Bitumen Shippers Seen as Losers in Federal Oil-by-Rail OrderLynn Doan
A federal order reclassifying types of crude carried in tanker-cars is threatening to reduce or delay shipments of bitumen and other low-volatility fuels, according to oil-by-rail companies.
The U.S. Transportation Department issued an emergency order yesterday requiring testing to ensure that flammable oils such as Bakken crude from North Dakota don’t explode during transit. It also raises the risk level of an entire class of less-volatile grades that must now be shipped in safer, “more robust” tanker-cars, a statement from the agency shows.
The order threatens to worsen a shortage of tanker-cars, forcing U.S. shippers to search for more protective units designed to handle flammable crudes or risk curtailing deliveries, according to Marvin Trimble, the commercial development director at Strobel Starostka Transfer Canada, a rail-services company.
“You’re going to have to shuffle around your entire fleet,” Trimble said at the Crude by Rail 2014 conference yesterday, sponsored by American Business Conferences in Glendale, California. “It may seem like a little bit of an announcement, but it’s going to have far-reaching ramifications, and I don’t know for how long.”
Oils that were previously categorized as less flammable “Group III” products must now be labeled as “Group I” or “Group II,” which require safer tank-cars. The agency’s order follows a series of explosions of trains carrying Bakken crude.
The rule will particularly impact companies that ship bitumen such as Altex Energy Ltd. because it’s typically classified as a Group III product, Trimble said.
Altex, based in Calgary, operates heavy oil-loading complexes in Canada. The company didn’t immediately respond to requests for comment sent by phone and e-mail.
An investigation by the Federal Railroad Administration found that shippers sometimes misclassified the oil they offered for sale, loading supplies into tankers that weren’t sturdy enough to safely carry materials in the highest hazard category.
“This order affects more than just oil coming out of the Bakken,” Mark Luitwieler, the executive vice president of operations for Peaker Energy, said at the industry gathering yesterday. Shipments of heavier oils such as waxy crude from Utah’s Uinta Basin will be just as affected, even if they’re less flammable, he predicts.
“That Uinta stuff is just like peanut butter,” said Luitwieler, whose Houston-based company develops crude-by-rail terminals.