UPDATE 2-Oil-by-rail shippers must account for dangerous gas, official says

Wed Feb 26, 2014 8:59pm EST

By Patrick Rucker

WASHINGTON Feb 26 (Reuters) - Oil companies handling volatile fuel out of North Dakota's energy patch must consider the dangers of flammable gas carried in the kind of oil-by-rail shipments involved in a string of fiery derailments, a U.S. regulator said on Wednesday.

Fuel produced in North Dakota's Bakken region is typically classed crude oil, but the liquid might be so gas-packed that it needs to be treated more carefully on the tracks, said Cynthia Quarterman, who oversees dangerous cargo as head of the Pipeline and Hazardous Materials Safety Administration (PHMSA).

"Do you have a flammable liquid? A flammable gas? Maybe there are multiple constituents and you have to determine what the appropriate packaging is," she told a congressional hearing on rail safety.

One area of concern has been how fuel is handled as it moves from fields to refiners and whether existing rules for hazardous material account for volatile gas that can build during such deliveries.

Existing hazardous material rules envision a test for the initial boiling point of crude oil and the liquid's flash point, or the temperature at which it will combust with a spark.

But the rules do not require a test for pressure and some lawmakers and Congressional staff say that is a blind spot in the regulations that should be addressed.

"The pressure and volatility of these shipments have not been getting enough attention," said Representative Rick Larsen, whose district in Washington state is home to a Tesoro Corp refinery that routinely receives shipments of oil from the Bakken region on railcars.

In March, a Tesoro executive reported that its refinery in Anacortes, Washington, was seeing pressures climb on its Bakken rail shipments. (for full report see:)

MISHAPS AND TESTS

Officials have been scrutinizing North Dakota rail shipments since a derailment in July in the Canadian town of Lac Megantic killed 47. Two further fiery derailments prompted more scrutiny.

Hess Corp, Marathon Oil Corp and Whiting Petroleum Corp were fined early this month for misclassifying fuel shipments.

Officials have sampled Bakken crude oil 58 times in recent months to help understand the hazards it poses and found many more examples of potential violations, Quarterman told a panel of the U.S. House of Representatives Transportation Committee. PHMSA, part of the Department of Transportation, is principally responsible for the safety of U.S. rail cargoes.

Although hazardous liquids do not require a test for pressure, shippers must weigh all risks when they classify fuel on the tracks, officials said.

"The regulations are clear," said Bill Schoonover, PHMSA's Deputy Associate Administrator for Hazardous Materials Safety. "A person must account for all hazards present if more than one hazardous material is being transported in a container."

If flammable gas such as propane moves in the same shipment as flammable liquids such as crude oil, the cargo should typically be treated as the more dangerous of the two substances, Schoonover said.

Propane is packaged in pressurized tank cars rather than standard DOT-111 cars that are the workhorse of oil-by-rail shipments.

On Tuesday, the Department of Transportation ordered stricter testing of North Dakota fuel carried on the rails.

Jack Gerard, president of the American Petroleum Institute, told lawmakers on Tuesday that the emergency order was too vague.

"The emergency order, from our standpoint, creates confusion," he said, since regulators did not say precisely how frequently crude should be sampled.

Shipments out of the Bakken are routinely carried on deliveries of 100-unit tank cars that can carry more than 600 barrels of fuel.

Quarterman said her agency would work with the oil industry to help it comply with the emergency order, and Representative Kevin Cramer of North Dakota said the kinks could be worked out.

"It does leave room for the industry to work with the regulators to fine-tune it," he said.

More than 70 percent of oil leaves North Dakota by rail but that number should go down, he said.

"I guess I would like to see at least half of our oil moving by pipelines in the next five years or so," he said. "But that is going to take a real lift."