Tag Archives: Tank car manufacture

Tesoro & Phillips 66 building crude railcars stronger than new US rules require

Repost from Reuters
[Editor:  These tank cars exceed the new standard, but still fail on several counts.  For instance, note the closing sentences here: “Hack said Tesoro is talking with Union Tank Car on possibly outfitting crude railcars to add enhanced brakes before the 2021 deadline.  ‘We have some time to make that decision,’ he said.”  You can be sure that every refinery seeking permits for crude by rail will crow that they, too, have ordered newer, safer tank cars.  Get ready, Benicia!   – RS]

EXCLUSIVE-Tesoro building crude railcars stronger than new US rules require

By Kristin Hayes, May 18, 2015 4:59pm BST

(Reuters) – U.S. refiner Tesoro Corp has ordered new crude oil railcars with features that surpass safety standards that federal regulators set this month, executives told Reuters.

The 210 tank cars being built in northern Louisiana are so-called pressure cars, with the same design as those that carry liquid petroleum gases such as propane and butane, gas cargoes that are more flammable than crude oil.

They will be delivered in the coming months after being ordered in early 2014.

The new federal rules for all crude and ethanol railcars built after Oct. 1 of this year do not require strength to the level of a pressure car but are stronger than the standards adopted by the industry in 2011.

Tesoro, like other oil-by-rail players, knew the federal standards were coming and the basics of what they would likely be. But the company went further with a stronger car, “which is the primary thing we control,” C.J. Warner, Tesoro’s head of strategy and business development, told Reuters.

The order was a sign the refiner wanted to get ahead of the coming regulations and avoid potential capacity bottlenecks at companies that build tank cars as shippers must now renovate their fleets.

Booming North American onshore production spurred sharp growth in moving oil by rail, particularly for U.S. West and East coast refiners which otherwise must depend on more costly imports. No major crude pipelines move oil from the Midcontinent west across the Rocky Mountains or east through the Appalachians and densely populated northeastern states.

Fiery derailments, caused in some cases by track failures, have become more frequent as oil-by-rail and crude-only trains carrying 100 cars or more went from nearly nothing five years ago to more than 1 million barrels per day late last year.

Opposition to moving oil by rail spiked on safety concerns, prompting the U.S. Department of Transportation and Canada to impose new railcar safety standards.

Tesoro isn’t the only refiner that didn’t wait for word from the U.S. DOT to order stronger cars.

Phillips 66 confirmed to Reuters that it also last year ordered 350 non-pressurized new cars that mostly match the new DOT standard. Those cars will be delivered by year-end, the company said.

THICKER HULLS

Both sets of new cars have 9/16-inch-thick hulls, steel shields on the front and back and protections for valves and fittings where crude goes in on top and drains out the bottom, as the new rules require, company executives said. Tesoro’s design modifies those fittings to handle crude rather than just LPGs.

Tesoro’s cars also have test pressure specifications of 200 pounds per square inch of internal pressure, twice that for non-pressurized cars. A test pressure is typically 20 to 40 percent of how much pressure it would take for the railcar to burst.

That level of test pressure is standard for cars that transport LPGs or highly poisonous substances such as hydrogen cyanide, according to the Association of American Railroads.

“When we saw the design, we were very comfortable that it would meet the new standards that we anticipated,” John Hack, Tesoro’s head of rail operations, told Reuters.

For Tesoro, which hopes to build the largest oil-by-rail facility in the United States in Washington state, it’s an investment in safety and continued access to cheaper North American crudes.

“It’s very important to us to continue to transport North American crude and get it from the Midcontinent out to the West Coast where it competes very nicely with the foreign crudes,” Warner said.

RETROFITS?

By last year most refiners, including Tesoro and Phillips 66, no longer accepted shipments in older, weaker railcars such as those used on a runaway crude train that careened into the small Quebec town of Lac Megantic in mid-2013, killing 47 people.

Early last year Tesoro needed to replace the last of its older cars and worked with its builder, Berkshire Hathaway Inc’s Union Tank Car, to develop the new design, Warner said.

Tesoro and Phillips 66 aim to use their newest cars in crude trains before deciding whether to order more. Both companies’ fleets meet the 2011 industry standard for cars with 7/16-inch-thick hulls and reinforced valves.

Those 7/16-inch cars don’t have to be thrown out, but to move in crude-only trains, they will need added protections, including ‘jackets’, or an extra layer of steel around the tank, according to the DOT rules.

Neither Tesoro’s nor Phillips 66’s new cars are equipped with specialized brakes that the DOT said crude-only trains must have starting in 2021 or be held to 30 miles per hour. An oil industry trade group is challenging that provision in court.

Hack said Tesoro is talking with Union Tank Car on possibly outfitting crude railcars to add enhanced brakes before the 2021 deadline.

“We have some time to make that decision,” he said.

(Reporting by Kristen Hays; Editing by Terry Wade and James Dalgleish)
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    AP: Fire from W.Va. oil train derailment burns for 3rd day

    Repost from The State, Columbia, South Carolina

    W.Va. oil train derailment was 1 of 3 with safer tank cars

    By John Raby & Jonathan Mattise, Feb 18, 2015,  UPDATED Feb 18, 2015 1:33pm ET
    A fire burns Monday, Feb. 16, 2015, after a train derailment near Charleston, W.Va. Nearby residents were told to evacuate as state emergency response and environmental officials headed to the scene. THE REGISTER-HERALD, STEVE KEENAN — AP Photo

    MOUNT CARBON, W.Va. — The fiery derailment of a train carrying crude oil in West Virginia is one of three in the past year involving tank cars that already meet a higher safety standard than what federal law requires — leading some to suggest even tougher requirements that industry representatives say would be costly.

    Hundreds of families were evacuated and nearby water treatment plants were temporarily shut down after cars derailed from a train carrying 3 million gallons of North Dakota crude Monday, shooting fireballs into the sky, leaking oil into a Kanawha River tributary and burning down a house nearby. It was snowing at the time, but it is not yet clear if weather was a factor.

    The fire smoldered for a third day Wednesday. State public safety division spokesman Larry Messina said the fire was 85 percent contained.

    The train’s tanks were a newer model — the 1232 — designed during safety upgrades voluntarily adopted by the industry four years ago. The same model spilled oil and caught fire in Timmins, Ontario on Saturday, and last year in Lynchburg, Virginia.

    A series of ruptures and fires have prompted the administration of President Barack Obama to consider requiring upgrades such as thicker tanks, shields to prevent tankers from crumpling, rollover protections and electronic brakes that could make cars stop simultaneously, rather than slam into each other.

    If approved, increased safety requirements now under White House review would phase out tens of thousands of older tank cars being used to carry highly flammable liquids.

    “This accident is another reminder of the need to improve the safety of transporting hazardous materials by rail,” said Christopher Hart, acting chairman of the National Transportation Safety Board.

    Oil industry officials had been opposed to further upgrading the 1232 cars because of costs. But late last year they changed their position and joined with the railway industry to support some upgrades, although they asked for time to make the improvements.

    Oil shipments by rail jumped from 9,500 carloads in 2008 to more than 435,000 in 2013, driven by a boom in the Bakken oil patch of North Dakota and Montana, where pipeline limitations force 70 percent of the crude to move by rail, according to American Fuel and Petrochemical Manufacturers.

    The downside: Trains hauling Bakken-region oil have been involved in major accidents in Virginia, North Dakota, Oklahoma, Alabama and Canada, where 47 people were killed by an explosive derailment in 2013 in Lac-Megantic, Quebec.

    Reports of leaks and other oil releases from tank cars are up as well, from 12 in 2008 to 186 last year, according to Department of Transportation records reviewed by The Associated Press.

    Just Saturday — two days before the West Virginia wreck — 29 cars of a 100-car Canadian National Railway train carrying diluted bitumen crude derailed in a remote area 50 miles south of Timmins, Ontario, spilling oil and catching fire. That train was headed from Alberta to Eastern Canada.

    The train Monday was bound for an oil shipping depot in Yorktown, Virginia, along the same route where three tanker cars plunged into the James River in Lynchburg, Virginia, prompting an evacuation last year.

    The train derailed near unincorporated Mount Carbon just after passing through Montgomery, a town of 1,946, on a stretch where the rails wind past businesses and homes crowded between the water and the steep, tree-covered hills. All but two of the train’s 109 cars were tank cars, and 26 of them left the tracks.

    Fire crews had little choice but to let the tanks burn themselves out. Each carried up to 30,000 gallons of crude.

    One person — the owner of the destroyed home — was treated for smoke inhalation, but no other injuries were reported, according to the train company, CSX. The two-person crew, an engineer and conductor, managed to decouple the train’s engines from the wreck behind it and walk away unharmed.

    The NTSB said its investigators will compare this wreck to others including Lynchburg and one near Casselton, N.D., when a Bakken crude train created a huge fireball that forced the evacuation of the farming town.

    No cause has been determined, said CSX regional vice president Randy Cheetham. He said the tracks had been inspected just three days before the wreck.

    “They’ll look at train handling, look at the track, look at the cars. But until they get in there and do their investigation, it’s unwise to do any type of speculation,” he said.

    By Tuesday evening, power crews were restoring electricity, water treatment plants were going back online, and most of the local residents were back home. Initial tests showed no crude near water plant intake points, state Environmental Protection spokeswoman Kelley Gillenwater said.

    State officials do have some say over rail safety.

    Railroads are required by federal order to tell state emergency officials where trains carrying Bakken crude are traveling. CSX and other railroads called this information proprietary, but more than 20 states rejected the industry’s argument, informing the public as well as first-responders about the crude moving through their communities.

    West Virginia is among those keeping it secret. State officials responded to an AP Freedom of Information request by releasing documents redacted to remove nearly every detail.

    There are no plans to reconsider after this latest derailment, said Melissa Cross, a program manager for the West Virginia Division of Homeland Security and Emergency Management.

    Contributors include Joan Lowy in Washington, D.C.; Matthew Brown in Billings, Montana; and Pam Ramsey in Charleston, West Virginia. Mattise reported from Charleston.
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      US House Committee: Members fume over delayed oil tank car rule

      Repost from CQ Roll Call
      [Editor: Significant quote by Oregon Rep. Peter DeFazio on new tank car safety rule: “Get it done, get it done now. Start the production. Create jobs here in America.”   – RS]

      Members Fume Over Delayed Oil Tank Car Rule

      By Tom Curry, Feb. 3, 2015 
      Rep. Jeff Denham, R- Calif., chairman of the House Transportation Subcommittee on Railroads, Pipelines, and Hazardous Materials (Photo By Douglas Graham/Roll Call)
      Rep. Jeff Denham, R- Calif., chairman of the House Transportation Subcommittee on Railroads, Pipelines, and Hazardous Materials (Photo By Douglas Graham/Roll Call)

      Another House hearing and another regulatory agency under bipartisan fire for its slowness in issuing an eagerly awaited rule that will have sweeping effects on several industries.

      Tuesday’s hearing of the House of Representatives Transportation and Infrastructure Subcommittee on Railroads Pipelines and Hazardous Materials was a chance for members and industry spokesmen to assail the Pipeline and Hazardous Materials Safety Administration (PHMSA) not issuing a rule that would tell railroads and rail car manufacturers the standard they need to meet for new oil tank cars.

      Transportation and Infrastructure Committee ranking member Peter DeFazio said that even though PHMSA has known that the older tank cars, designated as DOT-111’s, “are not adequate or safe since 1993, PHMSA has yet to promulgate a rule for new standards. In fact, the industry itself is so frustrated that they’ve proposed a new standard to the agency.”

      But the agency couldn’t act quickly, he said and the rule is “lost somewhere in the bowels of the administration between the agency and the trolls over at the Office of Management and Budget who will further delay the ruling.”

      PHMSA has “managed to mangle the rule by merging it together with operational issues which are much more difficult to deal with and controversial,” DeFazio said.

      PHMSA should simply issue a rule on tank cars: “Get it done, get it done now. Start the production. Create jobs here in America,” he said.

      What’s on people’s mind is the possibility of another Lac Megantic accident, the Quebec oil tank car derailment and explosion that killed 47 people in 2013.

      Greg Saxton, senior vice president of rail car manufacturer Greenbrier, said “if we were to have additional derailments that caused more fatalities, I think we could lose our franchise, the trust that the American people put in us to do this.”

      Saxton said, “You’ve got to get beyond this uncertainty” about the tank car standard.

      He added that “economic forces, the market, will crush an over-packaged commodity,” meaning that market forces will lead shippers to use the older, less safe, and less costly DOT-111 cars until PHMSA requires that they upgrade to a more crash-resistant model.

      Greenbrier has urged PHMSA to quickly adopt what’s called the “Option 2” design of a tank car with thicker steel tank shells and other safety features.

      Subcommittee Chairman Jeff Denham, R-Calif., told Saxton that he, too, wants to see PHMSA and OMB move quickly on the rule.

      But he said he wanted to make sure “that there is not a misperception” among the American people that “our current tank cars are not safe” and “that our industry does not have a safe record.”

      He noted that Greenbrier, the leading car manufacturer, could only build 8,000 new cars a year, so it would take perhaps a decade for that company and others to build new cars to replace all the DOT-111 cars.

      Denham also said the public shouldn’t think “that there’s some magic, quick, fast track to get all of these new tank cars” on the nation’s railroads very quickly.

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        Rail Tank-Car Orders Threatened by U.S. Crude’s Collapse

        Repost from Bloomberg News

        Rail Tank-Car Orders Threatened by U.S. Crude’s Collapse

        By Katherine Chiglinsky, January 22, 2015

        (Bloomberg) — Add tank-car makers to the list of U.S. industries bracing for the effects from the plunge in crude prices.While 2014’s record orders, including an all-time high 42,900 in the third quarter, will drive deliveries this year, according to Susquehanna International Group, manufacturers from Carl Icahn’s American Railcar Industries Inc. to Warren Buffett’s Union Tank Car Co. are facing a decline. New bookings in 2015 may plunge 70 percent, Macquarie Capital USA Inc. said, putting earnings at risk when scheduled deliveries drop in 2016.

        Oil prices down 49 percent since June have crimped investment in U.S. fields including the Bakken range, where horizontal drilling and hydraulic fracturing is more expensive than conventional oil drilling. That has hurt industries from steel to heavy equipment. It also has slowed the boom in oil-by-rail shipping, which along with new federal safety rules, had fueled the record orders.

        “The confidence of the industry has been shaken quite seriously,” Cleo Zagrean, a New York-based analyst for Macquarie Capital said by phone Jan. 15.

        Tank-car maker stocks have suffered amid the oil price decline, with shares of Trinity Industries Inc. dropping 40 percent in the fourth quarter, according to data compiled by Bloomberg. American Railcar shares fell 30 percent and Greenbrier Cos. dropped 27 percent.

        “It’s having an impact already,” said Art Hatfield, a managing director of equity research at Raymond James & Associates Inc. in Memphis, Tennessee. “I think the forward-looking minds are realizing that we may have hit a cyclical peak within the industry.”

        New freight-car orders fell to 37,431 in the fourth quarter, down 13 percent from record highs, according to data from the Railway Supply Institute, reported Thursday. Leasing company GATX Corp.’s deal with Trinity added 8,950 new car orders in the fourth quarter. Those cars will be delivered over a four-year period beginning March 2016.

        Backlogs swelled to a record 142,837 orders the Washington-based RSI said. These may bolster the industry through 2015.

        Throughout last year, buyers piled on requests for cars amid an oil boom in North Dakota and Texas. Freight-car bookings and backlogs swelled to record highs even as West Texas Intermediate crude oil prices fell 14 percent between July and the end of September, according to data compiled by Bloomberg.

        Orders for cars that carry cement and frac sand, a resource instrumental in the U.S. shale boom, declined in the fourth quarter from a record, according to Bascome Majors, an Atlanta-based transportation and rail-equipment analyst for Susquehanna International. Falling oil prices might temper future demand for frac-sand cars, he said.

        Significant Hit

        Oil prices tumbled 18 percent in November and 19 percent the next month, ending the year with the steepest monthly loss in six years, data compiled by Bloomberg show.

        “The oil price drop is a significant hit” to the tank-car industry, Macquarie’s Zagrean said. As customers re-evaluate the cost of new cars, even extensions on orders can weaken manufacturers’ earnings, she said.

        Freight-car producer Greenbrier has dodged order cancellations as oil prices fell. Only one customer approached the company about canceling an order but has yet to call the deal off, William Furman, chief executive officer, said in a conference call Jan. 7.

        Trinity had not seen any “appreciable impact” on its business from the low oil prices in the third quarter, Stephen Menzies, group president of the company’s rail and railcar leasing group, said in an earnings call October 29. The company stands by those comments, spokesman Jack Todd said in a Jan. 21 e-mail.

        Union Tank Car spokesman Bruce Winslow declined to comment on the company’s orders. GATX’s director of investor relations Jennifer Van Aken didn’t return phone calls seeking comment.

        In addition to concerns that low oil prices will threaten demand, the industry faces new regulations spurred by accidents including the July 2013 derailment and explosion in Lac-Megantic, Quebec, that killed 47 people.

        Phase Out

        The U.S. Pipeline and Hazardous Materials Administration plans to issue rules to phase out older rail cars that carry crude in the coming month, Susan Lagana, a PHMSA spokeswoman, wrote in an e-mailed statement Jan. 15. The type of tank car most implicated in spills, known as the DOT-111, would be phased out or rebuilt to meet the new standards within two years for the most volatile crude oil, according to the proposal.

        New rules may create “quite a lot of replacement demand,” Greenbrier CEO Furman said in the earnings call. Currently, the Lake Oswego, Oregon-based company’s tank-car orders comprise just slightly more than a quarter of its backlog, according to company spokesman Jack Isselmann.

        Owners are expected to scrap more than a fifth of an estimated 117,000 tankers that would require modifications. The work, which may include adding full height steel shields at the ends and adding a metal jacket around the body, is estimated to cost between $27,000 and $46,700 per car, an RSI study said.

        Safety Concerns

        BNSF Railway Co., which like Union Tank Car is owned by Buffett’s Berkshire Hathaway Inc., delayed an order of 5,000 new and safer oil-tank cars until the new safety standards are set. The railroad said last year that it would buy the new cars because of safety concerns even though railroads typically don’t own the cars that their locomotives haul on the track.

        Many of the orders for safer tank cars might already be included in the backlog as buyers line up in anticipation, Hatfield of Raymond James said.

        “This industry has really earned a lot of money in the last few years due to this tank-car boom and when that goes away, it’s going to have an impact on peoples’ businesses,” he said.

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