Why Nothing Will Happen On Oil by Rail Safety

Fri, 2014-03-14 13:29Justin Mikulka
Justin Mikulka's picture

Why Nothing Will Happen On Oil by Rail Safety

In the past month, there have been numerous public relations efforts suggesting that much is being done to improve oil by rail safety. Unfortunately, it seems these efforts will not involve much more than press releases and hollow promises, as regulators have made no meaningful changes to a broken and ineffective regulatory system.  

That approach, combined with the realities of the rail tank car industry, basically ensure that oil will be transported in the unsafe DOT-111 tank cars for many years to come, despite testimony at a recent congressional hearing from Robert Sumwalt of the National Transportation Safety Board (NTSB).

Sumwalt testified that, “multiple recent serious and fatal accidents reflect substantial shortcomings in tank car design that create an unacceptable public risk.”  

Unacceptable to the public, but apparently perfectly acceptable to the industry.

If you are a significant player in the oil and gas industry, you were likely at IHS CERAweek Energy Summit in Houston earlier this month.  Also attending were members of the defense industry and speakers such as recently retired Federal Reserve Chairman Ben Bernanke. This is where the important people speak the truth.  So after the public has been placated with articles touting new safety measures for the oil by rail industry, the attendees of CERAweek heard a different message.

Jason Bordoff of Columbia University’s Center on Global Energy Policy spoke at the conference. He notes how the government has been “quite restrained” when considering new regulations and in how they recognize there are tradeoffs when discussing safety.  

It’s easy to see where the government could have overreacted to some of the large accidents,” Bordoff said at the IHS CERAWeek energy summit in Houston. “I actually think they’ve been quite restrained in saying ‘we do want to understand this,’ in recognizing there are tradeoffs here in terms of new regulations and what costs they impose and what that might mean for the cost of transporting oil.”

Safety costs the industry money, which has typically translated into a willingness to trade improved safety in exchange for higher profits.

So, will the industry’s voluntary efforts make us any safer?  

Robert Chipkevich, a former director of rail accident investigations at the National Transportation Safety Board, points out that these safety measures are unenforceable.

“It's a positive step,” Chipkevich said. “But certainly there's nothing to say they would have to continue following those practices. The only way you can enforce something like that would be for regulators to publish regulations and do periodic oversight.”

While it may seem obvious, Chipkevich points out that the only way to improve safety would be for regulators to publish regulations and implement effective oversight.  Or, as it is known in the real world, do their job.

The one recent enforceable regulatory change was a requirement for increased testing of the Bakken crude for better classification.  From the February 25th DOT press release:

Today we are raising the bar for shipping crude oil on behalf of the families and communities along rail lines nationwide —if you intend to move crude oil by rail, then you must test and classify the material appropriately,” said DOT Secretary Anthony Foxx.

The industry promptly responded with a request to be allowed to ignore parts of this regulation.  Notice the “tradeoff” we are offered:

In the absence of a modification to provide shippers with a reasonable amount of time to complete the required testing, shippers may be forced to cease transporting petroleum crude oil by rail. This could result in shortages of transportation fuel and petrochemicals, and have an immediate and significant negative economic impact on the nation.”

One of the more popular talking points in the recent PR effort was that BNSF, the railroad that is the largest transporter of oil by rail, had volunteered to buy 5,000 new rail tank cars that exceed any existing safety standard.  

BNSF is owned by Berkshire Hathaway, which is run by Warren Buffett.  Berkshire Hathaway also owns Union Tank Car, one of the top manufacturers of rail tank cars.  

So, the big safety initiative we are being sold is that Warren Buffett’s one company has said they are looking for someone to build them 5,000 new cars — something one of his other companies profits from manufacturing.   

Lost in all of this discussion is the reality of the rail tank car issue and supply and demand. There simply aren’t enough tank cars available to keep up with the industry’s need to move oil by rail.

This is why the unsafe DOT-111’s will be used to transport oil by rail, in all likelihood, until the Bakken fields are depleted.  Here is an industry analyst talking about the tank car supply issue in early 2013.

People who want to ship oil can’t get them,” Toby Kolstad, president of the consultant firm Rail Theory Forecasts LLC said. “They’re desperate to get anything to move crude oil.”

Desperate to get anything to move crude oil.  At a time when, according to the NTSB, DOT-111’s make up almost 70% of the existing rail tank car fleet.  

Imagine the “tradeoff” we would have to make if these cars were no longer allowed to transport crude oil?  

It isn’t going to happen.  Which is why the Railway Supply Institute  has predicted it could take ten years to get rid of or retrofit the unsafe DOT-111s.

The industry isn’t desperate to get new tank cars because they want to replace the old cars with safer ones. They really just need more cars to move more oil, period.  And it’s not like they are waiting for new regulations to buy new cars, like we are led to believe.

…companies producing rail cars used to haul crude oil and other liquids can't churn them out fast enough. If you order a crude oil tank car today, know this: There are 48,000 ahead of you, and it'll be nearly three years before you see it.”

Given the lack of regulation, the industry’s influence over regulators and the industry’s track record of ignoring NTSB safety recommendations for decades — the reality is that it is highly likely that much of the Bakken Crude will be shipped in unsafe DOT-111’s for the next decade.  That might be just about the time the Bakken field’s output is declining as well.  

How convenient for the industry. For the rest of us, dangerous bomb trains will continue to pose a significant public safety threat that will very likely claim more lives.

Image credit: Wikimedia Commons

Comments

Well done. One quibble: It's Union Tank Car not “United Tank Car.” I'm not sure if the US Commerce Secretary Penny Pritzker's family sold its share of Marmon Group (the parent company of Union Tank Car) to Berkshire Hathaway. The 40 percent Berkshire didn't owned was suppose to be a done deal this spring.

 

Fixed that error, thanks Michael.

That Warren Buffett's BNSF is purchasing 5,000 new crude oil tank cars from Warren Buffett's Union Tank Car Co. isn't what's most important in fighting dangerous crude oil rail shipments. What Warren Buffett needs to be held accountable for is continuing to use the terribly unsafe DOT 111 tank cars on his BNSF railroad. This is what the message needs to be: Warren Buffett is using unsafe tank cars on his railroad and he needs to stop doing it.

Another aspect of the industry's public relations campaign that needs to be beaten down is the notion that the railroads which are charging a surcharge for shippers using DOT 111's (most notably CP Rail and CN, at the moment) are improving safety. They aren't improving safety, they're just making more money. This fact needs to be pointed out to the public and emphasized.

We who are fighting crude oil trains need to do a better job of getting our message out into the news and more strongly demanding action from our dysfunctional government.

 
[x]

How did it get missed for the last ten years?”

That was the question Deborah Hersman, chair of the National Transportation Safety Board (NTSB), posed to a panel of industry representatives back in April about how the rail industry had missed the fact that Bakken oil is more explosive than traditional crude oil.

How do we move to an environment where commodities are classified in the right containers from the get go and not just put in until we figure out that there’s a problem,” Hersman asked...

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