BNSF Railway Co. plans to apply a $1,000 surcharge for each older crude tank car, denting profits for shale drillers in North Dakota.
The railroad owned by Warren Buffett’s Berkshire Hathaway Inc. is the first major U.S. operator using fees to encourage shippers to scrap the puncture-prone older cars. The charge, which goes into effect Jan. 1, would add about $1.50 a barrel to the cost of transporting oil on them.
The Obama administration in July proposed phasing out thousands of the older tank cars within two years and lowering speed limits as part of new rules to reduce the risk of hauling crude by rail. The plan followed a series of fiery accidents, including the derailment and explosion of a crude train last year that killed 47 people in the Canadian town of Lac Mégantic.
The surcharge will pertain to cars known as DOT-111s and won’t apply to cars called CPC-1232s that are built to higher standards adopted in October 2011, according to a BNSF notice. Mike Trevino, a spokesman for BNSF, confirmed the notice.
Some refiners, such as PBF Energy Inc., Phillips 66 and Tesoro, have already filled their fleets with tank cars compliant with the post-2011 rules.
BNSF, which operates tracks that connect into the Bakken and other shale oil fields, said in February it plans to order 5,000 new crude tank cars with safety standards higher than the CPC-1232s in an effort to push shippers toward safer cars.
Canadian Pacific Railway Ltd. adopted a $325 surcharge in March for older crude tank cars in the U.S. that don’t meet the CPC-1232 standard, the company said in February. Earlier this year, Canadian National Railway Co. introduced a rate structure to “create an economic incentive” or shippers to use the safer tank cars, Mark Hallman, a company spokesman, said in an emailed response to questions.
Safety focus
The American Petroleum Institute, which represents shippers of crude oil, supports more safety upgrades for tank cars beyond what the industry adopted in October 2011, said Brian Straessle, a spokesman for the institute, in an e-mail. The safety focus shouldn’t only be on tank cars, he said.
“Because there are limits to what tank car design can achieve, we must take a comprehensive safety approach to prevent accidents before they happen, mitigate any that occur and enhance emergency response,” Straessle said.
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