BNSF Railway Adds $1,000 Surcharge to Older Oil Tank Cars

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As a common carrier, Berkshire Hathaway’s BNSF Railway can’t refuse under most circumstances to carry cargo, despite the potential loss or damage presented by the cargo. And, while BNSF’s growing role as a mobile crude oil pipeline has meant billions in new revenue, it also has presented new risks in regards to fire in the event of derailment, collision, or other accidents.

Now, BNSF has stepped up its efforts to ameliorate the financial cost of that risk through a $1,000 surcharge for each older crude oil tank car it transports.

BNSF, which this past February issued an RFP for 5,000 tank cars that meet higher fire and crash standards, will put the surcharge on older DOT-111 tank cars. Each tank car can hold up to 34,500 US gallons, so the charge adds just under 3 cents per gallon, or $1.26 a barrel.

BNSF’s crude oil trains can exceed 100 tank cars and a mile in length, giving the railroad potentially as much as an extra $100,000 in revenue per trainload.

With the Bakken oil boom, the railroad has become the largest transporter of crude oil in North America. The company recently celebrated its 1,000th crude-oil unit train at the COLT rail hub in Epping, North Dakota, which only opened in June 2012.

However, according to the Wall Street Journal, the oil derived from North Dakota’s Bakken shale has an 8 pounds per square inch Reid Vapor Pressure in warmer weather and 12.5 in colder weather. This is significantly higher than oil derived from the Eagle Ford Shale in Texas, and makes safety concerns in regards to older tank cars all the more important.

In addition to transitioning to safer tank cars, BNSF has boosted training for both its crews and emergency responders in communities along its routes. In August, BNSF gave emergency responders from 12 states specialized training focused on managing incidents related to crude oil trains.

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.