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Homemarket insiderBakken oil safety warning issued by federal government

Bakken oil safety warning issued by federal government

Following this week's fiery train crash in North Dakota, federal regulators on Thursday issued a safety alert that crude oil being transported from the Bakken region, which stretches through swaths of North Dakota and Montana, may be more flammable than traditional heavy crude.

The Pipeline and Hazardous Materials Safety Administration said it issued the alert to notify the public, emergency responders, shippers and carriers as a result of its preliminary inspections after recent train derailments and resulting fires in North Dakota, Alabama and Canada.

(Read more: Train collision forces N. Dakota town evacuation)

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The most serious of these derailments was in Lac-Megantic, Quebec, where last July a runaway train speeded for seven miles into the town and crashed into a nightclub, killing dozens. Part of the Department of Transportation, the PHMSA said it is reinforcing the requirement that hazardous materials be properly tested, characterized, classified and where necessary, degasified.

About 700,000 barrels per day of Bakken crude is carried by rail—a fast-growing, flexible alternative to pipelines for transporting the landlocked oil to the Gulf Coast and East and West Coast refineries. A total 900,000 barrels a day of crude moved by rail in North America during the third quarter, according to IHS.

The hazards of rail shipping are expected to give more weight to the argument for pipelines, including the controversial Keystone XL pipeline, under review by the State Department. That pipeline would carry crude from the Canadian sands to a southern extension that would bring it into the Gulf Coast refining region.

The pipeline agency, along with the Federal Railroad Administration, said that as part of its investigation of the accidents it has begun a compliance initiative involving unannounced inspections and testing of crude shipments to verify that they have been properly classified.

"The flammability and combustibility of these rail car accidents I think has caught [rail] industry people by surprise," said Christian Weatherbee, rail analyst at Citigroup.

The most recent incident occurred when a BNSF Railway train carrying soybeans derailed Monday and a portion fell onto a neighboring track in front of the approaching oil train. Eighteen of the 106 cars on the oil train derailed; several burned, causing a massive plume and explosions. The 2,400 residents of nearby Casselton, N.D., were temporarily evacuated.


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