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Oil-By-Rail Labelling Rules Tightened

10/18/2013 01:09 EDT | Updated 01/23/2014 06:58 EST
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Empty railroad tank cars snake their way into a storage yard in Newark, Delaware, July 28, 2013 The cars will return to North Dakota's Bakken region to be loaded with crude oil for another trip to the refinery at Delaware City, Delaware. With a shortage of new pipeline capacity, oil producers have been using rail as an alternative, and in some cases it's the preferred mode. (Curtis Tate/MCT via Getty Images)
In the wake of reports that oil involved in the Lac-Mégantic explosion was extremely volatile and unstable, Transport Canada has introduced new labelling requirements for shipping oil by rail.

Transport minister Lisa Raitt issued a directive Thursday ordering shippers and railways who ship crude oil to test it first.

That test will determine the classification of the crude oil by its volatility and should be recorded on safety data sheets provided to the Canadian Transport Emergency Centre, under the new directive.

Any crude shipped by rail that is not tested should be shipped with the most hazardous rating, the directive said.

The crude oil on a runaway train that devastated the Quebec town of Lac-Mégantic and killed 47 people was more volatile than its labelling indicated. That may have played a role in the tragedy as firefighters who handled a fire on the train ahead of the disaster were unaware of how explosive the cargo was.

Concern has been expressed about crude oil from North Dakota’s Bakken reserve — the source of the crude in the disaster — which is as explosive as gasoline.

Canada’s Transportation Safety Board is still investigating the accident, but has already tightened rules for shipping oil by rail, which is growing as North American oil production increases.

“As the speech from the throne reiterated yesterday, our government remains committed to taking action to protect public safety, and we will take targeted action to increase the safety of the transportation of dangerous goods,” Raitt said in a press statement.

Cost of shipping oil by rail to rise

The new rules are expected to boost the costs of shipping crude in North America, according to analyst Jerry Swank of Dallas-based Swank Capital.

"You’re going to see a massive flood of spending to get ahead of these government regulations,” Swank said at the Bloomberg Link Oil & Gas Conference in Houston on Thursday.

Crude oil shipped by rail in North America is forecast to rise to two million barrels a day by the end of 2014, according to pipeline operator TransCanada Corp.

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