Market News

 August 13, 2013
Do Crude Oil Shipments Make Rail Less Safe?

 Two Conversations about A Tragedy

It's been just over a month since a train loaded with crude oil from North Dakota derailed and exploded in the Canadian town of Lac-Megantic, Quebec, killing an estimated 47 residents. In the interval since the accident, the relevant authorities have focused on ascertaining the cause of the accident and determining how best to improve rail safety. However, there has also been another, less-customary conversation about whether oil in general, and the specific oil on this train, might be too dangerous to transport by rail at all. That conversation would benefit from some context that appears to be absent.

Both conversations began with a tragedy in a place I recognized immediately. Ten years ago my wife and I passed through Lac-Megantic and drove along the Chaudière river that originates there, on its way to the St. Lawrence. It's an area of natural beauty and historical significance. The images of destruction and of oil spilled in the river were gut-wrenching.

The investigation is still underway, but it seems significant that the Federal Railroad Administration (FRA) of the US Deparment of Transportation has already issued an Emergency Order banning the practice of leaving such trains unattended, pending the development of better procedures for securing them safely. Canadian authorities are reviewing their regulations and enforcement, as well as revisiting questions about the specific type of tank car in which the oil was carried. The Wall St. Journal reported that the FRA is also looking into the testing and classification of crude oil shipments, to ensure that the tank cars used to transport different crude oils are suited to the task. Meanwhile, the rail operator involved in the accident has filed for bankruptcy on both sides of the border.

Why Was That Train, in That Place, Carrying Oil?

The second conversation, apparently based on a belief that it is possible to cease our use of petroleum entirely if we only have the will, is occurring in a fact vacuum. Understanding why that particular batch of crude oil was on that specific track on that day requires unpacking a nested set of factors that starts with the fact that oil still accounts for 33% of total global energy consumption, but more importantly supplies 93% of transportation energy. Numerous forecasts, including the latest from the US Department of Energy, anticipate no reduction in global oil use through 2040. Although we've displaced much of the oil formerly used to generate electricity and have greatly improved vehicle fuel efficiency, our most successful alternative transportation fuel, ethanol --- no stranger to rail accidents -- accounted for just 3% of US liquid fuel use last year, when adjusted for its lower energy content.

Although global oil movements are dominated by pipelines, tankers and barges, rail remains an important mode because of its flexibility. It's also usually cheaper and more efficient than trucking for all but short distances, and safer, too --- despite accidents like this one. Although the rapid recent growth of crude-oil-by-rail and its role in the Keystone XL pipeline debate have attracted significant attention, last year's 234,000 tank-car loads of crude made up less than half of total US petroleum rail shipments and was dwarfed by over 1.5 million tank-car loads of chemicals hauled by rail in 2012.

Crude oil, especially light crudes like those produced from the Bakken and Eagle Ford shales, is flammable, and thus constitutes hazardous cargo. However, railroads routinely carry a wide variety of flammable and otherwise hazardous materials, including propane, gasoline, benzene, ethanol, chlorine gas, sulfuric acid and a variety of other chemicals. Safety is not determined by the cargo --- if it was, none of these substances would be on trains --- but by the combination of the equipment used to carry it, the rules and processes that dictate how to handle it, and the people who operate these systems. It's no coincidence that these are the areas on which the investigations and preliminary regulatory responses have focused.

Then there are the market and logistical circumstances that resulted in a refinery in St. John, New Brunswick that supplies both Canadian and US consumers and normally processes oil imported by tanker, purchasing oil produced in North Dakota and shipped halfway across the continent by train. North American oil production is expanding rapidly, with significant economic and energy security benefits. Much of this new oil is found in places not adequately served by the large network of existing pipelines. That situation may eventually be rectified, but in the meantime the mismatch between growing landlocked oil supplies and limited pipeline outlets for them has created an opportunity for rail operators reeling from the much larger shale-gas-induced decline in coal shipments. Serving that need keeps people and trains employed. And that, ultimately, is why a train carrying Bakken crude was on a track in Lac-Megantic this July.

Conclusions: The Right Focus Is on Improving Rail Safety

I can scarcely imagine what the survivors of the Lac-Megantic disaster and the families of the victims have been going through for the last month. Their lives will never be the same. But whatever the cause of the accident is eventually determined to have been --- human error, mechanical failure, aging infrastructure or something else --- it was not caused by the oil in those tank cars.

This accident presents us with two opportunities: One entails figuring out what happened and applying the lessons to making rail transport of all hazardous cargoes safer; the other involves using the tragedy to advance a social cause such as "ending our reliance on oil." As alluring as the latter might seem to some, the communities through which such freight travels in the course of keeping our economy running will benefit much more from the former.