Federal Railroad Administration Tightens Oil Shipping Standards

The Federal Railroad Administration (FRA) plans to start asking shipping companies to supply testing data they use to classify their crude-oil shipments, saying it is concerned that some shipments are being transported in tank cars that aren't safe enough.

In a letter to American Petroleum Institute CEO Jack Gerard last week, the FRA said it is investigating whether some crude shipments contain chemicals—possibly from the hydraulic-fracturing process used to extract it—that make them more hazardous than their classification indicates.

 

 

Oil producers and refiners are increasingly using rail in North Dakota and Texas, where there aren't enough pipelines.

The agency told the API it also suspects that mixes of crude and other chemicals might be the cause of an increase in damage to tank cars caused by "severe corrosion."

If shippers can't supply their testing data, the FRA said in the letter, it will work with the Pipeline and Hazardous Materials Safety Administration to test the shipments independently.

Companies routinely add highly corrosive hydrochloric acid to fracking fluid to break down rock formations. They also add certain chemicals to kill microorganisms and reduce friction in oil. Frack fluids are exempt from federal disclosure laws, but some companies voluntarily provide details, and some states require a thorough ingredient list.

The action is the latest by the agency to toughen regulation of the transport by rail of crude oil after a runaway train hauling 72 tank cars with crude oil derailed and exploded last month, killing 47 people and ravaging the Quebec town of Lac-Mégantic. The Quebec disaster follows a number of serious accidents involving hazardous materials and tank cars in recent years that have raised federal regulators' concern.

More than 34 million barrels of crude were delivered to U.S. refineries by train in 2012, a fivefold increase compared with a year earlier, according to the Energy Information Administration, the statistical arm of the U.S. Energy Department. The volume is expected to increase again in 2013.

The FRA moves will likely pose difficulties for some shippers. Oil producers and refiners are increasingly using rail in Texas and North Dakota, where there aren't enough pipelines to get the crude to markets that will command the highest price.
(WSJ, 8/7/2013, Photo: Getty Images)