DOT-111

If as appears likely, US regulators impose new rail tank car safety standards by the end of 2014 including the phasing out of older designs, the cost for a new car could be as much as $150,000. Retrofitting older designs to meet new standards could range between $20,000 and $60,000 per car. The resulting higher lease costs, concerns about safety and lingering logistics issues from this past winter are leading to producers looking more favorably at pipeline projects. The latest data this week from North Dakota indicates crude-by-rail traffic out of that State fell by 11.5 % from 693 Mb/d in November 2013 to 614 Mb/d in May 2014. Today we look at the impact of these changes on future crude-by-rail traffic.

The future pace of crude-by-rail growth in North America may depend on rulings expected by the end of 2014 from the US Department of Transport (DOT) concerning rail tank car designs mandated to carry crude oil safely. The costs of replacing or retrofitting the existing tank car fleet to meet such new standards - designed to reduce the risks associated with recent high profile accidents - will pass to rail car lessors and crude shippers who will end up paying higher lease rates. Today in the first of a two part series we look at how the rail industry can comply with new tank car standards.