Category Archives: Federal Regulation (U.S.)

California Regulation, Crude By Rail, Federal Regulation (U.S.), Solano County CA

Solano County lobbyists to advocate for crude-by-rail health and safety

By Roger Straw, February 12, 2015

Solano County seal (400x400)A little known but influential Council here in Solano County is the Solano County City County Coordinating Council (CCCC, or 4C’s).

Benicia Mayor Elizabeth Patterson’s recent E-Alert gives a rare look at the proceedings of a recent CCCC meeting, including adoption of a legislative platform for Solano County that calls for our State and Federal lobbyists to support efforts to improve safety of hazardous materials transported by rail.

Mayor Patterson offered the following insider perspective on the adoption of the 2016 legislative platform at the CCCC’s February 12, 2015 meeting:

Highlights of the discussion was the transportation safety issue that Benicia added: “Support efforts to improve safety of hazardous materials transported by rail, including crude by rail and enhance capacity of local emergency responders to appropriately respond to potential emergency events resulting from derailment or releases.”

…there was spirited discussion and accusations of “agenda driven” thinking and the language not necessary and other detracting remarks.  Because the 4Cs was established with a consensus protocol, a simple majority of the quorum was not enough to carry this suggestion forward.  After more discussion and the lead objector, Supervisor Spering, saw that that half the Mayors and three Supervisors did want the above language, he offered language that seemed to capture the essence of the suggestion.  In the end we gave direction to staff to finalize the language to be reviewed by Supervisor Spering and the City of Benicia.

Kudos to Mayor Patterson and Benicia city staff, and many thanks to the other County Supervisors and Mayors who backed this legislative priority.  Let’s hope that the compromise language still has some teeth!

It will be wonderful to be know that our County’s tax-supported State and Federal lobbyists are representing us to improve health and safety legislative measures with regard to crude by rail.

California House Transportation Subcommittee on Railroads Pipelines and Hazardous Materials, California Regulation, Crude By Rail, Emergency Readiness & Response, Federal Regulation (U.S.), Sacramento CA, Tank car design, Uprail communities, US Department of Transportation, Valero Benicia Refinery

Sacramento Bee editorial: We need open debate on oil train safety

Repost from The Sacramento Bee
[Benicia Independent Editor:  A bit odd that the Bee editorial is defending the rail industry’s right to talk to the media and to lobby congress.  Nice, though, when the Bee writes, “Thankfully, officials in Benicia actually listened to people who exercised free speech.  They announced last week they will redo parts of an environmental study….”  A call for open debate is a good thing.  However, the House subcommittee’s urging for timely new rules on tank car safety is infinitely more important than Rep. Denham’s comment and the Bee’s response.  For a more substantive article on the subcommittee proceedings, see the CQ Roll Call story.  – RS]

We need open debate on oil train safety

By the Editorial Board, 02/10/2015
Rep. Jeff Denham, chairman of the House Transportation Subcommittee on Railroads, Pipelines and Hazardous Materials, questions a witness last year.
Rep. Jeff Denham, chairman of the House Transportation Subcommittee on Railroads, Pipelines and Hazardous Materials, questions a witness last year. Pete Marovich / MCT Tribune News Service

As oil trains rumble through the Sacramento region, a key House panel held an important hearing on how rail and pipelines can keep up – safely – with the boom in domestic oil production. For two hours, top rail and oil industry executives testified and answered questions on this crucial issue.

Then Rep. Jeff Denham had to go and spoil it.

The Turlock Republican, chairman of the House Transportation Subcommittee on Railroads, Pipelines and Hazardous Materials, ended last week’s hearing on an unfortunate note – an unnecessary dressing down of a rail car manufacturing executive who called on federal regulators to speed up the rollout of safer oil tank cars.

Though his firm (which has a repair shop in Modesto) would benefit financially, Greg Saxton, senior vice president and chief engineer at the Greenbrier Companies, happens to be right. The National Transportation Safety Board, which put rail tank car safety on its “most wanted” list for 2015, points out that more than 100,000 outdated cars carry crude, increasing the risk of leaks and explosions. Denham also says he’s concerned that the U.S. Department of Transportation missed its own Jan. 30 deadline to submit new rules on oil tank cars.

So what was Saxton’s transgression, according to Denham? He had the temerity to talk to lowly newspaper editorial writers, as well as esteemed members of Congress.

Denham lectured Saxton that he didn’t want the “wrong people” – whoever they are – “talking to the ed boards across the country” and creating a “misperception” that “our industry” is unsafe.

“I just want to make sure we’re all singing the same tune that we have a very safe industry and we want to work together in improving that industry,” the congressman said, as pointed out by Mike Dunbar, opinions page editor at The Modesto Bee who talked to Saxton last month.

Last time we checked, acting as a public relations consultant for the oil industry isn’t Denham’s job. He should care much more about keeping his constituents in Modesto and Turlock safe. As chairman of this important panel, he should encourage open debate. Instead, his spokeswoman said Tuesday, Denham stands by his remarks to Saxton.

Thankfully, officials in Benicia actually listened to people who exercised free speech.

They announced last week they will redo parts of an environmental study on the proposal for two 50-car oil trains a day to traverse Sacramento and other Northern California cities on the way to the Valero refinery in Benicia.

Benicia officials are responding to environmental groups, Sacramento-area officials and Attorney General Kamala Harris, who had all properly pointed out that the report fell short in analyzing potential oil spills and fires in the middle of urban areas and didn’t even consider possible harm east of Roseville.

The updated study, to be released June 30, also needs to at least consider suggestions from Sacramento and Davis leaders that Union Pacific Railroad be required to give advance notice of oil shipments to emergency responders and be banned from parking oil trains in urban areas.

They’re the sorts of ideas that people might just want to explain to a congressional committee – or perhaps even an editorial board.

Federal Regulation (U.S.), Tank car design, Tank car manufacture, U.S. House of Representatives Transportation and Infrastructure Subcommittee on Railroads Pipelines and Hazardous Materials

US House Committee: Members fume over delayed oil tank car rule

Repost from CQ Roll Call
[Editor: Significant quote by Oregon Rep. Peter DeFazio on new tank car safety rule: “Get it done, get it done now. Start the production. Create jobs here in America.”   – RS]

Members Fume Over Delayed Oil Tank Car Rule

By Tom Curry, Feb. 3, 2015 
Rep. Jeff Denham, R- Calif., chairman of the House Transportation Subcommittee on Railroads, Pipelines, and Hazardous Materials (Photo By Douglas Graham/Roll Call)
Rep. Jeff Denham, R- Calif., chairman of the House Transportation Subcommittee on Railroads, Pipelines, and Hazardous Materials (Photo By Douglas Graham/Roll Call)

Another House hearing and another regulatory agency under bipartisan fire for its slowness in issuing an eagerly awaited rule that will have sweeping effects on several industries.

Tuesday’s hearing of the House of Representatives Transportation and Infrastructure Subcommittee on Railroads Pipelines and Hazardous Materials was a chance for members and industry spokesmen to assail the Pipeline and Hazardous Materials Safety Administration (PHMSA) not issuing a rule that would tell railroads and rail car manufacturers the standard they need to meet for new oil tank cars.

Transportation and Infrastructure Committee ranking member Peter DeFazio said that even though PHMSA has known that the older tank cars, designated as DOT-111’s, “are not adequate or safe since 1993, PHMSA has yet to promulgate a rule for new standards. In fact, the industry itself is so frustrated that they’ve proposed a new standard to the agency.”

But the agency couldn’t act quickly, he said and the rule is “lost somewhere in the bowels of the administration between the agency and the trolls over at the Office of Management and Budget who will further delay the ruling.”

PHMSA has “managed to mangle the rule by merging it together with operational issues which are much more difficult to deal with and controversial,” DeFazio said.

PHMSA should simply issue a rule on tank cars: “Get it done, get it done now. Start the production. Create jobs here in America,” he said.

What’s on people’s mind is the possibility of another Lac Megantic accident, the Quebec oil tank car derailment and explosion that killed 47 people in 2013.

Greg Saxton, senior vice president of rail car manufacturer Greenbrier, said “if we were to have additional derailments that caused more fatalities, I think we could lose our franchise, the trust that the American people put in us to do this.”

Saxton said, “You’ve got to get beyond this uncertainty” about the tank car standard.

He added that “economic forces, the market, will crush an over-packaged commodity,” meaning that market forces will lead shippers to use the older, less safe, and less costly DOT-111 cars until PHMSA requires that they upgrade to a more crash-resistant model.

Greenbrier has urged PHMSA to quickly adopt what’s called the “Option 2” design of a tank car with thicker steel tank shells and other safety features.

Subcommittee Chairman Jeff Denham, R-Calif., told Saxton that he, too, wants to see PHMSA and OMB move quickly on the rule.

But he said he wanted to make sure “that there is not a misperception” among the American people that “our current tank cars are not safe” and “that our industry does not have a safe record.”

He noted that Greenbrier, the leading car manufacturer, could only build 8,000 new cars a year, so it would take perhaps a decade for that company and others to build new cars to replace all the DOT-111 cars.

Denham also said the public shouldn’t think “that there’s some magic, quick, fast track to get all of these new tank cars” on the nation’s railroads very quickly.

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.