JUL
23

DOT Buckles Down on Crude by Rail

 
Today, the Department of Transportation (DOT) issued long-awaited proposed rules to improve the transportation of various materials including crude oil, ethanol, and other hazardous materials. In making the announcement, Transportation Secretary Anthony Foxx did not mince words, stating that DOT is “proposing to phase out the DOT-111 tank car in its current form.” The Pipeline and Hazardous Materials Safety Administration (PHMSA) is seeking feedback on specific redesigns to the now infamous DOT-111 tank cars, which were in use during all the oil train explosions of recent years. The National Transportation Safety Board (NTSB) has specifically noted that these types of tank cars suffer “high incidence of tank failure.” Indeed, in 2013 alone, there were 116 documented incidents involving tank cars carrying crude oil, and 154 tank cars failed last year. The most tragic example was the Lac-Megantic oil train explosion from last spring, which scorched a town and left over 40 dead, but failures in DOT-111s have led to significant damage to environmental resources and property from train derailments since the 1970s. Are DOT-111 cars an unusual occurrence on U.S. railroads? Hardly. Seventy percent of tank cars currently on U.S. railways are DOT-111, and they are used to transport a wide spectrum of hazmat commodities. Furthermore, unit train tank cars in crude oil service are seeing upwards of 90-100,000 miles of travel per year. The heavy strain and high usage placed on these cars increases the need to improve the current design. In 2011, following numerous accidents and investigations, some rules were put in place to improve the safety of future tank car designs. These measures included increased head and shell thickness, use of normalized steel (which improves both the durability and flexibility of the cars), a half-inch head shield covering, and improved top-fittings. However, even these newer cars have performed poorly in recent crashes—ten of the 13 cars that derailed in the recent explosion in Lynchburg, Virginia were constructed after 2011. Only about 18,000 of the 98,000 DOT-111s currently in use for flammable or hazardous material shipment were constructed following marginal safety improvements put into place in 2011, and the original design of DOT-111s dates back to the 1960s. According to the Rail Supply Institute, an additional 55,000 new cars have been ordered through 2015. A lack of pipeline capacity and the recent surge in U.S. oil production has prompted massive growth in demand for DOT-111 cars. In 2008, 9,500 rail-carloads of crude moved through our country compared to last year, when there were 415,000 rail-carloads. Importantly, sources agree that the safety benefits of new DOT-111s are not realized if old and new cars are commingled. So in this current proposal, DOT has two missions. First, it needs to impose safety standards that are more effective than the 2011 intervention. Second, it must make the new regulations apply to the tens of thousands of DOT-111 cars currently on the rails. Regarding improvements to the cars themselves, DOT’s proposed rule for tank cars constructed after October 1, 2015 intends to ensure that the new cars have a number of safety measures in the form of:
  • Thermal protection: an outer steel jacket that decreases the likelihood that the contents of the car will catch fire, and help contain fires that do occur
  • Improved top fittings and valves: the current top fittings for DOT-111 cars routinely fail in the event of derailment. Improved standards would strengthen these fittings, add additional protection since these top fittings are prone to catch on various obstacles and result in damage to the cars, and outfit the cars with safety valves capable of releasing pressure in a less dangerous manner
  • Tank head and shell puncture resistance: Cars must have additional shielding at the ends to protect against impact.
  • Increased thickness and use of normalized steel: DOT is currently evaluating if the new cars should be 9/16 inches thick with electronically controlled pneumatic brakes and rollover protection, 9/16 inch thick without the improved brakes and rollover protection, or 7/16 thick and without pneumatic brakes and rollover protection.
Critically, the rule would require existing cars to be retrofitted with these same features. Those not retrofitted would be retired, repurposed, or operated under speed restrictions for up to five years. However, doubts have been raised about the real effectiveness of retrofitting thermal protection. While there is general agreement that thermal protection is a useful addition in the case of new cars, industry has raised concerns that welding the thermal coverings to older cars can ultimately cause structural damage likely to weaken the cars over years of use. Further research is needed to help determine if this is a reasonable concern. In addition to critical modifications to the cars themselves, DOT has outlined a number of new guidelines for usage. You can see DOT’s full outline of the provisions here, but the new usage rules can be summarized as follows:
  • HHFTs: The rule will define the term “high-hazard flammable train” (HHFT) as one with 20 or more tank carloads of flammable liquids, including oil and ethanol. According to industry comments, typical oil trains carry over 50 cars at once, so this regulation should apply to most of the trains posing potential safety threats.
  • Sampling and Reporting: Gases and liquids for rail transportation will be sampled frequently at various points along the supply chain. Sampling methods will be refined to ensure they represent the qualities of the entire mixture, testing methods will be improved to enable better analysis and classification, and industry will be required to maintain sampling program data for DOT to access up on request. It’s worth noting that industry and DOT have been at odds over whether Bakken crude is more volatile than other sources of crude. Industry’s testing suggests it has similar vapor pressure and volatility as normal crude oil, though testing from regulatory bodies has found both a higher incidence of flammable gasses and a higher vapor pressure.
  • Routes: Carriers are required to perform a risk assessment of routes for HHFTs, based on 27 safety and security factors
  • Speeds: Trains with tank cars that do not meet the enhanced specifications will be required to travel below a 40-mph speed restriction. HHFTs that do not comply with new braking requirements will be required to travel below a 30-mph speed limit.
To their credit, following the recent spate of incidents, both the railroad and petroleum industries have agreed that safety improvements are necessary, and have urged the Department of Transportation to expedite the rulemaking so they can move forward with retrofitting unsafe cars and designing new ones that meet the updated safety requirements. The Houston Chronicle reports that, in fact, DOT’s original proposal was to phase out all the unsafe DOT-111s within six years, but the Association of American Railroads and American Petroleum Institute responded with a proposed three year timeline. According to the Financial Times, DOT’s aggressive two year timeline raises questions about whether manufacturers and transporters will have the capacity to build and retrofit all the cars in question in time. The Times also quotes Anthony Hatch, an independent rail analyst, who points out that the two year timeline has the potential to disrupt the crude oil supply chain, since railroads are already strained by the surge in crude oil movements. Earlier this year, it was documented that other goods shipped by rail such as coal and corn were suffering from backlogs and shipping delays as railroad capacity is increasingly consumed by oil shipments. While the new safety standards are desperately needed and long overdue, we will see if DOT’s two year timeline causes headaches for oil producers and refiners—ultimately passed on to consumers in the form of higher gasoline prices.