The document discusses the increase in oil transportation by rail in North America due to growing oil production and pipeline capacity constraints. It notes that rail provides a flexible alternative to pipelines, but that most rail tank cars, DOT-111s, are considered unsafe by regulators. Major oil spills from derailments have increased public safety concerns about transporting oil by rail near population centers. The document advocates for improved tank car standards and emergency response capabilities to help enable continued, safer growth of oil-by-rail transportation.

1. By: Mark Klapheke
S.N.131534A

2.  A vast network of rail already exists across both
America and Canada.
 New oil finds need ways to market. If pipelines aren’t
built in the right areas yet or if they are at capacity
there needs to be another way to get it out.
 Oil by rail has different financial, ecological and safety
advantages and disadvantages than other methods.
 Laws and safety regulations are being updated or
enacted in order to properly reflect the current reality
of how crude is transported across North America.
B

3. United States
 225,000 km of rail1
Canada
 50,000 kilometers of rail2
 A minimum of 840 fully
loaded oil cars (600k bpd)
just to move oil out of the
Bakken in the US 3,4
 69% of North Dakota’s
Bakken Oil or
approximately 550k bpd is
transported by rail5
C
D
A minimum of 1400
fully loaded oil cars (1
million barrels) used
to transport oil in N.
America daily3,4

4. Canada and America both enjoy very favorable freight
rates as well as a well developed network of rail.
I

5. EE
F
E

6. G
H

7.  Demand for transport of oil by rail has increased
dramatically in the last few years especially in the
Bakken area in the US.
 Rail has been able to cover shortfalls in pipeline
capacity and availability very quickly.
 Never in rail’s history has such a large volume of
petroleum products been transported cross-country
and even internationally between America and
Canada as now.
 What has happened to cause the boom in oil by rail?
Q

8. •It seems only reasonable to ship by rail, from a purely
financial perspective, if pipeline is not available to use and if
a profit can still be made after operating expenses are met
including the additional $12-$15 per barrel.
•Many of the larger oil finds and booms of the last 10 years
in North America have come from non-conventional finds,
which often come with higher extraction and processing
costs than conventional green field and even brown field
production leaving less profit per barrel and requiring a
high oil price to remain profitable.
•At $12 per barrel extra, North Dakota operations alone are
paying a minimum of $2.4 BILLION extra to ship oil by
rail a year.
It costs between $12 and $15 more to ship a
barrel of oil by train as opposed to pipelines.6

9.  The Keystone XL Pipeline project has been
waiting for approval in the US for several years
whereas rail either already exists or is cheaper
to build and maintain quickly.7
 With Bakken wells averaging 12 years7 and in-
situ oil sands wells in Alberta averaging 10-15
years11 it is often less economic to build
pipeline that could take many years to pay off.7
 “Even if all current pipeline projects are
approved in Canada, national oil production
will exceed pipeline capacity by one million
barrels a day by 2025”7
M

10.  69% of America’s fleet and 80% of the
Canadian fleet is composed of the DOT-111A
(CTC-111A in Canada) class tanker car.7
 Risks and information as pointed out by the
U.S.’s National Transportation Safety Board
include:
 “housing not effective in preventing impact
damage” and is “inadequate to withstand the forces
of a derailment.” 8
 Puncture resistance could be improved. 8
 New cars improved, old cars not (grandfathered in).
Having both on the same train negates the positive
improvements on the more modern cars8
J (background photo of a DOT-111A tanker car)

11.  There have been 10 significant oil-by-rail disasters
in N. America since 2008 spilling around 3 million
barrels of oil. The deadliest being in Lac-Megantic,
Quebec in July 2013 killing 47 which involved
Bakken oil.9
 DOT-111 tanker cars were involved.10
 Trains must pass through many population
centers, several of which are major metropolitan
areas, to get to refineries. 9
 Industry websites largely use statistics older than
2008 or 2009, which is before the oil-by-rail boom,
when discussing oil-by-rail incidents.
K (background photo from Lac-Magantic Derailment)

12.  On December 30, 2013, 9,500 barrels of Bakken
oil spilled and exploded in Casselton, ND. 14
 20 out of 106 oil tankers derailed, and 18 of those
were punctured and/or exploded traveling at 2/3 of
the speed limit. 14
 The investigation is ongoing and may take several
months to draw a conclusion.14
 DOT-111A tanker cars were involved with this
derailment and subsequent spill and explosions.15
 Oil-by-rail has increased 40 fold since 2008 and
is projected to grow 450% more over current
levels in the next 10 years.9
P

13.  Transport Canada has only 35 inspectors for all
dangerous goods shipped by rail in Canada.7
 The Auditor General of Transport Canada has
stated “’Transport Canada has not designed
and implemented the management practices
needed to effectively monitor regulatory
compliance’ when it comes to the
transportation of dangerous goods as defined
by the ministry.”7
 More inspectors are to be hired in the future.7
O (Canadian Minister of Transport, Infrastructure and Communities, Denis Lebel)

14.  The National Transportation Safety Board (U.S.)
has recently stated “Rail tank cars being used to
ship crude oil from North Dakota's Bakken region
are an ‘unacceptable public risk,’ and even cars
voluntarily upgraded by the industry may not be
sufficient”12
 Trains are required to slow down to approximately
55 kph while passing through population centers.13
 US lawmakers are pushing for existing DOT-111A
tanker cars to be retrofitted, but this is merely a
“voluntary agreement” and holds no legal
weight.12
N

15.  Oil by rail is very much an economic response to
not being able to get product to market quick
enough.
 Existing regulations and laws need to be updated
and implemented to reflect the reality of oil by rail
today.
 Further rerouting of trains around population
centers as well as tanker car safety and HazMat
response need to be considered as oil by rail seems
set to continue to boom.
 Left on their own, there is little financial incentive
for rail companies to upgrade their existing fleet.
L

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