New Tank Car Regulations for Transportation of Crude Oil and Other Flammable Liquids
On May 1, 2015, Transport Canada and the U.S. Department of
Transportation introduced new regulations relating to the
transportation of dangerous goods in Canada and the US. The
regulations, which are in response to the recommendations of the
Transportation Safety Board relating to the 2013
Lac-Mégantic disaster, introduce specifications for a new
class of tank cars and retrofit requirements for existing tank cars
used to transport flammable liquids.
Under the new regulations, existing tank cars used to transport
flammable liquids, such as crude oil and ethanol, must be phased
out between 2017 and 2025, depending on the type of tank car and
flammable liquid being transported. The regulations will be applied
first to tank cars carrying crude oil. Existing tank cars must be
retrofitted or replaced by new tank cars to comply with the new
standards, including thicker steel, full head shield protection, a
jacket with thermal protection, top fitting protection and new
bottom outlet requirements.
Impact on Documents Previously Deposited Under the Canada Transportation Act
Where an existing tank car is replaced with a new tank car to
satisfy the new regulations and a security interest has been
granted in the tank car being replaced, the underlying lease or
security agreement must be examined to determine if such
replacement is permitted. If the underlying lease or security
agreement provides for substitution of collateral, then the tank
car can be replaced (generally with the consent of the secured
party). Although the lease or security agreement may contain
language that allows for substitution and extends the security
interest to any replacement or substitution collateral, an
amendment to the corresponding deposit under the Canada
Transportation Act1 (the
"CTA") may also be required to ensure
that the collateral is sufficiently described for the purposes of
the CTA.
Where a tank car is retrofitted to satisfy the new regulations,
and assuming that the tank car is not assigned a new car number as
a result of the retrofitting process, documents previously
deposited under the CTA will not be impacted, provided that the
underlying lease or security agreement contains language to the
effect that the security interest extends to additions to or
replacements of the collateral.
Footnote
1 S.C. 1996, c. 10
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