OT5: What It Is, Why It’s Important

If you’re in the waste business, pay particular attention to the OT5 requirements, especially the ability to store railcars when you’re not using them.

Darell Luther

It takes a very large number and different types of railcars to keep rail shippers commerce flowing every day on North American Railroads. Eight main types of freight railcars make up the consolidated 1.5 million railcars in service. Of these 1.5 million railcars approximately 1.31 million of them are in revenue freight service in the U.S, the balance being in Canada and Mexico freight service and in maintenance of way service. These 1.31 million railcars are responsible for approximately 1.85 billion tons of commodity shipments every year.

Railcars fall into one of two overall categories when classified by railroads, they are either railroad owned or controlled or privately owned (see Table 1). Railroad owned or controlled railcars are either owned by the railroads or possibly a private investment company, but are running under a lease with the railroad and for operating purposes are controlled by the railroad whose marks are on the railcar. Railroad owned or controlled railcars are classified with the railroads reporting marks ending in a two to four letter designation (e.g. BNSF, UP, CSXT, NS) with a series of numbers that follow.

Private railcars, which account for approximately 65 percent of the total 1.5 million railcars in service, are owned by non-railroad entities and are classified as such carrying a four letter stencil ending in “X” (e.g. JOBX) with a series of numbers that follow. The large number of private railcars require a registration and approval process to ensure they meet the safety and mechanical requirements of the railroad on which they will be hauling freight. Additionally, if you desire to run your own Private Reporting Marks on your rail equipment, you will be required to fill out an AAR Interchange Agreement and pay the administrative fee for registration of the private reporting mark.

Private Railcars

The ability for a shipper or private railcar owner to run private railcars in service on any railroad in the U.S. is governed by a complex process as defined in the AAR Circular OT-5-J (OT5). The AAR publishes circulars for the purpose of communicating rules and regulations to railcar owners and users.

Circular OT5 has a number of requirements that are comprised of rules governing the assignment of reporting marks (private X marked railcars) and mechanical designations. OT5 is segregated into two primary classifications, those rules that apply to private tank cars and those that apply to private cars other than tank cars (see railcar type in Table 1).

Private Tank Cars

Using the AAR/UMLER fleet statistics as of January 2011, the private tank car fleet makes up 99.8 percent of the tank car fleet in operations today. That’s a significant number of the overall tank car fleet and given the broad spectrum of commodities a tank car can transport it’s important to have a process that ensures the safe and efficient transport of these commodities. It’s important to note that railroads do not hold themselves responsible to furnish tank cars to shippers and rarely is OT5 denied for tank cars provided the process is followed exactly as required.

That process for obtaining a railcar mark and approval to register tank cars is somewhat complex. Depending on where you are in the process the following compliance regulations are a requirement. Tank cars are regulated by several agencies and require a Certificate of Construction to be on file with the Bureau of Explosives and the Secretary AAR Technical Services showing compliance with Section 179.5 of the code of Federal Regulations. The good point is that railcar builders file these certificates as a matter of course on behalf of railcar buyers. If the railcar builders don’t file the data, major leasing companies that own, or Lessees that manage tank cars, have the inherent knowledge required to file the correct documentation with the right agencies.

All applications involving secondhand cars must include certification by the buyer and/or seller of Form 88-Series that shows compliance with AAR Mechanical Rule 88 of the AAR Office Manual. If you’re buying a tank car from a non-builder, be sure to require them to transfer the Form 88 – Series information. In today’s environment, this is mostly done through electronic transfer to avoid the paper requirements. However, there are still a few holdouts requiring paper transfers that are still valid.

If you’re running tank cars in service where the revenue move generates mileage earnings per Freight Tariff RPS6007-Series, the tank cars must be registered in the Universal Machine Language Equipment Register (UMLER). This data is then published in The Official Railway Equipment Register. Mileage earnings on tank cars are generally very limited to a few select commodities. The primary commodity shipped in tank cars still earning mileage is kaolin clay.

Private tank cars are assigned a mechanical designation differentiating the type of tank car design(s) and the general accepted commodities for that design. All private tank cars are assigned a mechanical designation of “T” when placed in service as new, rebuilt, secondhand or after modification.

Private Cars Other Than Tank Cars

The process of obtaining OT5 on private general service railcars (non-tank cars) is somewhat less complex than on tank cars. Given that there are still some 694,000 private railcars outside the tank car realm, the process is still important to ensure safe and efficient rail operations. Railroads not only require safe and efficient railcars on their lines through the use of the OT5 process, but also use OT5 to control the number of private railcars on their rail lines for purposes of controlling the number of railcars they handle for their commodities.

Railroads generally supply railcars that fit general service requirements and can be used across a wide array of commodities or are specific to long-term base load business. Specialty railcars within a classification or those that haul less than optimum capacity are types in which they tend not to invest.

The OT5 process for non-tank cars is similar to that of tank cars in that an applicant must still subscribe to the AAR Interchange Rules and properly maintain registration of reporting marks within UMLER. Form 88-series in paper or electronic form must be registered for the railcars being registered. Conversely, the OT5 process for non-tank cars is a bit different in that applicants should state the name of the owner or lessee, specific car numbers or series and the stations and industries at which the loads are intended to originate and the name of the originating line haul carrier. Applicants transmit the applications to the proposed originating carrier(s) who will subsequently notify the applicant of the approval or disapproval of the application. The carrier(s) cannot deny application approval for shipper-provided cars—except for reasons of safety, mechanical factors or inadequate storage space Application approval does not commit the approving carrier(s) to use the applicants’ cars. All applications must be submitted on Form OT-5.

After applications are approved, the owner or lessee may use the cars for the origination of traffic only at a specific station(s) and industry as defined in the OT5 form. If the owner or lessee desires to originate traffic at another station an OT5 form needs to be filled out and approved for that station as well.

Interpreting the OT5 Requirements

OT5 requirements for tank cars are pretty complex in setting up but, from a railroad and shipper perspective, are necessary to ensure a railcar is constructed in such a manner to safely transport the commodity(s) for which it was built. Railroads don’t compete with car owners, lessees and shippers to supply tank cars for freight service hence are rarely denied for anything other than mechanical reasons.

OT5 requirements for general service freight cars are a somewhat different matter. The process is to ensure safe and efficient railroad operations. Safety is easy to interpret and there’s clearly set rules and regulations that define it. However, efficiency is a different matter and is defined by a railroads need for a specific car type to satisfy its near term shipping requirements. The railroad’s goal is to invest in mainstream commodity railcars or base load business railcars and leave the specialty railcars to be supplied through private owners. The waste business generally falls into the specialty railcar category rarely being supplied with railroad owned or controlled equipment and mostly being supported by private railcar owners. Consider that most railcars designed to haul waste have special characteristics such as weep holes being plugged on mill gondolas to haul dirty-dirt, height extensions on coal gondolas to increase the cubic capacity to haul construction and demolition debris, interior bracing removal and exterior side stake reinforcement on flat bottom gondolas to haul auto shredder fluff without being in the way of unloading machinery, single platform spine cars to reduce tare weight on flat cars to allow more container lading capacity, etc.If you’re in the waste business, plan on supplying your own railcars. Pay particular attention to the OT5 requirements, especially the ability to store railcars when you’re not using them. The number one OT5 denial reason that we’ve seen is the lack of storage capacity for the private railcars being supplied.

Darell Luther is president of Forsyth, MT-based Tealinc Ltd., a rail transportation solutions and railcar leasing company. Darell’s career includes positions as president of DTE Rail and DTE Transportation Services Inc., Fieldston Transportation Services LLC, managing director of coal and unit trains for Southern Pacific Railroad and directors positions in marketing, fleet management and integrated network management at Burlington Northern Railroad. Darell has more than 24 years of rail, truck, barge and vessel transportation experience concentrated in bulk commodity and containerized shipments. He can be reached at (406) 347-5237, via e-mail at darell@tealinc.com or visit www.tealinc.com.

To request the information to register private reporting marks, e-mail private.marks@railinc.com. For complete forms or further direction, visit the AAR Web site at www.aar.org.

Table 1

Table 1

Freight Railcars by Type and Ownership/Control.

Table courtesy of Tealinc (adapted from AAR Statistics).