Greenbrier Companies (GBX)

[Enterprising Investor]

Canada toughens oil tank car standards, wants even new ones out by 2025 (3/12/15)

By Randall Palmer

(Reuters) - Canada proposed tough new oil tank car standards on Wednesday and said even improved tank cars coming into service now would have to be off the rails by 2025 at the latest.

The announcement comes after a rash of fiery derailments in Canada and the United States, including some that involved the newer, improved rail cars, and as more oil increasingly travels by rail due to higher output and a shortage of pipelines.

The proposed standards call for a hull thickness of 9/16 inch, up from the current 7/16 inch or half inch, depending on car type. It also makes thermal protection jackets and increased shields at each end of the cars mandatory.

Older DOT-111 cars are being replaced in Canada by CPC-1232 cars, but even these will have to be phased out by 2023 or 2025, depending on whether they are jacketed or not, under the proposed standards.

The proposed rules were welcomed by the Canadian Association of Petroleum Producers, which represents the country's largest oil companies. The group supports retrofitting the older model tankers and the phase in of more robust cars.

"Rail is anticipated to remain an important mode of transportation to transport Canadian crude to market," said Chelsie Klassen, a spokeswoman for the lobby group.

"Given the integrated nature of the North American rail network, there's a need to harmonize Canadian and U.S. standards on rail car standards."

Canada, which moved ahead of the United States in ruling DOT-111 cars cannot carry crude as of May 2017, signaled it was prepared to move faster than its neighbor on the latest standards.

Canada said the U.S. is following its own regulatory process and will make its own decision on this standard. Nonetheless, Canada said the new car will be called TC/DOT-117. TC stands for Transport Canada and DOT for U.S. Department of Transportation.

Transport Minister Lisa Raitt told Reuters earlier that, while the Washington and Ottawa are near agreement on a tougher standard for oil tanker cars, they might diverge on the phase-in period.

"Time is of the essence for us," she said.


Derailments in the U.S. and Canada have added to pressure to make tankers less vulnerable to rupture and explosion in the event of a mishap.

In July 2013, an oil train derailed in Lac-Megantic, Quebec, killing 47 people. Long oil trains regularly pass through larger metropolitan areas.

Although they are deemed somewhat safer than the older DOT-111s, nine CPC-1232s ruptured in a fiery Canadian National Railway Co accident in Ontario on Saturday.

Reuters previously reported that advanced braking systems - electronically controlled pneumatic or ECP brakes - could be part of the standard.

Transport Canada said on Wednesday it planned to include braking requirements, including ECP, in separate regulations rather than the tank car standards.

The U.S. rail industry has been pushing the White House to drop the braking requirements, arguing that U.S. Transportation Department estimates overstate the benefits and understate the costs of such systems.

A senior executive from Canadian Pacific Railway Ltd was part of a delegation of more than a dozen rail executives who attended a meeting with the White House Office of Management and Budget on March 6, where the industry urged the Obama administration to scrap the proposed requirements for ECP brakes.

"CP welcomes any progress towards the full implementation of safer tank car standards," Martin Cej, a spokesman for the railway, said in an email, though he declined comment on the possible braking standard.

Canadian National spokesman Mark Hallman said the rules calling for thicker tank walls were a "clear advance in tank car safety."

The Railway Association of Canada, representing most of Canada's railway companies, welcomed the new tank car standard, saying it had wanted something more robust than CPC-1232s.

http://www.reuters.com/article/2015/03/11/canada-usa-railways-idUSL1N0WD1KQ20150311