DOT issues rulemaking focused on safe transport of crude oil and other flammable materials via rail

With an eye on making transportation of crude oil by rail (CBR) and ethanol safer following various tragic accidents over the last year, the United States Department of Transportation yesterday released details regarding its rulemaking proposal designed to improve how large quantities of flammable materials by rail can be moved in a safer manner.

DOT’s proposal is in the form of a Notice of Proposed Rulemaking (NPRM) and a companion Advanced Notice of Proposed Rulemaking (APRM).

This development follows steps taken by the DOT and the major U.S.-based Class I railroads to establish a rail operations safety initiative comprised of new voluntary operating standards for moving crude by rail. Key components of that initiative include: lower speeds; community relations; increased trackside safety technology; increased emergency response training and tuition assistance; and emergency response capability planning.

The DOT’s NPRM includes:
-the proposal of enhanced tank car standards for tank cars, also referred to as high-hazard flammable trains or HTTF,  constructed after October 1, 2015, with one option to have 9/16 inch steel that would be outfitted with electronically controlled pneumatic (ECP) brakes and be equipped with rollover protection, a second option with 9/16 inch steel but not requiring ECP brakes or rollover protection, and a third option based on a 2011 industry standard with 7/16 inch steel and does not require ECP brakes or rollover protection
-requiring existing tank cars used to transport flammable liquids (known as DOT 111s) to be retrofitted to meet the selected option for performance requirements, with those not retrofitted to be retired, repurposed or operated under speed restrictions for up to five years;
-three speed restriction options, including a 40 mph restriction in all areas, a 40 mph restriction in high threat urban areas, and a 40 mph speed restriction in areas with a 100,000 or higher population; -requiring all HTTFs to be equipped with alternative brake signal propagation systems;
-a rail routing risk assessment that proposes carriers be required to perform a routing analysis for HHTF that would consider 27 safety and security factors and select a route based on findings of the route analysis;
-better classification and characterization of mined gasses and liquids that proposes the development and implementation of a written sampling and testing program for all mined gases and liquids like crude oil to address things like frequency of sampling and testing and sampling at various points along the supply chain

“Safety is our top priority, which is why I’ve worked aggressively to improve the safe transport of crude oil and other hazardous materials since my first week in office,” said DOT Secretary Anthony Foxx in a statement. “While we have made unprecedented progress through voluntary agreements and emergency orders, today’s proposal represents our most significant progress yet in developing and enforcing new rules to ensure that all flammable liquids, including Bakken crude and ethanol, are transported safely.”

Crude oil being transported out of the Bakken formation, which resides mainly in North Dakota and extends into Montana, Saskatchewan, and Manitoba, produces more than ten percent of total U.S. oil production, according to the United States Energy Information Administration.

The Pipeline and Hazardous Materials Safety Administration (PHMSA) recently issued a report focused on an analysis of Bakken crude oil that it compiled with the Federal Railroad Administration between August 2013 and May 2014, which showed that crude oil from the Bakken region of North Dakota “tends to be more volatile and flammable than other crude oils, adding that “the safety risk presented by transporting Bakken crude oil by rail is magnified both by an increasing volume of Bakken being shipped by throughout the U.S. and the large distances over which the product is shipped.”  The report stated that in 2008, 9,500 rail-carloads of crude moved through the U.S. compared to 2007, when there were 415,000 rail-carloads, and on average Bakken crude oil shipments travel over 1,000 miles from point of origin to refineries on the coasts.

Following the DOT’s proposal, the Association of American Railroads (AAR) said it is examining the details of the proposed rulemaking with full comments coming in the future.

“This long-anticipated rulemaking from DOT provides a much-needed pathway for enhancing the safe movement of flammable liquids in the U.S.,” said AAR President and CEO Edward Hamberger. “Railroads are playing a critical role in our country’s progress toward energy independence, moving more energy products like crude oil and ethanol than ever before.”

While the details of the NPRM are comprehensive, an industry source whom declined to be identified said they could have been much worse for United States Class I railroads. The source described facets of this proposal as reasonable and manageable and would not stand as a significant impediment to moving CBR, which has become an excellent revenue generator for the railroads.

Prior to the release of this NPRM, there was speculation that the DOT would issue requirements of 25 mph-30 mph speed limits on CBR unit trains. Tony Hatch, principal of New York-based ABH Consulting, said that such a low speed limit would add to congestion even as the industry tries to rebound in velocity and terminal dwell and other service metrics.

Norfolk Southern CEO Wick Moorman said on the company’s second quarter earnings call that speeds in that range would be extraordinarily disruptive to the NS rail network.

“Not only to trying to ship crude in which the exposure quite frankly would go up significantly because it would take a lot more trains and cars to move the same amount of oil, but it would be incredibly detrimental to the service in all of the rest of our business including Amtrak and including our auto business, our intermodal business, you name it and the resulting capacity loss I think is something that the rail network quite frankly could not manage,” he said. “So we’ve done a lot of modeling. We’ve had a lot of discussion with the regulators and I believe that we’ll be able to make our case that a minimum speed in the 40 to 45 mile an hour range is not only safe, which it is, but also is the range in which it will not be extraordinarily disruptive to the North American rail network.”

A Wall Street Journal report cited data from the Railway Supply Institute’s latest estimate that there are roughly 80,000 DOT-111 railcars that were built before 2011 transporting oil, ethanol, and other flammable liquids, with another 23,000 built in recent years that have more crash-resistant features.