On January 2, 2014, the Pipeline and Hazardous Material Safety Administration (PHMSA) issued a safety alert for the purpose of notifying the general public, emergency responders and shippers and carriers that recent 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 light of recent derailments across the United States and Canada, PHMSA reminded crude oil transporters "to properly test, characterize, classify and where appropriate sufficiently degasify hazardous material" before and during their transport. Pursuant to the alert, PHMSA also reminded stakeholders of its "Operation Classification" (also known as the "Bakken Blitz"), which is an on-going 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 comes on the heels of 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, which may be found here.
The initial impetus to both the issuance of these various safety advisories and the piqued interest of rail industry-regulators was the accident this past summer in Lac-Mégantic, Quebec, Canada, which occurred when an unattended 74-car freight train carrying Bakken crude oil derailed, resulting in the explosion of tank cars, fire, and thick clouds of diesel smoke over the city. The accident also caused the deaths of nearly fifty people, making it the deadliest rail catastrophe in Canadian history 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 it 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 uninhabitable. In fact, authorities estimate that homes situated in the most heavily contaminated areas may never again be inhabitable.
The Lac-Mégantic incident has not been an isolated one, and additional accidents involving the derailment and/or explosion of train cars transporting crude oil have since occurred in Aliceville, Alabama; Casselton, North Dakota; and New Brunswick, Canada. Thomas Simpson, the president of the Railway Supply Institute has indicated that in the wake of these accidents, "[t]here is an increased interest . . . to look at tank cars and whether we can do more to remove the risk." Members of the Shale Team at BakerHostetler anticipate seeing federal and state regulators revisiting existing law, pinpointing vulnerabilities, and strengthening regulatory oversight in the coming year as a result of these incidents.
These accidents and the safety alert most recently issued by PHMSA are important reminders of the risks associated with transporting highly flammable crude oil and the ways in which stakeholders can mitigate risk consistent with law and acceptable industry practice. With the start of the new year, January is a good time for regulated industries to revisit existing policies and procedures geared toward strengthening safety and minimizing risk.
The Shale Team at BakerHostetler remains poised and ready to collaborate with clients in developing risk management-related policies that comply with applicable law and to otherwise counsel members of the rail industry on their respective legal obligations.
More information regarding the PHMSA safety alert as well as recent rail accidents can be found here, here, and here. We will continue to update our blog as new guidance and/or alerts are released.
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