Rail Owner Voluntarily Moves to Improve Safety of Oil Transport


By James Burgess for OilPrice.com

Derailed trains carrying crude oil from America’s oil patch have become depressingly common, but with the federal government not moving on regulation, the rail industry is taking matters into their own hands. BNSF Railway Company, owned by Warren Buffet, announced that it would buy its own fleet of railcars with enhanced safety standards that go beyond what is required by law. They hope the safer cars will prevent future derailments, and lower the chances of safety incidents like explosions and oil spills.

The move is an interesting one because it is uncommon for railroad companies to own rail cars, instead they typically own tracks and locomotives. BNSF decided to purchase 5,000 rail cars with thicker walls and ends to reduce the chance of them puncturing if derailed.

The Association of American Railroads, a trade group, set safety standards like these for all cars built after 2011. But, much of the crude oil moving around the country today happens in older cars. The Pipeline and Hazardous Materials Safety Administration (PHMSA) is considering tighter regulations, but has stated that they will not be ready until next year.

But, with oil train accidents reaching a crisis point, even the oil industry and its allies believe action is needed. BNSF decided to take action, and it is not alone. Canadian National Railway Company (CNI) and Canadian Pacific Railway Ltd. (CP) announced in mid-February that they would charge customers a premium for shipping crude oil in the pre-2011 cars to cover the risk. And refineries are making moves too. Phillips 66 (PSX), PBF Energy Inc. (PBF), Irving Oil, Tesoro Corp. (TSO), and Valero Energy Corp. (VLO) – all involved in refining petroleum products to some degree – have announced varying efforts to phase out older cars and rely much more on the newer, safer rail cars.

The article originally appeared on OilPrice.com.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ, Inc.

This article appears in: Investing , Commodities , Business , US Markets

Referenced Stocks: CNI , CP , PSX , PBF , TSO , VLO



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