The Pipeline and Hazardous Materials Safety Administration's much-anticipated crude by rail rule will address over 3,000 comments, spanning a wide range of public opinion on crude by rail safety. PHMSA must address vast differences of opinion on complex issues, such as the timeline for implementing new DOT-111 tank car standards, whether tank car standards and operational restrictions should be tied to the new "high-hazard flammable train" concept and optimal speed restrictions on the shared rail network. Commenters on the proposed rule provided input on these and other issues.

In an Aug. 1, 2014, notice of proposed rulemaking, PHMSA sought comment on proposed new standards for "high-hazard flammable trains," defined as trains carrying "20 or more carloads of a Class 3 flammable liquid."[1] Crude oil and ethanol are the commodities most affected by the rule because they often are carried in high volumes on a single train. PHMSA cited recent high-profile derailments of crude-carrying trains in Lac-Megantic, Canada, Casselton, North Dakota, and Aliceville, Alabama, as prompting the need for regulatory changes to mitigate future incidents.

PHMSA requested comment on proposed revisions to the hazardous materials regulations in three main areas: (1) technical standards for U.S. Department of Transportation-specified rail tank cars used to transport flammable liquids on HHFTs; (2) railroad operational requirements for HHFTs, including routing, braking and speed restrictions; and (3) requirements for shippers to properly test and classify crude oil prior to transportation.

Timeline for DOT-111 Tank Car Standards

Among the most contentious issues is PHMSA's proposed timeline for implementing new standards for the DOT-111 tank car and phasing-out older DOT-111s. Environmentalists and public safety groups want animmediate end to the use of legacy DOT-111s in transporting crude, while industry groups assert PHMSA greatly underestimated the time it will take to implement the new standards. Government investigators have cited the crashworthiness of legacy DOT-111s as a contributing factor in recent derailments and explosions.

PHMSA's proposal would require all new tank cars constructed after Oct. 15, 2015, to meet enhanced regulatory standards, and all legacy DOT-111s used in HHFTs to be retrofitted or phased out, by packing group service as follows: by Oct. 1, 2017, for PG I; by Oct. 1, 2018, for PG II; and by Oct. 1, 2020, for PG III.[2]Because most light crude oil and ethanol shipments are PGs I and II, the proposal arguably requires retrofit or phase-out within two to three years of a final rule.

The timeline drew criticism from all sides of the debate. Environmental groups petitioned the DOT in July 2014 to immediately ban legacy DOT-111s from transporting crude oil by rail, using PHMSA's emergency order authority. Since then, those groups have filed two suits with the Ninth Circuit, claiming first that the DOT failed to act on the petition and, more recently, that the department inappropriately denied the petition.[3] On Jan. 20, 2015, an order by the court mediator stayed the case "until May 12, 2015, or pending publication in the Federal Register of the final tank car standards and phase out of DOT-111 tank cars, whichever occurs first."[4]

Industry groups, however, assert that sufficient numbers of DOT-111s cannot be manufactured or retrofitted within the two-year timeline, given the severe limitations in rail tank car manufacturing and shop capacity. The American Chemistry Council noted in its comments that the current backlog of tank car orders already is causing wait times of "two years from when a tank car is ordered to when it is delivered."[5] The Railway Supply Institute proposed a six-year timeline in which to retrofit or retire legacy DOT-111s, calling it "both aggressive and achievable."[6] The Association of American Railroads and American Petroleum Institute also supported a six-year timeframe. AAR and API proposed prioritizing the least sturdy of the legacy cars first (i.e., retrofitting the nonjacketed, non-CPC-1232 cars within the first three years), followed by nonjacketed CPC-1232 cars and supported prioritizing retrofits of tank cars carrying crude oil and ethanol.[7]

Linking Tank Car Design to HHFTs

Many groups criticized PHMSA's proposal to tie new tank car standards to only those cars used in an HHFT. Industry groups noted that shippers have no control over how a railroad will arrange and rearrange tank cars within a "manifest train" (i.e., one with mixed cargo) and that the HMR does not otherwise link container design to train composition.[8] AAR stated, "It would be unprecedented for PHMSA to adopt tank car specifications dependent on the amount of cars in a train."[9] Industry groups, including AAR, API, ACC and RSI, also noted the proposed rule would impact every DOT-111 tank car, not just those used on HHFTs, due to the impracticality of separating shipments with various types of DOT-111s.[10]

Environmental groups and the National Transportation Safety Board also support abandoning the HHFT limitation on tank car requirements, but for a much different reason. They claim the proposed rule would allow legacy DOT-111s to continuing transporting Class 3 flammable liquids, so long as they are on non-HHFTs (i.e., trains carrying less than 20 carloads of Class 3 liquids).[11]

Linking Operating Restrictions to HHFTs

Similarly, industry groups noted PHMSA's proposed operating restrictions for HHFTs would affect negativelyother cargo aboard those trains, even though PHMSA has not provided any justification to increase regulation of the other cargo. The Institute of Makers of Explosives, for example, "are not shippers of … Class 3 flammable liquids," but expressed concerned that restrictions on HHFTs will impact non-Class 3 cars placed on an HHFT by the railroads, leaving them "no viable options to avoid … HHFT service restrictions" for their consigned cargo.[12] For this reason, industry groups argue the costs of the rule are "dramatically underestimated."[13]

Some commenters criticized PHMSA's choice to use the HHFT concept at all, especially given that PHMSA seems most concerned with the dramatic rise in "unit trains" (i.e., trains carrying a single commodity, typically crude or ethanol, and usually in larger quantities of 50 to 120 cars per train).[14] The American Fuel and Petrochemical Manufacturers suggested limiting the rule to "petroleum crude oil and ethanol transported in unit trains (defined as 75 cars or more)."[15] The ACC similarly proposed limiting the final rule to crude oil and ethanol "unit trains," given PHMSA's concerns about "unique" risks of those commodities on "unit trains."[16]

Speed Restrictions

Another controversial proposal is the speed restriction of 40 mph for HHFTs with tank cars not meeting enhanced standards.[17] AAR member railroads already agreed with the DOT to reduce operating speeds to 40 mph in high-threat urban areas (HTUAs) when a legacy DOT-111 tank car is used on an HHFT carrying crude and to 50 mph everywhere for trains with over 20 loads of any hazardous materials (not just Class 3 flammable liquids).[18]

Uniformly, industry groups oppose any further limiting of the speed limits, arguing that slower speeds for HHFTs will impact all rail traffic on the railways, including for example, grain shipments, passenger trains and chemical industry shipments. AAR likened speed limits on rail to "traveling on a two-lane highway" except "much worse because the opportunities to pass are much more constrained."[19] Industry groups also noted there is no evidence that operating speeds caused recent derailments. The most significant recent incident — the derailment at Lac-Megantic, Canada, which killed 47 people — was not caused by operating speed, but rather by a conductor leaving the train unsecured and unattended atop a hill.

Environmental and safety groups, on the other hand, favor imposing stricter speed limits on all crude by rail shipments, with all such shipments routed away from populated areas.[20]

Crude Oil Characterization and Classification

PHMSA's proposal requires offerors of crude oil shipments to have in place systems to accurately characterize and classify crude prior to shipment. API's comments assert that the new ANSI/API voluntary standard for "Classifying and Loading of Crude Oil into Rail Tank Cars" (Sept. 2014), known as "Recommended Practice 3000" or "RP 3000," should suffice to satisfy the rule's testing requirements.[21] RP 3000 requires a documented sampling and testing program and both initial and ongoing testing of crude oil prior to offering it for rail transport.[22]

However, AFPM — an industry group focused on petroleum refining and petrochemical manufacturing — opposed the sampling and testing program altogether, stating it has "no safety benefit" and would be "unnecessary, unduly burdensome and confusing."[23] AFPM correctly pointed out that under current regulations, there are no meaningful differences between PG classifications of crude oil, in terms of the tanks cars authorized for use, required emergency response communications, and marking, labeling and placarding of rail cars.[24] AFPM did not mention the RP 3000 standard, but rather claimed there is no need for a federally mandated testing program because crude has well-understood properties and the PG assignment is entirely "immaterial" to compliance with the HMR's safety provisions.[25]

Conversely, environmental and safety groups want PHMSA to strengthen its proposed testing requirements to be less subjective and more uniform, instead of allowing individual oil producers to decide what tests and what frequency of testing suffice under the rule.[26] Additionally, they want PHMSA to require vapor pressure as a mandatory measurement of crude oil volatility.[27]

Track Maintenance and Human Error

Equipment suppliers, petroleum industry groups and environmentalists alike claimed that PHMSA's proposal conspicuously lacks a key, cost-effective solution — requiring railways to address longstanding deficiencies in the track itself and to lower the potential for operator error.[28] PHMSA acknowledged that "broken rails, track geometry, and human factors … are leading causes of derailments" and that broken rails were responsible for nearly eight times as many derailments as the average for all other causes.[29] However, PHMSA claimed these issues are adequately addressed in other DOT initiatives and noted the purpose of this rule is "mitigating the damages of train accidents," not necessarily preventing train accidents.[30]

By not addressing the cost-effectiveness of such obvious prevention measures, however, PHMSA's rule will be much more susceptible to attack in litigation. AAR seemed to be the only major constituency approving of this approach, arguing PHMSA should not mandate more track inspections, but rather defer to the Rail Safety Advisory Committee's findings on the issue.[31]

Cross-Border, Canadian Issues

Many industry groups, including AAR, RSI and the Canadian Association of Railway Suppliers, emphasized the need for PHMSA to ensure its rules on railway safety are harmonized with that of Canada, which is revising its transportation of dangerous goods regulations now. Harmonization of the HMR and TDG is key to ensuring railways can operate consistently and efficiently across national borders.

PHMSA also drew a great deal of attention from commenters with its prediction about the future of Canadian tar sands transportation. PHMSA estimated "23,000 cars will be transferred to Alberta tar sands service" and stated "no cars will be retired as a result of th[e] rule."[32] API and RSI, however, disputed such conversion could occur without significant retrofits of existing DOT-111s, to enable heating of viscous fuel.[33]Environmental groups also took issue with PHMSA's prediction because they oppose shipping diluted bitumen (dilbit) in DOT-111s, saying it "creates unacceptable safety hazards" and is "extremely difficult to clean up after a spill."[34] They asked PHMSA to explain what "tar sands service" means and to ensure that rail transport of dilbit and heavy oils are covered by the new rule.[35]

Finalizing the Rule

PHMSA recently announced it will delay publication of a final crude by rail rule from March 2015 to May 2015. On Feb. 5, 2015, the Office of Management and Budget received from PHMSA a final rule, which now will undergo final executive review and approval at OMB, a process that may take several months to complete. When published, the rule is sure to draw more stakeholder engagement and potential litigation from various groups on these key safety issues.

This article was originally published as a Law360 guest column on February 11, 2015.