Victim compensation after oil train derailment: Big Oil cost of doing business?

Repost from DESMOG

Cost of Doing Business? Oil Companies Agree To Pay For Some of Lac-Megantic Damages, But Not to Solve the Real Problems

By Justin Mikulka, June 21, 2015 – 05:58
Image credit: Wikimedia

Although insisting the industry is not to blame, several of the oil companies involved in the fatal Lac-Megantic oil train accident in 2013 have agreed to contribute to a fund to compensate the families of the 47 victims in that accident.

The Wall Street Journal reported recently that oil companies Shell, ConocoPhillips, Marathon and Irving have all agreed to contribute to the fund to avoid future litigation, along with General Electric and the Canadian government. While the actual amounts contributed by most companies involved are not available, the total fund is reportedly at $345 million. That sounds like a lot of money but still is less than the $400 million retirement package for Exxon’s last CEO, for example.

Canadian Pacific Railway Ltd. hasn’t agreed to the settlement, according to the Bangor Daily News, which reports that the judge in the case has delayed his decision on the settlement. Canadian Pacific has asked the court to shield it from future litigation and challenged the Quebec provincial court’s jurisdiction.

It is no surprise that oil companies would prefer to pay fines of tens of millions of dollars to avoid future litigation as well as duck responsibility for the full cost of the cleanup. Rebuilding the destroyed Lac Megantic property is expected to take as long as eight years and as much as $2.7 billion.

This approach has proven successful for the oil and rail industry in the past. In 2009, when a Canadian National (CN) ethanol train derailed in Cherry Valley, Illinois resulting in a fire and the death of one woman and injury to several others, the railroad paid the surviving family members $36 million.

The National Transportation Safety Board laid some of the blame for that tragedy on the “inadequate design of the tank cars, which made them subject to damage and catastrophic loss of hazardous materials during the derailment.”

But CN just paid the $36 million and the industry kept using the same inadequate DOT-111 tank cars to move ethanol and crude oil. It was the DOT-111 tank cars that were involved in the Lac-Megantic accident four years later, and the same tank cars that the oil industry is currently fighting to keep on the rails as long as possible.

There is no question it is far more profitable for the oil and rail industries to continue to use unsafe rail tank cars and to just pay off the families of the victims or for environmental damages from oil spills after any accidents than to invest in safer tank cars.

Canadian National has had two oil train derailments already in 2015 which the company reports have cost it $40 million. However, CN still reported over $700 million in net income for just the first quarter of 2015.

Business as usual in the oil-by-rail industry is highly profitable. Which is why the oil and rail industries are fighting against any safety measures that would require investment and cut into profits.

After the faulty tank cars, the two other issues the oil industry has fought against are modernized braking systems and removing the volatile and explosive natural gas liquids from the oil itself via stabilization.

Both of these proven safety measures would cost the industry billions of dollars to implement. So they haven’t done anything. It is far more profitable to live with the consequences of some accidents and make relatively small payouts to avoid lawsuits than it is to invest in safe alternatives.

In 2013, the year of the Lac-Megantic disaster, the big five oil companies made $93 billion in profits. Fines and settlements like those resulting from oil train disasters or deadly refinery accidents are simply a cost of doing business. And for these companies, it turns out to be a very small cost when compared to the profits.

In a forum on rail safety held in Albany, NY this month, emergency first responders from three oil train accidents (Lac-Megantic, Lynchburg, Virginia and Galena, Illinois) recounted their experiences dealing with oil train fires and explosions. While offering excellent insights to the risks involved with oil-by-rail, there also was insight into how the rail companies responded once the accidents occurred.

For both the Lynchburg and Galena accidents, it was noted that the rail companies were on the scene almost immediately. And they rebuilt the tracks and got them back in operation as soon as possible because in Galena, rail downtime was costing the company $1 million an hour. When money is at stake, the rail companies jump into action.

Did the rail company jump into action the day before the Lynchburg rail accident when an inspection revealed a defect in the track in Lynchburg? No.

At the forum in Albany, Lynchburg Battalion Chief Robert Lipscomb summed up the situation nicely.

“You got to remember their business is making money. Our business is taking care of emergencies. So sometimes those two don’t line up exactly right,” Lipscomb said.

When your business is making money, it is much easier to accomplish your goals by lobbying regulators to ensure weak regulations and paying out meaningless fines when something goes wrong than to invest in safety.

The oil trains will return to Lac-Megantic in 2016, with the same inadequate tank cars and 19th century braking systems. And they will be full of unstabilized, dangerous and very profitable oil.

New Brunswick derailment: some tank cars fared better than others

Repost from McClatchy DC News

Tank car upgrades effective in derailments, Canadian report shows

By Curtis Tate, McClatchy Washington Bureau, June 19, 2015

Tank car improvements required by the U.S. and Canadian governments last month should cut the risk of spills and fires in oil train accidents, Canadian investigators have concluded.

The finding came from the Transportation Safety Board of Canada’s investigation of on a derailment in January 2014 in Plaster Rock, New Brunswick.

While the report pinpointed a broken wheel as the cause, the derailment provided a rare side-by-side comparison of the performance of two different types of tank cars in use for decades on the North American rail system.

A type of tank car called the DOT-112 survived the Plaster Rock derailment with no impact damage, according to the report, released Friday. Four such cars carrying butane derailed.

In contrast, two DOT-111 cars carrying crude oil sustained punctures, spilling more than 60,000 gallons. The spilled oil caught fire.

The DOT-112 cars have features very similar to the new DOT-117 standard unveiled by regulators on May 1. Both include half-inch thick shields that fully protect both ends of the car, thicker 9/16-inch shells and thermal insulation around the tank shell enclosed with an additional layer of steel.

Typically, the DOT-111 cars have 7/16-inch shells and none of the other protections.

As McClatchy reported last year, the DOT-112 was beefed up after a series of catastrophic tank car explosions in the 1970s that killed railroad workers and firefighters and caused extensive property damage. After the 112 was upgraded, the accidents subsided.

But the DOT-111 fleet remained unchanged, even when railroads began hauling larger quantities of ethanol a decade ago, followed by crude oil five years ago.

The Canadian report lists 13 other rail accidents involving crude oil or ethanol since 2005 that illustrate the vulnerabilities of the DOT-111. Three of those derailments took place this year, including two in Ontario and one in West Virginia.

The list also includes the 2013 disaster in Lac-Megantic, Quebec, which resulted in 47 fatalities. The families of the victims and their attorneys earlier this month unanimously ratified a proposed $350 million settlement package.

The U.S. Department of Transportation last month required that new tank cars carrying crude oil and ethanol meet the DOT-117 standard beginning in October. Tank car owners, which are typically railcar manufacturers, financial firms and energy companies, must comply with a series of retrofit deadlines for DOT-111 cars that are spread out over a decade.

The oil industry says the timeline is too short, while environmentalists say it’s too long. Both have since taken the department to court.

NPR: Battle Over New Oil Train Standards Pits Safety Against Cost

Repost from National Public Radio (NPR)

Battle Over New Oil Train Standards Pits Safety Against Cost

By David Schaper, June 19, 2015 3:30 AM ET

A train carrying crude oil derailed in Mount Carbon, W.Va., in February, causing a large fire that forced hundreds of people to evacuate their homes.
A train carrying crude oil derailed in Mount Carbon, W.Va., in February, causing a large fire that forced hundreds of people to evacuate their homes. Steven Wayne Rotsch/Office of the Gov. of West Virginia/AP

The federal government’s new rules aimed at preventing explosive oil train derailments are sparking a backlash from all sides.

The railroads, oil producers and shippers say some of the new safety requirements are unproven and too costly, yet some safety advocates and environmental groups say the regulations aren’t strict enough and still leave too many people at risk.

Since February, five trains carrying North Dakota Bakken crude oil have derailed and exploded into flames in the U.S. and Canada. No one was hurt in the incidents in Mount Carbon, W.Va., and Northern Ontario in February; in Galena, Ill., and Northern Ontario in March, and in Heimdal, N.D., in May.

Stephanie Bilenko of La Grange, Ill. (from left), Paul Berland of suburban Elgin and Dr. Lora Chamberlain of Chicago, are members of a group urging more stringent rules for the oil-carrying trains.
Stephanie Bilenko of La Grange, Ill. (from left), Paul Berland of suburban Elgin and Dr. Lora Chamberlain of Chicago, are members of a group urging more stringent rules for the oil-carrying trains. David Schaper

But each of those fiery train wrecks occurred in lightly populated areas. Scores of oil trains also travel through dense cities, particularly Chicago, the nation’s railroad hub.

According to state records and published reports, about 40 or more trains carrying Bakken crude roll through the city each week on just the BNSF Railway’s tracks alone. Those trains pass right by apartment buildings, homes, businesses and even schools.

“Well just imagine the carnage,” said Christina Martinez. She was standing alongside the BNSF tracks in Chicago’s Pilsen neighborhood as a long train of black tank cars slowly rolled by, right across the street from St. Procopius, the Catholic elementary school her six-year-old attends.

“Just the other day they were playing soccer at my son’s school on Saturday and I saw the train go by and it had the ‘1267’, the red marking,” Martinez said, referring to the red, diamond-shaped placards on railroad tank cars that indicates their contents. The number 1267 signifies crude oil. “And I was like, ‘Oh my God.’ Can you imagine if it would derail and explode right here while these kids are playing soccer and all the people around there?”

New federal rules require stronger tank cars, with thicker shells and higher front and back safety shields for shipping crude oil and other flammable liquids. Older, weaker models that more easily rupture will have to be retrofitted or replaced within three to five years. But Martinez and others wanted rules limiting the volatility of what’s going into those tank cars, too.

Oil from North Dakota has a highly combustible mix of natural gases including butane, methane and propane. The state requires the conditioning of the gas and oil at the wellhead so the vapor pressure is below 13.7 pounds per square inch before it’s shipped. But even at that level, oil from derailed tank cars has exploded into flames.

And many safety advocates had hoped federal regulators would require conditioning to lower the vapor pressure even more.

“We don’t want these bomb trains going through our neighborhood,” said Lora Chamberlain of the group Chicagoland Oil by Rail. “Degasify the stuff. And so we’re really, really upset at the feds, the Department of Transportation, for not addressing this in these new rules.”

Oil trains sit idle on the BNSF Railway's tracks in Chicago's Pilsen neighborhood.
Oil trains sit idle on the BNSF Railway’s tracks in Chicago’s Pilsen neighborhood. David Schaper/NPR

Others criticize the rules for giving shippers three to five years to either strengthen or replace the weakest tank cars.

“The rules won’t take effect for many years,” said Paul Berland, who lives near busy railroad tracks in suburban Elgin. “They’re still playing Russian roulette with our communities.”

A coalition of environmental groups — including Earthjustice, ForestEthics and the Sierra Club — sued, alleging that loopholes could allow some dangerous tank cars to remain on the tracks for up to a decade.

“I don’t think our federal regulators did the job that they needed to do here; I think they wimped out, as it were,” said Tom Weisner, mayor of Aurora, Ill., a city of 200,000 about 40 miles west of Chicago that has seen a dramatic increase in oil trains rumbling through it.

Weisner is upset the new rules provide exemptions to trains with fewer than 20 contiguous tank cars of a flammable liquid, such as oil, and for trains with fewer than 35 such tank cars in total.

“They’ve left a hole in the regulations that you could drive a freight train through,” Weisner said.

At the same time, an oil industry group is challenging the new regulations in court, too, arguing that manufacturers won’t be able to build and retrofit tank cars fast enough to meet the requirements.

The railroad industry is also taking action against the new crude-by-rail rules, filing an appeal of the new rules with the Department of Transportation.

In a statement, Association of American Railroads spokesman Ed Greenberg said: “It is the AAR’s position the rule, while a good start, does not sufficiently advance safety and fails to fully address ongoing concerns of the freight rail industry and the general public. The AAR is urging the DOT to close the gap in the rule that allows shippers to continue using tank cars not meeting new design specifications, to remove the ECP brake requirement, and to enhance thermal protection by requiring a thermal blanket as part of new tank car safety design standards.”

AAR’s President Ed Hamberger discussed the problems the railroads have with the new rules in an interview with NPR prior to filing the appeal. “The one that we have real problems with is requiring something called ECP brakes — electronically controlled pneumatic brakes,” he said, adding the new braking system that the federal government is mandating is unproven.

“[DOT does] not claim that ECP brakes would prevent one accident,” Hamberger said. “Their entire safety case is based on the fact that ECP brakes are applied a little bit more quickly than the current system.”

Acting Federal Railroad Administrator Sarah Feinberg disagreed. “It’s not unproven at all,” she said, noting that the railroads say ECP brakes could cost nearly $10,000 per tank car.

“I do understand that the railroad industry views it as costly,” Feinberg adds. “I don’t think it’s particularly costly, especially when you compare it to the cost of a really significant incident with a train carrying this product.”

“We’re talking about unit trains, 70 or more cars, that are transporting an incredibly volatile and flammable substance through towns like Chicago, Philadelphia,” Feinberg continues. “I want those trains to have a really good braking system. I don’t want to get into an argument with the rail industry that it’s too expensive. I want people along rail lines to be protected.”

Feinberg said her agency is still studying whether to regulate the volatility of crude, but some in Congress don’t think this safety matter can wait.

“The new DOT rule is just like saying let the oil trains roll,” U.S. Sen. Maria Cantwell, D-Wash., said in a statement. “It does nothing to address explosive volatility, very little to address the threat of rail car punctures, and is too slow on the removal of the most dangerous cars.”

Cantwell is sponsoring legislation to force oil producers to reduce the crude’s volatility to make it less explosive, before shipping it on the nation’s rails.

Court delays Lac-Mégantic settlement

[Editor: Liability is a huge – and lingering – issue when it comes to oil train derailments and catastrophic firey explosions.  There have been daily updates this past week on an announced settlement in the massive Lac-Mégantic disaster of July, 2013.  We watch and wait for potentially precedent-setting decisions.  See below.  – RS]

Court delays ruling on 2013 Quebec oil train crash settlement

(Reuters) — A Quebec judge reserved his decision on Wednesday on whether to grant a motion that would clear the way for a settlement between victims of the 2013 Lac-Megantic oil train disaster and dozens of companies and individuals linked to the crash that killed 47 people.  Read More >


Canadian Pacific asks judge not to approve Lac-Megantic derailment settlement

In this July 6, 2013 file photo, smoke rises from railway cars carrying crude oil after derailing in downtown Lac Megantic, Que.
In this July 6, 2013 file photo, smoke rises from railway cars carrying crude oil after derailing in downtown Lac Megantic, Que. Paul Chiasson / THE CANADIAN PRESS

(Calgary Herald) — SHERBROOKE, Que. – Canadian Pacific Railway Ltd.’s lawyers asked a Quebec judge not to approve a proposed $430-million settlement fund for victims of the Lac-Megantic train derailment because they say its terms are unfair to the company.  Read More >


Quebec court to hear arguments in $431 million settlement for Lac-Megantic victims

(Globalnews.ca) – WATCH: A settlement to compensate victims of the Lac-Megantic train disaster may be in danger. Lawyers for Canadian Pacific are questioning the legitimacy of the entire process, just two days before a judge was set to approve the deal. As Mike Armstrong explains, the last minute hiccup could mean a delay of months or even years.  Read More >


 

Canadian Pacific legal challenge plunges Lac-Mégantic settlement into question

(Montreal Gazette) – A lawyer for the defunct railroad at the centre of the Lac-Mégantic train derailment said Canadian Pacific Railway Ltd. is acting deplorably and offensively by attempting to shut down proceedings to distribute more than $430 million to victims and creditors of the 2013 tragedy.  Read More >

 

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