The tank-car industry is expecting a flood of new orders once the United States finalizes rules intended to reduce spills and explosions when oil trains derail.
Washington is expected in May to harmonize its tank-car standards with those of Ottawa, which on Wednesday proposed new designs with thicker, ceramic-lined tanks, full-height shields at each end and improved protection over the valves.
The companies that manufacture tank cars for flammable goods in North America have an order backlog of 57,625, according to industry group Railway Supply Institute, as shippers of crude scramble to stay ahead of bans on older cars.
The handful of companies that make the rail cars have been adding capacity to meet rising demand and are expected to deliver at least 40,000 this year, up from about 35,000 in 2014. In addition, these same companies are able to upgrade at least 8,500 older tank cars to meet the new standards at a cost that can exceed $60,000 (U.S.) per car. Manufacturers do not not reveal prices, but tank cars built to the newest standards sell for less than $200,000, and cost about 25 per cent more than the older models.
"The rail car manufacturing and retrofit industry is more than able to meet this challenge," said Jack Isselmann, a vice-president with Greenbrier Cos., which makes a variety of rail cars and marine barges at factories in North America, Brazil and Europe. Mr. Isselmann said the company wants Washington to issue its new rules "immediately."
The plunge in crude prices has dampened the rise in orders for tank cars. At the same time, the urgency to replace older tank cars has been complicated by the length of time governments in Canada and the United States have taken in issuing new rules. Washington's rules are not expected until May, but tank-car makers have been going ahead with a model that matches the standards Ottawa proposed on Wednesday.
"I think a nearly two-year waiting period for resolution is complicating customers' buying decisions," Mr. Isselmann said by phone from Lake Oswego, Ore. "Customers are looking at the pending rule making with anticipation."
The new design is in response to the 2013 oil train derailment and explosions in Lac-Mégantic, Que., which killed 47 people and highlighted the dangers of moving an ever-increasing amount of oil in tank cars that were not designed for such service. The tank cars that exploded in Lac-Mégantic were known as DOT-111s, a model Ottawa has banned from crude oil service by May, 2017, unless they are made more crashworthy.
Ottawa says 147,000 DOT-111 tank cars are hauling flammable liquids on North American railways, and 80,000 of these were built before 2011.
But since the tragedy, even tank cars that were improved after 2011, known as CPC-1232 models, have proven to be prone to puncturing and fires in a derailment, including four in the past few weeks.
Ottawa says these tank cars can continue hauling oil and ethanol until between 2023 and 2025, when the new standard, which the government has labelled TC-117, becomes the law.