The lack of sufficient pipeline takeaway capacity is a major factor behind North Dakota shale oil’s significant price discount compared to comparable crudes from more accessible fields. This discount makes it economic to pay the $20 per barrel average cost of transporting the crude by train to the East Coast, where refineries are geared to process light crudes, against those on the Gulf Coast that deal with heavier feedstock.

As a result, over the last few years, large amounts of crude have travelled via Pan Am Railways and MMA to Maine and New Brunswick. There are also several proposals on the West Coast both in the US and Canada for a large expansion of oil transport by train to new and existing terminals, principally  for export.

According to the US Energy Information Agency, Bakken pipeline capacity will increase to more than 650,000 bbl/d and rail capacity to nearly 900,000 bbl/d in 2013.

Diana Furchtgott-Roth, the former chief economist at the US Department of Labor, said in the Globe and Mail that the tragedy in Lac-Mégantic should lead to a reappraisal of hydrocarbon transport in North America, with serious efforts now required to speed up new pipeline approvals.

Quoting data from the United States Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (PHMSA), Furchtgott-Roth says that road and rail have higher rates of serious incidents, injuries and fatalities than pipelines, even though more road and rail incidents go unreported. 

Between 2005 and 2009, road had the highest rate of incidents, with 19.95 per billion ton-miles. This was followed by rail, with 2.08 per billion ton-miles. Natural gas transmission came next, with 0.89 per billion ton-miles. Oil pipelines were the safest, with 0.58 serious incidents per billion ton-miles.

Fatality rates showed the same pattern. Pipeline transportation was safest, with rail 25 times as likely to have fatalities, and road 70 times as likely.

Rising oil and gas production is outpacing the transportation capacity of North America’s pipeline infrastructure. Crude oil shipments via rail have continued to expand at an accelerating rate. In 2012, US Class I railroads delivered 233,811 carloads of crude, compared with 66,000 in 2011 and 9,500 in 2008. According to Statistics Canada, 8,832 rail cars were shipping fuel oils in March 2012, compared with 5,602 in March 2011.

She concludes that as the production of oil and gas increases in North America, new pipelines are essential to transport oil from Alberta and North Dakota to the refineries on the Gulf, and shale gas from Pennsylvania, Ohio, Alabama, and North Dakota to the rest of the country.

And unlike pipeline proposals, rail movement of oil is not covered by any regular government or regulatory review. In late 2011, the Canadian Government’s Auditor General released a report that concluded, "Transport Canada has not designed and implemented the management practices needed to effectively monitor regulatory compliance" when it comes to the transportation of dangerous goods.

Alan Franck, Editor, HazardEx
Alan Franck, Editor, HazardEx

Environmentalists have criticised railways in Canada and the United States for continuing to use older oil tanker cars whose safety is considered suspect in some quarters.

A 2009 report by the National Transportation Safety Board about a Canadian National derailment in Illinois called the design of those tank cars inadequate and found that it made the cars subject to damage and catastrophic loss of hazardous materials.  Images suggested that the surviving tank cars on the Lac-Mégantic train were of the older design.

At the press conference on July 10, a junior transport minister said that once the Transportation Safety Board's investigation in Lac-Mégantic is complete, Transport Canada will be working closely with the rail industry to assess the continued use of older oil tanker cars in Canada.

A major factor for companies developing shale oil and gas is that building costly pipeline infrastructure is simply not economic. Wells move from place to place after relatively short periods, so building a pipeline that would take 50 years to pay for itself is not economically viable. With rail, the network of tracks can be extended relatively easily and service multiple wells in a certain area.

The Canadian and US rail networks’ traditional reliance on coal transportation has been hit by the downturn in coal on the continent, and they have been keen to replace this with booming oil and gas production, mainly from unconventional sources. Both the Canadian National Railway and the Canadian Pacific Railway have extensive rail networks into the United States and have been promoting what the industry often calls a “pipeline on rails” to serve the oil sands.

With the oil sands expected to double output, and the Bakken formation to begin producing nearly a million barrels a day within the decade, railway companies have rolled out nearly $1 billion in rail infrastructure investments and placed orders for over 30,000 new tanker cars designed to carry oil.

Speaking in New York in May, Canadian Prime Minister Stephen Harper said that the rejection of the Keystone XL pipeline would lead to an increase in oil sands shipments by rail, which he called “more environmentally challenging” than pipelines. 

But even if all current pipeline projects are approved in Canada, national oil production will exceed pipeline capacity by one million barrels a day by 2025, and that oil needs a way of reaching the coasts.

So cities and towns across the continent are likely to see a continued expansion of rail oil traffic, despite increased concerns after the horrific incident at Lac Mégantic.

What is clear is that regulators must review the lax standards that have obtained up until now in the sector and come up with a control regime that recognises the many potential risks and takes concrete steps to mitigate them to an acceptable degree. 

This will be a major task, and the executive and legislative branches in both countries need to ensure the necessary resources are made available to allow this to happen.

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