Banning crude by rail in North America

When a train loaded with crude oil from North Dakota rolled away from its night-time berth near the town of Lac-Megantic, Quebec, no one would have predicted the scope of its devastation.

The July 2013 derailment and explosion left 47 people dead, a town decimated and the fires took days to extinguish. Rail cars were piled up like charred sausages from the grill scraped off a plate into the rubbish bin; the burnt remains of a BBQ gone wrong.  

Regulators and the oil industry were astonished -- crude oil was not supposed to explode. But Lac-Megantic was only one example of American crude oil from North Dakota doing just that. 

Oil is essential to modern society. It fuels our cars, heats our homes and powers our factories. The United States, once heavily dependent upon foreign oil, is headed toward producing as much oil as it consumes.

The country is in a bumper production period and production has grown by an astonishing 2.4 million b/d since 2008, to around 7.4 million barrels per day in 2013, according to the Energy Information Administration. The EIA anticipates additional output of 1.5 million b/d by 2015. Much of the new production comes from the Bakken field in North Dakota and Eagle Ford in Texas. North Dakota is remote and is underserved by the U.S.'s existing pipeline infrastructure, and getting the oil out and to refineries is a problem. Cue oil by rail.

In 2013, around 400,000 carloads of crude oil moved by rail across the United States, a staggering 4000% increase over the previous five years, according to the Association of American Railroads, and the volumes continue to rise.

Every day, trains bristling with 100 or more cars containing oil make their way through major cities including Chicago, Little Rock or Fort Worth. The next derailment and explosion could kill hundreds, if not thousands, of people.

In December, in Castleton, North Dakota, a mile-long train carrying crude oil, believed to be from the Bakken, derailed and exploded in a "giant fireball" after colliding with another train.

In November, a 90-car train was crossing a trestle above a wetland in western Alabama when it derailed, spilled almost 3 million gallons of Bakken crude into the wetlands, and ignited a two-day fire.

Since 2008, at least ten incidents of trains hauling crude oil across North America have derailed and spilled "significant quantities of crude," according to the Associated Press.

Last year's derailments focused a harsh light on the safety of the tank cars, known as DOT-111s. Even though some U.S. and Canadian railroads and oil companies have pledged to upgrade their thin-bodied DOT-111 railcars to newer specification cars, serious concerns remain.

The newer railcars will remain only bolted on to an undercarriage, rather than permanently welded onto wheels which means that their round bodies can still fly off in a derailment as they did in Quebec and Alabama.

A regulator-mandated slowdown when going through populated areas and towns may reduce this possibility, but there is still the chance of a runaway train, such as in Lac-Megantic, or a collision with other vehicles.

In general, crude oil does not explode. It is usually viscous, heavy, thick and lacks the gassy volatility needed to blow itself up. Yet railcars loaded with Bakken crude are exploding when they crash.

Crude oil coming from the Bakken and Eagle Ford is of high quality - very low in density and sulphur. Analysis done by the Wall Street Journal showed that Bakken crude has an unusually high Reid Vapor Pressure, a measurement of volatility. As there are no laws mandating RVP tests for crude, the combustible nature of Bakken and Eagle Ford oil has been largely ignored.

Regulators were slow off the mark to test the quality of the oil being shipped by rail. Oil producers and refiners -- in their haste to sell and refine these cheap feedstocks -- often misclassified them as less hazardous than they really were.

The U.S. and Canada too quickly embraced moving crude by railcar, neglecting to test crude quality from newer fields and failing to strengthen safety regulations until after several fiery crashes.

The U.S. and Canadian governments should ban railcar shipping of crude oil that comes from Bakken and Eagle Ford fields. The flammable nature of the crude oil, coupled with the missile-like properties of the railcars, turns these trains into moving bombs which are a clear danger to human life. American energy independence should not be gained at the expense of human life. 

[This essay was written for a graduate business school application.]