Crude Beginnings to Regulating the Rail Transportation of Oil?

Posted on April 16, 2014 by Eva O'Brien

Transportation of crude oil via rail has increased from 9,500 carloads in 2008 to more than 400,000 carloads in 2013, and an increase in incidents associated with these shipments has occurred as well.  On February 25, 2014, the U.S. Department of Transportation (DOT) issued an Emergency Restriction-Prohibition Order (amended on March 6, 2014) to address safety issues of transporting crude oil by rail. 

The DOT Emergency Order focuses on the imminent safety hazard posed by misclassification of crude oil, which can lead to the use of containers that lack the safety enhancements necessary to safely transport oil properly classified as Packing Group (PG) I and II materials.  The Emergency Order required testing and classification of crude oil prior to transportation rather than reliance on generic information.  The amended Emergency Order stepped back somewhat because it “does not specify how often testing should or must be performed, nor does it require testing to be performed for each and every shipment.”  The amended order allows the operator to determine whether it has sufficient data available to reliably classify the crude oil it intends to ship.  It still requires operators to treat Class 3 petroleum crude oil as a PG I (highest danger classification) or PG II (medium danger classification) material rather than the less demanding PG III classification.  A presumptive PG I or PG II classification removes from use several models of tank cars that have fewer safety measures.  Recent accident investigations indicate that presumptive classifications become dangerous where some sources of crude (like the Bakken Formation) exhibit comparatively higher volatility.

This Emergency Order followed a DOT safety initiative (agreed to by the Association of American Railroads (“AAR”)) that establishes new, voluntary safety standards for the transportation of crude oil by rail, including speed restrictions, increased rail and mechanical inspections, and improved braking systems.   But are these measures enough? 

Overall, yes.  Improved safety requires actions of different types: (1) operational changes; (2) additional steps to prevent derailments; and (3) tank car design changes.  The Emergency Order and DOT/AAR safety initiative address the first two pathways.  What about tank car design?  The Emergency Order leaves that issue for another day.  Although the Emergency Order will affect the ability to use certain tank cars with fewer safety measures, it has been estimated that the tougher classification standards for crude oil will affect less than three percent of tank cars now used in the United States.  In 2011, AAR adopted higher standards for new tank cars transporting crude oil and ethanol, although there were no retrofit specifications adopted.  According to the AAR, roughly 92,000 tank cars are moving flammable liquids and approximately 78,000 of them do not meet the new 2011 tank car standards. 

Regulators have also acknowledged the need for improvements for tank cars.  The Pipelines and Hazardous Materials Safety Administration (PHMSA) is considering recommendations by the AAR to upgrade new tank car standards and require existing tank car retrofits.  The AAR recommended to PHMSA several improvements for tank cars transporting flammable liquids, including an outer steel jacket around the tank car, thermal protection, improved pressure relief valves, and other measures to prevent puncture in the case of an accident.

None of these measures are the final solution, but the Emergency Order, the DOT safety initiative and upgrades to tank car safety standards are crucial steps toward safer transportation of crude oil.