Tag Archives: Federal Regulation (U.S.)

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.

Another Oregon town calls for stricter rules on crude by rail

Repost from The Dalles Chronicle

The Dalles joins oil train debate

By RaeLynn Ricarte, January 29, 2015
A UNION Pacific freight train runs west along First Street, downtown The Dalles. The City of The Dalles has joined other Oregon and Washington cities in requesting greater federal oversight of oil train transports.
A UNION Pacific freight train runs west along First Street, downtown The Dalles. The City of The Dalles has joined other Oregon and Washington cities in requesting greater federal oversight of oil train transports. Photo by Mark Gibson.

The Dalles City Council has joined Hood River, Mosier and other Oregon towns in urging state officials to pursue greater federal regulation of crude oil transports.

The resolution approved by a unanimous vote Monday, Jan. 26, also recommends that rules be put in place to require that rail companies pay for damages caused by catastrophic fire and explosions following a derailment or accident.

Councilor Dan Spatz asked to have the issue put on the agenda, but was not at the Jan. 26 meeting.

The initial resolution, which is a formal expression of the council’s opinion, did not mention finances. However, local conservationist John Nelson, who has been pursuing action regarding oil trains at the city level, gained agreement from city officials to have the language included. “It’s a very complicated issue,” said Nelson, who provided the council with two news articles about the potential dangers of having oil shipped via railroad.

He said a 2013 derailment in Quebec, Canada, that killed 47 people ended up costing $2.7 billion in cleanup, damages and settlements.

The Washington side of the Columbia River Gorge has become the Pacific Northwest’s major railroad avenue for moving oil -— about 18 trains weekly — from North Dakota to shipping terminals.

Burlington Northern Sante Fe Railroad carries Bakken crude from North Dakota that is extracted from underground rock formations and is reportedly more flammable than traditional crude.

Environmental organizations, such as the Sierra Club, are seeking greater regulation of oil transports given the potential for an increase in shipments with North America on track to lead the world in oil production within five years.

Councilor Taner Elliott was unsure that the city’s resolution, which is non-binding, would be as solid an approach as sending a letter requesting details about safety measures to railroad companies, gorge legislators and state officials.

He said the city could ask for a briefing about what measures would be taken if an emergency occurred and to be kept abreast of new safety standards.

He said conversations with BNSF and Union Pacific, which operates on the Oregon side of the Columbia River, revealed “staggering numbers” tied to their respective prevention and emergency response plans.

“It appears they are very involved,” said Elliott, who did not provide specifics about what he had learned.

Representatives from both railroad companies said Wednesday that they had not been invited to Monday’s council meeting to answer questions or address safety issues.

Nelson told the council that the city’s resolution would let state officials know they was concerned about the welfare of citizens, as well as the environment in the Columbia River Gorge National Scenic Area. He said there was no local source for the foam that was necessary to extinguish flames if an explosion occurred.

He said travel to and from Portland for that product could delay response time, which would further threaten human life or resources.

In addition, he said local fire departments did not have the manpower or equipment to fight a catastrophic fire.

At Monday’s meeting Mayor Steve Lawrence said, once the resolution was approved, the Community Outreach Team could follow up by voicing concerns during a visit to Salem in the spring.

Tim Schechtel, a downtown property owner in The Dalles, said the oil boom in America had created an “unprecedented” risk for communities along railroad tracks.

According to information obtained last year by a Chronicle reporter, oil is traditionally delivered via pipelines, but the growth in U.S. and Canadian production has exceeded what they can carry.

That has caused oil transport by rail to increase from 9,500 carloads in 2008 to 400,000 in 2013.

Schechtel said oil unit trains were more than one-mile long with 100 cars and the potential to carry three million gallons of crude.

According to BNSF, 18 unit oil trains travel through the gorge each week. Schechtel said that put 54 million gallons of crude near residential communities.

“A lot of people are chiming in on this, nationally as well as locally,” he said.

Schechtel said the bigger picture was that fossil fuels contributed to global warming and acid rain around the world. So it was not too much to ask big oil companies, which were making huge profits, to better protect the public safety.

Councilor Linda Miller asked Schectel to expand upon his statements about the problems caused by the use of petroleum products.

“So, do you want to stop all oil trains coming through or just to make things safer?” she asked.

“I think just make safer at this time,” said Schectel, who felt the issue of pollution should be addressed at some point in the future.

“The bottom line is, if we had a catastrophe, it would be overwhelming,” said Lawrence.

U.S. Senators on new safety rules: Hurry up! or maybe… Slow Down!

[Editor: The news on Wednesday, January 28 carried two stories about U.S. Senators, one urging speed and the other urging delay in the Obama administration’s effort to – finally after over 20 years of delays – pass new rules governing rail transport of crude oil and other hazmat materials.  Washington Senator Maria Cantwell: the Department of Transportation should “move its behind.”  South Dakota Senator John Thune: the government is “moving too quickly.”    Read both stories below.  – RS]

Get moving on oil train safety rules, Cantwell tells Obama administration

Seattle PI, By Joel Connelly, January 28, 2015
In this image made available by the City of Lynchburg, several CSX tanker cars carrying crude oil in flames after derailing in downtown Lynchburg, Va., Wednesday, April 30, 2014. (AP Photo/City of Lynchburg, LuAnn Hunt)
Several CSX tanker cars carrying crude oil in flames after derailing in downtown Lynchburg, Va., Wednesday, April 30, 2014. (AP Photo/City of Lynchburg, LuAnn Hunt)

With 19 oil trains passing through Washington towns and cities each week, the U.S. Department of Transportation should move its behind, finalize and enforce safety rules for tanker cars, Sen. Maria Cantwell, D-Wash., said Wednesday.

“We should go faster: The administration should get those recommendations implemented,” Cantwell said at a Senate Commerce Committee hearing.

“My constituents are now seeing trains through every major city in our state: They’re literally hitting Spokane through the Tri-Cities, through Vancouver, up through Tacoma, Seattle, Everett and then up to the refineries.”  (…continued)


Thune urges White House to delay tank car safety rules

Argus Leader, By Christopher Doering, USA TODAY, January 28, 2015
poet ethanol Chancellor
Jeff Hansen tightens the bolts on top of an ethanol rail car after filling it Thursday at the POET ethanol plant in Chancellor, Jan. 27, 2011. (Elisha Page/Argus Leader)

WASHINGTON – An Obama administration effort to boost the safety of tank cars used to transport crude and other materials by train could disrupt the country’s already congested rail network if an unrealistic proposal is allowed to go forward, the head of the powerful Senate Commerce, Science and Transportation Committee said Wednesday.

Sen. John Thune, R-S.D., who chairs the Senate panel that oversees the country’s railroads, said the government was moving too quickly with a proposal for phasing out or retrofitting older freight-rail tank cars known as DOT-111 that carry crude oil and ethanol. The Transportation Department is to finalize the regulations on May 12, before giving the rail industry two years to comply.  (…continued)

 

DeFazio Blasts U.S. DOT for Failing to Address Rail Tank Car Safety

Press Release from Congressman Peter DeFazio

DeFazio Blasts U.S. DOT for Failing to Address Rail Tank Car Safety

Will request an Inspector General audit of PHMSA safety programs

From Press Release, 22 Jan 2015

Washington, D.C. – Today, Ranking Member of the Committee on Transportation and Infrastructure Peter DeFazio (D-OR) sent a letter to U.S. Department of Transportation (DOT) Secretary Anthony Foxx, urging him to take immediate action to address rail tank car safety and other significant pipeline and hazardous materials safety hazards.

“Despite numerous incidents involving the transportation of crude oil and other flammable materials by rail, subsequent NTSB safety recommendations, and an industry petition for new tank car design standards, the Pipeline and Hazardous Materials Safety Administration (PHMSA) failed to take action until a train transporting crude oil in DOT-111 tank cars in Lac-Megantic, Quebec, killed 47 people and completely destroyed the town center,” said DeFazio. “Here we are almost 15 months later, and we still do not have a final rule.”

DeFazio also takes issue with PHMSA’s failure to address longstanding, significant safety issues that extend to pipelines.

In multiple pipeline accident investigations over the last 15 years, the NTSB has identified the same persistent issues–most of which DOT has failed to address. Each time, Congress has been forced to require PHMSA to take action, most recently in the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011. Yet three years later, almost none of the important safety measures in the Act have been finalized, including requirements for pipeline operators to install automatic shutoff valves and to inspect pipelines beyond high-consequence areas.

“For these reasons, I will soon be sending a letter to the DOT Inspector General (IG), requesting a thorough audit of PHMSA’s pipeline and hazardous materials safety program, including an evaluation of the agency’s effectiveness in addressing significant safety issues, congressional mandates, and NTSB and IG recommendations in a timely manner; the process PHMSA utilizes for implementing such mandates and recommendations; the sufficiency of PHMSA’s efforts to coordinate with the modal administrations and address safety concerns raised by those administrations; and any impediments to agency action, such as resource constraints.”

DeFazio urges DOT to take immediate action to address these serious safety issues. He writes that the tens of millions of Americans who rely on the Federal Government to protect their safety and health and our nation’s natural resources rightly deserve more than proposed rules that languish in the Federal bureaucracy.

The full letter to Secretary Foxx is below:

January 22, 2015

The Honorable Anthony Foxx
Secretary of Transportation
U.S. Department of Transportation
1200 New Jersey Avenue, S.E.
Washington, D.C. 20590

Dear Secretary Foxx:

I write to express my serious concerns with the repeated failure of the U.S. Department of Transportation (DOT) to address longstanding and undisputed pipeline and hazardous materials safety issues.

The rule regarding Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains is a prime example. The DOT maintains finalizing this rule remains one of its highest priorities, yet the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) now reports that publication of a final rule is not anticipated until May 12, 2015. In fact, the DOT has not even transmitted a draft final rule to the Office of Management and Budget for review.

The National Transportation Safety Board (NTSB) has raised concerns about the “high incidence of failure” of DOT-111 tank cars since 1991. In fact, over the last 10 years, the NTSB has investigated or is currently investigating seven accidents involving the transportation of crude oil and other flammable materials in DOT-111 tank cars, including an October 2006 train derailment in New Brighton, Pennsylvania, which caused the release of 485,278 gallons of ethanol that ignited and burned for almost 48 hours; an October 2007 ethanol train derailment in Painesville, Ohio; a June 2009 ethanol train derailment and fire in Cherry Valley, Illinois, which killed one person, injured nine others, and resulted in a mandatory evacuation of about 600 residences within a half-mile radius of the accident site; an October 2011 ethanol train derailment in Tiskilwa, Illinois; a July 2012 mixed freight train derailment in Columbus, Ohio, which released 53,000 gallons of ethanol; a December 2013 train derailment and fire in Casselton, North Dakota, which resulted in the release of 476,000 gallons of crude oil and the evacuation of 1,400 residents; and, an April 2014 train derailment in Lynchburg, Virginia, which spilled 30,000 gallons of crude oil in and around the James River.

The NTSB has been made aware of (but is not investigating) five additional train accidents that occurred between August 2008 and February 2014 in the U.S., which involved the release of crude oil, causing significant environmental damage and fires.

In March 2011, the Association of American Railroads petitioned PHMSA to conduct a rulemaking on new tank car design standards, which seemingly languished in the bowels of the agency until 2013, when a train transporting crude oil in DOT-111 tank cars in Lac-Megantic, Quebec, killed 47 people and completely destroyed the town center. Coincidentally, two months later, PHMSA issued a Notice of Proposed Rulemaking (NPRM) on new tank car design standards.

Here we are almost 15 months later, and we still do not have a final rule. Frankly, I am concerned that opposition to the more contentious portions of the rule will only lead to further delays, possibly even litigation. That will end up postponing implementation of a final rule while the concerns of States and local communities are growing.

Moreover, these delays have significant implications for rail car manufacturers. It will take time for them to adjust to the standards proposed in the rule, which in turn will have a rippling effect on shippers who are putting off purchases of new tank cars until the new design standards are finalized. As I have said before, I believe that you should seriously consider severing this rule and propose one rule on stronger tank car design standards and another rule to address the operational changes proposed in the NPRM. That is sure to move this issue forward and address the more immediate dangers posed by the current DOT-111 tank cars.

Additionally, my concerns regarding PHMSA’s failure to address longstanding, significant safety issues extend to pipelines, as well. In multiple pipeline accident investigations over the last 15 years, the NTSB has identified the same persistent issues, most of which DOT has failed to address on its own accord. Each and every time, Congress has been forced to require PHMSA to take action, most recently in the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011 (P.L. 112-90). Yet, three years later, almost none of the important safety measures in the Act have been finalized, including requirements for pipeline operators to install automatic shutoff valves and to inspect pipelines beyond high-consequence areas.

For these reasons, I will soon be sending a letter to the DOT Inspector General (IG), requesting a thorough audit of PHMSA’s pipeline and hazardous materials safety program, including an evaluation of the agency’s effectiveness in addressing significant safety issues, congressional mandates, and NTSB and IG recommendations in a timely manner; the process PHMSA utilizes for implementing such mandates and recommendations; the sufficiency of PHMSA’s efforts to coordinate with the modal administrations and address safety concerns raised by those administrations; and any impediments to agency action, such as resource constraints.

In the interim, I urge you to take immediate action to address these serious safety issues. The tens of millions of Americans who rely on the Federal Government to protect their safety and health and our nation’s natural resources rightly deserve more than proposed rules that languish in the Federal bureaucracy. If you need additional information or have questions regarding this letter, please have your staff contact Jennifer Homendy of my staff at 202-225-3274.

Sincerely,

PETER DeFAZIO
Ranking Democratic Member