The transportation of crude oil by rail continues to be a key issue for rail and energy industry stakeholders as well as policy makers.  Below is a summary of recent developments.

1.     DOT Takes Six Crude-by-Rail Safety Actions

The Department of Transportation (DOT) recently announced a series of actions aimed at increasing the safety of crude oil shipped by rail.  How to improve the safety of crude-by-rail transportation has been a high-profile issue throughout the country, as the increase in crude-by-rail shipments in recent years has come with a number of serious derailments.   Railroads shippers and local governments have all weighed in with suggestions for how to improve safety and who should bear the associated costs, following the issuance by DOT last year of a Notice of Proposed Rulemaking on the issue.

The actions recently announced by DOT were carried out by the Federal Railroad Administration (FRA) and the Pipeline Hazardous Materials Safety Administration (PHMSA), which each have a role in the federal regulations governing crude-by-rail transportation.  The two agencies issued a joint Notice of Safety Advisory [1] to "remind" railroads and shippers that certain information may be required by PHMSA or FRA personnel in the course of an accident investigation. The Notice provides a list of the information which should be provided to FRA or PHMSA  personnel "as expeditiously as possible."  The information includes details on the locomotives involved, number of rail cars, position of the cars on the train, car owner(s), and other related matters.

PHMSA also issued its own Notice regarding the need for hazardous materials shippers and carriers to provide current, accurate and timely emergency response information on hazardous materials shipments.  PHMSA's Notice cited the current Hazardous Materials Regulations, which state that shipments of hazardous materials be "accompanied by shipping papers and other documentation to communicate to transport workers and emergency responders the hazards associated with a specific shipment."  See 49 CFR Parts 171-180.  The Notice also sets out the duties of hazardous materials shippers with respect to the provision of emergency response information.

Separately, the FRA took four additional actions.  It issued an Emergency Order setting a maximum speed limit of 40 miles per hour for Class 3 flammable liquids moving in High-Threat Urban Areas.  Specifically, the limit will apply to trains that contain "1) 20 or more loaded tank cars in a continuous block, or 35 or more loaded tank cars, of Class 3 flammable liquid; and 2) at least one DOT Specification 111 (DOT-111) tank car (including those built in accordance with Association of American Railroads (AAR) Casualty Prevention Circular 1232 (CPC-1232)) loaded with a Class 3 flammable liquid."  There are 46 High-Threat Urban Areas set forth in a list in the existing FRA regulations.

In addition, FRA issued a Notice of Safety Advisory that contains recommendations for railroads with respect to rail car inspection and equipment maintenance reviews.  The FRA also issued a Notice and Comment Request on a modification to the existing "Rail Equipment Accident/Incident Report" which would increase the information provided about rail cars carrying crude oil in any train involved in an FRA reportable accident.  Specifically, the modified form will collect the following information:  (1) the number of cars carrying crude oil; (2) the number of cars damaged or derailed carrying crude oil; and (3) the number of cars releasing crude oil.  Finally, the FRA sent a letter to the President of the Association of American Railroads, asking the railroads to "develop a process for the railroads to gather, organize, and store various information on [High Hazard Flammable Trains] so that, upon request of FRA or emergency responders, they can provide that information" in specified timeframes.  The FRA asked the railroads to develop this process in 30 days. 

These six DOT actions represent the latest attempts by regulators to address a safety issue that continues to be of great concern to policy makers and the various stakeholders.  As interested parties review and comment on these recent actions by FRA and PHMSA, the issue of crude-by-rail will remain in the headlines, particularly as final rules to govern crude-by-rail shipments are expected sometime in May of this year.

2.     AFPM Sues BNSF Over Tank Car Surcharge on Crude Oil by Rail Movements in Federal Court in Texas

The American Fuel and Petrochemical Manufacturers (AFPM) has filed a lawsuitagainst BNSF Railway over BNSF's $1,000 surcharge on each carload of crude oil that is shipped in an older model of rail car, known as "DOT-111's."  AFPM's lawsuit is another development in the on-going controversy over how best to ensure the safety of crude-by-rail shipments.

The DOT-111's are a general purpose tank car that has long been used for a variety of commodities shipped by rail.  With the increase in crude-by-rail shipments in the last few years, along with recent derailments of rail cars carrying crude oil, there has been increasing pressure on railroads and shippers to utilize newer tank cars that feature safety enhancements aimed at reducing the likelihood of accidents and spills.  However, there are not enough of the newer tank cars to continue to meet the demand for crude-by-rail shipments.  Thus, some shipments move in the DOT-111's.

AFPM's lawsuit alleges that BNSF's surcharge on the use of these DOT-111's is in violation of the railroad's common carrier obligation, a statutory mandate that requires railroads to provide transportation on reasonable request.  AFPM argues that "the statutory common carrier obligation includes a duty to transport hazardous materials where the appropriate agencies have promulgated comprehensive safety regulations."

Continuing, AFPM states that "[a]llowing railroads to penalize companies that ship crude oil in federally-authorized rail cars would circumvent [the Pipeline Hazardous Materials and Safety Administration]'s statutory and regulatory process for setting rail car standards for hazardous materials shipments."

BNSF has not filed its answer to AFPM's lawsuit.  In a statement on the company's website, BNSF characterized the surcharges as "rate discounts for crude shippers that load their product in rail cars with improved safety characteristics."  BNSF also stated that "our rate structure appropriately supports customers who are working to move to a safer car, which is in the interest of rail shippers, BNSF employees and the communities we serve."