Following the Tragedy at Lac-Mégantic shipping Crude Oil by Train in Canada will be more Costly

Posted by PITHOCRATES - April 27th, 2014

Week in Review

On July 6, 2013, a 4,701 ft-long train weighing 10,287 tons carrying crude oil stopped for the night at Nantes, Quebec.  She stopped on the mainline as the siding was occupied.  The crew of one parked the train, set the manual handbrakes on all 5 locomotives and 10 of the 72 freight cars and shut down 4 of the 5 locomotives.  Leaving one on to supply air pressure for the air brakes.  Then caught a taxi and headed for a motel.

The running locomotive had a broken piston.  Causing the engine to puff out black smoke and sparks as it sat there idling.  Later that night someone called 911 and reported that there was a fire on that locomotive.  The fire department arrived and per their protocol shut down the running locomotive before putting out the fire.  Otherwise the running locomotive would only continue to feed the fire by pumping more fuel into it.  After they put out the fire they called the railroad who sent some personnel out to make sure the train was okay.  After they did they left, too.  But ever since the fire department had shut down that locomotive air pressure had been dropping in the train line.  Eventually this loss of air pressure released the air brakes.  Leaving only the manual handbrakes to hold the train.  Which they couldn’t.  The train started to coast downhill.  Picking up speed.  Reaching about 60 mph as it hit a slow curve with a speed limit of 10 mph in Lac-Mégantic and jumped the track.  Derailing 63 of the 72 tank cars.  Subsequent tank car punctures, oil spills and explosions killed some 47 people and destroyed over 30 buildings.

This is the danger of shipping crude oil in rail cars.  There’s a lot of potential and kinetic energy to control.  Especially at these weights.  For that puts a lot of mass in motion that can become impossible to stop.  Of course, adding safety features to prevent things like this from happening, such as making these tank cars puncture-proof, can add a lot of non-revenue weight.  Which takes more fuel to move.  And that costs more money.  Which will raise the cost of delivering this crude oil to refineries.  And increase the cost of the refined products they make from it.  Unless the railroads find other ways to cut costs.  Say by shortening delivery times by traveling faster.  Allowing them an extra revenue-producing delivery or two per year to make up for the additional costs.  But thanks to the tragedy at Lac-Mégantic, though, not only will they be adding additional non-revenue weight they will be slowing their trains down, too (see Rail safety improvements announced by Lisa Raitt in wake of Lac-Mégantic posted 4/23/2014 on CBC News).

Changes to improve rail safety were announced Wednesday by federal Transport Minister Lisa Raitt in response to recommendations made by the Transportation Safety Board in the aftermath of the tragedy in Lac-Mégantic, Que.

The federal government wants a three-year phase-out or retrofit of older tank cars that are used to transport crude oil or ethanol by rail, but will not implement a key TSB recommendation that rail companies conduct route planning when transporting dangerous goods…

There are 65,000 of the more robust Dot-111 cars in North America that must be phased out or retrofitted within three years if used in Canada, Raitt said, adding, “Officials have advised us three years is doable.”  She said she couldn’t calculate the cost of the retrofits, but told reporters, “industry will be footing the bill…”

The transport minister also announced that mandatory emergency response plans will be required for all crude oil shipments in Canada…

Raitt also said railway companies will be required to reduce the speed of trains carrying dangerous goods. The speed limit will be 80 kilometres an hour [about 49 mph] for key trains, she said. She added that risk assessments will be conducted in certain areas of the country about further speed restrictions, a request that came from the Canadian Federation of Municipalities…

Brian Stevens head of UNIFOR, which represents thousands of unionized rail car inspectors at CN, CP and other Canadian rail companies, called today’s announcement a disappointment.

“This announcement really falls short, and lets Canadians down,” he told CBC News.

“These DOT-11 cars, they should be banned from carrying crude oil immediately. They can still be used to carry vegetable oil, or diesel fuel, but for carrying this dangerous crude there should be an immediate moratorium and that should have been easy enough for the minister to do and she failed to do that.

“There’s a lot of other tank cars in the system that can carry crude,” Stevens explained. “There doesn’t need to be this reliance on these antiquated cars that are prone to puncture.”

Industry will not be footing the bill.  That industry’s customers will be footing the bill.  As all businesses pass on their costs to their customers.  As it is the only way a business can stay in business.  Because they need to make money to pay all of their employees as well as all of their bills.  So if their costs increase they will have to raise their prices to ensure they can pay all of their employees and all of their bills.

What will the cost of this retrofit be?  To make these 65,000 tank cars puncture-proof?  Well, adding weight to these cars will take labor and material.  That additional weight may require modifications to the springs, brakes and bearings.  Perhaps even requiring another axel or two per car.  Let’s assume that it will take a crew of 6 three days to complete this retrofit per tank car (disassemble, reinforce and reassemble as well as completing other modifications required because of the additional weight).  Assuming a union labor cost (including taxes and benefits) of $125/hour and non-labor costs equaling labor costs would bring the retrofit for these 65,000 tanks cars to approximately $2.34 billion.  Which they will, of course, pass on to their customers.  Who will pass it on all the way to the gas station where we fill up our cars.  They will also pass down the additional fuel costs to pull all that additional nonrevenue weight.

Making these trains safer will be costly.  Of course, it begs this burning question: Why not just build pipelines?  Like the Keystone XL pipeline?  Which can deliver more crude oil faster and safer than any train can deliver it.  And with a smaller environmental impact.  As pipelines don’t crash or puncture.  So why not be safer and build the Keystone XL pipeline in lieu of using a more dangerous mode of transportation that results in tragedies like that at Lac-Mégantic?  Why?  Because of politics.  To shore up the Democrat base President Obama would rather risk Lac-Mégantic tragedies.  Instead of doing what’s best for the American economy.  And the American people.  Namely, building the Keystone XL pipeline.

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Americans want ever more Free Stuff as the Founding Fathers feared they would under Mob Rule

Posted by PITHOCRATES - April 27th, 2014

Week in Review

Let’s imagine you buy your groceries a different way.  Instead of going to the store and picking things off of the shelves and paying for them at checkout imagine this.  You don’t pay the store.  A third party does.  Like it does for everyone else that shops at this store.  Sounds great, doesn’t it?  Let’s say people pool their money together for purchasing power.  And have this third party take that pooled money and use it to get better pricing.  Because of the large amounts they will be paying for.

So everyone pays in a monthly amount to their third-party purchaser.  Then goes to the store and takes what they want.  And at checkout they just sign an invoice to acknowledge they took this stuff.  And the store will submit the bill to the third-party purchaser.  Of course, there would have to be some rules.  Because if everyone pays a flat amount each month you can’t have someone picking up steaks every day when you’re buying hamburger for your kids.  So there are limits to what you can buy.  Requiring the third party to review every submitted invoice.  Requiring a very large staff to review every grocery store purchase to approve and disapprove line items on each and every invoice for payment.  To resolve billing and payment errors.  And to bill shoppers for any unapproved purchases they made.  Even if they didn’t understand that these items weren’t covered.

So, included with that monthly payment there must be an overhead fee.  To pay for all those people reviewing those invoices.  Those who bill shoppers for unapproved items.  Those who pay for the approved purchases.  And those who process payments from shoppers.  Still, things slip through the cracks.  People are getting unapproved purchases through the system.  Grocery prices rise.  The overhead costs at the third party grow due to new costly regulations.  Etc.  Such that on occasion the total amount of cash out at the third party exceeds the total of cash in.  Requiring them to raise the monthly amount everyone pays.

Sounds a bit more complicated than just going to the store and paying for what you want out of pocket.  And more costly in the long run.  But if someone else pays the third party for those monthly fees it’s a whole different story.  Say as a benefit at work.  Because without you having to pay anything it’s just free groceries.  At least, to you.  And you will demand that your employer pays for more stuff so it’s free to you.  Even though it’s not.  Because the rising cost of third party grocery purchases will cost your employer.  Which will limit your pay.  And other benefits.  Because in the real world nothing is free.  Even if people think that a lot of stuff is free.  Or should be free.  Like health care (see Nearly 7 in 10 Americans say health plans should cover birth control by Karen Kaplan posted 4/22/2014 on the Los Angeles Times).

Among the various provisions of the Affordable Care Act, few are as controversial as the one requiring health insurance providers to include coverage for contraception. A new survey finds that support for this rule is widespread, with 69% of Americans in favor of the mandate…

Women, African Americans, Latinos and parents living with children under the age of 18 had higher levels of support for mandatory contraception coverage than people in other demographic groups, the survey found…

— 85% of those surveyed supported mandatory coverage for mammograms and colonoscopies.

— 84% supported mandatory coverage for recommended vaccines.

— 82% were in favor of mandatory coverage for diabetes and cholesterol screening tests.

— 77% backed the provision on mandatory coverage for mental health care.

— 75% supported mandatory coverage of dental care, including routine cleanings.

There’s a reason why the United States is a republic and not a democracy.  For the Founding Fathers feared a democracy.  And wanted responsible people between the people and the treasury.  For once people understood they could vote themselves the treasury they would.  And things like this would happen.  Mob rule.  Where the mob demands more and more free stuff while fewer and fewer people pay for that ‘free’ stuff.  And people in government anxious to win elections will keep giving the people more ‘free’ stuff that others have to pay for.  Until one day you end up with the health care system we have in the United States.  All because other people were paying for routine costs people could expect and budget for.  Things that if they paid out of pocket for would cost less in the long run.  Which would keep insurance what it was supposed to be.  Insurance.  And not turn it into a massive cost transfer scheme that only allowed the price of health care to soar.

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