Natural gas flares are seen at an oil pump site outside of Williston, N.D., on March 11, 2013. Oil drillers in North Dakota’s Bakken shale fields are allowing nearly a third of the natural gas they drill to burn off into the air, with a value of more than $100-million (U.S.) per month, according to a study.SHANNON STAPLETON/Reuters
An investigation into the disaster and its causes.
- Part 1: Last moments of Musi-Café (ebook free for subscribers)
- Part 2: How a flawed pipeline on wheels brought disaster
- Part 3: The oil was known to be deadly
- Part 4: Why railways can do as they please in Canada
The shrieking whistle of escaping gas continued for hours. Emergency crews ran for cover when they heard the noise, as they fought blasts of burning oil during the Lac-Mégantic rail disaster. The kettle-boil scream meant one thing: Oil vapours were shooting out of a derailed tank car and another fireball was about to rip from the broken train.
It wasn't until four days after the July 6 derailment that the fires finally subsided. But even before the inferno was extinguished and the burned-out town counted its 47 dead, rescue workers and rail, petroleum and government officials were asking the same troubling question: Why was the oil so explosive?
The North Dakota crude that levelled Lac-Mégantic was classified as flammable, a long-standing practice for all oils moved by rail. Hazardous material experts and rail officials interviewed by The Globe and Mail say the risks of exploding crude were not scrutinized until the tragedy.
"The explosions and everything, I didn't think crude oil did that," said Ed Pritchard, a former accident investigator with the U.S. Federal Railroad Administration.
Canada's Transportation Safety Board agreed. During an August briefing on its investigation into the crash, Ed Belkaloul, head of the federal TSB in Quebec, said the oil carried to Lac-Mégantic is undergoing testing because the crude reacted "in a way that was abnormal."
The potential explosiveness of the crude should not have been such a mystery. An investigation by The Globe into the Lac-Mégantic explosions shows there were warning signs that crude from the Bakken region straddling North Dakota and parts of Manitoba and Saskatchewan was not like other oils.
In New Town, N.D., where the ill-fated train was loaded with Bakken crude, locals like to boast that the honey-coloured oil is so light they can take it right from the well and pour it into truck engines because it requires little refining. Long before the crude exploded at Lac-Mégantic, there were signs that shippers, regulators and rail officials did not appear to consider the variable characteristics of oil loaded onto trains that travel through towns and cities.
As early as 2010, North Dakota geologists were investigating lethal gases in the oil. Early last spring, the Washington-based FRA grew concerned about Bakken crude when it became aware of "severe corrosion" of tank car walls and joints, according to a letter sent to a U.S. petroleum association. The five-page letter, a copy of which was obtained by The Globe, cites test findings showing that some Bakken oil was so flammable it could be ignited at temperatures as low as 20 C.
Bigger alarms went off in May, when pipeline giant Enbridge Inc. discovered dangerous hydrogen sulfide levels in Bakken crude – 24 times the legal limit. That was enough to prompt the U.S. Federal Energy Regulatory Commission to grant emergency powers to Enbridge to block crude that carried excessive amounts of the potentially lethal and explosive sulfide vapours from entering its pipeline.
Bakken oil is potentially more hazardous than conventional crude because it is lighter and contains a number of gases and compounds, such as methane and propane, that can make it much more corrosive and volatile.
What no one appears to have responded to was the safety of the rail transportation network carrying the oil. Today, railways haul more than two-thirds of the nearly 700,000 barrels of crude shipped daily from the Bakken formation of shale oil. Crude initially stranded by a pipeline shortage is now carried on trains loaded with as many as 120 cars of oil – so-called unit trains of crude that didn't exist five years ago.
U.S. and Canadian railway laws require shippers, railways and even buyers to ensure hazardous goods such as petroleum are properly classified so they are carried in sufficiently sturdy cars. But interviews with rail officials and exclusive access granted to a Globe reporter to the North Dakota crude facility that loaded the Lac-Mégantic train indicate that the makeup and flammability of Bakken oil is not always tested.
In the rush to capitalize on one of the world's biggest oil booms, questions about the potential hazards of shipping Bakken crude by rail took a back seat. When railways were chosen to supplement a pipeline shortage, the modern boom quickly stretched the limits of a century-old transportation network and regulatory system designed for safer goods such as grain and lumber.
Mr. Pritchard said that in his experience as a railroad inspector, oil companies and shippers do not always examine oil for corrosiveness and explosiveness.
"They didn't test the oil," he said.
Authorities did test the oil after the Lac-Mégantic disaster because, as regulators said, they could not explain the speed and ferocity of the fire.
"Did I lie awake about this? Yeah, I laid awake at night," Hunter Harrison, chief executive officer of Canadian Pacific Railway Ltd., said of the Quebec catastrophe. Canadian Pacific locomotives started the 72-tanker train on its journey from North Dakota. When the train pulled into a Montreal rail yard, the tank cars were transferred to Montreal, Maine & Atlantic (MM&A) Railway locomotives for delivery to an Irving Oil refinery in Saint John.
Prior to Lac-Mégantic, neither Mr. Harrison nor any other rail official, shipper, regulator or buyer publicly expressed concerns about shipping such large volumes of Bakken crude. Since then, Mr. Harrison has been a vocal critic of what he calls an inflexible and outdated regulatory regime that needs to be more vigilant and aggressive with mislabelled hazardous goods.
The train from North Dakota barrelled through the American Midwest, north to Windsor, Ont., and on to Burlington, Mississauga, Toronto and dozens of smaller towns before reaching Lac-Mégantic.
"I wonder this: Do people know what is going by their front door?" Mr. Harrison said.
BAKKEN BOTTLENECK
Ever since a drill rig struck black gold on Henry Bakken's farm in 1951, oil production has been an exercise in frustration in North Dakota. The gusher helped reveal what is now regarded as the largest single continuous oil formation in the United States.
The well on Mr. Bakken's farm somehow managed to drill through an existing shale rock fracture that tapped directly into a large pool of oil. For the next 50 years, the struggle to cajole "tight" Bakken oil from shale was a never-ending experiment in drilling techniques.
Holes had to be drilled into the rock and the oil pumped out with a pressurized brew of water, sand and chemicals. These hydraulic fracturing, or fracking, techniques are time-consuming, expensive and not always successful. When oil prices cratered in the mid-1980s, the wells were no longer economically viable. North Dakota went into a slump for two decades.
Good times returned in the mid-2000s when oil prices skyrocketed and local operators discovered that tilting vertical drills horizontally along the oil-rich middle of the Bakken rock sandwich significantly boosted the odds of scoring oil. Global oil giants moved in, thousands of new wells were erected, and the thinly populated state of 690,000 struggled to process the rapid industrialization of a landscape shaped by cattle and wheat farms.
As oil output soared, so did hazards. Workplace accidents increased so dramatically that North Dakota now has the highest rate of job fatalities in the U.S. – 12.4 per 100,000 workers, or four times the national rate. Gas pipelines are in such short supply that 30 per cent of natural gas isn't properly harvested and is instead burned off. From satellite cameras, North Dakota looks like a birthday cake with thousands of glowing candles.
While the state struggled to keep up with the boom, its oil reserves grew exponentially. A 2013 U.S. Geological Survey report estimates there are more than seven billion barrels of undiscovered and technically recoverable oil in the Bakken, more than twice its original estimate. Today, North Dakota is the second-largest domestic producer of oil after Texas.
What should have been an economic miracle for North Dakota has instead been a logistical nightmare. Since 2009, the state has been producing oil faster than it can be shipped to refineries. The bottleneck is so bad that market prices for Bakken crude are at times heavily discounted, falling as much as 28 per cent below benchmark prices in early 2012.
Existing pipelines winding through the state were already operating at full capacity. As a result, more than a third of the state's production was being shipped out on trucks by 2007, according to the North Dakota Pipeline Authority. The trucking frenzy was chewing up roads, driving accident rates to record highs and infuriating local residents.
One of the best solutions to the oil "overload," a seven-page memo from the pipeline authority explained in 2007, would be to gain access to the Keystone XL pipeline that was set to travel through the state by 2009. Moving oil by rail "didn't make economic sense," the report concluded, because it was too expensive and rail-loading facilities and tank cars were as rare as rain on North Dakota's parched plains.
Six years after North Dakota's hopeful report, the pipeline is still stalled by political and environmental opposition.
"The Keystone pipeline decision has taken longer than it took us to defeat Hitler," Heidi Heitkamp, a Democratic senator from North Dakota, fumed to USA Today in September.
PIPELINES ON THE RAILS
While the Keystone battle raged, oil-bearing trains slipped into the state with no additional regulatory scrutiny. Railways may be more expensive, slower and somewhat less reliable than pipelines, but in oil-clogged North Dakota they had a compelling sales pitch.
"Instant capacity," Trevin Hogg, a marketing manager with Union Pacific Railroad, boasted to industry trade journal Rail Magazine in 2011. While pipelines can wait years for approval, Mr. Hogg promised crude trains in North Dakota within "a couple of months."
What happened next was the largest surge ever in rail shipments of hazardous goods. By last month, more than 400,000 tank cars were carrying crude oil through Canadian and U.S. towns and cities. In 2009, the number was 8,000.
"This came on us pretty quick … like a gold rush," said Canadian Pacific's Mr. Harrison.
Canadian Pacific ranks as the second-biggest carrier of Bakken oil, after Texas-based BNSF Railroad, which accounts for nearly two-thirds of all crude rail shipments originating from North Dakota.
On paper, the concept of loading unit trains with crude was a brilliant stroke. The agonizing wait for new pipeline capacity had been solved, railways underwent an economic renaissance and Bakken oil was on track to eliminate American dependence on foreign oil.
By 2013, railways had become such a convenient shortcut that Kinder Morgan Energy Partners, the largest pipeline company in the U.S., announced in April that it was entering a new venture to ship crude by rail. Railways, more than a third more expensive than the cost of shooting oil through pipelines, were becoming the transportation mode of choice even for pipeline companies.
NEW TOWN, NEW WORLD
One outsider that helped pave the way for the rails was Miami-based energy logistics company World Fuel Services Corp. When the Bakken boom grabbed headlines in 2009, the buyer and shipper of fuel saw an opportunity to make money by buying heavily discounted Bakken oil on the bet that it could help break the crude bottleneck.
A World Fuel subsidiary formed a venture with a regional landowner, Dakota Plains Holding, to refurbish an old rail line south of the small community of New Town in northwest North Dakota. Located on 192 acres, the Dakota Plains facility is an efficient assembly line of incoming trucks, oil storage tanks, loading stations and rail tracks that transfers arriving crude from local producers to outgoing trains.
Shortly after Dakota Plains went into operation, World Fuel landed a contract to ship oil to a refinery owned by Irving Oil in Saint John. World Fuel bought oil from local producers and contracted railways to deliver the crude to New Brunswick.
Initially, World Fuel contacted Canada's two Class I railways. The first was Canadian Pacific, which had been hauling shipments of Bakken crude for a few years. The second, according to one source familiar with the conversation, was Canadian National Railway. Canadian Pacific was signed up, but Canadian National was rejected because it proposed a high fee, the source said.
The cheaper alternative was to combine Canadian Pacific with a struggling short-line railroad that barely stayed afloat hauling lumber and other forest products down some of the ricketiest tracks on the East Coast. MM&A was contracted to carry the crude from Montreal to the New Brunswick border, where its cargo would be handed over to a railway owned by the Irving family.
It can take as little as three or four hours to pump oil out of the ground and load it onto trains at the New Town facility. The Globe's review of the fuel-loading site confirmed that crude deliveries arriving from local wells are regularly mixed in holding tanks with oil from other wells.
Alan Roberts, who spent 43 years at the U.S. Department of Transportation investigating rail accidents, said crude is so variable that the blending of oil in North Dakota makes it difficult to know how caustic the mix is. "There is probably not any well site in the world where it has identical crude to the next field over or next field up," he said.
Even if the oil is tested and determined to be safe, the risk of explosion can be further compounded in transit when exposed to a hot sun, Mr. Roberts said.
"You get down the road and the sample could be entirely different," he said. "Why? Because the materials will stratify." In such cases, the lighter ends rise to the top and vapourize faster, creating an explosion risk.
The Transportation Safety Board of Canada issued an advisory in September that oil carried on the Lac-Mégantic train was more flammable than identified by its shipper. The board also said Irving Oil was responsible under Canadian regulations for ensuring that the crude was properly classified.
Paul Browning, chief executive officer of Irving Oil, said in an interview that one of the lessons to be learned from Lac-Mégantic is that additional testing is required. "I think the important thing as the importer," he said, "is we need to be in a position to convince the regulators that we've done our due diligence to make sure we understand the content of the rail cars."
THE SOURING OF BAKKEN OIL
Troubling signs were emerging about Bakken crude as early as 2010. In December of that year, a team of geologists and researchers presented an abstract to a Texas symposium about their plans to investigate the "souring" of Bakken oil. The abstract noted increased concentrations of hydrogen sulfide in local crude, which was posing health and environmental risks and corroding well equipment.
Their concerns raised questions about North Dakota crude, which was prized for its light qualities. Other oil formations in North Dakota and in parts of Canada are known for dangerous sulfide spikes, identified by a swampy odour of rotten eggs. The geologists outlined an ambitious research program to evaluate local wells and sample oil to understand more about the source of sulfides. The potential causes they outlined were fracturing fluids, chemical reactions with minerals or surface bacteria.
Four months later, the geologists published a short paper concluding it was unlikely that a chemical reaction with minerals explained the rise in sulfides. The team did not follow through with its plans to assess local wells, and there was no examination of the oil's interaction with chemically infused fracking fluids. Jim Sorensen, one of the authors of the report, said the research was discontinued because "we weren't seeing as much interest in the souring." The most likely culprit, he said, was bacteria on pumps, valves or storage tanks that were contaminating Bakken oil with sulfides.
"The oil companies are aware of this phenomenon," he said, and have since tried to control sulfide outbreaks by scrubbing equipment with chemical cleaners known as biocides.
Justin Bremer, also one of the authors, offered another explanation for the abbreviated research: "We didn't get a whole lot of co-operation from the industry." The research project had been triggered by a request from a local crude producer in 2010 that later decided not to co-operate when geologists started asking for samples and data about sulfides. The identity of the producer was not revealed. "It really would have helped. … We would have been able to pinpoint the cause pretty quickly," Mr. Bremer said.
Oil is regulated in North Dakota by the state's Department of Mineral Resources. Mr. Sorensen referred further questions about potential Bakken oil risks to the department's director Lynn Helms. A spokeswoman for Mr. Helms said he would not take questions relating to Bakken crude. "We don't have statistics on the nature of crude … it is not what we would look at." She said although the Lac-Mégantic oil explosions were "tragic and unfortunate," examining potential chemical risks in Bakken crude "doesn't fall under our jurisdiction." She referred questions about the safety of crude to federal railroad regulators.
The sulfide problem emerged again in early 2013 when pipeline companies started blocking oil with high rates of hydrogen sulfide. According to the Federal Energy Regulation Commission, Tesoro High Plains Pipeline began rejecting in January Bakken oil with more than five parts per million of sulfides. Belle Fourche and Bridger Pipeline moved in April to reject oil with more than 10 parts.
In June, Canadian pipeline giant Enbridge Inc. pleaded for FERC's help after discovering massive volumes of hydrogen sulfides had been piped into its storage tank in Berthold, N.D. U.S. laws prohibit workers from being exposed to more than 50 parts of hydrogen sulfide per million milligrams of liquid. Anything above triggers shock and convulsions; push it beyond 700 and death is likely within two breaths. At its Berthold facility, Enbridge discovered crude with 1,200 parts per million of the gas.
"We had to protect our people, our workers," said Robert Steede, Enbridge's director of North Dakota operations.
FERC granted Enbridge's plea to ban oil with more than five parts of hydrogen sulfide, despite an opposing motion from a local shipper, Plains Marketing LLP, that such an order could cause it "great economic harm."
For its part, World Fuel said it has not seen the same problem with hydrogen sulfide (H2S). "Based on our testing, H2S hasn't been a significant issue," a company spokesman said.
OPERATION CLASSIFICATION
U.S. federal railroad regulators started to take a second look at North Dakota crude in early 2013 after receiving reports about badly corroded tank cars. The discovery raised concerns about whether the crude was being shipped in sufficiently sturdy cars. Last spring, the FRA launched Operation Classification to investigate.
Random tests showed some Bakken oil was unusually flammable, improperly classified as a less hazardous material and transported in tank cars designed for less volatile crude. Crude is typically shipped in tankers known as DOT-111 cars, which have been criticized for being susceptible to corrosion and ruptures.
In a June 19 letter to the American Petroleum Institute, the railroad regulator made the remarkable admission that its investigative tools are so limited it "can only speculate" about the number of hazardous crude shipments that were improperly shipped.
According to industry sources, Canadian rail officials also began auditing oil, but their approach was, on at least one occasion, clumsy. In early 2013, Canadian transport officials tested a Canadian Pacific train and discovered crude was improperly classified. When they alerted the railway, the train had already left the station. There was no followup.
In October, after the Transportation Safety Board found the oil on the Lac-Mégantic train was incorrectly classified, Federal Minister of Transportation Lisa Raitt introduced new regulations that were intended to get tough on oil shippers. Anyone shipping oil to Canada would have to test to confirm it was less volatile than a Packing Group 1.
While that sounded reassuring, Mr. Prichard points out the failings of those rules: Since railways and fuel shippers are all about speed, it's easier to simply label all oil as Packing Group 1, without stopping to test it. In fact, The Globe has since learned that not all oil shipments in North Dakota are being tested. The result is railways and shippers have no better idea of the volatility of the oil they are shipping by rail today than they did before Lac-Mégantic.
DERAILMENT
It was just past midnight when the ground started to shake. Then came the explosions, one after another, so quickly that they couldn't be counted. Soon the sky was choked with black belching fumes of burning oil and gas that reached as high as 300 feet, witnesses said. It was two days before the burning oil was finally exhausted.
This was not a scene from Lac-Mégantic in July. Rather, these fiery blasts occurred on a flat timber trestle carrying 90 cars of Bakken crude over an Alabama swamp on Nov. 8. Four months after some rail experts portrayed the Lac-Mégantic explosions as a once-in-a-lifetime catastrophe caused by a confluence of railway errors, a steep hill and the town's cramped downtown, Bakken oil once again detonated a chain of tank cars.
There were no brake issues, no hill or cramped urban space to account for the Alabama explosions. This accident, still under investigation, occurred on a 10-foot-high embankment on a rural stretch outside Aliceville.
"No one was killed or injured," said Ken Gibson, director of the local Alabama Emergency Management Agency. "We were very fortunate this was an isolated area."
With a report from Justin Giovannetti in Lac-Mégantic and Jeff Jones in Calgary