North Dakota launches oil rules hoping to curb U.S. rail disasters

By Ernest Scheyder WILLISTON, N.D. (Reuters) - North Dakota will from Wednesday require the more-than 1.2 million barrels of crude extracted each day from the state's Bakken shale formation be run through machines that remove volatile gases linked to recent crude-by-rail disasters. The controversial step is designed to abrogate the damage North Dakota crude oil - 70 percent of which is transported via rail - can cause during derailments. In the absence of concrete regulations from the U.S. Department of Transportation, North Dakota's new rules become the de facto national standard on the treatment of crude before tankcar loading. "North Dakota's crude oil conditioning order is based on sound science and represents an important step in the ongoing work to ensure that oil-by-rail transportation is as safe as possible," said Governor Jack Dalrymple, who has also been pushing federal regulators for stricter rail car designs. The new regulations require every single barrel of North Dakota crude to be filtered for ethane, propane and other natural gas liquids (NGLs), which are found naturally co-mingled with oil. North Dakota crude contains a far-higher percentage of those gases than, for instance, crude extracted in Texas or Alaska, and that added volatility fueled a deadly derailment in Quebec in late 2013, as well as a string of successive disasters. The goal would be to produce a barrel of Bakken crude with pressure of no more than 13.7 psi, similar to 13.5 psi for most automobile gasoline. Because most of the oil extracted in the United States via hydraulic fracturing, commonly known as "fracking," is transported by rail, North Dakota's rules will influence regulatory decisions in Colorado, Wyoming and new shale fields, and have a national ripple effect. Dalrymple and two other members of the North Dakota Industrial Commission, the state's energy regulator, spent months collecting data and reviewing testimony from oil companies, academics, residents and investors on how best to implement the crude treatment rules. The triumvirate relied heavily on a crude quality report from Turner Mason & Co funded by the state's oil producers that downplayed the volatility of North Dakota oil. That's proven a delicate balancing act for the oil industry, which also touts the appeal of the state's crude to refiners. "North Dakota officials need to think more about the safety and health of all the people who live along train tracks nationwide," said Don Morrison, head of the Dakota Resource Council, an environmental group. "These new rules don't cut it." (Reporting by Ernest Scheyder; Editing by Terry Wade)