BNSF Restrictions Creates Rush for New Tank Cars

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After BNSF suffered a June derailment that saw ruptured tank cars spill some 230,000 gallons of crude oil spilled into an Iowa river, the class 1 railroad has reportedly responded by limiting the number of retrofitted tank cars called DOT 117Rs.

According to Reuters, BNSF banned the retrofitted cars, which were the type of cars that leaked in the Iowa spill, from all new contracts. The move sent refiners and producers scrambling to lease new tank cars.

BNSF has not confirmed the restriction.

The lease price of new tank cars has more than doubled from $400 a month last year to $1,000 today.

BNSF does not own the tank cars that run on its lines hauling crude oil and ethanol. The cars are owned by companies such as ConocoPhillips, or leased from brokers.

Ironically, BNSF, which is owned by Berkshire Hathaway, is limiting the very tank cars that are retrofitted by UTLX, another Berkshire company. UTLX has retrofitted almost 5,000 DOT-111 tank cars to the new DOT-117R standards.

In 2016, UTLX opened a tank car remanufacturing facility in Marion, Ohio to bring older tank cars up to DOT-117R standards and continue to be used for flammable liquids service.

The retrofits includes new top fittings protection, thermal insulation, an 11-gauge steel jacket, full ½-inch thick head shields, and a bottom outlet valve handle that disengages from the valve when the car is in transit.

© 2018 David Mazor

Disclosure: David Mazor is a freelance writer focusing on Berkshire Hathaway. The author is long in Berkshire Hathaway, and this article is not a recommendation on whether to buy or sell the stock. The information contained in this article should not be construed as personalized or individualized investment advice. Past performance is no guarantee of future results.

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