North American Oil Trains Under Scrutiny

Sheriff Craig Apple assured a room of concerned citizens that county emergency crews were prepared to handle an oil-train accident involving three or four tank cars.

Firefighters have been training to combat railcar fires with foam, and evacuation plans are detailed in a 500-page emergency response plan, Apple told residents in a May 12 address.

But he was blunt about the potential impact of a larger derailment: "Look, let's face it, there's going to be mayhem."

Albany's tracks handle as much as a fourth of the oil pumped from North Dakota's booming Bakken Shale, or up to several 100-car trains per day, each carrying 70,000 barrels.

It is one of several spots along North America's new oil-by-rail corridors where residents and officials are restless, following six fiery derailments in the past 10 months. Some want to limit or halt the traffic, fearful that existing precautions will not prevent deadly blasts, air and waterway pollution, or nuisances including nasty odors.

Since trains play a growing role in getting oil from landlocked North Dakota and central Canada to mostly coastal refineries, efforts to stop them could boost shipping costs or slow the pace of North America's oil boom. This could hit the bottom line of drillers like Continental Resources (CLR) or refiners like Phillips66.

The opposition extends beyond traditional hotbeds of environmental activism, to oil shipping or processing hubs like Albany, Philadelphia and St. John, New Brunswick in Canada, home to the country's largest refinery.

Efforts to stop oil trains are a new battle front for several major environmental groups that have campaigned to block the Keystone XL pipeline from bringing crude south from Canada's oil sands. With Keystone in limbo, U.S.-bound rail shipments of Canadian oil have risen 20-fold since 2011, the U.S. Congressional Research Service estimated.

With U.S. oil production at a 28-year high, new pipelines in booming shale areas like North Dakota's Bakken have not kept up. This has also pushed more crude onto trains.

Opposition movements have scored a few small victories. Albany County has temporarily halted plans by energy logistics firm Global Partners to install boilers at its rail terminal to make oil flow faster out of tank cars.

The Port of Portland, Oregon issued a blanket rejection of any proposals for crude oil transfer or storage facilities, and states including California, Washington and New York are reviewing oil-train safety. One project, a $110 million rail terminal proposed by refiner Tesoro Corp and Savage Cos. in Washington, is over budget and behind schedule, in part due to an extended state review.

Oil-train opponents are adopting tactics that helped to stall Keystone XL, including street protests and demands for detailed environmental studies.

But curbing oil trains may prove far trickier. Rail hubs face much less red tape than major new pipelines, and unlike pipeline operators, railroads usually are not required to submit comprehensive oil-spill response plans.

OIL ABOARD

U.S. cargoes have risen more than 50-fold since 2008, to around 1 million barrels a day. Volumes may reach 3 million barrels a day in 2016 -- more oil than OPEC member Venezuela pumps daily -- unless pipeline construction speeds up, Matt Rogers, a director at business consultancy McKinsey, told an energy conference last week. (For a map of operating and planned U.S. oil-train terminals and a timeline of derailments, click: http://link.reuters.com/zyt59v )

California may receive 25 percent of its oil by rail in 2016, up from 1 percent now, according to the state's Energy Commission.

About 60 oil-train terminals already exist along the 140,000 miles of U.S. rail tracks, and at least 30 more are planned, including eight in California.

Phyllis Fox, a well known U.S. air quality expert, said many hubs won quick approval in towns or cities that did not recognize potential hazards.

"They get the district to rubber stamp it," Fox said.

The shipping trend drew little public scrutiny until a runaway oil train killed 47 people in Lac Megantic, Quebec last July.

That and subsequent derailments have ignited a debate between regulators, railroads, drillers, refiners and railcar makers about who is responsible for preventing more disasters.

Railroads say older tank cars known as DOT-111s, which have gained a reputation for exploding during derailments, should be "aggressively" phased out. Shippers say railroads must improve their infrastructure. Others suggest that volatile Bakken shale crude may be to blame.

In January, the U.S. Department of Transportation warned of Bakken crude's fire risks, drawing rebukes from oil companies who say it is as safe as other U.S. varieties. This month, DOT issued a statement "strongly urging" shippers to use newer, safety-enhanced railcars for Bakken cargoes. But regulators did not ban older cars from handling it.

The DOT has ordered railroads to inform states about large rail cargoes of Bakken crude traveling through, following complaints about lack of disclosure.

"I don't think anyone has fully addressed the safety of these things," said Read Brugger of environmental group 350 Maine, which wants to ban oil trains in the state. "People don't think they should be coming through our towns and cities and along our bodies of water."

Derailments have continued. A fiery April 30 oil-train accident in Lynchburg, Virginia was the worst yet to affect a U.S. city. Tank cars carrying Bakken crude toppled into the James River, a source of regional drinking water, leaking 25,000 gallons and setting the river ablaze. The exploding cars included newer models with enhanced safety features like reinforced steel plates.

In January, oil-laden tank cars derailed on a rail bridge in Philadelphia, prompting a local protest.

Hours before Sheriff Apple's speech in Albany, four tank cars derailed at low speed in a rail yard near the city's bustling Ezra Prentice housing complex.

Canadian Pacific, the yard's operator, said there was no oil leak or fire. The railroad was fined $5,000 for failing to report the incident until five hours later.

Albany County Executive Dan McCoy, a former firefighter, said he will seek jail time for rail workers who fail to report future incidents within an hour.

SCARY FOOTAGE, CRUDE ODORS

North American railroads are among the world's most efficient. The Association of American Railroads says 99.997 percent of hazardous material cargoes arrive without incident.

But video from Lac Megantic shows the town center reduced to rubble, and images from derailments this year in North Dakota and Virginia feature fireballs up to 60 feet high.

Some worry about more insidious risks. In St. John, the site of Canada's biggest refinery, air quality incidents have risen since operator Irving Oil built about 145,000 barrels per day of rail unloading capacity three years ago, regulatory filings show.

Julie Dingwell, who lives nearby, said foul smells from the new terminal - the destination for the ill-fated Lac Megantic train - have kept her indoors several times over the past year.

Weeks after the Quebec disaster, St. John residents called the fire department as Irving unloaded a batch of high-sulfur Alberta crude from rail cars, filings show.

"You immediately think disaster," Dingwell said. "I've lived in this industrial city most of my life, so I know bad smells. That smell was beyond."

This February, Irving sent scores of apology letters to homes nearby. "We sincerely apologize for any inconvenience these odours may have caused you and your family," they say.

The terminal has begun using a liquid product called Ecosorb, made by Omni Industries, to neutralize the odors, an Irving official said in an email obtained by Reuters in April.

An Irving spokesperson did not respond to requests for comment.

MOVING WEST

Some 3,000 miles to the west, oil-by-rail is gathering steam along the Pacific Coast, a region long reliant on sea-borne oil imports with no pipeline links to the Bakken.

Tesoro Corp., which already ships oil by-rail to its Anacortes, Washington refinery, is seeking approval for a 360,000 barrel per day facility in Vancouver, Washington, population 165,000. It faces a months-long delay during a state environmental review. Its approval rests with Democratic Governor Jay Inslee, who has not taken a position on the project.

Tesoro has participated in more than 100 community meetings, a company spokeswoman said, adding that the project would boost energy independence and create hundreds of jobs.

Further north in Washington's Grays Harbor County, fishermen, tribal groups and environmentalists oppose plans by three firms to inaugurate oil-by-rail terminals. Their proposed sites are on an estuary in an earthquake zone, opponents say.

Three trains carrying grain have derailed in the county since late April, prompting a Federal Railroad Administration probe.

"We got lucky this time," said Arthur Grunbaum of the Friends of Grays Harbor group. "We won't be if crude oil is permitted."

Ed Johnstone, a fisherman who represents the Quinault Indian Nation on policy matters, said that allowing oil-trains would violate the Quinaults' land rights treaty. They have appealed to federal officials to nix the projects.

With each new derailment, the opposition to oil trains is coalescing, said Diana Bailey of the Natural Resources Defense Council, one of the leading national environmental groups and a major opponent of Keystone XL.

"It's no longer 'not in my backyard.' Now it's 'not in anyone's backyard,'" she said.

By Joshua Schneyer, Rory Carroll and Richard Valdmanis