Shippers and Railroads Express Differing Views Over Tank Car Requirements for Crude Oil by Rail at NTSB Forum

Nossaman LLP

Crude oil moving on the railroads has been traditionally shipped in the tank car known as the DOT 111.  However, as early as 1991, the National Transportation Safety Board (NTSB) expressed concern over the risks associated with transporting flammable materials in the 111s due to the thinness of the steel shell of the car.  As shipments of crude oil grew significantly in the last five years (from 9,500 carloads originated by U.S. railroads in 2008 to nearly 234,000 in 2012), concern over whether the 111 was adequate to handle flammable goods rose throughout the country

In 2011, a Tank Car Committee made up of the Association of American Railroads (AAR), rail shippers, and tank car manufacturers implemented voluntary standards for tank cars shipping crude oil by rail.  The result of the new standard was the development of what's known as the CFC 1232 car, or simply the 1232.  The 1232 is equipped with a thicker, more puncture-resistant shell (or jacket), extra protective head shields at both ends of tank car, and additional protection for the top fittings.

However, the adequacy of the 1232 cars  was called into question after the cars punctured during derailments, leading to the release of hazardous materials.  In part as a result of this heightened concern, the NTSB held a forum on rail safety and the transportation of crude oil and ethanol last week, in which the suitability of the 1232 was discussed at length.  

During the NTSB's forum, Robert Fronczak of the AAR said that the 1232 cars are "no longer adequate."  In contrast, Bob Greco of the American Petroleum Institute noted that the 1232 cars exceed the current DOT requirements and urged the adoption of rules that would use the 1232 as a standard for tank cars going forward.  The parties' differing comments at the forum reflect the uncertainty over whether the 1232, which shippers have invested heavily in, is safe and suitable for crude oil and ethanol rail transport or whether a newer, higher standard of tank car is necessary. 

Also speaking at the Forum was Dr. Magdy El-Sibaie, of the Pipeline and Hazardous Materials Safety Administration (PHMSA).  Last year, PHMSA issued an Advance Notice of Proposed Rulemaking seeking input on regulations addressing tank car safety.  Dr. El-Sibaie said that PHMSA is working hard to issue the subsequent Notice of Proposed Rulemaking.  DOT officials have indicated that a comprehensive rule will be released the week of April 28, 2014.  PHMSA's rule could have significant impact on the supply of rail cars for crude by rail shipments.

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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