Thursday, July 31, 2014

The Man Behind the Exploding Trains

by Eric de Place & Rich Feldman

 Pulling back the curtain on Warren Buffett's role. 

This post is 21 in the series: The Northwest's Pipeline on Rails
“Look for the UTLX logo on tank cars when you watch trains roll by. As a Berkshire shareholder, you own the cars with that insignia. When you spot a UTLX car, puff out your chest a bit…” – Berkshire Hathaway’s 2012 Annual Report
In our previous installment, we explored how unsafe DOT-111s, the Ford Pinto of rail cars, make up the vast majority of oil-filled tank cars now riding the rails in North America. With DOT-111s, there is no margin for error. A serious derailment will almost always lead to oil spills or explosions. But if they are so clearly dangerous, why are these tank cars still on the rails?
The reason, in short, is because the railroad and rail car industries have opposed new safety regulations. (The oil and ethanol industries have abetted their cause.) Citing supposedly onerous costs for retrofitting unsafe tank cars, as well as the related infrastructure to load and unload the products they carry, these companies have successfully argued against rules that would require them to make the upgrades that could prevent the explosions.
Behind many of the industry groups opposing hauling Bakken crude in only safe tank cars is a single figure: Warren Buffett.

Most people don’t realize it, but the tank cars that carry crude oil are not owned by the railroads that run them and are only rarely owned by the shippers who use them. In fact, roughly 80 percent of all the tank cars registered in North America are owned by companies that lease the tank cars to shippers. (Several of the major lessors also manufacture or repair tank cars.) These lessors—the actual owners of the tank cars—are the ones ultimately responsible for the fact that that the vast majority of oil trains today are largely composed of older models so riddled with obvious flaws that federal safety investigators have for years urged the entire fleet be retrofitted.  MORE

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