(Repeats Friday story with no changes to text)
By Patrick Rucker
WASHINGTON, April 27New rules on moving
hazardous materials like crude oil on U.S. railroads could
settle a dispute between the energy industry and rail companies
that boils down to a fraction of an inch of steel in the frame
of each tank car.
U.S. Transportation Secretary Anthony Foxx wrote Thursday in
a blog post that his agency would send its proposals to the
White House for review next week. The proposal will include
"options for enhancing tank car standards," he said.
Leaders of the energy and rail sectors will likely
scrutinize how much the new design could disrupt oil-by-rail
shipments that have increased in recent years alongside crude
production in energy patches like North Dakota's Bakken.
The new standards could also help restore confidence in
moving oil by rail, a practice that has been under scrutiny for
many months in the wake of several fiery derailments.
The workhorse for oil-by-rail shipments in North America has
long been the DOT-111 model, which will be mothballed in Canada
from 2017 onward, and which most stakeholders agree is outdated.
The American Petroleum Institute, the U.S. oil industry's
top trade group, has said a 7/16th inch thick frame is
sufficient for crude oil shipments while the American
Association of Railroads, the leading industry voice, has
proposed a thicker 9/16th shell.
Where the DOT comes down in the dispute over 1/8th inch of
steel could have major implications for the oil-by-rail sector.
The thicker the tank, the less product that can be loaded, which
quickly boils down to dollars and cents.
Once the regulators' proposal is received by the Office of
Information and Regulatory Affairs (OIRA), part of the White
House's Office of Management and Budget, the target turnaround
time is typically 90 days.
"That said, reviews can last much longer, particularly when
the regulation in question addresses controversial (or
expensive) issues," analyst Kevin Book, managing director of
Clearview Energy Partners, said in a research note.
Rail operators, oil producers and tank car manufacturers
have for months failed to agree on the best model to serve the
fast-growing domestic energy sector.
Of particular concern is North Dakota's Bakken region, where
oil production is nearing 1 million barrels per day and roughly
72 percent of that fuel moves on the tracks because of a
shortage in pipelines.
Officials have said that Bakken fuel could be more volatile
and explosion-prone than other domestic crude oil.
A tougher tankcar design known as the CPC-1232 has been the
industry standard since 2011. with many of those cars rolling
out of factories in recent years to meet oil-by-rail demand.
The CPC-1232, with its 7/16th inch thick frame, could well
be the starting point for the DOT, but all stakeholders are
expected to make their case. After the rules leave OIRA they
will be open to public comment.
Book said that recent signals out of two DOT branches - the
Federal Railroad Administration, and the Pipelines and Hazardous
Materials Administration - suggest DOT might propose adopting
the CPC-1232 standard, even though AAR has called for the
Once the rules are finalized, industry will also have to
weigh the costs of waiting for tanks built to the new
specifications against upgrading their existing fleet.
Retrofitting the existing fleet of roughly 78,000 old DOT
111 cars currently carrying flammable liquids is expected to top
$3 billion, rail industry sources estimate.
(Reporting by Patrick Rucker, editing by Ros Krasny and Andrew