NEW YORK Jan 2 Shares of Whiting Petroleum Corp
, Continental Resources Inc and other top crude
oil producers in the Bakken shale formation plunged on Thursday
after the U.S. government said oil produced there may be extra
The warning came three days after a BNSF train
carrying crude oil collided in eastern North Dakota with another
train carrying grain. The resulting explosion led to the
temporary evacuation of a nearby town and added to the growing
concern about the safety of oil-by-rail shipments.
Last July a runaway oil train, which originated in North
Dakota, derailed and exploded in a small Quebec town, killing 47
Oil extracted from the Bakken, a vast rock formation
underneath North Dakota and Montana, "may be more flammable than
traditional heavy crude oil," the Pipeline and Hazardous
Materials Safety Administration, part of the U.S. Department of
Transportation, said on Thursday.
Whiting & Continental, the largest Bakken producers, saw
their shares fall more than 3.5 percent after the announcement.
Shares of Oasis Petroleum Inc, Kodiak Oil & Gas Corp
and Northern Oil & Gas Inc saw similar drops.
Crude oil prices also fell, contributing to the
The U.S. government's warning should come as no surprise
considering refineries and other oil buyers value the high
energy content of Bakken crude oil, said Ron Ness, the head of
the North Dakota Petroleum Council, a trade group for oil
"I don't think there's any surprise that Bakken crude oil is
the highest quality crude oil available and it has more of those
high-end components that you're looking for in a top-shelf crude
oil," Ness said.
Ness said Whiting and other producers he represents follow
current federal standards for oil-by-rail shipment. He said the
U.S. government should consider updating transportation
regulations that currently put crude oil in the same category as
ammonia and other chemicals for safety standards.
Oil producers are not responsible for their product once it
is loaded onto railcars, a process that typically comes as sale
of the oil is finalized. Logistics companies often buy oil from
producers and arrange to have it shipped via rail or other
means, before selling it to the end user.
The oil involved in the Monday crash was loaded onto the
train in Fryburg, North Dakota, and was headed nearly 1,300
miles (2,092 km) to Hayti, Missouri.
Sources familiar with the loading operations told Reuters on
Tuesday that Houston-based logistics company Great Northern
Midstream loaded the crude at Fryburg, and it was to be unloaded
at Marquis Energy's storage terminal and barge loading facility
at Hayti, along the Mississippi River.
"When the train leaves the station, (the oil) is in someone
else's hands," Ness said.
The American Association of Railroads (AAR), an industry
trade group for BNSF and others, said it has worked with federal
regulators to try and increase railcar design standards and
other regulations. Railways do not inspect material they ship,
and simply transport it from one location to another.
A member of the National Transportation Safety Board said on
Tuesday that railcars involved in the crash were all older types
that do not meet the latest industry safety standards.