Tag Archives: Warren Buffett

Crude Oil Rail Shipments Sabotage Freedom of Information Act

Repost from Forbes

Crude Oil Rail Shipments Sabotage Freedom of Information Act

By James Conca, May 5, 2015 @ 4:40 AM

New regulations from the U.S. Department of Transportation declare that details about crude oil rail shipments are exempt from public disclosure (Tri-City Herald).

This ends DOT’s existing regulations that required railroads to share with state officials, and the public, information about shipping large volumes of dangerous crude oil by rail. These disclosure requirements were put in place last year after a Bakken crude oil train-wreck in Lynchburg, Virginia.

Now, railroads will only have to share this information with emergency responders who will be mum. And the information will be exempt from the Freedom of Information Act as well as public records and state disclosure laws (SSI).

Better response, slower speeds and safer rail cars are needed to stem the rise of crude oil rail car accidents. Transparency would be nice, too, although that took a real hit last week with the new regulations from the Department of Transportation. Source: National Transportation Safety Board

True, the new regulations do cover critical oil train operations in terms of “speed restrictions, braking systems, and routing, and adopts safety improvements in tank car design standards and a sampling and classification program for unrefined petroleum-based products.” All good things long needed to address the growing dangers in rail transport of crude.

But after the Lynchburg derailment and inferno, the feds required railroads to notify emergency response agencies if shipments over a million gallons crude oil were going through their states. Railroads complied, but asked states to keep that information confidential.

Most states refused (McClatchy).

Since then, the industry argued that details about the crude oil rail shipments were sensitive from a security and customer protection standpoint and should not be available to the public, although it’s more likely they just don’t want to get hassled by a public trying to restrict shipments from going through their towns, across their rivers and along their coasts.

At first, the Federal Railroad Administration disagreed with the industry (Federal Register), saying that information about the shipments was not sensitive from any standpoint.

But they seemed to have quietly caved to industry pressure.

The twin forces of the new North American energy boom and the lack of pipeline capacity have combined to suddenly and dramatically increase crude oil shipping by rail. The energy boom is not going away, and the XL pipeline is on hold indefinitely, so the increase in rail will continue.

Crude is a nasty material, very destructive when it spills into the environment, and very toxic when it contacts humans or animals. It’s not even useful for energy, or anything else, until it’s chemically processed, or refined, into suitable products like naphtha, gasoline, heating oil, kerosene, asphaltics, mineral spirits, natural gas liquids, and a host of other products.

Thus, the need to get it to the refineries that can handle it, mostly along the coasts. Without new pipelines, it’s going to go by rail.

But fiery derailments of crude oil trains in North America are becoming almost frequent, along with many simple spills (dot111). Every minute of every day, shipments of two million gallons of crude are traveling over a thousand miles in hundred-tank-car trains (PHMSA.gov), delivering as much oil as is expected by the Keystone XL Pipeline.

A clear example of this danger came on July 6, 2013, when a train carrying 72 tank cars, and over 2,000,000 gallons of Bakken oil shale crude from the Williston Basin of North Dakota, derailed in the small town of Lac-Megantic, Quebec. Much of the town was destroyed and forty-seven people were killed.

According to billionaire Warren Buffett, these new federal standards for shipping crude oil by rail will definitely slow-up the industry, and as CEO of Berkshire Hathaway’s BNSF railroad and its Union Tank Car business, he should know (Tri-City Herald).

Buffett says railroads are critical for transporting potentially dangerous products across the United States, and he thinks it makes more sense for railroads to haul them instead of trucks or pipelines, a controversial stand given the historical data (Pick Your Poison).

So what is the safest way to move crude oil?

The volume of oil spilled per billion-ton-miles for each mode of transport - truck worse than pipeline worse than rail worse than boat. But it depends upon your definition of worse. Source: Congressional Research Service R43390

The short answer is: truck worse than train worse than pipeline worse than boat (Oilprice.com). But that’s only for human death and property destruction. For the amount of oil spilled per billion-ton-miles, it’s truck worse than pipeline worse than rail worse than boat (Congressional Research Service). Even more different is for environmental impact, where it’s boat worse than pipeline worse than truck worse than rail.

But the accident frequency trend is against rail. Oil trains are getting bigger and towing more and more tanker cars. From 1975 to 2012, trains were short and spills were rare and small, with about half of those years having no spills above a few gallons (EarthJustice.org). Then came 2013, in which more crude oil was spilled in U.S. rail incidents than was spilled in the previous thirty-seven years.

The danger seems to be centered in the rail tank cars themselves (The Coming Oil Train Wreck). If these new regulations makes the rail cars safer, makes them go slower and routes them around environmentally sensitive or vulnerable areas, that’s wonderful.

But I don’t see why we aren’t allowed to know when the crude oil trains are near us.

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.

Crude by rail causing delays for rail shipments of other goods

Repost from The Wall Street Journal
[Editor: We missed this significant article from last March.  Also on the delays of farming shipments, see the Reuters report of April 15, 2014: Farmers: Oil trains may delay fertilizer shipments.  – R]

Surge in Rail Shipments of Oil Sidetracks Other Industries

Pileups at BNSF Railway Is Causing Delays for Shippers of Goods Ranging From Coal to Sugar
By Betsy Morris, Jacob Bunge and John W. Miller, March 13, 2014
A train carrying crude oil heads west through the small town of Shelby, Mont., in November. A major snarl in railroad traffic is ricocheting through the supply chains of businesses across the U.S. AP

A major snarl in railroad traffic is ricocheting through the supply chains of businesses across the U.S., causing delays and losses for shippers of goods ranging from coal to sugar.

Many of the problems stem from pileups at BNSF Railway Co. in a critical northern stretch of the country where it is shipping crude oil from North Dakota’s booming Bakken Shale region. The railroad, one of the biggest in North America, was already taxed by the heavy demand for oil transport. But its difficulties multiplied when it ran out of locomotives and crew, as a bitter winter forced it to use smaller trains.

That has caused a ripple effect across the country as shipments have been delayed. Deliveries of empty grain cars to farmers and grain elevators in the Midwest and Great Plains are running about two to three weeks late, the railroad says. The chief of a major sugar producer said he likes to load 50 railcars a day this time of year, but BNSF sometimes brings more than 50 and sometimes 30.

An executive close to big utility companies says coal-fired power plant inventories are running much lower than the usual 30 days. “The railroads tell us they aren’t serving power plants until their inventories are in single-digit days,” he said.

BNSF isn’t the only railroad with capacity problems, but its woes have been aggravated by a big grain harvest and its surging crude business.

The railroad knew it was in trouble when winter hit. “We found ourselves behind the curve,” said Bob Lease, vice president, service design and performance, for BNSF. “Now, we are finding we can’t fill all of the demand” as quickly as usual.

The backlogs could wind up costing shippers hundreds of millions of dollars, says Steve Sharp, president of Consumers United for Rail Equity, a group representing agriculture companies, manufacturers and utilities. His group has been pushing for tougher railroad regulation.

Andrew Walmsley, director of congressional relations for the American Farm Bureau Federation, a trade group for farmers, worries that continued capacity problems could hurt U.S. competitiveness in the world arena. “Our reliability as a trading partner comes into question anytime we can’t provide the most cost-competitive price in a predictable and timely manner,” he said.

BNSF is scrambling. The railroad is leasing and buying locomotives by the hundreds and hiring new crews. In mid-February it began building new track on top of frozen snow-covered ground along its main oil-patch route. It normally wouldn’t have attempted such a project until spring.

Mr. Lease says traffic should become more “normalized” by April 1, but he concedes that the railroad’s challenges will extend through 2014. “It takes a while to unravel,” he said.

BNSF, a unit of Warren Buffett’s  Berkshire Hathaway Inc.,  BRKB +1.19%     invented the business of carrying crude oil by rail when it launched its first long oil train, essentially a rolling pipeline, in 2009. The business has sharply exceeded its expectations. Shipments of crude by rail from North Dakota rocketed to a peak of 800,000 barrels a day last October from fewer than 100,000 barrels a day in 2010.

The surge has contributed to a tangle with potentially widespread impact. Larry Stranghoener, chief financial officer of fertilizer maker  Mosaic Co.  MOS +0.73%     , says that transport problems, including the crunch in railroad capacity, could spell “a slower season.”

“The primary preoccupation of our sales force, our supply chain and our customers frankly is getting product to them in time for the spring season,” he told the Minneapolis-area company’s investors Wednesday. Any delays transporting Mosaic’s fertilizer to dealers could cause them to defer additional orders, he said.

Some shippers, eager to move their products, have opted to use trucks. Trucking rates compare with rail costs within a 500-mile radius, but beyond that companies can wind up paying four to five times as much on a per-ton basis, says one shipping official.

At Black Gold Farms, based in Grand Forks, N.D., Chief Executive Gregg Halverson says his company has had to pay more to hire trucks to transport its potatoes, which it sells to chip makers.

“There’s more demand for truck transportation, and that hits us between the eyes,” Mr. Halverson said. “It’s not only the actual availability of the trucks, but trucking firms having trouble getting drivers, because of demand from the oil patch.” He declined to estimate how much more he is paying for trucks.

American Crystal Sugar Co., which says it supplies about 15% of the nation’s sugar, had to slow production at three of its five plants for 11 days in mid-February because it was running out of storage space while waiting for trains to ship its sugar to food companies. That has disrupted the Moorhead, Minn.-based cooperative’s just-in-time delivery system, said David Berg, its chief executive. “The railroad just threw that into complete chaos,” he said.

He said delays in outbound shipments of sugar have interfered with the production schedules of American Crystal’s customers, many of them major food manufacturers.

While he said he wasn’t aware of any food companies that have had to halt production, “They’ve been running on fumes for weeks,” he said. “We’ve been humping trucks all over the U.S. to keep people in supply.” American Crystal supplies  General Mills Inc.,  GIS +1.27%      Kraft Foods Group Inc.,  KRFT +1.30%     Nestlé SA, Mars Inc. and  Kellogg Co.  K +1.09%     , among others.

Mr. Berg and Perry Cerminara, director of global sweetener and energy-risk management at  Hershey Co.  HSY +0.07%     , called the problems caused by BNSF “serious” in a March 4 letter to regulators and stressed the “urgent” need to fix them. Mr. Cerminara wrote on behalf of the Sweetener Users Association, representing food manufacturers.

A spokesman for BNSF said it is working with customers individually to address their most critical issues and plans record spending on expansion this year.

Utilities are hoping railroads can improve their capacity before the busy summer season. “We try to build up inventories to around 40 days, so we’re counting on spring,” said one official at a coal-fired power plant. But, he added, “We’re not counting on a magic bullet.”

—Tony C. Dreibus, Annie Gasparro, Chester Dawson, David George-Cosh and Laura Stevens contributed to this article.

North Dakota Oil-By-Rail Routes & Chemical Composition Published for First Time

Repost from DESMOGBLOG
[Editor: This is an incredibly detailed report on North Dakota train routes and contents.  I am seeing similar reports for Washington State, Illinois and points east.  I am assuming – and hoping – that we will see something like this for California soon.  – RS]

Exclusive: North Dakota Oil-By-Rail Routes Published for First Time

Fri, 2014-06-27, Steve Horn

For the first time, DeSmogBlog has published dozens of documents obtained from the North Dakota government revealing routes and chemical composition data for oil-by-rail trains in the state carrying oil obtained via hydraulic fracturing (“fracking”) in the Bakken Shale.

The information was initially submitted to the U.S. Department of Transportation (DOT) under the legal dictates of a May 7 Emergency Order, which both the federal government and the rail industry initially argued should only be released to those with a “need-to-know” and not the public at-large.

North Dakota’s Department of Emergency Services, working in consultation with the North Dakota Office of the Attorney General, made the documents public a couple weeks after DeSmogBlog filed a June 13 North Dakota Public Records Statute request.

“There is no legal basis to protect what they have provided us at this point,” North Dakota assistant attorney general Mary Kae Kelsch said during the June 25 Department of Emergency Service’s quarterly meeting, which DeSmogBlog attended via phone. “It doesn’t meet any criteria for our state law to protect this.”

Initially, oil-by-rail giant Burlington Northern Santa Fe (BNSF) and other rail companies sent boilerplate letters — one copy of which has been obtained by DeSmogBlog from the Idaho Bureau of Homeland Security through the state’s Public Records Act — to several State Emergency Response Commissions (SERCs), arguing train routes should be kept confidential.

BNSF also sent several SERCs a boilerplate contract proposal, requesting that they exempt the information rail companies were compelled to submit to the SERCs under the DOT Emergency Order from release under Freedom of Information Act. A snippet of the proposed contract can be seen below:

Dan Wilz, homeland security division director and state security advisor of the Department of Emergency Services, said the claims did not hold legal water.

“Joe can stand on a street corner and figure that out within a week’s period,” Wilz said at the quarterly meeting. “They watch the trains go through their community each and every day.”

BNSF, Canadian Pacific Railway (CP Rail) and Northern Plains Railroad all submitted information to the Department of Emergency Services.

CP Rail: 7 Trains/Week, “Highly Flammable”

In its submission to the North Dakota Department of Emergency Services, CP Rail revealed it sent seven oil-by-rail trains through 13 counties in North Dakota the week of June 9-15. CP Rail also estimated it generally sends 2-5 trains through those same counties during an average week.

Some oil-by-rail trains, dubbed “bomb trains” by some due to their propensity to explode, carry over 2,677,500 gallons of fracked oil. The trains are often over a mile in length and contain over 100 cars.

The company also released information on the chemical composition of the Bakken oil it sends on its rail cars, conceding that Bakken oil is “highly flammable” and “easily ignited by heat, sparks or flames.”

Further, CP Rail admitted that Bakken oil has “a very low flash point” and that “water spray when fighting [its] fire may be inefficient.”

BNSF: Bakken Oil-By-Rail King

BNSF, owned by Warren Buffett — a major campaign contributor to President Barack Obama both in 2008 and 2012 and one of the richest men on the planet — is widely considered the king of oil-by-rail in the U.S. The documents BNSF released to the Department of Emergency Services back up the notion.

One document shows BNSF sent 31 oil-by-rail trains through Cass County, North Dakota during the week of May 29 – June 4, also saying it sends between 30-45 trains per week on average through the County. That same week, 30 BNSF trains zoomed through Barnes County, North Dakota.

A document filed the next week, covering June 5 – June 11, shows 45 trains passed through Cass County that week. Another 37 passed through Ward County, North Dakota and another 33 through McHenry, Pierce and Mountrail counties.

Northern Plains: Chemical Composition Revealed

In its DOT submission, Northern Plains included an expansive Bakken crude oil sample chemical composition test submitted by Musket Corporation, which has a terminal and transload site in North Dakota.

Northern Plains also submitted a Bakken Crude Safety Data Sheet, created by Musket, as well. The Sheet echos CP Rail in stating that Bakken oil is a “highly flammable liquid and vapor.”

Further, the Sheet explains that Bakken oil contains Benzene, a carcinogen.

A record amount of Bakken oil spilled into waterways that are a drinking source for many as a result explosions of oil-by-rail trains in 2013. Most recently, the exploding oil-by-rail train in Lynchburg, Virginia spilled into the James River.

Photo Credit: Erin Ferrell – ABC 13 News | Twitter

Compared to CP Rail and BNSF, Northern Plains is a minor player in terms of the amount of oil it carries by rail in North Dakota. It submitted that it carries 12 trains per year and all within Walsh County, North Dakota, also including a map of its route.

“Right to Know” vs. “Need to Know”

Despite the fact dozens of oil-by-rail trains pass through North Dakota counties on a daily basis, carrying a substance that contains a known carcinogen and is “highly flammable,” Big Rail and Big Oil used its legal might to claim only a select few “need to know” where these cars travel.

“For some reason this entire rail oil industry, they just fill these rail cars and send them without really knowing what’s in them,” Scott Smith, chief scientist for Water Defense said in an article appearing in the summer edition of the Earth Island Journal. “And it’s the only industry I’m aware of that gets away with that.”

But this time around, due to the North Dakota Public Records Statute, Big Rail and Big Oil didn’t get away with it.

Photo Credit: Kyle Potter | Forum of Fargo-Moorhead