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INTERVIEW-US will have answers in weeks on crude-by-rail mishaps: official

Patrick Rucker
Wednesday, 8 Jan 2014 | 12:13 PM ET

WASHINGTON, Jan 8 (Reuters) - Officials should know within weeks whether energy companies in North Dakota's oil patch are properly testing and labeling the kinds of crude-by-rail shipments involved in recent fiery accidents, a U.S. regulator told Reuters.

Technicians have sampled crude oil at wellheads, and at truck and train loading stations in North Dakota's Bakken region to try and understand why that fuel seems more prone to explode than other types of crude.

Producers and shippers could face tough fines or even criminal penalties if they are found to be wrongly handling dangerous material, said Cynthia Quarterman, who oversees dangerous train shipments as administrator of the Pipeline and Hazardous Materials Safety Administration (PHMSA), part of the U.S. Department of Transportation.

"At this point, everything is on the table," said Quarterman. "It is the shipper's obligation to put their product in the right tank car."

A string of explosive train accidents involving Bakken crude, including a derailment in Quebec in July that killed dozens of people, have intensified pressure on regulators to ensure crude-by-rail shipments are safe.

The latest incident came on Tuesday evening, when a train hauling crude oil and fuel gas derailed and caught fire in New Brunswick, Canada.

A week earlier, a train laded with Bakken crude had a fiery collision with a grain-hauling train in North Dakota.

"The industry needs to step forward," said Quarterman, interviewed in her office at PHMSA headquarters in Washington, D.C., before the latest Canadian mishap.

GAS-PACKED CRUDE

Officials have in recent weeks begun to more closely scrutinize fuel produced in the Bakken, Quarterman said, and technicians are studying whether dangerous gas is loaded along with crude oil.

In the far-flung Bakken oil fields, many producers load liquid fuels onto tankers but have no way to capture and store the gasses that erupt from the wellhead.

But by loading tankers under pressure, industry officials say, they can pack more of those volatile gasses, sometimes referred to as "light ends," onto trains bound for refineries.

"From the producer's point of view, it's often a choice of either putting those light ends on the tank car or flaring them - basically, throw them away," said Harry Giles, former director of Crude Oil Quality Association, which sets standards for the industry.

Early this month PHMSA ordered shippers to "sufficiently degasify hazardous materials prior to and during transportation" among other safety steps conceived days after the North Dakota derailment.

Quarterman said the lab results due in weeks will guide officials as they consider penalties against shippers who have wrongly labeled dangerous cargo and also shape thinking on industry-wide reforms.

"We are concerned that perhaps shippers have not been fulfilling their requirements in terms of testing and classifying and knowing what is coming out of the field," said Quarterman. "Whatever is in the crude will determine what our next steps are."

Trains carried nearly 700,000 barrels a day of North Dakota oil to market in October, a 67 percent jump from a year earlier, according to the state pipeline authority.

For many producers, moving crude oil on railcars has been the preferred means of bringing the product to distant refineries.

(Editing by Ros Krasny and Andrew Hay)