Compared to last year, transportation of goods by rail has increased. The two commodities with the largest increase in rail traffic have been coal and crude oil products. Transportation of crude oil and petroleum products by rail has increased by 13.4 percent. From January to October 2014, more than 672,000 tank cars have transported oil and petroleum products. Commentators have suggested that the increase is a result of the increased production of crude oil and the limited amount of pipeline available to transport the material. The amount of crude oil and petroleum products transported by rail pales in comparison to the amount of coal transported. Approximately 4.9 million tank cars of coal were shipped from January to October 2014.
The increased rail traffic has led federal and state regulators to impose additional requirements on rail carriers. The United States Department of Transportation’s Surface Transportation Board (STB) recently imposed a requirement that rail carriers submit weekly reports on their delivery performance. These reports will permit the STB to track the shipments and identify any potential problems from the increased rail traffic.
In addition, Lynn Helms, the Mineral Resources Director for North Dakota, has proposed new regulations for rail carriers in the state. Under the new rules, companies must lower the volatility of crude oil before it can be transported by rail. Specifically, the proposed rules would require crude oil to have a vapor pressure lower than 13.7 pounds per square inch (psi). National standards only require crude oil to have a vapor pressure lower than 14.7 psi. The proposal has been submitted to the North Dakota Industrial Commission (Commission). The Commission will meet on December 11th to discuss whether to adopt the proposal.
Although several members of the Commission have expressed their support for the proposed rules, members of the oil and gas industry have stated their displeasure with the proposal. According to opponents of the regulation, the proposal unduly focuses on crude oil and fails to address the true problem—safe rail transportation. Opponents also argue that the treatment process envisioned by the proposal would increase the amount of volatile material needed to be transported. Lastly, opponents argue that the treatment process would cause increased emissions from the amount of heating required to remove the chemicals from the gas.
This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713 651 3662) and Johnjerica Hodge (johnjerica.hodge@nortonrosefulbright.com or 713 651 5698) from Norton Rose Fulbright's Energy Practice Group.
