National, state and local  developments concerning the  shipment of oil by rail tank car  continue at a rapid pace. The  issue has received increasing  national and international  attention since the Lac-Mégantic  disaster in Quebec, Canada in  2013 which killed 47 people, as  well as several fiery U.S. derailments in the last year.The attention has resulted in:

  • A constant drumbeat of news stories and pronouncements by public officials;
  • Public realization that rail tank car shipments of oil have increased 42 fold in the last five years to over 400,000 in 2013;
  • Proposed tightening of rail tank car and oil train requirements by the Pipeline and Hazardous Materials Safety Administration (PHMSA) of the U.S. Department of Transportation (DOT);
  • Litigation against the New York State Department of Environmental Conservation by environmental organizations and potentially-impacted residents living near the Port of Albany; and
  • Disagreements in New York, California, and Maine over the local regulation of rail shipments of hazardous materials and related train information.

This advisory is part of a series on this subject. For earlier background, please see “Significant Impacts of Major Accidents of Crude Oil Rail Shipments Prompt Broad International Public and Regulatory Attention on Safety.”

U. S. NATIONAL DEVELOPMENTS

Following the National Transportation Safety Board (NTSB) fact-gathering railroad safety forum in April 2014 and the implementation of voluntary immediate actions to improve railway transport of crude oil, the PHMSA on July 23, 2014 proposed a set of rule amendments intended to increase both the safety of individual rail tank cars and oil trains generally. The rule proposal estimates that without any increased standards there would be at least one train disaster each year with costs exceeding $5 billion.

The proposed rule envisions the following actions:

  1. High-hazard flammable train (HHFT): Proposes a definition of HHFT as a train carrying 20 or more tank carloads of flammable liquids including crude oil and ethanol.
  2. Enhanced standards for both new and existing tank cars: Proposes (1) new standards with respect to thermal, top fittings, and bottom outlet protection; and (2) tank head and shell puncture resistance for rail tank cars constructed after October 1, 2015 and which are used to transport flammable liquids as part of a HHFT. The proposal requests comment on three options for enhanced rail tank car standard requirements:
    • Tank car option 1 would have 9/16 inch steel, would be outfitted with electronically controlled pneumatic (ECP) brakes, and would be equipped with rollover protection.
    • Tank car option 2 would also have 9/16 inch steel, but would not require ECP brakes or rollover protection.
    • Tank car option 3 is based on a 2011 industry standard which has 7/16 inch steel, and does not require ECP brakes or rollover protection.

The proposed rule requires existing rail tank cars  that are used to transport flammable liquids as part of a HHFT be retrofitted to meet the selected option for performance requirements or retired, repurposed, or operated under speed restrictions for up to five years.

  1. Notification to State Emergency Response Commissions: Proposes to codify DOT’s May 2014 emergency order that required trains containing one million gallons of Bakken crude oil to notify State Emergency Response Commissions (SERCs) or other appropriate state delegated entities about the operation of these trains through their States.
  2. Reduced operating speeds: Requests comment on three speed restriction options for HHFTs that contain any rail tank cars not meeting the enhanced tank car standards proposed by this rule:
    • a 40 miles per hour (mph) maximum speed restriction in all areas;
    • a 40-mph speed restriction in high threat urban areas; and
    • a 40-mph speed restriction in areas with a 100K+ population.

If rail tank cars in the HHFT meet specifications finalized in the enhanced tank car section of this rule, speed would be limited to 50-mph in all areas (rather than 40-mph). PHMSA also will evaluate a 30-mph speed restriction for HHFTs that do not comply with enhanced braking requirements.

  1. Enhanced braking: Proposes to require that all HHFTs be equipped with alternative brake signal propagation systems. Depending on the outcome of the rail tank car standard proposal and implementation timing, all HHFTs would be operated with either ECP brakes, a two-way end of train device (EOT), or distributed power (DP).
  2. Better classification and characterization of mined gases and liquids: Proposes development and implementation of a written sampling and  testing program for all mined gases and liquids, such as crude oil, and proposes that shippers offering oil for transport be required to certify that a sampling and testing program is in place, document the testing and sampling program, and make program information available to DOT personnel, upon request.
  3. Rail routing risk assessment: Proposes that carriers be required to perform a routing analysis for a HHFT that would consider 27 safety and security factors and select a route based on findings of the route analysis.

​Before the proposed rule was released, the White House held numerous meetings with oil producers, renewable fuel producers, chemical companies, refineries, and railroads to hear their positions. The varied opinions expressed at these meetings further highlight the significant disagreement and uncertainty by all parties in regards to the proposed rules, and to efforts to reform the transport of hazardous and flammable cargo in general.

Rail car owners and ethanol shippers are particularly opposed to requirements for tank car modifications. For example, BNSF Railway Co. proposed that the current fleet of some DOT-111 tank cars be phased out completely, and more stringent standards be implemented for the newer CPC-1232 tank cars. There are approximately 80,000 pre-2011 DOT-111 cars and approximately 10,000 post-2011 CPC-1232 cars in service. Another 12,500 CPC-1232 cars are on order for 2015. However, some industry participants have pointed out that making rail tank cars heavier and possibly reducing car volume will result in a need for additional trains to carry the same volume of oil. They argue that increased rail tank cars could intensify the problem. On the other hand, other industry participants recommended an approach that evaluated each liquid on its own unique characteristics instead of a blanket approach. Rail equipment producers, who simply sell equipment, are of course eager to see the fastest phase-out and most extensive retrofit requirements, which will provide them with work for years to come.

The increased volume of oil trains, including many so-called “unit trains” consisting of 100 or more oil tank cars, has increased concerns about security. Following the issuance of the rule proposal, the Department of Homeland Security’s Transportation Safety Administration convened a meeting of Interested Parties on July 11, 2014 to address these concerns.

CANADIAN NATIONAL DEVELOPMENTS

Earlier this year, Transport Canada imposed similar requirements on Canada’s major railroads. On July 1, 2014, broader requirements were announced by Transport Canada, including measures applicable to so-called “local railroads” normally regulated by the provinces. Among the operating requirements are that all trains carrying one or more rail tank cars must never be left unattended and must be operated by at least two qualified employees.

NEW YORK SPECIFIC DEVELOPMENTS

New York state, and Albany in particular, have become focal points for disagreements related to the risks associated with oil rail shipments. Much of the controversy centers on a proposal by Global Partners LP, an oil trans-shipping facility in the Port of Albany. Of particular concern in Albany is that the tracks and Global’s facility are located under and along an interstate highway along the Hudson River in downtown Albany and adjacent to the Prentice Homes public housing complex.

Global had, with little public attention, in 2012 secured approval from the New York State Department of Environmental Conservation (NYSDEC) to quadruple their oil throughput to 1.8 billion gallons annually. In 2013, Global submitted another application to modify a permit under Title V of the Clean Air Act to further expand the facility and install tank heaters to facilitate the transfer of heavy tar sands crude oil, which requires heating to transfer. The NYSDEC issued a determination under the State Environmental Quality Review Act (SEQRA) that the expansion would have no significant impacts. After extensive public outcry arose, the NYSDEC requested further information from Global and extended the public comment period until September 30, 2014.

Although it is anticipated that the NYSDEC might rescind the SEQRA negative determination, in order to preserve their rights and avoid a possible statute of limitations defense, several environmental organizations, lead by Riverkeeper and the Sierra Club Atlantic Chapter, along with the tenants’ association of the Prentice Homes public housing complex, filed suit in New York to challenge the issuance of the SEQRA negative determination. The parties have agreed with the NYSDEC and the New York Attorney General to stay the action until the NYSDEC determines its approach to the Global proposal.

The volume of oil shipped through Albany, as well as the Global proposal, have caused significant concern in Albany. Both the Mayor of Albany and the Albany County Executive have formed task forces to examine the current shipping of oil on tracks along the Hudson River through downtown Albany, as well as the proposed Global expansion. It remains to be seen whether either municipality attempts to assert jurisdiction over rail shipping, which would face significant adverse precedents under the Interstate Commerce Commission Termination Act of 1995, the Federal Railroad Safety Act of 1970, and the Noise Control Act of 1972.

The NYSDEC is also in the process of implementing community air screen monitoring around the Port of Albany to measure volatile organic compounds (VOCs) in three fixed residential locations. These samples were collected every week in May, and will determine the current air quality conditions to see if more sampling or inspections are necessary.

As mentioned above, the proposed federal rules will require railroads running trains with one million gallons or more per train of Bakken crude oil to disclose the train routing and traffic information to state emergency officials, who are expected to then pass this information on to local police and fire departments. This rule has been vehemently protested by CSX Transportation, who sought to have the New York State Division of Homeland Security and Emergency Services sign an agreement to never disclose the information. However, the New York Division took the position that such information was not protected and, in response to a Freedom of Information Law request, released the information. It was revealed that up to 44 trains carrying Bakken crude oil were passing through New York per week.

OTHER STATE AND LOCAL DEVELOPMENTS

Citizens in other parts of the country have also begun expressing concerns about oil trains. The city of South Portland, Maine passed a law banning the trans-shipment of oil sands crude through its port. The law is aimed at the anticipated reversal of flow of an existing pipeline; instead of conveying imported oil inland, the pipeline would bring crude to the port for export. A litigation challenge to this law is anticipated.

In California, security officials also released the information disclosing the number and routing of oil trains in California, including trains running directly through downtown Sacramento.

PRIVATE ACTIVITIES

Although there is far from unanimity in the industry, some parties are not waiting for regulations to compel action. Both BNSF and Union Pacific Corp. have publicly supported stronger rail car standards, with BNSF going a step further and ordering 5,000 cars that will meet the anticipated new Federal standards. Shippers and other market participants have expressed displeasure with the railroads, pointing out that the railroads caused the accidents and that the Lac-Megantic fire would not have been prevented by stronger rail tank cars. Given that even the least stringent of the three PHMSA proposals would cost in the billions of dollars, the players are all jockeying to limit their share of those retrofit and replacement costs.