U.S. rules could settle tank car dispute for oil-by-rail sector

Fri Apr 25, 2014 5:32pm EDT
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By Patrick Rucker

WASHINGTON, April 25 (Reuters) - New 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long been the DOT-111 model, which will be mothballed in Canada from 2017 onward, and which most stakeholders agree is outdated.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.   Continued...