With some extra points from a friend who REALLY knows a lot about rail freight: Two [points] that are missing: 1) Railroads are common carriers and by law cannot refuse this or any other traffic. In fact, a major Class 1 railroad sued to restrict the number of routes where they hauled deadly chlorine to reduce liability exposure. They lost. The Chlorine Institute lobbying group was highly vocal in this case. To be sure, this is very profitable traffic for the railroads, but the profit involved does not come close to the liability cost of a Lac Magantic type disaster. 2) As the article mentions, Bakken crude is unusually volatile. And the packing group designation used in the Lac Magantic disaster did not account for this volatility (most crude oil shipped in pipelines is not particularly combustible and explosive, you need a flamethrower to ignite it). Typical practice in the Eagle Ford (Texas) shale in fact is to equip wells with separators that remove the volatile dissolved gas that makes the crude volatile and explosive. This is economic for the producers there because there is a pipeline infrastructure in place to ship the resulting gasses to market as well as the oil. No such infrastructure exists in the Bakken, so the producers balk at the cost of adding them. But this cost is low compared to the liability cost of a rail shipping disaster (gas pipelines explode too, a big costly fatal one just happened in Taiwan the other day). Its also low compared to the producer profit margins on the produced oil, which are higher than the railroad profit margins.
Posted on: Fri, 08 Aug 2014 03:49:04 +0000
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