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The Reality of U.S. Oil Transport

Responsive Government

The major oil pipeline spills along the Santa Barbara coast and into the Yellowstone River in Montana this past year are only the most recent chapters in the growing list of major spills associated with oil transportation in the United States. These recent spills of 100,000 gallons and 50,000 gallons of oil, respectively, follow a nearly 1 million gallon spill of Canadian tar sands oil from an Enbridge pipeline that burst in the Kalamazoo River in Michigan in 2010, and other similar spills around the country. These spills and many others like them have resulted in significant harm to public health and the environment, created panic among residents, and forced state officials to declare states of emergency in affected area.

These more frequent pipeline spills are inevitable in light of the massive increases in oil and gas production in North America since 2007. Technological developments such as directional drilling and hydraulic fracturing have opened up vast new sources of shale oil and gas in traditional oil producing locations like Texas but also in North Dakota and Montana—states that have not been major oil producers for over 50 years. Between 2011 and 2012, U.S. crude oil production increased 790,000 barrels per day, the largest increase in annual output since the start of U.S. commercial development of crude oil in 1859. U.S. production of shale oil now makes up 35% of total U.S. oil production and, in 2013, North Dakota on its own began producing 1 million barrels per day, cementing it as the number two oil-producing state in the nation after Texas. This development of U.S. shale oil in disparate parts of the country, coupled with the major import of tar sands oil from Canada in recent years, has put a major strain on the infrastructure needed to transport all this new oil to refineries.

There are currently more than 2.6 million miles of pipelines (including oil, carbon dioxide, natural gas, and petroleum product pipelines) for gathering product, transporting it to refineries, and distributing it to vendors, operated by 300 companies and carrying billions of ton miles of liquid petroleum products every year. These include nearly 200,000 miles of dedicated hazardous liquid pipelines, including oil pipelines. And numerous major new pipelines like the controversial Keystone XL project are in the planning process and under construction across the country. This is particularly true in the upper Midwest where existing pipeline infrastructure is nowhere near sufficient to transport the vast amount of new shale oil in North Dakota and tar sands oil in Alberta to U.S. refineries.

In the meantime, as new pipelines are built, oil is increasingly traveling to refineries by rail. Although the railroad played an important role in transporting oil in the early part of the 20th century, by the mid-20th century, pipelines dominated. But now, with insufficient pipeline capacity to transport new sources of shale oil and tar sands oil, rail has become once again a major means of oil transport and, in some regions, the dominant means. For example, in 2005, rail transported less than 1% of U.S. crude oil to refineries. By 2013, rail transported 10% of crude oil nationwide and over 60% of crude oil produced in North Dakota. In 2013, there were 4,000 oil freight cars on the nation’s railways as compared to less than 10 in 2005. Not surprisingly, this has led to several, high-profile disasters, including the runaway oil train in Lac-Megantic, Quebec in 2013, which spilled approximately 1.5 million gallons of crude oil, killed several residents of the town, and forced a major evacuation. Shortly thereafter there was another oil train derailment and fire in Casselton, North Dakota. In 2015 already, there been five oil train explosions and spills in the United States and one in Canada, including the evacuation of a town in North Dakota just this month.

These high-profile pipeline and rail disasters have caused local, state, and federal officials to call for more stringent regulation of both pipelines and rail cars transporting oil, for increased communications between government officials and transporters, and for increased safety planning by all parties. But even if better processes and procedures are implemented, the fact remains that accidents (and in some case intentional sabotage) involving oil transportation will continue to occur and oil spills from pipelines and rail cars will continue to cause harm to human health and the environment so long as oil remains such a central part of our economy.

When considering the various options to address this reality, none of the solutions are ideal or have a realistic chance of success in the short term. Even environmentalists would agree that to the extent the nation still needs gasoline, it is better for economic and national security reasons to produce oil domestically rather than import it from overseas. Such domestic production requires transportation to refineries, at least barring future breakthroughs in crude oil processing technologies. This raises the question of whether we can reduce the underlying demand for oil by radically altering the sources of energy we use for transportation, such as a major shift toward electric vehicles that would rely on the energy used to produce electricity which, for the most part, does not include oil. But this shift toward electrification of vehicles, while making progress, is far from reducing domestic oil demand. Oil prices have plummeted in recent months, leading to cheap gasoline for consumers, which, in turn has increased their demand for larger cars that run on gasoline and decreased their demand for alternatives to gasoline, such as electric cars or even hybrid vehicles. This shift in consumer demand makes it more difficult for environmental groups or government agencies to continue to pressure the auto industry to continue to increase the efficiencies of their fleets or invest in new technologies to develop alternatives to gasoline engines. On the brighter side, at least for the environment if not for North American oil producers, is that lower oil prices render uneconomical some tar sands oil projects because of the cost associated with producing such oil. But that alone will not decrease production in general, just shift it to other locations.

If economics alone cannot drive a reduction in demand for oil, at least with today’s low gas prices, more regulation is necessary to reduce or at least shift crude oil demand to cleaner and safer transportation energy sources. For instance, if states follow the lead of California and begin to impose CO2 limits on emissions associated with the production, transportation, and use of transportation fuels in addition to electric power sector emissions, the most energy intensive oil projects will become less economical and may result a greater push to cleaner burning fuels, electric vehicles, and less dependence on crude oil. But none of these changes will happen tomorrow. In the meantime, the country will continue to transport oil by rail and by pipeline and despite the best efforts of regulators and operators, there will be spills that result in harm to human health and the environment.

For more information on the history, regulation, and challenges associated with oil and gas transportation see Alexandra B. Klass & Danielle Meinhardt, Transporting Oil and Gas: U.S. Infrastructure Challenges, 100 Iowa L. Rev. 947 (2015).

Responsive Government

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