Kemp: Bakken is no more, or less, dangerous than other light crudes
The NDPC report, written by engineering consultants Turner, Mason and Company, and based on laboratory tests conducted by the international inspection firm SGS, counters charges that Bakken is unusually dangerous and pushes back against assertions by U.S. government regulators that the oil is so uniquely dangerous that it requires special safety measures.
The report rejects an allegation by the U.S. government that Bakken oil is more volatile than most other crudes and faults regulators for what it calls a failure to provide evidence before making such a sweeping statement. It rejects views that Bakken is unsuitable to be carried in Class 111 tank cars, which have been implicated in a recent spate of fiery derailments.
But the report agrees with regulators in recommending that Bakken crude be classified and placarded as high risk (Packing Group I) rather than medium or low risk (Packing Groups II and III) flammable liquids under federal regulations governing the transport of hazardous materials.
It also accepts that "no rail car is designed to always withstand the full force of a high-speed train derailment; and once containment is breached during such an event, there are countless ignition sources" that can cause a devastating fire. In doing so, the report implicitly acknowledges the government's case for insisting on a new design for future tank cars and retrofitting old ones to reduce the probability of spills.
The investigations and regulations concerning Bakken crude and rail car safety launched since the devastating train fire at Lac-Megantic in July 2013 have strained relations between oil producers and shippers on the one hand and the railroads and the governments of the United States and Canada on the other.
"The industry supports regulations that are implemented through scientific investigation and factual basis, not implemented emotionally," the NDPC report says acidly. But despite the undoubted ill-feeling that exists between the oil industry and transportation safety regulators, there is now a substantial amount of agreement on the way forward.
The industry and regulators agree on (1) the need for careful handling of the oil before shipment; (2) testing of the oil on each crude-carrying unit train to ensure it falls within acceptable safety limits; and (3) shipping all cargoes in the highest-risk Packing Group I category and therefore subjecting them to the most stringent safety restrictions.
"The North Dakota Petroleum Council Study on Bakken Crude Properties," presented to state regulators on Wednesday, is based on an analysis of around 150 samples collected from seven rail sites and 15 wells during March and April and says it is "the most thorough and comprehensive study of crude quality from a tight oil production basin to date".
Samples were tested by SGS, an independent testing firm, for gravity, sulfur and various measures of volatility - including vapor pressure, initial boiling point, flash point and proportion of light ends such as ethane, propane and butane.
"Bakken crude is a light sweet crude with an API gravity between 40 and 43 degrees and a sulfur content of less than 0.2 percent by weight," according to the report. "As such it is similar to many other light sweet crude oils produced and transported in the United States."
Bakken is at the lighter end of crude grades deliverable against the NYMEX WTI light sweet contract. It is slightly lighter than Brent (37-39 degrees) andLouisiana Light Sweet (36-40 degrees) but much heavier than Eagle Ford (48 degrees) and Eagle Ford Light (59 degrees).
Test results put Bakken's vapor pressure at around 11 pounds per square inch - well below the limit of 43.5 psi for flammable liquids prescribed by the hazmat regulations, and far below the 100 psi design threshold of Class 111 tank cars.
By volume, Bakken contains about 5 percent light ends such as ethane, propane and butane, which can come out of solution and form explosive gases. But the light ends content is in line with other light crudes, suggesting Bakken is no more volatile than other domestic and international crude oils.
For classifying crude under the hazmat regulations, however, the two most important tests are flash point and initial boiling point.
The tests found the flash point for all the samples was below 73 degrees Fahrenheit (23 degrees Celsius), so Bakken cannot be classified in the lowest-risk Packing Group III.
The initial boiling point of the samples averaged 100 degrees Fahrenheit (which is just in Packing Group II). But many of the readings were around the 95-degree threshold that divides Packing Group II (medium risk) from Packing Group I (highest risk).
To err on the safe side, the report recommends all crude cargoes be classified as PG I even where test results indicate they could be placarded as PG II.
The test results confirm that the areas of disagreement with regulators are much narrower than is often thought.
U.S. and Canadian regulators and accident investigators complained that some cargoes had been placarded as Packing Group III (which everyone accepts is clearly wrong).
The only real dispute is whether tank cars carrying Bakken should be correctly placarded as Packing Group II or Packing Group I.
Everyone accepts the judgment is a fine one, but it is safest to classify cargoes as PG I, if only to remind shippers and railroads of the dangers posed by oil trains and warn emergency responders of the seriousness of the potential fire hazard.
The NDPC report takes great exception to a statement in a recent federal government rulemaking which observed Bakken oil "is more volatile than most other types of crude" without providing comparative data.
But even here, the difference is less than it seems. Bakken is no more volatile than other types of light crude, but of course it is considerably more volatile than medium or heavy crudes.
Therein lies the problem. "Bakken is moved by rail, pipeline and truck, and has been for decades," the report notes. "In the last few years, crude-by-rail has increased rapidly as production has topped 1 million barrels per day, and as such the opportunities for incidents to occur have increased."
Bakken has not become more dangerous. But when U.S. railroads were hauling only small quantities of crude, much of it medium or heavy grades, the number of light oil cargoes was too low for the full risks to be apparent. Now the number of light crude cargoes has increased by several orders of magnitude, the true riskiness of carrying it in old tank cars has been revealed.
In a sense, the industry and regulators are both correct. The North Dakota Petroleum Council is right to insist there is no reason to single out Bakken as especially dangerous, at least compared with other light oils. But the federal government is also right to say the emerging risks are unacceptable and new tank cars must be introduced to minimize the threat of spills.
The safest crude is the one that remains locked away in the tank car, even if the tank comes off the tracks.
John Kemp is a Reuters market analyst.