* CEO sees no impact on crude-by-rail from regulations
* Industry awaiting word from regulators on heightened
By Kristen Hays
HOUSTON, Jan 16 Potentially tougher safety
regulations for tank railcars that haul crude could be costly
but not dent growing volumes in transport giant CSX Corp's
oil hauling business, Chief Executive Michael Ward told
analysts on Thursday.
U.S. regulators are weighing new rules to better safeguard
railcars from punctures or leaks in light of recent accidents
involving trains carrying crude.
Ward and other CSX executives said on the company's
quarterly earnings call that they are working with railroad
regulators and customers as the U.S. Pipeline and Hazardous
Materials Safety Administration (PHMSA) considers tougher rules,
which the agency said this week likely won't be finished before
The expense of retrofitting older railcars, "while large,
won't impact our ability to move this crude by rail," Ward said.
He also said CSX expects to increase crude by rail shipments
by 50 percent this year.
He said CSX moved about 46,000 loads of crude in 2013,
mostly to U.S. East Coast refiners, running a single train per
day throughout the year. That increased to two trains late in
In 2014 the company expects to move two trains per day "and
then we will start positioning ourselves as more and more of the
unloading points along the East Coast are developed," Ward said.
Heightened scrutiny of the growing crude-by-rail movement
stems from recent crashes and derailments. The worst accident by
far happened last July in a small Quebec town when a runaway
train derailed and exploded, killing 47 people.
New regulations could include retrofitting older cars that
don't meet the latest industry standards of thicker hulls and
While the industry adopted those tougher standards for tank
railcars made after October 2011, some 80,000 older cars remain
in use, hauling flammable liquids, including crude.
The oil-by-rail movement is growing alongside booming North
American output, particularly to the East and West coasts where
pipeline infrastructure is lacking. Crude shipments jumped 71
percent in 2013 to more than 780,000 barrels per day compared to
the prior year, according to the Association of American
Consultancy Turner, Mason & Company said this week that
retrofitting is estimated to cost $30,000 to $60,000 per tank
car. That's $2.4 billion to $4.8 billion to retrofit 80,000
railcars, if all were upgraded.
The Railway Supply Institute, which represents tank car
owners, says nearly a third of those 80,000 railcars transport
crude oil, and the cost to upgrade all would reach $1 billion.
However, Turner Mason said that if regulations require a
changeover to railcars with the stronger post-October 2011
design, the industry likely will see the older cars phased out
via both replacement and retrofit.
Ward noted that railcars are largely owned by customers or
leasing companies. Railroads own the locomotives. He and other
executives said it was too early to speculate on new regulations
and their costs.
"It will probably be a matter of months as that evolves,"
On Thursday, U.S. Secretary of Transportation Anthony Foxx
said operators were mulling measures including routing some fuel
shipments around urban areas and slowing down trains carrying
some dangerous deliveries in the wake of a recent spate of fiery