Tag Archives: CSX

Dakota Access pipeline to upend oil delivery in U.S. – Losers to include struggling oil-by-rail industry

Repost from Reuters

Big Dakota pipeline to upend oil delivery in U.S.

By Catherine Ngai and Liz Hampton | NEW YORK/HOUSTON, Aug 12, 2016 12:46pm EDT
Dead sunflowers stand in a field near dormant oil drilling rigs which have been stacked in Dickinson, North Dakota January 21, 2016. REUTERS/Andrew Cullen
Dead sunflowers stand in a field near dormant oil drilling rigs which have been stacked in Dickinson, North Dakota January 21, 2016. REUTERS/Andrew Cullen

It may seem odd that the opening of one pipeline crossing through four U.S. Midwest states could upend the movement of oil throughout the country, but the Dakota Access line may do just that.

At the moment, crude oil moving out of North Dakota’s prolific Bakken shale to “refinery row” in the U.S. Gulf must travel a circuitous route through the Rocky Mountains or the Midwest and into Oklahoma, before heading south to the Gulf of Mexico.

The 450,000 barrel-per-day Dakota Access line, when it opens in the fourth quarter, will change that by providing U.S. Gulf refiners another option for crude supply.

Gulf Coast refiners and North Dakota oil producers will reap the benefits. Losers will include the struggling oil-by-rail industry which now brings crude to the coasts.

The pipeline also will create headaches for East and West Coast refiners, which serve the most heavily populated parts of the United States and consume a combined 4.1 million barrels of crude daily. They will have to rely more on foreign imports.

The pipeline, currently under construction, will connect western North Dakota to the Energy Transfer Crude Oil Pipeline Project (ETCOP) in Patoka, Illinois. From there, it will connect to the Nederland and Port Arthur, Texas, area, where refiners including Valero Energy, Total and Motiva Enterprises operate some of the largest U.S. refining facilities.

“That’s a better and cheaper path than going out West and down through the Rockies,” said Bernadette Johnson, managing partner at Ponderosa Advisors LLC, an energy advisory based in Denver.

CHEAPER THAN RAIL

Moving crude by pipeline is generally cheaper than using railcars. The flagging U.S. crude-by-rail industry already is moving only half as much oil as it did two years ago: volumes peaked at 944,000 bpd in October 2014, but were around just 400,000 bpd in May, according to the U.S. Energy Department.

Rail transport has become less economical for East and West Coast refiners when compared with importing Brent crude, the foreign benchmark, because declining supply out of North Dakota made that grade of oil less affordable.

“If you look at the Brent to Bakken arb, it’s tight,” said Afolabi Ogunnaike, a senior refining analyst at Wood Mackenzie in Houston. “If you look at the spot rate, it’s uneconomical to move crude by rail right now.”

Ponderosa Advisors estimated that the start-up of the pipeline could reroute an additional 150,000 to 200,000 bpd currently carried by rail to the U.S. East Coast and Gulf Coast.

Crude imports into the East Coast are now on the rise, averaging 788,000 bpd this year, with nearly 960,000 bpd in July, the highest level in three years, according to Thomson Reuters data.

On the West Coast, refiners like Shell, Tesoro and BP may have to commit to some railed volumes for longer because of shipping constraints, although it will largely depend on rail economics. They also face declining output from California and Alaska.

Tesoro’s top executive Gregory Goff told analysts and investors last week he expects rail costs to drop as much as 40 percent from the current $9-to-$10 barrel cost to compete with pipelines, in order to move Bakken to its Anacortes, Washington, refinery.

CHANGING TIDES

Rail companies have been trying to adapt. CSX Corp, which runs a network of lines in the eastern part of the country, said it was evaluating potential impacts of the pipeline. BNSF Railway declined to discuss future freight movements, but said that at its peak, it transported as many as 12 trains daily filled with crude, primarily from the Bakken. Today, it is moving less than half of that.

In a recent earnings call, midstream player Crestwood Equity Partners said it was working to capitalize on the pipeline and not be dependent on loading crude barrels onto trains. That includes building an interconnection to its 160,000 barrel-per-day COLT crude rail facility in North Dakota.

As refiners bring in more barrels from overseas, Brent’s premium over U.S. crude will eventually widen. On Thursday, December Brent futures settled at a 97-cent premium to U.S. crude, one of its widest premiums this year.

Separately, Bakken crude, a light barrel, could rise further due to the additional competition, especially as production is still falling. Bakken differentials hit a six-month low earlier this week of $2.65 a barrel below WTI, according to Reuters data, but rose to a $1.80 a barrel discount by Thursday.

(Reporting by Catherine Ngai in New York and Liz Hampton in Houston; Editing by David Gregorio)

Train Carrying LPG Derails in West Virginia

Repost from Natural Gas Intelligence / Shale Daily

Train Carrying LPG Derails in West Virginia

Jamison Cocklin,  December 28, 2015

A CSX Corp. train carrying liquefied petroleum gas (LPG) derailed early last Thursday in Wetzel County, WV, but no injuries or propane leaks were reported.

Six cars went off the tracks at a rail yard in New Martinsville, about 50 miles south of Wheeling, and four tipped over, CSX said. The cars were not damaged, but it remains unclear what caused the derailment. Both CSX and the Federal Railroad Administration are expected to investigate the cause. First responders said the incident did not affect nearby neighborhoods.

The incident occurred at about 2:45 a.m. EST and forced the company to shut down the stretch of tracks. Public safety officials said no gas leaks were discovered and added that the cars had a double steel casing that likely prevented any leaks.

LPG deliveries via rail in the region have increased with the rise in natural gas liquids production from the Appalachian Basin. Earlier this year, a 109-car CSX train carrying Bakken Shale crude oil derailed in the Mount Carbon area of West Virginia, about 35 miles southeast of Charleston. No injuries were reported, but about 19 rail cars exploded after they derailed (see Shale Daily, Feb. 20).

AP: Railroads beat back new safety rules after derailments

Repost from the Boston Herald

AP: Railroads beat back new safety rules after derailments

By Matthew Brown and Michael Kunzelman, December 05, 2015
FILE -In this Monday, Feb. 23, 2015, file photo, clean up continues near Mount Carbon, W.Va., where a train derailed and sent a tanker with crude oil into the Kanawha River. A little-known truth about North American railroads: No rules govern when rail becomes too worn down. Since 2000, U.S. officials blamed rail wear as the direct cause of 111 derailments causing $11 million in damage. (AP Photo/Chris Tilley, File)

A pair of train derailments in 2012 that killed two people in Maryland and triggered a fiery explosion in Ohio exposed a little-known and unsettling truth about railroads in the U.S. and Canada: No rules govern when rail becomes too worn down to be used for hauling hazardous chemicals, thousands of tons of freight or myriad other products on almost 170,000 miles of track.

U.S. transportation officials moved to establish universal standards for when such steel gets replaced, but resistance from major freight railroads killed that bid, according to Associated Press interviews with U.S. and Canadian transportation officials, industry representatives and safety investigators.

Now, following yet another major accident linked to worn-out rails — 27 tanker cars carrying crude oil that derailed and exploded in West Virginia earlier this year — regulators are reviving the prospect of new rules for worn rails and vowing they won’t allow the industry to sideline their efforts.

“We try to look at absolutely every place where we can affect and improve safety,” said Federal Railroad Administrator Sarah Feinberg. “Track generally is the place that we’re focusing at the moment, and it’s clearly overdue. Rail head wear is one place in particular that we feel like needs to be addressed as soon as possible.”

An official announcement on the agency’s intentions to revisit rail wear is expected by the end of the year.

In the meantime, federal regulators haven’t taken the positive steps that they need to, said Ronald Goldman, an attorney for the families of the two 19-year-old women who died in a 2012 derailment outside Baltimore.

“It’s a lack of will, not a lack of ability, in my opinion,” he added.

Industry supporters argue that the seven major freight railroads in the U.S. and Canada are in the best position to know what is going on with their lines, including when they need to be replaced or have the maximum speeds for trains traveling on them lowered. They also note a long-term decline in accidents that has reduced the frequency of derailments by more than 40 percent since 2000.

All sides agree it’s difficult to pinpoint how many accidents are tied to worn rail. Since 2000, U.S. officials blamed rail wear as the direct cause of 111 derailments causing $11 million in damage.

That’s less than 1 percent of all accidents, yet it masks a broader safety dilemma: Years of massive loads rolling over a rail will exacerbate defects in the steel, such as cracks or fractures. Investigators ultimately list the defect as the cause of a derailment, but it might never have been a problem if the rail had not been worn down.

“Rail defects are internal and rail wear is external, and when external meets internal, that’s when problems may arise,” said John Zuspan of Track Guy Consultants, a Pennsylvania firm that offers track inspections, safety training and other services for railroads.

Two accident causes in particular have the strongest correlation with worn-out rails: “detail fractures” that result from fatigued metal, and “vertical splits” in the head of the rail, where it makes contact with a train’s wheels, according to the FRA.

Those problems caused a combined 1,200 derailments with $300 million in damages, three deaths and 29 people injured in the U.S. between 2000 and the present, according to accident records reviewed by the AP.

Among them was the July 2012 derailment of a Norfolk Southern Railway train hauling ethanol and other products through Columbus, Ohio. Seventeen cars derailed, including three hauling highly flammable ethanol that exploded into flames, triggering an evacuation of surrounding neighborhoods.

A month later, another accident occurred involving a CSX Transportation train hauling coal over a bridge along Main Street in Ellicott City, Maryland, outside Baltimore. Twenty-one cars derailed when the company’s worn-down rail split beneath the weight of the coal cars. The two college students sitting on the bridge died, crushed by thousands of pounds of spilled coal.

The victims’ families reached a settlement with CSX last year for undisclosed terms. Goldman, the families’ attorney, said he pressed federal officials for a forum that would allow his clients to testify about the issue, but “nothing really happened.”

A month after the CSX derailment, federal regulators asked the Rail Safety Advisory Committee — a panel created by the Railroad Administration to include the industry and others in fashioning safety rules — to craft new standards to reduce the risks of worn-down rail. The committee set up a 116-person working group to tackle the problem, made up of industry representatives, government officials, consultants, researchers and railroad worker unions.

The group included 55 representatives from the major freight railroads and their industry organization, the Association of American Railroads. The FRA had 14 seats at the table and their counterparts from Transport Canada had five.

Following several meetings in 2012 and 2013, the group — which required consensus before recommending action — agreed on voluntary guidance for companies to manage rail wear, but no new regulations.

“There was certainly a lot of pushback and a lot of political pressure put on FRA not to adopt regulations for rail wear,” said Richard Inclima, director of safety for the union that represents track inspectors and a member of the working group. “Rail wear limits were on the table. The industry raised a lot of arguments against rail wear limits.”

“The industry doesn’t want to be regulated,” he added. “That’s no secret.”

The railroads’ opposition was confirmed by others involved with the group’s work including from the National Transportation Safety Board, the FRA and Transport Canada.

Association of American Railroads spokesman Ed Greenberg said the railroads were “unaware of any science-based data supporting rail wear limits.”

NTSB investigator Richard Hipskind, who took part in the Ellicott City and Columbus accident investigations and later served on the rail wear working group, said more research would be needed to establish universal standards.

Railroads have their own internal standards for rail wear, and have replaced more than 30,000 miles of rail since 2010, according to reports submitted by the major railroads to the U.S Surface Transportation Board, a semiautonomous agency under the umbrella of the U.S. Department of Transportation.

Standards vary among railroads and are complicated by differences in how much weight a given line bears, whether it’s in a wet or dry climate, and if the line goes through mountains or involves lots of turns. Those variables can make the difference between well-worn rail that’s still safe and routes that poses a heightened safety hazard, according to industry experts and safety officials.

Greenberg said the industry takes an aggressive approach to identifying and removing defective or worn sections of rail.

“Each railroad has its distinct operating environment and operating conditions that would be factored into this,” Greenberg said. He added that the industry was now interested in “renewed dialogue” with the FRA on the topic.

The AP requested details on rail wear standards from each of the seven major freight railroads — BNSF Railway, Union Pacific, Canadian Pacific, CSX, Canadian National, Norfolk Southern and Kansas City Southern. They either refused the request or referred questions to the railroad association, which also declined to release the standards.

Public attention to train derailments increased sharply after July 2013, when an out-of-control oil train derailed and exploded in Lac-Megantic, Quebec, killing 47 people. One of the most significant changes to emerge from that and other accidents involving crude and ethanol was a mandate for companies to phase out or upgrade tens of thousands of tank cars that are prone to rupture.

Those are important changes, said James Horbay, a rail safety engineer with Transport Canada. But what causes trains to come off the tracks in the first place needs to be resolved, he said.

“If you crash an airplane, are you going to say, ‘Let’s build an airplane that’s not going to fall apart when it hits the ground?'” he asked. “Whether rail wear is something that should be looked at is a good question to ask. You’re going right to the cause now.”


Matthew Brown reported from Billings, Montana.  Michael Kunzelman reported from Baton Rouge, Louisiana. 

Deadline for train safety technology undercut by industry lobbying

Repost from the Washington Post

Deadline for train safety technology undercut by industry lobbying

By Ashley Halsey III and Michael Laris October 25 at 10:13 PM


Until a train barreled off the tracks at 9:26 p.m. on May 12, it had been business as usual on Capitol Hill. Among the bills quietly making their way toward a final vote was one that would postpone by several years a multibillion- dollar safety-enhancement deadline facing the railroad industry.

A victory for the railroads, which maintain one of the most powerful lobbying efforts in Washington, seemed all but certain and likely to be little noticed outside of the industry.

But at that moment, an Amtrak train hurtling toward New York City derailed in Philadelphia, turning into a tangle of crushed metal that killed eight passengers and injured 200 more.

Everyone — including the railroad and federal investigators — agreed that the catastrophe could have been prevented by a single innovation called Positive Train Control (PTC). It’s an automatic braking system that federal regulators call “the single-most important rail safety development in more than a century.”

Now, after a period of reflection and several inquiries, Congress once more is on the brink of postponing the deadline for use of PTC. The proposed delay — until at least 2018 — comes in a new regulatory era for the railroads. Trains filled with volatile natural gas or oil have derailed seven times so far this year, and there is fear that one could cause catastrophic explosions as it passes through a city.

A mighty lobby

What has taken place since May provides insight into the influence that effective lobbyists wield in Washington and how ready access to members of Congress has helped one industry fend off a costly safety mandate.

Seven years ago, Congress ordered railroads to have PTC installed by the end of 2015. It was an uncomfortable deadline for the industry, one it argued should be postponed. PTC technology was too complex, the railroads said, and the $14.7 billion cost to equip freight and commuter lines was prohibitive. Federal economists put the cost-benefit ratio at about 20 to 1.

With their lobbyists in overdrive in 2008, the railroads might have persuaded Congress to delay the mandate. But in the middle of that debate, a head-on train collision in California killed 25 people and injured 102 others. The National Transportation Safety Board said PTC could have prevented the accident, and that moved lawmakers to settle on the Dec. 31, 2015, deadline.

The NTSB says it has investigated 145 rail accidents since 1969 that PTC could have prevented, with a toll of 288 people killed and 6,574 people injured.

In the years since Congress moved to finalize the deadline in 2008, the railroad industry has spent $316 million, according to the Center for Responsive Politics (CRP), to maintain one of the most savvy lobbying teams in Washington. It also contributed more than $24 million during the same period to the reelection efforts of members of Congress, targeting in particular the chairmen and members of key committees that govern its business.

In 2011, the chairman of the House subcommittee on railroads spoke out at a hearing, denouncing the PTC mandate as “an example of regulatory overreach.” He said PTC would have “a very, very small cost-benefit ratio.”

Since then, that chairman, Rep. Bill Shuster (R-Pa.), has risen to lead the full House Transportation Committee. Late last month, he introduced a bipartisan bill to extend the PTC deadline to at least 2018, and beyond if the “railroads demonstrate they are facing continued difficulties.”

“Railroads must implement this important but complicated safety technology in a responsible manner, and we need to give them the necessary time to do so,” Shuster said in a statement announcing the bill.

Since taking office in 2001, Shuster has received campaign contributions of $446,079 from the railroad industry, according to the CRP, with $141,484 of it coming in the 2013-2014 election cycle.

Money flows readily to the chairs of powerful committees, but other members of the House Transportation Committee also have benefited from railroad contributions. In the 2013-2014 election cycle, committee members received more than $1.25 million in direct contributions to their campaigns. As of the end of September, the railroads had pitched another $721,742 at the House committee members.

The Senate also has benefited from the railroad industry’s largesse, according to the CRP, with 77 senators receiving nearly $1.5 million in campaign contributions in 2013-2014.

Outside the Beltway, massive contributions may sound like the cost to buy a vote in Congress. But in this era of mega-money politics, campaign contributions win something almost as valuable for railroad lobbyists: face time with a member of the House or Senate.

“They call and they get a member meeting right away,” said a senior Senate staff member familiar with the process. “They have a lot of access.”

And that access brings into play what are described as some of the best lobbyists on Capitol Hill, including several dozen who once were staff members or lawmakers in Congress.

Rep. Peter A. DeFazio (Ore.), the ranking Democrat on the Transportation Committee and the recipient of more than $70,000 in railroad campaign money since 2013, says it’s the footwork of the lobbyists, not the campaign contributions, that wins the day.

“In these days, when you have one Wall Street billionaire spend a million bucks [on a campaign], getting a few thousand dollars from a railroad?” he said with a shrug. “The railroads invest a lot of time on the Hill, and they present a pretty good story for the most part.”

Oil boom raises the stakes

Rail safety has never been a more pressing issue than it is today. So far, the people who have died in U.S. accidents that PTC could have prevented have generally been crew members or passengers. That could change in dramatic, catastrophic fashion.

The number of rail tank cars carrying flammable material in the United States has grown from 9,500 seven years ago to 493,126 last year, thanks to the boom in domestic oil produced in the Bakken oil fields.

Those trains rumble from the oil fields in Montana, North Dakota and Saskatchewan, Canada, to refineries on the East, West and Gulf coasts.

This year, seven trains have derailed, either leaking their contents or exploding. All of the U.S. explosions have come in remote rural areas where the erupting fireballs did little damage.

Canada was not so lucky.

In July 2013, a runaway freight train carrying 74 tank cars full of Bakken oil derailed in the town of Lac-Mégantic, setting off an inferno that destroyed 30 downtown buildings and killed 47 people.

Coastal states in the United States and the city of Chicago, the most important railroad hub in the nation, have come up with scenarios that depict the potential damage and death tolls should a train explode in different sections of their urban areas. Chicago, fearing that the plan’s release could cause panic, has declined to make it public.

Sarah Feinberg, acting head of the Federal Railroad Administration, says that worries of a train exploding in the middle of a city have caused her sleepless nights.

“If PTC is not fully implemented by Jan. 1, 2016, we can and should expect there to be accidents in the months and years to follow that PTC could have prevented,” she told the House subcommittee on railroads in June.

Bob Gildersleeve Sr., whose son Bob, a Maryland father of two, was killed in the May crash, said rail companies seem to be evading the mandate with an attitude of: “What are you going to do about it?”

“Is a deadline a deadline?” Gildersleeve asked. “We’re talking about fixing things that will eventually save lives, and you guys haven’t done it. Why?”

Many railroads far behind

The railroads’ pitch for an extension — both loudly in the media and quietly to Congress — has been straightforward. Unless the deadline is postponed:

“Transportation of all goods over freight rail grinds to a halt; the U.S. economy loses $30 billion; household incomes drop by $17 billion; 700,000 Americans lose their jobs; millions of commuters are stranded.”

That was the message Oct. 19 when officials from three commuter rail lines and Association of American Railroads President Ed Hamberger held a conference call with reporters to add their voices to a chorus calling for an extension of the PTC deadline.

“If the congressionally mandated deadline of Dec. 31 is not extended, there will be a transportation crisis in the country with severe economic consequences,” said Michael Melaniphy, president of the American Public Transportation Association.

The call had an unintended subtext; all three of the commuter rail lines represented — Virginia Railway Express, Chicago’s Metra system and California’s San Joaquin Regional Rail Commission — said their installation of PTC would be substantially complete by the end of 2015. Amtrak also promises to have PTC operating in the Northeast Corridor rails that it owns by the current deadline.

But most passenger trains operate on track that’s owned by the freight railroads, and the freight rail lines are far from ready to meet the deadline. The freight companies say that without an extension, all traffic on their lines must halt to comply with the law.

The railroads say they’ve already spent $5.7 billion on PTC installation and are committed to finishing the job. None will meet the Dec. 31 deadline.

“It doesn’t matter how fast the bear is that’s chasing you, if you’re running as fast as you can, you can’t run any faster,” said Frank Lonegro, vice president of the freight rail carrier CSX, which operates more than 21,000 miles of rail in 23 eastern states, Washington and two Canadian provinces.

Some of the big railroads have made progress, while others lag far behind.

One of the largest, the BNSF Railway, has made substantial progress. At the other end of the spectrum, Union Pacific hasn’t fully equipped any of its 6,532 locomotives, according to a Federal Railroad Administration report released in August.

“Union Pacific is pretending [the deadline] is not happening,” said one federal official who reviewed the report.

Union Pacific spokesman Aaron Hunt says that “integrating these technologies into an interoperable system is very difficult,” much like merging medical records into a computerized system, and that the company already has made a $1.7 billion investment, including work on the bulk of its locomotives.

Lonegro’s colleague, CSX spokesman Rob Doolittle, said railroad lobbyists have been telling Congress for years that a 2015 deadline wasn’t realistic.

“In the early conversations, before the law was passed, the industry was identifying 2018 as a reasonable deadline that we thought we could achieve,” he said.

A federal official familiar with those 2008 negotiations offered a different perspective.

“The railroads were in the room, and [Association of American Railroads] and those guys were the ones who said 2015 was doable. They did not embrace the deadline, but they said it was a fair bill,” said the official, who spoke on the condition of anonymity because of involvement in the current negotiations.

“It certainly wasn’t, ‘Oh, we sprung it on the railroads at the last minute,’ as they would like some to believe,” said a staff member who was in the room while the deal was being struck.

When the final regulations were put in place nearly six years ago, federal officials tallied up the expected benefits of having the automatic braking system in place. The cost-benefit analysis put a price tag on crumpled locomotives, train delays, track damage, evacuation costs, the cleanup of hazardous spills and other consequences of the crashes that could be prevented.

Government economists also sought to calculate the human costs in injuries and deaths, using a figure of $6 million for each life that was expected to be saved. Over 20 years, there would be $269 million in savings, they figured, or the equivalent of 45 lives spared. There would be another $200 million in prevented injury costs.

In all, they projected $674 million in safety benefits from the PTC system. It would cost $13.2 billion over 20 years, including maintenance costs, to net those benefits, the economists calculated.

That came out to a cost-benefit ratio of about 20 to 1, a disconnect seized on by railroad executives, lobbyists and lawmakers sympathetic to their needs, such as Rep. John J. Duncan Jr. (R-Tenn.).

“Now, everybody has tremendous sympathy for those families that lost loved ones in the Amtrak accident, but my goodness, now we’re going to be spending billions to make something that already is one of the safest things in the entire world [safer]?” Duncan, who has received $303,250 in railroad campaign support during a 27-year career in the House, said at a June hearing. “And I’m thinking that we would be better off to spend those billions in many, many other ways — cancer research, and everything else.”

But federal rail officials and some outside experts argue that the technology needed to prevent crashes ultimately can transform the future of railroading. More frequent trains, more efficiently deployed across the country, could move more goods while cutting down on expensive fuel costs, dramatically increasing potential benefits.

Some industry executives have embraced this future, while others have pushed back. In a conference call with Wall Street analysts just 19 days before the Amtrak derailment, Union Pacific’s president and chief executive, Lance M. Fritz, predicted Congress would extend the deadline, adding that his company’s lobbyists were “giving feedback and input into our thoughts to help navigate that process.”

Dan Keating contributed to this report.