(Recasts, adds reaction from refiners, detail on changes)
NEW YORK/WASHINGTON, March 6 U.S. regulators on Thursday modified rules governing the testing of crude transported by rail following concerns that an emergency order one week ago could stymie deliveries from North Dakota's Bakken shale to U.S. refiners.
The Department of Transportation narrowed the scope of testing requirements laid out in its Feb. 25 order, saying that shippers must determine the flash point and boiling point of crude oil cargoes, but would not need to measure additional specifications provided they were familiar with the oil.
The new shipping guidelines follow a series of fiery accidents involving crude oil being moved by rail in the United States and Canada over the past year, many of which have involved Bakken crude that regulators say may be more flammable than other grades of oil.
The refinery industry group American Fuel & Petrochemical Manufacturers, which wrote to the DOT last week to warn that the broad testing requirements could slow operations and even halt deliveries, welcomed the change.
"We are very appreciative that PHMSA and DOT recognized the issue that we raised in our letter and moved quickly to address that immediate problem," said AFPM General Counsel Richard Moskowitz.
Last week's order had also included requirements to test for vapor pressure, flammable gases and corrosivity, now not required as long as the shipper has knowledge of the characteristics of the crude oil being shipped. The new order did not specify how frequently tests should be conducted.
Despite the industry's concerns, data from intelligence provider Genscape showed that oil shipments from twelve Bakken loading terminals were running at normal levels by early this week, rebounding from a brief fall in the days after the order.
The type of crude being shipped, and its volatility, determines what tank cars can transport the crude and how the cars are labeled.
Tesoro Corp, a major Bakken crude shipper since 2012, was at first glance "cautiously optimistic" that Thursday's order addressed the refiner's concerns with the initial order, said Stephen Brown, vice president and counsel for federal government affairs.
"Clearly, DOT is trying to cooperate with the industry in clarifying these concerns so that the primary goal of safe transportation of crude is facilitated."
The DOT, through the Pipeline and Hazardous Materials Safety Administration, last year began an operation it dubbed "Bakken Blitz," which includes spot inspection of oil shipments aboard trains in North Dakota to make sure the crude was labeled properly and being shipped in the right tank cars.
PHMSA had found 11 of 18 samples of crude oil shipments on the tracks were found to be shipped improperly. Last month, the DOT said it had fined three oil companies for wrongly classifying crude shipments from the Bakken.
Some remain concerned about the efficacy of crude oil testing in North Dakota.
Harry Giles, former manager of crude oil quality programs for the U.S. Energy Department's Strategic Petroleum Reserve who heads a liquid petroleum transport company, said that the order does not address the frequency and methodology of the testing.
Giles said testing could still be invalid if flammable gases and natural gas liquids in the crude vaporize and flash off before samples get to a laboratory if they were collected in inadequate containers and left unchilled.
"The problem remains that determination of both of these properties is not a trivial analytical procedure," he said.
Meanwhile, lawmakers called for stricter safety standards at a hearing on Thursday in Washington.
The Department of Transportation has too often relied on industry to police itself, said Senator Richard Blumenthal.
"Legal standards have to be imposed and followed," he said, exhorting regulators not to bend to the oil and rail industry. (Reporting by Patrick Rucker in Washington, Edward McAllister and Cezary Podkul in New York and Kristen Hays in Houston; Editing by Eric Beech and Diane Craft)