By Alex Binkley

Transport Minister Marc Garneau’s order to phase out two classes of tank cars used in transporting crude oil and condensates will complicate the petroleum industry’s logistics challenge but not completely disrupt shipments by rail, which are at record levels.

Brad Herald, Vice-President of Western Canada Operations for the Canadian Association of Petroleum Producers (CAPP), said the earlier than expected retirement of the two older classes of tank cars will be a challenge for the industry as it is struggling to clear as much product as possible. He described management of crude by rail shipments as a continental logistics exercise. In addition to making maximum use of the available tank cars, “we have to make sure there is capacity in the freight yards and on the rail lines to move them.”

Still to come will be a timeline for ending the use of a third class of tank cars in crude and condensate shipments, jacketed CPC 1232 cars. The optimum time for the withdrawal of these cars from hauling crude and condensates will be studied by a working group of industry, railway and government officials under CAPP’s direction, and will recommend a date to Garneau. Jacketed refers to the amount of thermal protection built into the cars to resist burning in the event of a derailment. Herald said Sept. 25 that formation of the working group is still under development. He welcomed the involvement of Transport officials in it. “We understand the working group will have a significant role in the decision,” he said. One of its tasks will be working with counterparts in the United States in managing the North American tank car fleet, which has about 50,000 cars in it.

Garneau said unjacketed CPC 1232 tank cars will be phased out by this Nov. 1 instead of April 1, 2020 as originally planned. As well, they and older DOT 111 tank cars will be barred from carrying condensates, highly volatile flammable liquids produced during crude oil refining, as of next Jan. 1, rather than April 30, 2025 as originally planned. The 111s were removed from crude oil service back on Nov. 1, 2016.

Only jacketed CPC 1232 cars and tank cars built to the TC/DOT 117 standard will be allowed to transport crude oil after Nov. 1 and condensates after next Jan. 1. “Phasing out these least crash-resistant tank cars as soon as possible is another concrete step the government is taking to enhance the safety of communities along our railway lines and to ensure rail continues to provide a reliable method of transportation for our products and commodities,” he said. The phaseout dates came after extensive consultations with industry, Herald said.

CN and Railway Association of Canada (RAC) welcomed the accelerated phaseout of the two classes of tank cars, which they said were older and less crash-resistant models. “Phasing out these cars ahead of schedule will enhance rail safety in Canada,” said RAC President and CEO Marc Brazeau. “Dangerous goods are part of our way of life, and the railway industry continues to work with government to further improve the transportation of these essential commodities across the country.” RAC has long advocated for more robust tank car standards including thicker steel and full-height head shields to protect cars from being punctured, among other safety features, he said. These requirements were reflected in Transport Canada’s TC-117 tank car standard, introduced in May 2015.

CN spokesperson Patrick Waldron said the railway “has long supported the use of more robust tank cars and welcomes the government’s accelerated phaseout. CN has processes in place to prevent cars that don’t meet the tank cars standards and regulations from moving on CN’s network. So we are prepared for these regulatory changes. At this point, cars moving on CN’s network already comply with the non-jacketed CPC 1232 in crude service deadline of Nov. 1. In other words, those cars are not moving on CN’s network for crude service.”

Rail customers and leasing companies own the vast majority of tank cars in service in North America and are responsible for updating and retrofitting their tank car fleets, Transport Canada said. Railways have a common carrier obligation to reasonably accommodate all customers who wish to ship their products, including dangerous goods, in Canada.

Condensates, which are transported in rail tank cars, are a hydrocarbon mixture sourced from liquid recovery units of natural gas production, gas plant, crude oil vapour treatment units and other plant and refinery operations The U.S. removed DOT 111 tank cars from crude oil service back in April, and has set April 2020, the original Canadian deadline, as the end for unjacketed CPC 1232 tank cars in transporting crude oil within the U.S.

The National Energy Board says that for May and June of this year, the latest data available, crude by rail shipments passed 6 million barrels each month, surpassing the previous high of 5.8 million barrels set in April. ARC Energy Research Institute of Calgary, which tracks trends in the petroleum industry, says the demand for rail shipments will continue to grow this year as the existing pipelines are at capacity and the supply of crude oil keeps increasing, and refinery demand in the U.S. remains strong.