Shippers Confused by New Federal Order on Oil Transport

Oil industry leader Jack Gerard said Wednesday that a recently released Transportation Department directive creates confusion over how to properly test and classify crude oil before rail transport.

"The emergency order says that we need to look at proper testing with sufficient frequency and quality. We don't know what that means," Gerard, the president of the American Petroleum Institute, said at a House Transportation and Infrastructure Subcommittee hearing convened to examine passenger- and freight-rail safety.

The head of Transportation's Pipeline and Hazardous Materials Safety Administration, Cynthia Quarterman, defended the order, saying that ambiguity was intentional so as not to force the industry's hand.

"We specifically left those terms to be determined by the shippers," Quarterman said. "We did not want to say for each and every instance before a shipment occurs that testing needed to occur."

When shippers handle large quantities of crude sourced from the same shale play, they are typically familiar with its composition and may not need to test and reclassify the crude each time it's loaded onto rail cars, Quarterman explained. In other instances, she said, shippers may need to test the crude more frequently if its composition is unknown or found not to be consistent.

"We are happy to talk with shippers that have questions and need clarification," Quarterman said.

A spate of recent accidents involving crude oil sourced from North Dakota's Bakken formation and shipped by rail has put crude-by-rail safety under the microscope. PHMSA in particular has taken heat for failing to finalize a rulemaking that would set revised tank-car standards for rail cars used to haul crude.

In response, the administration has issued a series of emergency orders aimed at boosting crude rail safety, including an order released on Tuesday mandating that shippers properly test and classify crude before shipment.

Gerard indicated, however, that the specifics of the order still need to be straightened out.

"The response we've gotten has been one of confusion," he said, referring to how oil-industry stakeholders reacted to the order. "I think in light of this we need to sit down with the administrator and others and seek clarification on exactly what it is they would like us to do in light of this order."