E&P Exec Skeptical About Effectiveness of DOT Tank Car Order

Responding to a string of recent derailments of trains carrying crude oil from the Bakken Shale play, the U.S. Department of Transportation (DOT) late last month issued an emergency order requiring all crude-by-rail shippers to ensure that the product is tested and classified according to federal safety regulations.

The emergency order immediately requires that all lower-risk, "Packing Group III" (PG III) crude shipments – treated as flammable liquids – be transported in more robust tank cars used to carry "Packing Group I" (PG I) and "Packing Group II" (PG II) hazardous materials. The derailments, which occurred in the states of Alabama and North Dakota and the Canadian province of Quebec, all carried Bakken crude in "DOT-111" tank cars used to carry PG III shipments.

"Today we are raising the bar for shipping crude oil on behalf of the families and communities along rail lines nationwide – if you intend to move crude oil by rail, then you must test and classify the material appropriately," commented DOT Secretary Anthony Foxx in a Feb. 25 press release. "And when you do ship it, you must follow the requirements for the two strongest safety packing groups."

The outspoken head of an exploration and production (E&P) company with operations in the Bakken and other shale plays recently told Rigzone that the order is not well-thought-out, and he questions how high DOT's emergency order will actually raise the proverbial bar. Moreover, he contends that better enforcement of existing rules and the approval of TransCanada's Keystone XL oil pipeline project would improve the safety of shipping crude oil. Read on for more insights from Chris Faulkner, CEO of Dallas-based Breitling Energy.

Rigzone: As the head of an E&P company, what does the U.S. Department of Transportation's emergency order mean for you in the near term? Longer term?

Faulkner: There are already reports of rail shipments slowing down, possibly as a result of the DOT's emergency order. If the order is enforced, it could continue slowing things down for a while because it requires more testing. But I would expect that to be short-lived, either because companies will simply fall into a new routine or they'll simply ignore the emergency order.

Rigzone: You've indicated that the order itself may not be well thought out. Why is that?


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 - E&P Exec Skeptical About Effectiveness of DOT Tank Car Order (Mar 07)