Tag Archives: Rail industry

Bakken Crude, Crude By Rail, Derailment, Explosion, Fire, Oil Industry, Oil stabilization, Rail industry, Tank car design, Tar sands crude, Valero Benicia Refinery

EDITORIAL: Four explosive derailments in a month – how much longer?

By Roger Straw, Benicia Independent Editor, March 6, 2015

Yesterday afternoon, a multitude of news flashes broke out telling of yet another oil train derailment with fiery explosions, this time right alongside the Mississippi River outside Galena, Illinois.  The oil and rail industries escaped with another close call – no one was injured or killed this time and – so far – no reports of crude oil in the waters of the mighty Mississip.

The Galena accident is the fourth major derailment with hazmat fire in recent weeks!  (Dubuque, Iowa [2/4]; Gogama, Ontario [2/14]; Mount Carbon, West Virginia [2/16]; and Galena, Illinois [3/5]).  (LATER: now there have been five: a second derailment and explosion in  Gogama Ontario, [on 3/7], just 23 miles from the 2/14 fire.  – Editor)

There WILL be more.  The question everyone is asking: whose lives are at risk right now in schools and hospitals, commercial centers, apartment complexes and homes in the mile-wide evacuation zones along the rails that crisscross the country?  If Valero’s Benicia refinery is granted a permit and hires Union Pacific to run oil trains over the Sierra and across the state of California to Benicia, whose cozy little town uprail from here will be host to the next “Big One?”  Or if we’re “lucky,” what California wilderness will be the next to endure the foul spills and the consuming fires of an explosive oil train crash?

And who will pay for lives and property lost, for infrastructure repairs and the massive cleanup?

Oddly perhaps, my thoughts turned gently this morning to those refinery executives who have invested so much time and energy in planning for and implementing the rail transport of North American oil – Bakken crude and tar-sands (diluted bitumen).  I’m trying to imagine what it must be like for these decent career employees to eagerly wake up to a good cup of coffee and the morning news … only to be jolted once again as their tv shows video of yet another horrific oil train explosion.  It must be disheartening.  How, with every news outlet all across the U.S. paying attention to the need for safer tank cars with stabilized contents (and more) – how difficult for oil industry execs to begin to realize the folly of their plans.  It must be like learning there’s no Santa Claus.  Or like a nation having to decide to back out of a Vietnam war.  It can’t be easy.  But I dare to hope that some executive somewhere is going to make a decision soon: this has to stop.  He or she can swallow that cup of coffee, take a deep breath, and lead the way.  No more.  Not here.  Not me.  Not our company.

I wonder, too, about those who govern.  Why should our officials continue to allow the use of those old failing rails, aging bridges and dangerous tank cars to carry volatile chemicals today?  How much longer until our local, state and federal leaders call an end to this dangerous and polluting practice?  When will they stop trying to fix the system with minor safety upgrades and call a moratorium until the whole thing is worked out to protect the public’s health and safety?

What started out here in Benicia in early 2013 as a small, alert group of us who were concerned for the earth; an effort to take no part locally in the stripping of lands and environments in Alberta Canada and Montana and the Dakotas; and an understanding of the facts indicating the certain increase in toxic emissions affecting our air and water if Valero would move to crude by rail … these early concerns of ours were “blown away” (as it were), by the explosions, by the frightening and repeated demonstrations of the incredible risks of transporting volatile North American crude oil by rail and by the lack of adequate safeguards of a rail industry that cannot be controlled locally or regionally.

Our federal regulators MUST stand up to the industries and put an immediate stop to these bomb trains.  Until new regulations are in place to stabilize the oil before it is loaded, and until a totally new design for safer tank cars is approved and manufactured, and until the infrastructure that carries those new cars is upgraded, we should not have to live with the deadly risk.

Our resources would be better spent during a moratorium on crude by rail funding a massive increase in investment in clean energy.  Someone needs to put serious effort into planning a 5 or 10 year phase-out of fossil fuels.  Ok, 20.  It would be cataclysmic to just STOP the flow of oil and gasoline.  Even so, I think we’d survive it.  Someone should think it through carefully, and lay it out in steps that lead surely and safely away from crude oil … by rail or by any other means.

– Benicia Independent Editor, Roger Straw

Crude By Rail, Health and safety impacts, Health impacts, Oil Industry, Oil producers, Rail industry, Risk Assessment

Safety warning from British Health & Safety Executive

Repost from Health & Safety Executive (HSE), Great Britain
[Editor: CONTEXT – I received this in an  email from Fred Millar,  independent consultant and expert on chemical safety and railroad transportation.  Fred’s email comment puts the British commentary in a “North American oil-train” perspective:  “Impact of falling oil prices may be quite small re volumes of Crude By Rail shipments, some informed observers have noted.  But this UK HSE message highlights a likely, less visible but no less ominous impact: dangerous lowering of safety standards in the oil industry [and by implication in the newly important “pipeline on rails” railroads carrying crude oil and other hazmat].  If this impact had not been seen previously at significant levels by safety agencies, there would be no need for such blunt alarums, of course.”  – RS]

No Compromise

By Judith Hackitt, HSE Chair, 2/6/15

The impacts of falling oil prices is having a wide ranging effect in the UK – from the lower cost of filling up the car to people’s livelihoods being under threat.

It is inevitable companies seek to adapt to rapidly changing circumstances and the decisions they are being forced to make are tough ones. It’s actually a stress test of leadership and senior management.

Part of that test is whether company decision makers have all the relevant information to make informed decisions.

How can they?

At the very least they have to make assumptions about what the future will look like. In this case, how long oil prices will stay at these levels? What decisions are competitor companies and industries taking? After all, they need to be making the right decisions for the company in the short term and for the mid to long term.

We’ve been here before, of course, in the 1990s when oil prices dropped and assumptions were made about the long term life of North Sea assets that proved to be wide of the mark. So this is a time when corporate memory really counts.

On that occasion the assumption was made that North Sea production would be wound down in the medium term and assets could afford to be neglected because they would soon be out of service. As prices rose again, the assets were called upon to continue to produce and many are now operating well beyond their original life expectancy. Doing that has required huge effort by the North Sea Oil and Gas industry to bring those neglected assets back up to the required standard.

Those who have led this effort to improve asset integrity deserve to be praised, but their voices need to continue to be heard as we go through this next difficult phase for the industry.

Cutting costs where there seems to be least tangible day-to-day effect is obviously tempting but leaders and senior managers need to pass the stress test on knowing where health and safety – and particularly process safety and asset integrity – sits in this mix.

Asset integrity must not suffer from short term expediency over where the axe falls. Leadership is critical to avoid wrong assumptions being made about the lifespan of assets, assumptions we know from previous experience can take years to reverse.

Current news headlines may be disconcerting, but I want all industries dealing with process safety to avoid inadvertently writing tomorrow’s headlines today.

Safety must not be compromised, even in tough times.

Bakken Crude, DOT-111, Federal Regulation (U.S.), Oil Industry, Oil prices, Rail industry, Tank car manufacture, Tank car retirement, Tank car retrofit

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.

Canadian regulation, Crude By Rail, Rail industry, Rail inspection, Rail Safety

Transportation Safety Board of Canada adds new demands to emergency directive

Repost from The Wall Street Journal
Editor: This story is also covered in railway-technology.com and The Globe and Mail.  – RS]

Canada’s TSB Concerned Railway Safety ‘Remains Inadequate’

Transportation Safety Agency Concerned Over Ottawa’s Oversight of Railway Companies

By Judy McKinnon, Jan. 28, 2015

Canada’s transportation safety agency said Wednesday it is concerned that Ottawa’s oversight of railway companies remains inadequate, while noting that measures now in place would significantly reduce the risk of runaway trains.

Last year, the agency recommended several measures to strengthen rail safety after a 2013 oil-train derailment in Quebec killed 47 people and devastated the small town of Lac-Mégantic.

“While recognizing significant positive action taken by the regulator, the Transportation Safety Board of Canada remains concerned about Transport Canada’s response to outstanding recommendations,” the agency said Wednesday.

Transport Canada is the Canadian federal ministry responsible for rail transportation.

The TSB said it is specifically concerned the ministry hasn’t yet put in place an effective oversight process “that guarantees all railways will be audited in sufficient breadth and frequency to ensure safety issues are addressed in a timely manner.”

Canadian Transportation Minister Lisa Raitt said the ministry has taken action to boost oversight. “As part of our response to the Transportation Safety Board, Transport Canada will be conducting full (safety management systems) audits of federally regulated railway companies on a three-to-five-year cycle,” Ms. Raitt’s spokeswoman said in an emailed statement.

In August, the TSB cited 18 factors for the Lac-Mégantic disaster, including a weak safety culture at the train’s operator—Montreal, Maine & Atlantic Railway Ltd.—and lax regulatory oversight. The derailment sharply raised concerns about the growing transportation of crude by rail and was followed by a number of other fiery but non-deadly accidents.

Among the TSB’s recommendations was that Transport Canada audit the safety management systems of all railways on a regular basis to confirm that safety measures are in place, and more measures to secure trains.

Transport Canada hasn’t yet shown that an effective oversight regime has been implemented, which could lead to a lag in identifying safety issues, the TSB said Wednesday.

As for preventing runaway trains, the agency said it is satisfied that Transport Canada has introduced “multiple layers” of defenses that, if fully implemented, will significantly reduce risks.

“The Minister of Transport and the department have taken strong action to improve rail safety in the wake of the Lac-Mégantic tragedy, but more work needs to be done,” the safety agency said.

Last year, the TSB found that the 72-car train derailed after being left unattended and improperly secured on a descending grade despite indications there were mechanical problems with the lead locomotive. The agency said then that the now-defunct railway didn’t properly train and oversee its crews and lacked fully functioning safety-management processes.

“As we have always said, and as the Transportation Safety Board report clearly indicates, this was a case where rules were not followed,” Ms. Raitt’s spokeswoman said Wednesday.

—Nirmala Menon contributed to this article.