Tuesday, January 14, 2014

Crude by rail, a cautionary tale

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What do New Jersey Governor Chris Christie’s “Bridgegate” and crude-by-rail accidents have in common? They both have the potential for significant long-term damage to the institutions involved. Each of these situations caused a hue and cry from the popular press that was loud enough to register on the Richter Scale.

It is true that the CBR accidents differed from Christie’s debacle in that certain of those accidents involved both loss of life and hundreds of millions of dollars in damages. But the public fallout from both has been significant in the extreme.

Prior to this writer becoming involved in rail equipment finance (and becoming a Railway Age Contributing Editor), I had a career as a corporate lawyer for a major Wall Street bank. I clearly remember my bank dropping various bank products, individual customers, and even whole countries like hot potatoes when significant problems with them became public. It always seemed to the bank management that cauterizing the wound was more important any single element of bank profit.

With this experience in public relations, I have been wondering why none of the major rail carriers, or perhaps the AAR, have “tweaked” to the fact that seeing massive napalm-like balls of flame regularly on the nightly news is something that, in the end, can come up and bite them on the behind. Even worse, while the CBR derailments on this side of the border haven’t involved the loss of life, many of the CBR moves from west to east involve transiting major population areas. Unlike other modes of transportation, the rails still retain virtually complete control of their operations. It would be a shame to lose this well-deserved right.

As far as I am aware, other than making appropriate comments on the need for ongoing safe operations, the rail industry has limited its reaction to CBR accidents to a call for the owners of the cars (non-railroads) to replace older tank cars in CBR service with more modern (and safer) cars over a period of years.

Before I say anything else, let me emphasize that I am a major cheerleader for our rail industry, fracking, and CBR. I never thought that American energy independence was anything I would ever see in my lifetime. I also believe that CBR is an unbelievable opportunity for the rail industry (and have helped promote it at my annual Rail Equipment Finance Conferences).

What concerns me is a belief that if the rail industry doesn’t do something reasonably immediate to take control of its own destiny with CBR rail safety, others—perhaps state, local, or federal legislators or regulators—will do it for them. Further CBR disasters have the potential to harm the public profile the railroads have been diligently and expensively developing over the past decade.

Clearly there is no “good” near-term solution, but this writer would be happy to see one or more railroads take a more aggressive public leadership position on this subject before someone else decides to “lead” their businesses for them.

(Tony Kruglinski is President of Railroad Financial Corp., which in recent years has financed thousands of new and used tank cars.)

Tony Kruglinski

Tony Kruglinski is President of Railroad Financial Corp., a financial advisory firm. He also serves as Chairman of Rail Equipment Finance (www.railequipmentfinance.com), an annual industry conference addressing critical developments concerning North America's railcar and locomotive fleet.

Kruglinski also mentors the annual Railroad Financial Desk Book, published each autumn. His Railway Age column, Financial Edge, is a longtime staple of the magazine and now will appear each month. Contact Tony at tkruglinski@railfin.com.

Website: www.railequipmentfinance.com