Oil and Rail Industries Agree to Phase Out Oldest Rail Oil Tank Cars

(Update 07/23/14): The Department of Transportation posted the new rules at 10 AM EST today that call for a phase-out within two years "of older DOT 111 tank cars for the shipment of packing group I flammable liquids, including most Bakken crude oil, unless the tank cars are retrofitted to comply with new tank car design standards..." The public comment period has been shortened to 60 days due to "the urgency of the safety issues addressed in these proposals."

"The oil industry and the railroads that haul its crude have offered U.S. regulators a joint plan to phase out a type of older tank car tied to a spate of fiery accidents, according to two people familiar with the proposal," write Jim Snyder and Thomas Black for Bloomberg Businessweek. "The parties agreed to scrap a fleet of thousands of DOT-111s within three years if manufacturers agree they can replace or retrofit the tank cars in that period," they add.

The alleged agreement between the two industry groups, the American Petroleum Institute and the Association of American Railroads, would mark a significant breakthrough as the two have sparred as to who was primarily at fault in the spate of horrific explosion of oil unit trains, the most recent being last April in Lynchburg, Va. API pointed to train derailments as the primary cause while AAR cited the volatility of the Bakken crude being carried in older rail cars not designed for it.

Crude by rail safety advocates have wanted the U.S. to follow what the Canadians did in April - require the phase-out of DOT-111 rail cars in three years. Instead, the U.S. offered a "safety advisory" urging "carriers of Bakken crude oil by rail tank car to select and use the railroad tank car designs with the highest level of integrity reasonably available within their fleet...and carriers of Bakken crude oil to avoid the use of older, legacy DOT Specification lll or CTC lll tank cars for the shipment of such oil to the extent reasonably practicable." [See post here].

Some have speculated that if DOT doesn't follow in Transport Canada's footstops the strongest rail cars would be used in Canada and the weakest sent south of their border.

"If adopted by federal officials, the industry plan would require a significant investment by oil and leasing companies that own rail cars," add Snyder and Black. They note that "(a)s many as 10 trains with 100 or more tank cars filled with crude leave North Dakota, home to a booming oil and natural gas industry, every day for refineries across the U.S."

The Associated Press also reported that an agreement may be near.