Ideas for Energy Paper



Crude Beginnings: Filling in Safety and Environmental Regulatory Gaps for Oil Transported By Rail

Molly A. Masterton[1]

I. Introduction

In early July 2013, a small town was set aflame when a freight train carrying 27 tank cars worth of Bakken crude oil derailed and created a chain of explosions that lasted several hours.[2]

Holding roughly of two million gallons of oil, the train was left standing seven miles outside of the town of Lac-Mégantic, Quebec, at the end of one engineer’s shift.[3] Although the brakes had been in place, the train sett off on a downhill course at some point after the engineer left. The train entered Lac-Mégantic at a speed of sixty miles per hour, and the resulting derailment killed forty-seven people, injured many more, and destroyed thirty buildings.[4]

The tragedy of Lac-Mégantic is one of several in recent years, part of a trend that has brought to light drastic insufficiencies in the North American regulatory framework for so-called “crude-by-rail” transportation. With its preexisting infrastructure that connects remote areas, rail has become the popular mode for transporting crude oil, natural gas, and ethanol as unconventional oil production has surged in areas without access to pipelines, such as North Dakota’s Bakken formation. [5] But despite certain economic and practical benefits of using our railways to transport crude oil, critics argue that regulation Bakken crude, which is now known to be more volatile than other forms, is insufficient once it reaches the rails.[6] Key concerns include the use of non-pressure “DOT-111” tank cars that are out of date and susceptible to corrosion and releasing contents when derailed, and that in many cases Bakken crude is not being properly classified per federal regulatory standards. These are both problems that underlay the Lac-Mégantic incident.[7]

Regulatory bodies at the federal, state, and local levels have risen to action in the wake of Lac- Mégantic and other recent derailments within U.S. borders. But according to the Center for Strategic Studies, while “[f]urther regulation of crude by rail is a near certainty…the ultimate scope and pace remains unclear.”[8] In early 2014, U.S. National Transportation Safety Board (“NTSB”) and the Transportation Safety Board of Canada released joint policy recommendations on this very issue, calling for the U.S. Pipeline and Hazardous Materials Safety Administration (“PHMSA”) and its Canadian counterpart to adopt a comprehensive approach that would include changing the safety classifications of crude oil under their Hazardous Materials Regulations (“HMR”),[9] requiring operators to perform detailed safety analysis and consideration of alternative routes for every shipment.[10] Attention has also been paid to the use of safety and security plans to reduce risk of future incidents,[11] which are currently only submitted and reviewed by the Federal Railroad Administration (“FRA”) in limited circumstances.[12] To date, the PHMSA has focused mainly on safety updates to the DOT-111 cars,[13] which would trigger at most a gradual phase-out of old railcars.[14] Despite calls for urgency from nearly all stakeholders, new tank car rules are not scheduled to arrive until January 2015 at the earliest.[15]

While the surge of crude oil may be reviving the utility of our railroad infrastructure, it is becoming increasingly clear that federal regulations have failed to keep up with emerging safety and environmental concerns pertaining to crude-by-rail. Looking toward the future of our national energy production, a comprehensive approach to crude-by-rail regulation is needed to ensure protection of human health and the environment and prevent future catastrophes like Lac- Mégantic. This paper argues that in addition requiring much-needed updates to DOT-111 railcars, the PHMSA and FRA should also: 1) carefully consider new ways of classifying crude oil to properly account for risks it presents when transported by rail, and 2) should expand emergency response plan requirements for crude-by-rail operators and have such plans approved by the FRA.

This analysis will proceed in Part II by providing background on flux of crude-by-rail transport in North America and accompanying safety and environmental concerns. Part III provides a general “lay of the land” with regard to the regulatory framework for transport of hazardous materials by rail, including PHMSA and FRA regulations. Part IV discusses regulatory developments in the wake of Lac-Mégantic, and ultimately proposes that strengthening of classification and emergency response planning is needed to form a comprehensive, immediate approach to reducing health and safety risks. Part V concludes.

II. Shale to Rail: The Rise of Crude-by-Rail and Accompanying Policy Concerns

In order to fully understand the need for expanded regulation and potential practical limitations thereof, it is relevant to consider how rapidly crude-by-rail transportation has grown in recent years, its various benefits, and how it interplays with pipeline transport. The following sections provide brief context for: 1) the rise of crude-by-rail; and 2) the bases for public safety and environmental concerns that would justify an updated, comprehensive regulatory approach.

A. The Rise of Crude-by-Rail Transportation

In the distant plains of North Dakota, approximately one million barrels of oil are now extracted every day.[16] The trend of oil production in the U.S. is oriented steeply upward; the count of proven crude oil reserves has been on the rise for four consecutive years.[17] By 2017, it is predicted that the U.S. may become the world’s chief oil producer, extracting as many as five million barrels of shale oil and 16 million barrels of total oil per day.[18] This boom is due primarily to increased use of modern technologies that take advantage of unconventional shale oil and “tight” oil formations. Unconventional resources are vast and most often located in areas of low population density, such as North Dakota, thus allowing for expansive industrialization of the oil plays.[19] For the time being, it appears that oil is here to stay.

If the existing rail infrastructure was first been considered a stopgap measure to allow increased oil harvests to reach refineries in the absence of new pipelines, it now appears that like unconventional oil, crude-by-rail may also be here for the proverbial long haul. [20] As oil production has increased faster than existing pipeline infrastructure could accommodate, rail has presented a relatively inexpensive fix, and crude-by-rail transport has grown from fewer than 9,500 carloads in 2008 to approximately 400,000 carloads last year.[21] See Figure 1. Rail and pipeline development are closely intertwined, and each has the potential to impact demand for the other. For example, in its recent supplemental environmental impact statement for the Keystone pipeline, the U.S. State Department considered the climate and other environment impacts of increased rail traffic resulting from increased flow from the pipeline.[22] [23] While rail may be seen as competing with the pipeline model as the primary method of oil transportation, pipeline development remains a key, and potentially safer, feature of domestic energy production and connecting U.S. and Canadian production systems.[24]

As unconventional oil plays are developed in new areas, the majority of refineries in the U.S. remain located in historic production areas such Texas, Oklahoma, and in coastal areas where oil is received by tankers.[25] In addition to providing an existing infrastructure, railroads have an advantage in that new tracks and transloading terminals can be built more quickly than pipelines or new refineries.[26] Although the cost of rail shipment may be higher per the barrel, rail has also proven faster than pipeline transport, with rail shipments taking as few as eight days between Alberta and the Gulf Coast, compared with as many as fifty days via pipeline.[27] In addition, rail provides increased flexibility with regard to contract timelines, rates, and variation of supply sources.[28]

The Bakken shale has seen the greatest market penetration of crude-by-rail, and North Dakota projects that 1.2 million barrels per day, or sixty percent of its total production, will leave the state via rail in 2014.[29]

Figure 1. Trends for crude-by-rail transportation between 2009 and 2013. Source: Energy Information Administration (2014).

B. Safety and Environmental Concerns

Along with its efficiency and quality of shipments, crude-by-rail brings with it a number of serious concerns. As succinctly described by one observer, watching an oil tanker train pass by is a scene like no other; more than a mile long, carrying 100 or more tanker cars, “it’s like a pipeline on wheels.” [30] It is debated which form of transport has the higher overall spill rate, rail or pipeline.[31] 148 incidents of crude oil released from railroads were counted between 2002 and 2012.[32] While only 39 of those spills released of more than five gallons,[33] the severity of such instances has put crude-by-rail into the realm of public scrutiny. In addition to the Lac-Mégantic incident in Quebec, 2013 saw derailments and explosions in both Alberta and North Dakota. [34] The North Dakota spill marked the fourth major derailment in the course of six months. [35] Even more recently, in January and February 2014, a train carrying crude oil derailed on a populated bridge in Philadelphia, and trains derailed and spilled crude in western Pennsylvania and New Brunswick, Canada.[36]

While the derailments themselves are cause for concern, a key safety consideration is that Bakken crude oil, as a lighter oil, has a higher gas-oil ratio that makes it more combustible and volatile than other forms of oil.[37] Heavy crude is more expensive to ship by rail, as it requires heating or dilution to be loaded into railcars, and few railcars are properly equipped to carry it.[38] Light crude dominates the crude-by-rail system, and only about 50,000 barrels of heavy tar sands crude is shipped by rail.[39] Adding to the flammability concern is that this more volatile crude oil is transported by railcars based on a 1960s design. The DOT-111 railcar, originally designed to haul nonhazardous materials, is known to be susceptible to corrosion and releases.[40] There are currently 228,000 DOT-111s in service, of which 94,000 carry flammable liquids.[41] According to the American Association of Railroads (“AAR”), as many as 78,000 of those cars are lacking up-to-date equipment, such as head shields and thermal jacketing, that would make them safer for transporting crude. [42] 

Releases of crude oil pose harm to more than just communities located near railways;

oil and gas can easily damage wildlife and ecosystems. While accidental releases account for only a small amount of the oil introduced into the environment, spilled oil that enters nearby waterways can have particularly drastic effects, including fish kills, altering benthic ecosystems in the river- or seabed, and more subtle effects on behavior and reproduction in aquatic birds and other species.[43] Unlike gas or diesel fuels, which evaporate upon entering water bodies, crude oils even in their “light” form can persist in the environment and cleanups must occur immediately following the spill to ensure effectiveness.[44] In turn, cleanups of water bodies and wildlife that have withstood spills can have toxic effects on humans, commonly including contact dermatitis or increased cancer risk.[45]

III. Analysis of the Regulatory Framework for Crude-by-Rail

Despite its novelty relative to other forms of oil, the transportation of millions of barrels of tight and shale oil is governed by a regulatory framework that had been in place since the 1970s. In order to provide context for the regulatory challenges currently faced as the result of rapid crude-by-oil expansion, the following sections give: 1) an overview of the various regulatory bodies and other stakeholders that are part of a patchwork system of rail regulation; and 2) a brief summary of the key statutes and regulations that apply to transportation of crude by rail. Ultimately, it concludes that there are significant regulatory gaps that could benefit from a modernized approach.

A. Regulatory Bodies and Stakeholders

The railroad industry is overseen by two main regulatory bodies within the U.S. Department of Transportation: the Pipelines and Hazardous Materials Safety Administration (“PHSMA”) and the Federal Railroad Administration (“FRA”).[46] While the FRA regulates rail carriers and ensures compliance with railroad safety regulations, including operating practices, track maintenance, and inspections, the PHMSA focuses more specifically on safety regulations for movement of hazardous materials.[47] The two agencies collaborate in rulemaking and other decisions as needed,[48] but they are ultimately “separate agencies with different leadership, mandates, and prerogatives,” a reality that could present difficulties to a comprehensive approach to crude-by-rail regulation.[49]

An independent supervisory agency outside of DOT, the National Transportation Safety Board (“NTSB”) is another body that can drive regulation of the rail industry through safety recommendations.[50] The NTSB conducts accident investigations and safety studies and advocates its recommendations among the PHMSA, but it does not possess any authority promulgate its own transportation safety regulations.[51] A second advisory body can also be found in the Railroad Safety Advisory Committee, which was formed by the FRA in 1996 to provide recommendations regarding the railroad safety regulatory program.[52] Although both bodies can play important roles in the rulemaking process, the extent to which their recommendations ultimately influence certain regulatory decisions is unclear. The NTSB, for instance, has recommended updating of DOT-111 railcars since 1991.[53]

At the state and local level, regulation of rail safety is largely preempted by the federal Hazardous Materials Transportation Act (“HMTA”).[54] Nonetheless, local leaders have become closely involved in calling for federal reform of rail safety in the wake of recent accidents affecting local communities.[55] In addition, as will be discussed further below, the insufficiencies of federal emergency response planning have led state and local governments to be sidled with the burden of emergency response.[56] In New York, Governor Andrew Cuomo has required state agencies to prepare and submit spill preparedness assessments.[57]

Private associations also play a central role in overall governance of the largely deregulated rail industry. The AAR, an organization of Class I railroads, sets voluntary industry standards for a variety of technical and quality assurance issues.[58] Within the AAR, the AAR Tank Car Committee focuses on industry standards for tank car design and construction, often going beyond what is required by federal requirements.[59] The American Short Line and Regional Railroad Association and the American Petroleum Institute (API) are other prominent groups that are closely involved in federal rulemaking and private standard-setting. Finally, the crude-by-rail industry itself is made up of a diverse set of stakeholders, which can be roughly broken down into crude producers or purchasers, rail companies (carriers), rail operators, and shippers. [60]

A. Sufficiency of Relevant Statutes and Regulations

Considering the wide range of regulatory players, it is perhaps unsurprising that crude-by-rail is governed by a complex set of laws and regulations that sometimes overlap. Rather than providing an exhaustive list of potentially applicable laws, the following sections provide a brief overview of laws most relevant to the current policy concerns regarding crude-by-rail: 1) the HTMA and Hazardous Materials Regulations; and 2) emergency response planning requirements under both the FRA and PHMSA laws.[61]

a. HMTA and Hazardous Materials Regulations

As the main statute affecting transportation of oil by rail, the HMTA sets broad limits on transport of crude oil with a number of provisions, including limits on quantity and rules regarding packing.[62] It also sets mathematical formulae for the filling of railcars with oil.[63] The Hazardous Materials Regulations (“HMR”),[64] promulgated by the PHMSA, contain more specific provisions relevant to crude-by-rail. The three most relevant aspects of these regulations are: 1) classification of hazardous materials and 2) tank car specifications.[65]

1) Classification

Crude oil is considered a Class 3 hazardous material, a Class that includes flammable and combustible liquids. [66] The two classes preceding Class 3 are explosives (Class 1) and gases (Class 2).[67] Within Class 3, a particular oil product may fall within a number of different “packing groups,” which determines the level of safety precautions required in loading and packaging.[68] The FRA is involved in this classification system, as its “material data safety sheet” dictates that characteristics that must be tested to determine packing groups, including “flash point, corrosivity, specific gravity at loading and reference temperatures, and the presence and concentration of specific compounds such as sulfur.”[69] Importantly, however, the material data safety sheet if considered by some to be outdated and not sufficiently based on tests at unconventional oil sites.[70] Because crude is often blended and derived from different sources, incorrect evaluation of safety characteristics is commonplace. In February 2014, PHMSA discovered based on a series of compliance inspections that 11 out of 18 randomly sampled batches of crude has been misclassified—placed into the wrong packing group—before arriving at the tank cars.[71] PHMSA utilized its enforcement authority to fine the three companies responsible a combined $93,000 for the violations, but the prevalence of misclassification may be indicative of a broader difficulty in ensuring that transportation of crude by rail is done with appropriate safeguards.[72]

Additionally, the HMRs allow for an exception wherein combustible liquids may be transported in non-DOT-specification bulk packaging[73] As a result, “AAR class” cars that are not built and maintained to DOT standards may be used to transport shipments of crude, even when the material has a relatively low flash point. According to the FRA, this trend could have grave

consequences for crude oil that has been misclassified and is actually more flammable than labeled, as was the case in the Lac-Mégantic incident. [74]

2) Tank Car and Loading Specifications

The HMRs set specific loading requirements for crude oil based on the type of tank car being used. To prevent overloading and explosions of tank cars, “outage” and “flash point” requirements are in place to ensure that the oil can be loaded safely and that its temperature will not increase to an unsafe level during transport.[75] Unfortunately, overloaded cars are an all too common issue in the rail industry. Many movement requests submitted to the FRA (about ten percent between 2004 and today) have been for overloaded tank cars, thirty-three percent of which were cars carrying Class 3 flammable liquids.[76] The problem is worsened by the use of out-of-date DOT-111 railcars, which are noted to be more susceptible to damage and leakage. The FRA has noted an “increasing number of incidents involving damage to tank cars in crude oil service in the form of severe corrosion of the internal surface of the tank, manway covers, and valves and fittings,” a trend possibly brought on by the use of fracking liquids and other chemicals that can contaminate batches of crude.[77] The NTSB has been advocating for updates to tank cars since 1991, when they conducted a study finding that fifty-four percent of DOT-111 cars released product when involved in accidents, and more recently in 2009 it noted the DOT-111’s “high incidence of [tank] failure when involved in accidents.”[78]

b. Emergency Response Planning

Although the HMRs do contain provisions for operators to engage in safety and security planning, the broadly applicable provisions focus on security of access and personnel, rather than how the hazardous materials operator would respond in the event of a derailment.[79] The HMRs can require more rigorous planning, including alternative route planning and recordkeeping requirements, but these are triggered only for Class 3 explosives and poisonous or radioactive materials.[80]

In the context of oil transportation, the FRA has separate regulations requiring completion of oil spill prevention and response plans.[81] Such plans are not officially required, however, and therefore are not filed with the agency, unless the operator uses tank cars that store more than 42,000 gallons of oil.[82] Nationwide, only five such containers are known to meet this threshold.[83] The 42,000 gallon threshold was set by the FRA in 1996, well before the recent upturn in oil production and transportation by rail.[84] Finally, even in the limited circumstances where emergency response plans are required, there exists no provision requiring the FRA to review and accept or reject those plans. This lack of oversight, as described by the NTSB, “calls into question why these plans are to be submitted.”[85] In the absence of mandatory emergency response planning at the federal level, the local governments whose communities face the greatest risk in the event of a derailment have been forced to take on the emergency role. Local fire departments, for instance, have authority to request documentation on hazardous materials shipping from railroads under their own voluntary standards.[86] But such planning requires time and technical expertise with regard to railroad management. While local officials may well have these capabilities in certain circumstances, as outgoing NTSB chairwoman Deborah Hersman remarked, there are inherent problems associated with the fact that “[rail] carriers have effectively placed the burden of remediating the environmental consequences of an accident on local communities along their routes.”[87]

III. Developments, Challenges, and Recommendations for a Comprehensive Approach to Crude-by-Rail Regulation

The rise of crude-by-rail, accompanied by the Lac-Mégantic and other incidents have brought to light a tangled web of regulatory gaps. If crude-by-rail really is here for the long haul, proper materials classification, railcar safety, and emergency planning are challenges regulators, railway operators, and local communities will continue to face for years to come. This final section first discusses the developments, or “crude beginnings” of regulatory reform, that have been put in motion in the last year. It then proposes that PHMSA and FRA should collaborate to address two key reforms: 1) considering new ways of classifying crude oil to properly account for risks it presents when transported by rail, and 2) expanding emergency responsive plan requirements for crude-by-rail operators and have such plans approved by the FRA. Broader policy implications, including the importance of coordinating with Canadian and state and local regulators, are also considered.

A. Developments

Perhaps not surprisingly, the industry has stepped in following the Lac-Mégantic incident to improve certain safety measures and has in many ways been its own regulator. In February 2014, the AAR, API, and American Short Line & Regional Railroad Association worked with the DOT to jointly publish voluntary interim measures for the industry that include using rail traffic routing technology, lowering speed limits in urban areas, and bolstering emergency response plans.[88] With regard to emergency response plans, it remains that so long as such plans are not reviewable by the FRA or PHMSA, their effectiveness cannot be ensured.[89] That same month, the DOT released an emergency order displaying their commitment to ensuring proper classification of crude oil shipments, stating that it would require on-site testing and classification of crude oil prior to transportation, rather than the traditional reliance on past information.[90] In an amended order released in March, however, the agency fails to specify how often such testing must be performed, and leaves the operator with discretion to determine whether their data is sufficiently reliable to classify.[91] Thus, questions remain as to whether the relevant federal agencies are taking enough action to address the roots of the classification problem.

In January 2014, the NTSB’s joint safety recommendations with the Transportation Safety Board of Canada focused on changing the safety classifications of crude oil, and the use of safety and security plans under the FRA requirements for operators to perform detailed safety analysis and consideration of alternative routes for every shipment.[92] To date, however, the PHMSA’s rulemaking focus has been dedicated to initiating updates to the DOT-111 railcars.[93] The current proposals include increasing the steel shell and head thickness of the cars and adding more robust protection such as pressure relief valves for top fittings.[94] DOT has estimated that the updated cars would cost approximately $18,000 more than the current version, and would also weigh more, thus likely incurring higher rail fees.[95] An upgraded version of the DOT-111 has been on the market since 2011 but orders for the safer cars are backlogged, indicating the lag time created by the surge of crude-by-rail shipments.[96] While certainly a worthy cause, considering that the NTSB has been calling for such reform for over two decades, it more than likely that once new specifications come out in 2015, several years could pass before the updated cars rule the rails.[97] While the proposal is supported by the AAR and other rail industry members, shippers that own or lease railcars have expressed opposition due to higher costs.[98]

Taken together, these agency and voluntary industry actions are certainly a start. They are not, however, a final solution to the wide range of problems that have arisen as the result of the crude-by-rail trend. Few onlookers expect a true transformation in the way crude oil is transported across the country. Some have noted that while the situation differs today because of the sheer volume of crude shipped, the risk of derailment is largely similar to how it has been for the past twenty years, over which regulatory bodies in the U.S. and Canada have both failed to take effective action.[99] The following section proposes two achievable additions to the federal enforcement scheme, which could be used in the alternative or in conjunction to create a more comprehensive approach.

B. Recommendations for Increased Federal Safety Enforcement

As described in detail above, proper classification of crude oil and selection of hazardous materials packing groups, particularly when the oil is blended with other materials, remains a crucial regulatory challenge.[100] The PHMSA and FRA have pointed to this as an area of concern, and the PHMSA has recently begun a compliance investigation, under which it is reviewing primarily shipments from the Bakken region and is engaging in “unannounced spot inspections, data collection, and sampling, as well as verifying compliance with federal safety regulations.” [101] Although the PHMSA has enforcement authority to issue fines for misclassification, the content of the January and March emergency orders indicates that the agency does not want to become too deeply involved in the way that operators classify their crude.[102] A possible approach to this stalemate would be for the PHMSA, rather than focusing on the various packaging classes and allowing operators to regularly underestimate flammability, to treat all crude oil transported by rail the same way as explosives, or Class 1 hazardous materials. This solution, as advocated by the NTSB, would require operators to comply with the safety and security planning measures required for the most harmful materials, including consideration of alternative routes to avoid highly populated areas or environmentally sensitive regions.[103]

Such a rulemaking would likely face some level of opposition from rail operators and shippers due to the time and expense required for alternative route analysis, but considering that the AAR voluntary measures already include commitments for operators to consider alternative routing, it could also be considered as a complement to the existing voluntary framework. Alternatively, if PHMSA finds it infeasible to re-classify crude as a whole, it could issue a separate rule or executive order that requires all crude to be carried in tank cars that have the additional safety measures required for explosive liquids.[104] As DOT-111 cars are re-designed to include additional safety measures, PHMSA should consider lining up these specifications with the car selection requirements for Class 1, as some overlap already exists. Considering the complexities presented by blended crude and mixed shipments, along with the insufficiencies of current data for estimating hazard levels, a more careful approach may be what is needed to ensure safety.

Regardless of whether PHMSA opts for a more aggressive approach to ensuring proper classification of crude shipments, emergency response planning should be a key focus for PHMSA and FRA, both as an interim measure while awaiting the phase-out of old railcars and as part of a longer-term approach. While rail operators are largely left to self-regulate in the realm of emergency response, companies shipping oil by pipeline or by seaborne tanker are required to submit emergency response plans to the PHMSA and the Coast Guard, both of which have the authority to review the plans for sufficiency.[105] Thus it appears that the FRA has been left behind in the case of crude-by-rail. This is highly problematic, as rail shipments, unlike pipelines, are often close to population centers and sensitive ecosystems.[106] “Depending on timing and location, even a small spill can cause significant harm to individual organisms and entire populations.”[107]

As the 42,000-gallon threshold for “comprehensive emergency response” has not been adjusted since 1996, the FRA should use the surge of crude-by-rail as an opportunity to reconsider this threshold, or to create a separate emergency response planning requirement for crude shipments in particular.[108] Although the FRA may not be able to expand its own authority to require review of plans without Congressional action, at bottom it could expand the applicability of the plans.

The seldom-invoked emergency response plans do not require alternative route analysis like the PHMSA safety and security plans, and thus might be subject to less scrutiny by the industry; instead, the provisions requires operators to provide baseline information on how they will response to discharges that occur during transportation, taking into account potential discharge levels and identifying the relevant personnel and agencies that would be contacted in the event of a spill.[109] Ultimately, a comprehensive approach would also include added authority for the FRA to review the quality of these plans.

B. Additional Recommendations

In addition to increased federal enforcement of safety standards, a holistic approach to crude-by-rail regulation also requires increased collaboration with other governmental bodies. At the state and local level, regulators who have tired of federal inaction are in the early stages of implementing innovation approaches. In Chicago, for instance, Mayor Rahm Emanuel has announced his intent to introduce a local fee on the transport of all hazardous materials by rail, the revenue from which would be used to assist emergency responders. [110] The AAR, however, has cautioned that a federal tax "could negatively impact consumers" in the form of higher energy costs.[111] An open rulemaking process initiated by the PHMSA and FRA would be an ideal way to bring together the various stakeholders to arrive at a rule that minimizes negative impacts on consumers and the rail industry, which is already working voluntarily to address safety concerns. An analysis under the National Environmental Policy Act (NEPA)[112] would also accompany any major rule making as a federal action “significantly affecting the quality of the human environment,”[113] and NEPA review should provide opportunity for public participation and thorough consideration of the human health and environmental impacts of any rulemaking. In addition, close coordination with local communities in implementation of emergency response plans is a necessary facet to the federal approach, and as local governments have already begun varying levels of emergency preparedness, operators may benefit from working with them.

Finally, although not the focus of this paper, harmony with the Canadian approach is also an essential piece of effective regulation in the U.S. The agencies have already taken a tandem approach, but it is notable that the while the Canadian government imposed new regulations in October 2013 requiring classification tests on crude oil before every transport or import into Canada, the U.S. approach is less clear-cut.[114] Canada may also be moving towards requiring emergency response planning for crude shipments of seventeen or more connected tank cars.[115] Due to the increasingly integrated nature of the North American railway system, the DOT would be well-suited to proceed with regulations in parallel such that the industry does not have to comply with two drastically different regulatory frameworks.[116]

V. Conclusion

As accurately described by Senator Charles Schumer of New York:“[t]he safety regime has to catch up with the reality that there are now hundreds of cars everyone admits could be dangerous if there is a derailment that are hurtling through heavily populated areas.”[117] Although the unconventional oil boom and accompanying rush to the rails is benefitting our national economy in tangible ways, clear regulatory gaps are preventing us from realizing the future of U.S. oil production in a responsible way that considers the needs of present local communities, the environment, and future generations. In addition to existing regulatory developments in the wake of the Lac-Mégantic incident, the PHMSA and FRA must take action to ensure a careful, comprehensive approach to regulation of crude-by-rail. While over time, improvements to the classification system for crude an expanding of emergency response planning may both become part of a comprehensive approach to regulating crude-by-rail, improved emergency response planning is especially needed as an interim measure to ensure safety of human health and the environment.

Honesty Pledge

"On my honor, I submit this work in good faith and pledge that I have neither given nor received improper aid in its completion." /s/ Molly A. Masterton

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[1] J.D. Candidate 2014, The George Washington University Law School. Work done in coordination with Energy & The Environment (6439), Spring 2014, instructed by Professors Robert Nordhaus and Debra Jacobson.

[2] J. Craig Anderson and Edward D. Murphy, Train Derails, Explodes near Maine-Canada border, Portland Press Herald (July 8, 2013),

[3] Id.

[4] Jacques Leslie, Shipping Crude Oil by Rail:  New Front in Tar Sands Wars (Dec. 5, 2013),

[5] Blake Sobczak, Despite Safety Warnings, Long Road Ahead for New Crude-by-Rail Regs, Energywire (January 24, 2014), available at

[6] See, e.g., U.S. Nat’l Transportation Safety Board, Safety Recommendation Letter R-14-004-006 (Jan. 21, 2014); U.S. Nat’l Transportation Safety Board, Safety Recommendation Letter R14-001-003 (Jan 23, 2014)(hereinafter “NTSB Safety Recommendations Letters”), available at ; Jad Mouawad, Bakken Crude, Rolling Through Albany, NY Times (Feb. 27, 2014),

[7] In the days following the horrific Lac- Mégantic derailment, inspectors determined that the oil carried by the train’s DOT-111 railcars was more explosive than indicated by its label. David Ljunggren, Fuel on Train in Quebec Disaster More Explosive than Labeled, Reuters Canada (Sept. 11, 2013), . See also NTSB Safety Recommendation Letter R-14-004-006, supra note 7, at 11, 13-15. See also Velamakanni, Off the Rails: PHMSA Regulation of DOT-111 Tank Cars, Infra Insight (Oct. 23, 2013),

[8] David Pumphrey et al., Center for Strategic & International Studies, Safety of Crude Oil by Rail 1 (2014), available at

[9] Hazardous Materials Regulations, 49 C.F.R Parts 171-180 (2012).

[10] See NTSB Safety Recommendation Letter R-14-004-006, supra note 8, at 11; U.S. Nat’l Transp. Safety Board, NTSB Calls for Tougher Standards on Trains Carrying Crude Oil (Press Release, January 23, 2014), available at .

[11] U.S. Dept. of Transportation, Federal Railroad Administration, Emergency Order No. 28 (Aug. 7, 2013).

[12] See 49 C.F.R Part 172.820 (2012) (listing threshold levels for submission of additional safety and security planning documents); 49 C.F.R. 130.2(a)(2) (thresholds for comprehensive emergency response planning).

[13] See Advanced Notice of Proposed Rulemaking, Hazardous Materials: Rail Petitions and Recommendations to Improve the Safety of Railroad Tank Car Transportation (RRR), 78 Fed. Reg. 54,849 (Nov. 5, 2013). See also Safety and Security Plan for Class 3 Hazardous Material Transported by Rail, 78 Fed. Reg. 69,745 (Nov. 20, 2013) (joint safety advisory by PHMSA and FRA emphasizing importance of proper classification, characterization, and packing group materials for crude transported by rail). Docket No. PHMSA-2013-0254),

[14] See id.

[15] Ernest Scheyder, North Dakota Governor: Crude Oil Railcar Safety Rules Needed Now, Reuters (Jan. 22, 2014),

[16] Kirk Siegler, Oil Train Derailments Spur Calls For Safety Measures, NPR (Feb. 2, 2014).



[17] U.S. Energy Information Administration, U.S. Crude Oil and Natural Gas Proved Reserves 1 (April 10, 2014), available at

[18] In addition to shale oil, the total oil count would include conventional oil, liquefied natural gas, and biofuel production See Leonardo Maugeri, The U.S. Shale Oil Boom: Potential Impacts and Vulnerabilities of an Unconventional Energy Source 1 (June 2013). While this paper focuses on the crude oil output and its implications once in commerce, it is relevant to note that oil is today being extracted through many different processes with varying levels of technological complexity. Oil resources can be generally broken down into “conventional” and “unconventional” reservoirs, the latter of which includes relatively new sources including shale oil and “tight oil” reservoirs. Recovery of tight oil requires stimulating the well with certain technologies, the most common of which is hydraulic fracturing or “fracking.” Horizontal drilling and mining are other advancements that have allowed producers to take more advantage of unconventional oil plays. See generally Canadian Society for Unconventional Resources, Understanding Tight Oil (2013), available at

[19] Maugeri, supra note 18, at 2.

[20] Julie Carey, Rail Emerging as Long-Term North American Crude Option, Oil & Gas Journal (Aug. 5, 2013), .

[21] Trends are based on Class I Railroad shipments. The U.S. railroad system has three classes, and Class I is generally used to transport large volumes over long distances between North American regions. Ass’n of American Railroads, Moving Crude Oil by Rail 1 (Dec. 2013), available at .

[22] U.S. Dept. of State, Bureau of Oceans and International Environmental and Scientific Affairs, Final Supplemental Environmental Impact Statement for the Keystone XL Project (Executive Summary) (Jan. 2014), available at

[23] Barclay Nicholson Fulbright & Jaworski LLP, Regulatory Complexity Governs Rail, Truck Oil Field Transportation (2014), available at

[24] JOHN FRITTELLI, ET AL., CONGRESSIONAL RESEARCH SERVICE, U.S. RAIL TRANSPORTATION OF CRUDE OIL: BACKGROUND AND ISSUES FOR CONGRESS 19 (Feb. 6, 2014)

[25] American Ass’n of Railroads, supra note 21, at 3.

[26] Carey, supra note 20.

[27] Id.

[28] With regard to product purity, rail allows for delivery of “pure barrels” of certain forms of crude that is not always possible with pipelines Ass’n of American Railroads, supra note 21, at 5-6.

[29] Pumphrey et al.., supra note 8, at 2.

[30] Kirk Siegler, Oil Train Derailments Spur Calls For Safety Measures, NPR (Feb. 2, 2014)



[31] In 2013, the International Energy Agency reported that the odds of a train spill were six times higher than a pipeline incident during the period between 2004 and 2012. It later stated that the total amount of oil released by pipelines was three times higher over that same period. Also of relevance is that railroad operators must report spills of any size, whereas in most cases pipelines report spills of five gallons or more. Ass’n of American Railroads, supra note 21, at 7; Eliot Caroom, Pipelines Spill Three Times as Much Oil as Trains, EII Says (May 14, 2013),

[32] Ass’n of American Railroads, supra note 21, at 7.

[33] Id.

[34] Pumphrey et al., supra note 6, at 1. See also Frittelli et al, supra note 24, at 1.

[35] Angela Greiling Keane and Mark Drajem, Bakken Crude More Dangerous to Shop and Other Oil: U.S., Bloomberg (Jan. 2, 2014),

[36] Pumphrey et al., supra note 6, at 1

[37] Greiling Keane and Drajem, supra note 35.

[38] Leslie, supra note 4.

[39] Although less explosive than light crude, spills of heavy crude lead to much more complex cleanup processed due to higher bitumen levels. Id.

[40] NTSB Safety Recommendation Letter R-14-004-006, supra note 8, at 11.

[41] American Railroad Association, Railroad Tank Cars, available at (last accessed March 1, 2014).

[42] See Sobczak, Despite Safety Warnings, supra note 5.

[43] Oil, in U.S. Geological Survey: Field Manual of Wildlife Diseases: Birds 309, 313 (1999), available at . Oil spills can thwart native plant development and can spur growth of certain algae populations. See Oil Spills: Severity and Consequences to Our Ecosystem, Dartmouth Undergraduate Journal of Science (Mar. 11, 2012),

[44] Oil Spills: Severity and Consequences to Our Ecosystem, supra note 43.

[45] USGS Field Manual, supra note 43, at 313.

[46] Pumphrey et al., supra note 8, at 2.

[47] Id.

[48] See, e.g., U.S. Dept. of Transportation, Federal Railroad Administration, Emergency Order No. 28 (Aug. 7, 2013).

[49] See Pumphrey et al., supra note 8, at 3.

[50] See NTSB Safety Recommendations Letters, supra note 6.

[51] Pumphrey et al., supra note 8, at 3.

[52] RSAC History, Federal Railroad Administration, Railroad Safety Advisory Committee,

[53] Pumphrey et al., supra note 8, at 6.

[54] Hazardous Materials Transportation Act, 49 U.S.C. § 1525(b)(1); 49 C.F.R. 174.2 (2012). See also Roth v. Norfalco, 651 F.3d 367, 376 (3d Cir. 2011)(holding HMTA to preempt common law claims for design defects)

[55] Pumphrey et al., supra note 8, at 8. In addition, several states, including Colorado, New York, North Dakota, Pennsylvania, and Texas, have promulgated baseline permitting, operating, and recordkeeping requirements for transportation of oil and gas wastes(e.g. fracking fluid) through their state. See Barclay Nicholson Fulbright & Jaworski LLP, Regulatory Complexity Governs Rail, Truck Oil Field Transportation (2014), available at

[56] Blake Sobczak, Oil-by-Rail Loophole Keeps U.S. Emergency Response Plans in the Dark, EnergyWire (April 22, 2014),

[57] Pumphrey et al., supra note 8, at 8.

[58] See AAR Indsutry Standards and Freight Loading, American Ass’n of Railroads,



[59] The tank car committee is composed of a diverse array of stakeholders, including car owners, manufacturers, and rail hazmat customers, and also receives input from the U.S. DOT, NTSB, and Transport Canada. See American Ass’n of Railroads, supra note 21, at 7-8.

[60] See Pumphrey et al., supra note 8, at 2-4. The term “shipper” is not defined in the Hazardous Materials Regulations, and there may be different ways to characterize entities depending on their position in the supply chain.

[61] Although this paper does not focus on more general railroad operations management, such as track maintenance, another relevant source of authority in the crude-by-rail discussion is the Federal Railroad Safety Improvement Act. Enacted in 2008 as an update to the 1970 Federal Railroad Safety Act following increased incidence of derailments, the FRSIA requires the FRA to study and consider revisions to frequency and method of track inspection. See Federal Railroad Safety Improvement Act, Pub. L. 110-432, § 403(a) (codified as amended at 49 U.S.C. § 20101 (2012)). . FRA conducted the study and on January 24, 2014 issued a final rule on improving rail integrity. See 79 Fed. Reg. 4234 (Jan. 24, 2014).

[62] 49 C.F.R. § 172.101 (2012). Notably, the Resource Conservation and Recovery Act (RCRA) contains an exemption for transportation of crude oil and related wastes (including fracking fluids) 42 U.S.C. §§ 6901 et seq. (2012).

[63] See also 49 U.S.C. §§ 5101-5127; § 5110 (shipping papers and disclosure).

[64] 49 C.F.R Parts 171-180 (2012).

[65] See Pumphrey et al., supra note 8, at 3.

[66] 49 C.F.R. 173.2 (2012). See also Pumphrey et al., supra note 6, at 2-4.

[67] Id. There are nine classes of hazardous materials under the HMRs, the others being: flammable solid, spontaneously combustible, dangerous when wet (class 4), oxidizing agents/organic peroxides (class 5); poisonous materials/infectious substances (class 6); radioactive materials (class 7); corrosive materials (class 8); miscellaneous (class 9).

[68] See 49 C.F.R. 173.3 (2012).

[69] The flash point of volatile material like crude is calculated as the lowest temperature at which the liquid can vaporize and ignite. Pomphrey et al., supra note 8, at 4.

[70] William C. Vantuono, U.S. Regulators Reviewing Crude-by-Rail, Railway Age (Aug. 29, 2013),

[71] Id.

[72] Pomphrey et al., supra note 8, at 4.

[73] 49 C.F.R 173.150(f)(3) (2012).

[74] U.S. Dept. of Transportation, Federal Railroad Administration, Letter to American Petroleum Institute (July 29, 2013), available at

[75] See generally 49 C.F.R 173.24b(a) (2012).

[76] See Vantuono, supra note 70.

[77] Id.

[78] See Pumphrey et al., supra note 8, at 5.

[79] See 49 C.F.R 172.802 (2012).

[80] 49 C.F.R 172.820(a).

[81] See generally 49 C.F.R. 130.2 (2012).

[82] 49 C.F.R. 130.2(a)(2).

[83] The most prevalent DOT-111 railcars can hold only up to 34,500 gallons. A FOIA response confirmed that none of those tanks are being used to haul crude. See Blake Sobczak, Crude-by-Rail's Surge Leaves Emergency Planning Oversight in the Dust, Energywire (Feb. 19, 2014).

[84] Id.

[85] Id.

[86] Id.

[87] Id.

[88] AAR’s members have agreed to implement these actions by July 1, 2014. The voluntary measures also included a commitment to contribute five million dollars to a new training program for hazardous materials shipping. Freight Railroads Join U.S. Transportation Secretary Foxx in Announcing Industry Crude By Rail Safety Initiative, Ass’n of American Railroads (Feb. 21, 2014),

[89] Sobczak, Emergency Planning Oversight, supra note 83.

[90] U.S. Dept. of Transportation, Emergency Restriction/Prohibition Order (Feb. 25, 2014), available at (Docket+DOT-OST-2014-0025).pdf

[91] See U.S. Dept. of Transportation, Emergency Restriction/Prohibition Order (Mar. 6, 2014),; Eva O’Brien, Crude Beginnings to Regulating the Rail Transportation of Oil? American College of Environmental Lawyers (April 16, 2014),

[92] See NTSB Safety Recommendation Letter R-14-004-006, supra note 8, at 11; U.S. Nat’l Transp. Safety Board, NTSB Calls for Tougher Standards on Trains Carrying Crude Oil (Press Release, January 23, 2014), available at .

[93] See Advanced Notice of Proposed Rulemaking, Hazardous Materials: Rail Petitions and Recommendations to Improve the Safety of Railroad Tank Car Transportation (RRR), 78 Fed. Reg. 54,849 (Nov. 5, 2013

[94] PHMSA, Hazardous Materials: Rail Petitions and Recommendations to Improve the Safety of Railroad Tank Car Transportation (RRR), 78 Fed. Reg. 54849 (Sept. 6, 2013), available at

[95] See Barclay Nicholson, supra note 23.

[96] See Leslie, supra note 4.

[97] Id.

[98] Greiling Keane and Drajem, supra note 35.

[99] O’Brien, supra note 91; Jad Mouawad and Ian Austen, U.S. and Canada Urge New Safety Rules for Crude Oil Shipments, NY Times (Jan. 23, 2014),

[100] See supra, p. 11-12.

[101] Vantuono, supra note 70. See also Emily Holden, PHMSA Stresses Crude Oil Shipping Rules After Canadian Rail Accident, CQ Roll Call (Nov. 20, 2013).

[102] See supra note 90-91.

[103] See generally 49 C.F.R. Part 174, Subpart (2012)(Explosive Materials).

[104] See 49 C.F.R. 174.104; NTSB Safety Recommendations Letters, supra note 6.

[105] See 49 C.F.R 192.615; 49 C.F.R 195.402 & 403 (2012).

[106] See Frittelli, supra note 24, at 10.

[107] Id.

[108] Sobczak, Emergency Planning Oversight, supra note 83.

[109] See 49 C.F.R. 130.31(a)(1)-(5)(2012).

[110] Sobczak, Despite Safety Warnings, supra note 5.

[111] Id.

[112] National Environmental Policy Act, 42 U.S.C. § 4321 et seq. (2012).

[113] 42 U.S.C. § 4332(2)(c).

[114]  Ljunggren, supra note 7.

[115] See Sobczak, Emergency Response Plans, supra note 56.

[116] Industry safety standards already apply to both U.S. and Canadian railroads. See Frittelli, supra note 24, at 13.

[117] Mouawad, supra note 3.

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