RSI report: Proposed tank-car rule could carry $60 billion price tag

A proposed tank-car rule could cost the economy as much as $60 billion, according to a new report prepared by economic research firm The Brattle Group for the Railway Supply Institute Committee on Tank Cars (RSI-CTC).

The committee submitted the report to the U.S. Pipeline and Hazardous Materials Safety Administration (PHMSA), which proposed the rule in July. The high price tag associated with the rule largely is due to the costs of modal shifts from rail to highways, potential modifications to tank cars, early retirement of existing tank cars and lost service time for tank cars under modification or awaiting modification, the report states.

"The numbers show that almost two-thirds of tank cars will need to be idled for some period of time during the proposed modification program,” said Kevin Neels, a Brattle Group principal and the report's co-author, in a press release. "Almost 1 million tank car years of capacity could be lost due to early retirement and idle time associated with cars awaiting modification."

Indirect effects of the proposed rule could be severe, such as higher gasoline prices due to decreased crude production, a reduction in ethanol production that would impact U.S. requirements to blend gasoline with ethanol, and constrained shop capacity because of an overly aggressive timetable for tank-car modifications, which potentially could result in transportation shortages for other commodities, the report states.

"The Railway Supply Institute Committee on Tank Cars is committed to aiding in the creation of a comprehensive industry response that will enhance the safe transportation of crude oil and ethanol by rail," said Railway Supply Institute President Tom Simpson. "Our experts have submitted a tank car-related proposal to PHMSA that will do just that. We have been calling on DOT since 2011 to identify tank car standards that can be efficiently and rapidly implemented."

The RSI-CTC’s proposal to PHMSA supports nearly all elements of the prescribed requirements in the proposed rule's third option involving modification requirements for existing tank cars, according to RSI. Specifically, modifications would include jackets if necessary, full-height head shields, a reconfigured bottom outlet valve handle and reclosing pressure relief valve, and a thermal protection system that meets the 100-minute pool fire requirement, RSI officials said. 

In contrast to the proposed rule, the RSI-CTC modification timeline would more realistically account for the shop capacity available to carry out the required modification work and avoid many of the penalties, inefficiencies and capacity shortages associated with "an overly aggressive timeline," they said. Car modifications would be prioritized to address tank cars that would benefit most from initial modifications.