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By Edward McAllister and Joshua Schneyer
NEW YORK, July 23 The U.S. Department of
Transportation on Wednesday proposed new safety rules for
hauling crude oil by rail after a string of explosive accidents,
in a move that could impact railroads, drillers, refiners and
railcar makers amid an energy boom.
The draft rules, which are subject to a 60-day public
comment period, come as regulators respond to a 50-fold hike in
crude-by-rail cargoes since 2008, and more than a dozen
accidents that have tarnished the lucrative new shipping trend.
Among the proposed rules released by the DOT are new speed
limits for trains carrying oil, enhanced safety features for new
railcars to carry oil and ethanol, and a quick phasing-out of
older cars deemed unsafe. Other measures include advanced
braking systems for trains, and expanded oil flammability
testing before cargoes are shipped.
"We need a new world order on how this stuff moves,"
Transportation Secretary Anthony Foxx told reporters after the
release of the draft rules.
The regulator's move has been widely anticipated by safety
advocates and industries involved in energy shipments, including
drillers and refiners who are wary that restrictions could
hamper their shipments, and tank car manufacturers, who may
benefit from big new tank car orders. Since the rules also
affect shipments of ethanol, another flammable liquid, they
could also impact the giant agribusiness industry.
Over the last 18 months, at least a dozen trains carrying
crude oil have derailed, six of which led to oil spills and
major fires and one of which caused the death of 47 people in
Most of the incidents have involved crude from the shale oil
revolution of the past three to fours years in the Bakken region
of North Dakota and Montana, which makes up the bulk of
crude-by-rail shipments that now surpass 1 million barrels per
On Wednesday, the DOT said its own testing has determined
that Bakken crude, known for its high content of gases, is more
flammable than crude from other regions.
Republican Senator John Hoeven of North Dakota said the
"comprehensive" proposed rules are a welcome step. "For over two
years, we have been pressing DOT to update and expedite
standards for rail cars," Hoeven said in a release.
TANK CAR PHASE-OUT
The most contentious proposals involve the phase-out of
about 50,000 older tank cars that make up the majority of the
oil-by-rail fleet but are deemed unsafe by DOT officials for
The DOT proposes prohibiting the use of these older cars
known as DOT-111s for shipping flammable crude oil that falls
into a category known as packing group 1. The DOT said that the
vast majority of Bakken crude samples it has tested meet the
criteria for packing group 1.
Under the proposal, such crude could be banned from these
older cars within two years. Less volatile crudes that fall into
packing groups two and three could still be shipped in the older
cars for three and five years respectively.
"It's a phase-out based on risk. We want to get the worst
stuff off the road as soon as possible," said Cynthia
Quarterman, administrator of the DOT's Pipeline and Hazardous
Materials Safety Administration.
The phase-out ruling and the DOT's Bakken testing is likely
to stoke a fierce debate between producers, oil refiners,
railroads and even U.S. residents who have been lobbying about
new tank car standards for months.
Some questioned if older cars could be phased out this
quickly, given the sheer number of cars involved. Brigham
McCown, a transportation safety consultant and former DOT
official said "it will likely take longer to get those cars out
Relying only on newer cars could raise transportation costs
for refiners or leading Bakken oil producers such as Oklahoma
City-based Continental Resources Inc.
Big oil producers have contended that Bakken oil is no more
volatile than other U.S. varieties and should not face added
shipping restrictions. Railroads, meanwhile, have expressed
concern about the dangers of shipping growing volumes of
volatile liquids on their lines.
The American Petroleum Institute, the U.S. oil industry's
biggest trade group, rebutted the DOT's Bakken crude testing.
"The best science and data do not support recent speculation
that crude oil from the Bakken presents greater than normal
transportation risks," said API President Jack Gerard.
The DOT proposed new safety specifications for future tank
cars with thicker hulls, advanced braking systems and roll-over
protection. A boom in orders for new tank cars and for
retrofitting older cars would likely benefit tank car
Shares in rail-car manufacturers rallied on the news, with
American Railcar Industries Inc gaining 3 percent,
while Greenbrier Co rose nearly 1 percent and Trinity
Industries Inc climbed 0.3 percent by mid afternoon.
The DOT offered three speed restriction proposals - 30, 40
miles and 50 miles per hour (48, 64 and 80 kph) - depending on
the age and safety specifications of the tank cars and the
trains' braking systems. Railroads have expressed concern that
slowing traffic could stunt business and possibly impact wider
commuter rail journeys. The DOT also called for updated braking
systems, offering three different options including electronic
"New tank car regulations are needed, but they will affect
everyone," said Brigham McCown, a transportation safety
consultant and former DOT official. "The costs will be passed
along to consumers at the pump."
(Reporting by Ros Krasny, Timothy Gardner, Edward McAllister
and Joshua Schneyer; Editing by Alden Bentley and Marguerita