Canada to Require Stronger Tank Cars for Crude by Rail

Canada will require railways shipping crude oil to use stronger tank cars, phase out weaker cars within three years and reduce the speed of trains carrying dangerous goods.

The Canadian government will ban the “least crash-resistant” of tanker cars known as DOT-111s from carrying dangerous goods, Transport Minister Lisa Raitt said today in Ottawa. DOT-111 cars carrying crude or ethanol that don’t meet new safety standards must be phased out or refitted within three years, she said.

“I am committed to making our country a model of world-class safety,” Raitt said. “The measures I am announcing today improve the safety of the railway and transportation of dangerous goods systems from coast to coast to coast.”

The U.S. and Canadian governments have tightened rail safety rules after crashes involving oil shipments, including the explosion in Lac-Megantic, Quebec in July, that killed 47 people.

Today’s announcement comes after transportation regulators in the U.S. and Canada said Jan. 23 that crude oil hauled by rail needs to be shipped in stronger tank cars and on safer routes. The Transportation Safety Board of Canada recommended tougher standards for DOT-111 cars, as well as better route planning and detailed emergency-response plans in communities where oil shipments travel, a recommendation Raitt accepted today. Her announcement didn’t specify how slowly trains carrying dangerous goods would be required to travel.

Problem Deadline

Norfolk Southern Corp. Chief Executive Officer Wick Moorman said today a similar deadline for taking the older tank cars off the tracks in the U.S. “would probably present some problems for us.” A quick phase-out period may leave the railroads short of cars to haul crude, he said on a conference call with analysts today.

“It’s very clear that if the regulators aren’t thoughtful about what they’re doing and looking at how we can get enough of the newer cars into the fleet, it could be a limiting impact on the shipment of crude by rail,” Moorman said.

Shipments of oil by rail have increased as growing output from Canada and the U.S. exceeds pipeline capacity.

A U.S. State Department report in January concluded that denying TransCanada Corp.’s Keystone XL pipeline wouldn’t significantly reduce production from Canada’s oil sands because output would reach markets in other ways, including by rail.

Safety Improvements

“We support, as a company, any new measures from the regulator that provides for improvement to safety,” Claude Mongeau, Canadian National Railway Co.’s chief executive officer, said to reporters today after the company’s annual meeting in Vancouver. “We have an unwavering commitment to safety.”

Mongeau said he believes the new regulatory measures will encourage railways and supply chain participants to make the transport of dangerous goods even safer.

Canadian National shares were little changed at C$63.88 at 2:30 p.m. in Toronto

In Lac-Megantic, where the town is rebuilding from the catastrophe, residents say while the railway is needed to support the local economy, strict safety rules should be enforced.

“Make sure there is a very safe railroad: it’s the first thing to do,” Raymond Lacroix, who is retiring in a few weeks as he turns 65, said yesterday. “After that, respect the rules that are already in place. They weren’t always respected in the past.”

Piles of rubble and security fences still surround parts of the site of Canada’s deadliest rail disaster since 1910. One downtown street is being rebuilt with a new pool hall, liquor outlet, clothing shop and ice cream store.

Bernadette Fortier said tougher rules are a good idea, adding that the reconstruction has been hard.

“We want our life to return to normal,” Fortier said. “We have seen the destruction, it’s being rebuilt, but it’s still too much construction for us to be able to bounce back.”

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