HOUSTON — Refiners are pleading with U.S. regulators for a timeout on new mandates forcing them to run a battery of tests on oil before loading it onto train tankers.
Uncertainty about the testing requirements outlined in the Transportation Department’s Feb. 25 emergency order could prompt some companies to stop shipping oil by rail, warned American Fuel and Petrochemical Manufacturers in a letter obtained by the Houston Chronicle.
Because the emergency order appears to require the tests on every shipment of oil before it rolls away, “AFPM members question whether they can continue to transport petroleum crude oil by rail,” the group’s president, Charles Drevna, told Transportation Secretary Anthony Foxx.
Without changes “to provide shippers with a reasonable amount of time to complete the required testing, shippers may be forced to cease transporting petroleum crude oil by rail,” Drevna said in his letter to Foxx. “This could result in shortages of transportation fuel and petrochemicals and have an immediate and significant negative impact on the nation.”
The Transportation Department laid out the emergency requirements last month, following a series of accidents involving crude-carrying trains and concerns that the light oil being extracted from North Dakota’s Bakken Formation is being classified as a less-volatile hazardous material.
Regulators cited “clear evidence of an ongoing problem with classification of petroleum crude oil that is being shipped by rail,” which could translate into inadequate packaging for the material and inaccurate information for first responders during an emergency.
The directive ordered “minimal testing” of oil to determine its flash point, boiling point, corrosivety, sulfur content, vapor pressure and other characteristics. It appears to require those tests be performed prior to each rail shipment.
Companies shipping oil by rail face criminal penalties of up to 10 years in jail and and civil fines of up to $175,000 a day for running afoul of the testing requirements.
Some refiners that ship oil by rail may already have been conducting similar tests, but not all were. And it’s not clear how quickly those companies can implement new testing programs and turn around the results.
Drevna said in an interview that because of antitrust concerns, the trade group does not know if any refiners have halted shipments in light of the order. But, he said he was hearing widespread concerns and questions from AFPM’s members.
He stressed that there is “a combined effort” among the railroads, the oil shippers, the Transportation Department and the Pipeline and Hazardous Materials Safety Administration to boost the safety of transporting crude by trains. “We appreciate the secretary’s desire and we want to work with them,” Drevna said.
Some of the tests may not be warranted on every single crude shipment, Drevna said. For instance, the corrosivity of crude cargoes is unlikely to radically change from shipment to shipment. It’s also “not to going to cause whether a train explodes if it derails,” Drevna said.
According to the trade group’s letter, refiners are still waiting for “the testing methodologies” to be “clarified.”
Railroads increasingly are filling in where oil pipelines don’t exist to carry crude from North Dakota and Alberta, Canada to coastal refineries. There were approximately 400,000 carloads of crude in 2013, up from just 9,500 five years earlier.
Related story: Regulatory limbo keeping safer crude cars off the tracks
The Association of American Railroads has voluntarily agreed to conduct more train track inspections and slow down some crude-carrying trains near big cities. Federal regulators also are working to develop stiffer standards for the tankers that carry oil, amid concerns a pre-2011 design is especially prone to rupture in an accident.
Jason Bordoff, founding director of Columbia University’s Center on Global Energy Policy, said regulators, railroads and the oil industry have responded prudently.
“It’s easy to see where the government could have overreacted to some of the large accidents,” Bordoff said at the IHS CERAWeek energy summit in Houston. “I actually think they’ve been quite restrained in saying ‘we do want to understand this,’ in recognizing there are tradeoffs here in terms of new regulations and what costs they impose and what that might mean for the cost of transporting oil.”
Bordoff also praised the industry for “aggressively” moving to get in front of the issue, in recognition they could face a “backlash” if they don’t deal with it appropriately.
“They see the risk if this goes wrong,” Bordoff said. “There is a legitimate issue here, there is risk, and it’s important that we be prudent and not overreact to it, but we take proper steps to try to minimize it.”