On July 23, the U.S. Department of Transportation (DOT) and its Pipeline and Hazardous Materials Safety Administration (PHMSA) announced a Notice of Proposed Rulemaking to strengthen safety standards for rail transport of crude, ethanol, and other flammable liquids. [1] This action followed a series of highly publicized derailments, fires, and explosions during the prior year, including a July 2013 incident in Lac-Megantic, Quebec, which killed 47 people, as well as incidents in Casselton, North Dakota, and Aliceville, Alabama. 

Under pressure to keep pace with the North American "energy renaissance" and a resulting 4000% increase in the use of rail to transport crude over the last several years, DOT proposes a comprehensive and risk-based regulatory regime. The proposal includes new operational requirements for trains transporting over 20 carloads of Class 3 flammable liquids, which are termed "High Hazard Flammable Trains" (HHFTs) in the proposed rule. These new operational requirements would include: rail-routing risk assessments based on various security factors; enhanced braking requirements; and reduced operating speeds. Regarding operating speeds, DOT proposes that all HHFTs will operate below 50 mph in all areas, and DOT further requests comment on whether HHFTs without the required enhanced braking should be limited to 30 mph and whether HHFTs without the enhanced tank car standards should be limited to 40 mph in all areas, high-threat urban areas, or areas with populations over 100,000.

DOT also proposes new tank car standards to replace DOT-111 tank cars, which have been the subject of recent and heavy criticism. The new tank car standards would apply to all new cars constructed after October 1, 2015, and any existing cars would be retrofitted to meet the same performance standards (except for top fittings protection) on a 5-year phase-out timeline, depending on the Packaging Class of the materials transported. DOT requests comment on whether the new tank car standard should be: a proposed DOT-designed car; the AAR 2014 Tank Car; or a jacketed CPC-1232 tank car. 

The proposal also includes stricter requirements for classifying and characterizing mined gases and liquids. Offerors and shippers of all mined gasses and liquids would be required to maintain a written sampling program for those materials transported and to make that information available to DOT upon request. DOT requests comment on the particulars of that prescribed sampling program, including testing methods, frequency, and location of sampling.

Along with the proposed rule, DOT also issued an Advanced Notice of Proposed Rulemaking (ANPRM) on a related recommendation by the National Transportation Safety Board (NTSB). [2] In that notice, DOT seeks comment on whether it should expand the regulatory requirement for Oil Spill Response Plans (OSRPs) by lowering the threshold of transported crude oil that triggers the need for a more robust "comprehensive OSRP." A comprehensive OSRP differs from a basic OSRP by requiring a shipper or offeror to have additional training, documentation, coordination, and contracted personnel and resources available to provide emergency response in the event of accidents.

Under existing rules, most shippers and offerors of crude oil are not required to prepare a comprehensive OSRP because the current threshold limit of 42,000 gallons of crude is measured on a per-package (or per-rail car) basis, and a typical rail car holds roughly 30,000 gallons. DOT proposes to redefine this threshold by aggregating amounts of crude oil transported on a single train. DOT seeks comment on an appropriate new threshold, measured on a per-train basis, and on the costs of such a change. Options under consideration include: 1,000,000 gallons (35 rail cars); 42,000 gallons (1.5 rail cars); 20 carloads; or another threshold.

DOT also released sampling results of Bakken crude analyzed during "Operation Classification," a series of unannounced DOT inspections between August 2013 and May 2014. DOT has interpreted these samples as establishing that light Bakken crude has "a higher gas content, higher vapor pressure, lower flash point and boiling point and thus a higher degree of volatility than most other crudes in the U.S., which correlates to increased ignitability and flammability." A review of the DOT report and test results, however, does not indicate what benchmark figures DOT relies upon in making that comparison to "other crudes in the U.S." It is unlikely that the DOT study will settle the question, as other studies assert that Bakken is similar to other crudes. 

Regardless, DOT has made clear it is concerned not only about the volatility of crude oil transported, but also about the dramatic increases in both the volume and the long distances over which crude is now being transported by rail. Prior to the announcements, DOT already had taken several voluntary and emergency steps to improve the safety of crude by rail transport. In May 2014, for example, DOT issued an emergency order requiring notification of state Emergency Response Commissions about the operation of such trains in their states. The proposed rule would make permanent this and other recent voluntary measures undertaken by industry to improve the safety of crude by rail transport. 

Energy companies utilizing rail transport should weigh in on these proposals as soon as possible. PHMSA has indicated that it does not intend to extend the comment period beyond the 60 days currently noticed. Accordingly, comments must be submitted no later than September 30, and a final rule could be issued as early as later this year.