The Wall Street Journal, Feb. 20, 2014
BNSF Railway Boosts Safety Efforts;
Company to Buy Up to 5,000 Tank Cars as Industry Weighs New Measures Following Train Derailments
By Laura Stevens
Major freight railroaders were expected to ship 400,000 carloads of crude oil last year. Shown, a BNSF train carried crude in Montana in November. Associated Press
BNSF Railway said it plans to buy as many as 5,000 new tank cars to transport crude oil, an unusual move that marks the latest effort by the rail industry to improve safety after a spate of accidents.
Railroads typically own engines and track but not the tank cars that run on their networks, 99% of which are owned by leasing companies, shippers and railcar manufacturers. BNSF, a unit of Warren Buffett's Berkshire Hathaway Inc., said it has requested bids from major railcar manufacturers for 5,000 "next generation" tank cars that are more accident-resistant in order to help improve industry safety.
The rail industry has experienced several accidents recently involving tank cars containing crude oil—including a fiery derailment in Quebec that killed 47 people in July and a December derailment of two BNSF trains in North Dakota that triggered explosions and prompted the evacuation of a nearby town.
Oil shipments by rail have ballooned with the development of new oil fields in North America: Major freight railroaders were projected to ship 400,000 carloads of crude oil last year, compared with 4,700 carloads in 2006, according to the American Association of Railroads, which represents freight railroads.
Federal regulators are pressing the industry to improve safety practices, and railroads and energy companies, after meeting with officials last month, pledged steps to enhance tank cars, better avoid derailments and reroute trains around high-risk areas. Petroleum industry representatives agreed to share information on the composition of the oil coming from the Bakken oil fields in the Northern Plains and southern Canada, which the U.S. government has warned may be more flammable than other crude oils.
The main type of tank car used on U.S. railways is known as DOT-111, used to carry goods ranging from fertilizer to corn syrup. There are about 272,100 of these DOT-111 cars in service in North America, according to the Railway Supply Institute, a trade association. About 39,000 DOT-111 cars are used for crude oil, but less than one-third of those are new or retrofitted to meet voluntary safety guidelines agreed to by the industry in 2011 to make them better withstand accidents.
Next-generation cars like those BNSF is seeking are expected to exceed the voluntary 2011 standards, with measures including thicker shields, a thermal protection system and a device to relieve pressure. BNSF said its purchase "may help accelerate the transition" to next-generation cars and help manufacturers move ahead with design and production while industry officials and the Transportation Department "continue to engage in the formal rule-making process."
BNSF didn't give an estimate for the likely cost of the cars, and the industry doesn't typically disclose prices. Current-generation tank cars typically cost between about $120,000 and $175,000, according to industry experts, and the new cars BNSF is seeking would likely cost more, meaning a possible outlay of nearly $1 billion for the Fort Worth, Texas, company.
American and Canadian railroads have urged that all existing tank cars be modified or upgraded or aggressively phased out of service. Two major Canadian railways recently said they would start charging more to carry tank cars that don't meet the 2011 guidelines.
E. Hunter Harrison, chief executive of Canadian Pacific Railway Ltd. , in a speech this week called for an immediate halt to shipments of oil on older model DOT-111 tank cars, but acknowledged that was unlikely to happen soon and said railroads are obligated to carry all manner of hazardous cargo.
"Don't wait to study. We know the facts," he said.
Some energy companies also are responding to safety pressure. On Monday, Canada's Irving Oil Corp. said it would phase out older DOT-111 cars from its own fleet by April. Refiner PBF Energy Inc. said last week that its Delaware City, Del., refinery will accept only the newer cars for delivery of Bakken crude oil starting in April. And refiner Tesoro Corp. this month said it had begun replacing its older cars and aimed to fully update its fleet by midyear.