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Railroad industry waiting for new regulations over tank cars

BISMARCK -- As oil industry representatives met here Tuesday to discuss the ever-changing industry, one thing was clear: There will be new regulations over shipping crude oil by train.

After the July derailment in Canada of a train carrying crude oil from North Dakota, the crude-by-rail safety inspections by the Obama administration, dubbed the "Bakken blitz," has many in the industry anxious about new federal regulations.

Jerry Charaska of ALLTranstek, a company that performs railcar inspections, said regulations currently discussed will have a minimal effect on the North Dakota Oil Patch.

Charaska, a panelist during the fourth annual Bakken Infrastructure Finance and Development Week sponsored by oil and infrastructure companies, said the regulations that may be handed down by the Federal Railroad Administration will largely affect companies that are leasing trains and will have to make modifications, rather than companies that purchase and own their own railcars.

"Rail seems to manage it very well," he said. "They modify the cars to fit the best needs, they are very innovative."

So far, many expect to see more requirements for oil tankers to have a head shield, a heavy steel plate on the end of tank cars, and added protection around the fittings on a tanker.

Charaska said the older tankers will likely have to undergo modifications to meet new federal requirements, an estimated $25,000 to retrofit each tank car.

"New requirements brings out the best of technology," Charaska said. "They're doable, it's just going to take a few years."

Anthony Gallo, a senior transportation analyst for the equity research department of Wells Fargo Securities, said railroad safety is both an operational science and emotional issue.

Railroads try to find the best practices for day-to-day operations, he said.

But "emotional issues in terms of future costs is a wild one," he said.

After the 2008 collision between passenger and freight trains in California, new requirements and regulations cost the railroad industry between $8 billion and $10 billion, he told the group.

Charaska, originally from Colorado, said the Association of American Railroads Tank Car Committee meeting set for mid-October in Colorado Springs, Colo., will be busy.

The biannual meeting that brings business and transportation officials together usually draws 300 to 600 people to discuss issues facing the tank car industry.

"It's going to be packed," he said pointing to large interest in the potential new regulations and corrosion issues within tankers due to various crude oil's around the country and Canada.

He said various subcommittees within the meeting will discuss the issues and implications they may have, and find ways to meet any new changes.

Mike Nowatzki

Mike Nowatzki reports for Forum News Service. He can be reached at (701) 255-5607.