United States: Crude-By-Rail Update: PHMSA Rejects Administrative Challenges To CBR Rule

Despite challenging oil prices and a decrease in the volume of crude oil traveling by rail,1 recent events have renewed the spotlight on crude-by-rail (CBR) transportation. First, two trains derailed in Wisconsin last weekend – one carrying ethanol and the other hauling crude oil.2 Second, the Pipeline and Hazardous Materials Safety Administration (PHMSA) reaffirmed its commitment to its CBR Rule.

Although the Wisconsin derailments resulted in no injuries, the crude oil derailment caused home evacuations and spilled roughly 1,000 gallons, and the ethanol derailment spilled an estimated 20,000 gallons directly into the Mississippi River. The incidents will likely refocus public and special interest group ire on CBR at a sensitive time when the fate of the CBR Rule rests with the judicial system.

PHMSA recently rejected administrative appeals from four trade associations and a consortium of Indian Tribes to the CBR Rule. The rejection closes one potential avenue of relief for parties affected by the rule. Now, affected parties must turn their hopes to the courts or Congress for any reformation to or repeal of the new rule.

What does PHMSA's rejection mean?

PHMSA's denial of the administrative appeals means that the agency likely will not take any action outside a mandate from the courts or Congress to alter the CBR Rule. Although affected parties should not be surprised by PHMSA's rejection of the administrative appeals, PHMSA's actions move the rule one step closer to surviving the post-issuance minefield intact.

Under PHMSA's regulations, an affected party can file an administrative appeal to challenge a final rule.3 An administrative appeal does not stay the effectiveness of a final rule,4 but it does provide affected parties a quick and relatively inexpensive – compared to Administrative Procedure Act litigation in a federal court – opportunity to convince the agency to change its own rule.

Four trade associations appealed the CBR Rule to PHMSA – the Dangerous Goods Advisory Council (DGAC), American Chemistry Council (ACC), Association of American Railroads (AAR), and American Fuel and Petrochemical Manufacturers (AFPM). Collectively, the associations asked PHMSA to alter the final rule in a number of ways.

Noticeably absent from the appealing associations is a direct representative of shippers or producers of crude oil – although the American Petroleum Institute (API) has filed suit against the rule in the United States Court of Appeals for the District of Columbia Circuit. As a result, the appeals appear to augment a growing schism between the parties affected by and challenging the rule,5 separating the chemical industry, tank car manufacturers, and the railroads from shippers and producers of crude oil.

The chemical industry asked PHMSA to narrow the scope of the CBR Rule to only apply to tank cars shipping crude oil and ethanol in a high-hazard flammable train (HHFT).6 DGAC's and ACC's arguments do not challenge the CBR Rule's applicability to crude oil and ethanol, but rather have transitioned to a focus on how the rule incorrectly captures Class 3 flammable liquids7 that allegedly do not pose the same danger as crude oil or ethanol.

The railroad industry generally asked PHMSA to increase the final rule's applicability and requirements for tank cars. First, AAR argued that PHMSA should eliminate the use of any DOT-111 tank cars for Class 3 flammable liquid service regardless of whether the tank car is placed in a HHFT. Second, AAR advocated for enhanced thermal protection for new and retrofitted tank cars. And third, AAR implored PHMSA to repeal the CBR Rule's electronically controlled pneumatic (ECP) brake systems mandate. While AAR's first and second positions appear to increase costs for tank car owners and reduce liability for the railroads, AAR's third position has been advocated by API as well.

Where do we go from here?

With PHMSA's rejection of the administrative appeals, affected parties must now focus on the courts and the pending challenges to the final rule in the D.C. Circuit. The court has consolidated the challenges from industry, special interest groups, and municipalities. The next deadline will be for the parties to submit briefing proposals by November 23, 2015. Considering that briefing has not begun, the court is unlikely to issue a substantive ruling until well into the first half of 2016 at the earliest.

As a backstop to the courts, however, AAR and the Railroad Supply Institute have experienced success in their lobbying efforts before Congress related to the CBR Rule. The House recently passed a highway funding bill with provisions for thermal jackets on tank cars – similar to AAR's proposal before PHMSA – and to commission a study of the effectiveness of ECP brake systems.8 While there appears to be some consensus between the House and Senate related to strictly related to railroad issues – like the ECP brake study – it is unlikely that oil and gas interests will be able to secure any reprieve related to the CBR Rule from the full Congress.

Footnotes

1. Bridget Hunsucker, Crude-by-Rail Evolves Into Permanent Midstream Fixture (Genscape 2015), available at http://info.genscape.com/crude-by-rail-evolves-white-paper-2015 ("From January through mid-September [2015], average daily loading volumes were about 13 percent lower than all of 2014.").

2. Associated Press, Second Train Derails in Wisconsin, Spills Oil, Wall Street Journal (Nov. 8, 2015), http://www.wsj.com/articles/second-train-derails-in-wisconsin-spills-oil-1447023575.

3. See 49 C.F.R. §§ 106.110-.130.

4. Id. at § 106.130.

5. Rachel Leven, As Crude-by-Rail 60-Day Challenge Clock Begins, API Sues, Others Consider Options, Bloomberg BNA (May 12, 2015), http://www.bna.com/crudebyrail-60day-challenge-n17179926392/ (discussing whether industry groups would jointly challenge the new crude-by-rail rule or if industry groups would fracture into individual lawsuits).  

6. 49 C.F.R. § 171.8 ("High-hazard flammable train (HHFT) means a single train transporting 20 or more loaded tank cars of a Class 3 flammable liquid in a continuous block or a single train carrying 35 or more loaded tank cars of a Class 3 flammable across the entire train.").

7. 49 C.F.R. § 179.120(a) (defining Class 3 flammable liquids as follows: "[A] liquid having a flash point of not more than 60°C (140°F), or any material in a liquid phase with a flash point at or above 37.8°C (100°F) that is intentionally heated and offered for transportation or transported at or above its flash point in a bulk packaging . . . ").

8. See U.S. House Passes Recommended Railway Safety Enhancements in New Surface Transportation Bill: Rules Advocated for by Railway Supply Institute Will Increase Focus on Advancing America's Transportation System, Railway Supply Institute (Nov. 6, 2015), http://rsiweb.org/u-s-house-passes-recommended-railway-safety-enhancements-in-new-surface-transportation-bill/.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.