New Oil Train Safety Rules Divide Rail Industry

Many railroad companies want more time to retrofit cars in the U.S. and Canada, but some are forging ahead.
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Smoke rises from railway cars that were carrying crude oil and derailed in downtown Lac-Megantic, Quebec, in 2013. Regulators in Canada and the United States have been working on new standards for trains that carry flammable fuel.

Three days after an oil train derailed and exploded in 2013 in Lac-Mégantic, Quebec, killing 47 people, Greg Saxton wandered through the disaster site inspecting tank cars.

For Saxton, the damage was personal. Some of the tank cars were built by Greenbrier, an Oregon-based manufacturer where he's chief engineer. Almost every car that derailed was punctured, some in multiple places. Crude oil flowed from the gashes, fueling the flames, covering the ground, and running off into nearby waterways.

Each day, as Saxton returned to the disaster zone, he passed a Roman Catholic church. "We never came and went when there wasn't a funeral going on," he said.

In the wake of this and other recent accidents as energy production soars in North America, Canadian and U.S. regulators are proposing new safety rules for tank cars that carry oil, ethanol, and other flammable liquids. Saxton and Greenbrier have pushed for swift changes, but others in the industry are asking for more time to retrofit cars like the type that exploded at Lac-Mégantic. (See related stories: "Oil Train Derails in Lynchburg, Virginia" and "North Dakota Oil Train Fire Spotlights Risks of Transporting Crude")

"If you don't set an aggressive time line, you won't see improvements as quickly as the current safety demands require," Jack Isselmann, a Greenbrier spokesman, said. "We've been frankly just perplexed and confused by the resistance."

Industry Pushes for More Time

The tank cars that derailed at Lac-Mégantic were built before October 2011, when the Association of American Railroads mandated safety enhancements to the oil and ethanol tankers known in the industry as DOT-111 cars. The cars lacked puncture-resistant steel jackets, thermal insulation, and heavy steel shields, all of which could have lessened the destruction, experts say.

In July, the U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration (PHMSA) proposed rules that, if finalized, would require higher safety standards for new oil cars. The rules also require owners to retrofit older cars or remove them from the rails by October 2017.

Canadian regulators in July mandated that DOT-111 tank cars built before 2014 be retrofitted or phased out by May 2017. Transport Canada, which regulates rail safety, has also proposed aggressive safety standards for new tank cars and will seek industry comment this fall before finalizing its rules.

Saxton and others at Greenbrier support the proposed regulations, which could be tremendously lucrative to the company. However, others in the rail supply industry say the proposed retrofit time line cannot be met.

The Railway Supply Institute—a trade organization that represents rail suppliers—has asked DOT to allow legacy cars in the oil and ethanol fleet to remain on the rails until 2020.

Thomas Simpson, the institute's president, said a survey of rail maintenance and repair shops found that only 15,000 of the roughly 50,000 non-jacketed legacy tank cars in the crude oil and ethanol fleet can be modified by the proposed 2017 deadline.

For many cars, the retrofit process would include adding thermal protection systems, thick steel plates at the ends, and outer steel jackets, as well as reconfiguring the bottom outlet valve to ensure it does not break off and release oil during a derailment.

That's too much work to complete before the deadline, and the regulations have not yet been finalized, Simpson said.

The proposed deadline, he said, will "idle cars waiting for shop capacity and adversely affect the movement of crude and ethanol."

Tying in the Keystone XL Debate

The American Petroleum Institute, which represents the oil and natural gas industry, also says the 2017 deadline to retrofit tank cars is too aggressive and could slow oil and gas production. (See related story: "Blocked on Keystone XL, Oil-Sands Industry Looks East")

In comments to U.S. regulators and the press, API tied the safety upgrades to approval of the proposed Keystone XL pipeline, which would transport Alberta's tar sands oil through the Midwest to Texas refineries.

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The deadly oil train accident at Lac-Megantic, Quebec, raised awareness of the potential dangers of transporting crude by rail.

If Keystone is not built, API president Jack Gerard said in September that the cost of the proposed oil tank rules would nearly double to $45 billion because demand for transporting crude by rail would be higher.  (See related story and map: "Keystone XL: 4 Animals and 3 Habitats in Its Path" and "Interactive Map: Mapping the Flow of Tar Sands Oil")

Both API and the Rail Supply Institute have also warned regulators that a short time line for retrofitting oil cars could cause a spike in truck shipments of oil and ethanol.

But Anthony Swift, an attorney with the Natural Resources Defense Council, an environmental group opposed to Keystone XL, called these arguments misleading. Swift said Keystone XL would have little impact on retrofitting tank cars, because most train traffic from the Bakken oil fields in North Dakota moves to East Coast and West Coast refineries. He said that traffic would not be affected by the pipeline.

Keystone XL would have the capacity to carry 830,000 barrels of oil-sands crude a day, with up to 100,000 barrels a day set aside for crude from the Bakken. By 2016, the rail industry in Canada is expected to carry about as much oil as Keystone XL would. The U.S. rail industry is already there: Almost 760,000 barrels a day of crude had traveled by rail by August.

Swift said the costs to the oil industry are worthwhile if lives are saved. "The argument that we need to wait until the oil industry does not need tank cars until we can make them safe is ridiculous on its face," he said.

Greenbrier Gears Up to Meet Demand

In February, Greenbrier introduced a beefed-up tanker with a 9/16-inch steel shell (1/8-inch thicker than many DOT-111 cars), 11-gauge steel jacket, removable bottom valve, and rollover protection for fittings along the top of the cars.

Greenbrier calls the tanker the "car of the future," saying it's eight times safer than the DOT-111. Isselmann said Greenbrier has received more than 3,000 orders for the new car and plans to double its manufacturing capacity by the end of the year.

In June, Greenbrier and Kansas rail-service company Watco joined forces to form GBW Railcar Services, creating the largest independent railcar repair-shop network in North America. Isselmann said the company plans to hire 400 workers and start second shifts at its factories to meet demand for retrofitting DOT-111 tank cars.

In comments to U.S. regulators, GBW said it currently has the capacity to retrofit more than 10 percent of the fleet of DOT-111 tank cars.

Isselmann said that number will grow as other companies take advantage of the market once regulators release final rules. For that reason, he said the industry's current capacity to meet regulations is less important than its ability to ramp up quickly to capture the increased business that new safety standards could bring.

"This notion that the status quo is going to remain—it's diversionary at best," Isselmann said.

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Almost every tanker in the Lac-Megantic accident was punctured. New standards would mandate stronger cars, among other measures.

Some in the industry are responding to public concern before rules are finalized. In April, Irving Oil—the owner of Canada's largest refinery, in Saint John, New Brunswick, where the Lac-Mégantic train was headed before the disaster—completed a voluntary conversion of its crude oil railcar fleet.

Also in April, Global Partners, one of the largest U.S. distributors of gasoline and other fuels, began requiring all crude oil unit trains making deliveries at its East and West Coast terminals to meet October 2011 safety standards for tank car design.

"As an industry, we have both an opportunity and a responsibility to maximize public confidence in the safety of the system that carries these products across the country," Eric Slifka, Global Partners' CEO, said in a press release.

A Push to Harmonize Regulations

As the U.S. and Canada consider train safety regulations, oil and rail companies are pushing to ensure that the same tank cars can be used to haul flammable liquids in both countries.

Regulators say they are working together to make that happen. Lauren Armstrong, a spokeswoman at Transport Canada, said the department is holding technical discussions on new tank car standards with the U.S. Department of Transportation and the Federal Railroad Administration.

However, coordinating tank car regulations between the two countries would have to overcome current gaps, industry representatives say.

In April, Transport Canada banned the use of the oldest and least crash-resistant DOT-111 tank cars, which lacked bottom reinforcement.  The U.S. so far has not banned the cars from carrying oil and ethanol.

Canada also set a 2017 deadline for retrofitting the cars. In the U.S., regulators are expected to release final rules by early 2015. The process, however, could continue much longer.

The strongest standards will carry the day, said Thomas Simpson, the president of the Railway Supply Institute. Given the large amount of oil that moves between the two countries, Simpson said it makes no business sense for companies to keep two different sets of cars to meet the two sets of rules.

Communities Concerned About Safety

But as final rules are being hammered out in the U.S., some train safety advocates and community groups worry they are being left out of the process.

Karen Darch, co-chair of TRAC, a coalition of Illinois communities concerned about train congestion and rail safety, said she is hopeful that final rules will include a fast deadline to retrofit old cars. (See related story: "Illinois Village Leads Charge for Tougher Train Rules")

But she said rail and oil industry lobbyists have had much more access to policymakers than community advocates, and she's concerned they will have a greater impact on final rules.

"The inside players, the guys in the industry," she said, "they seem to be able to be in front of the decision-makers more than we have been."

The Association of American Railroads was incorrectly listed as the American Railway Association in a previous version of this story.

The story is part of a special series that explores energy issues. For more, visit The Great Energy Challenge.

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