Canada moves up crude tank car retrofit date

OREANDA-NEWS. July 27, 2016. Canada has accelerated its crude-by-rail tank car retrofitting program, mandating that older tank cars be taken out of service eight months early, by 1 November.

Approximately 28,000 tanker cars will be affected by the new 1 November deadline, announced yesterday by Canada's Ministry of Transport. A spokesman for the ministry said the move was prompted by the recent drop in crude by rail activity, spurred by lower oil prices.

The fast-tracked retrofit schedule will affect DOT-111 tanker cars originally scheduled to be phased out by 1 May 2017. DOT-111 tankers jacketed with an extra metal layer, which were to be taken out of service a year later, also fall under the new timeline.

The move puts Canada ahead of the US in tightening its safety rules around shipping oil by rail. Under US regulations, DOT-111 cars will be allowed to carry oil rated as highly dangerous until early 2018, and crude rated less dangerous as late as May 2023.

The rulings were set into motion following the deaths of 47 people after a train derailed and exploded in Lac-Megantic, Quebec, in 2013. An investigation into the accident suggested the DOT-111 cars were prone to puncturing during derailments.

Strong oil prices and constrained pipeline capacity saw Canadian producers jockey for space on rail cars in recent years. Shipments by rail rose from 9,375 b/d in January 2012 to an all-time high of 178,989 b/d in September 2014.

Low prices and new pipeline capacity has since taken the edge off demand for the higher-cost transportation method, but there are signs of a possible turnaround. In April 108,591 b/d were exported by rail, a 23pc year-over-year increase that's the largest since September 2014, according to the National Energy Board. Analysts predict that with new rail terminals on line and expansions planned that volume could double by 2017.