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Page added on May 27, 2014

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Why Do These Tank Cars Carrying Oil Keep Blowing Up?

Early on the morning of July 6, 2013, a runaway freight train derailed in Lac-Mégantic, Quebec, setting off a series of massive explosions and inundating the town in flaming oil. The inferno destroyed the downtown area; 47 people died.

The 72-car train had been carrying nearly 2 million gallons of crude oil from North Dakota’s Bakken fields. While the recent surge in domestic oil production has raised concerns about fracking, less attention has been paid to the billions of gallons of petroleum crisscrossing the country in “virtual pipelines” running through neighbor­hoods and alongside waterways. Most of this oil is being shipped in what’s been called “the Ford Pinto of rail cars”—a tank car whose safety flaws have been known for more than two decades.

 

Holey Roller: The DOT-111

The original DOT-111 tank car was designed in the 1960s. Its safety flaws were pointed out in the early ’90s, but more than 200,000 are still in service, with about 78,000 carrying crude oil and other flammable liquids. The DOT-111 tank car’s design flaws “create an unacceptable public risk,” Deborah Hersman, then chair of the National Transportation Safety Board, testified at a Senate hearing in April. New York Sen. Charles E. Schumer has compared the car to “a ticking time bomb.” While the rail industry has voluntarily rolled out about 14,000 stronger tank cars, about 78,000 of the older DOT-111s remain in service. Retrofitting them would cost an estimated $1 billion.

The DOT-111

Chris Philpot

 

the Bakken Factor

The sudden flood of Bakken crude (currently 1 million barrels a day), which is potentially more flammable, volatile, and corrosive than traditional crude, also poses a new hazard. The violence of the Lac-Mégantic blast and other recent wrecks involving this variety of crude stunned railroads and regulators. In May, the Department of Transportation issued an emergency order requiring state crisis managers to be notified about large shipments of Bakken oil. The agency also advised railroads to stop carrying the oil in older DOT-111s, citing the increased propensity for accidents. Meanwhile, as US officials decide what to do next, Canada has ordered its railways to stop all crude shipments in the cars by 2017.

Lac Megantic oil train accident

Tank cars carrying crude oil derailed in Lac-Mégantic, Quebec, in July 2013, killing 47 people. AP Photo/The Canadian Press, Paul Chiasson

 

More Trains, More Spills
Trains carry more than 10 percent of all US oil, particularly from areas without major pipelines, such as the Bakken. The sudden surge of oil shipments has so clogged the rails that farmers in North Dakota complain that they can’t get fertilizer shipped in or their crops shipped out.

Not waiting for a final decision on the Keystone XL pipeline, oil companies are also building rail terminals in Canada’s tar sands region. The Association of American Railroads says that the vast majority of rail shipments arrive without incident. But more oil on the rails has also meant more spills. Trains leaked more crude in 2013 than all years since 1971 combined. (These figures don’t include the Lac-Mégantic disaster, in which 1.6 million gallons of oil spilled.)

Oil by rail

Off the Rails: Recent DOT-111 Accidents

Watch a video of tank cars exploding in Casselton at the top of the page. Watch video of the aftermath of the recent derailment and spill in Lynchburg, Virginia, below.

Oil rail spills

mother jones



15 Comments on "Why Do These Tank Cars Carrying Oil Keep Blowing Up?"

  1. shortonoil on Tue, 27th May 2014 8:05 am 

    It is not the tank cars, you freeckiing idiots, it’s what they are carrying. Prior to the shale revolution you never heard of a rail petroleum fire, now it’s almost an every afternoon episode. Shale is at least one-half condensate, and condensate is mostly pentane (C5H12). Pentane is light, and highly volatile. It’s not much good for anything but making plastic pipe, but it is sure makes a good train fire. We said months ago that until these cars are redesigned to handle this lighter material that they would keep flipping cars off the tracks. Well, they are burning down towns all across North America. Condensate is not crude oil, never was, never will be. Until that is understood people will continue to die!

    http://www.thehillsgroup.org

    .

  2. meld on Tue, 27th May 2014 10:02 am 

    Thanks Shortonoil. Didn’t know this info.

  3. bobinget on Tue, 27th May 2014 10:26 am 

    I posted on condensate problem last week.

    However, we are shipping higher volumes of oil by rail then ever in history. One glance at those graphs proves as much. In fact the situation is so crowded farmers can’t get fertilizer in or ship out grains.

    U.S. crude output, refining growth robust in April, API says
    U.S. crude oil production in April rose 12.6% year-on-year, reaching nearly 8.3 million barrels per day, the highest seen in that month since 1988, according to the American Petroleum Institute. Refined oil product gross inputs and exports also reached 16.1 million barrels per day, a 5.1% increase from April of last year. “April brought strong year-over-year growth in both the production and refining sectors. The oil and natural gas industry continues to provide a solid base for growth in the larger economy,” said API Chief Economist John Felmy. United Press International (5/23)

    Bigger Problem, we can’t go back to existing pipelines that served pre shale to provide imported crude. That train left the station while we were bragging about oil independence. When we didn’t soak up a million barrels a day imports, China did.

    Even Bigger Problem:
    Why spend billions on new tankers or pipelines when
    we may be looking at diminished shale production?

    akeout Threatens Shale Patch as Frackers Go for Broke
    Shakeout Threatens Shale Patch as Frackers Go for Broke
    By Asjylyn Loder May 26, 2014 7:00 PM ET

    The U.S. shale patch is facing a shakeout as drillers struggle to keep pace with the relentless spending needed to get oil and gas out of the ground.

    Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.

    “The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.”

    Some investors are already bailing out. On May 23, Loews Corp. (L), the holding company run by New York’s Tisch family, said it is weighing the sale of HighMount Exploration & Production LLC, its oil and natural gas subsidiary, at a loss.

    HighMount lost $20 million in the first three months of the year, after being unprofitable in 2013 and 2012, Loews said it its financial reports. As with much of the industry, HighMount has shifted its focus to oil after natural gas prices plunged and has struggled to find sites worth developing, company records show.

    Mary Skafidas, a spokeswoman for Loews, declined comment.

    In a measure of the shale industry’s financial burden, debt hit $163.6 billion in the first quarter, according to company records compiled by Bloomberg on 61 exploration and production companies that target oil and natural gas trapped in deep underground layers of rock. And companies including Forest Oil Corp. (FST), Goodrich Petroleum Corp. (GDP) and Quicksilver Resources Inc. (KWK) racked up interest expense of more than 20 percent.

    Production Declines
    Quicksilver acknowledges the company is over-leveraged, said David Erdman, a spokesman for Quicksilver. The company’s interest expense equaled almost 45 percent of revenue in the first quarter. “We have taken concrete measures to reduce debt,” he said.

    Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can’t afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.

    Interest Expenses
    “Interest expenses are rising,” said Virendra Chauhan, an oil analyst with Energy Aspects inLondon. “The risk for shale producers is that because of the production decline rates, you constantly have elevated capital expenditures.”

    Chauhan wrote a report last year titled “The Other Tale of Shale” that showed interest expenses are gobbling up a growing share of revenue at 35 companies he studied. Interest expense for the 61 companies examined by Bloomerg totalled almost $2 billion in the first quarter, 4.1 percent of revenue, up from 2.3 percent four years ago.

    The drilling spree boosted U.S. oil production to 8.4 million barrels a day, 16 percent more than a year ago and the highest since 1986. Growth has been driven by advances in horizontal drilling and hydraulic fracturing, or fracking, which unlocked crude and natural gas trapped in formations like North Dakota’s Bakken shale or the Marcellus in the U.S. northeast.

    Costly Gains
    The gains haven’t come cheaply. Goodrich said earlier this month that it’s trying to whittle its well costs in the Tuscaloosa Marine Shale down to $11.5 million apiece. The $1.1 billion company, based in Houston, spent almost $52 million more than it earned in the first quarter.

    The company has enough money to cover its 2014 capital needs and is working with its board to fund 2015 as it ramps up drilling, spokesman Daniel Jenkins said in an e-mail.

    A successful well announced last month has propelled Goodrich shares to $25.34, more than double the 2014 low of $12.28.

    While borrowing to spend is typical of start-up companies, it’s not always sustainable. Forest Oil, where interest expense totaled 27 percent of revenue in the first quarter, in February reporteddisappointing well results, and warned that it might run afoul of its debt agreements. Forest on May 6 announced a plan to sell itself to Sabine Oil & Gas LLC in an all-stock transaction. Denver-based Forest declined to put a value on the deal. The company declined comment. Shares have declined 39 percent so far this year.

    Eagle Ford
    Zaza Energy Corp. (ZAZA), which got its start as a joint venture with Hess Corp. (HES), bought up oil rights in the Eagle Ford shale field and the nearby Eaglebine in South Texas, near the heart of the U.S. oil boom. Its first quarter revenue fell short of interest expense. The firm’s accountants in March voiced “substantial doubt” about the Houston-based company’s ability to stay afloat.

    Hess, which dissolved the partnership almost two years ago, lost money on the deal. And its foray into what has turned out to be the biggest shale play in the U.S. prompted Elliott Management Corp., billionaire Paul Singer’s investment firm, to oust John Hess last year from the chairmanship of a company his father founded more than 80 years ago. Zaza has since entered into a joint venture with EOG Resources Inc. in Houston, one of the few shale companies to bring in more cash than it spends. Zaza’s shares have declined 28 percent this year.

    “We are now significantly increasing our production volumes and revenue,” said Todd A. Brooks, president and chief executive officer.

    Negative Outlook
    Swift Energy Co. (SFY) has slowed drilling while trying to sell acreage or find a partner to shoulder some of the costs. The company on May 6 announced a $175 million joint venture with a unit of a government-controlled energy company in Indonesia. The proceeds will be used to help pay down debt. The deal announcement still didn’t stop Standard & Poor’s from cutting Swift’s credit rating on May 15 and tagging the company with a negative outlook. Shares have declined 19 percent so far this year.

    “Traditionally we’ve been a financially conservative company,” said Bruce Vincent, president of Houston-based Swift. “We’ve become more leveraged than we historically have been and we’ve become uncomfortable with that.”

  4. bobinget on Tue, 27th May 2014 10:33 am 

    IOW’s, transportation is the least of our difficulties.

    From a popular Oil&Gas internet talk show message board:

    The article said 20% of the companies they examined had interest payments over 10%. They may have chosen the worst of the worst to highlight, but I suspect there are other well known names they didn’t mention.

    From the report mentioned in the article:
    “The very nature of shale wells, which exhibit high decline rates, results in the need to constantly allocate capital towards exploration drilling in order to maintain and grow production volumes. As a result, the average Capex spending of the 35 companies analysed to serve as a guide to the industry has amounted to a staggering $50 per barrel of oil equivalent (boe) over the last five years, at a time when their revenue per boe has averaged $51.5. For these same companies, free cash flow has been negative in almost every quarter since Q2 07. Negative FCF is not necessarily an issue, as it could just be a sign that companies are making large investments, however such investments would be expected to make high returns, which the shale industry cannot necessarily boast at least today.
    Worse still, to meet their Capex requirements, the companies have had to take on increasing levels of debt, and this is where we highlight the key risk to this business. The companies involved in shale production are highly geared, and this makes them susceptible in an environment of falling liquids prices, faltering production growth or rising interest rates.”

  5. rockman on Tue, 27th May 2014 10:57 am 

    Shorty has it right for the most part but I still suspect the primary cause of the explosions is methane. All oil (light or heavy) has some methane in solution…sometimes just a little and sometimes a lot. So it comes out of solution as the tanker rolls along and probably forms a small gas cap.

    And believe or not 100% methane will neither explode or even burn. Needs oxygen to allow combustion. Turns out the most explosive concentration is 5% to 15% methane mixed with air. I just pointed out elsewhere the most powerful non-nuke bomb is the giant fuel-air bomb that’s so big it has to be dropped from a big cargo plane. Falls by parachute and some distance above the ground it spews out a low concentration petroleum gas cloud which is then ignited. Similar effect that causes dust from grain (another hydrocarbon) elevators to explode.

    So what I envision is a small amount of the methane comes out of solution and produces a low concentration which can be set off by just static electricity. The explosion spews the now burning oil out just like a napalm bomb. IOW about your worse case scenario.

  6. surf on Tue, 27th May 2014 12:14 pm 

    the real question is why after over 100 years of rail experience are cars derailing? You would think the rail companies would know the causes and make changes to prevent them. Air Plane manufactures and airlines make changes after every accident to improve safety. Why can’t rail? If you don’t have derailments you won’t have fires.

  7. rockman on Tue, 27th May 2014 1:46 pm 

    surf – Probably because the cause of most accidents, rail and others, is human errors. So far we haven’t been able to keep humans completely out of the mix.

  8. Perk Earl on Tue, 27th May 2014 2:56 pm 

    Look at the movie Gravity. George Clooney and Sandra Bullock are out in space just shooting the breeze and goofing off like they have a no brainer warehouse job. The space station and other equipment is in the 10’s of billions of dollars but what’s the attitude? Couldn’t care less.

    Sure, I know it’s just a movie, but it won 7 academy awards, and I think that’s a reflection of changed attitudes towards work. My observation as a baby boomer is over the decades attitudes have changed from a sense of absolute seriousness (in which small mistakes were taken to task) to a relaxed lack of seriousness (in which small mistakes are not even mentioned because it’s not considered cool) and those small mistakes build up to in this case, train derailments.

  9. shortonoil on Tue, 27th May 2014 3:37 pm 

    “the real question is why after over 100 years of rail experience are cars derailing?”

    That was explained here several months ago. Yes, the railroads have been hauling crude for over a century. Old John D. made millions by forcing the railroads to pay him a fee for the crude that his competition shipped. What is coming out of the shale plays is not conventional crude, it is a lot lighter. It moves in the tanker car, and like milk, rather than molasses it gets the car rocking back, and forth. Milk tankers used to flip over on their backs regularly until the industry figured how to baffle them so the contents didn’t get moving side to side. Shale hasn’t been around long enough, nor is anyone convinced it is going to be, to justify the $billion or so needed to retrofit these cars. The shale industry would also have to admit that there is a difference between conventional crude, and shale oil. That is something that they have lied about, deceived, and spent millions to prevent.

    The shale industry will not be around for more than a few years in its present form. Most of it is losing money, and they will soon have overwhelming competition from the Canadians. The American consumer will wake up someday soon, and find that cheap hydrocarbons was a pipe dream. America has been subjected to a sub prime like fiasco that will make housing look like a give away program. Petroleum is in an advanced stage of depletion, and no amount of printing by the FED can change that!

    http://www.thehillsgroup.org

    .

  10. Davey on Tue, 27th May 2014 3:43 pm 

    Short, Bloomberg ran a story today on the demise of several shale operators. Reality cannot be suppressed!

  11. Northwest Resident on Tue, 27th May 2014 4:01 pm 

    “The American consumer will wake up someday soon…”

    Not if TPTB can prevent it. From their point of view, it is wiser to let that sleeping dog be. They deploy the mass media to sing sweet lullabies of oil gluts and energy independence, to paint beautiful dreamy pictures of energy investment gains beyond the wildest imagination — anything, whatever it takes, to keep that damn dog sleeping. Because IF that dog were to awake and sniff the air and take a look around, TPTB might end up having to deal with a Cujo-like situation — and that possibility must be avoided at all costs.

  12. J-Gav on Tue, 27th May 2014 4:39 pm 

    Go Short! – You’re on a roll! But of course, most people don’t know pentane from shmentane.

    Methane, human error, whatever the proximate cause in any particular case, rail is risky with such products unless extreme and expensive security measures are taken. And now we’ve just seen the head of Canadian Transportation state that, whether by pipeline or by rail, Canadian production will continue to arrive (on schedule?) to the USA.

  13. yellowcanoe on Tue, 27th May 2014 7:01 pm 

    Sure, we can build tank cars that are safer than the DOT 111 cars currently in use. However, safety is relative and I highly doubt that any design would have prevented the disaster at Lac Megantic. This was a case of a run away train coming down a steep gradient and then hitting a sharp curve in the town — a much more violent derailment than what typically occurs.

  14. Makati1 on Tue, 27th May 2014 8:26 pm 

    There are ~140,000 miles of Class-1* track in the US to maintain. Most of it tracks and beds maybe 100+ years old.

    There are only 7 Class-1 carriers left in the US. That means that each is responsible for 20,000+ miles of track on average, and all of those companies are not very profitable, if at all.

    Is it not to be expected that increased shipments in inappropriate cars will lead to more derailments? After all, war is more profitable than subsidizing the railroads. Especially when you are trying to push through a new pipeline for corporate profits. Human deaths are just ‘collateral damage’.

    * Class I carriers comprise only 1 percent of the number of U.S. freight railroads, but they account for 70 percent of the industry’s mileage operated, 89 percent of its employees, and 92 percent of its freight revenue.

  15. Davy, Hermann, MO on Tue, 27th May 2014 8:40 pm 

    Mak, the US has the finest freight railroad system in the world. The US has the worst passenger rail system in the world. You got it now? Capish?

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