Industry Takes Steps to Address Safety of Crude Oil Shipments

by Nossaman LLP
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The Department of Transportation (DOT) recently issued an Emergency Order (EO) requiring all rail carriers to notify State Emergency Response Commissions regarding the expected routing of their unit trains of Bakken crude oil.  This order is aimed at improving the safety of crude by rail shipments and requires the railroads to comply with specific reporting requirements.  

The railroads have long been subject to regulations governing the transportation of hazardous materials.  Following the attacks of September 11, new federal regulations required the railroads to adhere to reporting and safe handling requirements for certain hazardous materials. In addition, federal hazardous materials regulations set forth precise rules about the labeling and classification of oil shipments. 

The most recent EO is a significant move by DOT, adding to steps already taken by railroads and shippers to address safety issues involving crude oil. The railroad industry is particularly focused of the safety issues associated with crude oil because they are statutorily required to ship it, along with other hazardous materials, under the common carrier obligation.  The common carrier obligation, set forth in 49 U.S.C .§ 11101(a), imposes a duty on railroads to provide transportation upon reasonable request. Federal courts and the Surface Transportation Board have affirmed that railroads have a statutory common carrier obligation to transport hazardous materials.

Accordingly, in February, the Association of American Railroads announced a rail operations safety initiative in which the railroads instituted new voluntary operating practices for moving crude by rail.  Among other things, the railroads agreed, to increase track inspections on those main line routes where trains move 20 or more carloads of crude oil travel on one train; to lower speeds for trains carrying 20 or more tank cars of crude oil that include one or more of the older DOT 111 cars; and to install additional wayside wheel bearing detectors (if they are not already in place) every 40 miles along tracks with trains that carry 20 or more carloads of crude oil. 

In addition, the Class I railroads agreed that they will begin using the Rail Corridor Risk Management System (RCRMS) no later than July 1 to "aid in the determination of the safest and most secure rail routes for trains with 20 or more cars of crude oil."  The railroads described RCRMS as "a sophisticated analytical tool" which "takes into account 27 risk factors – including volume of commodity, trip length, population density along the route, local emergency response capability, track quality and signal systems – to assess the safety and security of rail routes." 

Individually, the railroads have also taken steps to address safety of crude by rail shipments.  As an example, CSX created a website solely to address crude-by-rail shipments.  Although the website serves as a marketing tool, with information for new rail shippers, and locations of refineries and terminals, the website also addresses safety concerns.  In particular, CSX has an interactive map of crude by rail shipments, providing the type of information communities might be especially interested in. 

In February, BNSF announced its plan to purchase its own fleet of 5,000 crude oil tank cars.  BNSF's fleet will be built to safety standards exceeding the industry's voluntary CPC-1232 specification for DOT 111 hazardous materials cars.  Tank cars are traditionally owned by the shippers rather than the railroads, so this was an especially interesting development in the crude by rail arena. 

The Canadian railroads, Canadian National (CN) and Canadian Pacific (CP), have taken their own initiatives to deal with the safety concerns of crude by rail shipments.  Earlier this year both CN and CP notified customers that they would levy a surcharge on all crude oil shipments moving in older model tank cars due to the increased safety risk associated with those cars. 

Railroads are not the only private sector players taking steps to address the safety of crude by rail.  In February, Tesoro, an independent refiner and marketer of petroleum products, announced that it would upgrade its fleet of crude oil tank cars to consist entirely of newer CPC-1232 compliant cars. Tesoro committed to equipping its fleet with reinforced shields and relief devices by mid-2014.

In addition, Global Partners LP, a distributor of gasoline, distillates, residual oil and renewable fuels to receivers in New England and New York, announced that it would voluntarily begin requiring compliance with CPC-1232 rail car design standards for all crude oil unit trains arriving at its East and West Coast terminals. The program will be phased in at Global's crude-by-rail receiving facilities in Albany, New York and Clatskanie, Oregon, starting June 1, 2014.

The American Fuel and Petrochemicals Manufacturers just released a study on the characteristics of Bakken Crude Oil.  The study was conducted in response to questions posed to the industry by DOT regarding the safety of Bakken crude moving by rail.  The results are based on the analysis of over 1400 samples of Bakken crude oil.  In addition, the North Dakota Petroleum Council released the results of its own study of the properties of crude oil.  Both studies said Bakken crude is similar to other light crudes and does not pose risks that are significantly different than other crudes or flammable liquids authorized for rail transport.

While these and other private sector initiatives represent varying approaches to crude by rail safety concerns – ranging from enhancing tank car and route safety, to incentivizing shipments in safer cars, to increasing reporting and information about these movements – the hope is that industry and government can work together to ensure that the safety issues presented by crude by rail are adequately addressed.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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