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A number of oil train derailments and resulting fires over the past year in the U.S. and Canada spurred questions about the volatility risk of U.S. Bakken crude oil being shipped by rail from North Dakota to refineries throughout North America.

The U.S. Department of Transportation has proposed new rules for tank car design and introduced revisions to train speed and braking practices for rail cars carrying crude oil and ethanol.

In response to the questions as to whether Bakken crude oil is more volatile or not, the North Dakota Petroleum Council’s Bakken Crude Characterization Task Force commissioned Turner Mason & Company, Dallas-based consulting engineers, to conduct a study of Bakken crude oil properties.

The study includes a comprehensive sampling and testing program to answer questions regarding the chemical and physical composition of Bakken crude oil, issues regarding proper classification and [to] establish a Bakken quality baseline. This program collected samples from seven representative rail terminals and 15 well sites. According to the report, the crude producers that provided the well samples account for over 50% of total North Dakota (ND) production.

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The study was completed and the council has now published its findings.

According to the NDPC report:

“The flash point of Bakken is below 73°F, and the Initial Boiling Point (IBP) generally averaged between 95°F and 100°F, both of which are in the normal range for a light crude oil.

“The data supports the current Department of Transportation (DOT) Pipeline and PHMSA classification for Bakken crude as a Class 3 Flammable Liquid (similar to other crude oils, as well as gasoline, ethanol and other materials containing light components). As a result, Bakken crude oil meets all specifications for transport using existing DOT- 111 tank cars.

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“This conclusion is consistent with the recent [American Fuel & Petrochemical Manufacturers’] AFPM Bakken Report, which stated: “Bakken crude oil does not pose risks significantly different than other crude oils or other flammable liquids authorized for rail transport. Bakken and other crude oils have been classified as flammable liquids. As noted, Bakken crude poses a lower risk than other flammable liquids authorized for transport by rail in the same specification tank cars.

“Measured tank car pressures show that even the older DOT 111’s authorized to transport Bakken crude oil are built with a wide margin of safety relative to the pressures that rail tanks may experience when transporting Bakken crude oil.

“Bakken crude oil currently is transported in compliance with the federal Hazardous Materials Regulations as a Class 3 Flammable Liquid in either Packing Group I, II, or III. In conclusion, there is no identifiable basis for regulating Bakken crude differently than other flammable liquids regulated by the DOT Hazardous Materials Regulations.”

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.