Thursday, May 7, 2015

WHILE WAR AND BUFFET RAKES IN THE CASH FROM HIS DANGEROUS BNSF RAILROAD, THE ENVIRONMENT TAKES A BEATING.






Nov. 10 (Bloomberg) -- Days after Warren Buffett announced his $26.5 billion buyout of railroad BNSF, he insisted that he’d paid a steep price to own a business that would benefit his company, Berkshire Hathaway Inc., over the next century. 

“You don’t get bargains on things like that,” he said in a November 2009 interview with Charlie Rose that aired on PBS. “It’s not cheap.” 

Five years later, that assessment rings a bit hollow. Buoyed by an onshore oil boom, BNSF has become a cash machine for Buffett. The railroad had sent more than $15 billion in dividends to Berkshire through Sept. 30, according to quarterly regulatory filings, the latest of which was released last week. More stunning: The business is on pace to return all the cash Buffett spent taking it private by the end of this year. 

Annual revenue at the railroad has risen 57 percent, and earnings more than doubled to $3.8 billion since Buffett bought it. Sales have climbed even as BNSF faced increased public scrutiny over service delays and safety. 

“He stole it,” said Jeff Matthews, a Berkshire shareholder and author of books about the company. “He’s got to feel really good that he bought it when he did, because it’s a wonderful asset, and it’s done nothing but get more valuable in the time that he’s owned it.” 

The railroad’s profit continued its climb in the third quarter as revenue from agricultural and industrial shipments, including oil, rose. The business accounted for more than a fifth of Omaha, Nebraska-based Berkshire’s net income in the period, according to a Nov. 7 regulatory filing. 

Oil Glut
Berkshire’s third-quarter profit slipped 8.6 percent to $4.62 billion on investment results, including the impairment of a holding in U.K. retailer Tesco Plc. Buffett’s company climbed 0.7 percent to $216,525 at 9:33 a.m. in New York trading after operating earnings beat analysts’ estimates on gains at units including the railroad. 

BNSF’s tracks sit on top of North Dakota’s Bakken formation, where energy producers are using fracking and other extraction methods to pull crude from the ground in unprecedented volumes. Because pipeline capacity is limited in the area, oil companies have turned to BNSF to ship their product to refineries.
The extra freight has exacerbated weather-related train tie-ups that the railroad has spent months working to resolve. In June, the U.S. Surface Transportation Board ordered BNSF and Canadian Pacific Railway Ltd. to report plans for resolving the delays. 

Below Standards
At a hearing in North Dakota in September, state officials urged the railroad to improve service. BNSF has said it’s adding workers and rail cars to improve operations. In the filing last week, Berkshire said that the railroad’s service is still “well below” its standards. 

The expansion of crude shipments has also created risks for the industry. Derailments of oil tank cars in the U.S. and Canada have led to fires, spills and the bankruptcy of smaller carrier Montreal, Maine & Atlantic Railway Ltd. after a derailment in Quebec last year that killed 47 people. 

BNSF has worked to allay concerns about oil shipments by agreeing to buy 5,000 safer tank cars. It has also announced plans to apply a surcharge on an older generation of cars that have been involved in some of the worst accidents.
Investments like those have been common since Berkshire took over. The railroad budgeted a record $5 billion this year to upgrade its network, expand facilities and buy equipment. That’s about $1 billion more than it spent in 2013. 

Cash, Stock
Even with those increasing outlays, BNSF’s climbing earnings have helped make the multiple that Buffett paid look small. Berkshire was already the railroad’s largest shareholder when he agreed to buy out the remaining 77.5 percent of the company. The price included Berkshire stock and $15.9 billion in cash. Since the beginning of 2011, the railroad has paid distributions to its parent of at least $750 million a quarter. 

Union Pacific Corp., BNSF’s main competitor in the western U.S., currently trades for about 12.6 times annual pretax, pre-interest income, according to data compiled by Bloomberg. Were Buffett’s railroad to fetch that kind of price now, 77.5 percent of it would be worth about $66.5 billion -- more than double what Berkshire paid. 

Part of Buffett’s success with BNSF comes down to luck, said James Armstrong, who oversees Berkshire shares as president of Henry H. Armstrong Associates. Very little crude was being shipped by rail when Buffett bought the company and it wasn’t widely known that BNSF would play such a big role in transporting oil from where it was produced. 

Luck aside, there’s little upside for Buffett in bragging, said Armstrong. Berkshire is always looking to buy other businesses and it needs to have a reputation for paying fair prices, he said. 

“It’s never in Buffett’s interest to indicate that he got a bargain, even though that’s what he’s shooting for,” Armstrong said. “He has to manage other people’s perception of him.”





ANOTHER ENVIRONMENTAL DISASTER IS UNLEASHED IN NORTH DAKOTA BY WAR AND BUFFET’S DANGEROUS RAILROAD BNSF.  WHILE HE RAKES IN THE CASH, HE BLAMES THE OIL COMPANIES FOR THE EXPLOSIONS AND FIRES. 

The entire population of  Heimdal, North Dakota has been evacuated Wednesday morning after a train carrying crude oil derailed and exploded.

A BNSF Railway oil train derailed around 7:30 am, setting at least 10 oil tanker cars on fire. The Bismarck Tribune spoke with emergency responders who "said the the sky was black with smoke near the derailment site."

About 40 people from Heimdal and the surrounding farmlands were evacuated; no injuries or fatalities have been reported.

"As this accident demonstrates, people, wildlife, rivers and lakes will continue to pay the price for the government’s failure to take steps to adequately protect us from these dangerous oil trains."

—Jared Margolis, Center for Biological Diversity
Valley News Live reports that BNSF spokesperson Amy McBeth "says the tank cars involved in the incident are the unjacketed CPC-1232 models."
These newer tank cars are supposedly safer than older DOT-111 models, but environmentalists note that four oil train accidents in the first three months of 2015 all involved the newer CPC-1232 cars.

Just last week, groups warned that the U.S. Department of Transportation's new oil-by-train safety standards "leave communities at risk of catastrophe."
On Wednesday morning, the people of Heimdal saw such a catastrophe up close.

The lesson was not lost on Earthjustice attorney Kristen Boyles, who said in a statement: "Again another derailment and explosion of a train carrying crude. Again another community evacuated and its people counting their blessings this didn’t happen half a mile down the track in the middle of town."

"We need to get these exploding death trains off the tracks now."
—Kristen Boyles, Earthjustice

She pointed out that "under the Department of Transportation’s new rules, the type of oil tank cars that are burning in Heimdal will stay on the rails for five to eight years. DOT’s new industry-pleasing rule is too weak and too slow. We need to get these exploding death trains off the tracks now."

"We will continue to see these fiery derailments even with the new regulations in place, because they fail to take sufficient actions to prevent oil trains wrecks," echoed Jared Margolis, an attorney for the Center for Biological Diversity. "As this accident demonstrates, people, wildlife, rivers and lakes will continue to pay the price for the government’s failure to take steps to adequately protect us from these dangerous oil trains."

CBD and Earthjustice are among many organizations calling for an immediate moratorium on so-called "bomb trains."

As Margolis added Wednesday, "It's dangerous and irresponsible to allow these trains—which have shown a propensity for going off the rails—to come through our communities and across some our most pristine landscapes."

The easiness with which these trains derail and explode makes it clear that very little can be done to prevent these explosions and fires.  The railroad industry is a "cheapskate" type of business.  They do not make much money (so they claim) and they have been under-invested in infrastructure improvements for many-many-many years.  The situation is helpless.  Besides, it costs much less money to them to deal with these disasters and explosions and fires than to improve the railroad and tank car safety.

The oil and gas industry is another "cheapskate" type of business, despite the amounts of profits they make.  They always spend the minimum amount on safety, as it affects their bottom line by lowering their profits without increasing oil or gas production.  

Two cheapskates (railroads  and oil and gas industries) come together and we have multiple of explosions and fires and property damage.  Stay tuned, as things will not improve by any measurable degree.



WAR AND BUFFET PROMISES TO FIX HIS TRAIN DISASTERS AFTER LATEST BNSF OIL TRAIN CABOOM IN NORTH DAKOTA.  MEANWHILE, HAVE A COKE ON HIM

MAY 6, 2015

BISMARCK, N.D. (AP) — A train that derailed and caught fire early Wednesday in rural North Dakota was hauling crude from the state's oil patch, raising questions about whether new state standards intended to reduce the volatility of such shipments are sufficient.

The six tank cars that exploded into flames were a model slated to be phased out or retrofitted by 2020 under a federal rule announced last week.
It's the fifth fiery accident since February involving that type of tank car, and industry critics responded to the latest with calls for them to be taken off the tracks immediately to prevent further fires.

No injuries were reported in the derailment of the 109-car BNSF railway train at around 7:30 a.m. That prompted the evacuation of the 20-resident town of Heimdal, about 115 miles northeast of Bismarck.

The Health Department was monitoring air quality and advising people not to breathe in the smoke. The danger from the smoke was mainly the particles it contains such as ash, not toxic chemicals, State Environmental Health Chief Dave Glatt said. Rain might have helped wash some of the particles out of the smoke, though it might also keep the plume closer to the ground and more likely to be encountered by people, he said.

In the immediate aftermath of the accident, BNSF vice president Mike Trevino said, the intensity of the blaze prevented firefighters from directly attacking the flames. As of Wednesday evening, two cars out of six continued to burn, he said.

State officials initially reported 10 cars on fire but later revised that to six. They were hauling Bakken oil loaded in the Tioga area, said Jeff Zent, spokesman for Gov. Jack Dalrymple.

The six cars that caught fire were carrying approximately 180,000 gallons of oil, Trevino said. Investigators haven't been able to get close enough to the spill to determine how much of the oil burned off, spilled or remained in the cars, authorities said.

Curt Benson, a 68-year-old retired sheriff who alerted authorities, said he was getting ready for the day when the explosion outside town rattled his house. With the large number of oil trains that come through the community each day, he figured that was the cause.

"I got in my car, still in my underwear, had shaving cream on my face, and drove down there," he said.

There was no immediate word on the cause.
Industry representatives and state officials said oil companies have been complying with a standard that went into effect April 1 requiring them to remove propane, butane and other gases that occur in North Dakota crude to reduce the chance of tank cars catching fire. There was nothing to immediately indicate a violation of that rule with the train involved in Wednesday's accident.
The crude in the tank cars was being shipped by the Hess Corporation, and regulators were seeking details on tests of the crude done by the Texas-based company prior to the accident, said Federal Railroad Administrator Sarah Feinberg.

Hess representatives did not immediately respond to a request for comment.
North Dakota officials said the new standard makes the volatility of treated oil comparable to unleaded gasoline.

Members of Congress, who have called for a stricter standard to be imposed at the federal level, said Wednesday's accident underscored that more needs to be done to prevent oil train fires that could cause a major disaster in an urban area. In 2013, a train loaded with crude from the Bakken region derailed and exploded in the small town of Lac-Megantic, Quebec, killing 47 people.

"With trains carrying this highly-explosive material by homes, schools and businesses each day, we need a strong national volatility standard as opposed to a patchwork of state laws," said U.S. Rep. Nita Lowey of New York, the ranking Democrat on the House Appropriations Committee.

Tessa Sandstrom with the North Dakota Petroleum Council said safety efforts should instead focus on preventing accidents through enhanced inspections of tracks and railroad equipment.

The rail line through Heimdal runs next to an intermittent waterway known as the Big Slough, which drains into the James River about 15 miles downstream near Bremen, North Dakota.

There were preliminary indications that some oil from the derailed cars got into Big Slough, but it will be difficult to verify until the fire dies down, Glatt said. In a similar incident outside Casselton, North Dakota, in December 2013, almost all of the spilled oil was consumed in the fire, he said.

The Federal Railroad Administration, the National Transportation Safety Board and the Environmental Protection Agency all sent investigators. The EPA planned to gauge any contamination to waterways in the vicinity, spokesman Rich Mylott said.

Since 2006, the U.S. and Canada have seen at least 24 oil train accidents involving a fire, derailment or significant amount of fuel spilled. Wednesday's derailment comes after the Department of Transportation announced a rule Friday to toughen construction standards for tens of thousands of tank cars that haul oil and other flammable liquids.

Feinberg said the Heimdal accident was "yet another reminder" of the need for changes that have been resisted by the oil industry, which has said it could take more than a decade to get unsafe tank cars replaced or off the tracks. She said federal officials planned additional steps to improve oil train safety but offered no specifics.

The cars that derailed were constructed under a 2011 voluntary rail industry standard intended to make them tougher than older cars that were long known to pose a safety risk. But the new cars, each carrying 30,000 gallons of fuel, have proved equally dangerous.

Roughly 22,000 of the new cars that are used to haul crude oil lack an extra layer of protection to shield them against fires or explosions.

The easiness with which these trains derail and explode makes it clear that very little can be done to prevent these explosions and fires.  The railroad industry is a "cheapskate" type of business.  They do not make much money (so they claim) and they have been under-invested in infrastructure improvements for many-many-many years.  The situation is helpless.  Besides, it costs much less money to them to deal with these disasters and explosions and fires than to improve the railroad and tank car safety.

The oil and gas industry is another "cheapskate" type of business, despite the amounts of profits they make.  They always spend the minimum amount on safety, as it affects their bottom line by lowering their profits without increasing oil or gas production.  

Two cheapskates (railroads  and oil and gas industries) come together and we have multiple of explosions and fires and property damage.  Stay tuned, as things will not improve by any measurable degree.