Category Archives: Rail tank cars

Rail industry phasing out DOT-111 tank cars involved in derailments ahead of deadline

Repost from The Jamestown Sun

Rail industry phasing out tank cars involved in Casselton derailment ahead of deadline

By John Hageman, Oct 24, 2017 12:27 p.m.
A fire from a train derailment burns uncontrollably as seen in this photograph Monday, Dec. 30, 2013, west of Casselton, N.D. Michael Vosburg / Forum News Service

BISMARCK — Amid declining shipments, the rail industry is phasing out “less-safe” tank cars carrying crude oil ahead of rapidly approaching deadlines to do so.

The federally mandated deadlines to remove the DOT-111 tank cars from oil service came after several high-profile derailments involving Bakken crude. That included the deadly Lac-Megantic, Quebec, disaster in 2013 and the explosion near Casselton, N.D., later that year.

As of Jan. 1, DOT-111 cars without a protective steel layer known as a jacket can no longer carry crude oil. Those cars with the jacket must be phased out two months later.

A U.S. Department of Transportation report sent to Congress last month shows the number of those cars carrying crude oil has dropped dramatically over the past few years. In 2013, 14,337 of them carried crude oil, which sank to 366 last year.

That shift has been aided by a steep decline in Williston Basin rail exports over the past few years. A rush of activity in western North Dakota forced oil onto the tracks, but pipelines are now the dominant form of oil transportation, according to the North Dakota Pipeline Authority.

“The first phase, in terms of removing the DOT-111s … that’s moving along very nicely,” said John Byrne, vice chairman of the Railway Supply Institute’s Committee on Tank Cars. “Because there’s a surplus of cars available to take them out of service and replace them with compliant cars.”

Ron Ness, president of the North Dakota Petroleum Council, said the Dakota Access Pipeline helped push oil off the tracks when it went online earlier this year. But rail shipments across the country have been declining since 2014, according to the Association of American Railroads.

The latest BNSF Railway Co. report provided by the state Department of Emergency Services, dated September, shows as many as three oil trains moved through Cass County in one week, down from a high of 56 first reached in 2014.

Pointing to increased training for first responders, DES Hazardous Chemical Officer Jeff Thompson said they’re “more comfortable with the situation than we were before.” But that doesn’t mean they’ve let their guard down.

“There’s always the fear that (it) happens in the middle of a town. And that goes with all train derailments, not just crude oil,” he said.

About 476,000 gallons of oil spilled near Casselton in late December 2013 after an oil train slammed into a derailed grain car, sparking a fireball over the snowy landscape. Residents evacuated, but there were no deaths or serious injuries, the National Transportation Safety Board said.

Oil spilled from 18 of the derailed DOT-111 cars in that incident, according to the NTSB, which “long had concerns” about the “less-safe” tank cars because they’re not puncture resistant, have relatively thin shells and lack thermal protection.

In announcing the agency’s findings on the Casselton derailment in February, the NTSB’s then-Chairman Christopher Hart said “progress toward removing or retrofitting DOT-111s has been too slow.” Thousands of those cars are still being used to carry ethanol and other flammable liquids, which have later phase-out dates, according to the transportation department’s report.

By 2029, flammable liquids can only be carried in DOT-117s, which have thicker shells and insulating material, Byrne said. The new and retrofitted versions of those cars now represent 9 percent of the fleet carrying Class 3 flammable liquids, which includes crude oil and ethanol, according the transportation department report.

“There’s been a huge improvement in the overall safety of the cars moving crude today versus what we were looking at in 2013, 2014,” Byrne said.

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    WALL STREET JOURNAL: The New Oil-Storage Space: Railcars

    Repost from the Wall Street Journal

    The New Oil-Storage Space: Railcars

    U.S. market is so oversupplied with oil that traders are experimenting with a new place for storing excess crude
    By Nicole Friedman and Bob Tita, Feb. 28, 2016 9:09 p.m. ET
    Rail tanker cars sat on tracks at the Red River Supply Inc. rail yard in Williston, N.D., in February 2015.
    Rail tanker cars sat on tracks at the Red River Supply Inc. rail yard in Williston, N.D., in February 2015. PHOTO: DANIEL ACKER/BLOOMBERG NEWS

    The U.S. is so awash in crude oil that traders are experimenting with new places to store it: empty railcars.

    Thousands of railcars ordered up to transport oil are now sitting idle because current ultralow crude prices have made shipping by train unprofitable. Meanwhile, traditional storage tanks are running out of room as U.S. oil inventories swell to their highest level since the 1930s.

    Some industry participants are calling the new practice “rolling storage”—a landlocked spin on the “floating storage” producers use to hold crude on giant oil tankers when inventories run high.

    The combination of cheap oil and surplus railcars has created a budding new side business for traders. J.P. Fjeld-Hansen, a managing director for trading company Musket Corp., tested using railcars for storage last year and found he could profit by putting the oil aside while locking in a higher price to deliver it in a later month.

    The company built a rail terminal in Windsor, Colo., in 2012 to load oil shipments during a boom in U.S. oil production. Now, Mr. Fjeld-Hansen says, “The focus has shifted from a loading terminal to an oil-storage and railcar-storage business.”

    Energy Midstream, a trading company based in The Woodlands, Texas, stored an ultralight oil known as condensate on Ohio railcars last month for about 15 days before shipping it to a buyer in Canada.

    Dennis Hoskins, a managing partner at Energy Midstream, says there are so many unused tank cars that he is constantly hearing from railcar owners hoping to put them to use. “We get offers everyday for railcars,” he said.

    The use of railcars for storage could be limited by the cost of track space and safety and liability concerns that have followed a string of high-profile transport accidents. Issues range from leaky cars to the risk of collisions and fires.

    Federal regulations require railroads that store cars loaded with hazardous materials like oil to comply with strict storage and security measures to keep the cars away from daily rail traffic. Railroads and users face responsibility for leaks, collisions or other mishaps.

    “I don’t want the liability,” said Judy Petry, president of Oklahoma rail operator Farmrail System Inc. “We prefer not to hold a loaded car.”

    Still, the oil has to go somewhere. The surge in shale-oil production has created a massive glut that the industry is struggling to absorb. BP PLC Chief Executive Bob Dudley joked in a speech this month that by midyear, “every storage tank and swimming pool in the world will be filled with oil.”

    Khory Ramage, president of Ironhorse Permian Basin LLC, which operates a rail terminal in Artesia, N.M., said he hears regularly from traders looking to store crude in his railcars.

    Crude-storage costs “have been accelerating, just due to the demand for it and less room,” he said. “You’ll probably start seeing this kick up more and more.”

    U.S. crude inventories rose above 500 million barrels in late January for the first time since 1930, according to the Energy Information Administration.

    The cheapest form of storage—underground salt caverns—can cost 25 cents a barrel each month, while storing crude on railcars costs about 50 cents a barrel and floating storage can cost 75 cents or more. The cost estimates don’t include loading and transportation.

    Railcars hold between 500 and 700 barrels of oil, less than a cavern, tank or ship can store.

    The use of U.S. railcars to transport large volumes of oil picked up steam a few years ago as a byproduct of the fracking boom. Fields sprung up faster than pipelines could be laid, so producers improvised and shipped their output to market by rail. Companies soon realized railroads offered greater flexibility to transfer oil to whomever offered the best price. Some pipeline companies even joined the rail business, building terminals to load and unload oil. U.S. oil settled Friday at $32.78 a barrel, down nearly 70% from mid-2014.

    The plunge in oil prices brought that activity to a halt. Analysts estimate there are now as many as 20,000 tank cars—about one-third of the North American fleet for hauling oil—parked out of the way in storage yards or along unused stretches of tracks in rural areas.

    Producers and shippers who signed long-term leases for the cars during the boom are stuck paying monthly rates that typically run $1,500 to $1,700 per car. Traders can pay those prices and still profit. Oil bought at the April price and sold through the futures market for delivery a year later could net a trader $8.07 a barrel, not including storage or transportation costs.

    As central storage hubs fill up, oil companies are more willing to pay for expensive and remote types of storage, said Ernie Barsamian, principal of the Tank Tiger, which keeps a database of companies looking to buy and sell oil storage space.

    The Tank Tiger posted an inquiry Wednesday on behalf of a client seeking 75,000 barrels of crude-oil storage or space to park 100 to 120 railcars loaded with crude.

    Mr. Barsamian likened the disappearance of available storage to a coloring book where nearly all the white space has been filled in.

    “You’re getting closer to the edges,” he said.

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      Told to fix leaky oil train cars in 2 months, owners sought 3 years

      Repost from McClatchyDC
      [Editor:  Significant quote: “This year is already the second worst for oil spilled from trains since the federal government began collecting data 40 years ago….trains spilled about 1 million gallons in 2013 alone, vs. 800,000 in all the prior years combined….More than 600,000 gallons of oil has spilled from trains so far this year….”  – RS]

      Told to fix leaky oil train cars in 2 months, owners sought 3 years

      By Curtis Tate and Samantha Wohlfeil, September 2, 2015 

      HIGHLIGHTS
      • Washington state spills led to March order from federal agency
      • Industry group asked for three-year extension
      • Regulators gave owners until end of 2015

      The wreckage of an oil train derailment in Mount Carbon, W.Va., still smolders 48 hours after the crash, on Wednesday, Feb. 18, 2015.

      WASHINGTON  |  Railroad tank cars equipped with defective valves still will be allowed to transport crude oil and other hazardous materials through the end of the year, despite a March directive from federal regulators requiring their replacement within 60 days.

      The Federal Railroad Administration order followed a Bellingham (Wash.) Herald story about a leaking oil train reported in Washington state in January. The Railway Supply Institute, trade group representing tank-car owners, wrote the agency in April asking for a three-year extension to replace the faulty valves on tank cars that carry hazardous materials.

      About 6,000 tank cars were affected by the recall, issued on March 13. On May 12, the day of the original deadline, regulators wrote back to the trade group that the agency found no basis to give tank car owners until 2018 to comply, but nonetheless gave them until Dec. 31, an extension of more than six months.

      Officials from the Railway Supply Institute couldn’t be reached to comment.

      60   Number of days tank car owners had to comply
      with March directive.

      The federal order came about a month after crews discovered tank cars leaking from their top fittings while hauling crude oil through Washington state.

      In mid-January, a 100-car train loaded with Bakken crude had 16 leaking cars removed at four different stops between northern Idaho and the Tesoro refinery in Anacortes, Wash.

      As the train traveled west along the Columbia River, leaking cars were pulled as they were discovered; at each stop, the entire train was inspected before continuing on to the next location.

      BNSF Railway, the train’s operator, said a total of 26 gallons of oil from 14 of the leaking cars was found only on the tops and sides of the cars, and no oil was found on the ground, in a report to the U.S. Department of Transportation.

      Separately, the Federal Railroad Administration fined the owner of a North Dakota oil loading terminal $10,000 for a spill from a tank car that was discovered in November in Washington state. When the car arrived at a refinery for unloading, inspectors found it coated in oil and measured about 1,600 gallons missing.

      State officials first learned of the spill a month after it happened, and no local officials were notified. In March, the Washington Utilities and Transportation Commission recommended $700,000 in fines against BNSF for failure to report 14 hazardous materials spills within the 30 minutes required by state law.

      BNSF has disputed the state regulator’s findings. A hearing is scheduled for January.

      Six major oil train derailments this year across North America have demonstrated the continued risks of large volumes of crude oil moving by rail.

      Four of those derailments occurred in just four weeks in February and March: two in Ontario, one in West Virginia and another in Illinois. All involved large spills, fires and explosions, but no serious injuries.

      Two less serious oil train derailments have occurred since, in North Dakota in May and Montana in July.

      600,000   Number of gallons of oil spilled from trains
      so far this year.

      The rail industry and its regulators have been under pressure from lawmakers and the public to fix tank car vulnerabilities and take more steps to prevent derailments from happening.

      The U.S. Department of Transportation issued its final rule on tank car standards for trains carrying oil, ethanol and other flammable liquids on May 1.

      The new rule requires a tougher design for the tank cars, including thicker shells, more puncture resistance and thermal insulation to protect against prolonged exposure to fire.

      It also requires existing tank cars be retrofitted to meet the new standards, depending on the level of hazard, within two to 10 years. Industry groups have challenged the new rule in court, saying it doesn’t give them enough time to complete the retrofit. Environmental groups have sued as well, saying it gives the industry too much time.

      This year is already the second worst for oil spilled from trains since the federal government began collecting data 40 years ago.  A McClatchy analysis of the data last year found that trains spilled about 1 million gallons in 2013 alone, vs. 800,000 in all the prior years combined.

      More than 600,000 gallons of oil has spilled from trains so far this year, according to a new analysis of data from the Pipeline and Hazardous Materials Safety Administration.

      Wohlfeil writes for the Bellingham Herald and reported from Bellingham, Wash.
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