Enclosed is a dossier of news articles for October 2014 compiled by Roger Annis on the ongoing expansion of the oil-by-rail industry in North America. You can view similar dossiers for previous months as well as extensive articles by Roger Annis following the July 7, 2013 oil train disaster at Lac Megantic, Quebec by going to the dedicated web page on the ‘A Socialist in Canada’ website.
1. Oil, rail industries want seven years to fix tank cars, Oct 1, 2014
2. Gov. Jay Inslee: ‘Outdated, inadequate and dangerous’ oil trains crossing state, Oct 1, 2014
3. New TSB rules would not have prevented Lac-Mégantic disaster, says CP Rail, Oct 3
4. More cause for concern over rail safety in North America, Oct 8
5. Saskatchewan derailment site poses ‘no risk to public’, Oct 9
6. Train cars that burned in Sask. same type as at Lac-Mégantic: TSB, Oct 9
7. Letter to CBC: ‘Accurate reporting on oil by train news, please’, Oct 9
8. As Trains Move Oil Bonanza, Delays Mount for Other Goods and Passengers New York Times, Oct 8
9. Suncor sneaks tar sands shipments past Great Lakes and St. Lawrence River communities, Oct 9
10. Oil train traffic increases through Bend, Klamath Falls and along Deschutes River, BNSF says, Oct 10
11. CSX stock soars in hopes CP will pursue takeover, Oct 13
12. Plummeting oil prices may push more Bakken crude onto rails, Oct 16
13. Montesano [Washington state] council says ‘no’ to oil trains, Oct 17
14. Railway mergers: CP Rail’s Hunter Harrison has just begun, Oct 18
15. Record revenues at Canadian railways, Oct 21
16. CP Rail CEO says rail industry needs mergers to address gridlock threat, Oct 21
17. Facing lawsuit, California oil train terminal to shut down, Oct 23
18. Railroads grudgingly disclose crude, grain delays, Oct 23
19. TSB finds Canadian railways failing to properly report accidents, Oct 27
20. Railway’s price hike takes aim at older crude-bearing cars, Oct 28
21. Ottawa to issue hand brake requirements for unattended trains
22. Ottawa to issue hand brake requirements for unattended trains, Oct 29
23. New rail safety rules announced following Mégantic report, Oct 29
* * *
1. Oil, rail industries want seven years to fix tank cars
By Joan Lowy, Associated Press, Oct 1, 2014
WASHINGTON (AP) — The oil and railroad industries are urging federal regulators to allow them as long as seven years to upgrade existing tank cars that transport highly volatile crude oil, a top oil industry official said Tuesday. The cars have ruptured and spilled oil during collisions, leading to intense fires.
Jack Gerard, president of the American Petroleum Institute, told reporters that his group and the Association of American Railroads are jointly asking the Transportation Department for six months to 12 months for rail tank car manufacturers to gear up to overhaul tens of thousands of cars and another three years to retrofit older cars.
The two industries, at odds until recently over how best to prevent oil train collisions and fires, also want three years after that to upgrade newer tank cars manufactured since 2011, known as “1232 cars,” he said.
The Transportation Department is weighing tougher safety regulations for rail shipments of crude, including stronger tank cars, slower train speeds and more advanced train braking systems. In July, the department proposed that older cars be retrofitted within two years.
The longer retrofit timeline reflects the need to allow tank-car makers time to expand their operations while still producing new tank cars, Gerard said.
The government’s more aggressive timeline could hurt consumers by disrupting the production and transportation of goods including chemicals, gasoline, crude oil and ethanol, he said. All are shipped in the same type of tank cars under government regulations.
The oil and railroad industries have made concessions to agree on a safer design for newly manufactured cars. The design adds safety features including “thermal blankets” between the shell of the tank car and an outer jacket. In a fire, the blanket helps prevent oil in tank cars that have not ruptured from overheating and exploding. But the design doesn’t include a thicker shell previously sought by the railroad industry.
The petroleum institute initially had opposed changing the 1232 car’s design, while the railroad industry sought extensive changes. Shippers such as oil companies will bear most of the cost of tank car retrofits and design changes because they lease or own tank cars, not the railroads.
The oil industry is also now opposing a proposal that oil trains be required to install electronically controlled brakes, a key concern for railroads. Electronically controlled brakes stop all the cars on a train at the same time rather than sequentially, which safety officials say can reduce the number of cars that derail in an accident. Railroad industry officials say safety benefits would be minimal and cost $12 billion to $21 billion, according to a CSX estimate.
Rail shipments of crude oil have grown from a few thousand carloads a decade ago to 434,000 carloads last year, in part thanks to an oil fracking boom in the Bakken region of North Dakota, Montana and western Canada.
Since 2008, there have been 10 significant derailments in the U.S. and Canada in which crude oil has spilled from ruptured tank cars, often igniting and resulting in huge fireballs, according to the National Transportation Safety Board.
2. Gov. Jay Inslee: ‘Outdated, inadequate and dangerous’ oil trains crossing [Washington] state
By Joel Connelly, Seattle Post-Intelligencer, October 1, 2014
(For comprehensive news of oil-by-rail in the Pacific Northwest, subscribe to the weekday bulletin of Seattle-based Sightline Institute and read its ongoing series ‘The Northwest’s pipeline on rail’.—RA)
“Outdated, inadequate and outright dangerous” oil trains are crossing Washington each day, and Gov. Jay Inslee vowed Wednesday to take actions that are within state powers, while urging the Obama administration to get moving on oil car safety.
“We have a situation that is glaringly obvious that these are dangerous oil trains . . . We have unsafe rail cars by the hundreds and thousands rolling through the state of Washington every day,” Inslee said, unveiling a report prepared by the Department of Ecology in conjunction with the state utilities commission.
The governor has written to U.S. Transportation Secretary Anthony Foxx, urging only a “one-year window” on aging, explosion prone DOT 111 rail cars, and that a 30 mile per hour speed limit be set for oil trains using the aging tanker cars. In this image made available by the City of Lynchburg, several CSX tanker cars carrying crude oil in flames after derailing in downtown Lynchburg, Va., Wednesday, April 30, 2014. (AP Photo/City of Lynchburg, LuAnn Hunt)
Under proposed rules, the Transportation Department would allow two years — starting in October of 2015 — to phase out the old tanker cars. “That is too long,” Inslee said.
The first oil train rolled into a Puget Sound refinery in September of 2012. Since then, operators of five Western Washington refineries have rapidly turned to the rails to receive Bakken crude oil from North Dakota. Supplies of oil from Alaska have gone down.
However, aging tanker cars carrying Bakken crude have been involved in explosive incidents. A train rolled into the small town of Lac-Megantic, Quebec, in the summer of 2013 and blew up the center of town killing 47 people. A train blew up near Casselton, N.D., fortunately away from populated areas.
In July, two rail cars carrying 28,000 gallons of Bakken crude oil derailed near the Magnolia Bridge in Seattle. The state “dodged a bullet,” Inslee said.
One major refiner, Tesoro, says it has phased out all DOT-111 railroad cars used to supply its refinery in Anacortes. The Burlington Northern-Sante Fe Railroad has announced it is purchasing 2,500 newer, safer railroad cars.
Tesoro has outlined procedures under which safety inspections are conducted on all tanker cars when they arrive at and when they leave its facilities. The company wants to build a major oil transshipment port at Vancouver on the Columbia River.
Still, Inslee is concerned as long as any aging tanker cars are on the rails anywhere in Washington.
“Speed kills,” said the governor. ”These cars were not designed to carry this product. . . . We don’t let speeding cars through our school zones. We should not allow unsafe (railroad) cars speeding through our cities.”
Under the Interstate Commerce Act, the federal government has most of the authority to regulate America’s railroads. The railroads have been used to a self-regulation environment in their operations, with the Department of Transportation rarely inflicting deadlines and stress.
Inslee has identified fields where the state can take action. Several will require legislative action. State initiatives would include:
–Getting legal authority to allow Washington Utilities and Transportation Commission inspectors to enter a private shipper’s property to conduct hazardous material inspections related to rail operations.
–Allow the UTC to fund additional inspector positions, including Federal Railroad Administration certified inspectors, plus three additional planners at the Department. of Ecology. They would develop new and maintain existing geographic response plans for inland and marine areas at risk from oil spills.
–Enhance and provide for a continuous supply of oil-spill-response equipment and local first responder firefighting equipment.
–Change the law to allow designated ‘first-class cities’ to opt-in to the UTC’s railroad crossing inspection and enforcement program. Inslee would have lawmakers give the UTC jurisdiction to require first class cities to tell the UTC when crossings are opened or closed.
–Provide money for the UTC to conduct railroad and road authority diagnostic reviews of high-risk crossings.
The main route of refinery-bound oil trains passed between several major cities — e.g., Seattle, Edmonds and Bellingham –and their waterfronts.
Inslee voiced confidence that the Legislature will find money to pay for state safety measures, saying lawmakers don’t want “oil blowing up next to Safeco Field and QWest (actually CenturyLink) Fields.
“When these things (trains) go, I don’t want to use the word ‘bomb” but that is the appropriate metaphor,” Inslee argued.
And, added the Governor, “The feds are taking action, but it is our job to prod them to additional action.”
3. New TSB rules would not have prevented Lac-Mégantic disaster, says CP Rail head
By Eric Atkins, Globe and Mail, Oct 3, 2014
Regulators have “overreacted” to the fatal derailment in Lac-Mégantic by imposing needless regulations on the rail industry, says Hunter Harrison, chief executive officer of Canadian Pacific Railway Ltd.
Mr. Harrison said human error caused a Montreal, Maine & Atlantic train hauling crude oil to roll down a hill and explode in the summer of 2013, killing 47 people and destroying much of the Quebec town. Slower speed limits or other rules that have been proposed or implemented since would not have prevented the disaster, he said.
“Lac-Mégantic happened, in my view, because of one person’s behaviour, if I read the file right,” Mr. Harrison said in an interview. “An individual did not set the brakes. And I think that we have overreacted and looked at a thousand different things about what we want to do with [regulations]. And you’re not going to write [regulations] that are going to stop behaviour.”
In the wake of Lac-Mégantic, Canada’s Transportation Safety Board made recommendations that call for railways to install better brakes on trains, have equipment at hand in the case of disasters, and divert dangerous-goods trains from populated areas.
Opposition parties and rail safety advocates say the regulations already implemented have not gone far enough to prevent another oil train explosion. Since the changes, three more large-scale oil train explosions have occurred in the U.S.
Mr. Harrison made the comments after making a presentation to investors in White Plains, N.Y., on the company’s four-year growth strategy. He added that the rail industry can safely move a range of goods, including oil. But he said rules that force rail companies to move more grain in Western Canada and parts of the U.S. are incompatible with calls for slower speeds.
The push for new regulations “has really been, on a relative basis, blown out of proportion as far as what the reaction should be,” he said. “Think about what’s going on today in North America in both countries, regulators, legislators, shippers are saying you gotta move more stuff, you gotta move it faster, you gotta move it safer. But, by the way you gotta slow down. It doesn’t work.”
The train that exploded in Lac-Mégantic was carrying crude oil from the Bakken region of North Dakota. CP locomotives pulled the train from North Dakota to Montreal, where it was put in the hands of MM&A. Investigators later determined the oil was far more volatile than most kinds of crude, and have since required Bakken crude to be labelled as more explosive.
Mr. Harrison, who once said he could not sleep after the disaster, recounted his horror at the images of the town in flames. “Have I seen larger derailments? Yeah, but have I seen the life of 47 people lost and the devastation? No. But … there was a lot learning to go through. We, the shipping community, did not know the properties [of the oil],” he said. “One of my first observations when I saw that big cloud in the sky was, ‘That’s not crude.’ Not the crude that I thought about. Though I didn’t know it had the different properties that it had.”
Mr. Harrison said Calgary-based CP has built better tracks and infrastructure in North Dakota, and that the industry is better prepared to handle Bakken crude now that its more explosive properties are well known.
The Memphis-born Mr. Harrison, who is expected to retire from CP in 2017, has been railroading since 1964. A former CEO of rival Canadian National Railway, he was parachuted into the top job at CP in 2012 by hedge fund Pershing Square Capital, which made a big investment and waged a campaign to change the board at what was North America’s poorest performing railway.
Since then, Mr. Harrison has slashed costs and jobs and boosted the company’s efficiency. Investors have enjoyed the ride, watching CP’s share price on the TSX more than triple to $234 under Mr. Harrison’s leadership. But the market has been waiting for signs Mr. Harrison can boost revenue, add customers and build a bigger rail company.
Under the plan CP outlined on Thursday in White Plains, faster service and train speeds were the keys to doubling profit and boosting annual revenue by 50 per cent to $10-billion by 2018. In presentations to analysts and investors, CP executives outlined plans to upgrade terminals, install new control centres and upgrade some tracks to increase average train speeds by one or two miles per hour, up from the current 19 mph, or 30 kilometres per hour.
In the interview with The Globe and Mail, Mr. Harrison said train speed has nothing to do with safety, and that he would never compromise safety in the interest of profits.
“I hope we never could be accused of compromising safety in the interests of the bottom line,” he said. “I don’t think that in all of my experience, and I’ve got a little bit, that running 30 miles an hour is a lot safer than 40 miles an hour. We have the ability with the appropriate infrastructure to move those commodities at the appropriate speed and do it very safely.”
Hunter Harrison, CP Rail CEO, Says Bureaucracy Hampering Safer Rail Transport
By Ross Marowits, The Canadian Press, **Sept 18, 2013**
Canadian chemical producers denied Wednesday that they are “dragging” their feet in purchasing safer railway cars, after the head of Canadian Pacific Railway accused the country’s petroleum, chemical and commodity producers of persistently stonewalling such efforts.
“We need to continue to improve with regulations and practices regarding safety, which is exactly what we do and the reason why we have such an advanced program in this area,” said Richard Paton, president of the Chemistry Industry Association of Canada.
“Yes we have to continue to improve the cars to make sure that the right car is there for the level of danger or risk of the product and we’re doing that,” he said.
Hunter Harrison, who has been CEO of Canadian Pacific (TSX:CP) since mid-2012 and before that headed Canadian National Railways (TSX:CNR), singled out shippers in an interview published Wednesday in the Globe and Mail newspaper.
“The root of all this is the dollar sign,” he said of the decades’ long efforts to hamper reform by large shippers who own the vast majority of North America’s tankers. “We can fix all this stuff, it is fixable.”
The veteran and highly regarded railway executive also said “turmoil” and “bureaucracy” are hampering the adoption of precautions that are needed to avoid further accidents like the deadly Lac-Megantic derailment in Quebec.
Harrison said it’s up to regulators to require sturdier rail cars, tighter safety rules and stiffer penalties, including jail time, for companies and employees who knowingly mislabel hazardous goods or fail to obey existing regulations.
But Paton said it takes time to produce a safer railway car and have it field tested.
That leaves chemical producers like those in the chlorine sector scrambling to buy as many mid-level tankers they can find until supercars with double hulls and extensive safety features get thorough testing and go into production. So far only a few of those advanced units, which cost 2 1/2 times that of a conventional car, have been manufactured for testing.
One company, for example, is spending about $75 million over five years to replace about 500 tank cars in its fleet with interim cars each costing about $150,000. “Delays isn’t just us, it’s right around the board — design, development, tests. It’s a lot of things that come into this picture rather than just the shipper,” Louis Laferriere, the association’s director, technical and sustainable logistics, added in an interview from Ottawa.
The leaders of the association that includes both of Canada’s largest railways as members acknowledged that safety is a big issue since the derailment that killed 47 people in Lac-Megantic, but said that Canada’s railways are among the safest in the world for transporting dangerous goods. “We’ll really need to address what happened at Lac-Magentic and correct that but, at large, it’s not an indication of a system in a bad state at all,” Laferriere said.
July’s derailment that devastated the Quebec town’s centre involved a train operated by Montreal Maine & Atlantic Railway, which was moving tanker cars with crude oil on their way to an Irving oil refinery in Saint John, N.B. Canadian Pacific moved the cars along an earlier stage of its journey from the source in the U.S. Midwest.
CN’s chief executive, Claude Mongeau, said shipment of dangerous goods by rail remains very safe but that tragic events such as Lac-Megantic require the industry to reassure the public. He said 99.997 per cent of dangerous goods safely reach their destination by rail without release but such a statistic means little in the face of disasters like the Lac-Megantic tragedy.
“I think our biggest challenge is to reassure the public,” he told a CIBC conference on Wednesday, adding that rail remains a cost-effective way to move goods across the country. “From a spill standpoint, railroads are as safe, if not slightly safer than pipelines. From an accident standpoint, this accident was tragic. But you look back over … 15 years, very few fatalities in the rail industry (have been) caused by the movement of dangerous goods.”
Mongeau said Montreal-based CN expects to double its shipments of crude from last year to 70,000 carloads this year and increase that again going forward. He said that growing shale oil from the Bakken region of North Dakota would have had trouble getting to market had it not been for rail. About two-thirds of such oil is moved by rail.
4. More cause for alarm over rail safety in North America
A 100-car CN train derailed and exploded yesterday in Saskatchewan, sending toxic fumes into the sky. It was a mixed cargo train and 26 cars derailed. Two of them contained petroleum distilates and four contained either hydrochloric acid or caustic soda. The crash is 230 km east of Saskatoon, near Wadena.
CBC received a report and photos from a local reporter: http://www.cbc.ca/news/canada/saskatchewan/major-train-derailment-and-fire-near-wadena-sask-1.2791337. Police established a five-mile cordon around the site, preventing anyone from entering, including reporters. There is a good news report by the Toronto Star and by Canadian Press, each quoting from eyewitnesses.
The aforementioned Toronto Star report has added a video report in which residents of the ‘Junction’ district of Toronto voice concern about increased rail traffic through their neighbourhood. The main CN freight train corridor through Toronto runs past their doorsteps.
The CBC Radio One national newsmagazine ‘The Current’ broadcasts a story today by its oil-by-rail reporter Dave Seglins who has been investigating the consequences of the punishing work routines of railway locomotive operators. The story is titled, ‘Freight Train operators are falling asleep at the switch and Transport Canada is struggling to prevent it‘. You can listen to that 20-minute story here. Here is a print report of the same story. I expect we will see more on this story as train operators take up CBC’s invitation to contact it with more accounts. Dave Seglins says more than a dozen have already contacted him.
CP and CN Rail are fighting back against increased regulation of the railways. So much for the lessons of Lac Mégantic. Here is a newspaper story on this from several days ago.
5. Saskatchewan derailment site poses ‘no risk to public’
By Canadian Press, in Toronto Star, Oct 9, 2014
WADENA, SASK.— Saskatchewan’s Environment Ministry says it will continue to monitor the air quality near a small community after a fiery train derailment that sent thick black smoke into the air. Spokesman Ralph Bock says there have been no measurable health concerns at the site.
“There have been no reports of any contaminants above any action levels,” Bock said Wednesday of airquality tests done to ensure the safety of people and animals. “Air monitoring will continue until the incident is concluded.”
Fire commissioner Duane McKay said the fire at the derailment was put out and salvage operations started overnight.
“Over the last few hours we’ve seen significant improvement in the situation,” he said. “Our focus has really been on the residual effects.”
McKay said officials will be doing visual surveys to check for smoke damage and residents can request water-quality tests if they are concerned. An evacuation order was lifted Wednesday morning for about 30 residents of Clair and the surrounding area, who were forced from their homes.
“There is no risk to the public now,” Wadena fire Chief Harold Narfason said. “There’s no concerns about pollutants in the air. Everything is falling into place quite nicely.”
The 100-car freight train derailed Tuesday about190 kilometres east of Saskatoon. Six of the 26 cars that left the track were carrying dangerous goods. Two contained petroleum products and caught fire.
CN spokesman Jim Feeny said the train was going within the speed limit of 40 kilometres per hour when it derailed. The two people on board were not hurt.
6. Train cars that burned in Sask. same type as at Lac-Mégantic: TSB
The railcars that split open and burned in Tuesday’s derailment near Clair, Sask., were Class 111, the same kind involved in the Lac-Mégantic disaster, CBC News has learned.
Rob Johnston, who is overseeing the federal Transportation Safety Board’s investigation into the derailment, said seven of the cars travelling with the train were Class 111, a type that the board has said need safety upgrades. Six of them were carrying hazardous products — hydrochloric acid, sodium hydroxide and petroleum distillates (a Varsol-type substance).
“The two that were carrying petroleum distillates did end up eventually releasing their products, and that was probably the source of the fire,” Johnston said.
No one was hurt in the Saskatchewan derailment, in which 26 out of 100 cars went off the tracks, but officials noted the outcome could have been different if it had happened in a populated area.
Following the July 2013 Lac-Mégantic derailment, which resulted in 47 deaths and destroyed more than 30 buildings in the Quebec town, the TSB issued a report that found the Class 111 tank cars were outdated. It said “enhanced protection standards must be put in place” for Class 111 tank cars. Damage to the Lac-Mégantic tank cars could have been reduced by enhanced safety features, the report said.
The TSB told CBC News it does not know whether the cars in Clair were given safety upgrades or not.
CN spokesman Jim Feeny told CBC News that the Class 111 tankers on the train that derailed are owned by independent shipping companies. Feeny confirmed the tankers had not been upgraded to meet new safety recommendations, noting CN does not have the power to force the companies to upgrade the tankers.
“CN does not own these cars,” Feeny told CBC News on Thursday. He also pointed out that although they were the older model of tanker, it was OK for them to transport petroleum distillates.
“They are compliant with the current codes,” Feeny said. “For the product that these cars were carrying, they were in full compliance.”
He added CN would prefer to see the newer-model of tanker in use. “We are in favour of an aggressive phase-out of the older DOT 111, but it will take time to do that,” he added. “In the meantime, we are required to accept them as our customers present them to us, so long as they are compliant with the existing codes.”
According to Feeny, the cars in question number in the “tens of thousands” across the rail systems of North America. “They are being replaced by upgraded or newer models, but it will take time,” he said. “In the meantime, the products that they are carrying are essential for our everyday lives.”
7. Letter to CBC: ‘Accurate reporting on oil by train news, please’
By Roger Annis, Oct 9, 2014
Hello CBC News,
The news report on your website and the reports on this morning’s national Radio One news concerning the train derailment in Saskatchewan two days ago are misleading. I refer specifically to the issue of DOT 111 rail cars transporting dangerous goods.
Your report expresses surprise that among the rail cars that derailed were DOT 111 models. But there is nothing surprising about that. These are the model of rail wagons that carry most liquid dangerous goods on North American railways. The issue that your report is referencing is the promise by Transport Minister Lisa Raitt last April to phase out the use of DOT 111s for dangerous goods within three years. The minister said this phaseout would occur in two phases, and this is where you confuse the listeners and readers. The first phase was to see the pre-year 2011 models of DOT 111 phased out within 30 days. I understand that these models lack a continuous, crash shield along the bottom and they have very limited, crash-resistant protection of valves. The remainder of the DOT 111s (post-year 2011) are to undergo significant crash-resistant protection or replacement within three years.
So, which model of DOT 111 was involved in the Saskatchewan crash? If these were pre-2011 models involved, then this is serious news, indeed. If they are the newer models (requiring modification by the three-year deadline), then it is a different sort of news–still newsworthy, but not as dramatic as your reports suggest.
I am disappointed to see and hear this degree of imprecision by CBC. Oil-by-rail traffic is a serious public health as well as environmental and climate change concern for Canadians. We deserve the facts, in all their accuracy.
Incidentally, the oil and rail industries in the United States are fiercely resisting any three-year deadline for modifications or replacements of the DOT 111. They want seven years. So we shall see how well Lisa Raitt’s three-year deadline holds up, considering the highly integrated railway network in North America. Add to this the fact that CN and CP Rail are now forcefully arguing, like their U.S. counterparts, that the disaster at Lac Mégantic was a one-off, perfect storm of an event that is unlikely to be repeated and therefore no major changes to railway safety regulation are required.
8. As Trains Move Oil Bonanza, Delays Mount for Other Goods and Passengers
By RON NIXON, New York Times, Oct. 8, 2014
WASHINGTON — An energy boom that has created a sharp increase in rail freight traffic nationwide is causing major delays for Amtrak passenger trains and is holding up the transport of vital consumer and industrial goods, including chemicals, coal and hundreds of thousands of new American cars, rail officials and federal and state regulators say.
American rail lines now move more than a million barrels of oil a day, much of it from the Bakken shale oil field in North Dakota and Montana and from the oil sands of Alberta, Canada. Last year about 415,000 rail cars filled with crude oil moved through the United States, compared with 9,500 in 2008, according to the Surface Transportation Board, a bipartisan body with oversight of the nation’s railroads.
In large part as a result, long-distance Amtrak passenger trains are now late 60 percent of the time, Amtrak officials said, compared with a year ago, when the trains were late 35 percent of the time. Continue reading the main story Related Coverage
Tim Kozojed, a farmer, transferred last year’s corn from a storage bin in Hillsboro, N.D., for shipment to market this month. Farmers say the backlog will worsen. (Grain Piles Up, Waiting for a Ride, as Trains Move North Dakota Oil, AUG. 25, 2014)
The problems are particularly acute on long-distance passenger lines like the Empire Builder, which shares tracks with freight traffic from Chicago to Portland, Ore., and is late nearly 70 percent of the time. Trains on the 47-hour trip typically run three to five hours behind. Revenue from the line has dropped 18 percent from last year, Amtrak officials said, as word about the sluggish service spread among passengers, most of whom use the Empire Builder for shorter trips between cities on the route.
“Clearly, we’re not getting the level of service that we want to give, or what our customers have been used to getting over the last decade,” said Edward R. Hamberger, president and chief executive of the Association of American Railroads, an industry trade group.
Delays are not as serious for rail service along the Northeast Corridor, where Amtrak owns most of the track between Washington and Boston and has more control over passenger service. On long-distance routes, Amtrak passenger trains run on tracks owned by the major freight railroads.
On the long-distance routes, aging tracks and a shortage of train cars, locomotives and crews have also caused delays, rail officials said. In addition, an improving economy has meant more goods shipped by rail over all. Rail accounts for 40 percent of all goods moved in the country as measured in ton-miles, derived by multiplying a cargo’s weight by the distance shipped. Trucks are second at 28 percent.
A proposed pipeline to move oil from Canada would alleviate some of the rail congestion but would not eliminate it, officials said.
Although North Dakota has been known within the industry for a surge in moving oil by rail, and resulting delays in grain shipments for farmers, rail officials say the congestion and late passenger trains have spread to many other states. On Wednesday, the Surface Transportation Board announced that the nation’s largest railroads must file public weekly reports about their performance, which the board said would give rail customers a better sense of the magnitude of the delays. Continue reading the main story Continue reading the main story Continue reading the main story
The problems are only expected to get worse. American coal exports to countries like China, which are picking up as domestic demand falls, will also compete for space on trains, as new coal export terminals are planned at several ports in the Pacific Northwest. (Increased Asian demand for coal reached record levels in 2012 and continues to be high.) In the United States, a record harvest of corn, soybeans and wheat is expected this year, adding to the stress on the nation’s rail network.
“It’s like having a fire hydrant hooked up to a garden hose,” said Mike Steenhoek, executive director of the Soybean Transportation Coalition in Iowa.
Railroad executives say they are working to unclog the congestion. Michael J. Trevino, a spokesman for the Burlington Northern Santa Fe line, owned by Warren Buffett, said the company had committed $5 billion for rail expansion and track maintenance to help improve its service.
The money includes about $300 million over the next three years to improve capacity and beef up the rail system in North Dakota, which Burlington Northern Santa Fe said would bring 300 more employees to the state and lead to smoother operations and faster deliveries. Mr. Trevino said B.N.S.F. was also making improvements to its tracks in Missouri that carry coal trains coming from Montana and Wyoming.
Thomas L. Lange, a spokesman for Union Pacific Railroad, said the company was buying about 229 new locomotives and hiring about 3,200 additional train crews to help deal with the increase in demand for service.
“We’ve had some delays in our system because demand for freight rail transportation for Union Pacific surged in 2014 to unexpected levels, which we have not seen since 2006,” Mr. Lange said. “We’re upgrading and expanding our system to make sure that at the end of the day, we get the goods delivered.”
A major speed bump in the nation’s rail congestion is Chicago, a transit point for six of the nation’s seven biggest railroads. Nearly half of what is known as intermodal rail traffic — the big steel boxes that can be carried aboard ships, trains or trucks — travels through the city. The congestion in Chicago is also caused by track sharing among freight, Amtrak and commuter trains.
The railroads and local, state and federal officials have committed $3.2 billion for 70 construction projects to replace rail intersections with overpasses and underpasses, in an effort to smooth the flow of traffic for the 1,300 freight and passenger trains that travel through Chicago each day. The project will also separate tracks now shared by freight and passenger trains at critical spots. Officials said about 22 of the projects had been completed.
In total, railroads will spend about $26 billion this year to upgrade the rail network and hire new workers, said Mr. Hamberger of the Association of American Railroads.
Despite the improvements, many industries say they still suffer delays. In April, the auto industry said it had more than 200,000 new cars in storage because of a shortage of trains to move the vehicles.
“Since the summer, we are seeing progress, but automakers are entering the fall with a backlog of new cars to transport by rail,” said Gloria Bergquist, vice president of communications for the Alliance of Automobile Manufacturers, the auto trade group. About 70 percent of new vehicles are moved by rail, according to the group. Industry officials say they are moving more cars by truck as a result of the rail congestion. But trucks are a more expensive method of moving the cars, a cost that may eventually be passed on to customers.
9. Suncor sneaks tar sands shipments past Great Lakes and St. Lawrence River communities
Suncor is setting a precedent around the Great Lakes and St. Lawrence River Basin with its new shipments of bitumen on the St. Lawrence River. On September 24, the first ever tanker to ship bitumen on the Great Lakes and St. Lawrence River Basin left the port of Sorel-Tracey in Quebec. The tanker, the Minerva-Gloria, carried an estimated 700,000 barrels of bitumen to Sardinia, Italy which arrived on Tuesday at 4:22 p.m. local time. A second tanker, the Genmar Daphne, is expected to arrive in Sorel on Sunday, October 12 where it will be loaded, travel along the St. Lawrence River and transport another load of Alberta bitumen to Italy. There are plans to ship 20 to 30 vessels like this each year along the St. Lawrence River.
A spill would have catastrophic effects on this waterway that millions of people rely on for drinking water.
Transport Canada and the government of Quebec approved these shipments without a thorough environmental assessment, public consultation and free, prior and informed consent of indigenous communities and municipalities. The Council of Canadians opposes these shipments because of the risk they pose to the Great Lakes and St. Lawrence River Basin. Many other organizations, communities and First Nations are also deeply concerned about the threat of bitumen shipments on the Great Lakes and St. Lawrence River. These shipments set a dangerous precedent and present an increased threat to the waters of the Basin.
Every day, energy giant Suncor transports bitumen via CN Rail from Alberta to a storage space in Quebec operated by Kildair Services. Given the train derailment in Wadena, SK on Tuesday and the catastrophe in Lac Mégantic last summer, the transport of hazardous materials by rail poses an increased risk to many communities along the route.
It is unclear what Suncor’s emergency response plan is and what safeguards have been put in place to protect communities along the rail and shipping route.
Just two days before the first shipment departed, Bloc Québécois MP Mr. Louis Plamondon raised concerns about the ability of the federal government respond to a spill: Mr. Speaker, a year ago, the federal government prohibited ships wider than 32 metres from going up the St. Lawrence River any further than Quebec City. Today there is a 44-metre-wide ship docked at Sorel-Tracy to take on tens of thousands of tonnes of crude oil. In 2010, the auditor general was very critical of the federal government’s ability to respond in the event of a marine oil spill. Can the minister tell us whether the federal government’s response capability meets the Auditor General’s requirements and prove that it is prepared to respond in the event of a spill, before increasing the frequency of this kind?
The mayor of Tracy raised concerns about the town’s ability to respond to a spill. A dozen municipalities along the river also do not have the lack of technical and financial capacity to address a spill.
Suncor’s shipments could pave the way for a plan being hatched by Calumet Specialty Products to build an oil terminal in Superior, Wisconsin at the edge of Lake Superior and at the foot of the Alberta Clipper, a pipeline that transports Alberta crude from Edmonton. The oil terminal would be able to load one oil tanker or barge every four days, with each tanker being able to hold about 77,000 barrels of crude oil and a 400-foot-long barge being able to hold about 110,000 barrels. Thirteen million barrels of crude oil could be shipped across the Great Lakes each year.
With the European Union recently abandoning plans to label more carbon intensive fuels such as tar sands and fracked oil, we could see an increase in plans to ship bitumen by tanker across the Great Lakes and St. Lawrence River.
These extreme energy projects are more water and energy intensive and are threatening the Great Lakes and St. Lawrence River Basin like never before. Read more about the first shipment and Maude Barlow’s report Liquid Pipeline: Extreme energy’s threat to the Great Lakes and the St. Lawrence River. Pipelines. There is also a move to “re-export” tar sands crude to Europe and Asia, via the U.S.
Suncor shipments are still in its early stages with the second shipment. Now is the time to stop them and call for genuine public debate and a full environmental review.
Here are five things you can do to stop Suncor’s shipments:
- Sign our action alert calling on Transport Canada and the Quebec’s Department of Sustainable Development, Environment and the Fight against Climate Change
- Contact your mayor and municipal councillor and urge them to call for a full environmental review and genuine public debate.
- Contact your Member of Parliament to express your concerns and urge them to call for a moratorium on the shipments until a full environmental review and public consultations are complete.
- Write a Letter to the Editor. Letters are read by politicians and members of the community. It’s a great way to educate people about these shipments.
- Talk to your friends, family and colleagues about these shipments. Despite the grave risks they pose, there is little information about the plan.
10. Oil train traffic increases through Bend, Klamath Falls and along Deschutes River, BNSF says
By Rob Davis, The Oregonian, October 10, 2014
Oil train traffic has increased through Bend, Klamath Falls and Central Oregon to as many as three weekly, a new report shows. It’s a sharp increase. BNSF Railway Co., a major hauler of the volatile crude extracted from North Dakota’s shale, had previously reported moving only one oil train a week through Central Oregon.
If the pace continues, the route would be as heavily traveled as Oregon’s principle oil train corridor between Portland and a terminal outside Clatskanie. Three trains weekly have plied that route for months.
Still, the volumes — between zero and three trains a week, a BNSF report says — are far less than what passes through the Pacific Northwest’s major route, the Washington side of the Columbia River Gorge. As many as 19 oil trains move there weekly. Gus Melonas, a BNSF spokesman, said the route still averages three to four trains a month.
A boom in the North Dakota’s Bakken formation has pushed an unprecedented amount of crude into the country’s rail system, leading to a string of fiery accidents that has attracted nationwide scrutiny.
The increase through Central Oregon is just one indicator of California’s growing demand for North Dakota oil. California, a major oil refining state, estimates its refineries will receive as many as 150 million barrels of oil by rail annually by 2016. That’s far more than the 3.6 million barrels of oil California received by rail in the first half of 2014.
Some of that huge increase in volume will be transported via the Central Oregon rail route, which starts east of The Dalles, winds along the Deschutes River, passes south through Bend and Klamath Falls.
Most crude moving to California comes from Canada, which produces heavier oil than North Dakota’s light, flammable crude. And it’s already passing through Oregon. Just how much is unclear. Railroads don’t have to disclose shipment volumes of Canadian crude, something that Sens. Ron Wyden and Jeff Merkley, Oregon Democrats, have pushed to change.
11. CSX stock soars in hopes CP will pursue takeover
By Eric Atkins, Globe and Mail, Oct 13, 2014
Shares of railway CSX Corp. soared by as much as 10 per cent in intraday trading on Monday after reports the U.S. company rejected an offer from Calgary-based Canadian Pacific Railway Ltd. It is unclear if CP will continue to pursue CSX, but investors seem to be betting the railway led by Hunter Harrison will not drop the bid.
CSX runs 21,000 miles (33,800 kilometres) of track east of the Mississippi River, and serves several oil refineries on the eastern seaboard. The company’s network would help CP relieve some of the bottleneck of oil-carrying trains that CP hauls from the Bakken region of North Dakota and parts of the Canadian Prairies. The amount of crude moving by rail has soared in the past few years amid a shortage of pipelines in North America.
CP shares were flat in trading on the New York Stock Exchange Monday. The price fell by almost 5 per cent on Friday, after rising by more than 50 per cent in the past 12 months. The Toronto Stock Exchange was closed on Monday for Thanksgiving.
Shares in Norfolk Southern Corp., another U.S. railway with a network east of the Mississippi River, rose by almost 3 per cent on Monday. Kansas City Southern Industries Inc., which has tracks that run from St. Louis and Kansas City to the U.S. Gulf Coast and into Mexico, rose by 3 per cent.
Fadi Chamoun, a Bank of Montreal equities analyst, said a hostile takeover of CSX was ambitious and “fraught with risks,” but possible with the help of an activist shareholder.
“CP Rail has talked about the possibility of another round of mergers in the railroad industry since the current management took over the helm in mid-2012,” Mr. Chamoun said in a note to clients.
Mr. Harrison took the reins of CP after a proxy battle led by U.S. hedge fund Pershing Square, which saw an opportunity to turn around what was North America’s least efficient railway. Since then, Memphis-born Mr. Harrison and his hand-picked leadership team have slashed costs, idled rail cars and revamped routes in a bid to boost profit. Mr. Harrison recently said the company plans to double profit within four years, and embark on a capital spending plan to increase train speeds by improving terminals and tracks. CP said its crude oil shipments should almost double by 2015 to 200,000 carloads.
A merger with CSX would form the biggest North American railway by network size – passing privately held Burlington Northern Santa Fe – and one of the biggest in revenue. The possible combination would also be one of just two railways that has tracks that touch both the east and west coasts. Montreal-based Canadian National Railway Co. is the only company that can make that claim.
“We don’t sense any of the other Class 1 railroads has an appetite for M&A, and CSX’s apparent response to CP Rail’s reported merger proposal is not surprising to us. That said, CP Rail’s choice of CSX as a target appears to meet some of the key conditions for mergers as laid out by the regulators,” Mr. Chamoun said.
Combining the companies’ networks could improve service for companies that ship their goods by rail, and boost competition in the industry, Mr. Chamoun said.
He added he expects the other major railways would oppose the merger, which would upend the rail industry’s balance of power. But Mr. Chamoun said the other rail companies could try to protect their businesses by pursuing mergers of their own, assuming the U.S. rail regulator, the Surface Transportation Board (STB), approves a CP-CSX takeover.
The regulator, however, blocked the merger proposal of CN and BNSF in 2000. Companies proposing similar deals in the future must show service will be maintained, and that rivals will not react by hastening industry concentration with their own mergers, the STB said.
Credit Suisse analyst Allison Landry wrote in a note to clients that STB rules for mergers between Class I railroads had “an arguably impossible hurdle rate.”
“Therefore, in our opinion, the deal is a non-starter,” she said.
In a client note, Cowen & Co. analyst Jason Seidl said Canadian Pacific could in theory team up with hedge fund Pershing Square Capital Management and take a bid directly to CSX shareholders.
But Mr. Seidl said any deal was unlikely in the near term since shippers and regulators were “disenchanted” with the rail industry because of its service and capacity problems. Severe weather last winter wreaked havoc on the major railways’ networks, while the rise in oil-by-rail shipments has caused delays for grain shippers.
Spokespeople with CP and CSX declined to comment on Monday.
12. Plummeting oil prices may push more Bakken crude onto rails
Mike Lee, E&E reporter, Energy Wire (subscriber only), October 16, 2014
The drop in oil prices could push more oil from North Dakota’s Bakken Shale onto rails, amid a debate about how to make the state’s crude safer.
Prices for Bakken crude have fallen faster than Brent crude, the international benchmark, Lynn Helms, North Dakota’s director of the Department of Mineral Resources, said during a conference call with reporters yesterday.
Brent, North Sea oil that is typically used at refineries on the East Coast, was selling for $85.50 earlier this week, while refiners in the Midwest were paying $66.25 for Bakken oil. There aren’t any major pipelines connecting North Dakota to the East Coast, so operators have to use rail to get it there.
“The incentive is really high to go after an $85.50 Brent price,” Helms said.
Brent dropped below $84 yesterday, and West Texas Intermediate, the U.S. benchmark, fell below $81 a barrel. The Brent price has fallen 27 percent since June and is the lowest since 2010, Bloomberg News reported.
North Dakota’s oil production has grown more than sixfold since 2008, when oil companies began using horizontal drilling and hydraulic fracturing, or fracking, to open up the Bakken Shale. North Dakota’s oil production reached a new record in August, 1.13 million barrels a day, according to the Department of Mineral Resources.
The state still lacks oil pipelines to handle its production, so about 60 percent of the crude is moved by rail.
Bakken crude has been involved in at least three fiery train crashes, including one last summer that killed 47 people in Lac-Mégantic, Quebec.
The U.S. Department of Transportation has said Bakken oil is more volatile than other types of oil, and it is considering tougher regulations that would phase out older-model rail cars, known as DOT-111s (EnergyWire, July 24).
The Wall Street Journal and other news outlets have reported that Bakken producers decided not to build stabilizing plants that strip out light, volatile liquids such as propane and butane. Those plants are more common in Texas, where the so-called light ends can be sold to nearby petrochemical plants.
DOT has hinted that it may propose further regulations requiring stabilization.
North Dakota officials, including Republican Gov. Jack Dalrymple, have questioned whether the state’s oil is being unfairly singled out, citing industry-backed studies that show Bakken oil is no more flammable than other types of light, sweet crude.
However, the North Dakota Industrial Commission, which Dalrymple leads, is considering regulations that would require stripping the light ends from Bakken oil without the cost of new stabilizing plants. Most oil wells in the Bakken already have equipment that could strip out volatile liquids if it’s used under specific conditions.
Ultimately, oil producers want to see pipelines built to connect the Bakken to refining centers, Justin Kringstad, director of the North Dakota Pipeline Authority, said on yesterday’s conference call. There are three major projects in various stages of development to carry Bakken crude, and the proposed Keystone XL pipeline would also carry some Bakken oil.
Pipelines typically require oil companies to sign long-term transportation contracts, so the near-term price of oil doesn’t affect their construction schedules as much.
13. Montesano [Washington state] council says ‘no’ to oil trains
By Brendan Carl, The Vidette, Oct 17, 2014
The Montesano City Council says it doesn’t want oil trains to run through the city and approved a resolution condemning the possible construction on three marine terminals for crude oil on the Port of Grays Harbor.
The city council approved a resolution requesting that various governing bodies rescind and deny future permits for potential oil exports by a vote of 6-1 on Tuesday with Councilwoman Pam McElliott as the only vote in opposition of the resolution.
The resolution follows the style of one that was approved by the Aberdeen City Council recently and was put on the agenda at the request of Councilwoman Marisa Salzer. The resolution requests that “the commissioners of the Port of Grays Harbor reconsider their proposal to build three marine terminals for the transfer of Bakken, tar sands and other crude oil which will result in this oil being transported on DOT 111 rail cars know to be unsafe through our urban centers.”
The resolution also requests that the cities and other governing bodies rescind the current permits and deny further permits due to the rail safety, the Washington State Department of Transportation and the Freight Mobility Strategic Investment Board analyze and study the potential economic effect of the oil train traffic and that Washington State Governor Jay Inslee would work with the various tribes to protect their treaty rights and fishing resources.
Members of the public packed the council chambers with several citizens standing in the hallway outside of the chamber just to be able to hear the council discussion. A public comment period lasted for almost an hour as 17 different residents took time to state their position and tell of the effects they believe the transport of crude oil could have on Montesano.
Dan Wood, a former county commissioner who lives in Montesano, began the comment period by sharing that the damage done by oil train explosions in several instances had affected an area that would include vital parts of the local communities in Grays Harbor.
“The blast zone is a half mile in each direction of the tracks,” Wood said. “If you go one half mile up from the tracks in various parts of Montesano you will take in Beacon Elementary, you will go up main street north of the court house, you will go beyond the fire department…eight schools in Grays Harbor County in East County are within a half mile of those tracks.”
Washington Dungeness Crab Fisherman’s Association Vice President Larry Thevik told the council that he believes the economy in Grays Harbor may be negatively affected by the oil terminal projects more than it will benefit from them.
“The 85 jobs the Port claims will come to Grays Harbor from the three proposed terminals are not that many and are hardly worth the risk they bring to existing jobs, our environment and the health and safety of communities along the rail lines,” Thevik said. “Profit will go elsewhere and the risk will stay with us.”
“We ask that you send a message by a positive vote on this resolution…that we won’t stand for the probably poisoning of our area so that the oil companies can make billions on our expense,” said Aberdeen City Councilman Alan Richrodm who led efforts to get Aberdeen to approve the similar resolution back on Sept. 24. “We will not stand by and hour our livelihood of tomorrow sacrificed for the profit of a few today.”
A loud applause came after Richrod’s statement.
Despite almost an hour full of public comment, Salzer made a motion to postpone a vote on the resolution until the Oct. 28 council meeting to be able to have a public hearing and have individuals in favor of the project represented as well. “I’m a firm believer in hearing both sides of the item before taking a vote,” Salzer said.
McElliott supported the motion and voted along with Salzer to postpone the vote, but the other five council members said they felt enough public comment had been made to vote and the motion failed 2-5.
“This agenda has been published for quite a while,” Councilman Pat Herrington said. “People for or against could have been here. What is the purpose of a public hearing? We had one.”
“What are we going to hear from a public hearing that we haven’t heard here tonight?” Councilman Ken Walkington said.
After an amendment was made to the resolution to change the language in section I to include all rail cars with unproven safety records instead of just the DOT 111 cars, Councilman Chris Hutchings made a motion to remove Section II A, which asks other cities and governing bodies would consider rescinding and deny future permits, from the resolution. “I just don’t feel I like that idea of telling another governing body if they have already have committed something that they need to resend it,” Hutchings said.
The motion to remove the section failed 2-5 with Hutchings and Councilman Lyle Powell as the two votes in favor.
McElliott said she knew she would be the lone council member in support of the crude transport, but that she felt the economic impact was too great to not support the crude terminals. “I’m not against crude by rail,” McElliott said. “I think we are trying to stop commerce and I hate to see that. Does the railroad need to do some updates? Absolutely. We don’t know that they are not going to do them.”
Walkington said he did not have the same faith that McElliott had in the individuals responsible for the transport of the oil. “I don’t have a lot of faith in the railroads,” Walkington said. “Let’s see them do the improvements and the upgrades and come back and we will consider oil by rail, but until those are made. … I’m not in favor.”
Councilman Tyler Trimble said he was in favor of the railroad and the commerce it will bring in the future, but that he, like Walkington, did not believe the infrastructure was in place for the safe transport of the crude oil. “It is not that this whole thing is against the railroad or against jobs,” Trimble said. “It is all pro-railroad and pro-jobs, everybody wants to continue to see the port succeed it is just we are not ready for oil to come in. We are not there.”
14. Railway mergers: CP Rail’s Hunter Harrison has just begun,
By David Olive, Business Columnist, Toronto Star, Oct 18, 2014
On the face of it, Hunter Harrison’s exploratory bid to merge his Canadian Pacific Railway Ltd. with U.S. rail giant CSX Corp. is audacity squared. The 187-year-old CSX is more than twice CP’s size in revenue, profits and trackage.
A merger of the two railways would vault CP from the smallest of the big six “Class I” rail operators on the continent to second place, trailing only Union Pacific Corp. (UP) of Omaha, Neb. A combined CSX-CP would have some 57,000 kilometres of track, more than industry leader UP. And the combined revenues and profits of a CSX-CP, at $18.1 billion and $2.7 billion (U.S.), respectively, would rank a close second to UP.
So why target the formidable CSX? The most compelling reason is that CSX is relatively bargain-priced. Its shares trade at just 16.5 times earnings, compared with CP’s lofty 28.9 times valuation. CP is also better run. Its operating profit margin in its second quarter was 35 per cent, compared with CSX’s 30 per cent in that period.
Wall Street has a dim regard for CSX’s reliance on coal shipments (23 per cent of CSX’s third-quarter sales), a prime emitter of greenhouse gasses that the U.S. power industry is gradually replacing with natural gas.
It’s that mismatch in valuations that would enable CP to pull off something of a merger of equals with CSX. It’s arresting that CSX’s market cap, or total shareholder value, is $32.4 billion, scarcely higher than that of the much smaller CP, at $28.4 billion.
Even though Harrison’s entreaty to Jacksonville, Fla.-based CSX two weeks ago was rebuffed, this story has just began. Investors in the widely held CSX will now pressure that company to either match Harrison’s remarkable performance at CP or consent to a merger.
Their eyes will pop when they assess the Harrison record in the Great White North. First, Harrison completed predecessor chief executive officer Paul Tellier’s project of taking Canadian National Railways Co. (CN) from worst to first in North American railway performance. And at CP, Harrison has more than tripled the shareholder value of CP since he was installed as CEO by U.S. activist Bill Ackman after a lengthy proxy fight in 2012.
Harrison defied understandably skeptical rail experts by vastly improving CP’s operating ratio from a dismal 81.3 per cent in 2011 to 65.1 per cent by mid-2014, one of the best in the industry, achieving that two years ahead of his self-imposed deadline. (The ratio measures non-interest expenses as a percent of revenues, and is the all-important benchmark of railway performance.)
With or without a merger, Harrison vowed earlier this month to boost CP’s revenues to $8.8 billion by 2018, a 55 per cent increase over current sales. Continued improved efficiencies are part of that plan, including an additional reduction of about 1,000 jobs (mostly through attrition, as Harrison’s previous 5,000 job cuts were), in order to get that benchmark operating ratio down still further, to the low 60s.
One way or another, insists Harrison, the oligopoly of six major North American Class I railways has to shrink further. “I don’t think there’s a choice,” Harrison said in a recent televised Bloomberg News interview. “There’s not going to be any more railroads built. We’ve got to start doing more with less (trackage). Mergers would create a lot more of (the) capacity” that shippers are demanding.
Mergers would, Harrison argues, create more capacity by reducing switching and relieving pressure on Chicago and other congested rail hubs, where chronic traffic jams slow service.
A merger or two would also increase rail capacity by eliminating duplicating lines, freeing capital for double-tracking and upgraded marshaling yards that would increase “velocity,” the pace at which trains are kept in operation.
As with airlines, whose costly planes make money only when they’re airborne, idling locomotives and rolling stock are a drain on railway treasuries. Equipment needs to be kept moving as much as possible, not stuck on a sideline or held up by a knot of traffic at a hub where several roads converge.
The remaining roads would actually be more competitive by offering improved service and a wider variety of services post-consolidation, rail analysts believe.
A CSX-CP combination, for instance, would create North America’s second transcontinental railroad, adding CSX’s operations in 23 states east of the Mississippi and in Ontario and Quebec to CP’s coast-to-coast network in Canada, which extends into the U.S. Midwest. (The other transcontinental road is CN.)
But those same analysts doubt that the consolidation that Harrison has been calling for starting at least seven years ago will be permitted by U.S. regulators.
In 2000, those regulators blocked a proposed merger of CN and what was then Burlington Northern Santa Fe Co., later bought by Warren Buffett.
U.S. regulators have since stiffened restrictions against rail mergers, in part under pressure from a trucking industry that nearly put railroading out of business in the 20th century, but in recent decades has been losing business to ever more sophisticated inter-modal services offered by the railways.
At best, skeptics say, Harrison has put eventual rail mergers on the political agenda. But “this merger is unlikely given the position the U.S. Surface Transportation Board (STB) has taken in the past,” rail analyst Ben Hartford of Milwaukee told Bloomberg News this week.
Shippers are bound to see things differently, though, welcoming better and more varied service from merged, streamlined railways better able to provide competition for a trucking industry on which many feel over-reliant.
North Americans also have a tough decision to make about the transport of heavy oil by rail or pipeline. Less but better-maintained track and the elimination of switching might tip the public-opinion balance in favour of rail.
There is little overlap in the networks of CSX and CN. Harrison, a U.S. native and veteran railroader, is more than a little familiar with U.S. rail politics. For help on that score, he counts among CP’s directors Linda Morgan, who served on the STB for nine years.
Harrison might not be pushing on an open door, but most analysts expect that in time the North American rail industry will be consolidated into just two mega-railroads. The CP helmsman admits he may be a little ahead of an industry that is still wary, for anti-trust reasons, of pursuing merger opportunities.
But it’s going to happen. “It makes too much sense” not to, Harrison insists.
15. Record revenues at Canadian railways
a. CN Rail profit rises to $853-million in third quarter on record revenues
Ross Marowits, Canadian Press, October 21, 2014
MONTREAL – Canadian National Railway says its net income surged 21% to $853 million in the third quarter as revenues reached a record $3.12 billion. Excluding one-time items, the earnings for the period ended Sept. 30 amounted to $1.04 per share, a penny shy of expectations, and compared with net income of $705 million or 86 cents last year, which included a $19-million income tax expense.
Revenues grew 16% from $2.7 billion as carloadings increased 11% to 1.47 million and revenue-ton miles were up 13%. “Clearly we are growing much faster than the economy, which is our game plan,” CEO Claude Mongeau said Tuesday during a conference call.
CN’s operating ratio, a measure of efficiency, improved one percentage point to an all-time low of 58.8%. The Montreal-based railway also said its board of directors authorized the repurchase over the next year of up to 28 million common shares, representing 3.4% of its outstanding shares. CN repurchased 22.3 million common shares last year, returning $1.4 billion to shareholders.
The railway saw its volume reached a record high in the quarter on robust grain shipments and strong growth in energy markets. Canadian grain shipments increased 50%.
It maintained its full-year outlook to deliver solid double-digit EPS growth over $3.06 in adjusted diluted EPS earned last year and to generate free cash flow in the range of $1.8 billion to $2 billion, excluding major asset sales.
Analyst foresee strong growth prospects for CN in crude oil and frac sand, along with international intermodal from Prince Rupert, B.C. Fadi Chamoun of BMO Capital Markets expects CN’s crude oil volumes will increase to 200,000 carloads a year by 2015 from about 130,000 currently, and could reach 300,000 over the next two years. Shipments of frac sand used to extract underground oil and gas in the process known as fracking are forecast to grow by 25% annually over the next several years.
CN, with about 24,000 employees, transports some $250 billion worth of good annually across its rail network spanning Canada and mid-America.
b. Canadian Pacific Railway profit, revenue rises, but falls short of estimates
Canadian Press, October 21, 2014
CALGARY — Canadian Pacific Railway says it had $400 million of net income or $2.31 per diluted share in the third quarter — up from last year but short of estimates. Its revenue for the three months ended Sept. 30 totalled $1.67 billion, also up from a year earlier but short of estimates.
Despite missing expectations, Canadian Pacific showed substantial improvements over its results in the third quarter of 2013. Net income was up $76 million or 23% from $324 million, net income per diluted share was up 47 cents or 26% from $1.84 and revenue was up $136 million or 8.7% from $1.53 billion a year earlier.
The company’s operating ratio — an important measure for the rail industry — also improved to a record low 62.8%, a decline of 3.1 percentage points.
Canadian Pacific confirmed Monday that talks with U.S. peer CSX Corp., which had been in the news for about a week, ended without a deal, putting a damper on the Calgary-based company’s hopes for an expanded North American rail network.
CP said that no further talks are planned with CSX of Jacksonville, Fla. It did not say specifically why the “exploratory conversations” ceased or when they ended, but noted that regulatory concerns generally appeared to be a “major deterrent” to major railways joining forces.
CSX declined to comment on Monday. A report in the Wall Street Journal more than a week ago said CSX had rebuffed CP’s overtures. CP’s network stretches from Vancouver to Montreal and the populous U.S. Northeast. Canadian Pacific also has an extensive network in the U.S. Midwest, including at the major rail hub through Chicago.
CSX’s system also reaches Chicago and traverses much of the eastern United States from Florida to the U.S. border with Ontario.
From the Globe and Mail, Oct 22, 2014: CP’s third-quarter results underscored the rise in rail freight. The company said revenue from crude oil shipments rose by 74 per cent in the quarter, year over year, while grain revenue rose by almost 20 per cent. The company reported a 26-per-cent rise in profit to $400-million and total revenue rose 9 per cent to $1.67billion.
16. CP Rail CEO says rail industry needs mergers to address gridlock threat
By Eric Atkins, Globe and Mail, October 21, 2014
The chief executive of Canadian Pacific Railway Ltd. says the industry needs mergers to address the growing threat of rail gridlock, and he wouldn’t rule out CP as a takeover candidate. “I think there might be a lot of companies out there that might want some of our talent,” CP’s CEO Hunter Harrison said on a conference call Tuesday. When asked if the 133-year old railway would be a seller or buyer, he replied: “Both work.”
Mr. Harrison’s comments came a day after CP said it had dropped merger talks with Jacksonville, Fla.,-based CSX Corp. That tie up would have given Calgary-based CP badly needed rail lines to major oil refineries in the United States. Mr. Harrison said there were “three or four” meetings with CSX executives at which a merger or takeover was talked about, but no offer was made after it became clear CSX was an unwilling partner. He declined to speak for CSX, and said he wanted no part of a hostile takeover, given the tensions and clashes that involves. CSX had no comment.
During the call, Mr. Harrison said the North American rail network is headed for gridlock as freight volumes soar at a time of increasing regulation and public resistance to new rail infrastructure. Railway mergers would increase network fluidity and ease bottlenecks in major rail hubs, he said. “There’s a desire to put more tonnage on the rail. At the same time, governments are saying that we want to slow you down because of [hazardous materials] and crude. There’s no more infrastructure [being built]. No one wants the railroad to run through their backyard, or their city.”
“I’ve been doing this 50 years and I don’t know how you do that,” Mr. Harrison said
He said there were no more talks planned with CSX, but he did not rule out a later deal, with CSX or another carrier. Indeed, he said the industry is slowly realizing mergers are required if railway congestion is to be overcome. “We tried and there were some issues where we didn’t see the world the same,” Mr. Harrison said, adding that he sees other railways, such as Norfolk Southern, as a good potential partner. However he threw doubt on a possible deal with Kansas City Southern and the two “western big boys;” Burlington Northern Santa Fe and Union Pacific.
Mr. Harrison said that while he has not spoken to the heads of other railways, “my sense is that some of them clearly share the view that this agenda is the right one.”
His call got some backing from Claude Mongeau, the CEO of Canadian National Railway Co. During a conference call on Tuesday to discuss CN’s quarterly earnings, Mr. Mongeau said if there were mergers, they would likely happen in the U.S., with that country going to four major railways to two. “The key word is hypothetical,” Mr. Mongeau added.
CP executives have repeatedly pointed to the congested hub at Chicago as the main reason mergers are needed. The Midwestern city’s rail yards handle a quarter of the U.S. freight carried by six railways. Mr. Harrison and other railways’ leaders have complained that poor communication among the various stakeholders compounds inefficiencies and slows the movement of cargo through Chicago. CN found a way around Chicago in 2007 by purchasing the Elgin, Joliet and Eastern Railway, a suburban line that skirts the congestion.
Clogged rail lines and poor service have gripped the industry in the past few years. Rising crop yields and oil production have sent freight volumes soaring. Both CP and CN are under Canadian government orders to move a minimum amount of grain each week in Western Canada. At the same time, the fatal derailment in Lac-Mégantic, Que., last year pushed regulators to restrict speeds on trains carrying hazardous cargo.
The U.S regulator, the Surface Transportation Board (STB), is believed to pose a major hurdle to any consolidation among the six major railways. More than a decade ago, the regulator blocked a merger between CN and Burlington Northern. The STB also toughened the standards it uses to judge proposed mergers, requiring them to enhance competition and not simply preserve it.
CP’s third-quarter results underscored the rise in rail freight. The company said revenue from crude oil shipments rose by 74 per cent in the quarter, year over year, while grain revenue rose by almost 20 per cent. The company reported a 26-per-cent rise in profit to $400-million and total revenue rose nine per cent to $1.67-billion.
CN reported a 21 per cent jump in third-quarter profit to $853-million. Revenue climbed 16 per cent to a record $3.1-billion.
17. Facing lawsuit, California oil train terminal to shut down
By Curtis Tate and Tony Bizjak, McClatchy Washington Bureau, in The Columbian, Oct 23, 2014
WASHINGTON — A legal victory in California this week over crude oil operations could have a spillover effect, emboldening critics of crude-by-rail shipments to press their concerns in other jurisdictions.
Earthjustice, a San Francisco-based environmental group, won its battle to halt crude oil train operations in the state as InterState Oil Co., a Sacramento fuel distributor, agreed to stop unloading train shipments of crude oil next month at the former McClellan Air Force Base. Sacramento County’s top air quality official said his agency mistakenly skirted the state’s environmental rules by issuing a permit for the operation.
Earthjustice contended the Sacramento air quality district should not have granted InterState a permit to transfer crude oil from trains to tanker trucks bound for Bay Area oil refineries without a full environmental impact review.
The court reversal in California could bolster efforts by environmental groups to slow or stop crude-by-rail projects elsewhere, particularly in Washington state. A proposed terminal in Vancouver would transfer oil from trains to tanker ships that could supply California refineries.
Patti Goldman, a managing attorney in the Seattle office of Earthjustice, said the decision sounded “a wake-up call” for permitting authorities to consider community input. “We have been seeing local authorities blindly approve crude-by-rail projects without being open with the public and without considering the full effects,” she said.
The McClellan operation is relatively small compared with crude oil train terminals proposed elsewhere in California. One, in southwestern Kern County in the southern Central Valley, will be able to receive one 100-car train full of crude oil each day. The McClellan facility was permitted to unload a similar amount once every two weeks.
The Kern facility, which could begin operating this month, was already zoned for transfer operations, and required no new environmental reviews or public comments.
In September, the Kern County Board of Supervisors approved a separate facility at a Bakersfield refinery that could receive two trains a day. Earthjustice sued the board earlier this month, contending that Kern’s environmental review was inadequate.
Environmental groups lost a legal fight in the Bay Area city of Richmond, where a terminal operated by pipeline company Kinder Morgan, the largest midstream – the shipping and storage of oil – energy company, unloads crude oil from trains to trucks that take it to local refineries. A judge rejected the lawsuit in September, ruling that the six-month statute of limitations had expired.
A McClatchy story in March revealed the existence of the McClellan operation to the surprise of local officials. State emergency officials and fire departments have said they don’t feel prepared to handle a major explosion or spill from a derailment.
Some of the crude unloaded at McClellan may have originated in North Dakota’s Bakken region. That type of oil, extracted through hydraulic fracturing, has been under increased scrutiny since a July 2013 derailment killed 47 people in Lac-Megantic, Quebec.
That accident and a series of fiery derailments since then have prompted the rail industry and its federal regulators to take steps to improve track conditions and operating practices. A stronger construction standard for tank cars used to ship flammable liquids is being finalized by the U.S. Department of Transportation.
The California Energy Commission projects that the state could receive as much as a quarter of its petroleum supply by rail in the next two years.
Earlier this month, BNSF Railway and Union Pacific sued California over a state law that requires railroads to develop oil spill prevention and response plans. The railroads argue that only the federal government has the power to regulate them.
18. Calif. officials see risks for residents as oil trains roll in
By Tony Bizjak, Sacramento Bee, Oct 23, 2014
Running counter to the conclusions of other recent reports, a new analysis by San Luis Obispo County officials says the influx of oil trains to California could put urban residents in danger.
The report examined Phillips 66’s plan to ship crude via 80-car trains five days a week to a Santa Maria refinery and concluded that there is a risk of spills and fires. “Up to seven crude oil trains a day could travel on the stretch of track between Roseville and Sacramento,” the report says. “The cumulative risk would be significant.”
Two similar plans — one by Valero Refining in Benicia and another by Alon USA in Bakersfield — have come under fire from environmental groups and state officials alike, who say their conclusions that the safety risks are minimal and don’t need mitigation are based on inadequate reviews.
“We have been trying to keep an eye on what is going on around the state, to understand comments coming in on the Valero project and others, and to take a holistic approach,” said San Luis Obispo County project manager Murry Wilson.
The report used a qualitative risk assessment and indicated that in the case of an explosive rail fire, residents could be injured or killed up to a third of a mile away.
Despite these conclusions, officials’ hands are largely tied by the precedence of federal law, which bars municipalities and states from establishing railroad safety rules. But the report suggests that one loophole could be the county’s permitting authority over the company’s planned refinery expansion, which officials could possibly use to compel the use of safer tanker cars and improved train-control technology.
“I can see there being a [legal] fight on that,” said attorney Mike Conneran of the Hanson Bridgett law firm in San Francisco. “It is pretty close to the line in telling the railroad what to do. On the other hand, the county is putting the obligation on the refinery, not the railroad. I think the real question may come down to whether such a mitigation measure is feasible if the refinery can’t force the railroad to comply”
19. Railroads grudgingly disclose crude, grain delays
By Blake Sobczak, E&E reporter, Energy Wire, Oct 24, 2014
North America’s biggest railroads have opened up about the service problems plaguing shipments of crude oil, grains and other commodities.
Freight giants, including BNSF Railway Co. and Canadian Pacific Railway Ltd., aren’t pleased about the delays, based on filings with the U.S. Surface Transportation Board on Wednesday. But they also aren’t pleased with STB’s new requirements for reporting a range of data that were never previously shared publicly.
Canadian Pacific’s president and chief operating officer, Keith Creel, urged the three-member board to “step back” and consult with railroads before implementing an Oct. 8 order that requires weekly updates on the number and type of delayed rail cars, the number of trains held up for more than six hours, average systemwide train speeds and seven other metrics (EnergyWire, Oct. 9).
“Much of the data requested in the Order is not helpful to understanding or improving levels of service,” Creel said in the letter, dated Oct. 22.
The Association of American Railroads, which represents freight giants including BNSF, Canadian Pacific, CSX Corp. and others, was similarly concerned about the scope of STB’s October ruling.
“A constructive public discourse regarding service data reporting … could have led to a more productive and less burdensome collection of information that would have satisfied the Board’s regulatory objectives,” the trade group said in its letter, posted to the STB’s website Wednesday evening.
An STB spokesman declined to comment on railroads’ criticisms, noting that the case investigating rail service issues is ongoing. The board, part of the Department of Transportation, held a public hearing in Washington, D.C., in April to hear from a range of industries and public figures worried about weekslong delays for rail shipments in states such as North Dakota.
In the wake of the hearing, the STB made Canadian Pacific and BNSF file weekly updates on their handling of agricultural shipments throughout their Western networks.
By late summer, many farmers and grain elevators in North Dakota were still waiting to get their 2013 crops to market as railroads grappled with unprecedented crude oil traffic and the aftereffects of harsh winter weather. STB convened a field hearing in Fargo, N.D., where regulators heard complaints that crude oil shipments from the Bakken Shale play were getting priority over wheat, soybeans and other agricultural products.
Sen. Heidi Heitkamp (D-N.D.) has pressed the board to require more transparency from railroads. She welcomed the first filings in a statement yesterday.
“As I’ve heard for months from North Dakota’s farmers, elevators, and other rail customers — including at the Surface Transportation Board field hearing in Fargo last month — we need as much information as possible from railroads so folks can make informed decisions,” Heitkamp said. “These reports are important for better understanding what’s responsible for the number of past-due cars in North Dakota, and as we continue harvest, I will keep working with all sides to help make sure all shippers have the service they need.”
BNSF and Canadian Pacific have denied favoring oil over grains but had also never disclosed crude-specific performance metrics until Wednesday’s filings.
From Oct. 12 until last Saturday, BNSF’s crude oil unit trains and grain trains moved at the same speed on average: 19.5 mph, according to STB filings. For Canadian Pacific, large crude shipments moved slightly faster than their agricultural counterparts: 22 mph, compared to 21.1 mph for the week ended Oct. 18.
Canadian Pacific reported a total of 56 tank cars loaded with crude that hadn’t moved in more than two days throughout its U.S. network. By contrast, 267 grain cars hadn’t moved in more than 48 hours during the same period.
For BNSF, the differences were similarly stark: 279 crude-filled tank cars in limbo, versus 3,710 loaded grain cars.
But are such figures evidence of preferential treatment?
“It looks like there’s an awful lot of grain cars that are sitting, especially when the movements should be very brisk for harvest time,” said Dan Wogsland, executive director of the North Dakota Grain Growers Association. “We’ll understand better as we go forward as to whether or not oil and other movements are getting better treatment.”
Wogsland has pushed railroads to give farmers a “fair share” of limited rail capacity. He said rail traffic has improved in recent weeks but said “we have to continue to be vigilant to make sure that the service needs are covered, and I think that one of the ways we can be vigilant is to continue to review these [reports] and observe a trend.”
BNSF cautioned that it had a limited amount of time to assemble the status update and noted that some of the data STB requested aren’t normally collected to share with customers.
“This initial and subsequent reports should be relied on only as a tool for distilling BNSF network trends over time as opposed to drawing conclusions based on absolute values,” the company wrote in its filing with STB.
BNSF went on to add that a car movement delay of more than 48 hours, or even more than 120 hours, “does not necessarily mean that the car will not be delivered in a timely manner.”
Stu Letcher, executive vice president of the North Dakota Grain Dealers Association, which represents 95 percent of grain elevator facilities in the state, was hesitant to draw conclusions from the first round of reports but welcomed their release as a “positive development.”
“With the status reports that [railroads] were doing for the grain metrics, you could see how they progressed over the course of the summer,” he said. “It would have been nice to be able to compare that to the oil. I think what we’re going to have to do is look at another report or two and get a feel for what the trend is.”
Members of North Dakota’s agricultural industry aren’t the only ones keeping a close eye on the new weekly filings. Genscape Inc., a Texas-based research and consulting firm that has recently started tracking oil train movements, said it will be monitoring the reports for signs of possible crude oil supply disruptions. U.S. refiners have increasingly relied on railed-in Bakken crude as an alternative to pricier foreign imports.
Bridget Hunsucker, a senior editor at Genscape who assembles the group’s PetroRail report, said crude-by-rail delays have “been pretty consistent over the past month or so,” particularly for East Coast deliveries.
Whereas a typical crude oil train might make two round trips per month from the Bakken Shale play to Pennsylvania or New York, lately trains have averaged about 1½ trips per month, she said.
Hunsucker added that refiners appear to have prepared for the delays. “They are looking usually way ahead in the future — I don’t think it has affected refinery runs,” she said.
Despite rumors of crude-by-rail-related refinery shutdowns in late August and September, she said, “everyone was pretty comfortable with the [oil] supply that they had.”
As for the STB filings?
“This is really cool information that I don’t think we’ve really seen before,” Hunsucker said.
20. TSB finds Canadian railways failing to properly report accidents
Eric Atkins, The Globe and Mail, Oct. 27 2014
Railways in Canada failed to properly report 254 accidents over a seven-year period, the Transportation Safety Board of Canada says. The investigator said on Monday a review of rail occurrences at three railways, including the company involved in the Lac-Mégantic disaster of 2013, found carriers failed to follow mandatory reporting requirements by notifying the watchdog of incidents late or not at all.
The TSB said the majority of the accidents in question at Montreal, Maine & Atlantic, Canadian National Railway Co. and Canadian Pacific Railway Ltd. were minor, and occurred in railyards with no injuries. But the regulator said it will consider “enforcement action” to address non-compliance.
According to TSB regulations, railways and their employees must report incidents that include collisions or derailments; a risk of collision between rail cars and/or locomotives; switches left in improper positions; accidental release of dangerous goods or radiation; a train failing to obey a stop signal.
Governments, railways and regulators have faced new scrutiny in the wake of the July 6, 2013, derailment and explosion of an unattended MM&A oil train. The explosions killed 47 people and gutted the Quebec town of Lac-Mégantic in what is the worst railway tragedy in Canada’s modern history. The small U.S.-owned railway failed to report 22 incidents between 2010 and 2013, including three derailments involving dangerous goods.
The TSB said most of the incidents it has now added to MM&A’s database of occurrences involved non-maintrack derailments “with limited damage to track or equipment.” MM&A went bankrupt after the Lac-Mégantic tragedy and no longer operates.
Most of the 100 unreported incidents at CP involved railyard derailments and collisions, including 31 cases where one or two rail cars derailed in yards or secondary lines. The TSB found 15 unreported cases where dangerous goods leaked from rail equipment and one involving a fire or explosion.
At CN, the watchdog found 132 occurrences, most of which were minor and did not happen on the main rail lines. Between 2007 and 2013, the TSB said CN did not properly report nine mainline derailments of one or two rail cars, and 111 minor derailments on non-mainline tracks.
21. Railway’s price hike takes aim at older crude-bearing cars
By Blake Sobczak, E&E reporter, Energy Wire, Oct 28, 2014
It’s no mystery among oil producers that their go-to tank car for moving crude to market — the model DOT-111 — is destined for extinction under proposed federal safety regulations. But the older tank car keeps getting costlier with age, a point BNSF Railway Co. drove home last week with the announcement of a $1,000 price hike on using DOT-111s built before tougher industry standards took effect in 2011.
The rate change, first reported by Bloomberg on Friday, was confirmed by BNSF spokesman Mike Trevino yesterday and is set to begin in 2015.
The price hike will affect oil companies in North Dakota’s Bakken Shale play, where about 600,000 barrels of crude is moved daily by rail. BNSF is one of only two major freight railroads with access to the Bakken Shale; the other railroad, Canadian Pacific, introduced a similar surcharge on using older-model DOT-111 cars earlier this year.
Kari Cutting, vice president of the North Dakota Petroleum Council, pointed out that older-model DOT-111 cars still meet requirements under the federal Pipeline and Hazardous Materials Safety Administration. PHMSA is weighing a proposal to phase out the cars from most crude oil and ethanol service by 2017. “Singling out crude oil from other flammable liquids to be penalized for movements in cars that still meet the current PHMSA code of federal regulations is a step backwards for all stakeholders,” Cutting said in a statement yesterday.
That hasn’t prevented railroads from steering shippers away from using DOT-111s whenever possible. Railroads, which rarely own the cars they ship, are free to adjust prices but are legally bound to accept tank cars that conform to PHMSA regulations.
Trevino of BNSF did not respond to questions about what motivated the rate change, but rival Canadian National Railway Co. has said it adjusted its freight rates at least in part because of safety concerns. “For CN, tank car design is one of the most important systemic issues arising from the Lac-Mégantic rail accident,” said CN spokesman Mark Hallman, referring to a crude oil train derailment and explosion that killed 47 people last year in a small Quebec town.
Hallman would not comment on the specifics of the company’s pricing schedules, noting that “CN’s rates with customers are confidential.”
In BNSF’s case, a $1,000 shift could wind up costing North Dakota oil drillers at least 80 cents per barrel for shipping crude to East Coast refineries, according to Sandy Fielden, director of energy analytics at the research and consulting firm RBN Energy. Fielden based his rough estimate on the assumptions that a tank car can hold 660 barrels of oil, a “unit train” of crude can make roughly two round trips from North Dakota to the East Coast per month, and BNSF’s price adjustment would be tacked onto lease costs that are tabulated monthly.
Shippers using CPC-1232 tank cars built after 2011 can avoid extra cost altogether. But order backlogs for the newer cars have stretched into the tens of thousands as shippers scramble to stay ahead of federal regulations and keep up with Bakken crude production growth. “There aren’t enough new cars yet to take all of that burden, so somebody’s going to have to use the old ones,” Fielden said.
For “secondary players” that can’t afford new cars, “it’s kind of like when you have a bad credit rating: At the bank, they stick you with all these charges,” he said. “You just have to keep paying more.”
Fielden added that crude-by-rail shippers should be most concerned about price differentials among domestic U.S. crude varieties and foreign benchmarks, which ultimately determine whether paying a premium for rail transport is a worthwhile option. He said a dollar or so tacked onto the per-barrel cost may make rail “less attractive,” but it’s hardly a “game-changer” for producers that must take to the tracks in the absence of pipelines or other alternatives.
“If you have a barrel of crude and you just dug it out of the ground, you’re going to get it to market in whatever way you can.”
22. Ottawa to issue hand brake requirements for unattended trains
By Kim Mackrael, The Globe and Mail , Oct. 29 2014
The federal government will issue detailed requirements specifying the number of hand brakes that must be set on unattended trains in its latest response to last year’s devastating accident in Lac-Mégantic, The Globe and Mail has learned.
Ottawa will also conduct a review of shortline railways’ employee training plans, after the Transportation Safety Board uncovered glaring gaps in the way Montreal, Maine & Atlantic staff were trained and tested, and take additional steps to deal with crude oil testing and classification. Transport Minister Lisa Raitt will announce the changes in Ottawa on Wednesday.
The changes come more than a year after a runaway oil train derailed and exploded in Lac-Mégantic, Que., killing 47 people and levelling dozens of downtown buildings. The train was carrying 72 tank cars of crude oil from the Bakken region in North Dakota, which has since been identified as typically more volatile and prone to exploding than traditional crude.
Wednesday’s announcement represents the latest in a series of regulatory shifts brought on by the worst rail disaster in modern Canadian history. A final report on the accident issued by the safety board in August found that multiple factors contributed to the crash, including a failure to apply enough hand brakes, a weak safety culture at the railway and poor federal oversight. The report also included two new recommendations calling for additional measures to prevent runaway trains and better government oversight of railway companies’ safety programs.
Sources familiar with the federal government’s plans said the changes to be announced Wednesday are a response to the latest TSB report and will include detailed, prescriptive requirements for how many hand brakes must be set on a train, measures to better review railway-training programs and additional steps to address crude-oil testing and classification. The sources spoke on condition of anonymity because the government had not yet issued an official response to the latest safety board recommendations.
The train that derailed in Lac-Mégantic was left unattended on a downward slope and its brakes were not properly set, the safety board investigation found. The government is expected to issue an emergency directive laying out how many brakes must be applied depending on the slope and the weight of the train, a source said. Current federal rules call for a “sufficient” number of hand brakes to be applied but do not give a specific number.
The emergency directive will explicitly require staff to disengage all of the train’s air brakes before conducting a “push-pull” test, designed to ensure the train won’t roll away unintentionally, according to the source. Depending on the location where the train is parked, the directive is also expected to require railways to use one or more physical defences, such as wheel chocks, to help prevent it from moving.
In addition, Ms. Raitt will initiate a new process for reviewing shortline railways’ employee training plans, sources said. That change responds to a safety advisory letter issued by the safety board in August, which raised doubts about the quality of training and testing procedures at smaller railways, including MM&A.
The government is also expected to address the classification of crude oil, sources said. A second safety board letter, also issued in August, said new federal requirements issued after the Lac-Mégantic disaster failed to explicitly deal with the “variability” of crude oil products, including the fact that different products may be blended together before they are shipped.
Ottawa is also considering additional measures to improve Transport Canada’s monitoring of safety management systems, sources said, but it was not immediately clear whether changes to the system would be announced by Ms. Raitt on Wednesday. As part of deregulation of the railway sector, railways were tasked with designing many safety and operating procedures, with approval by Transport Canada. In its final report in August, the safety board accused Transport Canada of failing to properly oversee the safety regime it designed.
Earlier this year, Transport Canada said it would require emergency response assistance plans for crude oil shipments, tougher standards for DOT-111 tank cars often used to haul crude oil, and risk assessments for key railway routes used to carry dangerous goods. All three changes responded to TSB recommendations that were issued in the months after the Lac-Mégantic crash and before the final TSB report was completed.
23. New rail safety rules announced following Mégantic report
Richard Valdmanis, Reuters, in Globe and Mail, Oct. 29 2014
OTTAWA–Canada will require railways to secure unattended trains with a minimum number of handbrakes and other physical defenses to prevent runaways, Canada’s transport ministry said on Wednesday in its latest response to last year’s deadly crash in Quebec. Transport Canada will also tighten enforcement of railway labeling of hazardous materials like volatile crude, and add staff to perform an “audit blitz”, Transport Minister Lisa Raitt said.
The changes are the latest in a slew of regulatory moves in North America since a train carrying crude oil crashed in Lac-Megantic, Quebec, last year, killing 47 people and highlighting the dangers from a surge in oil transport by rail. The Canadian Transportation Safety Board issued its final report on the crash in August, finding shortfalls in railway safety culture and federal oversight.
Canada has already moved to toughen tank car safety rules, and require railways to do risk assessments, produce emergency response plans, and improve security of parked trains.
As part of Wednesday’s new rules, Transport Canada said it is researching crude oil properties to ensure they are properly classified and will launch a “targeted inspection campaign” on railways to ensure their labeling matches. “Transport Canada will be recruiting engineering and scientific experts to support its oversight,” it said, and will boost the frequency of audits of railway safety procedures and systems.
Transport regulators will also require certain railways, including short lines, to submit employee training plans for review to identify gaps.