On May 1, 2015, the U.S. Department of Transportation, acting through the Pipeline and Hazardous Materials Safety Administration,1 issued a much-anticipated final rule on the enhanced tank car standards and operational controls for trains transporting flammable materials.2

The rule adopts safety improvements for tank cars used in trains transporting large volumes of flammable liquids and establishes speed, brake system, route selection and notification requirements for such trains. In addition, the rule establishes sampling and classification programs for unrefined petroleum-based products moving by rail.3 Although many of the key requirements take effect at later times, the final rule is effective 60 days after publication in the Federal Register.

The U.S. is the world's fastest growing producer of crude oil. Growth in domestic production has meant dramatic growth in the movement of crude oil by rail. In 2013, there were over 400,000 carloads of crude oil originated. Ethanol production also has increased considerably during the last 10 years.

As the shipments of crude oil and ethanol have increased, so have the number of train accidents involving these commodities.4 The projected continued growth of domestic production and the growing number of train accidents involving crude oil prompted PHMSA to conclude that the potential for future severe train accidents involving crude oil had increased substantially and that the new rule was required.

While the final rule poses many compliance challenges for the regulated industry (railroads, shippers and tank car owner/lessors), it reflects a more refined cost-benefit analysis than the proposed rule. Even so, some will think the rule does not go far enough to improve the safety of crude by rail and others will think aspects of the rule produce little safety benefit at a very high cost.

Final Rule: Key Themes

Emphasis on Mitigation

The Department of Transportation said the rule was designed to "reduce the consequences and, in some instances, reduce the probability of accidents involving trains transporting large quantities of flammable liquids." Thus, the Department of Transportation makes clear at the outset (in the first sentence of the summary of the voluminous explanation of the final rule) that the emphasis in the rule is on reducing the consequences of accidents involving trains transporting flammable liquids.

Emphasis on High-Volume Trains

The rule adopts safety improvements for tank cars used in trains transporting large volumes of flammable liquids and establishes speed, brake system, route selection and notification requirements for such trains. In addition, the rule establishes sampling and classification programs for unrefined petroleum-based products moving by rail.

Emphasis on Crude Oil and Ethanol

The primary impact of the rule is on the shipment of crude oil and ethanol, because these are the two commodities most often transported in high per-train volumes.

Harmonization of the North American Fleet

Flammable liquids regularly cross the U.S.-Canadian border and the rule represents a significant effort to harmonize the regulation of crude oil and ethanol rail transportation. Transport Canada and the Department of Transportation modal agencies (i.e., PHMSA and the Federal Railroad Administration) conducted extensive informal staff level discussions as well as formal discussions through the Regulatory Cooperation Council. Although there are significant exceptions, many aspects of the rule are harmonized with Canadian requirements.

Final Rule: Key Elements

High-Hazard Flammable Trains

Almost all of the most important new requirements of the rule apply to "high-hazard flammable trains" (HHFTs), which is defined in the final rule as a train with "a continuous block of 20 or more tank cars loaded with a flammable liquid or 35 or more tank cars loaded with a flammable liquid dispersed through a train." The NPRM would have defined an HHFT more broadly to apply to any train with 20 or more tank cars loaded with a Class 3 flammable liquid. The Department of Transportation says it changed the scope of the rule to focus on the highest risk shipments. This is a significant change and will come as a relief to some railroads and to shippers of flammable liquids in manifest trains.

Speed Limits on HHFTs

Under the rule, all high-hazard flammable trains have a maximum speed of 50 mph. HHFTs containing any tank cars that do not meet the new tank car standards (discussed below) are limited to 40 mph in high-threat urban areas.5 The general speed limit (50 mph) matches the voluntary standard and thus will come as no surprise to stakeholders.6 Likewise, the "city" speed limit (40 mph) slightly expands another existing limitation7 and thus also will not come as surprise to stakeholders, but it is important to note that the rule phases out the use in HHFT service of tank cars that do not meet the new tank car standard and thus the city speed limit does not allow perpetual use of existing cars in HHFT service.

New HHFT Tank Cars

The rule sets a new standard for tank cars used in a high-hazard flammable train.8The Department of Transportation said that replacing the current standard for tank cars would have "considerable safety and economic consequences" and that it wanted to ensure that the car selected will have the "greatest net social benefits." The Department of Transportation said it was "aware of, and accounted for, the large economic effects associated with regulatory changes of this scale."

In the NPRM, the Department of Transportation asked for comments on three options, all of which would reduce tank car punctures, releases from top and bottom fittings and improve containment of flammable liquid in a derailment because they all included increased tank head and shell resistance, thermal protection and improved top fitting and bottom outlet protection.

Option one offered the most protection and the highest cost, primarily due to the cost of electronically controlled pneumatic (ECP) brakes and enhanced top fitting protection. Option two had the same tank shell thickness as option one (i.e., 9/16-inch minimum), but would not require ECP brakes or enhanced top fitting protection. Option three was the least costly, with the existing standard shell thickness (i.e., 7/16-inch) but with enhancements making it better than the tanks cars in the existing fleet. The final rule nominally adopted option two, but also requires the introduction of ECP braking systems in certain operating scenarios (discussed below). Thus, the new tank car standard is effectively a hybrid between option one and option two from the NPRM. The new car will be designated as "DOT Specification 117."

The considerable delay between issuance of the NPRM and the final rule was largely attributable9 to the Department of Transportation's effort to re-evaluate the cost and safety benefits of the enhanced top fitting and ECP braking requirements of option one in light of extensive and substantive comments from railroads, shippers, the National Transportation Safety Board, environmental groups and the public.

The Department of Transportation acknowledged option one was the most robust tank car design among the three, but also noted it was the most costly. Option one received the support of the NTSB, many environmental groups and the public, but the Department of Transportation explained these groups "gave very little consideration to the costs of such standards." Many railroads, shippers and industry groups were opposed to option one, noting overall cost, weight issues and the lack of a substantial increase in safety associated with the proposed enhanced top fitting protection and ECP brakes. Many parties in favor of option one asserted that the safety benefits were justified, regardless of the increased cost.

The Department of Transportation ultimately concluded the safety benefit of the enhanced top fitting did not justify the increased cost and that ECP braking was justified for some but not all high-hazard flammable trains.

Disposition of the Existing Tank Car Fleet and the Retrofit Schedule

Existing tank cars may be retrofitted to the new DOT Specification 117 standard, operated for a prescribed time in HHFT service under speed restrictions, "repurposed" to non-HHFT service or simply retired from service. In the NPRM, the Department of Transportation proposed existing tank cars used in HHFT service be retrofitted over a five-year period, in stages based upon the packing group of the lading.

There were extensive comments on the ramifications of this proposal, including tank car demand considerations and several studies on manufacturing and retrofit shop capacity. Many railroads, industry trade groups and shippers advocated a timeline that took tank car type (as well as packing group) into account. Commenting parties sought revisions to the five-year phase-out period ranging from zero (i.e., immediate prohibition on use of existing tank cars) to 10 years. The Department of Transportation's re-evaluation of the retrofit timeline based on these comments was another reason10 for the considerable delay between issuance of the NPRM and the final rule.

The Department of Transportation concluded that a complete phase-out of noncompliant tank cars faster than five years was not achievable or prudent. The Department of Transportation revised the timeline to focus on packing group and tank car type and revised the retrofit timeline to take both factors into account. Accordingly, some noncompliant cars will be phased out faster than five years and others will remain in HHFT service longer than five years. For example, nonjacketed DOT-111 tanks cars (those deemed most likely to release lading in a derailment) carrying Packing Group I lading (the most dangerous) will be out of HHFT service as of Jan. 1, 2018. On the other end of the spectrum, jacketed CPC-1232 tank cars (those which were beginning in 2011 in response to concerns about the nonjacketed DOT-111s and which are closest to the new standard) can continue to carry Packing Group I and II lading until May 1, 2025. Some within the industry will continue to question whether this retrofit schedule is achievable and express concern about tank car shortages.

Enhanced Braking

The final rule requires high-hazard flammable trains to have one of two braking systems.11 However, a train with 70 or more tank cars loaded with Class 3 flammable liquids (flammable or combustible liquids, including crude oil and ethanol) traveling greater than 30 mph (defined as a "high-hazard flammable unit train" or HHFUT) containing at least one Packing Group I flammable liquid must have the more expensive ECP brakes by Jan. 1, 2021. All HHFUTs must have ECP brakes by May 1, 2023.

The HHFUT-limited and graduated roll out of ECP brakes (as compared with some scenarios in the NPRM) is unlikely to satisfy the regulated industry, which has asserted with one voice that ECP braking systems are expensive, untested and produce very little safety benefit. Other stakeholders will be disappointed that the rule does not required ECP brakes on all HHFTs and sooner.

Next Steps

Though refined, the final rule is controversial and it remains to be seen whether the regulated industry and other stakeholders will challenge or seek modification of the rule or, on the other hand, turn to the complex process of implementation.