Fear at headquarters

The folks who run the big freight railroads are a frightened lot these days. If they are not, they ought to be. Three times in six months, unit crude oil trains have derailed and cars of oil exploded. Forty-seven people are dead . . . so far.

The railroad executives are frightened (or, again, should be) for three reasons. First, you can’t fix what you don’t know is broken. All three trains originated in North Dakota, two from separate terminals served by BNSF Railway and one from a terminal served by Canadian Pacific. But no matter, all the Class I roads are handling crude oil from the Bakken shale formation in North Dakota, as terminators if not originators. So why are these cars exploding when the tank cars are ruptured in derailments? Nobody knows! Not the railroads, not the producers, not the refiners, and not the government regulators. People have their theories, such as buildup of gas compounds within the tank cars during transportation. But there seems to be something peculiar about the light sweet crude being pumped from the rocks in North Dakota, and until the circumstances which makes this oil so combustible are better understood, railroads are hosts to rolling time bombs. By itself, that’s bad enough because it affects public safety.

Second, these explosive derailments threaten a key new business of the railroads. Refineries on the east and west coasts are crying for North Dakota oil. They are not reached by pipelines from established oil fields in the center of the country. North Dakota oil is priced at a significant discount to what they had been paying for oil from overseas or Alaska, so everyone but the pipelines come out winners. But now, maybe not. These high-profile accidents play to the advantage of the pipeline companies. Kinder Morgan tried and failed to generate enough interest to build a pipeline near Union Pacific’s Sunset Route, from West Texas to California. Maybe the next time Kinder tries, it will attract the customers who spurned it a year ago.

Finally, and most important in my opinion, all this erodes public trust in railroads. You simply cannot overestimate the importance of having the public on your side. The TV commercials being aired with increasing frequency by big railroads and their trade group attest that railroads understand what I am saying. Take away trust, and you invite new layers of regulation while at the same time driving away customers and would-be customers. I feel quite sure that as I write this, environmental groups are organizing an assault on carrying crude oil on trains, and railroads will be the bad guys, whether they deserve to be or not.

The rail industry is united in asking the federal government to order that tank cars carrying hazardous materials such as oil be strengthened and reinforced, even if it costs them business in the short term. BNSF chairman Matt Rose was to meet with South Dakota’s two U.S. senators this weekend, presumably to tell them his railroad takes this seriously.

If so, perhaps BNSF and other railroads should institute some new safety requirements of their own, without waiting to be told. How about requiring that when a crude oil train meets a train on an adjacent track, that only one of the trains be moving? How about restricting the speed of these trains to 30 or 40 mph? There are operating inefficiencies associated with such measures. But in the short term, they are well worth the cost.—Fred Frailey