Thursday, February 20, 2014

BNSF taking bids on 5,000 oil tank cars

Written by  William C. Vantuono, Editor-in-Chief
BNSF crude oil train entering a depot outside of Williston, N.Dak. BNSF crude oil train entering a depot outside of Williston, N.Dak. REUTERS/Shannon Stapleton
BNSF Railway, the industry’s largest transporter of crude oil, announced on Thursday, Feb. 20, 2014, plans to purchase its own fleet of up to 5,000 crude oil tank cars that will be built to safety standards exceeding the industry’s voluntary CPC-1232 specification for DOT 111 hazmat cars. The CPC-1232 standard has applied to all DOT 111 cars built since October 2011.

BNSF’s announcement of an RFP (request for proposals) sent shares of several railcar manufacturers higher in early afternoon trading. Shares of Trinity Industries and The Greenbrier Companies, both major tank car manufacturers, rose about 10%.

“Our tank car RFP represents an important milestone in the improvement of safety standards for the transportation of crude by rail,” BNSF said. “It is a significant voluntary commitment that may help accelerate the transition to the Next Generation Tank Car and provide tank car builders a head start on tank car design and production, even as the Department of Transportation, railroads, and shippers continue to engage in the formal rulemaking process. BNSF believes that the RFP process will provide market participants more certainty, sooner.”

BNSF’s tank cars are to be built to exceed the stronger new standards the industry voluntarily adopted in October 2011 for the CPC-1232 jacketed tank car and will add the following new safety requirements:

• Body shell and head ends built of 9/16-inch-thick steel.

• Equipped with 11-gauge steel jackets and full-height, half-inch-thick head shields.

• A thermal protection system that incorporates ceramic thermal blanketing and an appropriately sized pressure relief device capable of surviving an ethanol-based pool fire.

• A bottom outlet valve handle that can be disengaged to prevent unintentional opening.

BNSF’s plan to purchase its own tank car fleet is unusual in an industry where most railcars are owned by leasing companies, which lease them to shippers, or by shippers themselves. Crude oil refiners like Phillips 66 and PBF Energy buy their own cars as well as lease them.

BNSF did not comment on possible CBR (crude by rail) rates for shippers who opt to use the railroad’s tank cars once they’re built, saying such information is proprietary. Other U.S. railroads also declined comment last week on the CN and Canadian Pacific’s decision to charge shippers more for using older DOT 111 tank cars that do not meet CPC-1232 standards.

The rail industry, including the RSICTC (Railway Supply Institute Committee on Tank Cars) and the AAR Tank Car Committee, has been pressing regulators (PHMSA and FRA) for a long time to implement a formal rulemaking on tank car safety standards and recently has been providing recommendations to regulators on tank thickness, head shield height, coupler design, outlet valve protection, and other design parameters. BNSF’s decision to purchase its own fleet of cars built to higher standards is yet another indication of the industry’s unwillingness to wait around for government regulators to act. PHMSA recently issued an ANPRM (Advance Notice of Proposed Rulemaking) on hazmat tank car safety standards but is not expected to issue a final rule until sometime in 2015.