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Crews work in the area of the derailed tanker cars in Lac-Mégantic, Que., on July 14, 2013. The train derailment and subsequent fires and explosions destroyed much of the downtown area of the picturesque Quebec town.PETER POWER/The Globe and Mail

An investigation into the disaster and its causes.

Long before disaster struck, the 5,900 residents of Lac-Mégantic had grown accustomed to the sight of large oil tankers rolling through their small, tightly knit community in the Eastern Townships of Quebec.

A shortage of oil pipelines in North America had created a new kind of railway industry traversing the continent. In just a few years, tankers carrying crude oil from the resource-rich West had grown from a mere 8,000 in 2009 to nearly 400,000, and Lac-Mégantic is located along one of the main routes to refineries in the East.

Despite this extraordinary boom in oil shipments, there was no change in regulatory oversight, or added safety measures, governing these veritable pipelines on wheels passing through hundreds of small towns across the country.

There were no new rules affecting the chain of 72 crude-laden tankers that barrelled toward the Quebec town on the night of July 6 – the same train that would explode in the worst rail disaster in modern Canadian history. The railway was not required to formulate a plan to deal with catastrophe, in the event the crude train derailed.

Such strategies, known as Emergency Response Assistance Plans, are the primary safeguard against materials designated as dangerous that move through communities. Though these plans are required for shipping everything from chlorine to gasoline, they do not apply to crude – even though regulators had ample opportunity to make that change. For years, Ottawa never saw crude, even in mass quantities, as such a dangerous product.

There were also no rules determining how much crude could be placed on one load, or how many tankers could be strung together without creating the risk of large explosions. There were no regulations requiring railways to place buffer cars periodically through these hazardous loads to help minimize the danger of an explosion. The number of inspectors designed to oversee the industry, meanwhile, had dropped from one for every 14 tanker cars on the rails to just one for every 4,000. In this specific instance, the paperwork relating to the cargo was wrong, underestimating the volatility of the oil, and there are serious concerns about whether the contents were properly tested prior to shipment.

In the four months since the Lac-Mégantic derailment, which killed 47 people and devastated the town, The Globe and Mail has investigated how the oil-by-rail industry came to exist, and what safeguards were put in place by government and regulators to ensure that moving vast quantities of oil on trains didn't expose the public to undue risks.

The investigation, which included gaining exclusive access to the site in North Dakota where the ill-fated Lac-Mégantic train was loaded, has uncovered serious questions about the practices employed by railways and oil companies, and what little they know about the volatility of the oil they ship by rail. Although Transport Canada officials have been reserved on the specifics of the disaster until the government completes its investigation into the Lac-Mégantic derailment, two high-ranking former hazardous materials inspectors in the U.S. agreed to take The Globe inside this new and murky world of crude by rail.

The newspaper conducted dozens of interviews with industry insiders, including railway officials, oil shippers, chemical analysts, inspectors and regulators, and obtained documents through Access to Information laws. What emerges is a disturbing picture of regulatory loopholes, government indifference and systemic failures in oversight that have, in a relatively short period of time, allowed railways to operate without close scrutiny on their way to making significant new revenue on oil shipments.

But who allowed this to happen? As more than 80,000 barrels of oil per shipment began to move on rails designed more than a century ago for shipping less volatile cargo such as lumber, coal or grain, minimal checks and balances were put in place. When the decision was made to begin shipping such huge amounts of oil by rail, the industry required no approval from government or regulators to proceed, even though documents obtained by The Globe show that U.S. government officials knew that moving such a "high concentration of hazardous materials" was inherently more risky.

"This was the worst accident in my 40 years of rail experience with hazardous materials, killing that many people," Ed Pritchard a former senior hazardous materials inspector for the Federal Railroad Administration in Washington, said of the Lac-Mégantic derailment. "I don't recall oil shipments ever being a problem. Now all of a sudden they're running 100-car trains of oil."

And this oil, it turns out, was a particularly volatile form of crude.

As Mr. Pritchard knows from his years of inspecting railways, and sharing insight with other inspectors, not all crude is the same.

"Some of it, I was told, it's damn near close to gasoline," he said.

High risk, low oversight

Before the oil boom, state legislators in North Dakota faced a tough decision: what to do with miles and miles of useless and decaying railway tracks. The rails were becoming too expensive to maintain, but they were no use to a dwindling industry that was shipping fewer loads of grain every year, and had all but abandoned the line.

Lacking a better solution, the state decided to turn the track into a bike path.

Had that plan been put in place, history might be much different. But before the old rail lines could be torn from the ground, something happened: North Dakota struck oil – so much that there were not enough pipelines to move it. And rail suddenly became popular again.

In fact, the roots of the Lac-Mégantic derailment were planted five years ago, by an offshoot of Enron Corp., the failed energy giant. Enron Oil and Gas, or EOG Resources as it is now known, was among the first energy producers to begin exploiting the rich Bakken oil reserves that straddle much of North Dakota and parts of southern Manitoba and Saskatchewan.

But EOG had a problem: It needed a way to get that oil to refineries.

New pipelines took years to build, but trains were a relatively quick and easy solution. The tracks were already in place and the railroad companies were eager for new business. Although oil had never been shipped in large quantities by rail – in 2008 not a single barrel of oil produced in North Dakota left by train – there was no reason it couldn't be, EOG believed.

In the early 1900s, the railway industry came up with a new concept to move large quantities of grain, called the unit train. These were trains of 80 to 100 cars, comprised entirely of the same product, which travelled on an express route from prairie to port as a way to speed up commerce. Although unit trains were historically used primarily for non-hazardous materials, EOG saw no reason why it couldn't move 100 cars of oil quickly down the tracks. Regulators saw no problem with it either.

EOG needed a way to fill the trains quickly, though, since loading 100 cars of oil could take days or weeks if done car-by-car. The company spent 2008 building a vast crude loading facility the size of 26 football fields on the vacant North Dakota prairie, where tanker cars were filled with oil using more than a dozen pumps working in tandem, then sent quickly on their way.

Speed was the key ingredient. According to an internal management presentation obtained by The Globe, EOG had invented a way to fill 100 rail tankers in about half a day. On Jan. 31, 2008, the first unit train of oil rolled out of North Dakota on its way to Oklahoma, and the industry changed forever.

"EOG was the godfather of this industry," said a senior industry official who spoke on condition his name not be used, fearing for his job in the wake of the Lac-Mégantic disaster. "Before that, we hadn't shipped very much crude by rail at all."

EOG's business boomed and other companies rushed to build similar loading facilities. By 2012, more than a dozen of them were in operation or slated to be built. But to move this much oil, neither the railways nor the oil companies needed to ask permission.

According to interviews with rail industry personnel and former hazardous materials inspectors, neither Transport Canada nor the U.S. Department of Transportation differentiated between the danger of moving a single car filled with crude oil, and moving a train carrying 100 cars of oil. The industry changed, but the rules overseeing it didn't, said a former top rail inspector.

Alan Roberts spent 43 years at the U.S. Department of Transportation investigating rail accidents, and oversaw the hazardous materials department, based in Washington, from 1975 up until his retirement at the turn of the century. He said Canadian and U.S. regulators have effectively left railways in charge of themselves when it comes to shipping oil, aside from some rudimentary rules governing track usage and restrictions on how fast a train can travel based on its weight.

"The whole distribution configuration has changed," Mr. Roberts said. Yet "there is virtually no regulation that I'm aware of" for moving large amounts of oil.

Meanwhile, the railways were racing ahead and banking unprecedented revenue from moving oil. Not surprisingly, they began to fight fiercely over the unit train business. Glossy brochures sent by railways to oil companies tell of a booming new industry, focusing on the speed of moving oil down the tracks.

A single unit train "can haul 81,000 barrels of crude," says a brochure sent to oil companies by Burlington Northern Santa Fe, the largest oil shipping railway in North America. The brochure captures the boom-time feel of the sector. "BNSF moved 100 million barrels of crude in 2012, and is ready to ship significantly more in the years ahead."

But inside the industry, railways and regulators knew of the possible danger of transporting such vast quantities of crude.

Internal U.S. government documents probing tanker car explosions in 2012 show the Washington-based National Transportation Safety Board was not only aware of potential problems, but concerned about the possibility of a major accident caused by oil unit trains. And if such a derailment were to occur, the board feared the consequences could be exponentially bigger, given the amount of crude being transported.

With the "increasing number of unit train shipments" happening in North America, "the risks are greater because of high concentrations of hazardous materials," warned the documents, which were part of an internal report. "Existing standards and regulations [are] insufficient."

No limits on crude

On the night the oil train exploded in Lac-Mégantic, several things went catastrophically wrong. As has been well documented in the months since the crash, the train, operated by Montreal, Maine & Atlantic, was parked for the night and left unattended, and began to roll down a hill towards the town after the brakes had been improperly applied, picking up speed as it went. When the train crashed, the crude tankers erupted in a series of devastating blasts.

While much of that can be chalked up to human error, the retired inspectors who agreed to speak to The Globe say there is a bigger picture that governments and regulators need to address. Had a unit train comprised of grain, coal or lumber rolled down the same hill, the cars would have still derailed, but the results would not have been nearly as deadly. Oil is different. Eyewitnesses report seeing multiple explosions coming from the 72-car Lac-Mégantic oil train within seconds of the crash, as the crude began to catch fire. Numerous people reported seeing mushroom clouds in the night sky.

But even though oil unit trains are different, and more hazardous, than typical trains, Transport Canada and U.S. regulators did not draw up extra safeguards as the industry began to experience rapid growth. The Globe investigated the rules governing how railroads can ship oil and found most of the operating procedures are set by the railways themselves.

For example, there are no restrictions on how many cars of oil a railway can transport, even though stringing together dozens of cars of oil can create a bigger danger of explosion. The only limit on how much oil can move on the tracks, and ultimately through cities and towns, is dictated by the length of sidings the company has on its line.

The sidings, which are tracks that run parallel to the main line, allow trains to pull over so that another can pass. Currently, the largest sidings in North America allow for 120-car trains. But there is already talk within the industry of constructing longer sidings so that railways can ship up to 140 cars, or more, using unit trains of oil. It amounts to self-regulation: At present, Transport Canada has no rules to regulate the amount of crude riding on the rails.

There are also no rules telling railways how they should assemble their oil trains, including where in the load to place buffer cars, which could help keep fires from spreading, and possibly prevent explosions in the event of a crash.

Many of the rules for shipping hazardous materials were written for trains comprised of mixed goods, called manifest trains, where smaller shipments of dangerous cargo are interspersed with other loads.

The rapidly growing oil-by-rail industry is governed by safety measures that never contemplated kilometre-long shipments of crude.

"There are, in the regulations, car placement requirements," said Mr. Pritchard, who retired as a U.S. Department of Transportation safety inspector in 2010. "You can't have a [hazardous materials] tank car next to a shiftable load, like a car carrying steel girders or telephone poles." The rules also state that hazardous materials must be six cars away from the caboose.

But those rules are out of touch with modern railway practices. For one thing, the railway industry stopped using cabooses in the 1980s. The guidelines haven't been updated.

The only fixed rule that oil unit trains must follow when they assemble their cars is to place a buffer car, which is either empty or full of a non-hazardous material such as gravel, between the locomotives and the first tanker car. In that regard, the train that exploded at Lac-Mégantic was fully compliant with current regulations.

But the use of buffer cars throughout the train could help prevent fires and explosions from spreading, or lessen their impact by parcelling up the shipment. However, this would cost the railways money since they'd have to run more empty cars.

"If you have 100 cars of hazardous materials, all you have to have is at least one buffer car – that's it," Mr. Pritchard said. Although the industry has morphed into something new, the rules and oversight have not kept pace. "The same rules I just described to you have been in place since I started my hazmat training back in the 1960s."

No emergency plan

The facility where the Lac-Mégantic train was loaded with crude sits on the south side of New Town, N.D., a frontier boomtown on the prairies that can't grow fast enough to supply sufficient hotels and restaurants to accommodate the influx of rig workers.

Last summer The Globe gained exclusive access to the site, which is where Miami-based World Fuel Services buys oil from drilling companies for shipment to refineries.

The site, with dual tracks for loading oil, is a testament to efficiency, but also an example of the greater risks created by this new era of oil trains. Each day, or every other day, a Canadian Pacific train backs about 40 empty tanker cars onto each track for filling. Large tanks holding Bakken crude drilled nearby dispense oil into the tanker cars. At the end of the process, engines hook up both 40-car loads and depart as an 80-car unit train. This is how the Lac-Mégantic train began its journey.

The amount of time it takes for crude to be pumped from the ground and loaded onto a train for shipping can be as little as three or four hours.

The reality is that not all crude is checked for critical characteristics such as flashpoint or boiling point, which provide insight into its explosiveness. The introduction of unit trains for oil has created an industry that is sometimes moving too quickly for careful inspection or testing.

But Mr. Pritchard has been to sites where the shippers knew they didn't have to do extensive testing, because of the loose regulations.

"They didn't have to," Mr. Pritchard said. "If they said it was a flammable liquid, and they pretty much knew it was a flammable liquid, that's all they had to say."

The reason for such lax scrutiny stems from the government's general lack of concern about shipping oil in general. For years, Ottawa never saw crude, even in mass quantities, as a more dangerous product.

In 2006, when internal auditors at Transport Canada began examining weaknesses in the department's handling of disaster preparedness, they zeroed in on the little-known Emergency Response Assistance Plans system. These plans, which help first responders such as fire crews deal with emergencies involving hazardous materials, ensure critical equipment – such as specialized foam trucks for extinguishing flames and other hazmat gear – is kept at stops along the route to deal with an accident.

Any company that wants to ship dangerous goods must have an ERAP in place. But when the internal auditors probed how the system worked, according to federal documents, they found troubling weaknesses.

Of the 926 ERAPs the government had approved for hazardous materials shipping, 453 of them were issued with interim approval, requiring followup. However, Transport Canada failed to follow up on roughly half of those interim approvals. In one instance, "one company transported shipments of at least 3,000 litres of flammable propane gas for over 13 years with only interim approval of its plan," the internal audit says.

Another weakness was what the program omitted. Although ERAPs were required for shipping everything from chlorine to gasoline, no emergency plan was needed for moving crude oil. The government did not see oil as potentially dangerous.

The auditors ordered an extensive review, and in 2008 Transport Canada pledged to fix the gaps in its ERAP system. Over the next five years, the department retrained staff and rewrote several of its policies. In April of this year, Transport Canada declared the job complete, and oil was left out of the program.

Three months later, 6.5 million litres of crude spilled from the train in Lac-Mégantic and erupted in a series of major explosions. The fire burned for days as emergency crews struggled to get the blaze under control, using equipment borrowed from nearby towns.

Responding to The Globe's revelations of questionable testing standards by oil shippers, Minister of Transport Lisa Raitt announced last week that the federal government is stepping up its oversight, and is working with U.S. regulators to deploy inspectors to oil-loading facilities to scrutinize crude being shipped to Canada by rail.

Calling the situation "unacceptable," Ms. Raitt said dealing with the matter "is a very high priority."

Yet even with that change, oil is still not part of the ERAP system, so there is still no requirement that shippers put in place an emergency response plan for crude that could save lives.

Claude Dauphin, the mayor of Lachine, Que., and the president of the Federation of Canadian Municipalities, said that problem shouldn't be allowed to continue.

"With what happened at Lac-Mégantic, and what could happen anywhere else in North America, I think we should have the same rules for crude oil. The same thing," Mr. Dauphin said.

No special measures

The investigation into how oil is classified exposes probably the most significant weakness in the system that is supposed to oversee the booming oil-by-rail industry.

Even if the oil on the Lac-Mégantic train had been correctly identified, it would not have changed how the railway operated, known among engineers as "train handling."

Although oil is supposedly tested for volatility, that information is primarily of use to emergency responders so they know the type of hazardous materials they are dealing with, and can set evacuation zones accordingly. It has no bearing on how oil cars are handled while in transit. Crude is shipped in standard tankers known as DOT-111 cars, which have been criticized for being susceptible to corrosion and ruptures. One of the biggest gaps in oversight is that the birth of oil unit trains hasn't required railways or shippers to take any special measures to ship the oil.

The tankers that left North Dakota travelled on a CPR train before being passed off to the MM&A railway for the trip through Lac-Mégantic. But in the only statement it has given since the Lac-Mégantic explosions, World Fuel Services conceded to The Globe that regardless of how the oil was classified at the source, it "would not have changed the manner in which it was handled, transported, routed or responded to by emergency personnel upon MM&A's derailment," said a spokesman for the company.

Nor was the disaster in Quebec a freak, one-time accident. On Nov. 8, a unit train carrying 90 tankers of crude oil from the Bakken fields of North Dakota derailed in Alabama, causing huge explosions. Witnesses said the flames rose 90 feet in the air. Much like the Lac-Mégantic derailment, observers were surprised crude oil would cause such a fire.

When companies began moving the first giant oil unit trains out of North Dakota and into Canada, Transport Canada and the U.S. Department of Transportation took no steps to require companies to handle the potentially explosive cargo any differently than if it were lumber or grain, even though inside the railway industry there was acknowledgment this new practice was much more risky.

In Canada, oil refiner Ultramar knew the risks. Ultramar began using a smaller version of the hazardous materials unit train in 1996 that shipped gasoline and heating oil from a refinery near Quebec City to ports outside Montreal. But after six derailments in eight years, including a 1999 collision that killed two people, the company decided to build a pipeline instead. Ultramar president Jean Bernier called the pipeline a "safer" option.

There have been other instances of unit trains carrying hazardous materials, though they are limited. Illinois Central railway decided to run a unit train of hazardous materials from Louisiana to Michigan in the 1970s, carrying chemicals from plants in the southern U.S. to factories in the Great Lakes region. Because the train was unusual, it was treated with special care: The cars went through a rigorous examination before departing, and the train never stopped for long periods of time – and was certainly never left unattended.

"They gave it a really good inspection before it departed the yards, and they expedited the movement. They didn't have it hanging around different yards, and they weren't running it every day," Mr. Pritchard said.

Fast forward to this summer, and the practices governing the MM&A train were much different. Not only had the struggling railway been granted permission by Transport Canada to operate with only a single crewman – which is exceedingly rare – in order to save costs, but there were few rules governing how the oil train must move.

The Globe learned through its investigation that as the train was making its way into Canada from the U.S., the locomotive was visibly sparking due to a broken piston in the engine. Even though this caused smoke in the cabin, the engineer pressed on. Despite carrying 72 cars of potentially explosive cargo, there are no federal rules to dictate how a hazardous materials train must be handled in such a situation, only a railway's own internal guidelines, which are not made public and are impossible to independently scrutinize.

It was only after the Lac-Mégantic derailment that Transport Canada ruled hazardous materials trains could no longer be operated by a single crewman, and that trains could not be left unattended on a main track.

Until that point, the railway sector had been anxious to convince government that its rules were fine, and that nothing needed changing. According to the federal lobbyist registry, the Railway Association of Canada requested in January of this year to meet with government officials "to assure them that current regulations for dangerous goods transportation are sufficient." The same request was made again in June.

But on July 8, two days after the Lac-Mégantic derailment, the railway association submitted a new version of its request for meetings. This time, the line about current regulations being "sufficient" was conspicuously absent.

Desensitized to risk

Not only did railways not have to seek clearance to start running full trains of crude through cities and towns, governments and regulators have failed to keep pace with the growth of the industry. The trains operate in an environment where there are fewer and fewer inspectors to ensure safety.

This allows railways to operate with very little scrutiny, in an industry where things go wrong with trains all the time – and the Lac-Mégantic train was no different. The Globe has learned that after the train left North Dakota, being pulled by Canadian Pacific, it was actually carrying 78 oil tankers. However, before the train was handed off to MM&A, six cars were removed from the train. When asked about the problem by The Globe, the railway said the cars were removed for unspecified mechanical problems, but refused to elaborate on the reason. The railways are not required to provide greater detail to the public.

The oversight of trains on the rails has diminished dramatically in recent years amid federal cost-cutting and deregulation, including the significant drop in the number of inspectors since the oil unit trains began to roll, said Bruce Campbell, executive director of the Canadian Centre for Policy Alternatives.

"Why did Transport Canada not strengthen enforcement of its dangerous goods regulatory system to handle the spectacular increase of oil transport by rail that has occurred in the last five years?" Mr. Campbell said.

But the shift to fewer regulations has pervaded the sector since 2001, when changes were made to the federal Railway Act that gave the railways control over their own safety management systems rather than having protocol prescribed by the government, which Transport Canada thought would be a more efficient and less-costly system. The plans cover everything from track maintenance to safety and security training.

While railways submit these plans to Transport Canada for scrutiny, they are not closely watched to see if companies are complying after the fact, according to a November report by the Auditor General. As a result, Transport Canada and its inspectors can't have a clear picture of what railways like MM&A are doing. Much of the time, the railways are regulating themselves.

Lax federal oversight in Canada and the U.S. – the rules are kept closely aligned to expedite trade and commerce – has meant trains can pass through cities and towns carrying what they want.

Asked if regulators have any say in the rise of oil unit trains, Nate Moulton, the head of railways for the Maine Department of Transportation, said "not that I'm aware of." Maine is one of the states that North Dakota oil trains pass through. "It's allowed," he said of the oil train boom. "But is it good practice? Fuels are something that have always been moved. Just not in these quantities."

In the wake of the Lac-Mégantic disaster, the railway industry has quoted statistics stating that more than 99.9 per cent of oil shipments by rail arrive at their destination without incident. Railway proponents have also argued that, in many places, towns grew up around the tracks and therefore inherit the risks associated with being located near rails. A century ago, however, when many of the laws that govern the rail system were originally formulated, trains were moving much safer goods, not 100 cars of volatile crude.

Steve Vachon is among those still trying to make sense of what happened in Lac-Mégantic, where he grew up. His father was an engineer who ran trains down those same tracks in Quebec. Back then, oil was never shipped in such huge quantities. There was no such thing as an oil unit train.

"I think we've become desensitized [to risk]," Mr. Vachon said. "You see the oil come through – you see it all the time, there's a lot of it – and you just kind of convince yourself that it's safe."

Follow Jacquie McNish on Twitter: @jacquiemcnishOpens in a new window

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