March 7 (Bloomberg) -- Bitumen from Canada’s oil-sands formations is free to ride in older rail cars under an amended set of rules issued by the U.S. yesterday that also eased testing for oils that shippers are familiar with handling.
The U.S. Transportation Department clarified requirements for shipping oil by rail issued Feb. 25 after companies were found classifying crudes as less hazardous than they were. The updated order makes clear that the rules apply only to flammable “UN 1267” crudes and that shippers with “sufficient knowledge” of the oils they’re handling will not be required to test for corrosivity.
“So unless the bitumen is categorized as UN 1267, Class III crude oil, the amended EO would not apply,” Jeannie Shiffer, a spokeswoman for the Transportation Department’s Pipeline and Hazardous Materials Safety Administration Transportation Department, said by e-mail. Bitumen diluted with condensate may be classified as a flammable oil and fall under the new rules, she said.
The trade group American Fuel & Petrochemical Manufacturers criticized the original order, saying it left questions unanswered, and warned that the lack of clarity could cause fuel shortages. The revisions are a “judicious response,” AFPM President Charles Drevna said in a statement yesterday.
Shippers of bitumen, a thick, tarlike substance found in oil sands, were particularly at risk from the Feb. 25 order. They would no longer have been able to export product in older cars known as AAR-211s, companies including Strobel Starostka Transfer Canada said.
“There are companies that take it out of the ground and call it bitumen or fuel oil from the start, and that would be perfectly legal” under the clarified order, Marvin Trimble, Strobel Starostka’s commercial development director, said by telephone yesterday.
Shipments of bitumen by rail to the U.S. are accelerating. More than 200,000 barrels a day of crude are leaving Western Canada by rail, and Peters & Co., a Calgary-based investment bank, forecast that would reach 500,000 by the end of the year.
Yesterday’s amended order also clarified that only companies “without sufficient knowledge” to classify the oil they’re shipping may be subject to additional tests such as those to detect the level of flammable gases, compounds such as hydrogen sulfide and corrosivity.
“It says that if the shipper is familiar with the material they’re transporting, then those tests are not necessary,” Rich Moskowitz, general counsel for the AFPM, said by telephone yesterday from Washington.
The Transportation Department warned of penalties for those who try to reclassify their crude to “circumvent the requirements.”
Western Canada Select, a heavy, sour Canadian crude blend, strengthened $1 to a discount of $21.90 a barrel against U.S. benchmark West Texas Intermediate, a three-week high, according to data compiled by Bloomberg at 11:57 a.m. New York time.
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