Oil on the Rails: States Increasing Regulation of Oil Trains

Perkins Coie
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The increase in North American petroleum production in recent years, coupled with inadequate pipeline infrastructure, has resulted in a significant rise of, and reliance on, the transport of crude oil by rail.  Public concerns with the safety of “oil trains” centers on risks associated with accidents that can have significant consequences. Perhaps the most notable is the accident that occurred in Lac-Mégantic, Quebec in July 2013 when 63 tank cars carrying petroleum crude oil derailed.  The resulting fire and explosion of multiple tank cars caused 47 fatalities and the destruction of a significant portion of the downtown area.

Federal law regulating rail carriers and the shipment of hazardous cargoes is extensive—and largely preemptive of state and local regulation.  The Federal Railroad Administration has jurisdiction over railroad safety and the Pipeline and Hazardous Materials Safety Administration is at the center of efforts to address public concerns associated with “oil train” safety.  The Administration has proposed new regulations, entitled Enhanced Tank Cars Standards and Operational Controls for High-Hazard Flammable Trains, that are scheduled to become final in May of this year.

State Regulation of Rail Safety

The states’ role in regulating railroad safety is limited and historically has been focused in a few key areas that are not preempted by federal law. 

In 2014, California enacted legislation that requires oil-transporting railroads to prepare oil spill contingency plans.  The railroads must “demonstrate ... the financial ability to pay for any damages that might arise during a reasonable worst case oil spill into waters of the state that results from the operations of the facility.”  The law also imposes fines and penalties for noncompliance.  The law is being challenged in federal court on federal preemption grounds.

Washington State has now joined California in seeking to regulate “oil trains.”  On April 24, 2015, the legislature passed the Washington State Oil Transportation Safety Act, which contains provisions that:

  • require railroads to submit oil spill contingency plans to the Washington State Department of Ecology;
  • require railroads to notify Ecology in advance of transfers of crude oil between rail facilities and vessels or other facilities;
  • increase the oil spill administration tax; and
  • authorize rulemaking to set safety standards for private railroad crossings used to transport crude oil.  

The bill that was passed lacked several elements of the original bill.  Governor Jay Inslee described the legislation as “a solid first step, but clearly we have more work to do.” 

State v. Federal Regulatory Tug-of-War

The tug-of-war between the states and the federal government will likely continue, especially as more states attempt to take on increased regulatory responsibilities.  The question of what role Congress has left to the states will be resolved by the courts, but until then, business interests dependent upon uniform and consistent regulation of rail carriers should expect more active state involvement in “oil train” safety issues.

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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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