Canada’s Transport Minister Lisa Raitt is taking unprecedented steps to introduce stricter safety rules governing the shipment of crude by rail, while narrowing the government’s focus on the role played by Bakken crude in a series of train derailments that have caused fires and explosions.
In announcing proposed regulatory amendments to the DOT-111 tank cars, she told reporters Jan. 10 that what has unfolded in the six months since the Lac-Megantic disaster is evidence of “increased volatility” in crude being shipped out of the Bakken.
“But maybe it isn’t the crude. Maybe it’s something else that needs classification. Maybe the tanker cars are not acceptable for the type of crude,” Raitt said, noting that issue remains under investigation.
For now, she said the new rules that are now subject to 30 days of consultation from Jan. 11 before implementation will require new DOT-111 cars to meet thicker steel requirements, as well as adding top fittings and head shield protection to the car.
A statement by Transport Canada said the industry is “already building new cars to this standard,” but the proposed amendment will turn previously agreed-to tank car standard requirements into regulations that will carry fines and terms of imprisonment.
Raitt also emphasized that Transport Canada is working closely with United States regulators because “whatever measures are taken do have to be standardized” between the two countries because of the cars that cross the international border.
She said the challenge facing governments is how far they can go toward retiring or retrofitting the existing fleet of more than 100,000 DOT-111 cars, given the demand for that equipment.
In addition to tackling the tank cars, Transport Canada will also require an enhanced classification regime for the transport of dangerous goods, including a record of goods classified as dangerous and a record of the sampling method for crude.
That is seen as addressing allegations that crude shippers from the Bakken region in North Dakota, Montana, Saskatchewan and Manitoba have not been testing their products before shipping them by rail.
Crude to be reclassified
The Canadian government said in December that it would reclassify crude oil as a highly hazardous material, upgrading its classification from flammable and non-explosive.
U.S. transport officials indicated earlier in January that oil shale extract from the Bakken is probably more flammable than traditional crude.
Even before Canada rolled out its proposed regulations, the Association of American Railroads introduced voluntary standards for cars built after Oct. 1, 2011, requiring protection for pressure relief valves that reclose after being activated and a minimum thickness for the steel shells and head shields of the cars.
The U.S. Pipeline and Hazardous Materials Safety Administration is still pondering whether to make those standards mandatory and whether to require all existing cars to be retrofitted.
Justin Long, an analyst with Stephens, a financial services investment firm, predicted final rules are not likely until the second half of 2014 and, if retrofitting is ordered, could cost $2 billion for shippers who own or lease tank cars.
But Stifel analyst Michael Baudendistel noted that it could take several years to retrofit all of the cars, while John Auers, a senior analyst with Turner, Mason & Co., suggested that introduction of the railcar regulations could be modeled after the gradual implementation of double-hull tankers after the Exxon Valdez spill in 1989.
Brian Ector, vice president of investor relations with Calgary-based Baytex Energy, said Canadian producers of Bakken crude are more likely to be impacted by train derailments than those that carry diluted and undiluted bitumen.
He said the Bakken crude is more volatile and flows more easily than bitumen, making it more flammable.
