By
Chriss Street
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It is too early to determine the cause of the latest accident, although Canadian investigators believe the Quebec carnage appears to be due to the train operator’s criminal negligence. But the real criminal negligence is that oil from fracking operations in booming North Dakota must be shipped by trains over a thousand mile to refiners in Nova Scotia, because U.S. regulators and their crony allies have fought building pipelines to protect and subsidize the profits of railroads, such as the Burlington Northern Railway Company that controls half the business. Given the huge risks of catastrophic loss of life and property, the Obama Administration will soon be pressured to approve the Keystone XL Pipeline.
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Every day, an average of ten trains with up to 100 tank-cars leave North Dakota carrying 3.35 million gallons of raw crude oil to journey over a thousand miles to refineries in Nova Scotia and Texas. Railroads carry 75% of North Dakota oil and are the prime reason oil hauled by tank cars in the U.S. rose over the last three years by 2,000% to a total of 6.5 billion gallons. Berkshire Hathaway’s CEO, Warren Buffet, announced that profit jumped 7.8% to $2.37 billion on strong railroad profits at their Burlington Northern subsidiary.
Railroads are designed to transport freight where people
are, whereas pipelines carry toxic products and go to refineries that are
specifically located at safe distances away from populated areas. Some media
stories have repeated public relations statements from the oil industry that
they prefer a mix of pipeline and rail transport of crude oil. But only good
fortune prevented the Alberta “pipeline on wheels” accident from killing
thousands and costing tens of millions in damages in a metropolitan area.
Railroads claimed to average only thirteen spills per year
for the last ten years, but 60% of oil shipments by rail were in the last two
years. There have been many serious oil train derailments this year. In
June, four Canadian Pacific (CP) rail cars carrying flammable petrochemicals
used to dilute oil derailed on a flood-damaged bridge spanning Calgary’s Bow
River. In May, five tankers containing oil on another CP train derailed
in rural Saskatchewan spilling 575 barrels of crude, the Toronto Sun reported.
In April, 22 CP rail cars jumped the tracks near White River, Ontario and
leaked 17,000 gallons of crude. In March, 14 cars on a mile-long train derailed
spilled 14,000 gallons of crude near Minneapolis.
The fallout from the Quebec disaster was expected to begin
having a negative impact on growth of moving petroleum by freight trains, which
was on trend to double this year from 2012. After the accident, Moody’s credit
rating service warned: “The Quebec derailment — likely North America’s
worst rail accident since 1918 — will inevitably lead to increased US and
Canadian government scrutiny and permitting delays, along with higher costs for
shippers,” the credit rating agency said in a note Wednesday. Moody’s revised
its ratings to “credit negative” for North American railways, which
have relied on the boon in moving crude by rail to offset declines in coal
shipments, it added.
Canadian Prime Minister Stephen Harper described the
aftermath of the Lac-Megantic disaster as a “war zone”.
Investigators believe the likely air brake failure allowed the train
normally creeping downhill at 15 miles per hour to accelerate to 63 miles an
hour and vaporize the little country town when it crashed and exploded.
But while Montreal, Maine & Atlantic Railway (MM&A)
Chairman Ed Burkhardt said his company would do “everything within its capacity”
to aid in environmental remediation as the train’s operator, both the U.S. and
Canadian branches of the railway filed for bankruptcy protection. According to
Maine District U.S. Bankruptcy Court documents, MM&A’s U.S. arm only has
between $50 million and $100 million in assets.
The Lac-Megantic cleanup costs are estimated to be over
$100 million and there is potential for hundreds of millions of dollars more in
personal injury lawsuits. MM&A has no capacity to foot the entire bill for
the disaster. The company carried multi-million dollar liability insurance with
XL Group PLC before the crash. XL Group immediately deployed representatives to
the scene after the Quebec derailment. If the insurer can demonstrate
negligence by the railroad operator, they will deny the claim.
America in 1970 had 315
refineries sprinkled across the nation and the U.S. imported 72 million gallons
of crude oil per day, but by 2006 environmental restrictions had shrunk
America’s number of refineries to 105 and we were importing 587 million gallons
per day. In percentage terms of U.S. supply, imports grew from 20% to 65%. In
2006, almost a third of U.S. total supply of oil was imported from the unstable
Persian Gulf.
Since the beginning of 2006, the drilling process known as hydraulic fracking has made commercially profitable petroleum deposits that were historically too costly to exploit. North Dakota Bakken production has grown from about 220,000 gallons a day to 46.5 million gallons today. Wayde Schafer of the Sierra Club that had been predicting U.S. oil and gas production peaked in the 1980s and was in terminal decline said: “The oil development has happened so rapidly, it’s ahead of the infrastructure to deal with it.”
Pipelines are the safest and most cost-effective transport for crude oil. Legislative and regulatory veto of projects like the Keystone XL pipeline pushed oil shipments onto to the more dicey rails. Rapidly expansion of shale oil and natural gas production is making American “energy independence” a reality. I believe Congress and the Administration now know they are morally just as criminally negligent as the train operators if they do not ensure public safety by green-lighting up to $5 trillion in new domestic pipeline and refinery capital investment.
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