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Pipeline vs. Rail: Canada Oil Train Crash

EconMatters's picture




 

By EconMatters

 

Almost exactly like the 2010 movie "Unstoppable" which tells the story of a runaway freight train carrying hazardous chemicals, another unmanned 73-tanker runaway train full of crude oil also was passing through a small town of Lac-Megantic in Quebec, Canada on an early Saturday morning, July 6.  However, in the movie, the runaway train was eventually stopped by two railroad workers (played by Denzel Washington and Chris Pine), sadly, this runaway train derailed and caused five tanker rail cars to explode in the downtown district of Lac-Megantic. 

 

Graphic Source: BBC

Loose Oil Market Remains Calm 

 

What ensued was described as "a war zone with multiple blasts came over a span of several hours" in the town of 6,000, which is about 155 miles east of Montreal and about 10 miles west of the Maine border. The latest news reported 13 dead, 50 missing, and crews are still working to contain 27,000 gallons of light crude that spilled from the tankers and possibly into a near-by river.

 

Typically, this kind of oil related disaster would have sent at least a spike or two to the oil price. However, attesting to the current loose and already over-supplied environment, traders and crude oil market hardly even blinked.

 


Bakken Oil Rail Shipping Economics 

 

The train, which belongs to Montreal Maine & Atlantic (MMA), reportedly was shipping the crude oil from the Bakken Field (in Williston Basin) in North Dakota towards Maine. Some of you may be wondering how this trade could make any economic sense considering shipping by rail adds about $20 a barrel, on average, to the cost of oil. Here is how the math works:

 

The modern day shale revolution has helped elevated North Dakota as well as the U.S. to be the most prolific oil producing regions in the world, but also has caught the energy and oil transport industry by surprise.

 

Chart Source: Minneapolis Fed

The lack of sufficient pipeline takeaway capacity was a major factor behind Bakken oil priced at a discount of $28 a barrel to NYMEX WTI in February 2012. Mind you that there’s also an additional WTI-to-Brent discount of up to $25/bbl at some point during 2012, owing largely again to the pipeline constraint leading to the oil glut at Cushing, OK, artificially depressing the price of NYMEX WTI.

 

The light and sweet Bakken crude is actually more suited for the refineries in the U.S. East Coast since plants there are mostly older and require higher grades of crude oil such as Bakken’s as feedstock, whereas the refineries on the Gulf Coast are geared more towards handling cheaper and heavier crude grades.

 

 

This unprecedented huge spread between the land-locked Bakken, WTI and Brent has made shipping crude oil by rail across Maine to a refinery in the Maritimes an attractive alternative. For example, by mid- 2012, both Pan Am Railways and MMA were looking to move vast amounts of crude to an Irving Oil refinery in St. John, New Brunswick.

 

Pipeline’s Loss Is Rail’s Gain

 

So while most of the environmental attention has been focused on boycotting new pipelines like the Keystone XL, railroad companies such CSX Corp. (NYSE: CSX) and Canadian National Railway (NYSE: CNI), hurting from decrease coal volume and a weak economic recovery, have emerged as significant players in the oil transport business at the Williston/Bakken field.

 

The North Dakota Pipeline Authority now estimates that 71% of the crude oil moved out of the Williston Basin was transported on rail cars while only 20% of it was carried in pipelines. Rising production and legislative gridlock on new pipelines means rail would have an increasing market share of transporting oil out of Williston basin.

 

Chart Source: EIA

Pipeline, Rail, or Truck?

 

Within the continental U.S., pipeline, rail, and truck are the three main transport modes for crude oil. Pipelines are the most cost-effective to transport crude oil in the United States, but they require heavy capital investment with many regulatory hurdles. Rail, on the other hand, is not as big an environmentalists’ target as oil pipelines, and is cheaper than truck in transporting oil. Ultimately, a legislative veto of pipeline projects like Keystone XL actually has pushed the underlying oil transport need and investment money towards rail.

 


Energy Security & Infrastructure

 

While the surging shale oil production has made “energy independence” seem more feasible for the U.S, it also has exposed the lag in the country’s infrastructure to transport new domestic production in a safe and the most cost-efficient timely manner to the end users, which is the more important aspect of achieving the ultimate energy security.

 

According to EIA, Bakken pipeline capacity will increase to more than 650,000 bbl/d and rail capacity to nearly 900,000 bbl/d in 2013. The price spread between Bakken oil, WTI and Brent has narrowed since 2012, and the trend is expected to continue. As this oil rail trade gradually becomes uneconomical, the fact remains that the U.S. needs more pipeline infrastructure in order to keep the nation’s energy cost in check.

 

Chart Source: EIA

This rail disaster at Lac-Megantic most likely will not slow down the rail development, but it is also time for the U.S. government to put idealism, politics and lobbying money aside and let the pipeline do what they do.  It is bad business if we have to import foreign oil because the country lacks more cost-competitive infrastructure to transport domestic oil production.

 

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Wed, 07/10/2013 - 09:43 | 3737120 orangegeek
orangegeek's picture

The Warren Buffet "rail solution" is helping his wallet, but not much else.

 

Canadian media has an eco-terrorism spin on this too.

 

http://www.sunnewsnetwork.ca/sunnews/straighttalk/archives/2013/07/20130...

Wed, 07/10/2013 - 10:49 | 3737336 TDoS
TDoS's picture

Leave it in the ground.

Wed, 07/10/2013 - 07:36 | 3736853 holgerdanske
holgerdanske's picture

I smell a rat.

Normally the position of the brakes on a train is ON, unless you have compressed air to drive the brakes open, and thus OFF.

That would be normal train procedure, taught by hundred years of experience.

 

That means if something or anything fails, the train should be braked solid.

 

If this line operates a different system, I don't know, but if so, it would be criminal, I would say.

Tue, 07/09/2013 - 22:13 | 3736106 gorillaonyourback
gorillaonyourback's picture

One sentence then summary.

60% annual depletion rate.

Crack cocain, u gotta be on crack to think it will last more than a few years lololol fuck where has the good peruvian flake gone

Tue, 07/09/2013 - 21:22 | 3735968 BigSpruce
BigSpruce's picture

The Irving refinery in St. John is one of the largest and most modern refineries in North America. Privately owned and run they are always reinvesting via capital improvements. In business the Irvings dont fuck around - it borders on ruthless - yet they provide tens of thousands of jobs in a region that has very little opportunity.

They are one the wealthiest families in the world and have a mammoth empire encompassing oil, timber, lumber and paper manufacturing, trucking, ship building, heavy construction etc.. yet most people have never heard of them. 

Tue, 07/09/2013 - 17:15 | 3735311 Michelle
Michelle's picture

Build refineries closer to the point of extraction versus shipping crude to the Saudi-owned refineries in the Gulf.

Tue, 07/09/2013 - 16:56 | 3735252 Marco
Marco's picture

Energy independence from tight oil? The US would run through it in less than a decade ... only gas has significant legs, not oil.

Tue, 07/09/2013 - 16:34 | 3735185 negative rates
negative rates's picture

Who needs to spend fast money on terroists when we have these bozo's floatin around.

Tue, 07/09/2013 - 16:12 | 3735090 Bollixed
Bollixed's picture

Just goes to show you, crossing the border 26 times with the same trainload of oil to game the system and take profits where no profits were earned has a downside.../sarc.

Tue, 07/09/2013 - 16:06 | 3735062 ebear
ebear's picture

 

Read up on railway air brakes:

http://www.railway-technical.com/brake2.shtml

Then consider that:

MM&A runs trains with only a single engineer.  No conductor or brakeman - he's all alone.

http://tinyurl.com/kd7h3lv

and that, as per practice, he left the train unattended.

http://tinyurl.com/kcu4vd2

"Nantes Fire Chief Patrick Lambert told the media that firefighters responded around 11:30 p.m. and put out the blaze, switching off the engine in the process, a move the company blames for releasing the brakes holding the train in place. They left about 45 minutes later, media has reported."


If the above statements are true, then no one was on the scene to advise the firefighters, who presumably knew nothing about train brakes.  If an engineer were present, he would have shut off the burning unit, cut it out of the train if possible, restart the remaining units to maintain air, then walk the train and set ALL the handbrakes.  A further precaution would be to set a derail device ahead of the train in the event the fire got out of control and damaged the train brake line. IMO, based on the facts presented, MM&A bears full responsibility for allowing its trains to be left unattended in an area where roll-away is possible.  Small town fire departments cannot be expected to understand the intricacies of railway operations any more than train crews are expected to understand firefighting.  If a competent MM&A employee were on site, he could have advised the fire department and taken the above mentioned steps. So add it up.  72 cars of combustible liquids, parked on a grade with only a single locomotive to maintain air pressure, and nobody at hand who knew anything about preventing a roll-away. Thanks Rail World. http://en.wikipedia.org/wiki/Rail_World,_Inc.

 


Tue, 07/09/2013 - 17:32 | 3735364 Herd Redirectio...
Herd Redirection Committee's picture

I think the rail company AND the dispatcher, and to an extent the firefighters are at fault.  Call it 40%, 40%, 20%.

Firefighters put out a fire, and leave, and then another fighter occurs as a result of their actions how many minutes later?  And how many dead?  Not entirely their fault, but IMO they are still 20% responsible for the manslaughter that occurred.

Tue, 07/09/2013 - 15:38 | 3734977 shovelhead
shovelhead's picture

We need to get the Saudi's to invade Iran and while they're not at home, take over Saudi Arabia.

Then we can make all the women top-less barmaids serving pulled pork sandwiches and the Saudi's won't want to come home.

America...Fuck Yeah!

Tue, 07/09/2013 - 15:34 | 3734962 Stuck on Zero
Stuck on Zero's picture

If you want to build a pipeline just weld all the tank cars together on the tracks and you've got a pipeline.

 

Tue, 07/09/2013 - 14:53 | 3734844 Not Too Important
Not Too Important's picture

The cars didn't explode because crude oil is explosive. Fracked crude is still full of the explosive chemicals used for extraction, and is left in during shipping to decrease viscosity. The chemicals are processed out just before final processing and delivery.

Whether shipped by rail or pipeline, this stuff is highly explosive and lethally carcinogenic, far more than regular crude. Every accident is going to be bad. Look at that spill in Arkansas. That got hushed up quick. At least nothing exploded, but the ground will be contaminated for hundreds of years.

And with the water shortages, and fracking wells using several million gallons of non-recoverable fresh water per rig and massive disposal problems, there is much to overcome before fracking becomes viable long-term.

Tue, 07/09/2013 - 16:38 | 3735201 Flakmeister
Flakmeister's picture

Crude oil that has been vaporized as a result of the massive amount of heat created in a collision certainly is explosive, esp. if the tankers were carrying dilbit....

I suggest you brush up on your stoichiometry....

Tue, 07/09/2013 - 14:46 | 3734814 jtlien
jtlien's picture

You don't hear much about it but the more trains you have the more car/train collisions occur.  The train usually wins in that case.    My grandfather was hit by one when he was 86.   In some places the tall corn grows right up to the intersection so  if the intersection has no warning signal you have to come practically to a stop and look both ways down the right of way to see that it is safe to cross.  We need inferstructure emminent domain reform so that pipelines can be built were needed.   I think coal slurry and oil pipelines are more economical and safer.

Tue, 07/09/2013 - 15:26 | 3734944 SmackDaddy
SmackDaddy's picture

I think at 86 year old, that's considered 'natural causes'.  Yeah, it's damn near impossible to see where a train might be coming from, and even harder to hear one, hahahhaha.  It's too bad natural selection didnt get your pappy before he had a chance to breed. 

Wed, 07/10/2013 - 10:45 | 3737320 jtlien
jtlien's picture

Who said he died.   He lived another 10 years after that.  

Tue, 07/09/2013 - 16:35 | 3735188 LFMayor
LFMayor's picture

ROFL!   Now that there is some Fight Club at it's finest!

Tue, 07/09/2013 - 13:49 | 3734576 Flakmeister
Flakmeister's picture

Brakes had been disabled in fatal oil train crash

The air brakes on the runaway oil train that devastated a Quebec town early Saturday had been disabled by firefighters who were called to extinguish a blaze aboard one of the locomotives 90 minutes before the disaster, the head of the railway said Monday.

...He told Reuters that firefighters had shut down the locomotive while they battled the fire, which was apparently caused by a broken oil or fuel line. But the train's crew had left the engine idling to keep the air brakes pressurized so the train wouldn't roll, said Ed Burkhardt, chairman of Montreal, Maine & Atlantic Railway.

Tue, 07/09/2013 - 17:22 | 3735332 Marco
Marco's picture

Why the fuck would you park an unattended vehicle with an active on break system? This is like leaving my car idling with a brick on the break pedal.

I'm amazed trains don't simply have a low geared electronic system to clamp on breaks statically for when they are left unattended.

Tue, 07/09/2013 - 17:47 | 3735406 mickeyman
mickeyman's picture

Or at least they could have put a couple of rocks behind the rear wheels.

Tue, 07/09/2013 - 16:42 | 3735210 ebear
ebear's picture

The fire dept. did what they were trained to do: shut off all sources of combustion.

The train was parked on a grade with no one competent in attendance.  EOS.

Tue, 07/09/2013 - 13:42 | 3734543 Flakmeister
Flakmeister's picture

Yet another puff piece for Keystone...

I wonder if the guy is a tagalong or actually on the Kochs payroll...

Tue, 07/09/2013 - 13:29 | 3734495 Stud Duck
Stud Duck's picture

Come on all you "brilliant ZH people, LOSS OF AIR PRESSURE CAUSES THE BRAKES TO SET!!!!

Air pressure has to be applied to release the brakes! Any dumb ass that has worked with semi trucks or trains know how the brake systems works!

Beware, the information recieved so far is incorrect regarding this run away train! Just like the West, Texas fertilizer explosion, anybody that has worked with ammonia nitrate as a explosive know that diesel fuel has to be added to it to make it go off! Adding water to ammonia nitrate produces laughing gas!

I am like Kunstler, and do not pay much attention to the consperisy blather, but common sense/logic tells me that their is much more to these stories than what we are hearing on the MSM.

 

Tue, 07/09/2013 - 17:32 | 3735362 Marco
Marco's picture

Only initially, the loss of air pressure in the brake line signals the breaks to apply ... but they apply by using air pressure in ancillary reservoirs. Eventually those reservoirs will go empty unless continually fed. Trains don't have a spring system which can put on an emergency brake when pressure drops completely.

Tue, 07/09/2013 - 14:58 | 3734864 Unknown Rider
Unknown Rider's picture

The largets industrial disaster in US history, the Texas City Disaster in 1947, was the result of ammonium nitrate detonating without any diesel involved. Best guess is that a lit cigarette fell into the hold and started a smouldering fire. The hold was sealed and flooded with steam. When the Grandcamp blew the detonation knocked airplanes out of the sky, leveled about 1000 buildings, and resulted in the detonation of the High Flyer.

Tue, 07/09/2013 - 16:38 | 3735200 LFMayor
LFMayor's picture

Funny thing, some grain elevators manage to blow up without EITHER diesel fuel or ammonium nitrate.  Flour mills too!  And I've even heard whispers of coal mines doing it, too. Except they don't even have any flour.

Tue, 07/09/2013 - 17:56 | 3735429 STP
STP's picture

The dust is combustive!  When you have x amount of dust (fuel) floating in the air (oxygen), in the right amounts, you get a combustible mixture.

http://en.wikipedia.org/wiki/Dust_explosion

https://www.osha.gov/dsg/combustibledust/index.html

From the OSHA website:

"Any combustible material can burn rapidly when in a finely divided form. If such a dust is suspended in air in the right concentration, under certain conditions, it can become explosible. Even materials that do not burn in larger pieces (such as aluminum or iron), given the proper conditions, can be explosible in dust form."

"The force from such an explosion can cause employee deaths, injuries, and destruction of entire buildings. For example, 3 workers were killed in a 2010 titanium dust explosion in West Virginia, and 14 workers were killed in a 2008 sugar dust explosion in Georgia. The U.S. Chemical Safety and Hazard Investigation Board (CSB) identified 281 combustible dust incidents between 1980 and 2005 that led to the deaths of 119 workers, injured 718, and extensively damaged numerous industrial facilities. "

 

Tue, 07/09/2013 - 15:24 | 3734708 oddjob
oddjob's picture

Train cars do not have maxis, that's basic stuff. Unlike truck trailer brakes the single source of air carries both the air that powers the brakes as well as the signal to control them.

Tue, 07/09/2013 - 16:36 | 3735197 ebear
ebear's picture

Correct, and if the air bleeds down too far (takes about an hour) you have NO BRAKES.

Tue, 07/09/2013 - 17:27 | 3735351 Herd Redirectio...
Herd Redirection Committee's picture

Apparently it took 5 minutes in this case.

Or, the firefighters shut off the engine, fought the fire for 1 hr, left, and just luckily the train only started moving 5 minutes after they got off.

Phew, that could have ended badly?  Whats that, 1/2 a town is destroyed and 50 dead/vaporized/labelled naively as missing?

Tue, 07/09/2013 - 13:20 | 3734453 madcuban
madcuban's picture

nothing like the movie in any way.  no reason to read past the first sentence.  again.

Tue, 07/09/2013 - 16:40 | 3735205 LFMayor
LFMayor's picture

For sure!  If it was like the movie, there would have been majik retards or majik persons of distinction to save the day.  That's why it was such a fuckin disaster.

Tue, 07/09/2013 - 13:16 | 3734441 SubjectivObject
SubjectivObject's picture

The article talks as if a justifiably long Bakken play life is assumed.  Are there any numbers on the producing life of the Bakken field?  Is it enough to justify new pipe line(s)?  I am suspicious the word is not, but that kind of fundamental has never stopped hubris born of disinfo.

Tue, 07/09/2013 - 13:16 | 3734439 MeelionDollerBogus
MeelionDollerBogus's picture

There's an automatic incentive to permit rail oil accidents:
the more they happen the more argument there is for "safe" pipelines that spill much less & less frequently.
So goes the company story.

Tue, 07/09/2013 - 14:09 | 3734658 Herd Redirectio...
Herd Redirection Committee's picture

Yeah, I mean, accidents happen, but this one?  This is a clusterfuck so bad you have to entertain the possibility of sabotage/fascist state terrorism.

Tue, 07/09/2013 - 14:16 | 3734680 Herd Redirectio...
Herd Redirection Committee's picture

Apparently the engine was idling, the firefighters then disabled the brakes and turned the engine off. They apparently told the dispatcher, who then.... Did nothing.

So not to worry, just your standard accident, not sabotage or anything fishy... /s

Tue, 07/09/2013 - 17:04 | 3735280 jimmytorpedo
jimmytorpedo's picture

Since it was in Quebec, we can assume, by law, that all the instructions were ONLY in French.

Since Pepsi's only work under tha table for cash, I'm betting the engineer was English.

And worked for that ice cream licking pervert octogenarian.

Tue, 07/09/2013 - 12:55 | 3734356 disabledvet
disabledvet's picture

how does a loss of air pressure cause the brakes to fail again?

Tue, 07/09/2013 - 12:59 | 3734376 oddjob
oddjob's picture

Once that engine is shut off, brake air pressure no longer builds.

Tue, 07/09/2013 - 13:34 | 3734523 I_Rowboat
I_Rowboat's picture

My understanding is that the brakes are normally clamped tight by powerful springs, and so air pressure is required to open them up and allow train cars to roll.  Loss of air pressure would've stopped the train, so something else must've happened, unless I'm mistaken.

Tue, 07/09/2013 - 14:11 | 3734646 oddjob
oddjob's picture

If the locomotive’s engine is shut down, then air is not being circulated to a reservoir. Without air pressure, the brakes “bleed,” and the spring-loaded system doesn’t function because proper pressure is required to force the air that applies the brakes to the train’s wheels, Mr. Beatty said.

“Whenever you leave a train, you must secure it. You have to put on hand brakes and you have to make sure there is continued air pressure,” he said. “If there isn’t continued air pressure in the brake lines, eventually the air leaks off.”

http://www.theglobeandmail.com/news/national/air-brakes-a-focal-point-in-safety-boards-probe-of-lac-megantic-disaster/article13084764/

Tue, 07/09/2013 - 14:21 | 3734693 Herd Redirectio...
Herd Redirection Committee's picture

But.... Apparently the train was rolling 5 minutes after firefighters left.  And the firefighters turned off the engine, apparently told the dispatcher, who apparently did nothing... Or was on the take.

Tue, 07/09/2013 - 18:03 | 3735443 disabledvet
disabledvet's picture

only five cars? http://abcnews.go.com/International/rail-tankers-quebec-train-crash-punc... i mean i think if i were the owner i'd be catching a flight there immediately to reach out to the folks.

Tue, 07/09/2013 - 13:32 | 3734519 Stud Duck
Stud Duck's picture

Your an idiot! The exact opposite occurs!

Tue, 07/09/2013 - 16:31 | 3735174 LFMayor
LFMayor's picture

Hey stud, I'm gonna guess they're not set up like tractor/trailer air brakes.

Don't feel bad brah, you had a 50% chance.  You steps up to the table and you puts down your chips.

Tue, 07/09/2013 - 15:09 | 3734892 oddjob
oddjob's picture

You might want to learn how a triple valve works. The air pressure is used to control the brakes and power them

http://www.railway-technical.com/brake2.shtml

I may be an idiot, but now you are one too.

 

 

Wed, 07/10/2013 - 06:41 | 3736793 savagegoose
savagegoose's picture

ite i suggest  stationing  trains loaded with  flammables at the bottom of valleys over night, instread of the top of hills, might make the brake conditions   moot.

Tue, 07/09/2013 - 15:48 | 3735008 Urban Roman
Urban Roman's picture

It was also my impression that the brakes were applied by powerful springs, and always set unless the air pressure takes it off. 

Interesting article -- I did not know that those springs are also made of air, and can bleed off. 

Which gets us back to the question -- how was it that the air reservoirs became so depleted so quickly, or why weren't they full when they parked the train? 

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