BUSINESS

Safety Rules Lag As Oil Transport By Train Rises

07/09/2013 05:07 EDT | Updated 09/07/2013 05:12 EDT
The sight of a locomotive hauling 100,000 litres of light crude oil through a small Canadian town like Lac-Megantic was nearly unimaginable just a few years ago.

But as North American oil production continues to outpace pipeline capacity, shipment by rail is increasingly common, and critics worry that safety regulations have not kept up with expansion.

"Even two or three years ago, shipping oil by rail was basically unheard of," says Keith Stewart, a climate and energy campaigner with Greenpeace Canada. "There's been this huge increase and it's been done without any oversight and review, and that's a huge mistake."

In 2012, less than four per cent of oil shipped through Canada went by rail to coastal refineries and export centres, but that is still more than triple the 2011 figure. What's more, the amounts are expected to increase significantly in the coming years, according to the National Energy Board.

Rail shipments of oil in Canada have gone from 500 carloads in 2009 to an estimated 140,000 this year, a 28,000 per cent increase, according to the Canadian Railway Association.

As public debate and opposition from environmental groups has stalled the construction of some big pipeline projects from Alberta, such as the proposed Northern Gateway pipeline to B.C. and the extension of the Keystone XL pipeline to the U.S. Gulf Coast, rail companies have increased their capacity to ship oil in an attempt to become bigger players, says Stewart.

Even if all current pipeline projects are approved in Canada, national oil production will exceed pipeline capacity by one million barrels a day by 2025, and that oil needs a way of reaching the coasts.

According to a report by RBC Capital Markets, if the U.S. State Department decides not to expand Keystone's capacity, Canadian oil shipments by rail could increase another 42 per cent by 2017.

Not just the oil sands

At least some of the oil shipped by rail in Canada is not coming from the oil sands, but from the Bakken shale gas formation, a currently booming 520,000-square-kilometre oil and natural gas deposit in North Dakota and Montana, which produces more than 700,000 barrels of oil daily.

The light crude oil on board the Maine, Montreal and Atlantic Railway train that exploded in Lac-Magentic was en-route from the Bakken reserves to an Irving Oil refinery in Saint John, N.B., the company said on Sunday.

According to Stewart, producers from the Bakken area are heavily dependent on rail transportation for a number of reasons.

Unlike oil sands developments, which are expected to produce for several decades, oil wells in the Bakken formation only produce for about 10 to 12 years, so it is not always economical or easy to connect them to the existing oil pipeline in the U.S., says Stewart.

Building costly pipeline infrastructure is simply not worth it for the companies developing these wells.

"The shale oil wells are rapidly moving in a physical sense, so building a pipeline that would take 50 years to pay for itself is not economically viable," says Stewart. "With rail, you can extend the network of tracks relatively easily and service multiple wells in a certain area."

With the oil sands expected to double output, and the Bakken formation to begin producing nearly a million barrels a day within the decade, railway companies have rolled out nearly $1 billion in rail infrastructure investments and placed orders for over 30,000 new tanker cars designed to carry oil.

However, an accident like the one at Lac-Megantic may now put a dent in some of these plans.

Transport Canada slow to respond

The accident in Lac-Magentic has raised serious questions about the enforcement of railway safety by Transport Canada, especially the transportation of so-called dangerous goods such as oil and toxic chemicals.

In late 2011, the auditor general released a report that concluded, "Transport Canada has not designed and implemented the management practices needed to effectively monitor regulatory compliance" when it comes to the transportation of dangerous goods, as these are defined by the ministry.

Critics also worry that that Transport Canada's lack of progress on this front could have dangerous outcomes as oil transportation by rail continues to expand.

The government says they will consider implementing regulatory changes if the investigation in Lac-Megantic highlights any serious faults.

In a statement issued on Sunday, Minister of Transport Denis Lebel issued a statement saying that "the Transportation Safety Board of Canada is conducting a full investigation" and that "should any deficiencies be identified, we will not hesitate to take appropriate action.

"Our government remains dedicated to keeping Canada's transportation system safe and secure," the statement says.

But the minister's response has not assuaged his critics.

"I think most Canadians would be surprised to hear that rail companies are left to inspect themselves and Transport Canada goes over the paperwork," says Olivia Chow, NDP transportation critic.

"Shouldn't there be spot-checks by the government to see whether what is on paper is actually what's happening in the field?"

Chow also says that the federal government has failed to implement recommendations from the Transportation Safety Board following other derailment investigations. These recommendations include retrofitting trains with automatic breaking mechanisms, though that recommendation only came in June.

According to E. Wayne Benedict, a labour lawyer and a former locomotive engineer who spent 15 years working for CP Rail and B.C. Rail, attempts at reducing enforcement costs has resulted in alarming deregulation in the industry.

"When I first started in the late '80s, there was active enforcement by Transport Canada. You never knew when they were going to show up, they'd be climbing all over the trains," says Benedict.

"By the time I left the railway industry in 2003, you could practically see tumbleweeds blowing across the tracks. You almost never saw the regulators."

Old tanker cars, old problems

According to Stewart, the possibility of oil spills from trains is greatly increased by the tanker cars used throughout most of North America.

The DOT-111A, called a CTC-111A in Canada, make up about 69 per cent of the American tanker car fleet and up to 80 per cent of the Canadian fleet, according to emails that Transport Canada sent to Stewart.

As early as 1994, regulators at the Transportation Safety Board wrote that this type of tanker car had a flawed design and that they have a "high incidence of tank integrity failure" during accidents.

"When there is a derailment they spill and rupture very easily," says Stewart. "You can no longer build this kind of design because of these problems. They can be retrofitted to make them safer but the rail industry has lobbied very hard against having to do it."

Stewart says that while safe rail transportation by rail will be a long-term process, the government can significantly improve safety by banning the use of the DOT-111A.

"We need to make sure that the way we transport and use oil is as safe as it can be and right now we are not nearly there," says Stewart.