U.S. Seeks New Rules for Rail Transport of Fuel-- 2nd Update

By Dow Jones Business News, 
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By Russell Gold, Betsy Morris, and Bob Tita

The U.S. government wants to phase out thousands of railroad tank cars that carry crude oil within two years once it adopts proposed rules to upgrade safety for trains carrying flammable liquids.

Tens of thousands of these older tank cars, known as DOT-111s, will have to be replaced or retrofitted under the proposed rules, announced Wednesday. This puts the U.S. on roughly the same timetable as Canada, which announced a phase out earlier this year.

The federal government's sweeping proposals come after a string of explosive derailments involving trains filled with oil from the Bakken Shale and will change how flammable liquids are transported in North America. But they aren't as stringent as some in the rail and energy industry feared.

Crude-carrying tank cars would need to upgraded by 2017. The proposed regulations would also give the ethanol industry until 2018 to improve or replace tank cars that carry that fuel. The deadline for cars used to transport other flammable liquids that typically pose less of a hazard than oil or ethanol would extend to 2020.

Other new requirements proposed include a 40-mile-per-hour speed limit until sturdier tank cars can be built or existing railcars can be strengthened, as well as other rules that cover tank-car design, routing, brakes and testing of hazardous liquids.

Railroads, oil companies and railcar owners have been expecting new U.S. regulations meant to improve the safety of oil shipments in the wake of several fiery train accidents. A year ago, a train full of oil from North Dakota exploded in a rural Quebec town, killing 47 people.

The proposed rules must be posted for 60 days to give the public, rail industry and other parties a chance to comment. The final rule is expected to become effective early next year. The rules also call for the rail industry to design routes based on safety and security factors.

The Wall Street Journal has reported that crude oil from North Dakota'sBakken Shale is volatile and contains large levels of combustible gases, and that the energy industry didn't install oil-field equipment to stabilize the crude. The federal government reported Wednesday that its own study had found Bakken oil is usually more volatile and flammable than other crude oils.

The rapidly growing amount of crude oil moving on the nation's railroads has sparked protest and concerns by local fire chiefs, who worry they aren't prepared for a catastrophic crash. In May, Transportation Secretary Anthony Foxx said the "safety of the nation's railroad system, and the people who live along rail corridors, is of paramount concern."

The American Petroleum Institute, a trade group that represents large oil producers, said it would review the proposed regulations. "The government can and should take steps to ensure greater safety without stalling the energy renaissance," API Chief Executive Jack Gerard said.

Starting last fall, the government has issued several temporary measures to improve safety. The proposed rules begin the process of permanently overhauling how the government regulates the transport of flammable fuel.

The proposed requirements would apply to any train with 20 or more tank cars of oil, ethanol or a comparable fuel to be categorized as a "high-hazard flammable train" and subject to the new rules. It has become common for dedicated oil trains consisting of 100 or more railcars filled with crude to operate as a pipeline on wheels.

The Transportation Department will ask for comment from industry and emergency-response officials on railcar design. The rules lay out several options, including improved brakes and thicker, 9/16th-inch steel walls on tank cars. The new design would cover all cars built after October 2015. Existing cars would need to be retrofitted, retired or used to carry less flammable liquids.

There are about 80,000 DOT-111 railcars built before 2011 that transport oil, ethanol and other flammable liquids and another 23,000 built in recent years with more crash-resistant features, according to the Railway Supply Institute's latest estimate.

The proposed rules leave open whether the 40-mph limit for high-hazard trains would only apply in certain urban areas. Trains with upgraded tank cars would be allowed to travel at 50 mph. Some experts had advocated for limiting oil trains to speeds of 30 mph or lower, but rail executives warned such a move could snarl the entire country's freight system.

"Picture yourself behind a hay wagon on a country road," said Edward Hamberger, president of the Association of American Railroads. "Trains don't just put on a turn signal and zip around each other."

Mr. Hamberger said the AAR is studying the proposals, but signaled he doesn't think the fighting over the safety rules is over, saying impacts to other freight customers and passenger trains must be considered.

But Norfolk Southern Corp. Chairman Charles Moorman told investors Wednesday that a 40-mph limit is safe and shouldn't disrupt other train traffic.

The rules also call for the rail industry to design routes based on safety and security factors. They also require the development of a robust program of sampling flammable cargoes. Last year, officials with the Transportation Department found that oil cargoes were poorly tested and the flammability of North Dakota crude was often mischaracterized.

The railroads have been worried that slower speed limits could cause major gridlock, while oil companies have fretted that new tank car design rules might reduce the amount of oil that can ship in each car.

Oil shipments on trains across the U.S. have grown exponentially in the last few years to 1 million barrels a day, as companies tap crude deposits in places where there are few pipelines to move it, such as the Bakken formation of North Dakota, according to the Energy Department.

Write to Russell Gold at russell.gold@wsj.com, Betsy Morris at betsy.morris@wsj.com and Bob Tita at robert.tita@ wsj.com

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  (END) Dow Jones Newswires
  07-23-142054ET
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This article appears in: Energy , Commodities

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