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Crude oil tank cars ablaze after train derails in Alabama

By Verna Gates and Edward McAllister

ALICEVILLE, Alabama (Reuters) - Several oil tank cars that burst into flames after a train derailed in rural Alabama were expected to keep burning into Saturday, potentially reigniting the push for tougher regulation of the boom in moving oil by rail.

Twenty-five of the train's 90 cars derailed near a 60-foot-long wooden trestle in the early hours of Friday morning, and a number were still on fire 18 hours later, operator Genesee & Wyoming Inc said. They were sending flames hundreds of feet high that could be seen from over 10 miles away.

No injuries were reported, but an unknown amount of crude oil spilled into an adjacent marshland, Genesee said. State officials said the oil had been contained, partly thanks to a nearby beaver dam that had already slowed the flow of water. The cause of the incident is under investigation.

A local official said the crude oil had originated in North Dakota, home of the booming Bakken shale patch. If so, it may have been carrying the same type of light crude oil that was on a Canadian train that derailed in the Quebec town of Lac-Megantic this summer, killing 47 people.

That incident, which the operator Montreal Maine & Atlantic blamed on a train engineer for not braking sufficiently on an incline, fueled a drive for tougher standards for oil rail shipments. Proposed measures included better testing of potentially explosive ultra-light shale crude and improved rail tank car standards. Tank cars made before 2011 have been cited by regulators as dangerously prone to puncture.

Genesee said the train was hauling 90 DOT-108 tank cars, a different model than the DOT-111s that have been cited before.

Each carried 30,000 gallons (114,000 liters) of crude, or 64,000 barrels in all, Genesee said.

It was not clear what caused Friday's accident in Pickens County, Alabama, or how old the tank cars were. The train was being driven by two engineers, both unharmed, officials said.

Nearly 18 hours after the derailment, officials had not yet been able to investigate the scene, leaving few guesses as to what may have caused one of the most dramatic oil-train incidents in the United States since shipments of crude by rail began to surge with the rise of shale oil three years ago.

"All the evidence we need to figure out what happened is underneath the wreckage," said Bill Jasper, president of the Alabama & Gulf Coast Railway. Repairs to the line are expected to take about a week, the railway said.

Genesee said data recorders showed the train was going slower than the 40 mile-per-hour (64 km-per-hour) limit, and the track had just been inspected on Monday.

Traders said they feared that tougher regulations could drive up costs for shipping U.S. crude by rail, reducing its competitiveness. Such speculation weakened U.S. crude oil futures relative to London's benchmark Brent, which already trades at a premium to the price in New York.

"It will provide very clear evidence of the potential risks for environmental groups and others opposed to the growth of crude by rail, and will likely increase pressure to tighten regulations," said Elena McGovern, Global Energy and Natural Resources analyst at Eurasia Group in Washington.

BOUND FOR FLORIDA

The train was carrying crude from Amory, Mississippi, to a terminal in Walnut Hill, Florida, that is owned by Genesis Energy, the company's chief financial officer Bob Deere said. It was to be pumped into a regional pipeline and delivered to an 80,000 barrel-per-day Shell Chemicals plant near Mobile, Alabama, according to a source familiar with the matter.

Deere said Genesis was still able to receive rail shipments, and deliveries were being rerouted around the affected area.

The accident happened in a wetlands area that eventually feeds into the Tombigbee River, according to the Alabama Department of Environmental Management. Booms were placed in the wetlands to contain the spilled oil.

Don Hartley, regional coordinator for the Alabama Emergency Management Agency, said the tank cars originated in North Dakota. Three cars had a "'bleve' - where pressure builds up and blows a hole." That started the fire, he said.

Alabama Emergency Management Agency spokeswoman Yasamie August said that one family was evacuated due to the incident but had already been able to return home.

"We don't have a cause yet, that will be determined with the investigation," said a Genesee & Wyoming spokesman.

The company said it had notified the National Transportation Safety Board, Federal Railroad Administration and National Crisis Response Center as is standard procedure.

FOCUS ON TANK CARS

Rapid proliferation of oil-by-train shipments started more than three years ago to get oil to markets as pipeline infrastructure lagged booming production in remote places such as North Dakota, as well as Canada's oil sands.

The East and West coasts in particular turned to rail to draw cheaper U.S. and Canadian crude. With no major oil pipelines in operation, or even planned, rail allowed them to tap into the burgeoning shale plays in North Dakota and Texas.

In the third quarter, crude-by-rail shipments rose 44 percent from the previous year to 93,312 carloads, equivalent to about 740,000 barrels per day (bpd) or almost one-tenth of U.S. production. That was down 14 percent from the second quarter due to narrower oil spreads that made costlier rail shipments less economic.

The U.S. National Transportation Safety Board has issued safety guidelines on the widely used, cylindrical tank cars known as DOT-111s, including a recommendation that all tank cars used to carry ethanol and crude oil be reinforced to make them more resistant to punctures if trains derail.

The new guidelines, put forward in March 2012 but which have not yet been adopted by the Department of Transportation agency that oversees the sector, stem from a deadly ethanol train derailment and explosion in Illinois in 2009.

DOT-111 railcars ordered after October 2011 have been manufactured to the new code, but the industry has resisted spending an estimated $1 billion to retrofit nearly 300,000 existing tank cars.

In Demopolis, Alabama, some 40 miles south of the site of the accident, where the rail line runs 300 meters away from the U.S. Jones Elementary School, Mayor Michael Grayson said there hadn't been an accident in the area in a century of train traffic.

But since last summer, when the oil trains first began humming past, officials discussed what might happen if a bridge just outside of town collapsed, dumping crude into the river.

"Sadly, with this thing, the only thing you can do is try to be prepared," he said by phone.

(Reporting by Edward McAllister and Verna Gates in Alabama; Additional reporting by Robert Gibbons, Anna Louie Sussman, Jeanine Prezioso and Nicolas Medina Mora in New York and David Sheppard in London; Editing by Gerald E. McCormick, Jonathan Leff, Alden Bentley and Lisa Shumaker)

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