On February 24, 2016, the Department of Transportation released an audit report finding systemic problems with the Federal Rail Administration’s policies, procedures, and enforcement of hazardous materials regulations. The likely effect is an over-correction by the Administration with more inspections, higher civil penalties, and referrals to the DOT for criminal investigation. The report should serve as a warning for any rail operator covered by HazMat regulations that increased scrutiny is likely to come soon.
I. The Federal Rail Administration
The Administration is responsible for enforcing HazMat regulations promulgated by the Pipeline and Hazardous Materials Safety Administration “pertaining to safe transport by rail of hazardous materials such as ethanol, crude oil, and toxic or poisonous inhalation hazard materials.”
II. Failure to Deter Sanctionable Conduct
The Administration’s 50+ inspectors, along with analogous state inspectors, conducted examinations of nearly 700,000 items like tank cars and facilities during the 2013-2014 fiscal year. Each inspector “can exercise considerable professional judgment in determining when, where, and what to inspect within their assigned areas” and whether an issue “warrants a violation report or other corrective actions …” The inspectors, however, “request civil penalties only for serious problems, such as loose tank car closures or repeated infractions” and the Administration “does not adjust penalties based on the seriousness of violations.” Instead, its “[p]olicies and procedures focus on processing penalties in a timely manner and avoiding litigation rather than adjusting penalties to accommodate for seriousness, as the law requires.”
The report criticizes the Administration for failing to refer a single case to the DOT for criminal investigation in a five-year lookback period, stating “[the Administration] pursues limited civil penalties for violations of hazardous materials regulations and, despite departmental requirements in several DOT Orders, does not refer cases to our office for criminal investigation.” In five years, none of the “17 cases that warranted referral to [the DOT] for criminal investigation” were referred. The DOT concludes that the Administration’s enforcement of the HazMat regulations is simply not aimed at deterring sanctionable conduct.
III. Failure to Conduct Risk Assessment and Failure to Share Information
The report concludes that the Administration also fails to appreciate HazMat transportation risks on a nationwide basis. Rather, it focuses on each of its eight regions individually “because [of the Administration’s] perception that each region faces different risks.” Because of its failure to appreciate nationwide risk, the Administration’s frontline inspectors cannot prioritize or coordinate their inspections across multiple regions for maximum effect. Additionally, its inspectors, although very well trained, do not have ready access to data outside their region or from other agencies (like Pipeline and Hazardous Materials Administration) due to sharing and technological barriers.
IV. Likely Effect
Penalties for violations of rail hazardous materials regulations will likely increase dramatically in the near future. Given the report’s conclusion that the Administration “lacks comprehensive risk evaluation and [a] focus on deterrence,” we can expect an over-correction by the Administration with more severe civil penalties and more cases referred to the DOT for criminal investigation.
For the full report, click here.