Shippers Confused by New Federal Order on Oil Transport

Jack Gerard, API
National Journal
Clare Foran
Feb. 26, 2014, 11:50 a.m.

Oil in­dustry lead­er Jack Ger­ard said Wed­nes­day that a re­cently re­leased Trans­port­a­tion De­part­ment dir­ect­ive cre­ates con­fu­sion over how to prop­erly test and clas­si­fy crude oil be­fore rail trans­port.

“The emer­gency or­der says that we need to look at prop­er test­ing with suf­fi­cient fre­quency and qual­ity. We don’t know what that means,” Ger­ard, the pres­id­ent of the Amer­ic­an Pet­ro­leum In­sti­tute, said at a House Trans­port­a­tion and In­fra­struc­ture Sub­com­mit­tee hear­ing con­vened to ex­am­ine pas­sen­ger- and freight-rail safety.

The head of Trans­port­a­tion’s Pipeline and Haz­ard­ous Ma­ter­i­als Safety Ad­min­is­tra­tion, Cyn­thia Quarter­man, de­fen­ded the or­der, say­ing that am­bi­gu­ity was in­ten­tion­al so as not to force the in­dustry’s hand.

“We spe­cific­ally left those terms to be de­term­ined by the ship­pers,” Quarter­man said. “We did not want to say for each and every in­stance be­fore a ship­ment oc­curs that test­ing needed to oc­cur.”

When ship­pers handle large quant­it­ies of crude sourced from the same shale play, they are typ­ic­ally fa­mil­i­ar with its com­pos­i­tion and may not need to test and re­clas­si­fy the crude each time it’s loaded onto rail cars, Quarter­man ex­plained. In oth­er in­stances, she said, ship­pers may need to test the crude more fre­quently if its com­pos­i­tion is un­known or found not to be con­sist­ent.

“We are happy to talk with ship­pers that have ques­tions and need cla­ri­fic­a­tion,” Quarter­man said.

A spate of re­cent ac­ci­dents in­volving crude oil sourced from North Dakota’s Bakken form­a­tion and shipped by rail has put crude-by-rail safety un­der the mi­cro­scope. PHMSA in par­tic­u­lar has taken heat for fail­ing to fi­nal­ize a rule­mak­ing that would set re­vised tank-car stand­ards for rail cars used to haul crude.

In re­sponse, the ad­min­is­tra­tion has is­sued a series of emer­gency or­ders aimed at boost­ing crude rail safety, in­clud­ing an or­der re­leased on Tues­day man­dat­ing that ship­pers prop­erly test and clas­si­fy crude be­fore ship­ment.

Ger­ard in­dic­ated, however, that the spe­cif­ics of the or­der still need to be straightened out.

“The re­sponse we’ve got­ten has been one of con­fu­sion,” he said, re­fer­ring to how oil-in­dustry stake­hold­ers re­acted to the or­der. “I think in light of this we need to sit down with the ad­min­is­trat­or and oth­ers and seek cla­ri­fic­a­tion on ex­actly what it is they would like us to do in light of this or­der.”

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