United States: Crude-By-Rail Update: What To Expect From Recent Crude Oil Derailments

These are uncertain and stressful times for all involved in the transportation of crude oil by rail. Since February 14, two fiery derailments in West Virginia and Ontario have refocused an unwelcome spotlight on the necessity of transporting crude oil production by railroad in areas without adequate access to pipelines.

The attention comes at a politically sensitive juncture as the Pipeline and Hazardous Materials Safety Administration's and the Federal Railroad Administration's comprehensive crude-by-rail safety rule awaits review with the White House's Office of Management and Budget1– a process that will likely produce a final rule by mid-May.

But can companies involved in crude-by-rail expect other repercussions from the two recent derailments? Without a doubt they can.

Unsurprisingly, environmental group opposition will increase as the recent disasters are prophesized as harbingers of disasters to come.2 Indeed, photos of the derailment in West Virginia show the fire burning on the banks of the Kanawha River, which will increase resistance to crude oil traveling in close proximity to environmentally sensitive water sources.3

Grassroots resistance to any crude-oil trains traveling through citizens' backyards will increase as well. Although this resistance has already been fierce in some states, opposition in states that are geographically remote from current crude oil production may continue to grow. In turn, citizens will pressure their state and federal political representatives for tighter restrictions on crude-by-rail.5 Grassroots resistance may grow quickly due to striking headlines created by the evacuation of 2,500 people and the declaration of a state of emergency in West Virginia.6

As the political opposition increases, PHMSA and FRA will face additional pressure to adopt more stringent safety standards in the final crude-by-rail rule. The recent events may lend some support to that pressure, as the train that derailed in West Virginia consisted entirely of CPC-1232 tank cars7 – a tank car with more stringent design standards than the controversial DOT-111s. As the crude-by-rail rule is currently written, the agencies propose a slightly improved CPC-1232 as the least-stringent design standard for new tank cars.8 The West Virginia derailment will likely increase pressure on the agencies not to select the CPC-1232-based option for new tank cars, which would in turn likely lead to more expensive and more onerous requirements for the construction of the new DOT-117 tank car.9

Finally, the Department of Transportation, through PHMSA or FRA, could exercise its emergency order powers to immediately address perceived safety risks10 – as DOT has done to respond to crude-by-rail accidents since the Lac-Mégantic, Canada, derailment. A potential emergency order could mandate immediately implementable operational requirements such as speed limits or routing restrictions for crude-by-rail. Or a potential emergency order could reach further and impose limitations on the types of equipment that may be used in crude-oil unit trains, such as tank car types or braking systems. Action of this type may reveal an early glimpse of the requirements that the final crude-by-rail rule will impose.

Whatever transpires from the two recent derailments, it is certain that the crude-by-rail industry will continue to face vociferous opposition and unsettling uncertainty until – and likely after – PHMSA and FRA finalize the proposed crude-by-rail rule.

Footnotes

[1] Blake Sobczak, TRANSPORT: 'Comprehensive' Crude-by-Rail Rule Sent to White House for Review, E & E Publishing (Feb. 6, 2015), http://www.eenews.net/energywire/stories/1060012998/print.

[2] Blake Sobczak, TRANSPORT: 2,500 Evacuate After Crude-Bearing Train Catches Fire in W.Va., E & E Publishing (Feb. 17, 2015), http://www.eenews.net/energywire/stories/1060013551/print (quoting Mollie Matteson with the Center for Biological Diversity: "Waiting another two, three, or five years for marginal improvements in oil train safety is not acceptable when these bomb trains keep derailing and setting towns and rivers on fire.").

[3] Ryan Parker, State of Emergency Declared in West Virginia After Train Derails, Explodes, L.A. Times (Feb. 16, 2015), http://www.latimes.com/nation/nationnow/la-na-nn-train-derailment-west-virginia-20150216-story.html ("West Virginia American Water shut down its Montgomery treatment plant because the facility draws water from an area near the incident.").

[4] Train Derailment Sends Oil Tanker Into West Virginia River, FoxNews.com (Feb. 17, 2015), http://www.foxnews.com/us/2015/02/17/train-derailment-sends-oil-tanker-into-west-virginia-river/ (photo credit to Bob Aaron-WCHS).

[5] See, e.g., Blake Sobczak, TRANSPORT: DeFazio Calls Crude-by-Rail Regulator to Account, E & E Publishing (Feb. 4, 2015), http://www.eenews.net/energywire/stories/1060012821/print (discussing the criticism Representative Peter DeFazio, a democrat from Oregon, has voiced against the DOT and PHMSA related to crude-by-rail); Letter from Joseph J. Martens, Comm'nr, N.Y. State Dep't of Enviro. Conserv., and Joan McDonald, Comm'nr, N.Y. State Dep't of Transp., to Jack Dalrymple, Governor, North Dakota (Oct. 21, 2014), available at http://www.dec.ny.gov/docs/permits_ej_operations_pdf/ltrnorthdakota1014.pdf (asking North Dakota to adopt regulations that require the stabilization of crude oil by separating dissolved gasses prior to transportation).

[6] Sobczack, supra note 2 ("A mile-long train carrying crude oil derailed and caught fire near Montgomery, W.Va., yesterday, destroying one home and causing 2,500 people to evacuate, according to local authorities." (emphasis added)); Parker, supra note 3 ("Gov. Earl Ray Tomblin declared a state of emergency about 6 p.m. eastern time [on Feb. 16, 2015]." (emphasis added)).

[7] Sobczak, supra note 2, ("CSX reported that all tank cars involved in the derailment were built to the tougher, type CPC-1232 standard that the rail supply industry has used since 2011.").

[8] Hazardous Materials: Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains, 79 Fed. Reg. 45016, 45052 (Aug. 1, 2014).

[9] Id. at 45051-53.

[10] 49 U.S.C. §§ 5121, 20104(a)(1) (providing for emergency order power under the Hazardous Materials Transportation Act and the Federal Railroad Safety Act).

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