Recent train crashes involving crude oil from the Bakken shale formation in North Dakota have led many to question the safety of transporting energy by rail. An accident in Casselton, North Dakota late last year and the derailment and explosion of oil railcars in Lac-Mégantic, Quebec last summer, have many concerned.
Regulators have jumped into action and proposed stricter regulations on rail cars traveling in and out of the Bakken region. Considering that accidents occurring during the transport of crude oil and other key petroleum products are extremely rare, any overreaction will do little but depress Bakken oil prices at a time when this region is leading a state revival.
Fact: more than 99.9 percent of the oil and petroleum products transported by pipeline, rail, and marine are delivered without incident. To put that into perspective, only 90.5 percent of first class mail shipped through the United States Postal Service arrives at its destination on time and without incident.
Rail is also much safer than road transportation. Of the 34,000 deaths resulting from transportation-related accidents in 2011, 93 percent occurred on highways -- mostly in cars, light trucks, and vans. Rail accounted for only 759 deaths. And most of those occurred when people trespassed onto the tracks and were struck by an oncoming train.
Rail transports a very high volume of oil per year without spillage. In 2012, railroads carried 11.2 billion gallons of gas, only 95,000 gallons of which was lost in accidents. That's a 99.999 percent success rate.
Oil pipelines have also proven to be very safe, although not accident-free. The number of deaths from such oil carriage has steadily dropped in recent years. And so has the rate of breakages and spills. In 2012, over 474 billion gallons of crude oil and petroleum products were carried by pipeline. Just .0005 percent of that haul was spilled -- that's another 99.999 percentage success rate.
Still, accidents are often tragic. They ruin companies, too. The Montreal, Maine and Atlantic Railway -- the carrier involved in the Lac-Mégantic accident -- was forced to file for bankruptcy after the crash.
Given these facts, regulators should be mindful of costs, benefits, and unintended consequences before imposing new rules and controls. Misguided regulations can actually impede best business practices and promote less safe alternatives, while inhibiting industry expansions using the latest and best technologies. And don't forget: foregone employment opportunities in a recessionary economy have human costs too.
The gains from America's new energy boom is the brightest spot of an otherwise stagnant economy. The transportation/midstream sector is part of the oil and gas industry's 9.2 million domestic jobs that on average pay $12,000 above the economy-wide norm. North Dakota alone now produces over a million barrels of oil a day, making it a new oil power within the United States and North America.
Energy imports are falling, and the United States is on track to soon be the number one energy producer in the world. For the first time in decades, oil from the Middle East and other tumultuous areas of the world have some real competition.
Regulatory overkill with oil transportation can strand oil and gas at the wellhead, immobilizing a valuable asset flow. Accidents happen, but trying to legislate away risk risks legislating away the economic activity. There would not be a transportation industry, or, indeed, industrial life, if accidents could not happen. Still, 99.9 percent is not good enough because of the human and economic toll from the residual.
Despite these two recent tragedies, domestic transporters of crude oil and petroleum products can stand high. The industry continues to adopt new technologies to further mitigate the risk of spill or derailment. Regulators should avoid fire-ready-aim rules. And in all cases, anti-industry agendas should not substitute for real reform with real improvement.
Robert L. Bradley Jr. is founder and CEO of the Institute for Energy Research and author of seven books on energy history and public policy.