The Quebec crude-by-rail tragedy: Will it have a lasting impact? - analysis by Tony Hatch

The horrific story of the terrible July 6 derailment and explosion in Lac-Mégantic, Quebec, kept getting sadder and more confusing as the week unfolded. You've read the headlines, seen the clips and heard the sound bites: A Montreal, Maine & Atlantic Railway Inc. (MMA) train came loose and became a runaway, derailing five locomotives and a number of its 72 tank cars carrying crude oil, which then exploded. As of July 11, the number of dead (24) continued to increase. So did the questions surrounding the incident. Ultimately, the Quebec tragedy will raise doubts about railroad safety — but should it?

The derailment shouldn't have any direct impact on Canadian Pacific, the originating carrier out of North Dakota. While the MMA — a regional railway division of Rail World Inc. started by beloved and famed railroader Ed Burkhardt — continued to release information in a rather spasmodic fashion, the story, and the chain of custody, remained mysterious (at least as of July 11). The apparent addition of a local fire department on the scene prior to the accident raises all sorts of questions, and we still don’t know how the crude ignited (Did the runaway hit parked propone cars?), but this clearly isn’t a simple case of rail underinvestment, say, or bad safety policy.

And yet there has been rampant speculation about rail issues without the full facts presented, reflecting in some ways the anger over rail in Canada, or the desire of some to see — or exclude — the XL pipeline. Or to exclude all fracking — typical headlines read on the order of “Deadly Rail Tragedy Raises Questions of Rail Safety."

On the face of it, this doesn’t seem to be a sign of a systemic issue in railway safety. But in a sound-bite, political world — a world in which the Canadian prime minister can support his favored (XL) pipeline project by undermining the record of two Canadian railways (and their tens of thousands of employees), or that HBO can show “Gasland 2” in prime time — anything is up for, or can be included in, debate.
 
Facts vs. fear. Ahh, but as I allude to below, facts are indeed “stupid things” that often get in the way of political debate; meanwhile, fear grows. Massively reported as "fact" is the notion that crude by rail (CBR) isn’t regulated for safety (the Federal Railroad Administration would be puzzled by that), or that this awful incident is tied to the politically charged (XL-related) notion of Canadian oil imports — actually, the origin of the crude was in North Dakota, heading to New Brunswick. Many national papers even transposed the relative safety records of rail and pipeline (a spill rate of 0.38 gallons per million barrels moved for rail, 2002-12, vs. 0.88 for pipelines). 
 
Rails are different than pipelines, to be sure. In terms of rail vs. pipe, rails do connect populated areas (their primary mission!) and pipelines do not. That usually doesn’t factor into the case of crude, which isn’t thought to carry much risk of explosion (again: What happened in Quebec?) but of leakage (i.e., environmental risk), where their track record actually is better than pipelines', contrary to what has been reported. One other point: There has been a boom in CBR, but it is hardly stretching the rail network’s capabilities. The new energy world since, say, 2010 has led to a decrease in rail traffic — coal’s 20 percent decline is a much, much bigger deal in terms of the network and capacity and congestion than the boomlet in CBR. Railroads, which report all spills, typically would have somewhat more incidents, but each typically would be significantly smaller.

Five days after the incident, there still are many questions, which I will try to address below.

• How did the train come loose? It is important to understand the crude and chemical supply chain. The product goes from originating shipper — in this case, an E&P company in the Bakken — on rail cars. The cars are manufactured by one of a few companies and owned (and usually maintained) by third parties, such as GATX or Union Tank Car, or financial firms to the operating railways (in this case, with help from a terminal operator). Where will we find fault in this case? Keep in mind that local authorities had not ruled out “foul play” as of this writing.

• How did the crude explode? Crude, unlike refined products, isn’t very flammable.  Leaking is the typical fear after derailments, not explosions.  What was the igniter??  Other cars with propane? Are we concerned about leakage or explosions?

• Can rails handle CBR safely? News reports refer to the “spate” of incidents, including three on the CP that involved spills, all relatively minor, as if there were an epidemic of rail safety issues coming after the safest year on record for the entire industry. On a daily basis, rails carry such commodities as toxic inhalation hazard (TIH) chemicals, much more dangerous than crude oil, and do so often against their corporate wishes because of their safety record.

• Are short lines less safe then major rails? A fair question — there is no reason that the MMA’s track record will show anything systemic (the railroad is privately held, but early reports suggest its record is a bit poorer than the Class I average). Short-line holding companies like Genesee & Wyoming Inc. actually have safety records better than Class I averages.

• Is this new energy world simply not worth the risk? That is a crazy assumption given the benefits of energy independence and the potential for a manufacturing “renaissance,” but nonetheless will be argued.

• Will there be significant changes mandated? Unlike the awful 2008 Chatsworth, Calif., accident (commuter crash/engineer texting), there isn’t a safety bill ready to hand in to Congress (or Parliament).  The (over?) reaction to Chatsworth led to the $15 billion positive train control "unfunded mandate." What the Quebec tragedy will lead to is anyone’s guess, and will depend in part on what the investigation(s) uncover, but it doesn’t appear that radical operating change will come out of this.

And here are a few more questions that should be asked:
 
• Is this a sign of something systemic? No. As the Association of American Railroads and the regulatory body charged with rail safety (FRA) confirm, railroads are at their safest levels ever. The number of train accidents with haz-mat release has declined 26 percent since 2000. Spills usually are the concern with CBR (again, not explosions). The spill rate is less than half that of pipelines, as noted.

• Do rails care about safety and do they spend enough? The rails spend about 17 percent or so of their annual revenues on capex, with safety an enormous priority — for obvious human reasons, of course — but also because without no-fault provisions, accidents are expensive and divisive. Meanwhile, track capacity and on-time performance are increasingly critical elements of rail marketshare and return on investment, and they'll be even more so in the future.

• Is this the most dangerous product carried by rail? Far from it — rails safely carry the refined products, which indeed are highly flammable. As noted, they carry TIH chemicals, including chlorine (for drinking water). They handle this business at obviously huge risk (see the impact of the 2005 Graniteville accident, hundreds of millions of dollars to Norfolk Southern Corp.) due to the common carriage rules that require them to carry it. And they continue to do so because they are the safest mode for moving such dangerous goods. As of 2010, haz-mats represented about 6 percent of the rail unit total, with 99.997 percent reaching their destination without incident, according to the AAR.

• Will the Quebec tragedy have a lasting impact on policy or modal choice? It clearly is an evolving story with many questions yet to be answered. Given what little we know now, along with the body of work by the rails and their safety records, one can only hope that statistics and facts outweigh sound bites and politics. I remain convinced that this isn’t a systemic issue.

I welcome any comments.

Tony Hatch is an independent transportation analyst and consultant, and a program consultant for Progressive Railroading's RailTrends® conference. Email him at abh18@mindspring.com.