Shale oil under fresh scrutiny

New twist in Lac-mégantic investigation

Crude oil shipped by railroad from North Dakota is drawing fresh scrutiny from regulators concerned that the cargo is adding environmental and safety hazards.

The U.S. Federal Railroad Administration is investigating whether chemicals used in hydraulic fracturing are corroding rail tank cars and increasing risks. Separately, three pipeline companies including Calgary-based Enbridge warned regulators that North Dakota oil with too much hydrogen sulphide, which is toxic and flammable, was reaching terminals and putting workers at risk.

After tanker cars on an unattended Montreal, Maine & Atlantic train derailed and blew up July 6 in Lac-Mégantic, Que., investigators have been considering whether the composition of the crude, which normally doesn’t explode, may have played a role in the accident that killed 47 people. The oil was from North Dakota’s Bakken shale.

“The fact that there were explosions, and crude oil is not supposed to explode, raises a lot of suspicions as to whether there were other chemicals, and so on, added to oil in the process before the shipment,” Edward Burkhardt, chief executive of Rail World Inc., which owns the railway, said in an interview.

Canadian regulators are testing the composition of crude from the wrecked train. They visited North Dakota as part of their review, said Chris Krepski, a spokesman for the Transportation Safety Board.

“We did take samples from the tank cars to get a better understanding of what was actually carried in them and verifying that against the shipping documents,” Krepski said. “It’s safe to say we’re looking at everything.”

Montreal, Maine & Atlantic said last week it was forced to file for bankruptcy because of potential liability in the crash. The railway’s licence to operate in Canada will be revoked as of Aug. 20.

North Dakota is the secondbiggest oil-producing state in the U.S., with more than 790,000 barrels a day this year, up from about 150,000 barrels in 2008. Railways move 75 per cent of the state’s crude. Much of North Dakota’s production relies on hydraulic fracturing or fracking, a technique in which millions of gallons of chemically treated water and sand are forced underground to shatter rock and free trapped oil. Highly corrosive hydrochloric acid is widely used to extract oil in the state, according to a 2011 report from the Society of Petroleum Engineers.

In a July 29 letter to the American Petroleum Institute, a Washington-based lobbying and standards-setting group for the oil and gas industry, the railway administration said it found increasing cases of damage to tanker cars’ interior surfaces. A possible cause is contamination of crude by materials used in fracking, according to the letter.

“If the hydrochloric acid is carried with the oil into rail cars, corrosion can be an issue,” Andy Lipow, president of Houston-based Lipow Oil Associates LLC, said in an email.

Shippers need to know the properties of the oil to ensure that it’s transported in tankers equipped to handle the cargo, according to the rail agency’s letter. Because information provided to railways on the properties of oil is not gathered from tests, the agency said it “can only speculate” as to the number of cars in violation of hazardous-materials regulations.

The Quebec accident also revived a debate over the type of cars used to haul oil. For years, regulators and watchdogs have sought improvements to a common car design shown to be susceptible to rupture when derailed. The U.S. National Transportation Safety Board estimates 69 per cent of today’s rail tank-car fleet has “a high incidence of tank failure during accidents,” chairman Deborah Hersman wrote last year. The agency recommended thicker shells and other modifications to strengthen the cars. The rail industry is fighting a proposal to retrofit existing cars, saying it could cost $1 billion.

Shippers also must account for hydrogen sulphide, a highly flammable toxic gas that at some wells is a byproduct of oil, to properly classify oil for transport. The Bakken oilfield generally produces lighter oil with little or no hydrogen sulphide, though at times, crudes with different grades are mixed for shipping, said John Harju, associate director for research at the University of North Dakota Energy and Environmental Research Center, and co-author of the Society of Petroleum Engineers report on the Bakken reservoir.

“You see little blender facilities popping up all over the place along pipelines and rails,” Harju said in an interview.

In June, Enbridge won an emergency order to reject oil with high hydrogen-sulphide levels from its system after telling the Federal Energy Regulatory Commission that it found dangerous levels of the compound at a rail terminal in Berthold, N.D. In addition to being highly flammable, hydrogen sulphide in the air is an irritant and a chemical asphyxiant.

Enbridge won FERC’s permission to refuse delivery of any oil with hydrogen sulphide that exceeded five parts per million. In a May 5 test, Enbridge found levels as high as 1,200 parts per million at its Berthold terminal “that could cause death, or serious injuries,” according to the company’s FERC filing.