Exporting Gasoline by Rail to Mexico Likely to Recreate Mistakes of Explosive Bakken Oil Trains

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The oil industry learned an important lesson from its rush to moveย by train the highly flammable oil drilled in North Dakota’s Bakken Shale. The lesson wasn’t that those oil trains were unsafe and even dubbed โ€œbomb trainsโ€ by rail workers (although they were). The lesson wasn’t that their derailments caused several major oil spills in North America as well asย the tragic accident in Lac-Mรฉgantic, Canada,ย which killed 47 people and leveled the downtown area (although theyย did).

No, what the oil industry learned from this experience was that when it doesnโ€™t have adequate pipeline capacity, its companies can still make money moving flammable petroleum products by rail, despite the well-documented risks outlined above. And the industry isย now taking the same steps to move refined petroleum productsย โ€” including gasoline โ€” to Mexico byย rail.

โ€œThere is a tremendous opportunity to move product into Mexico effectively by rail,โ€ย Daniel Gordon,ย executive vice president of business development and strategy at refining company Delek U.S. Holdings Inc., explainedย to Reutersย inย January.

Kansas City Southern is one of the larger rail companiesย ideally positioned to profit from this opportunity, its CEO Patrick Ottensmeyer toldย Reuters.

โ€œThe railroad is already built. Building terminals, buying equipment, all of that is easy compared to building a 1,000-to-1,500-mile pipeline. We have at least a three-to five-year head start on pipelines,โ€ he said.

Kansas City Southern increased itsย fuel shipmentsย to Mexico by over 200 percent inย 2017.

Ottensmeyer echoes the bullish sentiment of the oil and rail companies in North Dakota as the Bakken oil industry escalated years ahead of the pipelines it needed to transport itsย products.

Rail company Union Pacificโ€™s (UP) business manager Trevor Hogg explained to Progressive Railroading in May 2011 the same advantages of rail vs. pipelines: โ€œAlthough it can take one to five years to obtain permits, clear regulatory hurdles, and establish infrastructure for a pipeline, UP can start up a crude move โ€˜in a couple ofย monthsโ€™.โ€

And so American companies will be loading long unit trains full of gasoline, diesel, and jet fuel at U.S. refineries and then shipping those trains to Mexico. This opportunity is even part of the business plan for a new $450 million Texas refinery that broke ground in late 2017 and plans to use rail to ship its finished products toย Mexico.

Exxon Claims Gas-by-Rail Effectiveย Butย ‘Safe’

So, is it safe to be moving refined petroleum products like gasoline by rail? According to ExxonMobil, the practice is both safe andย effective.

Martin Proske, Mexico fuels director for ExxonMobil, explained to Reutersย the company position on shipping refined petroleum products by rail:ย โ€œIt is an efficient way, a safeย way.โ€

While it is fair to say that moving flammable products by rail is efficient, what is dubious is the safety. Was it safe to move Bakken oil by rail, considering itsย high volatility and massive explosions during derailments?ย No.

Interestingly enough, as the investigations into the Lac-Mรฉgantic disaster unfolded, Don Ross, the lead investigator for Canadaโ€™s Transportation Safety Board, explained just how flammable the Bakken oil that caused the deadly explosion actuallyย was:

โ€œWhen we analyzed the product samples from the nine intact tank cars from the Lac-Mรฉgantic accident, we identified the product as having the characteristics of a packing group 2 flammable liquid. Packing group 2 is the packing group that gasoline isย in.โ€

Even though gasoline was used as an example of just how dangerous the oil in the Lac-Mรฉgantic accident was (i.e., as flammable as gasoline), nowย American oil and rail companies are ramping up a whole new gasoline-by-rail industry. And they very likely will be doing it using the riskiest of rail tank cars, DOT-111 cars,ย which were not designedย to move flammable products and which the U.S. is slowly phasing out. But these tank carsย are cheap and readily available, making themย enticing to the oil and rail industries in markets outside the U.S.

Reuters reported that โ€œthe Mexican market has also become a boon for tank car leasing companies.โ€ In its coverage, it notes that according to rail consultant Tom Williamson of Transportation Consultants,ย โ€œLease rates for older tank cars being phased out in the United States that can still be used in Mexico have jumped to roughly $500 a month, up from $200 six monthsย ago.โ€ย 

When DeSmog asked Williamson about the types of rail cars he was discussing with Reuters, he replied,ย โ€œWe are not involved in the moves to Mexico for petroleum or petroleum products.โ€ An odd response given that he spoke with authority to Reuters about the subject. Why would those in the rail industry not want to explain which tank cars were being used to move gasoline byย rail?

The clue is that the lease rates Williamson cited were for โ€œolder tank cars being phased out in the United States that can still be used in Mexico.โ€ That almost certainly refers to the DOT-111 tank cars that are being phased out of use for moving oil by rail in Canada and the U.S. They are being phased out becauseย these thin-shelled rail carsย pose huge risks when used to move flammable liquids. Fred Millar, a consultant who focuses on rail safety, refers to the DOT-111 tank cars as โ€œPepsi cans onย wheels.โ€ย 

The U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA) is the division of the Federal Railroad Administration responsible for regulating the movement of flammable materials by rail. PHMSA responded to an inquiry about regulations for moving gasoline by rail by simply stating:ย โ€œGas-by-rail is subject to the regulations as crude-by-rail and HHFT [high-hazard flammableย trains].โ€

Which is true. However, as weโ€™ve detailed on DeSmog, the current regulations for moving flammable materials by train are woefully inadequate and fail to address many known safety risks. As a result, it shouldn’t be surprising that a โ€œbusiness as usualโ€ approach is being applied to the new business of exporting gasoline by rail to Mexico. Unless something goes terribly wrong, the practice likely will undergo no new scrutiny. As they say in the rail industry: โ€œRailroad rules have been written in blood.โ€ Donโ€™t expect any new regulations until someone dies as a result of shippingย gas-by-rail.

Exxon did not respond to a request for comment on the types of rail cars the company was using to ensure the movement of gas by rail is โ€œsafe.โ€ย Representatives of rail company Kansas City Southern in both the U.S. andย Mexican offices failed to respond to questions on the types of rail cars being used to move gas by rail. From regulators and industry consultants to rail and oil companies, no one seems to want to share any details about this new โ€œsafeโ€ and โ€œefficientโ€ gas-by-railย business.ย 

Gas by Rail:ย Bomb Trains, Partย 2?

In 2014, Deborah Hersman, who at the time was the head of the National Transportation Safety Board (NTSB),ย posed the following question to a large group gathered in Washington, D.C., to discuss how to deal withย exploding Bakken oilย trains.

โ€œHow did it [risk of Bakken oil trains] get missed for the last 10ย years?โ€

As weโ€™ve detailed on DeSmog, it is highly unlikely the risk of putting volatile Bakken oil in DOT-111 tank cars was missed โ€” what is more likely is that it was ignored. The DOT-111s were cheap and available. The oil was clearly volatile โ€” some shale oil is capable of essentiallyย boilingย at room temperatureย โ€” but, as the industry has admittedย readily,ย that volatility made the oil more valuable because of the natural gas liquids like propane andย butane.

As a result,ย oil companies have chosen to place dangerously volatileย oil inย unsafe rail cars because it was the best option at the time, for the oil producers at least. Safety was clearly not the top priority. And regulators did nothing to address the risks of this new oil-by-rail industry. Even when the head of the Federal Railroad Adminstration proposed addressingย the volatility of oilย with newย regulations that took effect in 2015, he was overruled by Obama’s White House.ย 

All indications point to American companies knowingly filling long unit trains of unsafe DOT-111 tank cars with gasoline, which are then shipped by rail to Mexico. As PHMSA has noted, this does not violate existingย regulations.

However, it clearly puts at risk any communities living along the tracks that these trainsย travel. DeSmog contacted the NTSB to request a comment on the safety of moving gasoline by rail. The NTSB has a policy of only commenting on investigations and not on policy. It should be noted that while the NTSB often issues safety warnings, the agency has no enforcement authority, which means its warnings often are ignoredย for โ€”ย decades.ย 

In a 1991 letter warning about the risksย of movingย flammable liquids in DOT-111 tank cars, the NTSB wrote:ย โ€œThe inadequacy of the protection provided by DOT-111A tank cars for certain dangerous products has been evident for many years.โ€ That was nearly three decadesย ago.

In March of this year, NTSB board member Robert Sumwalt toldย Railway Track & Structures magazine, โ€œWe urge stakeholders to move to using the DOT-117 standard when carrying ethanol as soon as possible, ahead of the mandated deadlines.โ€ย The DOT-117 tank cars are more robust tank cars and required by the latest federal rules. As noted on DeSmog, the industry has been very slow in upgrading to the DOT-117 standard among the fleet of tank cars used to move crude oil. And the ethanol industry still mostly uses the DOT-111 tankย cars.ย 

While the NTSB would not comment on the safety of moving gasoline by rail in DOT-111 tank cars, the boardย has warned about moving ethanol in anything but the safestย DOT-117 tank cars. Ethanol and gasoline have the same classification for flammableย liquids.ย 

It is highly unlikely that the risks of Bakken oil were missed by the industry during the Bakken oil-by-rail boom. And while regulatory agencies like PHMSA might be able to claim ignorance, even when the risks are known, PHMSA‘s record isn’t particularly encouraging. Its actions (or inactions) have earned it the nicknameย โ€œfluffy industry petโ€ย from critics such as Rep. Jackie Speiers (D-CA).ย ย 

The risks of moving flammable liquids like Bakken crude, ethanol, and gasoline by rail are evident. For a preview of what’s to come by exporting gasoline on trains to Mexico, just look to theย past.

Main image: Texas Mexican Railway car. Credit: Curtis Cronn,ย CC BYNCNDย 2.0

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Justin Mikulka is a research fellow at New Consensus. Prior to joining New Consensus in October 2021, Justin reported for DeSmog, where he began in 2014. Justin has a degree in Civil and Environmental Engineering from Cornell University.

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