Train Wreck in Iowa Dumps 230,000 Gallons of Oil into Floodwaters

A 32-car oil train derailed in northwestern Iowa Friday while crossing the flooding Little Rock River near the town of Doon. The train was carrying crude from the oil sands of western Alberta to Stroud, Oklahoma. The crude belonged to ConocoPhillips (NYSE: COP) and was being transported by BNSF, a wholly owned subsidiary of Berkshire Hathaway Inc. (NYSE: BRK-A).

The derailment and spill are likely to add fuel to the flames of disagreement between proponents and opponents of the Keystone XL pipeline project. On the one hand, proponents are likely to argue that pipelines are much safer than trains; on the other, opponents will say that either form of transportation is a recipe for this kind of disaster.

A Conoco spokesman said that each tank car could hold more than 25,000 gallons of oil (about 600 42-gallon barrels). A BNSF spokesman said that 14 of the 32 oil cars on the train were leaking oil into the flooded river and that about 100,000 gallons of the spilled oil had been contained.

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While the cause for the derailment has not been officially determined, a disaster proclamation by the state’s governor and local officials blamed flooding caused by two days of heavy rain for eroding the soil beneath the railroad tracks.

The argument over transportation safety takes on added meaning as more new pipeline projects are scheduled to move oil from the Permian Basin of west Texas to export terminals in Houston and Corpus Christi and to the nation’s primary pricing point for crude oil, Cushing, Oklahoma. Until those pipelines are completed–expected by the middle of next year–rail and truck transportation of crude will rise as producers try to keep their wells pumping and the oil flowing to market.

But the price differential between pipeline transportation and transportation by rail or truck rose to as much as $15 a barrel earlier this year. That lowers the price producers receive for their oil, not an economic environment conducive to making a profit.

Officials worry that the Iowa spill may cause oil to reach as far south as Omaha, 150 miles downstream from the site of the derailment. The city of Rock Valley, Iowa, has already shut down its water wells and plans to drain and clean them until testing indicates the water is safe to drink.

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