USDOT Issues Emergency Order Impacting All Bakken Crude Oil Rail Shipments

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In response to safety concerns over trains carrying crude oil extracted from Bakken shale, the federal Department of Transportation (USDOT) issued an Emergency Restriction/Prohibition Order yesterday, affecting all those who transport crude oil by rail in the United States.

Specifically, the USDOT stated that its investigations into train accidents and derailments in North Dakota, Alabama, and Quebec, indicated violations of federal laws and regulations related to hazardous materials, particularly with regard to the classification and packaging of crude oil transported by rail.  Misclassification of Bakken crude oil, according to the USDOT, constitutes an imminent safety hazard that precipitated its emergency order. 

The amount of crude oil shipped by rail in the United States has grown substantially over the past several years, driven in large measure by significant increases in oil production from the Williston Basin region that stretches across parts of North Dakota, Montana, and into Canada, and includes the Bakken shale formation.

Subject to the USDOT’s emergency order, and effective immediately, those who transport crude oil by rail must (1) ensure that the crude oil is “properly tested under current regulations,” and (2) classify crude oil—typically a Class 3 flammable liquid under USDOT rules—as Packing Group I or Packing Group II and transport it according to those regulations.  Classification of crude oil as Packing Group I or Packing Group II will require use of more robust rail tank cars than is required for lower risk classifications like Packing Group III.  In fact, the DOT’s emergency order states that “shipments are an imminent hazard when Packing Group I or Packing Group II petroleum crude oil is misclassified as Packing Group III, which could lead to an improper package being used to transport the misclassified hazardous material.”  As a result, the order precludes shippers from classifying crude oil as Packing Group III until further notice.

U.S. Senator Heidi Heitkamp of North Dakota and the petrochemical industry expressed concerns about questions that the emergency order left unanswered, including the appropriate frequency of testing mandated under the order and the potential impact on capacity for crude oil transportation.  

The emergency order also comes on the heels of a February 21 agreement between the USDOT and the freight rail industry, which identified voluntary safety standards the industry will adopt for transporting crude oil by rail.  Under the terms of that agreement, railroads will increase annual rail inspections above the minimum required under federal law; conduct track geometry inspections that are not mandated by federal law; equip trains with either distributed power or telemetry devices to enable engagement of emergency brakes on both ends of trains for quicker stopping; among other provisions.