Repost from ABC News [Editor: Significant quote: “…even with oil prices falling off a cliff, industry analysts and railroad executives point out that crude shipments still make up just a sliver of the overall freight delivered by rail. What’s more, because fuel is such a huge cost in the industry, railroads are a direct beneficiary of those falling prices.” – RS]
Low Oil Prices Unlikely to Hurt Railroads Much
By Josh Funk, AP Business News, Jan 5, 2015
The stunning collapse in oil prices over the past several months won’t derail the railroads’ profit engine even if it does slow the tremendous growth in crude shipments seen in recent years.
Carloads of crude oil spiked well over 4000 percent between 2008 and last year — from 9,500 carloads to 435,560 — as production boomed and the cost for a barrel of oil soared into the triple digits.
Those prices have tumbled severely, to just above $50 per barrel Friday, and that has rattled some of the investors who have plowed money into companies like Union Pacific, Norfolk Southern and CSX.
All three of those companies have seen their stock prices slip over the past month, along with major U.S. stock markets.
But even with oil prices falling off a cliff, industry analysts and railroad executives point out that crude shipments still make up just a sliver of the overall freight delivered by rail. What’s more, because fuel is such a huge cost in the industry, railroads are a direct beneficiary of those falling prices.
Crude oil shipments remain less than 2 percent of all the carloads major U.S. railroads deliver. Sub-$60 oil might force producers to rein in spending but railroads ? which spend hundreds of million of dollars every quarter on fuel? will see their costs fall away.
Those falling energy prices have also proven to be the equivalent of a massive tax cut for both consumers and businesses, and railroads stand to benefit from that as well.
Fueled by a rebounding employment as well as rising consumer and business confidence, U.S. economic growth reached a sizzling 5 percent annual rate last quarter, the government reported this month. The rebounding economy is likely to drive even greater demand for shipping.
Edward Jones analyst Logan Purk says the importance of crude oil shipments by rail seems to have been inflated by investors.
“It seems like whatever loss in business they see will be offset by the drop in fuel costs,” Purk said.
The crude oil business has provided a nice boost for railroads at a time when coal shipments were declining. Profits at the major U.S. railroads have been improving steadily along with the economy, reaching $13.4 billion in 2013, up from $11.9 billion in 2012 and $10.9 billion in 2011.
Officials from Union Pacific Corp, Norfolk Southern Corp., CSX Corp. and Canadian Pacific all tried to reassure investors about crude oil shipments during their latest investment conferences.
“I don’t think that we are going to see any knee-jerk reaction. I don’t think we are going to see anything stopped in the Bakken,” said Canadian Pacific CEO Hunter Harrison said of the massive oil and gas fields that stretch from North Dakota and Montana into Canada.
The Bakken region is one of the places where railroads are hauling the majority of the oil because pipeline capacity hasn’t been able to keep up with production.
Through the fall, North Dakota oil drillers remained on pace to set a sixth consecutive annual record for crude oil production.
Justin Kringstad, director of the North Dakota Pipeline Authority, said the lower prices will prompt oil companies to look for ways to reduce costs, but he’s not yet sure how much of an effect it will have on production in the region.
“It’s still a little early to make any firm assessments,” Kringstad said.
Repost from Sightline Daily [Editor: These images would be great for posters (see below) – and the author speaks for me when he writes, “Government regulators have been slow to act, their responses painfully milquetoast. As a result, much of what I do involves research into the often-complex details of federal rulemaking procedures, rail car design standards, insurance policies, and the like—all the issues that Sightline is shining a light on….Yet on some level it’s not about any of that. It’s about a reckless and unaccountable oil industry that—in the most literal and obvious way—profits by putting our lives at risk. Every time I hear one of their accountability-shirking lines, I can’t help recalling images from those tragedies and near-tragedies.” – RS]
Oil Trains: The Industry Speaks for Itself – a record of denial and deceit, in photos
By Eric de Place and Keiko Budech, December 30, 2014
A year and a half after an oil train inferno ended 47 lives in Lac-Megantic, Quebec, the crude-by-rail industry rolls on, virtually unimpeded. It’s hard not to feel horrified when, one after another, we register the place names of oil train explosions—Aliceville, Alabama; Casselton, View PostNorth Dakota; Lynchburg, Virginia—as grim warnings of what could happen in so many other North American communities.
Government regulators have been slow to act, their responses painfully milquetoast. As a result, much of what I do involves research into the often-complex details of federal rulemaking procedures, rail car design standards, insurance policies, and the like—all the issues that Sightline is shining a light on.
Yet on some level it’s not about any of that. It’s about a reckless and unaccountable oil industry that—in the most literal and obvious way—profits by putting our lives at risk. Every time I hear one of their accountability-shirking lines, I can’t help recalling images from those tragedies and near-tragedies. The juxtaposition is startling that we decided to undertake a small photo project to capture it. We hope that you’ll find the following useful in your own work, and if so, that you’ll share the images with your own networks.
It’s a practically a given that we’ll hear more empty reassurances and lies from oil and rail executives in the new year, and as growing numbers of oil trains crisscross the continent, there’s every likelihood we’ll have another catastrophe to catalog. To grasp the magnitude of the oil industry’s cynicism, it’s best to hear them in their own words.
Lynchburg, VA, Derailment by LuAnn HuntAliceville, AL, Derailment, by John WathenLac-Mégantic Derailment by TSB CanadaLac-Mégantic Derailment by TSB CanadaLac-Mégantic Derailment by David CharronLac-Mégantic Derailment by TSB CanadaLynchburg, VA, Derailment by Michael Cover
Many railroad companies want more time to retrofit cars in the U.S. and Canada, but some are forging ahead.
By Joe Eaton for National Geographic, October 31, 2014
Smoke rises from railway cars that were carrying crude oil and derailed in downtown Lac-Megantic, Quebec, in 2013. Regulators in Canada and the United States have been working on new standards for trains that carry flammable fuel. – Photograph by Paul Chiasson, Associated Press
Three days after an oil train derailed and exploded in 2013 in Lac-Mégantic, Quebec, killing 47 people, Greg Saxton wandered through the disaster site inspecting tank cars.
For Saxton, the damage was personal. Some of the tank cars were built by Greenbrier, an Oregon-based manufacturer where he’s chief engineer. Almost every car that derailed was punctured, some in multiple places. Crude oil flowed from the gashes, fueling the flames, covering the ground, and running off into nearby waterways.
Each day, as Saxton returned to the disaster zone, he passed a Roman Catholic church. “We never came and went when there wasn’t a funeral going on,” he said.
In the wake of this and other recent accidents as energy production soars in North America, Canadian and U.S. regulators are proposing new safety rules for tank cars that carry oil, ethanol, and other flammable liquids. Saxton and Greenbrier have pushed for swift changes, but others in the industry are asking for more time to retrofit cars like the type that exploded at Lac-Mégantic. (See related stories: “Oil Train Derails in Lynchburg, Virginia” and “North Dakota Oil Train Fire Spotlights Risks of Transporting Crude“)
“If you don’t set an aggressive time line, you won’t see improvements as quickly as the current safety demands require,” Jack Isselmann, a Greenbrier spokesman, said. “We’ve been frankly just perplexed and confused by the resistance.”
Industry Pushes for More Time
The tank cars that derailed at Lac-Mégantic were built before October 2011, when the American Railway Association mandated safety enhancements to the oil and ethanol tankers known in the industry as DOT-111 cars. The cars lacked puncture-resistant steel jackets, thermal insulation, and heavy steel shields, all of which could have lessened the destruction, experts say.
In July, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed rules that, if finalized, would require higher safety standards for new oil cars. The rules also require owners to retrofit older cars or remove them from the rails by October 2017.
Canadian regulators in July mandated that DOT-111 tank cars built before 2014 be retrofitted or phased out by May 2017. Transport Canada, which regulates rail safety, has also proposed aggressive safety standards for new tank cars and will seek industry comment this fall before finalizing its rules.
Saxton and others at Greenbrier support the proposed regulations, which could be tremendously lucrative to the company. However, others in the rail supply industry say the proposed retrofit time line cannot be met.
The Railway Supply Institute—a trade organization that represents the rail industry—has asked DOT to allow legacy cars in the oil and ethanol fleet to remain on the rails until 2020.
Thomas Simpson, the institute’s president, said a survey of rail maintenance and repair shops found that only 15,000 of the roughly 50,000 non-jacketed legacy tank cars in the crude oil and ethanol fleet can be modified by the proposed 2017 deadline.
For many cars, the retrofit process would include adding thermal protection systems, thick steel plates at the ends, and outer steel jackets, as well as reconfiguring the bottom outlet valve to ensure it does not break off and release oil during a derailment.
That’s too much work to complete before the deadline, and the regulations have not yet been finalized, Simpson said.
The proposed deadline, he said, will “idle cars waiting for shop capacity and adversely affect the movement of crude and ethanol.”
In comments to U.S. regulators and the press, API tied the safety upgrades to approval of the proposed Keystone XL pipeline, which would transport Alberta’s tar sands oil through the Midwest to Texas refineries.
The deadly oil train accident at Lac-Megantic, Quebec, raised awareness of the potential dangers of transporting crude by rail. – Photograph by Ryan Remiorz, Associated Press
Both API and the Rail Supply Institute have also warned regulators that a short time line for retrofitting oil cars could cause a spike in truck shipments of oil and ethanol.
But Anthony Swift, an attorney with the Natural Resources Defense Council, an environmental group opposed to Keystone XL, called these arguments misleading. Swift said Keystone XL would have little impact on retrofitting tank cars, because most train traffic from the Bakken oil fields in North Dakota moves to East Coast and West Coast refineries. He said that traffic would not be affected by the pipeline.
Keystone XL would have the capacity to carry 830,000 barrels of oil-sands crude a day, with up to 100,000 barrels a day set aside for crude from the Bakken. By 2016, the rail industry in Canada is expected to carry about as much oil as Keystone XL would. The U.S. rail industry is already there: Almost 760,000 barrels a day of crude had traveled by rail by August.
Swift said the costs to the oil industry are worthwhile if lives are saved. “The argument that we need to wait until the oil industry does not need tank cars until we can make them safe is ridiculous on its face,” he said.
Greenbrier Gears Up to Meet Demand
In February, Greenbrier introduced a beefed-up tanker with a 9/16-inch steel shell (1/8-inch thicker than many DOT-111 cars), 11-gauge steel jacket, removable bottom valve, and rollover protection for fittings along the top of the cars.
Greenbrier calls the tanker the “car of the future,” saying it’s eight times safer than the DOT-111. Isselmann said Greenbrier has received more than 3,000 orders for the new car and plans to double its manufacturing capacity by the end of the year.
In June, Greenbrier and Kansas rail-service company Watco joined forces to form GBW Railcar Services, creating the largest independent railcar repair-shop network in North America. Isselmann said the company plans to hire 400 workers and start second shifts at its factories to meet demand for retrofitting DOT-111 tank cars.
In comments to U.S. regulators, GBW said it currently has the capacity to retrofit more than 10 percent of the fleet of DOT-111 tank cars.
Isselmann said that number will grow as other companies take advantage of the market once regulators release final rules. For that reason, he said the industry’s current capacity to meet regulations is less important than its ability to ramp up quickly to capture the increased business that new safety standards could bring.
“This notion that the status quo is going to remain—it’s diversionary at best,” Isselmann said.
Almost every tanker in the Lac-Megantic accident was punctured. New standards would mandate stronger cars, among other measures. – Photograph by Ryan Remiorz, Associated Press
Some in the industry are responding to public concern before rules are finalized. In April, Irving Oil—the owner of Canada’s largest refinery, in Saint John, New Brunswick, where the Lac-Mégantic train was headed before the disaster—completed a voluntary conversion of its crude oil railcar fleet.
Also in April, Global Partners, one of the largest U.S. distributors of gasoline and other fuels, began requiring all crude oil unit trains making deliveries at its East and West Coast terminals to meet October 2011 safety standards for tank car design.
“As an industry, we have both an opportunity and a responsibility to maximize public confidence in the safety of the system that carries these products across the country,” Eric Slifka, Global Partners’ CEO, said in a press release.
A Push to Harmonize Regulations
As the U.S. and Canada consider train safety regulations, oil and rail companies are pushing to ensure that the same tank cars can be used to haul flammable liquids in both countries.
Regulators say they are working together to make that happen. Lauren Armstrong, a spokeswoman at Transport Canada, said the department is holding technical discussions on new tank car standards with the U.S. Department of Transportation and the Federal Railroad Administration.
However, coordinating tank car regulations between the two countries would have to overcome current gaps, industry representatives say.
In April, Transport Canada banned the use of the oldest and least crash-resistant DOT-111 tank cars, which lacked bottom reinforcement. The U.S. so far has not banned the cars from carrying oil and ethanol.
Canada also set a 2017 deadline for retrofitting the cars. In the U.S., regulators are expected to release final rules by early 2015. The process, however, could continue much longer.
The strongest standards will carry the day, said Thomas Simpson, the president of the Railway Supply Institute. Given the large amount of oil that moves between the two countries, Simpson said it makes no business sense for companies to keep two different sets of cars to meet the two sets of rules.
Communities Concerned About Safety
But as final rules are being hammered out in the U.S., some train safety advocates and community groups worry they are being left out of the process.
But she said rail and oil industry lobbyists have had much more access to policymakers than community advocates, and she’s concerned they will have a greater impact on final rules.
“The inside players, the guys in the industry,” she said, “they seem to be able to be in front of the decision-makers more than we have been.”
by John Light, September 2, 2014
In this July 16, 2013, photo, railroad oil tankers are lined up at the Port of Albany, in Albany, NY. (AP Photo/Mike Groll, File)
If you reside in the US, there’s around an eight percent chance that you live in an oil train’s blast zone. And there’s a fight going on at the state and federal levels, between monied interests and regulatory agencies, over efforts to ensure that these trains — which have shown a tendency to burst into flames — will be relatively safe.
The increased use of hydraulic fracturing — fracking — has made oil that was previously inaccessible available to drillers. The crude then has to make its way to refineries, and while the boom in pipeline projects has received quite a bit of attention, roughly 60 percent of it travels by rail.
On Friday, California legislators passed a bill that would require railroads to tell emergency officials when oil trains filled with explosive Bakken crude — oil from a particularly productive region in western North Dakota — would pass through the state. The law reflects growing concern, across America, about the dangers of these trains moving through dense communities, including Sacramento, California’s capital.
Oil tanker cars move along a web of routes that crisscross the United States. In 2013, about 400,000 cars made the journey, a 4,000 percent increase over the previous five years. The boost in oil cars has been so great that less lucrative industries are having trouble finding rail transport for their products. In March, General Mills announced that it had lost 62 days of production on such favorites as Cheerios because the trains that had shipped agricultural products were being leased by the fossil fuel industry.
Most oil reaches its destination without any problems, but as production has skyrocketed, the railroads have become increasingly taxed. Those who live near railways have noticed the uptick, with trains rumbling through towns much more frequently, and at much higher speeds.
Last July, a tanker train filled with North Dakota crude derailed in the middle of the night in Lac-Mégantic, a small Canadian town near the border with Maine; the resulting inferno killed 47 people. Since then, derailments in Casselton, North Dakota, and Lynchburg, Virginia, have led to evacuations. The Lac-Mégantic disaster spurred protests from fire chiefs and town officials who said that they were ill-equipped to deal with a possible derailment.
In the year since, officials have moved to formalize several safety measures. This July, the Obama administration proposed a plan that involves banning certain older tank cars, using better breaks on car, restricting speeds and possibly rerouting trains.
That first point, phasing out old tank cars, is a key area of contention. For the most part, the opposition isn’t coming from the railroads; it’s the oil companies that lease the tank cars that are fighting the new regulations. As Bloomberg Businessweek’s Matthew Philips explained earlier this summer:
It’s helpful to understand the three industries with something at stake here: railroads, energy companies, and tank-car manufacturers. The railroads own the tracks but not the tank cars or the oil that’s inside. The oil often belongs to big energy companies such as refiners or even trading firms that profit from buying it near the source—say, in North Dakota—and selling it elsewhere. These energy companies tend to lease the tank cars from large manufacturing companies or big lenders such as General Electric (GE) and CIT Group (CIT).
Although it is never their oil on board, the railroads usually end up in the headlines when something goes wrong. That’s why they have been eager for a rule to make energy companies use stronger tank cars. Meanwhile, the oil industry has been busy issuing studies trying to prove that the oil coming out of North Dakota is safe enough to travel in the existing tank cars. The energy lobby also thinks railroads need to do a better job of keeping the trains on the tracks. Tank-car manufacturers, meanwhile, simply want some clarity around what kind of cars they need to build.
Canada, following the Lac-Mégantic disaster, announced plans to phase out one older tank car that has been linked to several accidents over the next three years; the Obama administration proposal would do it in two.
But the oil industry doesn’t want that. Leading the charge is the American Petroleum Institute, an organization that, so far in 2014, has spent $4 million lobbying regulators and Congress. They’ve pushed back against labeling Bakken crude as more hazardous than other crude oil, even though many studies have found that it is.
Environmental groups blame this lobbying effort for several weaknesses in the proposed rules. For one, they would only apply to trains that have 20 or more carloads of Bakken crude. “If the rule is approved as drafted, it would still be legal to transport around 570,000 gallons (the equivalent of the fuel carried by seven Boeing 747s) of volatile Bakken crude in a train composed of 19 unsafe, [aging] tank cars—and none of the other aspects of the new rules, including routing, notification, train speed, and more would apply,” wrote Eric de Place of the sustainability think-tank Sightline Institute, who also criticized the proposal for not immediately banning older tankers.
And even if the regulations were to be put in place despite the API’s attempts to weaken them, there’s the distinct possibility that regulators will fall short. The government has often taken a hands-off approach in determining what gets shipped, and how — and in enforcing existing rules requiring that officials in the cities it passes through be informed that potentially hazardous shipments are coming. In These Times reported that government inspections to make sure railroads are properly labeling the product they are shipping (the Bakken crude was improperly labeled in the Lac-Mégantic disaster) are supposed to be unannounced, but are sometimes pre-arranged. Meanwhile, railroads are cutting back on the number of crew members manning trains, a move that some workers feel will lead to less safe travel.
“No one would permit an airliner to fly with just one pilot, even though they can fly themselves,” wrote John Previsich, the president of the Sheet Metal, Air, Rail and Transportation union’s transportation devision. “Trains, which cannot operate themselves, should be no different.”
John Light blogs and works on multimedia projects for Moyers & Company. Before joining the Moyers team, he was a public radio producer. His work has been supported by grants from The Nation Institute Investigative Fund and the Alfred I. duPont-Columbia Awards, among others. A New Jersey native, John studied history and film at Oberlin College and holds a master’s degree in journalism from Columbia University
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