Providing coverage of Alaska and northern Canada's oil and gas industry
December 2013

Vol. 18, No. 51 Week of December 22, 2013

Highly dangerous?

Transport Canada expected to elevate crude oil to highest hazard level

Gary Park

For Petroleum News Bakken

The Canadian government and federal transportation regulators are tightening their squeeze on shippers using rail to move crude out of the Bakken and other sources in Western Canada, with Transport Minister Lisa Raitt hinting that crude could soon be designated as a dangerous substance.

Raitt has given a working group within her department until the end of January to draft an Emergency Response Assistance Plan, or ERAP, which will move crude to the highest level of hazardous goods, targeting mid-2014 to implement a new regime governing oil shipments.

The new rules will require railways and importers to have specific emergency plans for crude, including the creation of specialized response teams to deal with accidents, matching the ERAPs that were put in place for chlorine and propane after a 1979 derailment in the Greater Toronto area forced the evacuation of 220,000 residents.

She said the government was no longer prepared to see Transport Canada continue its history of taking 10 or 15 years to hold “conversations and consultations” only to decide — as the agency did in 2006, 2008 and 2012 — not to treat oil as a particularly dangerous product.

That thinking came to an end on July 6 at Lac-Megantic, Quebec, when a train hauling 72 tank cars of crude from the North Dakota Bakken, derailed, with five cars exploding, killing 47 people and leveling much of the town center, making it the worst railway disaster in Canadian history.

Irving Oil records seized

Separately, inspectors from Transport Canada seized records Dec. 11 from Irving Oil headquarters in New Brunswick, whose 300,000 barrels per day refinery was the destination for the Bakken shipment.

Court documents filed in support of the search warrant indicate Irving is under investigation to determine whether it followed safety and security rules for importing dangerous goods and whether those goods were accompanied by proper documentation.

Officials of privately owned Irving confirmed the company has received requests from government inspectors about their operations and is “complying with all requests for information (while) operations remain normal.”

In recent years, Irving has been a major buyer of Bakken crude from North Dakota, which is prized for its light qualities and occasionally discounted prices.

Irving receives most of its Bakken crude from World Fuel Services, which delivers to New Brunswick via three railroads, and Global Partners, which ships by rail to Albany, where the crude is loaded on to tanker ships that connect with the Irving refinery.

According to court documents, Irving regularly received tank cars from Montreal, Maine & Atlantic Railway with paperwork that suggested the crude was not particularly volatile, although the empty tanks cars were returned to the shipper with a more volatile classification for the residual oil inside them.

The documents did not show who was responsible for changes to the paperwork.

More volatile than indicated

The Transportation Safety Board of Canada said recently that the crude involved in the Lac Megantic explosion was more volatile than indicated in paperwork. Penalties for contravening Canadian legislation covering the movements of dangerous goods are up to two years in prison or a C$50,000 fine for a first offence.

Raitt has said there is a clear need for higher safety standards to deal with the rapid increase in crude shipments through towns and cities, while Transport Canada has started to pursue oil shippers who are not properly testing crude before the shipments take place.

She said there is now pressure on Transport Canada to “make sure we focus more clearly” on fixing the problems.

“Everybody understands and knows what the urgency is,” she said. “We want to get these things moving as fast as possible.”

Michael Bourque, president of the Railway Association of Canada, said the government’s action comes as no surprise, although he cautioned that reclassification of the crude might result in higher costs for railways and other shippers.

“But if they improve safety and they are the right things to do, then it’s worth it,” he said.

David Jeanes, president of Transport Action Canada, said Raitt is “taking one small step in the right direction. We’ve got to tighten up the rules. I think that’s coming.”

Canada’s two largest railways — Canadian National and Canadian Pacific — had no immediate comment.

However, Canadian National Chief Executive Officer Claude Mongeau told reporters in early December that he understands the public concern about the movement of dangerous goods by rail through urban centers, though he was emphatic that rerouting the shipments away from towns and cities would be impractical because many of the goods are integral to lifestyles.

He said the dangerous goods moved by Canadian National are worth C$25 billion a year, with 99.997 percent arriving at their destination without incident.

Mongeau described the Lac Megantic disaster as an “outlier,” in which “at least six things” needed to go wrong for the unmanned train to roll down a slope into the town.

He said Canadian National would not oppose further regulations if they were based on sound and fact-based policy.

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