Energy briefs

2014-06-01T00:00:00Z 2014-06-02T12:15:55Z Energy briefs The Billings Gazette
June 01, 2014 12:00 am

Industry opposes rail car rules

BISMARCK, N.D. — Oil industry representatives are pushing back against tougher rules for rail cars carrying crude despite a string of fiery accidents and insisting that oil shipped by train from the Northern Plains is no more dangerous than some other cargoes.

An industry-funded report released on May 20 said the volatility of Bakken oil from North Dakota and Montana is comparable to other light crudes.

But the report offers further evidence that Bakken crude is more volatile than heavier oils such as from Canada's tar sands, following similar studies by Canadian regulators and refiners. The results show Bakken oil is similar to light crudes produced elsewhere in the United States, with characteristics that fall well within the margin of safety for the current tank car fleet, industry representatives said.

Kari Cutting, vice president of the North Dakota Petroleum Council, said it proves federal rules "are sufficient."

A former senior federal railway safety official disagreed and said recent accidents are enough to justify government intervention.

"We already have examples of this particular crude going 'boom,'" said Grady Cothen, former deputy associate administrator for safety at the Federal Railroad Administration. "That's how it has to be treated from a regulatory standpoint despite the distinctions being made" by oil companies.

Oil trains in the U.S. and Canada were involved in at least eight major accidents during the last year, including an explosion in Lac-Megantic, Quebec that killed 47. Other trains carrying Bakken crude have since derailed and caught fire in Alabama, North Dakota, New Brunswick and Virginia.

Regulators in response have discouraged shippers from using older tank cars known to rupture during accidents.

The U.S. Department of Transportation issued a safety alert in January warning the public, emergency responders and shippers about the potential high volatility of crude from the Bakken oil patch. The sprawling oil shale reserve is fueling the surging industry in Eastern Montana and western North Dakota, which is now the nation's second-largest oil producer behind Texas.

Tens of thousands of the older, defective rail cars are being used to haul crude in the U.S.

The National Transportation Safety Board has urged that they be retrofitted or phased out of service.

The North Dakota Petroleum Council, which represents more than 500 companies working in the oil fields of North Dakota and Montana, commissioned the $400,000 study of Bakken crude characteristics. The group said more than 150 oil samples were taken from well sites and rail facilities throughout North Dakota and Montana, and sent to independent laboratories for analyses. The results will be shared with federal regulators this month, the group said.

Last week, the American Fuel and Petrochemical Manufacturers, a lobbying group for oil refiners, found Bakken crude is no more risky or flammable to ship than other oils, if hauled correctly under current federal rules.

A Department of Transportation spokeswoman said the agency was reviewing the industry data even as it continues analyzing samples of Bakken oil gathered by regulators. Results of the government's testing have not been released.

Canadian investigators have said the crude involved in the Lac-Megantic was highly volatile and comparable to gasoline.

Cutting disputed the need, expressed by many regulators, for stronger tank cars to better resist rupturing in case of derailment.

"It's not proven that existing steel is going to prevent those breaches," Cutting said. She also said that newer, stronger DOT-111 tank cars have 14 percent less capacity than older tank cars. Cutting said making those cars the standard will require hundreds more trains to make up the lost volume, actually increasing the risk of accidents.

The Bakken encompasses some 25,000 square miles in North Dakota, Montana, Saskatchewan and Manitoba.

Mile-long trains pulling more than 100 cars laden with Bakken crude began running in 2008 when the state first reached its shipping capacity with existing pipelines and infrastructure. More than $2 billion has been spent on infrastructure and nearly two dozen railed-oil loading facilities have been built in North Dakota in recent years to move Bakken crude to locations as varied as Washington state, Louisiana, Pennsylvania, New Jersey and New Brunswick, Canada.

North Dakota officials say that more than 70 percent of the more than 1 million barrels of oil produced daily from the Bakken region is being moved by rail, as producers increasingly have turn to trains to reach U.S. refineries where premium prices are fetched.

New technology

could limit flaring

BISMARCK, N.D. — Mark Peterson is one of several entrepreneurs touting a new technology meant to reduce natural gas flaring and add value to mineral rights owners. However, there’s no way for him or mineral owners to know whether proper royalties were paid between the time the units started operating and when the state learned about them.

Natural gas liquid stripping units have been around for decades but have not always been affordable or easy, said Lynn Helms, the North Dakota Department of Mineral Resources director. Peterson wanted to change that.

Now the units are gaining popularity as a way to fix flaring for oil producers in the Bakken with isolated wells who are waiting for a pipeline connection.

As the new technology spreads, regulators have to keep up. There has been a lag between when a technology comes into use and when it becomes regulated — and again when companies that slipped through the cracks become compliant.

Eleven stripping units are now registered with the state, according to Department of Mineral Resources records. Only one is reporting production. Of the other 10, at least three of them have been on well sites since last June.

Because the state did not know about the units, royalties may not have been paid by the oil companies on liquids stripped during that nearly year-long gap, as they should have been.

Before reporting requirements were developed by the Legislature, a June 10, 2012 article in the Billings Gazette said one company had a unit stripping liquids at an oil well within an hour’s drive of WatfordCity.

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