Tag Archives: Canadian Pacific

ABC News: Low Oil Prices Unlikely to Hurt Railroads Much

Repost from ABC News
[Editor: Significant quote: “…even with oil prices falling off a cliff, industry analysts and railroad executives point out that crude shipments still make up just a sliver of the overall freight delivered by rail. What’s more, because fuel is such a huge cost in the industry, railroads are a direct beneficiary of those falling prices.”  – RS]

Low Oil Prices Unlikely to Hurt Railroads Much

By Josh Funk, AP Business News, Jan 5, 2015

The stunning collapse in oil prices over the past several months won’t derail the railroads’ profit engine even if it does slow the tremendous growth in crude shipments seen in recent years.

Carloads of crude oil spiked well over 4000 percent between 2008 and last year — from 9,500 carloads to 435,560 — as production boomed and the cost for a barrel of oil soared into the triple digits.

Those prices have tumbled severely, to just above $50 per barrel Friday, and that has rattled some of the investors who have plowed money into companies like Union Pacific, Norfolk Southern and CSX.

All three of those companies have seen their stock prices slip over the past month, along with major U.S. stock markets.

But even with oil prices falling off a cliff, industry analysts and railroad executives point out that crude shipments still make up just a sliver of the overall freight delivered by rail. What’s more, because fuel is such a huge cost in the industry, railroads are a direct beneficiary of those falling prices.

Crude oil shipments remain less than 2 percent of all the carloads major U.S. railroads deliver. Sub-$60 oil might force producers to rein in spending but railroads ? which spend hundreds of million of dollars every quarter on fuel? will see their costs fall away.

Those falling energy prices have also proven to be the equivalent of a massive tax cut for both consumers and businesses, and railroads stand to benefit from that as well.

Fueled by a rebounding employment as well as rising consumer and business confidence, U.S. economic growth reached a sizzling 5 percent annual rate last quarter, the government reported this month. The rebounding economy is likely to drive even greater demand for shipping.

Edward Jones analyst Logan Purk says the importance of crude oil shipments by rail seems to have been inflated by investors.

“It seems like whatever loss in business they see will be offset by the drop in fuel costs,” Purk said.

The crude oil business has provided a nice boost for railroads at a time when coal shipments were declining. Profits at the major U.S. railroads have been improving steadily along with the economy, reaching $13.4 billion in 2013, up from $11.9 billion in 2012 and $10.9 billion in 2011.

Officials from Union Pacific Corp, Norfolk Southern Corp., CSX Corp. and Canadian Pacific all tried to reassure investors about crude oil shipments during their latest investment conferences.

“I don’t think that we are going to see any knee-jerk reaction. I don’t think we are going to see anything stopped in the Bakken,” said Canadian Pacific CEO Hunter Harrison said of the massive oil and gas fields that stretch from North Dakota and Montana into Canada.

The Bakken region is one of the places where railroads are hauling the majority of the oil because pipeline capacity hasn’t been able to keep up with production.

Through the fall, North Dakota oil drillers remained on pace to set a sixth consecutive annual record for crude oil production.

Justin Kringstad, director of the North Dakota Pipeline Authority, said the lower prices will prompt oil companies to look for ways to reduce costs, but he’s not yet sure how much of an effect it will have on production in the region.

“It’s still a little early to make any firm assessments,” Kringstad said.

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    Federal Inspector General to audit transport of volatile crude by rail cars

    Repost from The Chicago Sun Times
    [Editor: See the Inspector General’s audit announcement here and the PDF notice to the Federal Railroad Administrator here.  – RS]

    Federal IG to audit transport of volatile crude by rail cars

    Rosalind Rossi, October 29, 2014
    A CSX train from Chicago carrying crude oil derailed in April in Lynchburg, Va., forcing the evacuation of hundred.
    A CSX train from Chicago carrying crude oil derailed in April in Lynchburg, Va., forcing the evacuation of hundreds.

    A federal inspector general is launching an audit of whether hazardous materials are being carried safely over the nation’s rails — including highly-volatile Bakken crude that travels through the Chicago area.

    “Due to the public safety risk posed by increases in the transportation of hazardous materials by rail, we are initiating an audit assessing the Federal Railroad Administration’s (FRA) enforcement of hazardous materials regulations using inspections and other tools,” a memo on the website of the Office of Inspector General of the U.S. Department of Transportation said Wednesday.

    The memo specifically cited a fatal July 2013 Bakken oil train derailment in Lac Megantic, Canada, that “highlighted the importance of oversight of hazardous materials being transported by rail.” The Lac Megantic blast decimated more than 30 downtown buildings in the Canadian town and killed 47 people.

    At least eight rail lines carry Bakken crude through Illinois, according to the Illinois Emergency Management Agency. They are BNSF, Norfolk-Southern, Alton & Southern, CN, CSX, Indiana Harbor Belt, Union Pacific and Canadian Pacific. Maps provided by BNSF to the Illinois emergency agency indicated BNSF rails carry Bakken through Cook County.

    A candlelight vigil about what protestors called “bomb trains” was held July 10 at the BNSF terminal at 16th Street and Western Ave out of fear that black tank cars observed there with  placards indicating they held flammable petroleum were actually carrying Bakken crude. The protest was among those waged nationally to observe the one-year anniversary of the Lac Megantic disaster.

    “We saw 47 people killed in Lac Megantic,’’ Debra Michaud, an organizer of the Pilsen protest, said at the time. “A bomb train explosion in Pilsen or Little Village would be many times that.’’

    In April, a CSX train traveling from Chicago and loaded with crude oil derailed and exploded in Lynchburg, Va.. The incident shut down roads and bridges and forced the evacuation of hundreds. No one was injured or killed.

    The crash was among series of accidents across North America involving railroads’ crude oil shipments, which have surged dramatically as oil production rises in regions like North Dakota’s Bakken shale and western Canada.

    Wednesday’s inspector general memo noted that crude oil shipments have increased from 9,500 carloads in 2008 to 407,761 in 2013 — a more than 4000 percent jump.

    Mayors Karen Darch of Barrington and Tom Weisner of Aurora have been particularly vocal about the increasing transport of volatile crude and other dangerous products. They say their residents face frequent traffic jams caused by long trains carrying volatile liquids and worry about the sturdiness of tank cars holding such liquid.

    Some volatile fluids are being transported in the equivalent of the “Ford Pinto” of rail cars and such tankers should be upgraded, Darch has contended.

    Darch Wednesday welcomed the IG audit as a positive development.

    “We are all concerned about public safety risk and hopefully this report will have suggestions for further enhancing public safety,” Darch said.

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      Canada may require new electronically controlled brakes (and other measures) for oil trains … by 2020

      Repost from the Globe and Mail, Ottawa, Canada
      [Editor: Significant quote: “Electronically controlled air brakes are favoured by some rail-safety advocates because they allow an engineer to apply the brakes on all of a train’s cars at the same time – regardless of how close they are to the locomotive.  In contrast, traditional air brakes rely on a signal that begins from the locomotive and moves car by car toward the back of the train. On longer unit trains such as those typically used to haul crude oil, rail cars near the back of the train won’t receive the signal as quickly, increasing the risk of a derailment when the brakes are applied suddenly.”  – RS]

      Putting the brakes on train derailment

      By Kim Mackrael, Aug. 15 2014

      The federal government is mulling a plan to require new electronically controlled air brakes for rail cars that haul dangerous goods such as crude oil and ethanol after a series of explosive oil-train derailments in Canada and the United States.

      A consultation document sent to the railway transportation industry last month laid out Transport Canada’s proposal for a new class of tank car, including the new air brake system and full head shields to prevent punctures. Older-model DOT-111 tank cars have been heavily criticized as prone to puncture and corrosion.

      Electronically controlled air brakes are favoured by some rail-safety advocates because they allow an engineer to apply the brakes on all of a train’s cars at the same time – regardless of how close they are to the locomotive.

      In contrast, traditional air brakes rely on a signal that begins from the locomotive and moves car by car toward the back of the train. On longer unit trains such as those typically used to haul crude oil, rail cars near the back of the train won’t receive the signal as quickly, increasing the risk of a derailment when the brakes are applied suddenly.

      Don Ross, who led the Transportation Safety Board’s investigation into last year’s rail disaster in Lac-Mégantic, Que., said the agency generally supports the use of the electronically controlled brakes because they can improve rail safety, particularly on longer trains. “It’s encouraging, now, that they’ve got out for discussion a very good standard,” Mr. Ross said in a recent interview.

      “We would be very happy to see the industry adopt that.”

      Transport Minister Lisa Raitt told The Globe and Mail on Friday that she had already begun consultations on the matter, but has so far heard that the industry does not believe electronically controlled air brakes are necessary. “The ones that I’ve been speaking to say it’s too difficult to implement in the North American market,” Ms. Raitt said, adding, “That’s the consultation so far, but we’re still gathering information right now.”

      One concern with electronically controlled brakes is that the system would need to be installed on all of a train’s cars for it to function properly, a factor that would limit railways’ flexibility in assembling longer or mixed trains.

      In addition to the new air brake system, the proposed new standard includes full head shields to prevent puncture, improved top-fitting protection for the pressure release valve, mandatory thermal jackets to prevent overheating, and new standards for bottom outlet valves to prevent leaks during an accident.

      The standard goes beyond requirements announced in April for a three-year phaseout or retrofit of pre-2011 tank cars used to haul crude oil. Those rules included half-head shields, top-fitting protection and thicker steel.

      The new proposal would give industry until May, 2020, to start using the next-generation cars to move the most dangerous flammable liquids, classified as Packing Group 1. New or retrofitted cars would be required for moderately dangerous flammable liquids by May, 2022, and for all flammable liquids by May, 2025.

      A spokesperson for Canadian Pacific said on Friday that the company is evaluating Transport Canada’s proposal, but did not comment on any specific aspect of the proposed change. Canadian National said it is reviewing the proposal and would provide comments to the regulator as part of the consultation process.

      Last month, U.S. regulators issued three possible requirements for next-generation DOT-111 tank cars.

      The toughest standards proposed by the U.S. are similar to the Transport Canada proposal and include electronically controlled air brakes.

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