With what passes for chest-beating in the world of railway regulation, US politicians this summer claimed that the Transportation Department’s newly proposed crude oil, ethanol, and flammable materials train rules made the US Number One when it comes to tank car regulation—and that we are doing better than Canada.
In his reading of a July 23 press release announcing the rule-making (which implied that unsafe DOT-111 tank cars would be off the rails within two years although it was actually 38 months from the date of the announcement), Rep. Rick Larsen said, “That’s a year faster than what the Canadians have proposed. A lot of people have suggested Canada as a model for what we should do. Well, we’re a year faster.”
Was Larsen right? Let’s do the tally to see who is really Number One.
Round 1: Date when legacy DOT-111s are off the rails—Canada 1; USA -1
Neither US nor Canadian regulators proposed an immediate ban on all legacy DOT-111s transporting Bakken crude oil. That’s what ought to happen, and it is the action sought by the recent EarthJustice formal legal petition to USDOT, but that’s not what we’re seeing.
In fact, US regulators proposed a three year-plus delay for even the initial phase-out. The upshot is that according to the proposed rule in the US, trains of 20 or more tank cars of volatile Bakken crude oil will not be able to use DOT-111s after October 1, 2017 (if the oil is classified as Packing Group I) or if carrying ethanol after October 1, 2018.
In Canada, by contrast, legacy DOT-111s will not be allowed for crude oil or ethanol oil after May 1, 2017, according the proposed rule by Transport Canada. (Canada’s proposed rule would allow the use of CPC-1232 standard tank cars up to May 1, 2020 for highly hazardous materials.)
In other words, Canada has proposed to phase out legacy DOT-111s for crude oil and ethanol faster than the US. What’s more, the Canadian phase-out covers all oil and ethanol trains, not just those comprised of 20 or more tank cars.
- That’s 1 point to Canada for a faster phase-out of legacy DOT-111s carrying hazardous fuels. They would have received another point if CPC-1232s were also phased out after May 1, 2017, and we will have to wait for the final rule to see what they decide.
But that’s not the end of this round. We’re penalizing Team America for USDOT’s deceptive press release on its proposed new tank car rules because it implied a shorter phase-out than it really offers. The feds’ statement says [emphasis added]: “Specifically, within two years, it proposes the phase-out of the use of older DOT-111 tank cars for the shipment of packing group I flammable liquids, including most Bakken crude oil…”
Which is highly misleading. In fact, the press release omitted the start date for the phase-out—October 1, 2015—and so it should have read “within 38 months.”
- Penalty against USA for a bad press release that misled the media and the public (and apparently Rep. Larsen) about when DOT-111s would actually be (partially) phased out. Minus 1 point.
Round 2: Immediate removal of the worst-of-the-worst DOT-111 tank cars—Canada 2; USA 0
On April 23, 2014, Canadian regulators required the immediate removal of 5,000 of the least safe DOT-111s from hazardous service. No phase-out, no comment period, just an immediate halt in using these incredibly unsafe tank cars from hauling hazardous materials to protect the public from an imminent danger. The banned tank cars have a construction weakness in the bottom of the tank car frame that is very prone to failure in a derailment. In Canada, these tank cars now have to carry a big label that says, “Do not load with dangerous goods in Canada.”
Yet in the US, regulators have not taken immediate action on these worst-of-the-worst DOT-111s, not even in the proposed rules. In the US, you can basically just paint over the Canadian warning label and keep using these same tank cars to ship Bakken crude or ethanol all the way until October 1, 2017 under the proposed rule. Even then, you can keep on using them just as long as the shipment is less than 20 carloads.
- We award 2 points to Canada for a) listening to their Transportation Safety Board; and b) taking immediate action to remove the most hazardous DOT-111s from service.
Round 3: Improved tank car standards—Canada 1; USA 1
In the draft rule, US regulators have proposed a new specification DOT-117 tank car to replace the DOT-111 for use in unit trains of ethanol or Bakken crude oil. However, instead of proposing a single tank car standard based on the best available science, the proposed rule sets out three options for comment. The weakest option is based on what is known as the CPC-1232 tank car standard that the industry already voluntarily agreed to use for new tank cars starting in 2010. Most of the tank cars involved in the Lynchburg, Virginia oil train explosion were CPC-1232s.
On July 2, Canadian officials proposed a rule with an improved tank car design and brakes called the TC-140 for the transport of flammable liquids, which is equivalent to the best option proposed by USDOT. However, Canada has proposed a slower phase-in of the improved standard.
- So, one point each as this round continues to play out. Canada laid down a marker for the best tank car standard; the final score will depend on the actual rule from the USDOT as well as the harmonization process between the two countries.
Round 4: Taking on underinsurance of railroads for transporting crude oil and ethanol—Canada 2; USA 0
The Lac-Megantic accident revealed the oil-by-rail industry is radically under-insured for the risks of shipping volatile Bakken crude. The railroad involved only had $25 million in liability insurance, and estimates of the total cost to clean up, remediate, and rebuild the town have risen as high as $2.7 billion. Families who lost loved ones and property owners wiped out by the accident are having to go to court, likely for years, to sue anyone connected to the shipment for damages. It is highly likely that provincial and federal taxpayers will end up stuck with a significant bill for the cleanup. An accident in a more populated area would have an even higher cost, far exceeding the $1 billion insurance levels that even major railroads like BNSF carry.
In Canada, requiring the oil-by-rail industry to carry sufficient insurance was a central piece of political leadership’s response to Lac-Megantic along with requiring new tank standards—even if it meant increasing the costs to the energy sector. This was highlighted in the Conservative Party’s 2013 Throne Speech (equivalent to the President’s State of the Union address): “Our government will require shippers and railways to carry additional insurance so they are held accountable. And we will take targeted action to increase the safety of the transportation of dangerous goods.”
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Subsequently, Transport Canada undertook a consultation to deal with the liability issue.
In the US, despite several Congressional hearings, there has not been a question about railroad under-insurance. The political focus has instead been on pushing the Department of Transportation to issue new rules for tank cars and to make sure, in effect, that emergency responders have enough foam to spray on the embers of a populated area after an oil train explosion. Elected officials have not wrestled with who will have to pay for the potentially billions of dollars in uninsured damages and whether it’s appropriate that taxpayers will likely have to pick up the tab.
In fairness, USDOT did acknowledge in its Draft Regulatory Impact Analysis (an accompaniment to the proposed rules) that one reason for implementing rules to make crude oil and ethanol transport safer is because “shippers and rail companies are not insured against the full liability of the consequences of incidents involving hazardous materials.”
- Two points for Canada for taking seriously the problem of under-insurance of oil and ethanol trains. Zero points for the USA ignoring it at the leadership level.
Round 5: Taking on misclassification of Bakken crude oil—Canada 1; USA 1
At the heart of the hazardous materials shipping system is the proper classification of the product being transported, which is the responsibility of the shipper. Regulators have found instances where Bakken crude oil was misclassified and being transported incorrectly. For example, the oil in the train that exploded in Lac-Megantic was misclassified as “Packing Group III,” the lowest hazard, when it should have been classified as “Packing Group II,” a more dangerous category. Federal agencies are now focused on ensuring that shippers are properly classifying crude oil for transportation in accordance with regulations.
Along with the draft rules addressing classification issues, the US feds concurrently released a report summarizing an analysis of Bakken crude oil. Unsurprisingly, the federal data show that crude oil from the Bakken region in North Dakota tends to be more volatile and flammable than other crude oils. The new findings contradict recent assertions by the American Petroleum Institute that, based on their private studies, Bakken oil is no different from other flammable liquids commonly shipped in DOT-111s.
On July 2014, Canada adopted changes to its hazardous material regulations to address classification problems found with products like Bakken crude oil. However, Canada’s Transportation Safety Board has raised concerns that Bakken crude oil is still being misclassified, despite assurances from the federal government that everything is okay.
- One point to the US for pushing back on the oil companies’ idea that Bakken oil is not exceptionally dangerous. One point to Canada for quickly addressing misclassification, though it looks like they have more work to do.
Final score: Canada 7; USA 1
With a few exceptions, the Canadian regulatory response to oil trains has been far superior to the American approach. In many instances, they have bypassed drawn-out rule-making and issued emergency orders to address safety issues raised by their independent safety agency.
That’s not to say that Canada’s requirements are sufficient, but rather to point out just what a poor showing US regulators and leadership are making when it comes to protecting the American public and taxpayer from exploding oil trains.