April 17, 2013 THE SAFETY OF RAILWAY TANK CARS AND LIQUID PIPELINES IN THE MOVEMENT OF CRUDE OIL

AND RELATED PRODUCTS

There is considerable current controversy concerning the construction of new pipelines, or the expansion of existing pipelines, to serve the anticipated increase in production of crude oil from the Alberta oil sands. As part of this issue, there has been interest in whether Canadian railways can provide an alternative means to transport the crude oil to markets. As part of the debate, there has become a concern about the relative safety of railways and pipelines in the movement of crude oil. This note will provide an analysis of the risks from railways and pipelines based upon research conducted by the American Association of Railways (AAR) in 2013 concerning US rail and US pipelines1 from 1990 to 2009. This research was motivated by a memorandum from the Manhattan Institute for Policy Research2, which was quoted at the November 2012 annual investor conference of TransCanada (the company proposing to build the Keystone XL oil pipeline) saying railways have roughly 25 more accidents than pipelines. ANALYSIS The first step in the analysis is to determine the metrics to be used to measure the risk, such as: The frequency of incidents when product is accidentally released; The quantity of product accidentally released; The number of fatalities associated with an accidental release; and The number of human injuries associated with an accidental release.

Both the Manhattan Institute, and the TransCanada quote above, refer exclusively to the frequency of US incidents between 2005 and 2009, and the AAR takes exception to the actual calculation, but also to its relevance. To quote the AAR:
AARs analysis of the Hazardous Material Identification System incident database for 20052009 period indicates that 75% of the railway hazmat incidents identified [in the Manhattan Institute memorandum] involved releases less than 5 gallons

that are related to minor leaks and spills and, in some cases, the incidents involve no release at all. While the occurrence of such incidents may be of interest to safety regulators, their simple number does not provide an appropriate metric to assess overall safety risk. The balance of this note will restrict its attention to the remaining three metrics.
1

Research is being considered to examine the risks from Canadian railways and pipelines, but it is not anticipated that there is a significant difference between Canada and the US. 2 Pipelines are Safest for Transportation of Oil and Gas, June 2012 memor andum by Diana FurchtgottRoth, Manhattan Institute for Policy Research.

April 17, 2013 The second step in the analysis is to define the product under consideration. Railways in the US and Canada have not been in the business of moving significant quantities of crude oil until quite recently and so there is little or no historical record as a basis of comparison. Once again, both the Manhattan Institute and the TransCanada quote above refer to the frequency of US rail incidents involving all hazmat commodities, and the AAR gain takes exception. To quote the AAR:
The railway incident count includes ALL hazardous materials, including major commodities like sulfuric acid and chlorine that never move in hazardous liquid pipelines The focus of the rail pipeline comparison should logically be on moving crude oil and oil products that is the province of the hazardous liquid pipelines Inclusion of a deadly commodity like chlorine brings in the worst railway hazmat accident in 25 years that occurred in 2005 at Graniteville, South Carolina Ethanol is another significant rail hazmat commodity that virtually never moves in pipelines because it is water-soluble

Therefore the AAR analysis limits itself for comparison purposes to rail products that are hazardous liquid pipeline commodities crude oil, gasoline, diesel fuel, petroleum liquids, propane, kerosene, etc. etc. Exhibit 1 presents an incident summary of the three metrics for comparison between US rail and US pipelines for these hazardous liquid pipeline commodities over the period 1990 to 2009. Later data is not fully available at time of writing. The following points may be noted: The total of the commodities moved is measured in billions of barrel-miles. Transportation output is usually measured as a combination of weight and distance. In this case a barrel is a volume measure, common in the oil industry, and the AAR assumes one barrel is equal to 42 gallons. To convert to a weight measure the density of the product is required, and the AAR has assumed an average density of the hazardous liquid pipeline commodities such that 7.13 barrels is equal to one ton; Separating the total period into two decades, it is apparent that rail has seen a 40% increase in the total of the commodities moved between 1990-1999 and 20002009, while pipelines have remained essentially flat. It should also be noted however that overall the pipelines move some 30-times more product than rail pipelines are by far the dominant mode; Column 2 of Exhibit 1 presents the gross quantity of product released by accident measured in barrels3. While pipelines release significantly more product, as indicated above they move significantly more product, and when the release rate is determined as barrels released per billion barrel-miles, then rail and pipelines had very similar release rates over the period 1990-1999;

The quantities presented are gross release figures rather than the net release figures after product recovery, because no data was available to the AAR on rail product recovery.

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When release rates are examined over the second period 2000-2009 it becomes apparent that both rail and pipelines have made significant progress in reducing release rates, but rail has made better progress 16.5 barrels per barrel-miles for rail compared with 23.9 barrels per barrel-mile for pipelines, a 30% better performance; To put this into more readily understood terms, if it is arbitrarily assumed that each mode moves the product an average 3,000 miles, then over the 20-year period rail would have moved a little under one billion barrels and pipelines would have moved a little under 30 billion barrels. The quantities released over that period would then have been less that one-hundredth of one percent of the total moved for both modes4. It is apparent that both modes are safe when viewed from the perspective of quantities of product released accidentally;

Since the average hauls for both modes are likely to be less than 3,000 miles, the actual percentage release rates would be lower than indicated here.

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Turning now to the second risk metric, the number of fatalities associated with incidents concerning the transport of hazardous liquid pipeline commodities by rail and pipeline, Exhibit 1 presents the figures for 1990-2009; Rail had one fatality in the first decade and two fatalities in the second decade. Pipelines had 23 fatalities in the first decade and 19 in the second decade. However, a direct comparison is inappropriate given that pipelines move 30-times more product than rail. If a fatality rate is calculated per billion barrel-miles, then pipelines have a marginally better performance, but the fact is that while each and every fatality is a tragedy, the absolute numbers are very small compared with many other human activities; To put these fatality and injury rates into perspective, on March 31, 2013 there was a single highway incident on Interstate 77 in southwest Virginia due to fog that killed three people and injured 25 others. This one highway incident had casualties in excess of the rail casualties from moving hazardous liquid pipeline commodities throughout the whole of the US over the 10-year period 2000-2009; The third metric, the number of personal injuries associated with incidents concerning the transport of hazardous liquid pipeline commodities by rail and pipeline, Exhibit 1 presents the figures for 1990-2009; Rail had 13 personal injuries in the first decade and 27 in the second decade. Pipelines had 126 personal injuries in the first decade and 55 in the second decade. Once again however, a direct comparison is inappropriate given that pipelines move 30-times more product than rail. If an injury rate is calculated per billion barrel-miles, then pipelines have a better performance, but as for fatalities the fact is that, the absolute numbers are very small compared with many other human activities.

CONCLUSION The analysis indicates two general conclusions:

1. Both pipelines and railways are extremely safe on any reasonable measure; 2. The relative difference between the two modes of transport is small. However, the performance of rail in quantities of product released is better than pipelines, while the performance of pipelines in fatalities and personal injuries is better than rail; As a postscript, care must be taken when reviewing reports of risk, from advocates opposed to resource developments such as the Alberta oil sands, and from media outlets intent upon spreading alarm. Two recent examples serve as a word of caution.

April 17, 2013 On April 4, 2013 there was an incident on Canadian Pacific Railway (CP) at White River, Ontario, which involved a gross release of crude oil of 400 barrels. This incident was reported hourly on CBC Radio News as a spill of 60,000 litres. Both figures are correct, but one wonders if the incident would have been so newsworthy if it had been reported that the incident involved the contents of about two-thirds of one tank car5. Moreover, referring back to Exhibit 1, the worst year for rail release was 1990 when the equivalent of 16 tank cars of product were released in the whole of the US during that year. Furthermore, on April 13, 2013 there was a pipeline release in Mayflower, Arkansas, which involved a gross release of 5,000 barrels of crude oil, which was described in the media as a river of oil. This release volume involved the equivalent of about 8 tank cars. Again referring back to Exhibit 1, the worst year for pipeline release was 1991 when the equivalent of 335 tank cars of product were released in the whole of the US during that year, which would imply an average of the equivalent of 6 tank cars every week. Overall, it is well documented that human beings are notoriously poor at evaluating relative risks to the point of irrationality. It is perhaps too much to hope that professional analysts and media commentators would take the time to evaluate their figures before alarming the public at large.

CP has estimated that crude oil can be moved with some 600 barrels per tank car.