IN the first part of 2014, U.S. shale drillers watched with growing alarm as rail regulators contemplated tough new oil-by-rail rules, fearing rapid changes might slow shipments from North Dakota’s Bakken fields and force them to curtail production due to a lack of new pipelines.

    What a difference a year makes.

    Now, with beat-down oil prices slamming the brakes on the shale industry’s breakneck growth, even tough new rules on phasing out older oil-tank cars and speed restrictions announced Friday are unlikely to thwart new production, experts say.

    The deceleration of growth in the shale plays has taken the pressure off rail operators to make up for a shortfall in pipeline capacity, particularly from North Dakota’s Bakken region, which relies on trains to ship as much as 60 percent of its output, according to state figures.

    “Oil producers have more to worry about than new rail regulations,” Cleo Zagrean, a transportation analyst with Macquarie Securities, said Friday.

    The new regulations call for phasing out or upgrading the oldest variety of oil tank cars, DOT-111s, within three years, and retrofitting newer CPC-1232s within five years — a timeline that was shorter than generally expected last year but less aggressive than some analysts had recently feared.

    That should give rail companies and tank car owners enough time to implement certain provisions, and manage higher cost, without causing a massive shock to a network that now transports more than a 10th of the nation’s crude oil production.

    Greenbrier Company Inc., one of the country’s leading tank car builders, said the rule offered an “achievable timeline” for retrofitting older cars. It said the upgrades for crude oil cars could be completed in about 3.7 years, according to a report it commissioned.

    Even so, the rules will not be good news for producers, with some of the estimated US$2.5 billion in added rail system costs likely to be passed on to shippers, cutting into local prices (BAK-) that fell to below US$40 a barrel in March, well below the cost of new drilling for many operators.

    Energy research firm ESAI recently estimated that replacing the older cars could add up to US$3 a barrel on shipping costs.

    The unexpected imposition of a new 50 miles per hour speed limit for trains carrying high volumes of crude oil also threatens to complicate logistics for shippers and curtail volumes, said Michael Wojciechowski, an analyst at Wood Mackenzie.

    (SD-Agencies)