(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
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)