Rail industry tussles over U.S. tank car regulations

Reuters

By Edward McAllister and Selam Gebrekidan

NEW YORK, Nov 21 (Reuters) - Disagreements over new safetystandards for U.S. rail cars could delay design changes astrains haul more flammable liquids like crude oil across thecountry.

A series of accidents on trains transporting oil in NorthAmerica prompted the Association of American Railroads last weekto propose strict guidelines for new cars and the phasing out ofold ones.

But opposition is emerging to the AAR proposals, making anindustry consensus that has sped up recent changes seemunlikely. Without its own agreed standards, the industry wouldhave to wait on regulations from the U.S. Department ofTransport (DOT), which could take another year at least.

"I'm not optimistic that we will get consensus, but wemight," said AAR president Edward Hamberger on the sidelines ofa rail conference in New York on Thursday.

The cost of an overhaul is the main reason behind thedifferences. Railroads own very few tank cars but often bear thecost of accidents. But investing in new cars or retrofittingolder ones is likely to fall on the shoulders of shippers ortank car owners.

The Railway Supply Institute and the American PetroleumInstitute, which represent tank car owners, manufacturers andshippers, are offering less stringent changes that they saywould be sufficient to meet the challenges of a growingcrude-by-rail trade.

The AAR's changes, including pressure release valves,thermal insulation and steel jackets, could cost from $30,000 to$40,000 per car, said Tom Simpson, president of the RailwaySupply Institute, at the rail conference on Thursday.

Steel jackets represent one of the most expensivealterations, he said, adding that he supported cars with andwithout protective jackets.

The RSI, API and a number of other groups are expected tofile their own counter-proposals to the Department ofTransportation's Pipeline and Hazardous Materials SafetyAdministration (PHMSA) by a Dec. 5 deadline.

PHMSA has so far received nearly 80 comments on itsSeptember "Advance Notice of Proposed Rulemaking" on the safetyof rail tank cars. The government is not expected to makerecommendations until the spring of 2014.

RETROFIT OR RETIRE

About 92,000 tank cars are moving flammable liquids on U.S.railroads, with about 78,000 of those requiring retrofit orphase out, the AAR said in its filing to PHMSA.

RSI estimates, however, show only 68,000 older cars that donot meet standards are transporting crude oil and ethanol today.

Safety of crude-carrying trains has become a major talkingpoint in the rail industry since one derailed in the Quebec townof Lac-Megantic this summer, killing 47 people.

Earlier this month, another train transporting crudederailed in western Alabama, causing a number of cars to explodeand spill oil into a nearby wetland area.

Now, with a backlog of train car orders, manufacturers arestruggling to keep up. It could take ten years to have all thecars changed over, Simpson said.

Others, like Hunter Harrison, chief executive of CanadianPacific Railway, are more optimistic.

"If all of us in the industry that have the technicalexpertise and shop capacity and knowledge and labor at ourdisposal, if we allocated those resources to assist the typicalcar builders those that would do most of the conversions, wecould fix the situation much quicker," Harrison said.

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