Lac-Mégantic disaster forces Irving Oil to alter routes

Irving Oil Ltd. is already rerouting its rail shipments of western crude oil to its Saint John refinery following the Lac-Mégantic train derailment last weekend.

The train, which derailed and exploded early Saturday, was carrying a shipment of crude oil destined for the Irving Oil Ltd. refinery in Saint John.

Western Bakken Crude from North Dakota is continuing to roll into Saint John every day despite the rail disaster in the small Quebec community.

While the Montreal, Maine & Atlantic Rail Ltd. route through Lac-Mégantic was an important rail line for the company, equal amounts of western crude are being shipped through southern Maine via the Pan Am Railway and along the Canadian route on CN tracks.

Irving Oil may be able to increase tanker traffic on one or both of those routes while shipments have stopped coming through Lac-Mégantic.

The company has also shipped western oil by rail and barge through Albany, N.Y., to Saint John.

There are now reports the company is preparing to ship crude oil through a southern U.S. port.

"On the Gulf Coast, they have several options to deliver rail cars into the Houston area or Port Arthur or even into the New Orleans area and put it on a tanker from there," said Andrew Lipow, a consultant with Lipow Oil Associates in Houston.

Bob Vander Valk, of the Bakken Oil Business Journal, said Irving Oil is now arranging to get some western crude shipped through Houston.

The company has not responded to a request for information about its purchasing plans.

Andrew Ang, of Oil Pricing Information Service, said Irving Oil’s ability to use southern rail and barge routes means the impact of the Lac-Mégantic tragedy on its access to western crude oil will not "be that great."

Since the company built a new rail terminal last year, the number of trains carrying oil into the city has more than doubled.

The Irving Oil refinery in Saint John is the largest in Canada and can process 300,000 barrels of oil per day. Saint John also has a deep-water port and a liquefied natural gas facility.

Estimated 50 people killed in disaster

The Lac-Mégantic disaster occurred when a train pulling 72 cars of crude oil jumped the track and exploded into flames on July 6.

An estimated 50 people have been killed in the explosion, which is considered Canada’s worst train incident in years.

The disaster has caused several New Brunswick politicians and fire departments that have trains carrying crude oil passing by their communities to start investigating their own rail safety policies.

As well, the Maine legislature has been considering a study on the transportation of crude oil through the state.

Some anti-oil protesters in Maine say the Quebec disaster is causing people in the state to reconsider the rules around trains carrying oil across the state.

Moody's, the influential credit-rating agency, said on Thursday it expected the train disaster would eventually make shipping by rail in Canada and the United States more costly.

The disaster will lead to increased scrutiny and result in regulatory delays from Canadian and U.S. governments, according to the company.

About two-thirds of North Dakota's daily crude oil production — at 727,000 barrels per day in April — is transported by rail because of the lack of sufficient pipeline capacity.