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 A series of oil train accidents, including the July 2013 explosion
of a train carrying crude in Lac-Megantic, Quebec, that killed 47
people, led U.S. and Canadian regulators to announce sweeping safety
rules in May. Among other things, U.S. oil trains are required to
install new electronically controlled pneumatic (ECP) brakes.
But in late June, the Republican-controlled Senate Commerce
Committee approved a measure to drop that requirement, and order
years of new research to confirm the safety benefits of ECP brakes.
On Wednesday, the panel will decide whether to send the measure to
the full Senate, setting the stage for a fight with Democrats who
say the repeal would delay the use of feature that can help avoid
catastrophic derailments and minimize the consequences of accidents
that do occur.
The looming debate pits Democrats, federal regulators, safety
advocates and environmentalists against the crude-by-rail industry,
which claims that installing the brakes would slap an unnecessary $3
billion cost on railroads, oil refiners and other owners of rolling
stock, and potentially jeopardize safety.
BNSF Railway Co, the No. 2 U.S. railroad, which Buffett owns through
his Berkshire Hathaway Inc <BRKa.N> holding company, is the leading
U.S. railroad for crude oil shipments, controlling three-quarters of
the carload volume in 2013. Along with CSX Corp <CSX.N>, it's also
associated with the most oil train accidents, according to a Reuters
analysis of incident reports.
Environmental groups estimate that 25 million Americans live near
tracks traversed by crude oil shipments, making ECP brakes and other
federal requirements essential to ensuring safety. Because the
brakes act simultaneously on all cars and locomotives, they give
train operators greater control and allow trains to stop more
quickly than conventional air brakes, which slow rail cars in
succession, advocates say.
"To walk away from what we know to be the best technology is pretty
crazy," said Sean Dixon, an attorney with clean water advocacy group
Riverkeeper.
Democrats will try to strike out the ECP amendment by offering a
measure of their own when the committee meets on Wednesday,
according to an aide. If the attempt fails, Democrats expect to
fight the amendment on the floor of the Senate.
But the rail industry says the equipment is unreliable and could
jeopardize safety, while further eroding the competitiveness of
transporting oil by rail, which is already $5 to $10 a barrel more
expensive than pipeline transmission.
ECP brakes are made mainly by two U.S.-based manufacturers -- New
York Air Brake, the U.S. unit of Germany's Knorr-Bremse AG, and
Wabtec Corp. While a New York Air Brake official said ECP technology
is reliable, the company has said that ECP brakes aren't a solution
for oil trains because most derailments are caused by a broken
track, wheel or axle, and ECP brakes can’t stop an accident once a
train starts to derail.
"It's the wrong solution for the problem," company president Mike
Hawthorne told Reuters.
 Wabtec officials did not return phone calls.
RAIL LOBBYING IN FULL SWING
The most forceful lobbying against ECP brakes has come via the
Association of American Railroads, a trade group that represents
more than 20 freight railroad companies, including BNSF and CSX,
Congressional staff said. AAR's aim "is anything that results in delaying, diluting or
ultimately overturning the regulation," one Democratic Senate aide
said.
AAR has spent $14.5 million since 2012 lobbying Congress and the
administration, including topics related to the crude-by-rail
business, according to Senate records reviewed by Reuters.
Among individual railroads, BNSF was the top lobbyist, having spent
$12.7 million since 2012. Buffett also has a small stake in oil
refiner Phillips 66 <PSX.N>, an owner of oil tank cars that has
spent $6.4 million lobbying Congress.
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BNSF's closest lobbying rival is Union Pacific Corp <UNP.N> at $7.5
million. Canadian National Railway Co <CNR.TO>, CSX, and Norfolk
Southern Corp <NSC.N> have each spent between $3 million and $4
million during the same period. Union Pacific is the biggest U.S.
railroad, while CSX is third and Norfolk Southern is fourth.
The records don't break down how much these companies spent
specifically on oil train regulations and related issues.
BNSF lobbies the government on a range of issues, and crude-by-rail
represents a small part of those efforts, spokesman Michael Trevino
said. He also said the company supports the study and testing of ECP
brake technology before implementation.
Berkshire Hathaway did not immediately respond to a request for
comment. A Phillips 66 spokesman said the refiner is committed to
being a "safety leader" and will comply with the new oil train
standards.
AAR has asked the U.S. Department of Transportation to throw out the
brake requirement and enhance other security measures involving tank
cars. AAR President and Chief Executive Officer Edward Hamberger
declined to comment because the group's appeal is pending. An AAR
official said the group made sure lawmakers had "pertinent
information" about the issue.
CRUDE BY RAIL BOOM
The series of oil train explosions in recent years follows a boom in
U.S. shale oil production, notably in the Bakken region of North
Dakota. Bakken crude has helped reduce U.S. dependence on foreign
oil but is also considered more volatile and flammable than heavier
crudes.
Because the landlocked Bakken region is not easily accessed by oil
pipelines, rail provides the main transportation route. The result
has been a bonanza in the crude by rail business. Shipments surged
to more than 350 million barrels in 2014 from less than 680,000
barrels in 2008, according to industry data.
BNSF has been the biggest beneficiary. In 2013, the railroad hauled
324,206 carloads of crude oil, about three quarters of the
industry's total volume of 435,560 carloads, according to data
provided by the company and AAR.
But BNSF also has been involved in six of the 18 U.S. oil train
derailments since the Lac-Megantic disaster, second only to CSX,
which has had seven. The latest BNSF derailment was in Heimdal,
North Dakota, on May 6. Ten cars left the rails. The crude caught
fire, forcing the town of 40 to evacuate.
The Transportation Department disputes the industry's claim that the
new regulations would cost $3 billion: over 20 years, officials say
the cost would be $492 million, offset by $426 million to $1.7
billion in benefits.
Without the ECP brake and other new federal safety rules including
thicker tank car hulls, damages from "high consequence events" could
reach $12.6 billion over the next 20 years, the department says.
Senator John Thune of South Dakota, who chairs the Senate Commerce
Committee and authored the ECP repeal measure, was not available to
comment. Frederick Hill, the committee's Republican spokesman, said
the measure would still require railroads to equip oil trains with
ECP brakes beginning in 2021 should new research demonstrate the
technology's benefits.
(Reporting by David Morgan. Editing by So Young Kim and John
Pickering)
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