Category Archives: Tank car retirement

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.

Crude By Rail, Federal Regulation (U.S.), Tank car design, Tank car retirement, Tank car retrofit, US Department of Transportation

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)

 

Crude By Rail, DOT-111, Emergency Readiness & Response, Federal Regulation (U.S.), Tank car retirement, Train speed, U.S. Department of Transportation

Groups Question Industry Influence on Oil Train Safety Rules, submit FOI request

Press Release from ForestEthics

Groups Question Industry Influence on Oil Train Safety Rules

Freedom of Information Requests Target Five Federal Agencies, Nearly 100 Lobbyists

By Eddie Scher, Jan 15, 2015

Today four public interest groups requested records exchanged between five US government agencies and nearly 100 oil and rail industry representatives on new oil train safety standards. The Department of Transportation announced yesterday that the agency would miss the January 15 deadline set by Congress and issue final rules by May 12, 2015.

“New oil train safety standards are decades late: the National Transportation Safety Board first called antiquated DOT-111 tank cars unsafe for hauling crude oil in 1991,” says Ross Hammond, ForestEthics US campaigns director. “But the administration seems to have trouble asking the oil and rail industry for common sense safety standards like speed limits, sharing information with firefighters, and a ban of the most dangerous cars.”

The Freedom of Information Act requests filed by ForestEthics, Communities for a Better Environment, Ezra Prentice Homes Tenants Association (Albany, NY), and Citizens Acting or Rail Safety (La Crosse, WI) name 97 individual lobbyists from the American Petroleum Institute, Association of American Railroads and specific oil and rail companies, including Chevron, Tesoro, and Burlington Northern Santa Fe (BNSF). Among the lobbyists named are six former members of Congress: Trent Lott, Vin Weber, John Breaux, Steve LaTourette, Max Sandlin and Bill Lipinski.

“The public has the right to know how an army of lobbyists is influencing the Department of Transportation,” says Ross Hammond, ForestEthics US campaigns director. “Oil trains carrying millions of gallons of toxic, explosive crude oil threaten the 25 million Americans who live in the blast zone. DOT should listen their own safety experts and quickly finalize strong new standards that take DOT-111s off the tracks, slow these trains down, prepare first responders and protect families.”

Government agencies and officials covered by this FOIA request are US Department of Transportation, National Transportation Safety Board, Surface Transportation Board, Federal Railroad Administration, and Pipeline and Hazardous Materials Safety Administration (PHMSA).

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ForestEthics demands that corporations and government protect community health, the climate, and our wild places. We’ve secured the protection of 65 million acres of wilderness by pushing major companies to shift hundreds of millions of dollars to responsible purchasing. www.ForestEthics.org

Bakken Crude, Climate Change, Derailment, DOT-111, Fossil fuels, Tank car design, Tank car retirement, Tank car retrofit, Volatility

DOT Ignores Congress’ Deadline for Upgrading Safety Rules to Prevent Oil Train Disasters

News Release from Center For Biological Diversity
[Editor: see this story also in INFORUM (Fargo ND), which shows an interesting photo of a cross section from a damaged oil tanker car.  – RS]

Department of Transportation Ignores Congressional Deadline for Upgrading Safety Rules to Prevent Oil Train Disasters

PORTLAND, Ore.— Ignoring a congressional stipulation in the 2015 budget bill calling for new safety rules for oil trains by Jan. 15, federal transportation officials now say they won’t update the rules until May. Amid mounting concerns over the unchecked rise in shipments of highly volatile crude oil by train that has resulted in several explosive derailments and dozens of fatalities in the past two years, the federal Department of Transportation has yet to enact any on-the-ground safety improvements.

“Every day of delay is another day of putting people and the environment at risk of great harm,” said Jared Margolis, an attorney at the Center who focuses on the impacts of energy development on endangered species. “Continuing to allow these bomb trains to operate under current regulations is simply rolling the dice as to where and when the next disaster will occur.”

While several explosive oil-train accidents have occurred since the rulemaking process began in September 2013, the agency has failed to take any immediate action to resolve well-established concerns, such as the use of unsafe, puncture-prone DOT-111 tank cars.

“DOT-111 tank cars were never intended to transport these hazardous products,” said Margolis. “Failing to ban them immediately is a failure of the government’s duty to protect us from harm.”

Congress, understanding that rapid action is essential to protect the public, put a requirement in the 2015 budget bill for federal transportation officials to issue new safety rules by Jan. 15; but the industry has been fighting to delay and chip away at any efforts that would make moving oil by rail more expensive, regardless of safety concerns.

“Bomb trains are just one of many dangers posed by our continued dependence on fossil fuels,” Margolis said. “Ultimately, if we’re going to avoid dangerous oil-train derailments, as well as avoid the climate catastrophe that is currently being caused by our emissions, we must move away from these dangerous fossil fuels.”

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The Center for Biological Diversity is a national, nonprofit conservation organization with more than 800,000 members and online activists dedicated to the protection of endangered species and wild places.