On March 13, American Fuel & Petrochemical Manufacturers (AFPM) — the oil refiners' trade association — sued oil-by-rail carrying giant Burlington Northern Santa Fe (BNSF) for allegedly violating its common carrier obligation under federal...read more
Fox Guarding Henhouse: Oil-By-Rail Standards Led by American Petroleum Institute
Fox Guarding Henhouse: Oil-By-Rail Standards Led by American Petroleum Institute
“How did it get missed for the last ten years?”
That was the question Deborah Hersman, chair of the National Transportation Safety Board (NTSB), posed to a panel of industry representatives back in April about how the rail industry had missed the fact that Bakken oil is more explosive than traditional crude oil.
“How do we move to an environment where commodities are classified in the right containers from the get go and not just put in until we figure out that there’s a problem,” Hersman asked during the two-day forum on transportation of crude oil and ethanol. “Is there a process for that?”
The first panelist to respond was Robert Fronczak, assistant vice president of environmental and hazardous materials for the Association of American Railroads (AAR). His response was telling.
“We’ve know about this long before Lac-Megantic and that is why we initiated the tank car committee activity and passed CPC-1232 in 2011,” Fronczak replied, “To ask why the standards are the way they are, you’d have to ask DOT that.”
So, now as the new oil-by-rail safety regulations have been sent from the Department of Transportation (DOT) to the White House’s Office of Information and Regulatory Affairs, it seems like a good time to review Hersman’s questions.
How did we miss this? Is there a process to properly classify commodities for the right container before they are ever shipped?
Missed or Ignored?
Fronczak stated that industry knew about the explosive danger of Bakken crude long before the Lac-Megantic disaster, but it was up to the Department of Transportation to do something about it. That begs the question: what did the department know?
In a letter sent by Thomas J. Herrmann of the Federal Railroad Administration (a division of DOT) to the American Petroleum Institute’s CEO Jack Gerard on July 29, 2013, just 23 days after the Lac-Megantic disaster, it would appear the DOT was well aware of Bakken crude classification issues.
FRA audits of crude oil loading facilities indicate that the classification of crude oil being transported by rail is often based solely on Material Safety Data Sheet (MSDS) data that only provides a material classification and a range of material properties. This MSDS information is typically provided by the consignee to the shipper, and the shipper is unaware of validation of the values of the crude oil properties.
FRA's audits indicate that MSDS information is not gleaned from any recently conducted tests or from testing for the many different sources (wells) of the crude oil. For example, a shipper provided information to FRA showing that crude oil being transported by rail had a flash point of 68° F, or a Packing Group I hazardous material. However, the crude oil had been improperly classified as a Packing Group III material and was being transported in AAR class tank cars that were not equipped with the required design enhancements.
The letter goes into detail on several other issues with Bakken crude and recommends that “shippers evaluate their processes for testing, classifying, and packaging the crude oil that they offer into transportation via railroad tank cars.”
So it is clear that as of July 2013, the Federal Railroad Administration was well aware of issues regarding misclassification of Bakken crude oil based on its own audits.
Several of the panellists at the NTSB hearing in April made the point that Bakken crude was different.
“We are just not sure what we’re handling,” Fronczak said. “We’ve done some minor sampling, you know a few samples that indicate that the crude oil does have a high vapor pressure and a fairly high amount of dissolved gas and so we feel a pressure car is more appropriate.”
A pressure car is currently the safest possible tank car the new regulations could require.
William Finn of the Railway Supply Institute echoed this sentiment, “For years we’ve transported crude oil in one eleven cars [DOT-111], what’s changed here is the introduction of the unit train and the question of what’s happening with the Bakken crude oil and the high vapor pressures.”
Greg Saxton, chief engineer for tank car manufacturer Greenbrier Companies, said: “The crude we are moving today, we think its different than what we were moving five or ten years ago.”
If the exploding trains weren’t enough to convince people that the Bakken crude oil is different, those comments should remove any doubt.
API Concludes Bakken Oil Poses No “Special Risks”
In April, DOT Secretary Anthony Foxx commented to the Associated Press on how important proper crude oil classification was regarding oil-by-rail safety, saying, “One of the most fundamental questions that cuts across everything in crude oil-by-rail is how it is classified.”
So who gave the presentation at the NTSB conference on classification of crude oil? The American Petroleum Institute.
Lee Johnson gave a presentation on the API’s current crude oil classification working group, which he stated, “is going to come up with the standard which is going to have guidance on how often you should do that [testing], what tests you should take, sampling techniques, lab techniques. It’s going to be a very comprehensive standard. At this point there is no industry standard.”
During his presentation, Johnson highlighted one of the main efforts of the API’s work on classification. The North Dakota Petroleum Council was hiring a firm to conduct testing on Bakken crude for classification purposes.
The results of that Bakken classification testing have since been released and were reported in the Wall Street Journal as follows:
Crude oil from the Bakken Shale formation doesn't pose special risks to rail transport and shouldn't require a separate classification regime than other hazardous liquids, North Dakota oil producers said.
This is what happens when you let an industry self-regulate. They make up their own rules and reality. In May, API CEO Jack Gerard made his position clear:
“It is essential to separate fact from fiction as we work to enhance the safe transportation of crude oil. Multiple studies have now debunked the idea that Bakken crude is meaningfully different than other crudes.”
However, not everyone was buying these results. New York’s Senator Chuck Schumer told Reuters that these test results should be “taken with a grain of salt.”
And the Canadian Crude Quality Technical Association said, “We would consider the data suspect.”
The main reason for the association’s suspicion is the sampling technique that was used. The samples were taken using open containers, which allow the volatile gases to escape before testing.
That’s the kind of thing that happens when there are no standards for sampling and testing.
The New Regulations
So as the new oil-by-rail safety regulations are about to be released by the White House, there still are no enforceable standards on how to properly sample, test and classify Bakken crude oil. The only testing data that’s been released up to this point is from the oil industry’s lobbying groups.
The Department of Transportation has taken samples of Bakken crude and conducted testing — however, the report on their results is still pending and there is no scheduled release date. It is nearly a year after the department’s initial letter to Jack Gerard of the American Petroleum Institute.
Further, the Department of Transportation is not ultimately responsible for developing new standards for testing and classifying crude oil.
To understand how the regulatory agency in charge of an industry is not responsible for developing these standards, you must look at the wording of legislation signed into law by President Bill Clinton in 1996 called “The National Technology Transfer and Advancement Act of 1995.”
This legislation essentially privatized the development of standards. The act states:
“All Federal agencies and departments shall use technical standards that are developed and adopted by voluntary consensus standards bodies, using such technical standards as a means to carry out policy objectives or activities determined by the agencies and departments.”
So, for there to be new enforceable regulations regarding the classification of Bakken crude, several things would have to happen. An external standard developer like ASTM International would have to develop standards. Then members of industry or their lobbyists would have to volunteer to petition the DOT to adopt those standards as part of the regulations. This would require a new DOT rulemaking process separate from the one currently in progress, which could take several years.
A Fundamental Question Goes Unanswered
So, on the eve of new regulations, the fundamental question of how to properly sample and test Bakken crude oil for appropriate classification has not been answered. And the only group currently working on an “industry standard” for this is the American Petroleum Institute, which has already concluded that Bakken crude is no different from other crude oils — at the same time API is having private meetings at the White House regarding the new regulations.
Chair Hersman resigned shortly after the forum in April, ending her 10-year career with the NTSB. At the time she told the AP she had, “seen a lot of difficulty when it comes to safety rules being implemented if we don't have a high enough body count. That is a tombstone mentality. We know the steps that will prevent or mitigate these accidents. What is missing is the will to require people to do so.”
If the current process regarding new oil-by-rail regulations in the U.S. is any indication, apparently we haven’t achieved a high enough body count yet.
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