The cloud over crude oil by rail

Posted by Fred Frailey
on Thursday, November 14, 2013

I salute the Association of American Railroads for getting out in front of the issue of tank car safety today with recommendations for retrofitting most cars that haul hazardous materials, particularly crude oil. A spate of accidents involving spillage and explosion of crude oil call into question the ability of railroads to safety transport this stuff. My reading of the AAR’s recommendations to a government agency leads me to believe the rail industry is meeting this issue head-on, and perhaps at great cost to itself.

What the rail trade group supports, in a filing with the Pipeline & Hazardous Materials Safety Administration, a unit of the Department of Transportation, is that 78,000 tank cars either be expensively retrofitted or not be used to haul oil, ethanol and other hazmat loads.

At issue are the 92,000 DOT-111 tank cars used to move flammable liquids. Of these, only 14,000 are built to the latest industry standards, with outer steel jackets, thermal protection, full-height head shields and high-flow pressure-relief valves. AAR is suggesting that the other 78,000 tank cars be retrofitted with these protections.

There’s a big risk being taken. PHMSA is taking comments from interested parties until December 5. Some time thereafter it will almost certainly issue new safety standards for tank cars handling hazardous liquids. The derailment and explosion of a runaway, unattended Montreal Maine & Atlantic crude oil train in Lac Megantic, Que., this July killed dozens of townspeople and made railroad handling of this traffic a front page issue. New rules are a certainty.

The risk is that PHMSA will adopt AAR’s recommendations or even tougher standards and put them in effect either immediately or within a year or two. Says Robert Pickel, senior VP sales and marketing for National Steel Car: “You can’t jacket a car that is already built.” He is fearful that all 78,000 might be made obsolete overnight.

Of course if that happens you can forget about crude by rail in any meaningful volume for years to come. The car builders (there are four tank car makers, including National Steel Car) have capacity today to built about 25,000 tank cars per year, according to Pickel. Subtract the 10,000 cars to be used for other purposes, and you are left with 15,000 cars for crude oil service. At that rate it would take at least five years to replace those 78,000 cars, should adding outer steel jackets be deemed economically impractical. And all the while demand for crude by rail will likely be growing.

Here’s the rub: Do nothing and as the spills and explosions continue, you’ll have Congress and not PHMSA making the rules, and those rules will be draconian. The AAR statement was issued just days after a crude oil train operated by a Genesee & Wyoming subsidiary derailed over a wood trestle in Alabama, with three cars exploding. It’s unacceptable for trains to blow up all the time, and twice in four months means all the time to me.

So the railroads bit the bullet and said let’s fix this. We’ll see if they pay dearly in the short term, by not having enough crude oil cars in service. — Fred W. Frailey

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