Railcars need updating after crude crashes, says manufacturer

A train is derailed west of Casselton, North Dakota
Source: Tyler Spriggs

Some 80,000 tank cars that don't meet current industry safety standards need to be replaced or retrofitted after several crashes involving trains carrying crude oil, the head of railcar maker The Greenbriar Co. said Wednesday.

CEO William Furman added that "modest but meaningful'' improvements that can be implemented immediately could reduce major risks of a hazardous materials leak in derailments by as much as 80 percent.

"We believe a retrofit proposal, if adopted, can be completed in a reasonably expedited time frame and do not accept that there is not adequate capacity in the industry to do so,'' Furman said during Greenbriar's quarterly earnings conference call with analysts.

"The concern for public safety here is delay ... through the inability to act on the regulatory front while the public would like to see something done sooner.''

The Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA) is weighing new rules based on petitions from the railroad industry, shippers and recommendations from the National Transportation Safety Board.

Furman's comments came after a Canadian National Railway train carrying crude and propane derailed and caught fire late Tuesday in New Brunswick, Canada.

In North Dakota last week a 106-car BNSF Railway crude-oil train crashed into a derailed car carrying grain, causing multiple explosions and fires.

(Read more: Train collision forces N. Dakota town evacuation)

No one was hurt in either incident, the latest in a number of accidents involving crude-carrying trains in North America. They highlight safety issues as the oil-by-rail movement grows in tandem with the U.S. inland oil production boom.

The worst accident by far happened last July in a small Quebec town, where a runaway train derailed and exploded, killing 47 people.

Oil train derailment in Casselton, ND

The Railway Supply Institute, which represents tank car owners, last month urged the PHMSA to adopt safety standards endorsed in October 2011 by the Association of American Railroads, the rail industry's trade group.

Under those standards, tank railcars built that date should have thicker hulls and reinforced valves to better protect against punctures or leaks in derailments.

But those built before then lack those features, and the rail industry has said it could cost $1 billion to retrofit them. Furman said Wednesday that about 80,000 railcars "that are in question'' were being used.

"Crude by rail is here to stay, provided that the public remains confident in the safety of rail transportation,'' he said.

(Watch: Will oil supply crush crude?)

The railcars involved in last week's North Dakota crash were of older design, according to the National Transportation Safety Board's preliminary information.

A mass overhaul of those older cars or a move to replace them with post-October 2011 models would be a boon to railcar manufacturers like Greenbriar.

Furman said the company was "well-positioned to respond'' to shippers' retrofitting or newbuild needs.

The East and West coasts are the major destinations for railed Bakken crude from North Dakota, as it is cheaper than imports and pipeline infrastructure is lacking.

The U.S. Gulf Coast also moves crude via rail, both from North Dakota and other oil plays, such as the booming Eagle Ford shale and Permian Basin in Texas. But increased or converted pipeline infrastructure in Texas and Louisiana makes rail less critical than in the other regions.

—By Reuters