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Train Carrying Bakken Crude Derails; Reignites Rail vs. Pipeline Debate

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The recent derailment and fire near Casselton, North Dakota has renewed the debate between greater safety for shipping through pipeline or rail in the U.S., according to a report by Bloomberg.

Climate change has been the focus of the fight over TransCanada Corp.'s (TRP) proposed Keystone XL pipeline from Canada to the U.S. Gulf Coast, but a subset in the debate has been the relative safety of pipes versus trains. The U.S. State Department, reviewing the $5.4 billion project because it would cross the U.S. border, is weighing whether the pipeline would be in the national interest.

According to Robert Schulz, a professor at the University of Calgary’s Haskayne School of Business, "Bakken oil is going to come under increasing scrutiny. You may see additional thoughts of, 'Let's approve Keystone because it’s going to be safer.'"

Keystone would allow about 100,000 barrels a day of crude from the Bakken formation in Montana and North Dakota onto the pipeline through a link in Baker, Montana.

The North Dakota accident is the fourth major North American derailment in six months by trains transporting crude. Record volumes of oil are moving by rail as production from North Dakota and Texas has pushed U.S. output to the most since 1988 and pipeline capacity has failed to keep up.

Public safety officials urged more than 2,000 North Dakota residents to flee fumes from the fire that engulfed BNSF Railway Co. cars carrying oil after a collision Dec. 30 with another train about 25 miles (40 kilometers) west of Fargo.