July 14, 2015
Railroads Lobby to Weaken Oil-By-Rail Safety Rules
(Reuters) — Billionaire investor Warren Buffett is set to be a chief beneficiary of a bid by Senate Republicans to weaken new regulations to improve train safety in the $2.8 billion crude-by-rail industry, a key cog in the development of the vast North American shale oil fields.
A series of oil train accidents, including the July 2013 explosion of a train carrying crude in Lac-Mégantic, Quebec, that killed 47 people, led U.S. and Canadian regulators to announce sweeping safety rules in May. Among other things, U.S. oil trains are required to install new electronically controlled pneumatic brakes.
But in late June, the Republican-controlled Senate Commerce Committee approved a measure to drop that requirement and order years of new research to confirm the safety benefits of ECP brakes.
On Wednesday, the panel will decide whether to send the measure to the full Senate, setting the stage for a fight with Democrats who say the repeal would delay the use of feature that can help avoid catastrophic derailments and minimize the consequences of accidents that do occur.
The looming debate pits Democrats, federal regulators, safety advocates and environmentalists against the crude-by-rail industry, which claims that installing the brakes would slap an unnecessary $3 billion cost on railroads, oil refiners and other owners of rolling stock, and potentially jeopardize safety.
BNSF Railway Co., the No. 2 U.S. railroad, which Mr. Buffett owns through his Berkshire Hathaway Inc. holding company, is the leading U.S. railroad for crude oil shipments, controlling three-quarters of the carload volume in 2013. Along with CSX Corp., it's also associated with the most oil train accidents, according to a Reuters analysis of incident reports.
Environmental groups estimate that 25 million Americans live near tracks traversed by crude oil shipments, making ECP brakes and other federal requirements essential to ensuring safety. Because the brakes act simultaneously on all cars and locomotives, they give train operators greater control and allow trains to stop more quickly than conventional air brakes, which slow rail cars in succession, advocates say.
"To walk away from what we know to be the best technology is pretty crazy," said Sean Dixon, an attorney with clean water advocacy group Riverkeeper.
Democrats will try to strike out the ECP amendment by offering a measure of their own when the committee meets on Wednesday, according to an aide. If the attempt fails, Democrats expect to fight the amendment on the floor of the Senate.
But the rail industry says the equipment is unreliable and could jeopardize safety while further eroding the competitiveness of transporting oil by rail, which is already $5 to $10 a barrel more expensive than pipeline transmission.
ECP brakes are made mainly by two U.S.-based manufacturers: New York Air Brake, the U.S. unit of Germany's Knorr-Bremse A.G.; and Wabtec Corp.
While a New York Air Brake official said ECP technology is reliable, the company has said that ECP brakes aren't a solution for oil trains because most derailments are caused by a broken track, wheel or axle, and ECP brakes can't stop an accident once a train starts to derail.
"It's the wrong solution for the problem," company President Mike Hawthorne told Reuters.
Wabtec officials did not return phone calls.
Rail lobbying in full swing
The most forceful lobbying against ECP brakes has come via the Association of American Railroads, a trade group that represents more than 20 freight railroad companies, including BNSF and CSX, Congressional staff said.
AAR's aim "is anything that results in delaying, diluting or ultimately overturning the regulation," one Democratic Senate aide said.
AAR has spent $14.5 million since 2012 lobbying Congress and the administration, including topics related to the crude-by-rail business, according to Senate records reviewed by Reuters.
Among individual railroads, BNSF was the top lobbyist, having spent $12.7 million since 2012. Mr. Buffett also has a small stake in oil refiner Phillips 66, an owner of oil tank cars that has spent $6.4 million lobbying Congress.
BNSF's closest lobbying rival is Union Pacific Corp. at $7.5 million. Canadian National Railway Co., CSX and Norfolk Southern Corp. have each spent between $3 million and $4 million during the same period. Union Pacific is the biggest U.S. railroad, while CSX is third and Norfolk Southern is fourth.
The records don't break down how much these companies spent specifically on oil train regulations and related issues.
BNSF lobbies the government on a range of issues, and crude-by-rail represents a small part of those efforts, spokesman Michael Trevino said. He also said the company supports the study and testing of ECP brake technology before implementation.
Berkshire Hathaway did not immediately respond to a request for comment. A Phillips 66 spokesman said the refiner is committed to being a "safety leader" and will comply with the new oil train standards.
AAR has asked the U.S. Department of Transportation to throw out the brake requirement and enhance other security measures involving tank cars. AAR President and CEO Edward Hamberger declined to comment because the group's appeal is pending. An AAR official said the group made sure lawmakers had "pertinent information" about the issue.
Crude-by-rail boom
The series of oil train explosions in recent years follows a boom in U.S. shale oil production, notably in the Bakken region of North Dakota. Bakken crude has helped reduce U.S. dependence on foreign oil but is also considered more volatile and flammable than heavier crudes.
Because the landlocked Bakken region is not easily accessed by oil pipelines, rail provides the main transportation route. The result has been a bonanza in the crude by rail business. Shipments surged to more than 350 million barrels in 2014 from less than 680,000 barrels in 2008, according to industry data.
BNSF has been the biggest beneficiary. In 2013, the railroad hauled 324,206 carloads of crude oil, about three-quarters of the industry's total volume of 435,560 carloads, according to data provided by the company and AAR.
But BNSF also has been involved in six of the 18 U.S. oil train derailments since the Lac-Mégantic disaster, second only to CSX, which has had seven. The latest BNSF derailment was in Heimdal, North Dakota, on May 6. Ten cars left the rails, and the crude caught fire, forcing the town of 40 to evacuate.
The Transportation Department disputes the industry's claim that the new regulations would cost $3 billion: over 20 years, officials say the cost would be $492 million, offset by $426 million to $1.7 billion in benefits.
Without the ECP brake and other new federal safety rules including thicker tank car hulls, damages from "high consequence events" could reach $12.6 billion over the next 20 years, the department says.
Sen. John Thune, R-S.D., who chairs the Senate Commerce Committee and authored the ECP repeal measure, was not available to comment. Frederick Hill, the committee's Republican spokesman, said the measure would still require railroads to equip oil trains with ECP brakes beginning in 2021 should new research demonstrate the technology's benefits.
GOP Bill Would Undermine Rail Safety Regulations
By Joan Lowy and Tom Krisher on Jul 17, 2015
Source: Associated Press
WASHINGTON (AP) — At a time of high-profile train wrecks, Republicans are working on legislation to roll back safety regulation of the railroad industriy.
A bill approved this week on a party-line vote by a Senate committee brims with industry-sought provisions that would block, delay or roll back safety rules. The measure is to be part of a must-pass transportation bill that GOP leaders hope to put to a vote in the Senate as early as next week.
They are under pressure to act quickly because authority for transportation programs expires on July 31. Without a cash infusion, the government will have to delay highway and transit aid to states.
One provision would block a new Department of Transportation rule requiring that trains hauling crude oil are equipped with electronically controlled brakes that affect cars all at the same time, rather than sequentially. The bill calls for a study of the technology and puts off any regulatory mandate, which could delay implementation for years.
The brake rule was prompted by a series of train wrecks in which cars of crude oil and ethanol exploded, igniting fires that burned for days. Freight railroads oppose the rule, which could cost them billions of dollars.
Another provision would give freight and commuter railroads and Amtrak more time to install a safety system called positive train control. The technology relies on GPS, wireless radio and computers to monitor train position and slow or stop trains in danger of derailing because they're traveling too fast, are about to collide with another train or are about to enter an area where crews are working on tracks.
A 2008 law requires railroads to have the technology installed and operating by the end of this year. Most are not expected to make that deadline.
The National Transportation Safety Board says that if the technology had been in operation, it could have prevented an Amtrak derailment in May that killed eight people and injured about 200 others in Philadelphia, and a derailment that killed four passengers and injured 64 others in New York City in December 2013, as well as other fatal accidents.
Railroads say they have spent billions of dollars on the technology but have been hampered by technical and financial difficulties and need more time.
Thune and other Republicans on the committee said the changes were necessary reforms to federal agencies that have overstepped their bounds or have issued regulations that unfairly penalize industry without improving safety. Thune noted the bill contains several provisions sought by Democrats and safety advocates.
The GOP bill is "loaded down with giveaways to special interests that will set back safety for years to come," said Jackie Gillan, president of Advocates for Highway and Auto Safety. "The influence of corporate lobbyists had more sway than commonsense and cost-effective solutions to deadly problems."
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Rail Executive Blasts Oil-Train Rules
Norfolk Southern CEO says regulations could make oil-by-rail prohibitively expensive
Laura Stevens
May 5, 2015 5:20 p.m. ET Wall Street Journal
Norfolk Southern Corp. Chief Executive Charles W. “Wick” Moorman said that the rail industry will challenge the federal government’s new crude-by-rail rules, adding regulators have “made some serious mistakes in the regulations.”
The new safety rules could make shipping crude oil by train prohibitively expensive, Mr. Moorman said in an interview on Tuesday.
“At a certain point, the economics are such that you can’t justify shipping the oil. The price to get it to the refinery is too high and the downside of that is that it will throttle the journey toward energy independence in this country,” Mr. Moorman said.
On Friday, the U.S. Department of Transportation called for installing new braking systems on trains hauling more than 70 cars of crude oil by 2021. The final rule was issued last week and regulations will be phased in over several years. They also would require upgrades and other changes for tank cars hauling oil and other flammable liquids.
In some respects, the new tank car standards don’t go far enough, Mr. Moorman said. For instance, they require thermal wraps that could prevent a tank car from exploding for 100 minutes during a fire, versus an industry suggestion of 800 minutes. Though the industry generally agrees that hauling crude oil in older tank cars isn’t safe, the new rules allow shipments in any kind of tank car, provided it is in less than a block of 20 tank cars or fewer than 35 tank cars total, he said.
The new brake requirement took the rail industry by surprise, he said.
The Norfolk, Virginia-based company is one of a handful of major railroads operating in the U.S. It has most thoroughly tested the newly mandated electronically controlled pneumatic brakes, Mr. Moorman said.
“It is very expensive, it doesn’t work well,” Mr. Moorman said. “We are committed to safety. The last thing in the world we want is a derailment…this technology just doesn’t do anything.”
And it puts the railroads in a difficult spot for a couple of reasons. For starters, railroads don’t own the vast majority of tank cars so have no control over whether the costly new brakes are installed. Moreover, the brake requirement isn’t a mandate for tank car owners, only railroads.
‘We believe strongly that our rule will stand up [to challenges].’
—Anthony Foxx, Transportation Secretary
If tank cars aren’t equipped with the new brakes by 2021, oil trains will either have to be reduced to a maximum of 69 tank cars or to a maximum speed of 30 miles an hour, Mr. Moorman said. Either choice would “eat up an enormous amount of capacity,” Mr. Moorman said.
Railroads would have to build new tracks and infrastructure to handle the slowdown or extra trains. “Even if you have two tracks, running at 30 mph, you’ll never get there,” he added.
The Association of American Railroads said the new braking rule would apply to about 70% of oil trains. Mr. Moorman said the brake requirement could cost railroads billions of dollars when factoring in added infrastructure if tank car owners don’t install the brakes.
Mr. Moorman said he is sure the industry will petition the Transportation Department for reconsideration or challenge it in court. “There is a lot of discussion going on in the industry about how to challenge this,” Mr. Moorman said. “I’m sure it will be challenged.”
On Friday, Transportation Secretary Anthony Foxx said that if the rule was challenged in court, “we believe strongly that our rule will stand up.”
The Transportation Department estimates that the rule will cost the railroad industry $2.5 billion over 20 years, and save between $912 million and $2.9 billion due to fewer accidents. Industry officials said the government estimate doesn’t account for the cost of brake installations and other expenses.
