When disaster becomes mundane

Author Tom Fowler

Stop me if you heard this one: A train carrying a load of crude derails and bursts into flames.

Stop me if you heard this one: A train carrying a load of crude derails and bursts into flames.

It’s a story line that’s sadly become routine of late, although images of smoke and flames leaping skyward are enticing fodder for network television news. The BNSF derailment near Heimdal, North Dakota last week was the 5th so far this year and the 12th since the deadly Lac Megantic accident in July 2013 killed 47 in Quebec. 

Market reaction was negligible – it was just one unit train, 107 tanks cars of crude delayed in a market already flush with oil. Other trains were quickly rerouted around the site.

And with US regulators having unveiled new crude by rail safety rules just a week prior, few are cringing, waiting for a heavier regulatory reaction from Washington. Instead the American Petroleum Institute led the backlash against the rules, telling an appeals court the timeline for implementation was too short.

Yet despite the new rules, the prospects for an end to the accidents don’t appear to be any closer.

The volume of crude moving by rail may have peaked late last year – the top seven North American rail carriers reported 242,149 total carloads of crude moved in the third quarter 2014 according to Argus data, before taking a slight dip to 241,509 carloads in the fourth quarter.

But US crude production is expected to keep growing to hit a new record this year, despite the drop-off in new drilling in response to a collapse in crude prices. Even in North Dakota, where much of the railed crude originates, crude production defied expectations and grew about 1pc to 1.19mn b/d in March. It’s expected to increase even more by June when price-related tax breaks go into effect.

New North Dakota state rules aimed at addressing what was believed to be a factor in explosive derailments – high Reid vapor pressure (RVP) measurements for Bakken crude — don’t appear to have had much impact either. The RVP for the crude involved in last week’s accident was 10.8psi RVP, well under the state’s new 13.7psi standard.

The new federal regulations unveiled this month attempt to address crude volatility using a different measurement than RVP — the initial boiling point of the crude — by requiring crudes with lower boiling points to be transported in more durable tank cars. But with or without legal challenges, those new rules are several years away from taking effect.

So until then, it may be more of the same, unless the true root cause of the derailments is determined.

For more information, please contact OilBlog@argusmedia.com

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