Leaky Valves on US Oil Railcars to be Replaced

The U.S. Federal Railroad Commission on Friday said about 6,000 tank railcars that carry crude oil and other hazardous materials have valves that can leak and must be replaced within 60 days.

The valves, manufactured by Berkshire Hathaway (BRK-B) Inc-owned McKenzie Valve & Machining LLC, are inconsistent with a design approved by the American Association of Railroads, the FRA said. Certain closure plugs on the 3-inch valves can damage seals and cause leaks.

Similar 1-inch and 2-inch McKenzie-manufactured valves also must be replaced within 90 days, the FRA said. Even though they were not found to leak, they also are not approved for use on tank cars, the agency said.

McKenzie has sold 37,000 of those smaller valves, the FRA said.

"The removal and replacement of these valves are not expected to significantly disrupt freight rail traffic," the FRA said.

McKenzie referred inquiries to Berkshire-owned Union Tank Car, which manufactured many of the affected tank cars. The company did not immediately respond to inquiries.

The FRA has investigated several valve leaks, ranging from a few gallons to 38 barrels, that occurred when the loaded trains were en route to their destinations.

One involved a 100-car crude train bound for Tesoro Corp's refinery in Washington state in January. The FRA found seven railcars had leaked about 5 gallons of oil each.

Tesoro said on Friday that the company idled railcars in its fleet with the defective valves in January that were manufactured by McKenzie and installed on railcars built by Union Tank Car.

Tesoro said those railcars will not resume hauling crude until the valves are replaced, but the company has adequate additional cars to fill in until those repairs are complete.

Another leak involved a train that arrived with oil-stained railcars at BP Plc's Washington refinery in November. The train's cargo's load was 38 barrels lighter upon arrival, according to a study released this month by Washington's Department of Ecology.

Both trains were loaded with North Dakota Bakken crude and hauled by Berkshire-owned BNSF Railway Co.

The approximate 6,000 railcars with the leak-prone valves include both the latest design adopted by the industry in October 2011 and an older type, FRA spokesman Mike Booth said.

The FRA also said it would audit the AAR's valve approval process. AAR said it supported the FRA's replacement order and would work with the agency to ensure its approval requirements are satisfactory.

(Reporting by Kristen Hays; Editing by Lisa Shumaker)