The nation's oil refiners are suing BNSF Railway for adding a $1,000 surcharge to crude oil shipments in standard tank cars to force shippers to switch to safer cars that are not yet required by federal regulators and are not yet available, according to the lawsuit.
The American Fuel & Petrochemical Manufacturers sued BNSF last week in U.S. District Court in Houston.
AFPM is a trade association of 120 U.S. oil refinery operators, which account for 95 percent of the nation's refining capacity.
BNSF is the largest transporter of crude oil in North America and is carrying more than half the crude oil produced from the Bakken formation in North Dakota and Montana.
A large portion of the rail cars used to ship oil are DOT 111 tank cars, and as of Jan. 1, BNSF levied a $1,000 surcharge on oil shipments in those cars, as the railroad said last year it would. Railroads don’t own most of the tank cars used to transport oil, the shippers do.
Safety standards that govern oil tank cars are set by the Pipeline and Hazardous Materials Safety Administration, part of the U.S. Department of Transportation. The White House Office of Management and Budget is reviewing a new tank car standard proposed by the Department of Transportation. It is overdue and is scheduled for publication on May 12.
The purpose of the surcharge is to force shippers to retrofit or retire the federally authorized DOT 111 railcars, and BNSF has admitted as much, the lawsuit said, even though a new generation of cars has not yet been manufactured. As a common carrier, the refiners said, BNSF is obliged to carry freight under the safety agency's terms.
They want the surcharge nullified. BNSF did not offer a response to the lawsuit Monday. One DOT-111 tank car holds about 30,000 gallons, or 700 barrels of oil. The complaint says the $1,000 surcharge adds $1.50 per barrel in rail transportation costs.
With the rise of hydraulic fracking, rail shipments of crude oil increased from around 10,000 carloads in 2008 to more than 400,000 in 2013, according to the Association of American Railroads.
In the past month, there have been four derailments of trains hauling crude oil, two in Ontario, Canada, one in Illinois and one in West Virginia, some with spectacular explosions.
In another development, on Friday the Federal Railroad Administration ordered rail tank car owners to replace defective valves never approved for installation on thousands of tank cars, which caused oil to spill from moving trains.
The valves were all manufactured and sold by McKenzie Valve and Machining, a company in Tennessee.
Ed Greenberg, a spokesman for the American Association of Railroads, said it supported the order.
The cars on which the valves were installed were CPC-1232 model cars built after 2011, which some oil companies have started using after the safety of the older DOT-111 rail cars was called into question.
But newer CPC-1232-standard cars that lack features that reduce damage from punctures and fire exposure have performed no better in the four recent oil train derailments in West Virginia, Illinois and Ontario.