Older crude oil tankers may end up on U.S. rails

  • Article by: DAVID SHAFFER , Star Tribune
  • Updated: April 17, 2014 - 9:38 PM

Canadian pricing gives shippers reason to move crude in less-robust tankers, BNSF says.

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BNSF Railway Co. says Canadian pricing may push older, less-robust crude oil tank cars to U.S. tracks, while newer cars roll across Canada. MATTHEEW BROWN • AP

BNSF Railway officials have told federal regulators they’re concerned that older, less-robust tank cars will end up on U.S. oil trains because of Canadian railroad pricing policies discouraging them.

Canadian Pacific and Canadian National railroads recently imposed surcharges on shippers using older tank cars known as DOT-111s to discourage their use for crude oil shipments. Tank cars built since October 2011 have thicker steel to make them more puncture-resistant.

BNSF, which hasn’t imposed such disincentives, is concerned that the newer tank cars “will end up in Canada” while the older DOT-111s “will come to the U.S.,” according to official notes from a March 19 meeting with the administrator and top officials of the U.S. Transportation Department’s Pipeline and Hazardous Materials Safety Administration.

The agency released the meeting summary because it’s considering new tank car regulations that likely will require upgrading, retiring or repurposing about 65,000 older DOT-111s, many of which haul crude oil, especially in North Dakota. But that rule is months from being final, and upgrading older tankers would take years.

Minnesota has a stake in the outcome because about six North Dakota oil trains per day travel through the Twin Cities, many of them 100 cars long. Most move on BNSF lines, the rest on Canadian Pacific’s. Ethanol trains, which pose a similar hazard, move on Union Pacific tracks through the state.

Fiery oil train wrecks, including one in Casselton, N.D., on Dec. 30, have provoked rail safety hearings in Congress and at the State Capitol. A bill in the Minnesota Legislature would beef up track inspections and emergency response capabilities in the state.

Dave Christianson, who directs freight and rail planning for the Minnesota Department of Transportation, said BNSF has a valid concern that the Canadian surcharges could result in more older tankers on U.S. tracks.

“It definitely will be an incentive to shift some new cars into Canadian service first, leaving the U.S. Bakken fleet lagging behind in updating and conversions to safer cars,” said Christianson, who did not attend the meeting in Washington, D.C.

BNSF spokeswoman Amy McBeth declined to elaborate on what company executives told DOT officials. Four BNSF officials attended the meeting with Administrator Cynthia Quartermaster and five officials of the Pipeline and Hazardous Materials Safety Administration, the notes say.

BNSF announced in February that it will purchase up to 5,000 new tank cars and lease them back to oil shippers. That is an unusual step because railroads typically don’t own tank cars; shippers usually purchase or lease them on their own.

According to the meeting notes, BNSF officials believe “there needs to be [a] disincentive to use DOT-111 and they are looking at pricing as well.” The notes also say BNSF wants a new federal tank car standard in place before it places its $700 million order. Under a new timeline posted Thursday, the federal agency projects a speedier regulatory review, with its final comment period ending in September, more than three months earlier than previously stated.

Canadian Pacific, whose U.S. headquarters is in Minneapolis, in March began imposing a $325-per-car surcharge for each old tanker that a shipper uses to deliver crude oil or other hazardous commodity.

“CP’s new rate structure is for shippers on both sides of the border,” said company spokesman Ed Greenberg. “We believe upgraded tank cars are the best investments to enhance safety.”

Canadian National declined to comment. That railroad doesn’t run oil trains through Minnesota. But its tracks from Canada to Duluth would be an alternative path for Canadian crude oil if the controversial Keystone XL pipeline isn’t built, according to a U.S. State Department analysis released in January. One of the alternative-to-Keystone oil train routes goes through the Twin Cities, and another through western Minnesota on BNSF tracks, the analysis said.

David Shaffer • 612-673-7090

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