COLUMN-With prison threat, U.S. tightens screw on oil shippers: Kemp
(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON Feb 26 (Reuters) - Crude oil shippers in the United States must conduct detailed chemical tests and classify cargoes as moderate- or high-risk materials before loading them onto the rail network, or face prison, under an order issued by the U.S. Department of Transportation on Monday.
Safety officials have acted following a spate of fiery derailments involving crude-carrying trains, including an accident in Quebec in 2013 that killed at least 42 people.
The emergency order is needed "to eliminate unsafe conditions and practices related to the classification and packaging of petroleum crude oil that create an imminent hazard to public health and safety and the environment", the department explained in a notice outlining the rules.
The department's inspectors found evidence shippers have wrongly classified crude cargoes as low-risk materials (Packing Group III) when they should have been classified as moderate (Packing Group II) or high risk (Packing Group I) under hazardous-materials regulations.
It also stated that some shippers have been relying on the generic information about chemical properties and handling risks of crude oil contained in materials safety data sheets (MSDS) rather than carrying out proper tests to identify the specific properties of particular cargoes.
"MSDS information has been based upon old test data," according to the department (link.reuters.com/sar27v).
As a result, some crude is being shipped in tank cars that are not appropriate for the purpose and railroad operators, train crews and emergency responders have not been fully informed about the potential risks.
"Misclassification is one of the most dangerous mistakes to be made when dealing with hazardous materials because proper classification is the critical first step in determining how to pack, handle, communicate about and safely transport (them)" the department warned.
"Misclassification may indicate larger problems with company management, oversight and quality control," it added in a pointed comment about what officials perceive as a lax safety culture.
The Pipeline and Hazardous Materials Safety Administration "is still investigating the variability and flammability" of oil being produced from North Dakota's Bakken formation.
In the meantime, safety officials have concluded misclassification of crude constitutes an imminent hazard that presents a substantial likelihood of death, severe personal injury, or substantial endangerment to health, property or the environment.
With immediate effect, therefore, the department has ordered shippers to classify all crude cargoes as Packing Group I or II materials, ensuring they can only be carried in tank cars approved for the carriage of highly hazardous flammable liquids.
It also ordered shippers offering a "large bulk quantity" of oil to the rail system to test a sample before handing it over to the railroad operator.
At a minimum, tests must determine the crude's flash point, boiling point, corrosiveness, vapour pressure, and presence of sulphur, hydrogen sulphide and flammable gases.
The department has threatened substantial fines and up to 10 years' imprisonment for anyone failing to comply.
Under federal law, any person who knowingly, wilfully or recklessly violates the order can be imprisoned for up to five years - rising to 10 years for a violation that involves the release of hazardous materials and causes death or bodily injury (49 USC 5124).
The emergency restriction builds on previous orders by other safety regulators instructing shippers to take more care over classifying their cargoes.
It comes as accidents involving crude-carrying trains become a political issue and Congress steps up its oversight of crude-by-rail safety.
In taking a much more prescriptive approach, threatening fines and even prison time, the emergency order marks a dramatic escalation and makes clear the government is no longer prepared to view this as an internal industry matter for shippers to resolve on their own. (Editing by Dale Hudson)
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