White House To Propose New Rules For Crude Oil Rail Shipments


Crude oil train

Bloomberg reports the Obama Administration will propose new rules for transporting crude oil by rail Wednesday, aimed at reducing speeds and requiring sturdier tanker cars.

The rules are a reaction to a spate of derailments and explosions that have plagued the rail transportation of crude oil in North America recently, as the drilling and tracking boom has driven the amount of crude oil hauled by train to new heights.

While the specifics remain unknown, two unnamed sources told Bloomberg that the rules will include slower speed limits for trains to reduce accidents, and thicker hulls for the tanker cars to provide more protection should a derailment occur. They also said the new rules would apply to the rail shipment of ethanol biofuel.

Members of the industry itself are split on what form the new rules should take. Railroad operators agreed in February to slow down their speeds in urban areas to 40mph, which is 10mph slower than the previous speed limit. Rail executives fear the White House may decide to lower that ceiling further to 30mph, which they argue will impede shipping, create bottlenecks and raise costs.

But a letter from Union Tank Car Co. — a tank car manufacturer owned by Warren Buffett — argued this month that most of the recent accidents were due to rail operations or infrastructure. So rail operations, including speed limits, needed to be updated.

“The quickest and most meaningful way to improve crude-by-rail safety is to approve new regulations regarding railroad operating procedures and classification and testing of flammable liquids,” the letter said.

Manufacturers like Union Tank Car Co., however, are also trying to avoid the new requirements that would fall on their portion of the industry. New modifications to tank car design and thickness could increase costs by as much as $60,000 per car, in some estimates.

The crude oil produced by the Bakken shale boom in North Dakota has proved more flammable and explosive than other forms of crude. But the American Petroleum Institute (API) has opposed reclassifying it more flammable than other crudes, as this would require shipping it in specially designed cars intended for dangerous chemicals.

API is a trade association of major oil producers, and has been at loggerheads with the Association of American Railroads — which represents operators — over the design of tanker cars. The operators have proposed increasing the thickness of tank car hulls to 9/16 of an inch. But the oil industry says the current 7/16 of an inch thickness is sufficient, and increasing it would cut down on the amount of oil that can be shipped per car. Meanwhile, Bill Furman, the CEO of tank car manufacturer Greenbrier Co., said technology advancements have opened the door to other modifications that will maintain capacity even with the thicker hulls.

So earlier this month, the two groups split the difference, and proposed an 8/16 inch thick hull, plus a three-year phaseout of older tank car models. It’s unknown whether federal regulators will take them up on the offer.

Rail carloads of oil hit 408,000 in the US last year, way up from 11,000 in 2009. And 2013 saw a string of train wrecks and explosions, as cars carrying oil derailed in Minnesota, Virginia, Alabama, Nevada, and several places in Canada.