Oil leads to boom in rail tank-car business
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OTTAWA - American officials say there are about 10,000 new tank cars for transporting crude oil on order in Canada and the northeastern United States "due to the lack of pipeline infrastructure."
But a report last year by the National Transportation Safety Board in Washington found that older, unsafe tank cars make up about 70 per cent of the North American fleet — and that those cars will be on the rails for decades.
The horrific derailment, explosion and fire in Lac-Megantic, Que. — which officials now believed may have claimed the lives of as many as 60 people — has focused new attention on the booming oil-by-rail phenomenon.
Almost two years ago, tank-car makers voluntarily adopted tougher standards for construction, including thicker tank walls, safer valves and shields to prevent punctures.
But American regulators have "concluded that the safety benefits of new specification tank cars will not be realized while the current fleet of DOT-111 tank cars remains in ... service," according to a March 2012 report by the National Transportation Safety Board.
Tank cars have a service life between 30 and 40 years and the industry is resisting the billion-dollar-plus price tag to retrofit older DOT-111 cars.
And getting the new stock can be a slow process.
Calgary-based Cenovus Energy, for instance, reports it will take more than 18 months to get some newly ordered tank cars for bitumen, which will include a heating coil to keep the heavy crude pliable.
The U.S. Railway Supply Institute, an industry lobby group, says 17,666 tank cars, of all types, were delivered in 2012 against almost 36,000 orders — leaving a backlog of more than 48,000 on order.
Tank cars are generally owned or leased by the supplier, not the railway companies that move them. The specialty cars, which can cost more than $100,000 each, are not considered a wise investment by rail companies who want versatility in their rolling stock.
That suggests the cost of upgrading the fleet would fall on the petroleum industry, not cash-strapped rail carriers.
"There is a significant backlog, and demand for tank cars is at an all-time high," spokesman Bruce Winslow of the Union Tank Car Company in Chicago said in an interview.
The U.S. report noted that rail shipments of crude oil from the Bakken shale reserve in North Dakota alone — the source of the Lac-Megantic cargo — had climbed to 13,000 carloads from 500 three years earlier, and are estimated to hit 70,000 carloads annually.
There are only a handful of rail tank car manufacturers in North America. Winslow wouldn't comment on whether any Union Tank built cars were involved in Lac-Megantic.
But Canadian investigators say the 72 oil-filled cars under the care of the Montreal, Maine & Atlantic railway company were all DOT-111s, a common model that has come under intense criticism for two decades.
As a result of a 1999 accident in Cornwall, Ont., the Transportation Safety Board of Canada concluded that "In general, Class 111A tank cars do not have sufficient protection against punctures, even in a low-speed impact, due to the thinness of the tank shell and the absence of a head shield."
In fact, a 1996 report recommended Transport Canada "take immediate action to further reduce the potential for the accidental release of the most toxic and volatile dangerous goods transported in Class 111A tank cars ...."
"To date, there have been no changes in car design to improve the puncture resistance of Class 111A tank cars with a gross weight of 263,000 pounds ... even though they represent the majority of newly constructed and in-service cars," the board reported in May 2005.
Keith Stewart of Greenpeace Canada says the Lac-Megantic crash and some of the older pipeline spills show "a prioritizing of getting the oil out as quickly as possible over public safety and environmental safety."
The argument of necessity for using the older, unsafe tank cars doesn't wash, said Stewart.
"There is no constitutional right to move oil by any means necessary," he said in an interview.
"That's a decision that Canadians get to make about what's safe enough to go through the heart of our communities; not the oil companies and not the rail companies."
"If that means you're going to slow down that oil-by-rail revolution, well then it should be slowed down."