Oil Train Derails in North Dakota
Another week, another train derailment
In the early hours this Wednesday, just outside the rural community of Heimdal, North Dakota, a train overloaded with crude oil derailed and burst into flames.
The BNSF train held 109 cars. All but two of those were hauling Bakken crude.
In what has become an all too common theme of the oil renaissance in the state, another burning locomotive made headlines all over the U.S.
The town, though home to just 40 people, was forced to evacuate amid fears that the fire would explode larger and that oil and black plumes of smoke would poison the water and air within the blast radius.
Thankfully, no one was injured during the fire, and HAZMAT crews were able to stifle the oil leak by erecting walls to protect a nearby river.
The residents were also lucky that the ground had been freshly dampened by a rainstorm, preventing the oil fires from spreading to nearby homes and farmland.
As of Thursday, the evacuation order was lifted, and crews worked to move the remaining oil from the train into trucks for shipment, while a few highways in the area remained closed.
Luckily, the people of Heimdal are safe... for now.
Once the debris is cleared and the remaining tank cars removed from the rails, it's just a matter of time before more trains overloaded with crude oil and underequipped for safety barrel through their small town.
The train cars were CPC-1232 models, which are scheduled for phase-out in the next five years (keep your fingers crossed for no more accidents in the meantime), and they were unjacketed, making a fire in the case of a derailment likely.
That's why earlier this week, U.S. regulators laid down "strict" new regulations on tanker cars that carry flammable liquids like crude oil.
Of course, it's doubtful the new rules will stop accidents...
Although new rules on tanker cars and oil-by-rail speed limits are a good step forward, it'll take anywhere from five to 10 years to update existing fleets.
That's plenty of time for more dangerous and potentially deadly accidents to take place throughout the United States and Canada.
And even still, these rules may make tankers themselves safer, but they do nothing to alleviate the major causes of oil-by-rail accidents.
According to the Federal Railroad Administration, between 2011 and 2012, rail shipments grew by 423%, and in 2013, that number grew by another 400,000 shipments.
Add to that the fact that most of this growth happened as crude oil production grew and that these trains carry a vast amount of oil per locomotive.
I mean, the one that crashed on Wednesday had 107 cars that were deemed unsafe carrying highly flammable crude oil.
You see, it's the overcrowded rails and overloaded trains that are the problem — not the thickness of the hulls on tankers or the security of the valves where oil flows.
And if traffic problems aren't quelled soon, the U.S. could see a major accident do some serious and irreparable damage.
According to the EIA, 52% of the oil that comes to refineries on the East Coast (home to a few of America's major cities) arrives through rail transport...
As the chart above shows, that is an astounding amount of growth in a short period of time. It has rail companies wringing their hands and residents near major oil formations and refineries fearing for their safety.
Remember too that this is just the East Coast region of the United States.
Add the rest of the country to it, and you'll see that dangerous trains full of crude are traveling near big population centers like Seattle and Chicago every single day.
If one derails in the wrong place at the wrong time, the consequences could be beyond repair.
Luckily, there is a solution, and it's progressed nicely in several key locations...
Our analysts have traveled the world over, dedicated to finding the best and most profitable investments in the global energy markets. All you have to do to join our Energy and Capital investment community is sign up for the daily newsletter below.
Pipelines will Save Lives
If you read Energy and Capital on a regular basis, you know I'm talking about pipelines.
Although I may sound like a bit of a broken record, it cannot be said enough that North American pipelines are one of the top three energy investments right now.
With a 10-year timetable on new tanker cars being deployed, the only way for the industry and regulators to make the rails safer is to offer other competitive midstream options.
And the best option by far is through pipeline.
When a company sends its oil through a pipeline, it stays out of sight and goes from the field to the refinery with ease. Pipelines don't create smog, don't have the same burdensome speed limits as rail, and are much cheaper.
The only reason shale drillers still rely on trains is because the necessary pipelines haven't been built or are still under construction.
Even though we've known about shale for some time, the shale oil boom is still very young, and as a result, pipeline capacity hasn't kept pace.
This is changing...
By the end of 2017, pipeline capacity is expected to double in formations like the Bakken, Niobrara, and Permian, adding key lines that will expand production in those areas.
Until next time,
A true insider in the energy markets, Keith is one of few financial reporters to have visited the Alberta oil sands. His research has helped thousands of investors capitalize from the rapidly changing face of energy. Keith connects with hundreds of thousands of readers as the Managing Editor of Energy & Capital as well as Investment Director of Angel Publishing's Energy Investor. For years, Keith has been providing in-depth coverage of the Bakken, the Haynesville Shale, and the Marcellus natural gas formations — all ahead of the mainstream media. For more on Keith, go to his editor's page.
Energy Demand will Increase 58% Over the Next 25 Years
After getting your report, you’ll begin receiving the Energy and Capital e-Letter, delivered to your inbox daily.