Oil by rail: Have the lessons of Lac-Mégantic been learned?

February 1, 2016

With pipeline approvals stalled—Keystone XL denied, Northern Gateway dead, Energy East and Kinder Morgan in deep trouble— the oil industry is running out of room. Despite the collapse in oil prices, production is still expected to grow as existing investments come on stream. Especially in the short-term, it is looking to find alternate ways to move crude oil from Western Canada to market.

Enter oil-by-rail. The Canadian Association of Petroleum Producers estimates that oil transportation by rail will grow from 200,000 barrels per day in 2015 to between 500,000 and 600,000 barrels per day by 2018—potentially a three-fold increase. This means ever more oil trains rumbling through populated communities east and west across Canada, and south to the US.

It has been less than three years since the tragic Lac-Mégantic oil train disaster. Is transportation of oil by rail safe enough now to prevent another Lac-Mégantic? Are the measures taken to improve the rail safety system and restore public confidence, adequate? Can the current rail infrastructure safely handle the current volume of dangerous goods traffic let alone its expected growth.

The answer to these questions is in my view, No! Here are some of the reasons why:

First, following the accident the government quickly removed the most unsafe tank cars, with the rest of the so-called legacy cars scheduled for removal by May 1, 2017. However, two separate CN derailments last winter near Gogama, Ontario involved recently upgraded tank cars, which also punctured, spilled their contents and exploded— this time carrying Alberta diluted bitumen. One of these occurred dangerously close to the town. A new super reinforced design has been approved for North America, but will not be fully in place until 2025. Until then, volatile oil will continue to be transported in unsafe tank cars.

Second, prior to Lac-Mégantic, Transport Canada failed to inspect and verify the volatility of Bakken oil despite evidence it was routinely misclassified as lower volatility. Notwithstanding the misclassification issue, there are still are no regulations in place either in Canada or the US that require the removal of the volatile components of Baken oil or bitumen prior to being loaded onto trains.

The Transport Safety Board’s 2014 Watchlist identified the transport of flammable liquids as a major risk to rail safety: “ The current railway operating practices, com­bined with the vulnerability of the tank cars used to transport such prod­ucts, are not adequate to effectively mitigate the risk posed by the transpor­tation of large quantities of flammable liquids by rail.”

Third, Transport Canada moved immediately after the accident to reverse its earlier decision to allow all railways that wanted to run their freight trains with a single operator (including one with an appalling safety record), could do so without meeting an exhaustive set of conditions prior to being granted an exemption.

This incredibly irresponsible decision suggests regulatory capture by regulation-averse industry lobbyists, and some compliant senior bureaucrats doing the bidding of their political masters bent on dismantling “silent job killing” regulations. This seemingly compromised system needs to be redeemed, and the independence of the regulator assured.

Fourth, Transport Canada has failed to address major problems—identified repeatedly by the Auditor General—in its Safety Management System (SMS) regulatory regime. SMS was supposed to supplement traditional regulatory oversight, but without adequate resources companies were effectively regulating themselves, making their own judgments regarding risk versus profits. The SMS system was identified in Transportation Safety Board’s 2014 Watchlist as among “those issues posing the greatest risk to Canada’s transportation system.”

Finally, resources available to the Transportation of Dangerous Goods (TDG) and Rail Safety divisions of Transport Canada remain woefully inadequate to cope with crude oil traffic. Transport Canada’s rail safety and TDG budgets have been frozen or cut over the last five years. According to the most recent planning and priorities documents, rail safety oversight spending is expected to decline 20% by 2017–18.

During the election the Liberals pledged to the citizens group, Safe Rail Communities, and others that it would: “increase government regulation and enforcement for the transportation of dangerous substances over rail, and provide Transport Canada with the necessary funding and resources to hire and train an adequate number of dangerous goods and rail safety inspectors to ensure proper oversight of the rail industry.” The upcoming federal budget should reveal more about the government plans to fulfill this commitment.

It has also pledged a major infrastructure investment initiative. Mayors have called for the construction of new dedicated rail routes to circumvent heavily populated areas. This should be a priority—starting with Lac-Mégantic whose citizens are demanding it.

The new government, with the best of intentions, should not be deluded into thinking that piecemeal regulatory improvements are sufficient. Systemic reform is needed to secure the social licence that the Prime Minister promises: to convince a skeptical public that the lessons of Lac-Mégantic have been learned, that the transportation of oil by rail through populated centres is safe.

Bruce Campbell is on leave as executive director of the Canadian Centre for Policy Alternatives. Awarded a Law Foundation of Ontario social justice fellowship, he is currently a visiting fellow at the University of Ottawa law faculty.

This piece was originally published in the Hill Times