Railcars in North Dakota crude train crash older, less safe -investigators

* Railcars don't meet industry's latest safety standards

* Crude loaded in North Dakota, bound for Missouri

By Alicia Underlee Nelson

FARGO, N.D., Dec 31 (Reuters) - The railcars carrying crude oil that crashed into a derailed grain train in North Dakota on Monday were all older types that do not meet the latest industry safety standards, a member of the National Transportation Safety Board said on Tuesday.

Robert Sumwalt, who is leading the NTSB's investigation into the collision of two BNSF Railway Co trains, said the cylindrical tank cars on the oil train were known as DOT-111s, which are widely used to move crude and ethanol.

In October 2011, the American Association of Railroads, the rail industry's trade group, adopted new standards requiring tank cars manufactured after that date to have thicker hulls and reinforced valves to better protect against punctures and leaks in derailments. U.S. regulators also are considering tougher safety standards.

"Our preliminary information is that none of the cars were of the newer design," Sumwalt said at a news conference in Fargo, North Dakota, east of the crash site.

Those details go to the heart of growing debate about stronger safety measures as the oil-by-rail movement grows in tandem with the U.S. shale oil boom.

Such measures could include tighter rules for moving highly flammable types of crude, such as the light-sweet variety produced in the Bakken shale play, or costly retrofits of older tank railcars.

Monday's crash of the 106-car eastbound BNSF crude train into a derailed westbound BNSF grain train set off explosions near a small town west of Fargo, North Dakota, and a fire that still burned more than 24 hours later.

No injuries were reported, but the crash was among several explosive derailments in 2013 involving trains hauling oil. The worst accident by far happened in July in a small Quebec town when a runaway train derailed and exploded, killing 47 people.

OLDER RAILCARS

The NTSB has said at least 69 percent of railcars in use were built before 2011. The rail industry also has said it could cost $1 billion to retrofit all those railcars to meet the post-October 2011 standard.

BNSF Chief Executive Officer Matt Rose, who is stepping down as CEO on Wednesday but will remain chairman, told Reuters in an interview in November that the company supports phasing out those older cars over seven years, which allows companies enough time to build replacements.

BNSF is owned by Warren Buffett's Berkshire Hathaway Inc .

1300-MILE TRIP

Sumwalt said the crude involved in the crash was loaded onto the train in Fryburg, North Dakota, and was headed nearly 1,300 miles (2,092 km) to Hayti, Missouri.

Sources familiar with the loading operations told Reuters on Tuesday that Houston-based logistics company Great Northern Midstream loaded the crude at Fryburg, and it was to be unloaded at Marquis Energy's storage terminal and barge loading facility at Hayti, along the Mississippi River.

Great Northern Midstream referred all questions to the NTSB, and Marquis Energy did not return a call seeking comment. Both companies are privately held.

Marquis Energy's Hayti operation receives crude via rail, then transports it via barge to refiners along the river and the U.S. Gulf Coast.

The U.S. East and West coasts are the major destinations for railed Bakken crude, as it is cheaper than imports and rail is the main transport choice because pipeline infrastructure is lacking.

The U.S. Gulf Coast market has less demand for Bakken crude because growing pipeline infrastructure in Texas increasingly moves burgeoning Texas output - also largely light sweet crudes that are cheaper than imports - to Gulf Coast refineries.