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    Intermodal safety in

    the transport of oil

    by Diana Furchtgott-Roth

    and Kenneth P. Green

    ENERGY TRANSPORTATION

    STUDIES IN

    October 2013

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    Studies in EnergyTransportation

    October 2013

    Intermodal Safety in

    the Transport of Oil

    by Diana Furchtgott-Roth and Kenneth P. Green

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    www.fraserinstitute.org / Fraser Institute

    Contents

    Executive summary / iii

    Introduction / 1

    Conclusion / 14

    References / 15

    About the author & Acknowledgments / 20

    Publishing information / 21

    Supporting the Fraser Institute / 22

    Purpose, funding, & independence / 23

    About the Fraser Institute / 24

    Editorial Advisory Board / 25

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    www.fraserinstitute.org / Fraser Institute

    Executive summary

    Rising oil and natural gas production in North America is outpacing the

    transportation capacity o our pipeline inrastructure. As one o us (Green)

    discussed in a previous study in this series, Te Canadian Oil ransport

    Conundrum, Canada is poised to dramatically increase production o

    bitumen rom oil sand deposits in Western Canada (2013). In the ace o

    expanding production and pipeline bottlenecks, more oil is moving by rail

    in both Canada and the United States, but transport o oil by rail (or other

    non-pipeline transportation modes) carries its own set o risks. While pipe-

    lines may leak, trains and trucks can crash, hurting individuals, as we saw in

    Lac-Mgantic in July 2013, and barges can sink. Tere is no perectly risk-ree

    way to transport oil, or anything else or that matter.

    Although North America is home to 825,000 kilometres o pipeline

    in Canada and 4.2 million kilometres in the US, US government authorities

    still insist on blocking additional pipeline construction.

    Data to compare the saety o transportation o oil and gas by pipe-

    line, road, and rail in the US is publicly available rom the Department o

    ransportations Pipeline and Hazardous Materials Saety Administration

    (PHMSA). Operators report any incident that crosses a certain saety thresh-

    old, as well as injuries and atalities, to PHMSA.

    US data on incident, injury, and atality rates or pipelines, road, and

    rail or the 2005 to 2009 period (the latest data available) show that road andrail have higher rates o serious incidents, injuries, and atalities than pipelines,

    even though more road and rail incidents go unreported. Americans are 75

    percent more likely to get killed by lightning than to be killed in a pipeline

    accident (Furchtgott-Roth, 2013).

    Ater reviewing available data on the saety o dierent oil-transport

    modes, we conclude that the evidence is clear: transporting oil by pipeline

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    iv / Intermodal Safety in the Transport of Oil

    Fraser Institute / www.fraserinstitute.org

    is sae and environmentally riendly. Furthermore, pipeline transportation

    is saer than transportation by road, rail, or barge, as measured by incidents,

    injuries, and atalities.

    For North America to realize the massive economic benefts rom the

    development o those oil sands, the transport conundrum must be solved. At

    present, resistance to pipeline transport is sending oil to market by modes

    o transport that pose higher risks o spills and personal injuries such as rail

    and road transport.

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    www.fraserinstitute.org / Fraser Institute / 1

    Introduction

    Te Obama administrations decision to delay approval or the construction

    o ransCanada Inc.s proposed Keystone XL pipeline was based, in part,

    on concerns over the saety and reliability o oil pipelines. Te Keystone XL

    pipeline is intended to transport oil rom Canada to US reners on the Gul

    o Mexico. In announcing his decision, President Barack Obama called or a

    ull assessment o the pipelines impact, especially the health and saety o

    the American people. (White House, 2012). Additional proposed pipelines

    in Canada are also being challenged on the grounds o environmental saety.

    Most recently, the government o British Columbia rejected the proposed

    Northern Gateway pipeline on environmental grounds (CBC News, 2013,

    May 31). Proposals to double the existing rans Mountain pipeline (which

    transports oil rom Alberta west to British Columbia) and to reverse the

    ow o Enbridges Line 9 pipeline (which runs between Sarnia and West

    Northover, Ontario) to also ace environmental challenges (Vanderklippe,

    2012, Sept. 18).

    In June the National Academy o Sciences released a study entitled

    Eects o Diluted Bitumen on Crude Oil ransmission Pipelines that was

    required as part o the Pipeline Saety, Regulatory Certainty and Jobs

    Creation Act o 2011. Te report ound no evidence that diluted bitu

    men, the type o crude oil that would ow through the proposed Keystone

    XL pipeline, would contribute to pipeline ailures or corrosion (National

    Research Council, 2013).At the end o June, Obama put orward another requirement with

    regard to allowing the Keystone XL pipeline to advance, in a speech on cli

    mate policy given at Georgetown University on June 25, 2013. Obama said

    Allowing the Keystone pipeline to be built requires a nding that doing

    so would be in our nations interest. And our national interest will be served

    only i this project does not signicantly exacerbate the problem o carbon

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    pollution. Te net eects o the pipelines impact on our climate will be abso

    lutely critical to determining whether this project is allowed to go orward.

    (White House, 2013)

    Pipelines for oil and gas

    Pipelines have been used to transport Canadian natural gas and oil, both

    across Canada and into the United States, or over a century. Canadas

    irst pipeline began in 1853, with the development o a 25 kilometre cast

    iron pipeline that moved natural gas to roisRivires, QC, or street

    lights (Natural Resources Canada, 2013). Canada is home to an estimated

    825,000 kilometres o transmission, gathering, and distribution pipe

    lines. he National Energy Board, which has regulated interprovincial

    and international pipelines since 1959, is currently responsible or 71,000

    kilometres o oil and natural gas pipelines (Natural Resources Canada,

    2013). Our neighbor to the south, not surprisingly, has a much larger

    pipeline network-4.2 million kilometres o interstate pipeline crisscross

    America, carrying crude oil, petroleum products, and natural gas. In the

    United States these pipelines are primarily regulated by the Department

    o ransportation.

    Based on the experience o both Canada and the United States, we can

    examine the question o whether pipeline transport o oil is sae.

    Rail transportation of oil

    As the major alternative means o uel shipment, transport o crude oil by rail

    has been increasing as limitations on pipeline capacity both in Canada and

    the United States have become maniest.

    Canada

    Te Canadian Association o Pipeline Producers (CAPP) reports that trans

    portation o crude oil production by rail in Canada is still quite modest, at

    20,000 barrels per day (bbl/d) in 2011 (CAPP, n.d.).

    United States

    RBC Capital Markets estimates that currently 115,000 barrels o oil per day

    are shipped by rail to the United States, with a trend toward 300,000 barrels

    per day by 2015. RBC observes that there is no ofcial tracking data available

    or crude oil shipments by rail (RBC, 2013). For perspective, the Keystone XL

    pipeline, i approved, would carry 830,000 barrels per day.

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    Intermodal Safety in the Transport of Oil / 3

    www.fraserinstitute.org / Fraser Institute

    Te Association o American Railroads reports that between 2008 and

    2011 the total share o oil and gas rail shipments grew dramatically, rom 2%

    o all carloads to 11% (Parrish, 2011). In 2011 alone, rail capacity in the Bakken

    area-stretching rom southern Alberta to the northern US Great Plains-

    tripled to almost 300,000 barrels per day (Estathiuo, 2012, Jan. 23). Crude

    oil shipments via rail have continued to expand at an accelerating rate; US

    Class I railroads delivered 234,000 carloads o crude in 2012, compared to just

    66,000 in 2011 and 9,500 in 2008 (Association o American Railroads, 2013).

    United States and Canada

    RBC suggests that the uture growth o oil by rail depends heavily on whether

    or not large pipelines are built:

    Continued growth in crude oil shipments by rail will absorb some o

    the planned growth envisioned by select companies in Canadas oil

    sands sector, but we expect some large projects are likely candidates

    to be deerred with overall industry growth being constrained i the

    830,000

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