Here is an article with several comments made by rail financing and leasing executives regarding two different subjects. The first one is about rail financing, and the second one is about regulation. Interestingly, much of the financing topic worries about new regulations on tank cars, and almost the entire regulations topic also worries about new regulations on tank cars. The two topic headings are in bold in the article as follows:
“What is the key issue facing the rail finance/leasing sector in 2014? Why?”
“On the regulatory front, what's your biggest near-term concern ... and why?”
http://www.progressiverailroading.com/rail_industry_trends/article/Rail-finance-and-leasing-What-are-the-key-issues-in-2014--39472
To say the least, the executives appear to be unconvinced that the current improved safety standards being incorporated into new tank cars being built will satisfy the newer standards coming soon. And, there is obvious apprehension about what the new standards will be.
I think these highly informed comments give great insight into the battle that is shaping up over the danger of hauling Bakken crude, and how that problem will be addressed. One comment worries about misguided regulations being foisted upon the railroad industry when it says:
“Public perception influences politics which make regulations and the public not fully informed."
I see an early comment about the "spiraling costs" being a worry as well. It's simple economics; the new reg cars are non-extant, and yet the demand for them will be urgent and protracted. IOW, they are few where the demand is great. It follows that the urgency for them will make them costly for some time, but also that those costs will have to be borne at the far end of the distribution chain. That sobering reality changes the market.
-Crandell
Spiraling costs? Is this a fear or a reality? Or threat? What would it cost to provide the same level of safety for highway vehicles coupled with the actual costs of highway transportation? If rail is safer overall and if rail transportation is cheaper overall, then the costs and cost increases are inevitable. It is American business, so, yes, no matter what the price will go up. Of course, that is, unless somebody comes up with a safer and cheaper way to move the stuff. Move anything.
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selectorI see an early comment about the "spiraling costs" being a worry as well. That sobering reality changes the market.
Yes it does change the market. That much is inevitable from what we know about the cost of changing the tank car fleet so far. It also has the power to kill the market by pricing transportation out of the market. That part is the unknown that depends on the new tank car regulations that are not yet released. A lot of people say the oil has to move one way or the other. No it doesn’t have to move. Or at least Bakken oil does not have to move.
Bakken oil will stay in the ground if it doubles the cost of gasoline compared to gasoline produced from foreign oil.
henry6Spiraling costs? Is this a fear or a reality? Or threat?
It is a fear and a reality that justifies the fear. I am not sure what you mean by a "threat." A threat by who?
The spiraling cost of new regulations is certainly a threat to the oil and railroad industries. It is also a threat to the public. Ironically, however, the public also plays a role in making the threat, to the extent that they fan the flames of new regulations.
Tank cars are already the most expensive production freight car on the rails. They also produce the biggest lease revenue! The shippers will have to bear the entire initial cost for these cars. The aAR has been pushing for this for several years, the car leasing firms have been fighting it. Now, with the 'Feds' involved, it will happen. How much 'over the top' safety features will be in the new regulation remains to be seen.
BNSF has a small fleet of 25,000 gallon tank cars(more than most railroads). They are taking quotes from car builders for 15,000 tank cars to meet the proposed new standards(what-ever they will be). I wonder if BNSF is serious about buying those cars, or is trying to 'push' the tank car leasing companies to action?
Jim
Modeling BNSF and Milwaukee Road in SW Wisconsin
Euclid henry6Spiraling costs? Is this a fear or a reality? Or threat? It is a fear and a reality that justifies the fear. I am not sure what you mean by a "threat." A threat by who? The spiraling cost of new regulations is certainly a threat to the oil and railroad industries. It is also a threat to the public. Ironically, however, the public also plays a role in making the threat, to the extent that they fan the flames of new regulations.
It is all rhetoric and posturing. Of course prices will go up. But what are the alternatives? There are none. We either do it or we don't...but there is a price either way. What all this is about is to who is to end up with the greatest amount of blame; watch the finger pointing...in a circle.
henry6 Euclid henry6Spiraling costs? Is this a fear or a reality? Or threat? It is a fear and a reality that justifies the fear. I am not sure what you mean by a "threat." A threat by who? The spiraling cost of new regulations is certainly a threat to the oil and railroad industries. It is also a threat to the public. Ironically, however, the public also plays a role in making the threat, to the extent that they fan the flames of new regulations. Of course prices will go up. But what are the alternatives? There are none. We either do it or we don't...but there is a price either way.
Of course prices will go up. But what are the alternatives? There are none. We either do it or we don't...but there is a price either way.
Sure there will be a price either way. But the issue is the amount of the price, not whether or not there will be a price.
And contrary to what you say, there definitely is an alternative to a product that is deemed to have too high of a price. That alternative is to not buy it, or to shop for a cheaper product.
I don't see how you can dismiss this by saying that it is all rhetoric and posturing. There is indeed a real issue here.
Actually rail is the alternative. Pipelines were the usual choice before oil companies realized there was a rail alternative. Pipelines have continued to be built to the Bakken, and more projects are in the works, including to the east coast. If rail gets too expensive, they will simply fall back on pipelines.
Remember reading about WW-2 oil trains. Can anyone enlighten us on the differences from then to now ?
News censorship during World War 2 would have prevented any oil train derailments or disasters from being reported.
There was no such thing as instant communications like we have today, and it was easy for the authorities to quash any news that they considered harmful to the national security or aiding the enemy.
Yes rail is the alternative as oil and gas companies found out. The ability to redirect a shipment en route and not be saddled with an empty pipe for long periods of time while paying for it are two reasons they are warming to rail transit.
henry6Yes rail is the alternative as oil and gas companies found out.
Henry,
You brought up the subject of “alternatives” in response to me saying that the rail and oil industries were threatened by the spiraling cost of new regulations. You dismissed that threat by saying, “Of course prices will go up. But what are the alternatives? There are none.”
I can see the following alternatives:
1) Build new pipelines.
2) Buy cheaper foreign oil.
3) Consume less oil.
4) Increase the safety of shipping oil by rail.
Euclid Here is an article with several comments made by rail financing and leasing executives regarding two different subjects. The first one is about rail financing, and the second one is about regulation. Interestingly, much of the financing topic worries about new regulations on tank cars, and almost the entire regulations topic also worries about new regulations on tank cars. The two topic headings are in bold in the article as follows: “What is the key issue facing the rail finance/leasing sector in 2014? Why?” “On the regulatory front, what's your biggest near-term concern ... and why?” http://www.progressiverailroading.com/rail_industry_trends/article/Rail-finance-and-leasing-What-are-the-key-issues-in-2014--39472 To say the least, the executives appear to be unconvinced that the current improved safety standards being incorporated into new tank cars being built will satisfy the newer standards coming soon. And, there is obvious apprehension about what the new standards will be. I think these highly informed comments give great insight into the battle that is shaping up over the danger of hauling Bakken crude, and how that problem will be addressed. One comment worries about misguided regulations being foisted upon the railroad industry when it says: “Public perception influences politics which make regulations and the public not fully informed."
Thanks, To Euclid for posting that article !
My take is sort of contrarian to this problem, and is something we will face around here more and more. Political Impacts on a industry we all have our own field of interests in, and perspectives. This whole 'situation' could be said to exist because of 'politics'' Influences, Good, Bad or otherwise...
Prior to the last national elections the rail industry was rolling along as it had for years, lean years, followed by periods of reexamination of all aspects ( Capital issues for the RRs).. Railroads did their 'thing' and the pipelines as well. The nation was rocking along. 'Fracking' was not a particularly hot issue on the National scene, and the Canadian Tar Sands were there as well, as the 'New' Bakken Oil Shale deposits.
Along came a proposal to build a pipeline, a normal, pretty innocuous proposal in the scheme of things. As we were already as a Nation crisscrossed by thousands of miles of 'safe' pipeline.
But then the Keystone XL pipeline became a major 'cause celebre' in the Activist segment of our society. And as they say " The fight was joined'" . Every aspect of the involvement of the pipeline in things became a talking point to the Media., to be dissected according to the point of view of the 'writer/ reporter'. But Commerce being what it is, the oil was still used by the Petroleum Industry and needed where it could be processed. They remembered how in " Olden times' the railroads used tank cars to deliver most of their products in bulk wherever it was needed. The " Luddite' activists went crazy; seeing their efforts thwarted by Capitalism. Then inevitably, their were incidents ( accidents?) and they were Front Page news, The "Battle was joined!'
So here we are now the politicians saw a chance for publicity, to get their 'face time' and they do what politicians want to do they scream for 'new' regulations and laws with their names on them ( good for their reelections) Regulators regulate, and Industries are left in the position to be first 'reactive' and then later they try to gain the ownership of the issue by being 'proactive'.
So the activist community wins slightly, the pipelines are at capacity and the new capacity is interdicted, as the product still need to get to its' markets'. The Rail industry uses its existing tank car fleet, but the technology is not 100%. So the regulators demand more new technologies in that fleet and hand the bill to the industry to digest and some how make it fit their demands...
Ultimately, all those 'costs wind up as increased costs to the 'consumer'.
Now the question becomes, who gets the brass ring on this merry-go-rouind.
As an example of what another thread topic examined before it went off-topic, the post above is highly politically partisan.
C&NW, CA&E, MILW, CGW and IC fan
schlimm As an example of what another thread topic examined before it went off-topic, the post above is highly politically partisan.
I only see the generic "politicians" and "activists" How can that be partisan?
Norm
The crux of the problem - is not the tank car regulations per se - but that the regulations have yet to be finalized so that everyone, users, providers and finance types know what they are facing and can go about building cars that meet the final specifications.
Never too old to have a happy childhood!
blue streak 1Remember reading about WW-2 oil trains. Can anyone enlighten us on the differences from then to now ?
That question comes up often. I would answer it this way:
1) Traditional oil shipping by rail has involved oil that has not been as volatile and flammable as Bakken oil.
2) Traditional oil shipping by rail has mostly involved smaller quantities. Oil was shipped in unit trains during WWII, but even that example did not rise to nearly the traffic level of Bakken oil today. And the traffic level of Bakken oil today is certain to rise to much greater traffic levels in the very near future.
3) In the past eras such as the time of WWII, oil was seen as an essential, life supporting commodity just like food. Today, much of society demonizes oil and holds it in contempt. So there is less sympathy for the occasional oil accident.
Euclid blue streak 1Remember reading about WW-2 oil trains. Can anyone enlighten us on the differences from then to now ? 3) In the past eras such as the time of WWII, oil was seen as an essential, life supporting commodity just like food. Today, much of society demonizes oil and holds it in contempt. So there is less sympathy for the occasional oil accident.
When everything they do is in someway supported by oil and it's derivitives - without oil they don't have the life they expect and demand to have. Be careful what you ask for, you may get it!
BaltACDEuclidblue streak 1Remember reading about WW-2 oil trains. Can anyone enlighten us on the differences from then to now ? 3) In the past eras such as the time of WWII, oil was seen as an essential, life supporting commodity just like food. Today, much of society demonizes oil and holds it in contempt. So there is less sympathy for the occasional oil accident. When everything they do is in someway supported by oil and it's derivitives - without oil they don't have the life they expect and demand to have. Be careful what you ask for, you may get it!
Euclidblue streak 1Remember reading about WW-2 oil trains. Can anyone enlighten us on the differences from then to now ? 3) In the past eras such as the time of WWII, oil was seen as an essential, life supporting commodity just like food. Today, much of society demonizes oil and holds it in contempt. So there is less sympathy for the occasional oil accident.
Yes I agree that there is a disconnect in the minds of most people holding the anti-oil sentiment. They don’t connect the dots between personally relying on oil as being essential, and wanting it banished from society.
samfp1943My take is sort of contrarian to this problem, and is something we will face around here more and more. Political Impacts on a industry we all have our own field of interests in, and perspectives. This whole 'situation' could be said to exist because of 'politics'' Influences, Good, Bad or otherwise... Prior to the last national elections the rail industry was rolling along as it had for years, lean years, followed by periods of reexamination of all aspects ( Capital issues for the RRs).. Railroads did their 'thing' and the pipelines as well. The nation was rocking along. 'Fracking' was not a particularly hot issue on the National scene, and the Canadian Tar Sands were there as well, as the 'New' Bakken Oil Shale deposits. Along came a proposal to build a pipeline, a normal, pretty innocuous proposal in the scheme of things. As we were already as a Nation crisscrossed by thousands of miles of 'safe' pipeline. But then the Keystone XL pipeline became a major 'cause celebre' in the Activist segment of our society. And as they say " The fight was joined'" . Every aspect of the involvement of the pipeline in things became a talking point to the Media., to be dissected according to the point of view of the 'writer/ reporter'. But Commerce being what it is, the oil was still used by the Petroleum Industry and needed where it could be processed. They remembered how in " Olden times' the railroads used tank cars to deliver most of their products in bulk wherever it was needed. The " Luddite' activists went crazy; seeing their efforts thwarted by Capitalism. Then inevitably, their were incidents ( accidents?) and they were Front Page news, The "Battle was joined!' So here we are now the politicians saw a chance for publicity, to get their 'face time' and they do what politicians want to do they scream for 'new' regulations and laws with their names on them ( good for their reelections) Regulators regulate, and Industries are left in the position to be first 'reactive' and then later they try to gain the ownership of the issue by being 'proactive'. So the activist community wins slightly, the pipelines are at capacity and the new capacity is interdicted, as the product still need to get to its' markets'. The Rail industry uses its existing tank car fleet, but the technology is not 100%. So the regulators demand more new technologies in that fleet and hand the bill to the industry to digest and some how make it fit their demands... Ultimately, all those 'costs wind up as increased costs to the 'consumer'.
Sam,
I agree completely with your take on this subject, particularly your suggestion that the safety issue is being exploited as a cause for the oil opposition with the help of the media and the politicians. Rail did a surprise end run around their pipeline opposition, and they are not amused. Certainly, they will wield their power to even the score.
That power is lobbying the regulators to price oil-by-rail out of the market by forcing the cost up with new regulations for safer tank cars and safer operations. They can easily argue that tank cars should be strong enough to withstand any crash without rupture. That is the logical conclusion to the idea of making tank cars safer by making them stronger. It will sound reasonable to everyone outside of the industry.
Yet, I do not believe that it is possible to reach that goal of an infallible tank car without pricing rail shipping out of the market.
Norm48327 schlimm As an example of what another thread topic examined before it went off-topic, the post above is highly politically partisan. I only see the generic "politicians" and "activists" How can that be partisan?
Thank You, Norm: (Norm48327 )
Believe me, I am very, well aware of the 'turns off the tracks' that some Threads have made around here, and it usually done in a volley of ad Hominem attacks.
I purposefully couched my response to attempt NOT to poke fingers in to individual political sympathies; (to be partisan on one side or the other of this issue.).
My feelings are that this is an issue that many are interested in, and can contribute their insights to that discussion. Yes! I said it is deep in political agendas, and regulatory functions. I would just hope that we could talk about it without wearing our own feelings on our shirt cuffs. The Industry is going to have to get out in front of what I would perceive as a coming tide of regulations that is going to drag the future down by the weight of those regulations.
The current problem in 'changing tank car regulations'; is not directly about the regulations being changed - it is about it is time for the regulators to 'doo doo or get off the pot' when it comes to specifying the 'new' regulations for tank cars. Car owners know the regulations are going to change - they just want to know what the final specifications will be.
Tank car owners need to make financial plans to determine if they can retrofit their existing fleet to the new regulations at a acceptable ROI or if they will have to buy new cars. The longer the regulations exist in limbo, the more uncertainity stalls investment in better cars and a increased level of safety.
samfp1943 I purposefully couched my response to attempt NOT to poke fingers in to individual political sympathies; (to be partisan on one side or the other of this issue.).
My point was that your post is partisan and inflammatory in its tone and language. Sure, you avoid the names of political parties, but partisan politically also refers to issues and groups.
Railroads were founded in politics, from the B&O in 1827, and exist every day in the political world and for every action they take there is a political entity that must be 'coddled' for them to carry through on their intents.
At various points in time railroads have crossed swords with every political persuasion known to man on one topic or another.
The thought of separating railroads from politics it preposterous.
It is not politics we must and want to avoid, it is sword and flame throwing, name calling, insults, and the absence of facts that accompany such discussion that cause the problems in so called "political discussions".
henry6 It is not politics we must and want to avoid, it is sword and flame throwing, name calling, insults, and the absence of facts that accompany such discussion that cause the problems in so called "political discussions".
1. The forum policy has been to exclude politics. You want to change it, take it up with the Kalmbach forum moderators.
2. The use of the term "Luddites" in the poster's remarks is an example of "sword and flame throwing, name calling, insults, and the absence of facts."
3. sam's post also implies some rather unsavory or illegal activities, albeit as a snarky comment: The " Luddite' activists went crazy; seeing their efforts thwarted by Capitalism. Then inevitably, their were incidents ( accidents?) and they were Front Page news, The "Battle was joined!' [my emphasis]
schlimm henry6 It is not politics we must and want to avoid, it is sword and flame throwing, name calling, insults, and the absence of facts that accompany such discussion that cause the problems in so called "political discussions". 1. The forum policy has been to exclude politics. You want to change it, take it up with the Kalmbach forum moderators.
Thanks to Chris / CopCarSS for my avatar.
On March 6, 2014, Senator Heitkamp participated in a Senate Commerce subcommittee hearing about rail safety - which she called for after the December 2013 train derailment near Casselton. Here is a portion of the exchange.
https://www.youtube.com/watch?v=AwIT_PIB63A
In this discussion, Senator Heitkamp focuses on the issue of getting the DOT-111 tank cars out of service quickly. She seems unconvinced that the phase-out is moving quickly enough. Mr. Searles describes what I believe would be considered diminishing returns of safety for each increment of tank car improvement. I would interpret that to mean that a completely safe tank car is unattainable because of rising cost and diminishing returns.
Senator Heitkamp says, “This is not a tradeoff of economics versus safety. We have to make the transportation of this material as safe as humanly possible.”
I would say that there will have to be a tradeoff of economics versus safety in order to not price rail transportation out of the market.
What exactly is the dispute that Senator Heitkamp is referring to when she says this is shaping up to be a regulatory fight? I guess the dispute will be whether the impending new tank car specifications need to exceed the standards of the 1232 tank cars.
EuclidWhat exactly is the dispute that Senator Heitkamp is referring to when she says this is shaping up to be a regulatory fight? I guess the dispute will be whether the impending new tank car specifications need to exceed the standards of the 1232 tank cars.
There will be those who feel that even with the improvements on the spec for the 1232 cars they still aren't safe enough.
Disregarding those who feel the products in question shouldn't be moved at all, we're always going to see folks who feel that things should be "safer." I'd put such folks in the same group as parents who don't think junior should ever get a scrape while playing outside.
I agree with the diminishing returns comment. Eventually you'll reach the point where incremental improvements will increase the cost on a logarithmic scale.
As long as the product has to be transported from A to B, there will be some risk involved. Only so much can be done to reduce that risk. It's not possible to completely eliminate it.
As for the regulatory fight - based on the video, I only see that happening if outside parties try to force conditions that the major players find excessive. It actually sounds like the AAR, API, and whoever that other guy was are pretty much on the same sheet of music. In some ways, I'd view the senator's comment as a threat.
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
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