Overhaul of regulations governing railcar construction is long overdue. The May 1 announcement from Canadian and U.S. transportation ministers unveiling requirements for an upgraded class of railcar to transport crude oil and other flammable liquids is therefore welcome news.
The new rules for more robust railcars come too late for the Quebec town of Lac-Mégantic, site of Canada’s worst rail accident involving flammable liquids, and other communities that have suffered social, economic and environmental damage from train derailments.
They’re no guarantee against future dangerous-goods accidents, but the new requirements should help reduce derailment impacts and costs. They should also improve rail’s appeal as a key conduit for getting Canadian energy to domestic and global markets – an option that’s increasingly needed as environmental opposition and economic complications conspire against proposals for new and expanded pipelines.
The Canadian Association of Petroleum Producers estimates that rail’s annual crude oil payload will rise to 700,000 barrels per day by the end of 2016 from 200,000 in 2013. But dangerous-goods accidents in Canada have likewise increased: to 144 in 2013 from 119 in 2012.
Moving oil by rail has several advantages over pipelines, including lower capital costs, faster delivery to market and quicker response to demand fluctuations. It also gives Canadian producers more access to global markets and allows them to load pure Canadian crude on ships in U.S. ports, thereby avoiding U.S. export bans of unrefined U.S. crude, which is often mixed with Canadian crude in pipelines.
However, the reduced financial impact of derailments will be among the key benefits of the new railcar regulations. The cost of instituting them is estimated at $1 billion over 20 years. But with the bill for a typical derailment estimated at $13 million, savings in environmental and other expenses will quickly offset any financial outlay for new and refurbished North American railroad rolling stock.
