BNSF Won't Face Trial Over Surcharge on Older Oil Tank Cars

BNSF Railway Co. won’t face a refining industry challenge to the $1,000 surcharge the nation’s largest oil hauler slapped on older-model tank cars it claimed can’t safely ship highly volatile crude from shale formations such as North Dakota’s Bakken region.

U.S. District Judge David Hittner of Houston agreed with BNSF that the dispute should be decided by the federal Surface Transportation Board, which has the exclusive right to set rail shipping rates. On March 11, he threw out the challenge, which was lodged last year by the largest trade group of U.S. refining and petrochemical makers, according to court records.

The crude processors, which own the tank cars, complained the shipping surcharge was BNSF’s attempt to prematurely retire as much as 28 percent of the nation’s rail tanker fleet, even though the older cars still meet federal safety guidelines. Newer tank cars feature thicker or doubled outer walls that make them less prone to ruptures.

The older-model tank cars have been implicated in several fiery rail disasters, in which Bakken crude cargoes exploded or burned as the cars derailed or crashed. One runaway oil train crashed and killed 47 people in Quebec in 2013.

The petrochemical makers and refiners complained the railroad’s surcharge added $1.50 per barrel to their shipping costs at a time when crude prices were plummeting.

The case is American Fuel & Petrochemical Manufacturers v. BNSF Railway Co., 15-00682, U.S. District Court, Southern District of Texas (Houston).

To contact the reporter on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com. To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net, Lynn Doan

By: Laurel Brubaker Calkins

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