Crude Oil Transportation

ELI forum examines pipeline, rail, maritime crude oil transportation

By Nick Snow 
Washington Editor

Crude oil transportation—whether by pipeline, rail, or maritime—has become a hot public topic in the US only relatively recently. But work to address problems arising from it has been going on for years, said lawyers involved in the matter during discussion hosted by the Environmental Law Institute on May 7.

Their descriptions of what's been going on, however, ranged from years of indifference followed by sporadic bursts of activity after a major incident to cooperative, concerted efforts by government officials and regulated companies to identify, address, and solve problems.

"There's been work going on behind the scenes for years with respect to environmental safety in crude oil transport," said discussion moderator John J. Jablonski, a partner in Goldberg Segalla LLP's Buffalo, NY, office. "There has been a concerted effort by many groups, some with divergent interests, in trying to work these issues out," he said.

Jablonski said crude oil transportation has frequently been in the news recently—from the derailment of a crude oil unit train in Lynchburg, Va. (see sidebar, p. 26), to the continuing battle surrounding the proposed Keystone XL crude pipeline's cross-border to permit, to periodic discharges into bodies of water from crude tankers and product barges.

"All of these events have brought to public attention the transportation of crude oil in the US," Jablonski said. "Last year, if you'd asked someone in the general public about this, they would have had no idea of the crude oil transportation industry and how it has grown in the last 4-5 years. Now, people are looking earnestly at safety issues which are involved."

Connie S. Rosebury, a general attorney at Union Pacific Railroad Co., said, "There's probably not a hotter regulatory topic in the transportation world. It's out there, and out there at every level—not just from the federal government, but in the states and in local communities along the routes."

Rail's dramatic growth

Hardly anyone discussed transporting crude by rail 10, or even 5, years ago, Rosebury said. In 2011, it was confined to 30,000 carloads within California on a small line. The following year, shipments climbed to 67,000 carloads on routes from North Dakota, Texas, and Oklahoma to the US Gulf Coast. Shipments rose again in 2013 to 425,000 carloads as more Bakken crude moved to Pacific Northwest and East Coast refineries as well as the Gulf Coast, along with more shipments from Oklahoma, Texas, and Colorado.

"This industry literally came out of nowhere, but it was helpful to the US economy in the jobs it provided," Rosebury said. "It also is helping the US reach its goal of energy independence."

When a parked crude oil unit train began to roll downhill early the morning of July 6, 2013, and reached 65 mph before it derailed in Lac-Megantic, Que., setting off fires and explosions that killed at least 42 people and extensively damaged property, it was a wake-up call to both government regulators and the industry in the US as well as in Canada, she continued.

Immediate actions included Transport Canada's emergency directive covering securement, locking cabs, and reversers; the US Federal Railroad Administration's (FRA) Emergency Order No. 28; past and present National Transportation Safety Board recommendations; and a convening of the Railroad Safety Advisory Committee (RSAC) in the US, according to Rosebury.

RSAC submitted a report to DOT on Apr. 1 covering securement, operations testing, hazardous materials, and crew size, she said. "The train in Lac-Megantic was operated by a short line, with a one-person crew," Rosebury said. The Class 1 tier in the US uses two-person crews on all mainlines, but discussions about the number and qualifications of the crew members are ongoing."

Tank car design

The Lac-Megantic accident also renewed focus on tank cars' design. "These are the things we can do to improve their crashworthiness and survivability so they won't puncture and cause a release that could catch fire or explode," Rosebury said. Possible measures include making the steel shell thicker, requiring that the cars be jacketed, improving thermal protection, and requiring each to have a high-pressure release valve, she indicated.

Her remarks came the same day the US Department of Transportation issued an emergency order requiring all trains carrying large amounts of Bakken crude to notify state emergency response commissions that the trains were passing through their states.

Two of DOT's agencies, the Pipeline and Hazardous Materials Safety Administration (PHMSA) and FRA, also issued a safety advisory on May 7 that strongly urged carriers shipping or offering Bakken crude to use tank car designs with the highest level of integrity available. They also recommended that carriers avoid using older legacy DOT Specification 111 or CTC 111 tank cars to ship Bakken crude.

"Rail is undeniably a quicker way of transporting crude oil, but pipelines can provide much more capacity," George (Casey) Hopkins, a partner at Vinson & Elkins LLP's Washington office, said at ELI's forum. "Keystone XL, if it is approved, would transport 900,000 b/d."

Pipelines have been used to transport crude in the US for 75 years, he said. In 2012, 14.1 billion bbl of petroleum materials moved by pipeline, 99.999% of which were safely delivered, Hopkins said. Operators spent $1.6 billion that year to evaluate, inspect, and maintain those pipelines, he added.

He said oil pipelines have been federally regulated since 1969, with PHMSA most recently issuing a May 6 safety advisory outlining lessons learned from the July 25, 2010, crude release from Enbridge Inc.'s 30-in. line near Marshall, Mich.

High-consequence areas

Federal regulations closely regulate risks to populated and high-consequence areas that include drinking water intakes and unusually sensitive ecological resource areas, according to Hopkins. Many operators have gone further by using markers where soil may be disturbed, public education programs about the pipeline's presence, and leak detection systems that break a pipeline into smaller segments that use a mass-balance system capable of detecting a leak less than 20% of flow in certain cases, he said.

The number of pipeline incidents reported to PHMSA may seem high, but Hopkins said a closer look at the agency's Liquid Hydrocarbon Incident Database shows that 60% of the failures occur at pumping stations or similar facilities while only 30% happen on mainline pipelines. "Moreover, a significant portion of all spilled product—11,286 gal/billion ton-miles—is captured," he said, adding that 76% of leaks between 2002 and July 2012 involved fewer than 30 bbl of oil.

Hopkins said pipelines transported more petroleum materials between 2005 and 2009—an average 584.1 billion ton-miles/year—than any other transportation mode. They also had the lowest rate of incidents (0.58/billion ton-miles), he indicated. Recent statistics also show the current regulatory environment is working, with 60% fewer releases, a 35% reduction in the number of released barrels, and drops in all major spill causes in the 2008-10 period compared with 1999-2001.

"The industry is in the process of investing an incredible amount in its inspection and maintenance procedures," Hopkins said. "In terms of planning for incidents, it is doing the best it can to respond. The fact is that a lot of the pipe is buried, and many of the tools we have are limited in detection. There's a lot of work going on there now. The industry also has created some self-government principles that go beyond what PHMSA requires."

When it comes to maritime transportation of crude, "it's important to understand what it was like before there was any regulation," said Michaela E. Noble, chief of the Environmental Law Division in the US Coast Guard's Maritime and International Law Office.

"In approximately 50 years after the sinking of the Titanic, there were hardly any changes, and most of the transportation involved coal, not oil," Noble explained. "Then a tanker spilled thousands of barrels of crude when it ran aground off England in 1967, leading the International Maritime Organization to establish the first transportation lanes."

More accidents

The grounding of the Argo Merchant, a Liberian-flagged tanker, off New England in 1976, and several more accidents resulted in additional requirements for a short period. Then matters returned to business-as-usual until the Exxon Valdez struck Bligh Reef in Prince William Sound in 1989. "Although it was only the 54th largest oil spill in history, it caught public attention because of Alaska's remoteness," Noble said, adding that Congress passed the 1990 Oil Pollution Act soon after.

OPA's primary requirement—for tankers in US waters to have double, instead of single, hulls—did not include barges carrying petroleum and products. "There are still some single-hulled tanker barges, but those are being phased out by 2015 and replaced by double-hulled barges," Noble said. The law also established new crew licensing and manning requirements, increased contingency planning, more federal response capability and broader authority, higher penalties and potential liabilities, and new research and development programs.

"While the volume of oil transported has increased since 1990, we've seen fewer discharges because of the industry's high rate of compliance," Noble said. "Most tanker vessels are required to be equipped with automatic identification systems, which allow them to see each other in real time and identify potential collisions and grounding. As aids to transportation, we also place radio transmitters on reefs and buoys which send signals to all passing vessels," she said.

Noble continued, "The relative risk is the amount of oil that is discharged at any one time. We have been regulating this industry since the 1990s and have not seen a correlative increase in the number of charges. The industry is complying. The regulations are working."

There remain, however, significant gaps that need to be closed, a fourth panelist warned. Anthony Swift, a staff attorney in the Natural Resources Defense Council's International Program, said technological breakthroughs that have allowed the US to produce significantly more oil and gas also raise questions about the country's long-term environmental goals.

"Yesterday's long-term climate study showed there are significant impacts already," he told the ELI forum. "Our infrastructure decisions need to take a climate lens at these policies and make sure our carbon decisions are consistent with a 2°—instead of a 6°—warming scenario."

Coroners, not planners

Federal regulators need to become actively involved in planning crude oil transportation routes, Swift said. "All too often, we find they have served as coroners after a major spill when they should have been engaged in the pipeline siting process," he said. "States have some jurisdiction in siting, but there's a lot of space in between where pipelines could be sited at less vulnerable areas. We also have found a litany of issues when it comes to the inspection and construction clauses built into pipeline requirements."

Swift said PHMSA has found that most pipeline leak-detection systems are not effective. Regulations don't push the industry to adopt better standards, which in turn doesn't push owners and operators to produce better leak-detection systems, he maintained. "Small spills are a major problem with major pipelines," he said. "The bigger the pipeline, the bigger the blind spots."

Pipelines also don't have abandonment plans, Swift said. "We have several that haven't been rebuilt since [the National Environmental Policy Act] was enacted, and there are plans to repurpose other US pipelines, such as one in the Northeast, which is more than 60 years old," he said.

"The crude-by-rail boom is relatively recent," he continued. "It has caught both industry and regulators off-guard, with unit trains of more than 100 cars. Over three quarters of our rolling stock is DOT-111 tank cars that need to be phased out. When you're moving 100 tank cars in a row, an accident on one can trigger a chain reaction."

It also has become increasingly apparent that new types of crude might have significantly different properties, Swift said. "Bakken crude has a higher vapor pressure, raising the question of whether it should be treated as a volatile gas instead of a crude," he said. "Tar sands crude raises major environmental questions because it's heavier than water, which happened in the Enbridge spill in Michigan."

Regulatory staffing also matters, he added. "More inspectors are needed," said Swift. "But agencies need stronger regulatory teeth and authority to impose bigger fines so the industry has an incentive to be more proactive."

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