New oil-by-rail regulations to boost costs

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Posted: Sunday, October 20, 2013 12:00 am

New rules will boost costs to transport crude by rail in North America as trains are forecast to carry as much as 2 million barrels a day.

“You’re going to see a massive flood of spending to get ahead of these government regulations,” Jerry Swank, managing partner at Dallas-based Swank Capital, said last week during the Bloomberg Link Oil & Gas Conference in Houston.

Regulators in Canada and the U.S. imposed emergency requirements and may seek stiffer rules after a runaway train carrying crude derailed and exploded on July 6 in Lac-Megantic, Quebec, killing 47 people.

Energy companies are transporting more oil on rail cars as improved drilling methods extract more North American oil and new pipelines are delayed. Across the continent, trains are forecast to move as much as 2 million barrels a day of crude by the end of 2014, according to pipeline operator Trans- Canada Corp.

Transport Canada issued emergency directives for transporting hazardous cargoes after the July derailment of a train operated by Montreal, Maine & Atlantic Railway Ltd. in Quebec, including requiring two train operators, locks on cabins and ensuring that brakes are properly applied.

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