Rail explosions won’t curb soaring oil shipments

HOUSTON — The derailment of a train carrying oil in North Dakota on Monday, and the subsequent evacuations caused by its explosion, could draw more regulatory scrutiny to rail shipments of crude. But the soaring use of trains to move oil is a long-term trend that is not likely to change soon, analysts say.

The incident “will continue discussion of safety issues surrounding train transport of crude oil,” investment banking firm Tudor, Pickering, Holt & Co. said in a note to investors on Tuesday. The derailment “could pressure the permitting processes currently ongoing for rail facilities” on the west coast, the note said.

But the trend of heavy rail use for moving oil is here to stay, the firm said.

“Rail will be the long-term transportation solution out of the Bakken (Shale play of North Dakota) to the U.S. East and West Coasts due to the lack of pipeline infrastructure to those refining centers,” the firm said.

EY: Rail will be lasting competitor against pipelines

Although pipelines are a much safer way to move oil, a limited availability of lines in areas of booming production has inspired widespread use of rail cars to move crude.

Rail movements of crude have skyrocketed in recent years, growing from 18,000 barrels a day in 2008 to 425,000 barrels a day in 2012.

The growth continued this year, with rail shipments of oil and petroleum products up 31 percent from 2012, according to the Association of American Railroads.

EY Oil & Gas, in a report released in September, argued that even with new pipelines that are under construction or have been recently completed, the flexibility of railroads will give them a permanent role in moving crude.

“Rail is here to stay,” EY analyst Foster Mellen said in September. “You can reroute a train and move it to places where you can’t have a pipeline. The economics of pipelines are almost always going to be superior to rail, but to move that crude from the Bakken to Washington State’s Cherry Point refinery, you don’t have viable options.”

The derailment Monday resulted in the second major explosion of a train carrying oil from North Dakota across North America this year.

A train that derailed and exploded in the Canadian province of Quebec in July decimated parts of the town of Lac-Mégantic. Forty seven people died in the resulting blaze, according to the Associated Press.

Risks: Rail disaster underscores risks in oil transportation

The train was reportedly moving oil from North Dakota to a refinery in Canada.

The derailment Monday occurred after a grain train owned by BNSF Railways first derailed in Casselton, North Dakota, according to the National Transportation Safety Board. A train traveling in the opposite direction carrying oil then hit the derailment and also derailed, the agency said. The crash caused explosions that sent huge fireballs into the air near Casselton, North Dakota.

The National Transportation Safety Board said it launched a “go-team” on Monday to investigate the incident.