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UPDATE 1-BNSF drops plan to buy tank cars on customer concerns
May 15, 2015 / 10:12 PM / 2 years ago

UPDATE 1-BNSF drops plan to buy tank cars on customer concerns

(Adds quotes, details on U.S. rail car standards)

By Kristen Hays

HOUSTON, May 15 (Reuters) - BNSF Railway Co this week told customers it had dropped a plan announced last year to buy 5,000 stronger crude oil tank cars after customers were concerned about the company moving into railcar ownership.

The company, owned by Warren Buffett's Berkshire Hathaway Inc also said in a letter sent to shippers on Wednesday it is concerned that new U.S. tank car safety standards issued earlier his month "could remove capacity from our network," particularly a requirement to have enhanced brakes by 2021.

BNSF spokeswoman Roxanne Butler confirmed the information in the company letter to customers.

Three BNSF crude trains that have crashed or derailed and caught fire since late 2013 - the latest just last week - are part of a spate of such fiery accidents that focused attention on safety.

BNSF's letter went out a week and a half after the U.S. Department of Transportation unveiled new standards for rail cars that carry crude and ethanol. All new cars built after Oct. 1 this year must have 9/16-inch hulls - thicker than the industry standard of 7/16-inches adopted in 2011 - and other reinforcements to protect against punctures and leaks in a derailment.

The 7/16-inch cars can be retrofitted with protections for top and bottom fittings, steel shields on the front and back and "jackets," or an extra layer of steel around the hull, on a staggered schedule depending on how strong they are now.

The industry largely expected rules for thicker steel and other reinforcements, but the brake issue has prompted opposition. The American Petroleum Institute is challenging that provision. {ID:nL1N0Y403E]

In its letter, BNSF advised customers who buy new rail cars to include structures that allow enhanced brakes to be added at a later date "while the industry continues to work through these issues."

BNSF in February last year asked railcar manufacturers to submit proposals to build a stronger car than the 2011 standard, just three months after a BNSF crude train hit a derailed grain railcar in North Dakota, causing a fire that lasted several days. The move was unusual, as railroads generally own just the tracks and locomotives, while shippers or railcar leasing companies own the cars.

But BNSF's letter said that in later conversations with shippers, "BNSF owning or leasing tank cars was not viewed as useful," so the company scrapped the idea.

Reporting by Kristen Hays; Editing by Dan Grebler

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