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Train carrying crude oil derails, explodes in Alabama

Source: Reuters - Fri, 8 Nov 2013 21:15 GMT
Author: Reuters
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(Adds potential volume of crude on train, detail on crash location and destination of train, paragraphs 3-12)

By Edward McAllister

Nov 8 (Reuters) - A 90-car train carrying crude oil derailed and exploded in a rural area of western Alabama early on Friday, leaving 11 cars burning and potentially bolstering the push for tougher regulation of a boom in moving oil by rail.

No injuries have been reported, but 20 of the train's cars derailed and a number were still on fire on Friday afternoon, local officials said. Those cars, which threw flames 300 feet into the night sky, are being left to burn down, which could take up to 24 hours, according to the train owner, Genesee & Wyoming.

If full, the train, which passes near schools and crosses rivers in the area, could hold up to 65,000 barrels of crude oil, according to Reuters calculations.

A local official said the crude oil had originated in North Dakota, home of the booming Bakken shale patch. If so, it may have been carrying the same type of light crude oil that was on a Canadian train that derailed in the Quebec town of Lac-Megantic this summer, killing 47 people.

That incident, which the operator Montreal Maine & Atlantic blamed on a train engineer for not applying enough brakes on an incline, fueled a drive for tougher standards for oil rail shipments. Proposed measures included better testing of potentially explosive ultra-light shale crude and improved rail tank car standards. Tank cars made before 2011 have been cited by regulators as dangerously prone to puncture.

It was not clear what caused Friday's accident in Pickens County, Alabama, nor how old the cars on the Genesee & Wyoming train were. The train was being driven by two engineers, both unharmed, officials said.

The accident happened in a wetlands area which eventually feeds into the Tombigbee River, according to the Alabama Department of Environmental Management. Booms were placed in the wetlands to contain the spilled oil.

While it did not seem to pose major environmental risk, the accident still appeared to be the most dramatic of its kind in the United States since trafficking of crude by rail began to increase with the growth of shale oil production three years ago.

"It will provide very clear evidence of the potential risks for environmental groups and others opposed to the growth of crude by rail, and will likely increase pressure to tighten regulations," said Elena McGovern, Global Energy and Natural Resources analyst at Eurasia Group in Washington.

Traders said they feared that tougher regulations could drive up costs for shipping U.S. crude by rail, reducing its competitiveness. Such speculation weakened U.S. crude oil futures relative to London's benchmark Brent, which already trades at a premium to the price in New York.

BOUND FOR FLORIDA

The train was carrying crude from Amory, Mississippi, to a terminal in Walnut Hill, Florida owned by Genesis Energy, the company's chief financial officer Bob Deere said. Trade sources said it would likely be pumped from there into pipelines for delivery to Gulf Coast refineries.

Deere said Genesis was still able to receive rail shipments and deliveries were being rerouted around the impacted area.

Don Hartley, regional coordinator for the Alabama Emergency Management Agency, said the tank cars originated in North Dakota. Three cars had a "'bleve' - where pressure builds up and blows a hole." That started the fire, he said.

Alabama Emergency Management Agency spokeswoman Yasamie August said that one family was evacuated due to the incident, but had already been able to return home.

So far there are no details on the cause.

"We don't have a cause yet, that will be determined with the investigation," said a Genesee & Wyoming spokesman.

The company said it had notified the National Transportation Safety Board, Federal Railroad Administration and National Crisis Response Center per standard procedure.

FOCUS ON TANK CARS

Rapid proliferation of oil-by-train shipments started more than three years ago to get oil to markets as pipeline infrastructure lagged booming production in remote places like North Dakota, as well as Canada's oil sands.

The East and West coasts in particular turned to rail to draw cheaper U.S. and Canadian crude. With no major oil pipelines in operation, or even planned, rail allowed them to tap into the burgeoning shale plays in North Dakota and Texas.

In the third quarter, crude-by-rail shipments rose 44 percent from the previous year to 93,312 carloads, equivalent to about 740,000 barrels per day (bpd) or almost one tenth of U.S. production. That was down 14 percent from the second quarter due to narrower oil spreads that made costlier rail shipments less economic.

The U.S. National Transportation Safety Board has issued safety guidelines on the widely used, cylindrical tank cars known as DOT-111s, including a recommendation that all tank cars used to carry ethanol and crude oil be reinforced to make them more resistant to punctures if trains derail.

The new guidelines, put forward in March 2012 but which have not yet been adopted by the Department of Transportation agency that oversees the sector, stem from a deadly ethanol train derailment and explosion in Illinois in 2009.

DOT-111 railcars ordered after October 2011 have been manufactured to the new code, but the industry has resisted spending an estimated $1 billion to retrofit nearly 300,000 existing tank cars. (Reporting by Edward McAllister, Robert Gibbons, Anna Louie Sussman, Jeanine Prezioso and Nicolas Medina Mora in New York and David Sheppard in London; editing by Gerald E. McCormick, Jonathan Leff and Alden Bentley)

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