The nation’s thirst for oil is likely to keep weak and outdated railcars moving flammable crude through American cities for years, even if regulators require upgrades to the cars at a cost that could exceed $1 billion.
Although four recent derailments, including one that killed 47 people, drew attention to potential dangers, it could take a decade to replace all the older tank cars, and there’s little clamor to pull them from service and slow the oil rush.
That means oil producers will continue shipping trainloads of crude to refineries even as they attempt to improve the strength of rail fleets. And while derailments are rare, the shipments will present a continuing concern for first responders.
“These older cars are out there and our personnel have to be aware of them,” said Richard Hopkins, a training coordinator for the International Association of Fire Fighters. “If they are involved in a derailment, they are very likely to release their product.”
Federal regulators have said that the grade of crude most commonly shipped on railways today may be more flammable than other types. They did not specify why, but other researchers have said the light crude often produced from shale plays has more gaseous components that ignite readily.
The firefighters union has warned its more than 300,000 members about the risk of the flammable cargoes, as rail shipments of oil have become common nationwide.
Key shale role
Shipments of crude by rail have played a major role in the surging Bakken Shale play of North Dakota, where production has soared from 90,000 barrels of oil per day at the start of 2005 to 973,000 barrels a day in November 2013, according to the most recent data from the state.
That’s a higher output than Qatar, Ecuador or Libya – members of the Organization of the Petroleum Exporting Countries.
About 700,000 barrels of oil per day move out of the Bakken region by rail, allowing refineries on the east and west coasts to use the crude instead of buying more expensive overseas shipments, said Foster Mellen, senior strategic analyst for EY Oil & Gas.
Rail shipment typically costs several dollars per barrel more than pipeline transport, Mellen said. But rail shipments can link oil fields and refineries with limited pipeline access, he said.
Concerns about fragile tank cars aren’t likely to stop rail shipments, and the resulting economic benefits for states, oil producers, rail companies, and refineries, Mellen said.
“If we’re talking about shutting down all or most of the crude production in North Dakota because of the issues we’ve had with a few cars, there’s huge economic ramifications for that,” he said.
New cars urged
The derailments involved trains carrying oil in older versions of the widely used DOT-111 tank car. The National Transportation Safety Board said in 2012 that the old versions of the DOT-111 are weak and should be retrofitted or phased out because they are likely to be punctured in the case of a derailment. New DOT-111 tank cars have thicker walls, among other requirements.
When two BNSF Railway trains collided in North Dakota Dec. 30, the safety board said last week, 18 of 20 older, oil-carrying DOT-111 cars that derailed were punctured.
The accident caused no injuries, but the resulting explosions sent towering fireballs into the sky and forced 1,400 people to evacuate from Casselton, N.D.
A train derailment in July in Lac-Megantic, Quebec, also involved the old DOT-111 rail cars. Many of them exploded, leveling part of the town and causing 47 deaths.
Canadian National Railway Co. drew more attention to the problematic cars after a derailment on Jan. 7 in Canada’s New Brunswick province. The incident involved five tank cars carrying crude oil, including two old model DOT-111 tankers and three new ones, Canadian National spokesman Mark Hallman said in an email.
“The new specification DOT-111 tank cars involved in the accident appeared to fare better than the older DOT-111 tank cars,” Hallman said.
Railways, oil companies, refiners and even tank car producers have responded to the mounting concern about the rail cars by supporting new regulations that could force tank car owners to make upgrades.
The upgrades could cost $2,000 to $80,000 per car, depending on the amount of work required, said Thomas Simpson, president of the Railway Supply Institute, which represents car owners and manufacturers.
The American Association of Railroads has said the total upgrade cost could exceed $1 billion, estimating an average cost of $15,000 to retrofit each tank car.
The added costs of retrofits, combined with the temporary loss of rail cars requiring upgrades, could reduce oil shipments and raise costs for companies leasing tank cars. But the effect on production is likely to be minimal.
“You may see a small price hiccup,” said Jack Ekstrom, vice president of government affairs for Whiting Petroleum Corp., a major producer of oil in the Bakken region. “That’s of zero consequence compared to endangering human life.”
Rules a year away?
Regulations that could force those rail car upgrades are at least a year away, according to a timeline published last week by the U.S. Transportation Department’s Pipeline and Hazardous Materials Safety Administration, which is working on the requirements.
The regulations could come sooner, however, depending on the level of urgency the Transportation Department places on the issue, said Brigham McCown, who served as administrator of the Pipeline and Hazardous Materials Administration from 2005 to 2007.
“If the stars were aligned, it’s possible to do a rule by October,” McCown said.
The oil industry’s lobbying group, the American Petroleum Institute, says newer, stronger tank cars now are carrying some crude. Still, 70 percent of the 37,356 tank cars currently moving crude on railroads are older DOT-111 models, according to the group.
Railway associations say the process of upgrading, repurposing or retiring all of the old model cars could take seven to 10 years.
Regulators could take other steps to curb the risk of major disasters in the case of a derailment, including requirements to limit the number of adjacent cars that could hold crude, or rerouting oil trains away from cities, McCown said.
Oil companies argue that the most pressing concern is not the tank cars, but the causes of the derailments in the first place.
“We shouldn’t ever forget the fundamental root cause that has taken place to cause the incident,” said Jack Gerard, president of the American Petroleum Institute. “If it’s because a railcar has gone off the track, we should make the sure the railcars don’t go off the track.”
Reporter Jennifer A. Dlouhy contributed reporting from Washington.
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