Category Archives: Tank car retrofit

Bakken Crude, Canadian regulation, Crude By Rail, DOT-111, Insurance Industry, Tank car retrofit, Volatile gases

Rightwing Canadian Thinktank: Bakken crude is safe, consumers will pay for unneeded regulation

Repost from The Waterloo Record, Kitchener, Ontario, Canada [Editor: It is instructive – although distressing – to take note of current talking points of the right-wing Canadian Fraser Institute.  – RS]

Consumers are the losers in rush to regulate oil by rail

Opinion, by Kenneth P. Green

In the wake of the 2013 Lac-Mégantic oil-by-rail disaster, when a train carrying crude oil from North Dakota’s Bakken field exploded in Quebec, some people began to characterize Bakken crude oil as “uniquely flammable,” implying that new rail car standards might be required to move the material.Indeed, the supposed uniquely flammable characteristics of Bakken crude was ultimately cited as a central reason for the recent Department of Transportation proposal to tighten railcar standards in the U.S., which Canada will almost certainly have to match given the integrated nature of the North American rail system.

There’s no question we must carefully consider the safety of how we move oil, whether by pipeline, rail, roadway or barge. But we should make those judgments based on data, not on emotion or hunches. We also need to consider the costs that such decisions might impose on consumers of oil and derivative products and services. And a recent study of Bakken crude commissioned by the North Dakota Petroleum Council reveals that Bakken crude is just regular crude oil that can be safely transported in existing rail cars.

The study sampled Bakken crude at 15 well sites across the Bakken formation, and at seven rail terminals, testing the oil for a broad range of physical characteristics.

To summarize the findings in plain language: Bakken crude is comparable to light sweet crude oil when it comes to its relative weight as compared to water, and it has very low levels of sulphur and corrosive acidic components. The vapour pressure of Bakken oil (a measure of how much outward pressure that Bakken oil would exert on a container such as a rail car) was found to be within a few pounds per square inch of other light sweet crude oils.

The flash point of Bakken oil (that’s the lowest temperature at which the oil could vaporize enough to ignite in air) was found to be below 73 degrees Fahrenheit, similar to other light sweet crudes. The initial boiling point (that’s the temperature at which bubbles form in a heated liquid) was found to be between 95 F and 100 F, which is also in the normal range for light sweet crude oil; and Bakken crude didn’t have unusually high concentrations of very light (and particularly flammable) hydrocarbons (known as “light ends”).

And, contrary to suggestions that there might have been additions to Bakken crude that would make it uniquely flammable, the study found no evidence that Bakken crude was “spiked” with more flammable natural gas liquids prior to being shipped by rail.

Finally, the report notes that: “… Bakken crude oil meets all specifications for transport using existing DOT-111 tank cars.” This conclusion is consistent with the recent American Fuel & Petrochemical Manufacturers Bakken Report, which stated: “Bakken crude oil does not pose risks significantly different from other crude oils or other flammable liquids authorized for rail transport. While Bakken and other crude oils have been classified as flammable liquids, the report noted Bakken crude poses a lower risk than other flammable liquids authorized for transport by rail in the same specification tank cars.”

The “uniquely flammable” narrative has driven the ongoing process to develop new rail-safety regulations, and new standards have been proposed in the U.S.

Retrofitting existing rail cars to meet the new standards is estimated to cost between $30,000 US and $40,000 US, and industry estimates suggest there are about 78,000 cars that need to be retrofit, at a total cost of $2.3 billion US to $3.1 billion US. Complying with the new regulations will increase costs of oil transport and, thus, the cost of oil, gasoline, derivative products and services provided through the use of those products for everyday consumers. It will also slow the trend of the shift to rail, at least in the short term, until retrofits can be worked through the system.

Some have suggested that the new standards might engender savings through reduced insurance rates, though this seems unlikely. In the wake of the Lac-Mégantic derailment, the United States Pipeline and Hazardous Materials Safety Administration effectively concluded that current insurance coverage levels were not simply low, they were drastically too low to cover potential costs of an accident. If anything, there will be still higher insurance rates issued to cover the more expensive cars, further reducing the economic viability of moving large quantities of oil by rail.

Adding to the complexity, there may not be sufficient resources in the rail-insurance sector to step up to the plate and offer more comprehensive coverage.

We may or may not be safer as a result of the proposed tank-car regulations, but it may be that the “uniquely flammable” narrative of Bakken crude has led us to focus on the wrong problem by tackling the material aspect of things before we’ve tackled the insurance side of the equation. Most likely, an integrated process tying both factors together would have yielded a superior outcome.

Kenneth P. Green is the senior director of natural resource studies at the Fraser Institute, an independent, right-of-centre think-tank.
Emergency Readiness & Response, Insurance Industry, Tank car design, Tank car retrofit

Ca-ching: Oil-by-rail surge to benefit three commercial sectors

Repost from Benzinga
[Editor: Quick & dirty on the 3 sectors: Freight Car Designers And Refitters, Insurance Providers, and Emergency Services And Safety Training.  UNLESS … if we stop crude by rail in its tracks, the only CA-CHING will be in the alternative energy fields.  – RS] 

3 Sectors Expected To Benefit From The Oil-By-Rail Surge

Bruce Kennedy, Benzinga Staff Writer, August 11, 2014

It’s been just over a year since a freight train carrying crude oil from the Bakken shale fields in North Dakota derailed and exploded in a Quebec town near the U.S.-Canadian border, killing 47 people.

That accident, along with several others in its wake, drew attention to the enormous increase in shale oil now being transported from North Dakota and Canada by rail – and the vulnerabilities of that form of transport.

“More crude oil is being shipped by rail than ever before, with much of it being transported out of North Dakota’s Bakken Shale Formation,” Department of Transportation Secretary Anthony Fox pointed out in a press conference last month. “In 2008, producers shipped 9,500 rail-carloads of oil in the U.S.; by just last year, that number skyrocketed to 415,000 rail-carloads — a jump of more than 4,300 percent.”

At that same press conference, Fox announced a rule-making proposal to improve the safe transportation of large quantities of flammable materials by rail – crude oil and ethanol in particular.

The increase in oil being transported by rail, as well as the new safety measures, might also be a windfall for companies in some related fields.

Freight Car Designers And Refitters

The proposed new safety rules for oil freight cars means a potential bonanza for firms like The Greenbrier Companies (NYSE: GBX). The Oregon-based group is a leading manufacturer and marketer of railroad freight car equipment in both North America and Europe.

Along with retro-fitting existing oil rail cars, Greenbrier is also designing a new genreration “Tank Car of the Future,”  with a thicker tank and bigger welds to ensure greater safety.

The new design, according to the Rigzone oil and gas industry web site, is “intended to meet anticipated new industry and government standards for tank cars transporting certain hazardous material.”

Insurance Providers

The Wall Street Journal reports that most, big North American railroads usually carry about $1.5 billion in liability insurance – but notes that accidents like last year’s deadly derailment and explosion in Lac-Mégantic, Quebec, can end up costing billions of dollars more in cost, especially if that accident happens in a populated area.

“Even if it happens outside of town, the massive damage to property and the environment — you’re stymied when you have these kind of crude oil fires burning hot and big for days,” Karen Darch, president of Barrington, Illinois, told the newspaper.

This could lead to an increase in the need for insurance.

“With experts predicting that oil spill derailments may increase in frequency over the next decade, the insurance industry must be prepared to address this new coverage threat,” says the law industry tracker web site Law360 earlier this year, “including the coverage issues and potential exposure which may arise from these disasters.”

Emergency Services And Safety Training

Earlier this year, Minnesota’s state legislature passed an oil transport law. The measure, reportedly worth more than $6 million, took fees generated in part from oil and railroad companies and put that funding towards tanker and pipeline disaster training, as well as more state transportation safety inspectors.

As former National Transportation Safety Board Chairwoman Deborah Hersman pointed out in a letter written this past January to the head of the Federal Railroad Administration, there is no mandate for the railroads to come up with comprehensive disaster response plans for oil train derailments

This means the rail carriers “have effectively placed the burden of remediating the environmental consequences of an accident on local communities along their routes,” the letter said.

According to the Association of American Railroads, the industry is providing $5 million to develop and fund specialized training for first responders handling a crude-by-rail accident, as well as developing “an inventory of emergency response resources and equipment for responding to the release of large amounts of crude oil along routes over which trains with 20 or more cars of crude oil operate.”

Bakken Crude, Crude By Rail, Federal Regulation (U.S.), High Hazard Flammable Trains (HHFTs), Tank car design, Tank car retrofit, Train dwell time, Train speed

An inside look at rail industry views on proposed safety rules

Repost from Railway Age
[Editor: Check out rail industry insider perspectives on the DOT’s proposed new safety rules, and a few of their hoped-for changes before the rules become final.  – RS]

DOT crude oil NPRM: Will cooler heads prevail?

August 7, 2014, by  William C. Vantuono, Editor-in-Chief
A recent call-in forum on crude by rail conducted by Cowen and Company Managing Director and Railway Age Contributing Editor Jason H. Seidl “helped affirm our view that the final version of the DOT’s safety rules may include some changes to the ones proposed on July 23.”

“We believe that the final draft of the [Notice of Proposed Rulemaking on High-Hazard Flammable Trains and DOT 111 tank cars] could be more friendly to shippers than the first proposal,” said Seidl. “This, along with the removed uncertainty, could put a more positive spin on regulations that are sure to add costs for the industry.”

Retrofitting tank cars to 9/16-inch-thick steel is “a tall order,” said Seidl. “A railcar manufacturing executive on our panel suggested that retrofitting existing 7/16-inch-steel cars to 9/16-inch layers would be a problematic task, as the technology for implementing the conversion may not be currently available. Additionally, such an undertaking may be restricted by tight steel supplies, which could disrupt and prolong production for months. This would exacerbate concerns about the two- to five-year proposed compliance period, which is already viewed as insufficient by many players in the industry. According to our panelist, a more realistic retrofitting of the existing 7/16-inch-steel car fleet would take five to seven years and consist of other improvements, such as top fittings and thermal jackets. If retrofitting to a 9/16-inch-steel layer is ultimately adopted in one or more of the paths to compliance, the Greenbrier Companies could benefit as it already applies this standard to its “Tank Car of the Future” group of tank cars. That being said, we believe that the final version of the rules will include some key changes to the ones proposed on July 23.”

The Cowen panelists agreed that reducing crude oil train dwell time would make more sense than reducing speed. “The consensus opinion seemed to be that enforcing broad speed restrictions may not be the right approach,” noted Seidl. “The panelists indicated that emphasis should be placed on reducing the total time that High Hazard Flammable Trains (HHFTs) spend in populated areas, and slower trains do just the opposite. Additionally, reduced train speeds would require more cars and detrimentally impact the supply chain, potentially resulting in higher dwell times in populated areas. One panelist suggested that CBR regulators should communicate with the groups that have created regulations for other rail-transported hazardous materials, such as chlorine. Such regulations, which rely in large part on reducing dwell time in densely populated areas, appear to have been effective in improving transportation safety.”

CPC-1232 standard, DOT-111, Ethanol, Federal Regulation (U.S.), Tank car retrofit, Train speed

Ethanol dependent on old-style tank cars

Repost from Argus

Railway Supply Institute: Ethanol dependent on old-style tank cars

1 Aug 2014

Houston  — The US ethanol industry is particularly vulnerable to pending regulatory changes that will require retrofitting or retiring a type of railcar that carries 98pc of ethanol production.

In comments to the US Department of Transportation’s (DOT) planned changes to tank car design released last week, the Railway Supply Institute (RSI) said about 29,200 of the approximately 29,780 tank cars moving ethanol as of June were doing so in unjacketed old-style DOT-111 tank cars. Those cars must be retrofitted or retired under the proposed rules.

Jackets add another layer of steel to the tank, increasing overall protection. They are an option to retrofit DOT-111s to make them safer.

DOT-111 cars have been under renewed scrutiny since several exploded into flames in a July 2013 derailment at Lac-Megantic, Quebec, killing 47 people. Four more fiery crude-by-rail accidents since then spun regulators in both the US and Canada into action on car design.

But it was an ethanol train derailment in June 2009 that spurred the first wave of action. The Cherry Valley, Illinois, accident killed one person and prompted industry to voluntarily strengthen car design in 2011, creating the current industry standard known as CPC-1232.

But despite the reliance on older DOT-111s to move ethanol, documentation from the Surface Transportation Board and the Pipeline and Hazardous Material Safety Administration shows there was only one ethanol-by-rail accident last year — with no release or fire — compared with five crude-by-rail accidents.

The last reported US ethanol-by-rail accident involving a fire was in August 2012 at Plevna, Montana, when 17 cars derailed and 12 spilled more than 245,000 USG.

According to RSI’s comments to the DOT, which were released last week along with a series of proposals on new speed limits and tank car design for flammable liquids, 580 tank cars either of the newer CPC-1232 model or jacketed DOT-111s were moving ethanol in June, making up 2pc of the fleet.

Meanwhile, of the 42,550 tank cars moving crude in June, 19,750 either were newer-model CPC-1232 or DOT-111 with jacketing, accounting for 46pc.

“Our industry’s rapid expansion occurred in 2005-2006-2007, and the only cars made available were the [DOT-111] cars, which were purchased or leased with the expectation of a 40- or 50-year lifespan,” Bob Dinneen, chief executive of the Renewable Fuels Association, told Argus. “When you started to see a lot more crude oil moving from the Bakken, by then the [CPC-1232] cars were being made available, so they were lucky to get those cars.”

DOT last week suggested that DOT-111 tank cars be retired after two years, to be replaced either by a more stringent design it has proposed, another proposed by the Association of American Railroads that is largely similar except that it lacks electronically controlled pneumatic brakes, or continuation of the current CPC-1232 design.

The initial regulatory push is too broad-brush and should be more focused on crude, Dinneen said.

“They ought to be prioritizing by the commodity about which, by their own admission, they are most concerned,” Dinneen said, referring to light crude. Conversely, the American Petroleum Institute chastised the government for singling out Bakken crude, which it said is no more volatile than other grades.

Yesterday, railcar lessor GATX also called for a more commodity-based approach to the DOT-111 phase-out, saying it is not currently clear what markets DOT-111s might serve once they are banned from crude or ethanol use.