Reuters has reported that shares of Whiting Petroleum Corp., Continental Resources Inc., and other top crude oil producers in the Bakken shale formation plunged on Jan. 2 after a US government agency said that oil produced there may be extra flammable.
On Jan. 2, the Pipeline and Hazardous Materials Safety Administration, which is part of the US Department of Transportation, stated that oil extracted from the Bakken shale formation "may be more flammable than traditional heavy crude oil."
Whiting and Continental, the largest Bakken producers, saw their shares fall more than 3.5% after the announcement. Shares of Oasis Petroleum Inc., Kodiak Oil & Gas Corp., and Northern Oil & Gas Inc. saw similar drops. Crude oil prices also fell, contributing to the decline.
The agency's warning came three days after a BNSF train carrying crude oil collided in eastern North Dakota with another train carrying grain. The resulting explosion led to the temporary evacuation of a nearby town and added to the growing concern about the safety of oil-by-rail shipments. Last July, a runaway oil train, which originated in North Dakota, derailed and exploded in a small town in Quebec, Canada, killing 47 people.
Ron Ness, head of the North Dakota Petroleum Council, commented that the US government should consider updating transportation regulations that currently put crude oil in the same category as ammonia and other chemicals for safety standards. Oil producers are not responsible for their product once it is loaded onto railcars, a process that typically comes as sale of the oil is finalized. Logistics companies often buy oil from producers and arrange to have it shipped via rail or other means, before selling it to the end user.
"When the train leaves the station, (the oil) is in someone else's hands," Ness said.