Air Pollution, Greenhouse Gas Emissions Cost More Than Accidents When Shipping Petroleum

While the policy debate surrounding crude oil transportation costs has emphasized accidents and spills, a new study by Carnegie Mellon University and University of Pittsburgh researchers indicates the debate is overlooking a more serious cost — air pollution and greenhouse gas emissions.

The researchers presented their findings in a paper, titled "The External Costs of Transporting Petroleum Products by Pipelines and Rail: Evidence From Shipments of Crude Oil from North Dakota," published by The National Bureau of Economic Research.

The team included Karen Clay, professor of economics and public policy in CMU's Heinz College of Information Systems and Public Policy, Akshaya Jha, assistant professor of economics and public policy in Heinz College and the College of Engineering's Department of Engineering and Public Policy; Nicholas Muller, the Lester and Judith Lave Professor of Economics at CMU's Tepper School of Business, and Randall Walsh, associate professor of economics at the University of Pittsburgh.

The work was conducted as part of CMU's Wilton E. Scott Institute for Energy Innovation.

"We are the first to construct estimates of air pollution and greenhouse gas costs for movements of crude oil by rail and pipelines," Clay said.

To construct the estimates, the researchers used data on locomotive diesel consumption, pipeline pumping station electricity consumption, locomotive and power plant emission factors and the AP2 integrated assessment model, which maps county level emissions to costs for affected counties. Their estimations also were based on The Pipeline and Hazardous Materials Safety Administration's 2015 study.

The paper is the first to compare the costs of air pollution, greenhouse gas emissions, and spills and accidents across rail and pipelines.

Using data of crude oil transported out of North Dakota in 2014, Muller said the team found "that air pollution and greenhouse gas costs of shipping crude oil by rail are much larger than spill and accident costs."

And the costs are high.

"Air pollution and greenhouse gas costs of moving a fully loaded 100-car train of crude oil from North Dakota to the Gulf Coast are about $150,000 and from North Dakota to the East Coast are $210,000. The total estimated air pollution and greenhouse gas damages for oil shipped by rail from North Dakota in 2014 exceed $420 million," Muller said.

The authors note that air pollution and greenhouse gas costs equal $1,000 per 1 million barrel-miles via rail transportation compared to just under $400 in damages from spills and accidents. Via pipelines, it costs $500 in pollution and emissions costs per 1 million barrel-miles while it costs about $50 for spills and accidents.

Clay said their estimates indicate the costs are more than twice as large for rail and more than eight times as large for pipelines.

For policymakers, these findings are key to helping address the costs that firms impose in a variety of ways, including taxes and/or policies that would make pipelines easier to build, she said. The team said their results suggest that further research is necessary.