Analysis: Quebec rail disaster shines critical light on oil-by-rail boom

Sun Jul 7, 2013 7:00pm EDT
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By Scott Haggett, Dave Sherwood and Cezary Podkul

(Reuters) - The deadly train derailment in Quebec this weekend is set to bring intense scrutiny to the dramatic growth in North America of shipping crude oil by rail, a century-old practice unexpectedly revived by the surge in shale oil production.

At least five people were killed, and another 40 are missing, after a train carrying 73 tank cars of North Dakota crude rolled driverless down a hill into the heart of Lac-Megantic, Quebec, where it derailed and exploded, leveling the town center.

It was the latest and most deadly in a series of high-profile accidents involving crude oil shipments on North America's rail network. Oil by rail - at least until now - has widely been expected to continue growing as shale oil output races ahead far faster than new pipelines can be built.

Hauling some 50,000 barrels of crude, the train was one of around 10 such shipments a month now crossing Maine, a route that allows oil producers in North Dakota to get cheaper domestic crude to coastal refiners. Across North America, oil by rail traffic has more than doubled since 2011; in Maine, such shipments were unheard of two years ago.

"The frequency of the number of incidents that have occurred raises legitimate questions that the industry and government need to look at," said Jim Hall, managing partner of consultants Hall & Associates LLC, and a former chairman of the U.S. National Transportation Safety Board.

"The issue here is: are they expanding too rapidly?" he said. "Are they in a rush to accommodate and to make the economic advantage of carrying these?"


There are many unanswered questions about the Quebec disaster that will likely shape the public and regulatory response, including why a parked freight train suddenly began rolling again, and why carloads of crude oil - a highly flammable but not typically explosive substance - caused such widespread disaster.   Continued...

Firefighters spray water on the wreckage of the train explosion in Lac Megantic, July 7, 2013. REUTERS/Paul Chiasson/Pool