Editor’s Note: This entry is also to be published in the Spring 2014 Bakken Oil Report.
Recent accidents involving rail cars transporting crude oil from the Bakken shale region have resulted in the heightened interest of rail industry regulators and other federal agencies, including the Pipeline and Hazardous Material Safety Administration (PHMSA), the Federal Railroad Administration (FRA), and the National Transportation Safety Board (NTSB). In January 2014 alone, PHMSA issued a safety alert addressing the flammability characteristics of crude oil originating from the Bakken shale formations and the NTSB issued two letters containing safety recommendations to both FRA and PHMSA, copies of which may be found: here, here and here.
The PHMSA safety alert and NTSB’s safety recommendations arrived on the heels of (i) FRA’s August 2, 2013 Emergency Order 28, which addresses safety issues related to unattended rail cars carrying Bakken crude oil; (ii) FRA and PHMSA’s August 2, 2013 joint safety advisory 2013-06, which contains additional recommendations for railroads and shippers to implement improved safety measures for the transport of Bakken crude oil; and (iii) FRA and PHSMA’s second joint safety advisory, published on November 20, 2013, which discusses the importance of proper characterization, classification and selection of a packing group for Class 3 materials and the corresponding requirements in the Federal hazardous materials regulations for safety and security planning.
In the meantime, while agencies have been scrambling to compile their safety recommendations and other notices, rail accidents have continued to occur. For example, as recently as December 30, 2013, a BNSF Railway Company train carrying fracked oil from Bakken shale deposits derailed outside of Casselton, North Dakota, resulting in the rupture of several DOT-111 train cars and the spilling of 400,000 gallons of crude oil. Local residents were also evacuated. A week later, a Canadian National Railway train, also carrying crude oil, derailed and caught fire. Again, local residents were evacuated from their homes. These incidents, along with others like them, have led to headlines like “Another Day, Another Crude by Rail Accident” and “Accidents Surge as Oil Industry Takes the Train.”
The purpose of this article is thus threefold: (i) first, to examine the impetus underlying industry regulator’s piqued interest in the transport of Bakken crude oil and describe the factual background surrounding recent rail incidents (for the purpose of placing NTSB, FRA, and PHMSA’s safety-related communications in context); (ii) second, to summarize the NTSB’s recent, though non-binding, recommendations to FRA and PHMSA; and (iii) third and finally, to summarize the recent safety alert issued by PHMSA in January 2014 as well as similar safety alerts that pre-date it.
I. Lac-Mégantic and Other Accidents Involving Bakken Formation Crude Oil
On July 6, 2013, an unattended seventy-four car freight train weighing more than 10,000 tons and carrying Bakken formation crude oil ran away and derailed, resulting in fireworks of exploding train cars, clouds of billowing diesel smoke, and fires whose heat could be felt more than a mile away. This accident also caused the deaths of forty-seven people (some of whose remains were never recovered), making it the deadliest Canadian rail catastrophe since 1864.
In addition to human casualties, the accident contaminated the Chaudière River with arsenic, polycyclic aromatic hydrocarbons, and roughly 100,000 liters of oil, and also resulted in the spillage of benzene, a natural constituent of crude oil, on and around the accident site. This spillage rendered buildings and other structures temporarily uninhabitable, and authorities estimate that homes situated in the most heavily contaminated areas may never again be livable.
While thus far the incident at Lac-Mégantic is unique in that no other accident involving the transport of Bakken formation crude oil has claimed human lives, other incidents involving Bakken oil transport have “exhibited the potential for severe catastrophic outcomes had they occurred in such critical areas.” For example, post-Lac Mégantic, accidents involving the derailment and/or explosion of train cars transporting Bakken crude oil have occurred in Aliceville, Alabama; Casselton, North Dakota; and New Brunswick, Canada. Not surprisingly, Thomas Simpson, the president of the Railway Supply Institute, has indicated in comments to the press following these derailments that, “[t]here is an increased interest. . . to look at tank cars and whether we can do more to remove the risk.”
II. NTSB Recommendations
As rail accidents involving the transport of Bakken crude oil have increased in an industry already facing broad regulatory oversight, the multitude of safety-related responses by various federal agencies have not surprised rail industry stakeholders, many of whom prioritize both safety and compliance with industry regulations. As of the date of this article, the most recent safety-related recommendations issued by a federal agency arising from accidents involving Bakken crude oil come from the NTSB, which sent letters to both PHMSA and FRA on January 21, 2014 and 23, 2014, respectively. As NTSB indicated in each letter, it derived its recommendations from its participation in the Transportation Safety Board of Canada’s (TSB) investigation of the Lac-Mégantic accident. The TSB made similar recommendations with respect to Transport Canada as well as the U.S. PHMSA, which may be accessed at the following address: http://www.tsb.gc.ca/eng/medias-media/communiques/rail/2014/r13d0054-20140123.asp.
Among other things, NTSB’s recommendations “address hazardous materials route analysis and selection, oil spill prevention and response plans, and identification and classification of hazardous materials in railroad freight transportation,” and call for industry regulators to strengthen safety measures surrounding the transport of Bakken formation crude oil. Each letter contains three separate recommendations, with the first recommendation being the same in each letter, and the latter two recommendations being tailored specifically to FRA and PHMSA’s regulatory relationship with the rail industry.
To illustrate, the first recommendation NTSB makes in its January 2014 letters is that FRA and PHMSA work together to expand hazardous materials route planning and selection requirements for railroads under Title 49 Code of Federal Regulations 172.820 to include key trains transporting flammable liquids as defined by the Association of American Railroads Circular No. OT-55-N, and, where technically feasible, require rerouting to avoid transportation of such hazardous materials through populated and other sensitive areas. (R-14-1).
In support of this recommendation, NTSB notes that “rail shipments of crude oil have sharply increased in recent years as the United States experiences unprecedented growth in oil production.” While FRA acknowledged in its Emergency Order No. 28 that “better security is needed for unattended trains” and “route planning and route selections protections currently required for explosive, toxic by inhalation, or radioactive materials are not required for trains transporting large bulk quantities of volatile flammable liquids through populated communities,” NTSB counters that these assessments and other protections “should be extended to key trains transporting large volumes of flammable liquid” to mitigate the risk of another tragic rail incident.
Other Safety Recommendations to FRA
In addition to the foregoing, the NTSB also makes the following two recommendations to FRA:
Develop a program to audit response plans for rail carriers of petroleum products to ensure that adequate provisions are in place to respond to and remove a worst-case discharge to the maximum extent practicable and to mitigate or prevent a substantial threat of a worst case discharge. (R-14-2).
Audit shippers and rail carriers of crude oil to ensure they are using appropriate hazardous materials shipping classifications, have developed transportation safety and security plans, and have made adequate provision for safety and security. (R-14-3).
In support of these recommendations, NTSB notes that while rail industry stakeholders must submit comprehensive spill response plans to FRA, no provision exists for FRA to review and approve such plans. NTSB argues that “the FRA would be better prepared to identify deficient response plans if it had a program to thoroughly review and approve each plan before carriers are permitted to transport petroleum oil products.” NTSB also notes that “the practice of mischaracterizing the packing group of crude oil shipments may allow shippers to avoid the security requirements necessary for transporting large quantities of volatile crude oil.” Thus, NTSB believes that implementing these measures would lessen the likelihood of another explosive incident involving the transport of Bakken formation crude oil.
Other Safety Recommendations to PHMSA
In its January 21, 2014 letter to PHMSA, NTSB also makes the following additional recommendations:
Revise the spill response planning thresholds contained in Title 49 Code of Federal Regulations Part 130 to require comprehensive response plans to effectively provide for the carriers’ ability to respond to worst-case discharges resulting from accidents involving unit trains or blocks of tank cars transporting oil and petroleum products. (R-14-5).
Require shippers to sufficiently test and document physical and chemical characteristics of hazardous materials to ensure the proper classification, packaging, and record-keeping of products offered in transportation. (R-14-6).
In support of these measures, NTSB asserts that existing regulations governing spill responses are inadequate to mitigate the risk of petroleum product releases in accidents, as conditions have significantly changed with the recent massive growth in crude oil transportation. NTSB also notes that while regulations “prescribe test methods to assign the appropriate classification, there is an assumption that shippers have exercised the necessary due diligence and testing to ensure their shipments are properly described,” even though this is not necessarily the case.
Moreover, the record-keeping requirements of applicable law do not mandate that shippers maintain any evidence showing that hazardous materials have been adequately evaluated and that their classification and description is justified. Because the NTSB argues that “properly classified shipments are paramount for appropriate package selection, for assessment of risks to develop meaningful safety and security plans, and for the safety of emergency responders and other individuals who may come into contact with hazardous materials in transportation,” NTSB submits that “PHMSA should require shippers to sufficiently test and document the physical and chemical characteristics of hazardous materials to ensure the proper classification, packaging, and record-keeping of products offered in transportation.” Again, NTSB argues that implementing both measures would reduce the likelihood of another train accident involving the transport of Bakken formation crude oil.
III. PHSMA Safety Alert and its Predecessors
A few weeks prior to NTSB’s issuance of its Safety Recommendation Letters, PHMSA issued a safety alert notifying the general public, emergency responders, and shippers and carriers that recent train derailments and resulting fires associated with the transport of crude oil from the Bakken region indicate that this kind of crude oil may be more flammable than traditional heavy crude oil. In its alert, PHMSA reminded crude oil transporters “to properly test, characterize, classify and where appropriate sufficiently degasify hazardous material” before and during transport. PHMSA also reminded industry stakeholders of its “Operation Classification” (also known as the “Bakken Blitz”), which is an ongoing compliance initiative with the Federal Railroad Administration (FRA) involving “unannounced inspections and testing of crude oil samples to verify that offerors of the materials have been properly classified and describe the hazardous materials.”
This Safety Alert follows PHMSA’s and FRA’s November 2013 Joint Safety Advisory similarly urging members of the rail industry to ensure they (i) properly characterize, classify, and select an appropriate packing group for Class 3 materials, (ii) comply with all Federal hazardous materials regulations for safety and security planning; and (iii) revise existing safety and security plans, including risk assessments, in light of FRA guidance issued in August 2013.
Consequences and Conclusion
Recent rail accidents involving Bakken formation crude oil as well as guidance issued by federal agencies serve as well-timed reminders of the risks associated with transporting highly flammable substances and the importance of mitigating these risks consistent with law and acceptable industry practice. Moreover, industry regulators have demonstrated already this year that they are serious about compliance and willing to take whatever enforcement actions they deem necessary. An example of this occurred in February 2014 when the U.S. Department of Transportation issued notices of proposed violations with fines totaling $93,000 to Hess Corp., Marathon Oil Corp, and Whiting Oil and Gas Corp., all for allegedly misclassifying crude oil from North Dakota’s Bakken region, in violation of 49 U.S.C. § 5101 and 49 C.F.R. Parts 171-180. The coming months will likely bring increased regulatory oversight, promulgation of new regulations, and additional fines levied against those who fail to comply with applicable law. Thus, members of the rail industry who intend to transport Bakken formation crude oil or who may already be doing so should revisit existing practices, policies, and procedures to ensure they comply with industry standards and appropriately mitigate risk.