Oil and Gas Transportation: Department of Transportation Is Taking Actions to Address Rail Safety, but Additional Actions Are Needed to Improve Pipeline Safety
Released: 2014-09-22T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: Technology advancements such as horizontal drilling and hydraulic fracturing (pumping water, sand, and chemicals into wells to fracture underground rock formations and allow oil or gas to flow) have allowed companies to extract oil and gas from shale and other tight geological formations. As a result, oil and gas production has increased more than fivefold from 2007 through 2012. DOT oversees the safety of the U.S. transportation system.

GAO was asked to review oil and gas transportation infrastructure issues. This report examines (1) overall challenges that increased oil and gas production may pose for transportation infrastructure, (2) specific pipeline safety risks and how DOT is addressing them, and (3) specific rail safety risks and how DOT is addressing them. GAO analyzed federal transportation infrastructure and safety data generally from 2008 to 2012 or 2013 (as available), reviewed documents, and interviewed agency, industry, and safety stakeholders, as well as state and industry officials in states with large-scale shale oil and gas development.

section_title: What GAO Found
paragraphs: Increased oil and gas production presents challenges for transportation infrastructure because some of this increase is in areas with limited transportation linkages. For example, insufficient pipeline capacity to transport crude oil has resulted in the increased use of rail, truck, and barge to move oil to refineries, according to government and industry studies and publications GAO reviewed. These transportation limitations and related effects could pose environmental risks and have economic implications. For instance, natural gas produced as a byproduct of oil is burned—a process called flaring—by operators due, in part, to insufficient pipelines in production areas. In a 2012 report, GAO found that flaring poses a risk to air quality as it emits carbon dioxide, a greenhouse gas linked to climate change, and other air pollutants. In addition, flaring results in the loss of a valuable resource and royalty revenue.

Due to the increased oil and gas production, construction of larger, higher-pressure gathering pipelines (pipelines that transport products to processing facilities and other long-distance pipelines) has increased. However, these pipelines, if located in rural areas, are generally not subject to U.S. Department of Transportation (DOT) safety regulations that apply to other pipelines, including emergency response requirements. Historically, gathering pipelines were smaller and operated at lower pressure and thus posed less risk than long-distance pipelines. But the recent increase in their size and pressure raises safety concerns because they could affect a greater area in the event of an incident. In 2011, DOT began a regulatory proceeding to address the safety risks of gathering pipelines, but it has not proposed new regulations. Although states may regulate gathering pipelines, an association of state pipeline regulators' report on state pipeline oversight shows that most states do not currently regulate gathering pipelines in rural areas.

Crude oil carloads moved by rail in 2012 increased by 24 times over that moved in 2008. Such an increase raises specific concerns about testing and packaging of crude oil, use of unit trains (trains of about 80 to 120 crude oil cars), and emergency response preparedness. Crude oil shippers are required to identify their product's hazardous properties, including flammability, before packaging the oil in an authorized tank car. DOT has issued safety alerts on the importance of proper testing and packaging of crude oil. However, industry stakeholders said that DOT's guidance on this issue is vague and that clarity about the type and frequency of testing is needed. In July 2014, DOT proposed new regulations for crude oil shippers to develop a product-testing program subject to DOT's review. Additionally, unit trains, which can carry 3 million or more gallons of crude oil and travel to various locations through the country, are not covered under DOT's comprehensive emergency response planning requirements for transporting crude oil by rail because the requirements currently only apply to individual tank cars and not unit trains. This raises concerns about the adequacy of emergency response preparedness, especially in rural areas where there may be fewer resources to respond to a serious incident. Also in July 2014, DOT sought public comment on potential options for addressing this gap in emergency response planning requirements for transporting crude oil by rail.

section_title: What GAO Recommends
paragraphs: DOT should move forward with a proposed rulemaking to address safety risks—including emergency response planning—from newer gathering pipelines. DOT generally concurred with the recommendation and stated that it is developing a rulemaking to revise its pipeline safety regulations.

section_title: Letter
paragraphs: U.S. production of oil and gas resources has increased in recent years,  driven in part by improvements in technologies. Oil and gas resources  contained in underground shale formations were previously considered to  be inaccessible because traditional techniques did not yield sufficient  amounts for economically viable production. The application of horizontal  drilling techniques and hydraulic fracturing—a process that injects a  combination of water, sand, and chemical additives under high pressure  to create and maintain fractures in underground rock formations that allow  oil and natural gas to flow—have increased U.S. crude oil and natural gas  production dramatically.

This rapid expansion of domestic oil and gas production has also  changed dynamics for transporting these products to the market and has  raised questions about safety. While pipelines transport the majority of oil  and gas in the United States, recent development of crude oil in parts of  the country underserved by pipeline has led shippers to use other modes,  with rail seeing the largest percentage increase. Although pipeline  operators and railroads have generally good safety records, the increased  transportation of these flammable hazardous materials creates the  potential for serious incidents. The explosion and fire caused by the July  2013 derailment of a crude oil train in Lac-Mégantic, Quebec killed 47  people and extensively damaged the city’s downtown area, highlighting  the consequences that may result from such incidents. The U.S.  Department of Transportation (DOT) is responsible for ensuring the safety  of the U.S. transportation system, including protecting people and the  environment from the risks of transporting hazardous materials by  pipeline, rail, and other modes. In particular, DOT’s Pipeline and  Hazardous Materials Safety Administration (PHMSA) has responsibility  for pipeline safety oversight as well as hazardous materials transportation  safety oversight for other transportation modes, including rail.

You requested that we examine the impact of shale oil and gas  development on transportation infrastructure and safety. We are providing  a broad overview of transportation infrastructure impacts and a closer  look at the infrastructure changes and associated safety issues with  pipeline and rail. Specifically, this report addresses:  (1) challenges, if any, that increased domestic oil and gas production  poses for U.S. transportation infrastructure and examples of associated  risks and implications;  (2) how pipeline infrastructure has changed as a result of increased oil  and gas production, the key related safety risks, and to what extent DOT  has addressed these risks; and  (3) how rail infrastructure has changed as a result of increased oil  production, the key related safety risks, and to what extent DOT has  addressed these risks.

To identify challenges increased domestic oil and gas production poses  for U.S. transportation infrastructure and the associated implications, we  reviewed and synthesized information from studies and other publications  from federal, state, and tribal government agencies; industry; academics;  and other organizations. We identified these studies and publications by  conducting a search of web-based databases and other resources  containing general academic articles, government resources, and “gray  literature.” We believe the studies and publications identified through our  literature search provide key examples of transportation infrastructure  limitations and associated implications. In addition, we analyzed data  from the U.S. Department of Energy’s Energy Information Administration  (EIA) on oil and gas produced from 2007 to 2012. To assess the reliability  of these data, we examined EIA’s published methodology for collecting  this information and found the data sufficiently reliable for the purposes of  this report.

To determine how pipeline infrastructure has changed as a result of  increased oil and gas production, we analyzed PHMSA data on pipeline  construction from January 1, 2010 through December 31, 2012 and  interviewed DOT officials and industry representatives, including pipeline  operators. To determine how rail infrastructure has changed, we analyzed  the Surface Transportation Board’s (STB) data for calendar years 2008  through 2012 on crude oil shipments by rail and interviewed DOT officials  and industry representatives, including railroads. To identify the key  safety risks related to changes in pipeline and rail infrastructure, we  analyzed PHMSA data from January 1, 2008 through December 31, 2013  on pipeline and rail incidents, reviewed documents submitted as part of  DOT’s rulemaking on rail safety, and interviewed DOT officials and  representatives from safety organizations, emergency responder  associations, and industry. We assessed the reliability of PHMSA’s data  on pipeline construction and pipeline and rail incidents and STB’s data on  crude oil shipments by rail by reviewing documentation about the data  sources, interviewing agency officials about how the data were collected,  and reviewing related internal controls. We also reviewed some of the  data for potential inconsistencies through testing and comparing the data  to publicly available sources of similar information. We concluded that  these data were sufficiently reliable for the purposes used in our report.  Additionally, to examine infrastructure impacts and safety risks closely  associated with transporting shale oil and gas, we interviewed officials  and reviewed related documents from state oil and gas safety regulatory  agencies, transportation departments, industry associations and oil and  gas transportation companies (such as pipeline operators, railroads, and  operators of rail loading terminals) in four states: North Dakota,  Pennsylvania, Texas, and West Virginia. We selected these states  because of their significant shale oil and gas development and varying  geographic locations. To evaluate to what extent DOT has addressed  safety risks, we reviewed federal laws and regulations and DOT  emergency orders and guidance, interviewed DOT officials, and  compared DOT’s actions against risk-based management principles. See  appendix I for a more detailed description of our objectives, scope, and  methodology.

We conducted this performance audit from August 2013 to August 2014  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
subsections: section_title: Location of Oil and Gas Development in the United States
paragraphs: Oil and natural gas are found in a variety of geologic formations  distributed across the country, such as shale and tight sandstone. Shale  plays—sets of discovered or undiscovered oil and natural gas  accumulations or prospects that exhibit similar geological  characteristics—are located within basins, which are large-scale  geological depressions, often hundreds of miles across, that also may  contain other oil and gas resources. Figure 1 shows the location of shale  plays and basins in the contiguous 48 states.

Shale plays can contain oil, natural gas, or both. In addition, a shale gas  play may contain “dry” or “wet” natural gas. Dry natural gas is a mixture of  hydrocarbon compounds that exists as a gas both underground in the  reservoir and during production under standard temperature and pressure  conditions. Wet natural gas contains natural gas liquids, or the portion of  the hydrocarbon resource that exists as a gas when in natural  underground reservoir conditions but that is liquid at surface conditions.  The natural gas liquids are typically propane, butane, and ethane and are  separated from the produced natural gas at the surface. Operators may  then sell the natural gas liquids, which may give wet shale gas plays an  economic advantage over dry gas plays. According to a 2014 EIA  publication, operators moved away from the development of shale plays  that are primarily dry gas in favor of developing plays with higher  concentrations of crude oil and natural gas liquids such as the Eagle Ford  in Texas, because given natural gas prices at that time, crude oil and  natural gas liquids were more valuable products. Another advantage of  liquid petroleum and natural gas liquids is that they can be transported  more easily through different modes of transportation than dry natural  gas, which is transported almost entirely by pipelines to markets and  consumers.

section_title: Oil and Gas Production
paragraphs: In recent years, domestic onshore production of oil and gas has been  steadily rising. For example, from 2007 through 2012, annual production  from shale and tight sandstone formations increased more than sixfold for  oil and approximately fivefold for gas (see fig. 2). Horizontal drilling and  hydraulic fracturing have advanced significantly over the last decade and  are largely credited with spurring the boom in oil and gas production in  the United States.

Oil: Average domestic crude oil production from shale and tight  sandstone formations in 2012 has increased more than sixfold compared  with average production in 2007, from 0.34 million barrels per day in 2007  to 2.25 million barrels per day in 2012. To put this into context, according  to EIA data, the United States consumed an average of more than 18  million barrels of petroleum products per day in 2012. According to EIA  officials, oil from shale and tight sandstone formations accounts for 31  percent of total U.S. production. According to EIA, increased production in  2012 and 2013 was the largest annual increase since the beginning of  U.S. commercial crude oil production in 1859. Much of the increase in  crude oil production has been from shale formations, such as the Bakken  in North Dakota, the Eagle Ford in Texas, and the Niobrara in Colorado.  According to EIA officials, U.S. production of crude oil is expected to  continue to increase—by 48 percent from 2012 to 2019—and will remain  above the 2012 level through 2040.

Natural Gas: Domestic natural gas production in 2012 has increased  about fivefold compared with production in 2007, from less than 2 trillion  cubic feet in 2007 to more than 10 trillion cubic feet in 2012. To put this  into context, annual domestic consumption of natural gas was just over  25 trillion cubic feet in 2012, according to EIA data. In September 2012,  we found that, assuming current consumption levels without consideration  of a specific market price for future gas supplies, the amount of domestic  technically recoverable shale gas could provide enough natural gas to  supply the nation for the next 14 to 100 years. Much of the increase in  natural gas has been from shale formations, such as the Barnett,  Fayetteville, Haynesville, and Marcellus formations.

section_title: Transportation Modes
paragraphs: Multiple modes of transportation, including pipeline, rail, highways, and  waterways, connect oil and gas production infrastructure (such as wells  and processing plants) in shale areas to customers, which include  refineries, industrial users, and individual consumers. Additionally, when  products switch modes of transportation, oil-loading terminals, sometimes  referred to as “transload” terminals, transfer the product from one mode to  another, such as when crude oil is transferred from a truck or gathering  pipeline to a train. Responsibility for maintaining these modes vary:  pipelines and rail are generally privately owned, while highways and  waterways are generally public. Figure 3 illustrates how various  transportation modes work together to bring oil and gas from production  areas to users.

Approximately 2.5 million miles of pipelines transport roughly two-thirds of  domestic energy supplies throughout the United States. These pipelines  carry natural gas and hazardous liquids, including crude oil and natural  gas liquids from production areas to end users, such as residences and  businesses. Gathering pipelines collect produced oil and gas from their  source and transport these products to processing facilities and  transmission pipelines. Transmission pipelines then transport these  products longer distances to users such as residences and businesses.  Distribution pipelines transport natural gas to consumers for use and are  not within the scope of this report. Characteristics of gathering and  transmission pipelines are described in table 1.

The U.S. rail network consists of about 200,000 miles of track, which runs  mostly through rural areas. The railroad industry is dominated by the  seven largest railroads, known as Class I railroads, which collectively  accounted for more than 90 percent of annual railroad-freight revenues in  2012. Smaller regional and short-line railroads transport freight shorter  distances and can help connect customers in areas not served by the  larger railroads. The railroads’ national association, the Association of  American Railroads (AAR), represents the interests of the industry and  works with railroads and other stakeholders to develop industry  standards. Crude oil travels by rail in tank cars, commonly DOT-111 tank  cars, which are generally owned by shippers or third parties. The DOT- 111 is a DOT-specification tank car, meaning it must be built to conform  to standards specified in DOT regulation. It is a non-pressurized car that  is used to transport a variety of liquid products, including hazardous,  flammable materials like crude oil. Terminals, referred to as transload  facilities, transfer crude oil from other transportation modes (typically  trucks or gathering pipelines) to tank cars for transport by train.

In addition to pipeline and rail, other modes, including barge and truck  may transport oil and gas products. For example, barges may transport  oil over longer distances on major waterways, such as the Mississippi  River, while trucks typically transport oil over short distances to transload  facilities. While this report provides a closer look at transportation  infrastructure and safety impacts of shale oil and natural gas development  on pipeline and rail nationwide, we also discuss highway infrastructure  and safety impacts in the four selected states we examined (see app. II  for a summary of highway-related impacts).

section_title: Department of Transportation
paragraphs: DOT is responsible for ensuring the safe transportation of people and  goods through regulations, oversight, inspections, and other efforts,  sometimes in partnership with states. Within DOT, PHMSA’s Office of  Pipeline Safety oversees the safety of pipelines through regulation and an  inspection program, which includes over 100 PHMSA inspectors, and  also collects information about the location of pipelines. PHMSA also has  arrangements with states, which collectively have over 300 inspectors, to  assist with overseeing interstate pipelines, intrastate pipelines, or both.  PHMSA’s current pipeline regulations cover all hazardous liquid (including  crude oil) and natural gas transmission pipelines. In addition to minimum  safety standards that all transmission pipeline operators must meet,  PHMSA employs a risk-based approach to transmission pipeline  regulation and requires operators to systematically identify and mitigate  risks in “high-consequence areas,” which include populated and  environmentally sensitive areas. PHMSA also applies this risk-based  approach to gathering pipelines and regulates gathering pipelines in non- rural areas, resulting in regulation of approximately 10 percent of the  nation’s gathering pipelines. Generally, PHMSA retains full responsibility  for inspecting interstate pipelines for compliance with its regulations and  taking enforcement actions when needed. However, states may be  authorized to conduct inspections of interstate pipelines, as well as  inspections and associated enforcement for intrastate pipelines. States  can also promulgate regulations for intrastate pipelines, including  gathering pipelines, even if these pipelines are not covered by PHMSA’s  federal safety requirements.

PHMSA, through its Office of Hazardous Materials Safety, also regulates  shippers and railroads transporting hazardous materials like crude oil by  rail and other modes. A memorandum of agreement details how  PHMSA works with the other DOT modal agencies to address hazardous- material transportation safety. DOT’s other modal administrations have  responsibility for safety of their respective modes, such as the Federal  Railroad Administration (FRA), which oversees rail safety. FRA enforces  its own and PHMSA’s safety regulations through inspections by FRA  officials and state partners in some states. PHMSA also has hazardous  materials inspectors who enforce requirements for hazardous material  packaging for transportation. Additionally, PHMSA’s regulations include  emergency response planning requirements for pipelines and the  transportation of crude oil by rail. Specifically, regulations require  operators of transmission pipelines and urban gathering pipelines to  prepare emergency response plans and coordinate them with emergency  responders. Railroads that transport crude oil in tanks larger than  42,000 gallons are required to develop comprehensive oil-spill response  plans with additional requirements for contingency planning, ensuring  response resources by contract or other means, and training. Railroads  are required to submit comprehensive plans to FRA for review.  Otherwise, railroads are required to develop basic response plans, for  which there are fewer requirements. Because PHMSA applies a risk- based approach to its transportation oversight, we believe it is appropriate  to apply principles of risk-based management to assessing the agency’s  efforts in this area. Risk-based management has several key  characteristics that help to ensure safety, including (1) using information  to identify and assess risks; (2) prioritizing risks so that resources may be  allocated to address higher risks first; and (3) promoting the use of  regulations, policies, and procedures to provide consistency in decision  making.

section_title: Increased Oil and Gas Production Presents Challenges for Transportation Infrastructure That Could Pose Environmental and Safety Risks and Have Economic Implications
paragraphs: Increased oil and gas production presents challenges for transportation  infrastructure because some of the growth in production has been in  areas with limited transportation linkages to processing facilities.  According to studies and publications we reviewed, infrastructure  limitations and related effects could pose environmental and safety risks  and have economic implications, including lost revenue and hindered oil  and gas production.
subsections: section_title: Increased Domestic Oil and Gas Production Presents Challenges for Transportation Infrastructure
paragraphs: Though capital investments in U.S. infrastructure for oil and gas  transportation, processing, and storage have increased significantly in  recent years—by 60 percent from 2008 to 2012, according to a December  2013 industry report—expansions in infrastructure have not kept pace  with increased domestic oil and gas production. In the United States,  most oil and nearly all natural gas are transported by pipeline. According  to EIA data, U.S. refinery receipts of domestic crude oil by pipeline  increased almost 25 percent from 2008 to 2012, from 1.6 billion barrels to  nearly 2 billion barrels. However, according to a number of studies and  publications we reviewed, including a 2013 report from the Fraser  Institute, oil and natural gas production in the United States is outpacing  the capacity to transport the resources through existing pipeline  infrastructure. In February 2013, EIA reported that pipeline capacity to  deliver crude oil to a key hub increased by about 815,000 barrels per day  from 2010 through 2013; however, the increase has been inadequate to  transport crude oil from production sites to refineries. In March 2014, we  found that most of the system of crude oil pipelines in the United States  was constructed in the 1950s, 1960s, and 1970s to accommodate the  needs of the refining sector and demand centers at that time. We also  found that, according to Department of Energy officials, this infrastructure  was designed primarily to move crude oil from the South to the North, but  emerging crude oil production centers in Western Canada, Texas, and  North Dakota have strained the existing pipeline infrastructure. For  example, according to a 2013 industry publication, oil production  exceeded pipeline capacity in North Dakota by about 300,000 barrels of  oil per day in the state.

The limited pipeline capacity to transport crude oil has resulted in the  increased use of other transportation options, in particular rail, truck, and  barge (see fig. 4).

Rail: According to a 2014 EIA report, U.S. refinery receipts of  domestic crude oil by rail increased more than sevenfold from 2008 to  2012, from 4 million barrels to 30 million barrels. The increased use  of rail for transporting crude oil is due to the increases in crude oil  production in North Dakota, Texas, and other states, which have  exceeded the capacity of existing pipelines to move oil from  production areas to refineries, according to a number of studies and  publications we reviewed.

Truck: According to a 2014 EIA report, U.S. refinery receipts of  domestic crude oil by truck increased almost 90 percent from 2008 to  2012, from 69 million barrels to 131 million barrels. In addition,  according to a North Dakota Pipeline Authority publication, some  natural gas liquids are transported to market by truck.

Barge: According to a 2014 EIA report, U.S. refinery receipts of  domestic crude oil by barge increased more than 200 percent from  2008 to 2012, from 48 million barrels to 151 million barrels.  According to the EIA report, the increase in barge shipments may be  partially explained by crude oil being transferred to barges from rail  cars for the final leg of some journeys to refineries, particularly on the  East Coast and along the Mississippi River.

According to a number of studies and publications that we reviewed, in  addition to pipeline capacity limitations, rail, barges, and processing  facilities and storage facilities also face limitations. For example, a 2013  industry publication identified a backlog for tank cars, needed to transport  oil by rail, in the United States at nearly 60,000—representing over 20  percent of the existing U.S. tank car fleet. In addition, a 2014  Congressional Research Service report states that significant  development of loading and unloading facilities could be required if rail is  to continue substituting for pipeline capacity. Further, a number of  studies and publications identified that oil and gas production in some  areas can exceed the capacity to process and store the resources. For  example, state officials in North Dakota reported in 2013 that maintaining  sufficient natural gas processing capacity is a challenge of increased  production.

section_title: Transportation Infrastructure Limitations and Related Effects Could Pose Environmental and Safety Risks and Have Economic Implications
paragraphs: A number of studies and publications we reviewed identified  environmental and safety risks or economic implications from  transportation infrastructure limitations. For example:  Risks to air quality: These risks can be the result of intentional flaring—a  process of burning the gas developed along with oil—of associated  natural gas that results from limited pipeline infrastructure and of engine  exhaust from increased truck and rail traffic.

Oil and natural gas are often found together in the same reservoir. The  natural gas produced from oil wells is generally classified as “associated- dissolved,” meaning that it is associated with or dissolved in crude oil. In  areas where the primary purpose of drilling is to produce oil, operators  may flare associated natural gas because no local market exists for the  gas and transporting to a market may not be economically feasible. In  September 2012, we found that flaring poses a risk to air quality because  it emits carbon dioxide—a greenhouse gas linked to climate change—and  other air pollutants that can increase ground-level ozone levels and  contribute to regional haze. In January 2014, the North Dakota Industrial  Commission reported that nearly 30 percent of all natural gas produced in  the state is flared. According to a 2013 report from Ceres, flaring in North  Dakota in 2012 resulted in greenhouse gas emissions equivalent to  adding 1 million cars to the road.

Increased truck and rail traffic associated with the movement of oil from  well sites also creates a risk to air quality as engine exhaust, containing  air pollutants such as nitrogen oxides and particulate matter that affect  public health and the environment is released into the atmosphere.  Specifically, the Department of State reported in 2014 that increasing the  number of unit trains transporting crude oil could increase greenhouse  gases emitted directly from the combustion of diesel fuel in trains and in  2011 we found that trucking freight produces more air pollution than other  transportation modes. Air quality may also be degraded as fleets of  trucks traveling on newly graded or unpaved roads increase the amount  of dust released into the air—which can contribute to the formation of  regional haze.

Inherent safety risks: Transporting oil and gas by any means—through  pipelines, rail, truck, or barge—poses inherent safety risks. However, in  January 2013, we found that pipelines are relatively safe when compared  with other modes, such as rail and truck, for transporting hazardous  goods because pipelines are mostly underground. For example, we  found that large trucks and rail cars transporting hazardous materials,  including crude oil and natural gas liquids, resulted in far more fatalities  and incidents than pipelines. Specifically, we found that from 2007 to  2011, fatalities averaged about 14 per year for all pipeline incidents  reported to PHMSA, including an average of about 2 fatalities per year  resulting from incidents on hazardous liquid and natural gas transmission  pipelines. In comparison, in 2010, 3,675 fatalities resulted from incidents  involving large trucks and 730 additional fatalities resulted from railroad  incidents. Therefore, increased transport of oil and gas by rail, truck, or  barge could increase safety risks.

According to state officials and several publications we reviewed,  increased truck traffic resulting from increased oil and gas production can  present hazardous driving conditions—particularly on roads not designed  to handle heavy truck traffic. Our analysis of data from PHMSA found  that in recent years, the number of reported incidents involving the  transport of crude oil by truck in both Texas and North Dakota has  increased. Specifically, such incidents increased in Texas from 17  incidents in 2008 to 70 incidents in 2013, and in North Dakota they  increased from 1 incident in 2008 to 16 incidents in 2013.

Barge accidents also pose safety risks and can have associated  environmental and economic effects. For example, according to the U.S.  Coast Guard Polluting Incident Compendium, in 2011, a barge struck a  bridge on the Lower Mississippi River causing damage to the barge and a  discharge of just over 11,000 gallons of oil. In February 2014, a barge  crash resulted in the spilling of about 31,500 gallons of crude oil into the  Mississippi River, temporarily shutting down transportation along the river.  According to a 2012 Congressional Research Service report, an oil spill  from a barge can cause significant harm to marine ecosystems and  individual aquatic organisms and negatively affect business activity near  the spill, particularly businesses and individuals that count on the  resources and reputation of the local environment. For instance, the  local fishing and tourist industry may be affected, and in some cases, a  well-publicized oil spill can weaken local or regional industries near the  spill site, regardless of the actual threat to human health created by the  spill.

Economic implications: According to a number of studies and publications  we reviewed, infrastructure limitations and related effects could have  economic implications, including lost revenue, higher energy prices, and  hindered development.

Lost revenue: In addition to the risks to air quality from flaring, we  found in October 2010 that flaring natural gas has economic  implications, and in April 2014 the Environmental Protection Agency  reported that flaring results in the destruction of a valuable resource.  For example, in 2010 we found that on federal oil and gas leases,  natural gas that is flared, instead of captured for sale, represents a  loss of about $23 million annually in royalty revenue for the federal  government. According to a 2013 report from the North Dakota  Pipeline Authority, in August 2013, 2.7 percent of the total economic  value and 7.2 percent of the total energy content being produced in  North Dakota were lost due to flaring. In another example, a Ceres  report found that in May 2013 roughly $3.6 million of revenue was lost  per day, at market rates, as a result of flaring in North Dakota.

Higher energy prices: Growing shale development and the resulting  increased availability and lower prices of natural gas have contributed  to an increasing reliance on natural gas as a source of producing  electricity in some parts of the country. However, pipeline  infrastructure limitations have at times contributed to price spikes. For  example, according to a paper from ICF International, pipeline  limitations were a contributing factor to higher natural gas prices in the  northeast in January 2014. A cold weather pattern involving record  low temperatures led to increased demand for natural gas for space  heating and for generating electricity across parts of the country. With  the surge in demand, several major pipeline systems became  constrained and could not deliver sufficient natural gas to meet  demand. According to a 2014 EIA publication, prices at the Algonquin,  Massachusetts trading point, which normally are around $3 to $6 per  million British thermal units (MMBtu) during unconstrained periods,  reached up to $38/MMBtu in early January. These price increases  for natural gas led electricity systems to use more oil-fueled  generating resources during this period.

Hindered oil and gas production: A 2013 study sponsored in part  by the Utah Department of Transportation found that oil and gas  production from the Uinta Basin is likely to be constrained by  limitations in the capacity of transportation infrastructure. Specifically,  the study found that existing pipelines in the state are already at or  near capacity, and by 2020, demand on the infrastructure network to  transport oil and gas will exceed capacity—resulting in a loss of 12  percent of potential production over the next 30 years. Further,  according to a 2013 industry report, infrastructure constraints such as  pipeline limitations and bottlenecks from the Permian Basin in Texas  to a key hub have contributed to discounted prices for some domestic  crude oils. For example, we found in March 2014 that West Texas  Intermediate crude oil—a domestic crude oil delivered to a key hub  that is used as a benchmark for pricing for all crude oil—was priced  just under $18 per barrel less in 2012 than Brent, an international  benchmark crude oil from the European North Sea that has  historically been about the same price as West Texas Intermediate.  These discounted prices mean resource developers have received  lower prices for their crude oil production. According to a 2013 Energy  Policy Research Foundation report, discounted prices may eventually  lead to production growth constraints.

section_title: DOT Has Not Fully Addressed Safety Risks from Expansion of Federally Unregulated Gathering Pipelines
subsections: section_title: Increases in the Number, Size, and Operating Pressure of Gathering Pipelines Pose Additional Risk, Particularly Where They Are Not Federally Regulated
paragraphs: Gathering pipeline construction has increased significantly as a result of  increased shale oil and gas development; however, the increase in  pipeline mileage is unknown because data on gathering pipelines are not  systematically collected by PHMSA nor by every state. The Interstate  Natural Gas Association of America (INGAA), a trade organization  representing interstate natural gas transmission pipeline companies,  estimated in March 2014 that shale oil and gas development will result in  approximately 14,000 miles of new gas gathering pipelines and 7,800  miles of new oil gathering pipelines added each year from 2011 through  2035. State officials in Pennsylvania, North Dakota, Texas, and West  Virginia said that companies have invested significantly in gathering  pipeline infrastructure. For example, according to data published by  Texas state officials, 15,684 new miles of federally unregulated gathering  pipelines were added in the state between 2010 and 2013. In response  to the growth in gathering pipelines, Texas officials told us that their state  enacted legislation to increase state regulatory authority over gathering  pipelines. Similarly, North Dakota passed rule changes in 2013 to  increase state regulatory authority over gathering pipelines. Texas  officials told us that they plan to study and determine what parts of their  rules should apply to gathering pipelines during 2014 and then issue  guidance in 2015. In April 2014, North Dakota implemented regulations  requiring companies to report the location and characteristics of gathering  pipelines carrying any products including natural gas, crude oil, natural  gas liquids, water, and others. The National Association of Pipeline Safety  Representatives, an association representing state pipeline safety  officials, produced a compendium of state pipeline regulations showing  that most states with delegated authority from PHMSA to conduct  intrastate inspections do not have expanded regulations that cover  increased oversight of gathering pipelines. As a result, companies  building gathering pipelines in rural areas are generally not subject to  inspection and do not have to report the location and characteristics of  much of the gathering pipelines being installed.

Although the majority of the total gathering pipeline network that exists  are the traditional small pipelines, state pipeline regulators, PHMSA  officials, and pipeline operators we spoke with said that some newly built  gathering pipelines have larger diameters and higher operating pressures  that more closely resemble transmission pipelines than traditional  gathering pipelines. For example, while gathering pipelines have  traditionally been 2 to 12 inches in diameter, one company operating in  the Texas Eagle Ford shale region showed us plans to build 30- and 36- inch natural gas gathering pipelines, which is near the high end of  diameters for regulated transmission pipelines. Historically, federally  unregulated gathering pipelines were low pressure, smaller-diameter  pipelines and were generally in rural areas where there was less safety  risk. Now, according to PHMSA, industry, and state pipeline safety  officials we spoke to, gathering pipelines of larger diameter and higher  pressure are being constructed, including in areas closer to populations.  Such construction could increase safety risk, since an incident occurring  on one of these larger, high-pressure unregulated gathering pipelines  could affect a greater area and be as serious as an incident involving a  regulated transmission pipeline of similar diameter and pressure.

Pipeline operators and industry organizations told us that new gathering  pipelines are likely safer because new pipelines are less susceptible to  issues like corrosion—a common reason for failure in older pipelines.  Pipeline operators also told us that some large-diameter, high-pressure  gathering pipelines are built to the same specifications as regulated  transmission pipelines and that these pipelines are in very rural areas  with little risk to people. They also expressed that safety is very important  to the industry and that companies understand not only the potential harm  to the network, people, and environment, but also the public perception  following a high-profile incident and therefore manage their assets to  avoid incidents. Nonetheless, state pipeline regulators, PHMSA officials,  and safety organizations expressed concern with the potential safety  threat of unregulated gathering pipelines of this size. For example, a  citizens’ shale development awareness group in Pennsylvania has  documented construction of several unregulated gathering pipelines in  the state that are 24 inches in diameter. The group argues that while  these gathering pipelines are in rural areas, they are being built  unnecessarily close to homes. PHMSA officials told us that the large  diameter and pressure of the pipelines increase the concern for the safety  of the environment and people nearby.

In addition to potential increased safety risk as a result of the changing  characteristics of the pipelines, some stakeholders shared concerns  about the readiness of emergency responders to address potential  incidents that could occur with unregulated gathering pipelines. PHMSA’s  emergency response planning requirements that apply to other pipelines  do not apply to rural unregulated gathering pipelines. Consequently,  response planning in rural areas with unregulated gathering lines may be  inadequate to address a major incident. Transmission pipeline operators  with pipelines similar in size to the new gathering pipelines are required to  develop comprehensive emergency response plans and coordinate with  local emergency responders. Emergency response officials whom we  spoke with stated that lacking information about the location of some  gathering pipelines, responders—particularly in rural areas—may not be  adequately prepared to respond to an incident. A representative from the  National Association of State Fire Marshals told us that training and  communication with pipeline companies are key for emergency  responders’ knowledge and awareness. Additionally, emergency  response officials also told us that rural areas in particular lack the level of  hazardous-materials response resources found in metropolitan areas  where more is known about the extent of local pipeline networks. The  National Transportation Safety Board (NTSB) has also stated that  emergency response planning is critical for pipeline safety and has  recommended that pipeline operators help ensure adequate emergency  response by providing local jurisdictions and residents with key  information on the pipelines in their areas.

section_title: DOT Has Not Proposed Regulatory Changes to Address Risks Posed by Gathering Pipelines
paragraphs: As previously discussed, PHMSA applies a risk-based approach to  regulating pipeline safety. A key principle of risk-based management is  promoting the use of regulations, policies, and procedures to provide  consistency in decision-making. PHMSA has acknowledged the growing  potential risk of federally unregulated gathering pipelines as more are  constructed and at larger diameters and higher pressures, but DOT has  not proposed regulatory changes to address this risk. In August 2011,  PHMSA published an Advance Notice of Proposed Rulemaking, stating  that the existing regulatory framework for natural gas gathering pipelines  may no longer be appropriate due to recent developments in gas  production. In the notice, PHMSA asked for comment on whether it  should consider establishing new, risk-based safety requirements for  large-diameter, high-pressure gas gathering pipelines in rural locations,  among other potential changes to gathering pipeline regulations. The  proposal also states that enforcement of current requirements has been  hampered by the conflicting and ambiguous language of the current  regulation that can produce multiple classifications for the same pipeline  system, which means that parts of a single pipeline system can be  classified as rural gathering pipelines and therefore be unregulated, while  other parts of the same pipeline with the same characteristics are  regulated. PHMSA officials told us they have drafted proposed  regulations for both gas and hazardous liquid gathering pipelines but as  of June 2014, the agency had not issued the Notice of Proposed  Rulemaking for comment. According to DOT officials, the proposed gas  rule is being reviewed internally and the proposed hazardous liquid rule is  with the Office of Management and Budget for review. PHMSA officials  also told us they have studied existing federal and state gathering  pipeline regulation to help identify where gathering pipelines are currently  regulated and remaining gaps; however, this study has been in the final  stages of review during the course of our work and has not yet been  published.

Given the lack of PHMSA regulation of rural gathering pipelines, the  extent, location, and construction practices for rural gathering pipelines is  largely unknown by federal, state, and local officials, and oversight to  verify the construction and monitor operators’ safety practices is lacking.  In 2012, we concluded that unregulated gathering pipelines also pose  risks due to construction quality, maintenance practices, and limited or  unknown information on pipeline integrity.  We recommended at that  time that PHMSA collect data on unregulated gathering pipelines to  facilitate quantitatively assessing the safety risks posed by these  pipelines, which we said could assist in determining the sufficiency of  safety regulations for gathering pipelines. According to DOT officials, as  of July 2014, PHMSA has compiled data on existing gathering pipeline  requirements, and the resulting report is under internal review.  Furthermore, officials said that data collection is part of the proposed  rules also under review. In 2010, the National Association of Pipeline  Safety Representatives recommended that PHMSA modify federal  pipeline regulations to establish requirements for gathering pipelines in  rural areas that are presently not regulated. The association stated that  with the advent of new production technologies, there has been rapid  development of gas production from shale formations such as the  Barnett, Marcellus, and Bakken resulting in a significant amount of new  gathering pipeline construction. Further, in these newer gas gathering  systems, it is not uncommon to find rural gathering pipelines up to 30  inches in diameter and operating at 1480 psi, which is the higher end of  traditional transmission operating pressure. Enhanced pipeline safety for  all types of pipeline was also on NTSB’s “Most Wanted List” in 2013 and  2014. NTSB has prioritized overall pipeline safety because of the  increased demand in oil and gas and the aging pipeline infrastructure.

Resources are an important consideration in evaluating how to address  the increased risk of gathering pipelines. According to PHMSA officials,  inspection resources are limited and would be further stretched if rural  gathering pipelines were regulated. If PHMSA were to receive increased  staff funding in the near future, there could be a lag in ramping up the  inspection workforce because inspectors would have to complete  PHMSA’s 3-year pipeline-inspection training to become fully certified.  However, if PHMSA were to set minimum federal regulations for  gathering pipelines, this would enable the agency to include currently  federally unregulated rural gathering lines in decisions for prioritizing  resources for addressing safety risks. This is in line with the principles of  risk-based management, while also enabling data-driven, evidence-based  decisions about the risks of rural gathering pipelines, which our previous  work has shown is especially important in a time of limited resources.  State regulators in all four states we spoke with acknowledged their  resources could also be strained; however, the officials supported  regulating rural gathering pipelines. State officials said that without rural  gathering pipeline regulation, such as provisions for inspections or  industry reporting, they have limited knowledge of the construction and  maintenance practices of rural gathering pipeline operators, do not  always know where new rural gathering pipelines are being constructed,  and may not even have communication with the operators.

section_title: Transmission Pipeline Infrastructure Has Not Increased Substantially as a Result of Shale Development
paragraphs: Gas flows from shale plays into transmission pipelines have increased,  but construction of new transmission pipelines has not increased  dramatically as a result of increased shale development. According to  PHMSA data, approximately 4,500 miles of new oil and gas transmission  pipelines were built between January 2010 and December 2012. This  includes about 2,000 miles each of crude oil and natural gas pipelines  and the remaining is pipeline for natural gas liquids.

Oil and gas pipeline industry representatives and transmission pipeline  companies we spoke with stated that transmission pipeline companies  have been able to accommodate increased demand in various ways.  Transmission pipeline companies have repurposed existing pipelines,  made operational changes—including increased compression and  change in directional flow—and added additional capacity to the current  network through smaller-scale construction projects. Companies have  repurposed pipelines by changing them from one product to another,  such as converting a natural gas pipeline to a natural gas liquid pipeline  or a crude oil pipeline. Companies have also instituted operational  changes such as adding additional compression to their line, which allows  them to move more gas through the same lines, and changing directional  flow of a pipeline. One pipeline operator we spoke with is reversing flow  of its gas transmission pipeline. Prior to shale development, this pipeline  moved natural gas from the Gulf Coast to the Northeast. By 2017, the  volume of gas that once flowed north will flow south. The pipeline  operator stated that changing the direction of the flow, while not as easy  as flipping a switch, requires significantly less time and money than  building a new pipeline. Smaller-scale construction projects, such as short  pipeline extensions, help meet the demands of shale areas like the  Marcellus because the natural gas being produced is in close proximity to  its destination market. Therefore, it is primarily a matter of connecting  new gas production into the existing transmission pipeline network.

However, accommodating increased demand through new construction is  a challenging proposition. To build a transmission pipeline requires a  long-term commitment—often a contract that spans 30 to 50 years from  producers. Major transmission pipeline projects may also face long  timeframes. Pipeline companies we spoke with stated that once contracts  are in place it usually takes 2 to 4 years to complete a pipeline. This is in  part a result of the permitting process, which can include multiple federal  and state agencies as well as obtaining rights to build on properties of  individual land owners. Timelines can be longer if the pipeline  construction project is contentious. The construction timeline is also  dependent on terrain and weather. Pipeline industry representatives in  West Virginia told us that constructing pipelines in mountainous terrains is  much more difficult than in flat land. State officials in North Dakota said  that long winters and short construction seasons cause construction  projects to last over several construction seasons to complete. Other  reasons provided by state officials and industry officials for a slower  growth in pipeline infrastructure in North Dakota include the challenge of  securing right-of-ways, as well as uncertainty in market demand. It is  possible that continued shale exploration and development in other parts  of the country could displace demand for Bakken shale products.  Developers have proposed some future pipeline projects, and some have  been approved in areas like North Dakota, but transmission pipeline  mileage has not seen the same kind of rapid increase as gathering  pipeline mileage. For example, Enbridge Energy Partners has proposed a  transmission pipeline called Sandpiper that spans 612 miles from North  Dakota through Minnesota to Wisconsin. The pipeline is proposed to be  24 inches and 30 inches in different places and will carry between  225,000 and 375,000 barrels of oil. WBI Energy announced planning for a  375-mile natural gas transmission line called the Dakota Pipeline in  January 2014. The proposed route would start in North Dakota and  continue into Minnesota.

In areas of shale development without access to an established pipeline  network, such as the Bakken region, lengthy timelines and high costs  associated with building transmission pipeline have led producers to seek  alternative methods for transporting some of the production—primarily  rail.

section_title: DOT Is Working to Address Risks Related to the Increase in Transportation of Oil by Rail
subsections: section_title: Crude Oil Is Transported Increasingly by Rail and Travels Long Distances in Large Volumes
paragraphs: The use of rail to transport crude oil from development areas to refineries  has increased dramatically. STB data show that rail moved about 236,000  carloads of crude oil in 2012, which is 24 times more than the  approximately 9,700 carloads moved in 2008 (see fig. 5). Carloads  further increased in 2013, with AAR reporting that Class I freight railroads  originated 407,761 carloads of crude oil that year.

According to railroads, the majority of this increased movement of crude  oil by rail is done using unit trains, which are trains that carry only one  commodity to a single destination. Crude oil unit trains may consist of   80 to 120 tank cars, each carrying about 30,000 gallons of product, for a  total of about 2.4 million to 3.6 million gallons of crude oil per train (see  figure 6). This has resulted in an increase in demand for tank cars.  According to AAR, nearly 50,000 tank cars were used to transport crude  oil by rail as of April 2014.

There are different types of crude oil, which affects where crude is  refined, as refineries are configured differently to handle the various  types. This, in turn, affects where crude oil is transported for refining.  Increasingly, crude oil produced in the United States is “light and sweet”  (lower in density and sulfur content); in contrast, a portion of new  Canadian production has been “heavy and sour” crude oil (higher in  density and sulfur content). We have previously reported that not all  U.S. refineries can take advantage of domestic crude oils to the same  extent because of configuration constraints at some refineries.  Therefore, oil may travel long distances to a refinery with the matching  refining configuration even if there is refinery capacity nearer to the crude  oil source. According to an oil industry association in North Dakota, much  of the domestic refining capacity for Bakken crude oil, which is a lighter  crude, is located along the Gulf, East, and West Coasts. According to  STB data, about 69 percent of crude oil transported by rail in 2012  originated in North Dakota, followed by Texas and all other states (see  fig. 7). STB data show that crude oil originating in North Dakota in 2012  traveled to 19 destination American states or Canadian provinces across  North America. While most Bakken crude oil was shipped to destinations  along the Gulf Coast, there was a large increase in oil shipped to East  and West Coast destinations in 2012, signaling a shift in demand from the  Gulf region to the other coasts.

While pipelines generally deliver commodities to a fixed customer, rail  offers the flexibility to serve different customers, allowing shippers to shift  product quickly in response to market needs and price opportunities.  Despite the great increase in crude oil transported by rail, the commodity  remains a small percentage of railroads’ business, comprising about 1.4  percent of Class I railroads’ freight originations in 2013, according to  AAR. As previously discussed, there are thousands of miles of track in  the United States, providing various shipping opportunities for crude oil,  as well as other commodities. Officials from Class I railroads said they  have not extensively added new infrastructure to specifically  accommodate the increased shipping of crude oil by rail, although officials  from some railroads said they have added track infrastructure in specific  areas of increased shale oil development to increase capacity.

section_title: DOT Is Taking Action to Address Safety Risks Resulting from the Transport of Crude Oil by Rail
paragraphs: As the movement of crude oil by rail has increased, incidents, such as  spills and fires involving crude oil trains have also increased. PHMSA’s  hazardous materials incident data show that rail crude oil incidents in the  United States increased from 8 incidents in 2008 to 119 incidents in  2013. These data show that the majority of the 2013 incidents were  small; however, two incidents in 2013, in Aliceville, Alabama and  Casselton, North Dakota resulted in large spills and greater damage.  Significant incidents have continued to occur in 2014, including an April  derailment and fire in Lynchburg, Virginia. During a presentation at an  April 2014 forum on rail safety, NTSB noted that significant accidents  involving crude oil have increased in recent years, with one incident  occurring between 2008 and 2012 compared to eight incidents since  2012.

DOT, primarily through PHMSA and FRA, sometimes jointly, has taken  steps to engage the rail and oil and gas shipping industries and  emergency responders to address the safety of transporting crude oil by  rail, particularly in response to concerns stemming from the July 2013  Lac-Mégantic, Quebec accident:  In August 2013, February 2014, and May 2014, DOT issued  emergency orders to compel shippers and railroads to address safety  risks by taking steps to secure unattended trains, ensure proper  testing and packaging of crude oil, and notify emergency responders  about crude oil shipments. DOT also issued safety advisories during  this period recommending additional actions.

In August 2013, PHMSA, with FRA assistance, initiated an ongoing  special inspection program to examine whether crude oil rail  shipments are appropriately tested and packaged. The effort consists  of spot inspections, data collection, and testing crude oil samples  taken from tank cars. Initial information from the program has  identified deficiencies; DOT issued fines against three companies in  February 2014 for not following proper crude oil packaging  procedures. According to PHMSA officials, this effort inspects about 2  percent of Bakken crude oil trains.

In September 2013, PHMSA issued an Advance Notice of Proposed  Rulemaking seeking comments from industry and other stakeholders  on improvements to standards for crude oil rail tank cars. This action  was in response to the railroad industry’s 2011 petition for improved  standards and recommendations from NTSB.

In January 2014, PHMSA issued a safety alert notifying the general  public, emergency responders, shippers, and carriers that Bakken  crude oil may be more flammable than traditional heavy crude oil  based on tests associated with PHMSA and FRA’s special inspection  program. PHMSA said it planned to issue final results of the tests at a  later date.

In February 2014, DOT entered into a voluntary agreement with AAR  to improve the safety of moving crude oil by rail including increased  track inspections, improved emergency braking capabilities, use of a  risk-based routing tool to identifying the safest routes, travel at lower  speeds, and emergency response training and planning.

Also in February 2014, PHMSA officials met with emergency  responders and industry groups to discuss training and awareness  related to the transport of Bakken crude oil.

In July 2014, DOT issued an update on PHMSA and FRA’s joint  special inspection program that includes results to date of their crude  oil testing efforts and related discussion of the appropriate packaging  of oil tested.

Additionally, in July 2014, PHMSA, in coordination with FRA, proposed  new rules that align with key areas of concern cited by stakeholders:  crude oil classification, testing, and packaging; crude oil tank car design;  and emergency response. Specifically, PHMSA issued a Notice of  Proposed Rulemaking seeking comment on proposals for new regulations  to lessen the frequency and consequences of train accidents involving  large volumes of flammable liquids, such as crude oil. The proposal  includes new operational requirements for certain trains transporting a  large volume of flammable liquids; revisions to requirements for crude oil  classification, testing, and packaging; and improvements in tank car  standards. Additionally, PHMSA, also in consultation with FRA, issued  an Advance Notice of Proposed Rulemaking seeking comments in  response to questions about potential revisions to current regulations for  emergency response planning for crude oil transported by rail.
subsections: section_title: Crude Oil Classification, Testing, and Packaging
paragraphs: PHMSA’s current regulations for transporting hazardous materials require  that shippers classify and characterize the materials they ship to identify  the materials’ characteristic properties and select an appropriate shipping  package based on those properties. “Classification” refers to identifying  a material’s hazard class, which could be one or more from the list of nine  in PHMSA’s hazardous materials regulations, such as a flammable liquid  or flammable gas. “Characterization” refers to ascertaining other  characteristics of the product to determine its proper packing group, a  designation based on risk that identifies acceptable packages.  Specifically, PHMSA’s regulations classify crude oil as a flammable liquid  and offer acceptable tank cars under three packing groups based on  characteristics such as the oil’s flash point—lowest temperature at which  a liquid can vaporize to form an ignitable mixture in air—and boiling  point. PHMSA’s regulations provide options for the tests shippers may  use to determine these characteristics. Crude oil with higher boiling and  flash points is considered less risky, since it is less likely to form  flammable vapor unless exposed to extreme temperatures, and more  approved packaging choices exist for such oil than for oil with lower  boiling and flash points that could form ignitable vapor at lower  temperatures. Substances that are gases, rather than liquid, at ambient  temperatures are even more flammable, and thus more stringent  packaging requirements apply to flammable gases than to flammable  liquids. In particular, flammable gases must be packaged in pressure tank  cars, which provide additional safety in the event of an accident.

According to PHMSA officials, because crude oil is a natural resource, it  has greater characteristic variability than a hazardous material  manufactured under strict specifications or quality guidelines. Thus,  testing may need to be done more frequently to make sure the proper  packaging rules are followed, since different rules may apply depending  on the characteristics of a particular oil shipment. A review by Canadian  transportation safety officials determined that the crude oil involved in the  Lac-Mégantic accident was packaged under less stringent packing  requirements than those which should have been followed, given the  flammability characteristics of the oil involved. Although, as DOT officials  pointed out, a different packing group would not have changed the  package itself, since the type of tank car involved in the incident, the  DOT-111 tank car, is allowed for crude oil transport under all three  packing groups.

Stakeholders we spoke to have differing views on the volatility of crude oil  from the Bakken region, the area where the most crude oil is being  shipped by rail. Some industry stakeholders, including the operators of  Bakken crude oil rail terminals, characterized Bakken crude oil as being  like any other crude oil produced in the United States, while other  stakeholders said it has differences that may make it more volatile. In  particular, PHMSA and AAR officials said that Bakken oil has variable  composition and may sometimes contain higher than usual levels of  dissolved natural gases. According to AAR officials, this can lead to  flammable gases building up in a tank car during transport. AAR officials  also said that the presence of natural gas makes fires more likely when  crude oil tank cars are involved in an accident. Additionally, a May 2014  industry study noted that Bakken crude oil may contain higher amounts of  dissolved flammable gases; however, the report states that it is not  enough to warrant new regulations for crude oil rail transportation.

According to PHMSA officials, the current regulatory framework for  classifying and packaging crude oil for transport by rail may need to be  further examined to ascertain if it addresses all of the risks posed by  some shale crude oils that have properties unlike other typical crudes.  PHMSA’s July 2014 Notice of Proposed Rulemaking calls for shippers of  mined gases and liquids to be transported by rail, including crude oil, to  develop and implement a program for sampling and testing to ensure the  shippers’ materials are properly classified and characterized. The  procedures must outline a frequency of sampling and testing that  accounts for the potential variability of the material being tested, sampling  at various points to understand the variability of the material during  transportation, sampling methods that ensure a representative sample of  the entire packaged mixture is collected, and testing methods used,  among other requirements. The sampling and testing program must be  documented in writing and retained for as long as it remains in effect and  be made available to DOT for review upon request.

Representatives from railroads and crude oil terminals we spoke to, as  well as from the oil and gas industry, have indicated that clarification  about the requirements for testing and packaging crude oil is needed.  Specifically, two of the railroads and two crude oil rail terminal operators  told us that PHMSA needs to clarify its crude oil testing requirements,  including to more clearly state which tests should be done and with what  frequency. One of the terminal operators told us that without clearer  guidance, they are unsure whether they are performing the right tests and  testing with sufficient frequency. They are also concerned they may be  incurring unnecessary expense from over-testing. PHMSA’s July 2014  Notice of Proposed Rulemaking does not state which tests should be  performed or specifically how often, but does state that testing methods  used should enable complete analysis, classification, and characterization  of the material as required by PHMSA’s regulations and that the  frequency of testing should account for the potential variability of the  material. The notice also seeks comment on whether more or less  specificity of these requirements would aid shippers and whether the  proposed guidelines provide sufficient clarity for shippers to understand  whether they are in compliance. PHMSA has also drafted more detailed  guidance on classification and packaging crude oil, including testing  procedures, but had not released it publicly as of June 2014.

Additionally, the American Petroleum Institute, an oil and gas industry  association, formed a working group in 2014 to develop industry  standards for testing and packaging of crude oil for transportation by rail,  which the group hopes to implement by October 2014. PHMSA officials  said that PHSMA scientists have been attending the group’s meetings  and providing input. In its July 2014 Notice of Proposed Rulemaking,  PHMSA noted that it is encouraged by the development of an industry  standard and that once finalized, PHMSA may consider adoption of such  a standard.

section_title: Crude Oil Tank Car Design
paragraphs: Under PHMSA’s current packaging regulations, a number of types of tank  cars are approved for transporting crude oil. However, DOT-111 tank  cars are most commonly used, according to industry and railroad  representatives, and PHMSA’s regulations allow its use for all types of  crude oil, regardless of packing group.

NTSB has documented a history of safety concerns with the DOT-111  tank car. Specifically, NTSB has raised concerns regarding the tank car’s  puncture resistance, heat tolerance, and potential for overpressurization  during a fire. In its report of a 2011 investigation of the derailment of a  train hauling ethanol tank cars, NTSB noted that its 1991 safety study and  four train-derailment investigations from 1992 to 2009 had identified  problems with DOT-111 tank cars. The report further concluded that the  car’s poor performance suggested that DOT-111 tank cars are  inadequately designed to prevent punctures and breaches and that the  catastrophic release of hazardous materials can be expected when  derailments involve DOT-111 cars. In response to that and other rail  incidents, in 2012, NTSB recommended that PHMSA upgrade its DOT- 111 tank car standards to improve tank shielding and puncture  resistance, a move the industry had already begun to address.

In 2011, the railroad industry petitioned PHMSA to adopt improved  standards for DOT-111 tank cars and worked with tank car manufacturers  and other stakeholders to develop improved industry standards that were  implemented later that year. These standards called for a thicker shell to  improve puncture resistance, shielding at both ends of the tank car, and  protection for the top fittings of the tank car. More recently in November  2013, following the Lac-Mégantic accident, the railroad industry called for  further tank car upgrades, including a thicker shell, protection to prevent  overheating, additional shielding, protection for outlet handles on the  bottom of a tank, and high-capacity pressure relief valves. Figure 8  shows how these various proposed upgrades may be incorporated into a  crude oil tank car.

Although tank cars are generally owned by shippers or third parties, one  railroad told us they intend to acquire their own fleet of tank cars built to  the railroad industry’s 2013 proposed standards. The railroad hopes to  incentivize the cars’ use by shippers; however, railroads are obligated to  move materials as long as they are packaged according to federal  standards, and told us they cannot force customers to use upgraded cars  and have to accept cargo so long as it is in an allowable package, which  includes older model DOT-111 cars.

A wide range of stakeholders we interviewed—including those from  PHMSA, NTSB, state transportation agencies, railroad industry, and rail  suppliers—told us that crude oil tank car standards need to be improved.  Most shippers, railroads, and rail suppliers providing comments in  response to PHMSA’s September 2013 rail safety Advance Notice of  Proposed Rulemaking also stated this opinion. However, there were  some differences in their views on how improvements should be  implemented. Those who commented in response to PHMSA’s notice  supported enacting the industry’s upgraded tank car standard into  regulation and were generally supportive of proposals to strengthen tank  cars’ puncture resistance through design features such as thicker tank  walls, jackets, and shielding. However, stakeholders disagreed on the  extent to which existing tank cars should—or even could—be retrofitted to  meet higher standards. For example, shippers and rail suppliers stated  that existing tank cars built to the current industry standards that already  exceed the regulatory standard should be exempt from retrofitting if  PHMSA were to adopt an even higher standard. Shippers also expressed  concerns that retrofitting would be costly, take tank cars out of service,  and put a burden on the already busy shops that also build new tank cars.  Local-government and rail-industry commenters supported retrofitting  existing cars.

In its July 2014 Notice of Proposed Rulemaking, PHMSA sought  comment on requirements for a new DOT-117 tank car standard to  replace the current DOT-111 standard for newly manufactured tank cars  transporting flammable liquids, which could be one of three options: 1) a  design by PHMSA and FRA that would increase puncture resistance,  provide thermal protection, protect top fittings and bottom outlets, and  improve braking performance; 2) the design in the railroad industry’s  proposal from November 2013 previously discussed; and 3) the 2011  industry-developed tank car design with some enhancements. PHMSA’s  Notice of Proposed Rulemaking concluded that cars built to the option 3  standard would likely be built in the absence of a new rule, based on  commitments from industry, but that options 1 and 2 would provide  additional safety benefits, along with additional cost. Specifically, PHMSA  estimated that the improved braking, roll-over protection and increased  shell thickness under option 1 would cost $5,000 more per car than option  3. According to PHMSA, option 2 would have most of the same safety  features as option 1 except rollover protection and the improved braking  system, resulting in a cost of $2,000 more per car than option 3. In  addition to the new DOT-117 standard, the proposal would create a  performance standard for the design and construction of new tank cars  equivalent to the DOT-117, subject to FRA approval. Under the proposal,  existing tank cars would have to be retrofitted to comply with the  performance standard. The proposal calls for phasing out use of all  DOT-111 tank cars for transporting flammable liquids by October 1, 2020,  although the cars could still be used to transport other materials.

Although this proposed rule had previously been scheduled for release in  November 2014, PHMSA accelerated its efforts to issue a proposal,  resulting in the July 2014 release. According to PHMSA officials, the  agency did not issue a proposal sooner because the industry, as well as  the public, have had different opinions on tank car specifications. Since  2011, PHMSA has received multiple petitions seeking changes to tank  car safety standards. In the interim, the railroad industry has moved to  adopt higher standards, and in a May 2014 safety advisory, PHMSA and  FRA asked companies to refrain from using older tank cars if possible.

section_title: Emergency Response
paragraphs: Transporting a large volume of flammable liquid in one train increases the  risk of a large fire or explosion in the event of a derailment, such as in the  Lac-Mégantic incident. DOT has noted that the transportation of crude oil  in unit trains compounds the risk of ignition, and NTSB has reported that  crude oil unit trains present the potential for disastrous consequences in  the event of an accident. Associations representing emergency  responders told us they are particularly concerned about the risk these  trains pose to rural areas, which generally have fewer resources to  respond to hazardous materials incidents. They also cited concerns with  the general lack of awareness about risks and the need for industry to  better communicate with local responders about them. Railroad officials  told us that risks from unit trains can be managed. Further, railroad  officials told us that transporting crude oil in trains that carry a mixture of  freight commodities could be higher risk, due to the need to sort crude oil  tank cars in rail yards, and that doing so would lead to reduced efficiency  by increasing the turn-around times for crude oil trains. In August 2013,  AAR revised its guidance on hazardous materials operating practices so  that its restrictions would apply to crude oil unit trains; these restrictions  include a 50 MPH speed limit, limitations on the use of track siding, and  requirements for addressing defective bearings. However, associations  representing emergency responders told us that industry should do more  to prepare responders for potential incidents, such as by providing  information, training, and resources. These organizations also shared  concerns about rural responders lacking resources and information to  respond as effectively as responders in urban areas. As previously  mentioned, stakeholders told us that rural areas may lack sufficient  resources to respond to a major event, like an accident involving a crude  oil unit train.

As previously discussed, PHMSA has engaged emergency responders  on crude oil transportation safety, and the voluntary commitment DOT  secured from railroads included emergency response planning and  training efforts. However, PHMSA’s requirements for comprehensive  emergency response planning do not apply to unit trains used to transport  crude oil, raising concerns about the abilities of responders and other  stakeholders to effectively handle potential incidents. As currently  worded, PHMSA’s regulations require comprehensive plans for trains that  haul any liquid petroleum or non-petroleum oil in a quantity greater than  42,000 gallons per package—greater than the about 30,000 gallons of  crude oil typically transported in a tank car—even though a unit train of  100 cars could carry about 3 million gallons of crude oil. Instead,  PHMSA requires railroads to have a basic plan that includes information  about the maximum potential discharge, response plans, and  identification of (but not coordination with) private response personnel  and the appropriate people and agencies to contact in the event of an  incident. Federal regulations require that comprehensive emergency  response plans include a written plan outlining contingency planning, an  identified central coordinating official during an incident, private personnel  secured by contract or other means to respond to a worst-case incident,  training, equipment, and response actions and be subject to review by  FRA. Without a comprehensive plan, PHMSA does not have assurance  that railroads have taken steps to plan for response needs and identified  and coordinated with the appropriate responders. PHMSA’s July 2014  Advance Notice of Proposed Rulemaking seeks comment on several  possible ways of expanding the comprehensive planning requirement to  include crude oil unit trains by changing the threshold under which such  plans are required.

Although this review focuses on the packaging and movement of crude oil  in tank cars, our prior work has found that while DOT has taken actions in  this area, there are other safety issues that are also relevant to the  context of the safety of transporting crude oil by rail. Specifically, in a  December 2013 report, we found that FRA has developed a risk-based  approach to direct its inspection efforts, but the agency had been slow to  implement broader risk reduction planning. As required by the Rail  Safety Improvement Act of 2008, FRA was tasked with overseeing  railroads’ development of risk reduction plans. Specifically, FRA was  required to issue a final rule by October 2012 directing railroads to  develop these plans, but our report found that FRA had not yet issued the  final rule. Our report described safety challenges that railroads face,  some of which can contribute to derailments. Other actions have been  taken subsequently. FRA issued a final rule in January 2014 revising  track inspection requirements to increase the standard for track used to  transport hazardous materials. And, as discussed, railroads entered  into a voluntary agreement with DOT in February 2014 to improve the  safety of crude oil trains. In their comments in response to PHMSA’s  September 2013 Advance Notice of Proposed Rulemaking on rail safety,  several shippers noted that recent incidents have generally been caused  by defective track, railroad equipment or operational issues, and  supported improvements in these areas. NTSB’s accident report for the  aforementioned 2011 derailment of ethanol tank cars noted that although  problems with tank cars were a contributing factor, the probable cause of  the accident was a broken rail. PHMSA has also noted that addressing  the causes of derailments, not just upgrading tank cars, is important for  improving the safety of transporting crude oil by rail. According to PHMSA  officials, the severity of a derailment may present a wide range of forces  for any particular tank car to withstand, and therefore, even an enhanced  tank car may have variable performance and may not always perform  better in a given derailment. PHMSA’s July 2014 Notice of Proposed  Rulemaking to address safety of transporting crude oil by rail includes a  number of other provisions in addition to those already discussed for  trains carrying 20 or more tank carloads of flammable liquids, including a  routing analysis, enhanced braking, and codifying the May 2014  emergency order requiring notification to emergency responders about  crude oil shipments.

section_title: Conclusions
paragraphs: The advent of new oil and gas production technologies has created a new  energy boom for the United States. However, with this increase in  production comes the responsibility to move those flammable, hazardous  materials safely.

While the Department of Transportation has worked to identify and  address risks, its regulation has not kept pace with the changing oil and  gas transportation environment. Gathering pipeline construction has  increased, but some of these new pipelines in rural areas fall outside the  current safety framework, despite operating at the size and pressure (and  therefore similar risk) as federally regulated transmission lines. DOT  began a rulemaking to address this issue in 2011 but did not issue  proposed rules. Subsequently, new gathering pipeline infrastructure has  continued to grow, with industry predicting such growth will continue for  the foreseeable future, raising concerns where such pipelines are not  subject to safety regulations.

The growth in the use of rail to move crude oil has likewise revealed risks  not fully addressed by the current safety framework, particularly in  ensuring that oil is properly tested and packaged for shipping. Emergency  responders also need to be adequately prepared in the event that  incidents occur, both for pipeline and for rail. Recent transportation  incidents, such as the July 2013 train accident in Lac-Mégantic, Quebec,  have highlighted the need for risk-based federal safety oversight. Since  the Lac-Mégantic accident, much emphasis has been placed on the need  to upgrade standards for tank cars that carry crude oil, but attention to  tank cars alone is not sufficient to address safety, a sentiment shared by  some railroads and shippers, as well as DOT. Oil and gas shippers,  railroads and pipeline operators, emergency responders, and government  all have a role to play. Shippers, in particular, play an important role in  making sure that hazardous materials like crude oil are properly  packaged for safe transport. This underscores the importance of DOT’s  role in assessing the risk such oil poses and providing clear guidance for  handling it safely. Without timely action to address safety risks posed by  increased transport of oil and gas by pipeline and rail, additional  accidents that could have been prevented or mitigated may endanger the  public and call into question the readiness of transportation networks in  the new oil and gas environment. DOT’s recent proposed rulemakings to  address concerns about transporting crude oil by rail signal the  department’s commitment to addressing these important safety issues.  Because of the ongoing rail safety rulemakings, we are not making  recommendations related to rail at this time.

section_title: Recommendation
paragraphs: To address the increased risk posed by new gathering pipeline  construction in shale development areas, we recommend that the  Secretary of Transportation, in conjunction with the Administrator of  PHMSA, move forward with a Notice of Proposed Rulemaking to address  gathering pipeline safety that addresses the risks of larger-diameter,  higher-pressure gathering pipelines, including subjecting such pipelines to  emergency response planning requirements that currently do not apply.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOT for comment. We received  written comments from DOT’s Assistant Secretary for Administration,  which are reproduced in appendix III. These comments stated that  PHMSA generally concurred with our recommendation to move forward  with a rulemaking to address risks posed by gathering pipelines. Further,  the letter stated that PHMSA is developing a rulemaking to revise its  pipeline safety regulations and is examining the need to adopt safety  requirements for gas gathering pipelines that are not currently subject to  regulations. Additionally, the letter stated that proposed regulations are  under development to ensure the safety of natural gas and hazardous  liquid gathering pipelines that include collecting new information about  gathering pipelines to better understand the risk they pose.

In the version of the draft report we sent to DOT for comment, we had  also recommended that PHMSA develop and publish additional guidance  on testing, classification and packaging of crude oil for transport by rail  and that PHMSA address emergency response planning regulations for  transporting oil by rail so that they include shipments of crude oil by unit  trains. DOT’s written response stated that PHMSA generally concurred  with these recommendations and was taking steps to address them.  Subsequently, on July 23, 2014, PHMSA, in coordination with FRA,  issued rulemaking proposals that, if implemented, would likely address  these concerns. Therefore, we are no longer making those  recommendations in this report and we have added language to the  report describing the objectives of the proposals. We also received  technical comments from DOT, which we incorporated as appropriate.

As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 30 days from the  report date. At that time, we will send copies of this report to the  appropriate congressional committees and to the Secretary of  Transportation. In addition, the report will be available at no charge on the  GAO website at http://www.gao.gov.

If you or your staffs have any questions about this report, please contact  Susan Fleming at (202) 512-2834 or flemings@gao.gov or Frank Rusco  at (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this report. Major contributors to this report are listed in appendix IV.

section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: This report addresses (1) challenges, if any, that increased domestic oil  and gas production poses for U.S. transportation infrastructure and  examples of associated risks and implications; (2) how pipeline  infrastructure has changed as a result of increased oil and gas  production, the key related safety risks, and to what extent the U.S.  Department of Transportation (DOT) has addressed these risks; and (3)  how rail infrastructure has changed as a result of increased oil production,  the key related safety risks, and to what extent DOT has addressed these  risks.

To identify challenges increased domestic oil and gas production poses  for U.S. transportation infrastructure and examples of the associated risks  and implications, we reviewed and synthesized information from 36  studies and other publications from federal, state, and tribal government  agencies; industry; academics; and other organizations. We identified  these studies and publications by conducting a search of web-based  databases and resources—including Transport Research International  Documentation, ProQuest, and FirstSearch—containing general  academic articles, government resources, and “gray literature.” Studies  and publications were limited to those focused on domestic onshore oil  and gas production and published in the years 2008 through 2013. In  addition, we reviewed prior work we have conducted. We included  examples of known transportation infrastructure limitations and  associated effects from these studies and publications in this report. We  believe the studies and publications identified through our literature  search and included in our review have identified key examples of known  transportation infrastructure limitations and associated effects. In addition,  we analyzed data from the U.S. Department of Energy’s Energy  Information Administration (EIA) to identify oil and gas produced from  2007 to 2012. To assess the reliability of these data, we examined EIA’s  published methodology for collecting this information and found the data  sufficiently reliable for the purposes of this report.

To determine how pipeline infrastructure has changed as a result of  increased oil and gas production, we analyzed data from DOT’s Pipeline  and Hazardous Materials Safety Administration (PHMSA) on pipeline  construction from January 1, 2010 through December 31, 2012 and  interviewed PHMSA officials and representatives of pipeline industry  associations and operators. We assessed the reliability of the data on  pipeline construction by reviewing documentation about the database,  interviewing agency officials about how the data are collected, comparing  the data to similar information from EIA on completed pipeline projects,  and reviewing the agency’s related internal controls. We determined that  the data were sufficiently reliable for describing new pipeline construction  projects. We identified key pipeline safety risks by reviewing documents  provided by and interviewing officials from PHMSA, pipeline industry  associations and operators, and safety organizations. To examine trends  in pipeline incidents, we analyzed PHMSA’s pipeline incident data from  January 1, 2008 through December 31, 2013. This analysis only  examined transmission pipeline incidents, since many gathering pipelines  are not regulated and therefore the data may not include potential  gathering pipeline incidents. We assessed the reliability of these data by  reviewing documentation on the collection of these data, interviewing  agency officials about how the data are collected and whether there are  potential limitations for using the data as we intended, and reviewing the  agency’s related internal controls. We determined that these data were  sufficiently reliable for identifying trends in pipeline incidents. We also  examined transportation infrastructure changes and safety risks specific  to key shale development areas in four states selected because they are  located above shale plays in different parts of the country with generally  the highest levels of oil and gas production from 2007 through 2011,  according to EIA data. The states and corresponding shale plays were  Pennsylvania and West Virginia (Marcellus shale play), North Dakota  (Bakken shale play), and Texas (Eagle Ford shale play). In these states,  we spoke with state oil and gas regulatory and transportation agencies,  oil and gas industry associations, oil and gas companies, railroads, and  crude oil rail terminal operators, as well as a community advocacy  organization in Pennsylvania. We also reviewed documents provided by  these organizations.

To determine how rail infrastructure has changed, we analyzed Surface  Transportation Board (STB) data on crude oil shipments by rail for  calendar years 2008 through 2012 and interviewed DOT officials from  PHMSA and the Federal Railroad Administration and industry  representatives, including railroads. We assessed the reliability of the  STB data by reviewing documentation about the data, interviewing  agency officials about how the data were collected and ways they could  be analyzed, and reviewing the agency’s related internal controls. We  determined that the data were sufficiently reliable for describing trends in  the movement of crude oil. To identify the key safety risks related to  changes in rail infrastructure, we analyzed PHMSA’s data on rail  hazardous-materials incidents from January 1, 2008 through December  31, 2013, reviewed documents submitted to a DOT rulemaking  proceeding on rail safety, and interviewed DOT officials and  representatives from safety organizations and industry. We assessed the  reliability of PHMSA’s incident data by reviewing documentation about the  data, interviewing agencies officials about how the data were collected,  testing the data for inconsistencies, and reviewing the agency’s related  internal controls. We concluded that the data were sufficiently reliable for  discussing trends in rail hazardous-materials incidents. Additionally, to  examine infrastructure impacts and safety issues closely associated with  shale areas, we Interviewed officials from state oil and gas regulatory and  transportation agencies, industry associations and oil and gas  transportation companies in the four states mentioned previously: North  Dakota, Pennsylvania, Texas, and West Virginia. To evaluate to what  extent DOT has addressed safety risks, we reviewed federal laws and  regulations, DOT emergency orders and guidance, and interviewed DOT  officials. National and state-level stakeholders we interviewed are listed in  tables 2 and 3.

We conducted this performance audit from August 2013 to August 2014  in accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.

section_title: Appendix II: Impacts of Shale Oil and Gas Development on Highways in Selected States
paragraphs: Pipeline and rail are used to transport shale oil and gas long distances;  however, truck transportation via local roads and highways also plays an  important role. Trucks transport these goods from production areas to  pipeline and rail as well as haul most materials needed to develop oil and  gas, such as water, sand, and equipment used during drilling and  hydraulic fracturing. State agencies within the four states we examined  (Pennsylvania, North Dakota, Pennsylvania, and Texas) have noted  significant local road and highway impacts and safety concerns as a  result of shale oil and gas development and have taken steps to address  these impacts.
subsections: section_title: Infrastructure Impacts
paragraphs: States have reported a significant increase in truck traffic as a result of  shale oil and gas development, the effects of which are particularly acute  in rural areas unused to this level of road congestion. State officials  provided estimates of the number of truck-loads required to drill and  fracture a shale gas well ranging from about 1,200 to about 3,000.  Although the number of trucks is greatest during the initial drilling and  fracturing phases, significant truck volume may return if a well is re- fractured and, in the case of oil wells, trucks can be used to remove oil if  the wells are not connected by pipeline. State officials told us that roads  in many of these areas prior to development were built for light local and  farm use and were not built for the additional thousands of heavy truck  loads associated with oil and gas development, leading to deterioration.  North Dakota officials told us that many of the roads the oil industry is  using were built to handle approximately 600 loads a day and now these  roads can see thousands of heavy truck loads per day. Officials also told  us that state-wide, truck traffic accounts for approximately 18 percent of  all traffic, but in development areas truck traffic can account for 35 to 50  percent. As a result, it has been much more difficult to predict where the  biggest road deterioration is going to happen because it depends on the  location and intensity of shale development. In Pennsylvania, officials told  us the increased volume of trucks has shortened the roads’ normal life  cycle, leading to accelerated deterioration and significant damage. The  costs of shoring up and rebuilding roads to address these impacts are  significant. The Texas Department of Transportation estimated an annual  impact to farm-to-market roads, state highways, and local roads in the  Eagle Ford area of about $4 billion.

section_title: Safety Concerns
paragraphs: Road deterioration and increased truck volumes have created safety  concerns in these states. Reported highway incidents involving crude oil  have increased in recent years in North Dakota and Texas, the two states  we examined with significant shale oil development. In Texas, for  example, the Texas Department of Transportation reported an increase in  highway crashes in the Eagle Ford shale and Permian Basin areas, with  the Permian area seeing a 13 percent increase in roadway fatalities  between 2012 and 2013.

section_title: Actions to Address Impacts and Safety
paragraphs: The following actions are examples of ways state officials said they have  addressed highway infrastructure and safety concerns:

Extraction taxes. Officials in North Dakota told us the state uses taxes  on extracted mineral resources to pay for road improvements. In  2013, the Texas state legislature voted to transfer a portion of the  state’s oil and gas severance tax to pay for road maintenance, a  measure that will go before Texas voters for approval in November  2014.

Use agreements. In Pennsylvania and West Virginia, states have  entered into road-use agreements with energy companies making the  companies responsible for their damage to the roads and maintaining  them. Companies must also pay a bond as part of the agreement.  Officials told us these agreements have helped make companies  more responsible for their impact. For example, in Pennsylvania,  officials told us industry had invested over $750 million in roadway  infrastructure improvements.

Public awareness. Texas launched a public education campaign to  alert drivers to the need to use caution when driving through energy- related work zones.

Although much of the impact has been on rural, nonfederal roads, the  Federal Highway Administration has been involved in helping states to  coordinate information sharing. For example, in 2011, the Federal  Highway Administration hosted an information-sharing meeting between  officials in Pennsylvania and West Virginia, who told us the session was  beneficial.

section_title: Appendix III: Comments from Department of Transportation

section_title: Appendix IV: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts

section_title: Staff Acknowledgments
paragraphs: In addition to the individuals named above, Karla Springer (Assistant  Director), Sara Vermillion (Assistant Director), Melissa Bodeau, Lorraine  Ettaro, Quindi Franco, David Hooper, Andrew Huddleston, John Mingus,  Joshua Ormond, James Russell, Holly Sasso, Jay Spaan, Jack Wang,  Amy Ward-Meier, and Jade Winfree made key contributions to this report.


Question-summary annotations: questions: question: Why does increased oil and gas production present challenges for transportation infrastructure?
answer: Increased oil and gas production presents challenges for transportation infrastructure because some of this increase is in areas with limited transportation linkages.

question: How has pipeline capacity affected oil transportation?
answer: For example, insufficient pipeline capacity to transport crude oil has resulted in the increased use of rail, truck, and barge to move oil to refineries, according to government and industry studies and publications GAO reviewed.
child_questions: question: Why are these changes in transportation a cause for concern?
answer: These transportation limitations and related effects could pose environmental risks and have economic implications. For instance, natural gas produced as a byproduct of oil is burned—a process called flaring—by operators due, in part, to insufficient pipelines in production areas.

question: What is flaring?
answer: For instance, natural gas produced as a byproduct of oil is burned—a process called flaring—by operators due, in part, to insufficient pipelines in production areas.
child_questions: question: Why is flaring a cause for concern?
answer: In a 2012 report, GAO found that flaring poses a risk to air quality as it emits carbon dioxide, a greenhouse gas linked to climate change, and other air pollutants. In addition, flaring results in the loss of a valuable resource and royalty revenue.

questions: question: How has the nature of oil and gas pipelines changed?
answer: Due to the increased oil and gas production, construction of larger, higher-pressure gathering pipelines (pipelines that transport products to processing facilities and other long-distance pipelines) has increased.
child_questions: question: How are these pipelines regulated?
answer: However, these pipelines, if located in rural areas, are generally not subject to U.S. Department of Transportation (DOT) safety regulations that apply to other pipelines, including emergency response requirements.
child_questions: question: Why are these pipelines not subject to these regulations?
answer: Historically, gathering pipelines were smaller and operated at lower pressure and thus posed less risk than long-distance pipelines.
child_questions: question: To what extent is this still true?
answer: But the recent increase in their size and pressure raises safety concerns because they could affect a greater area in the event of an incident.

question: How are new regulations for these pipelines being considered?
answer: In 2011, DOT began a regulatory proceeding to address the safety risks of gathering pipelines, but it has not proposed new regulations. Although states may regulate gathering pipelines, an association of state pipeline regulators' report on state pipeline oversight shows that most states do not currently regulate gathering pipelines in rural areas.

questions: question: How has rail transportation of crude changed between 2008 and 2012?
answer: Crude oil carloads moved by rail in 2012 increased by 24 times over that moved in 2008.
child_questions: question: Why is this increase concerning?
answer: Such an increase raises specific concerns about testing and packaging of crude oil, use of unit trains (trains of about 80 to 120 crude oil cars), and emergency response preparedness.

question: What precautions do crude oil shippers take?
answer: Crude oil shippers are required to identify their product's hazardous properties, including flammability, before packaging the oil in an authorized tank car.

question: What guidance has DOT provided regarding packaging?
answer: DOT has issued safety alerts on the importance of proper testing and packaging of crude oil.
child_questions: question: To what extent is this guidance adequate?
answer: However, industry stakeholders said that DOT's guidance on this issue is vague and that clarity about the type and frequency of testing is needed.

question: Why are unit trains not covered under the DOT requirements?
answer: Additionally, unit trains, which can carry 3 million or more gallons of crude oil and travel to various locations through the country, are not covered under DOT's comprehensive emergency response planning requirements for transporting crude oil by rail because the requirements currently only apply to individual tank cars and not unit trains.
child_questions: question: Why is this a cause for concern?
answer: This raises concerns about the adequacy of emergency response preparedness, especially in rural areas where there may be fewer resources to respond to a serious incident.

questions: question: How have oil and gas extraction techniques improved?
answer: Technology advancements such as horizontal drilling and hydraulic fracturing (pumping water, sand, and chemicals into wells to fracture underground rock formations and allow oil or gas to flow) have allowed companies to extract oil and gas from shale and other tight geological formations.
child_questions: question: How has this affected oil and gas production?
answer: As a result, oil and gas production has increased more than fivefold from 2007 through 2012.

question: How is the safety of the U.S. transportation system maintained?
answer: DOT oversees the safety of the U.S. transportation system.

questions: question: What was GAO asked to review?
answer: GAO was asked to review oil and gas transportation infrastructure issues.

question: What does this report examine?
answer: This report examines (1) overall challenges that increased oil and gas production may pose for transportation infrastructure, (2) specific pipeline safety risks and how DOT is addressing them, and (3) specific rail safety risks and how DOT is addressing them.
child_questions: question: How did GAO collect data for this report?
answer: GAO analyzed federal transportation infrastructure and safety data generally from 2008 to 2012 or 2013 (as available), reviewed documents, and interviewed agency, industry, and safety stakeholders, as well as state and industry officials in states with large-scale shale oil and gas development.