United States: Crude-By-Rail Update: The DOT's Final Rule Is Out—How Can Producers And Midstream Transporters Comply With The New Classification Standards?

On May 1, the Department of Transportation—through its operating agencies the Pipeline and Hazardous Materials Safety Administration1 and the Federal Railroad Administration—issued its final crude-by-rail rule. The rule mandates more stringent standards for newly constructed tank cars—along with the retrofitting of older ones—and imposes new operational controls for high-hazard flammable trains.2 Despite the new rule, congressional and regulatory scrutiny remains focused on crude-by-rail transportation as accidents continue to occur, including a derailment on May 6 near Heimdal, North Dakota.3

Aside from the short- and medium-term macroeconomic effects of increasing costs and barriers to crude oil transportation from pipeline-starved shale plays, the rule imposes immediate requirements on the crude-by-rail industry.4 Primarily, the rule demands immediate compliance from railroads and tank car owners (e.g., new DOT-117 tank car specifications, speed limits, and braking and routing requirements).5

But producers and midstream transporters—"offerors"6 of crude oil—did not escape unscathed. Offerors along the supply chain must implement a new program for classifying7 "unrefined petroleum-based products" (i.e., sampling and testing).

Why is this important? It is important because throughout the rule's preamble the agencies reiterate their commitment to increased inspections and enforcement actions against offerors that misclassify crude oil8—a potential warning of future "Bakken Blitz" campaigns.9 And violations of the hazardous materials regulations (HMR) carry a stiff civil penalty of $75,000 per violation, which can increase to $175,000 per violation if injury or property damage occurs.10 And the agencies have the option of potential criminal penalties, carrying additional fines and imprisonment.11

So what does the rule require? The rule requires offerors to adopt a written sampling and testing program that at a minimum specifies:

  • A frequency of sampling and testing that accounts for any appreciable variability of the material (e.g., history, temperature, method of extraction [including chemical use], location of extraction, time of year, length of time between shipments);
  • Sampling prior to the initial offering of the material for transportation and when changes that may affect the properties of the material occur (i.e., mixing of the material from multiple sources or further processing and then subsequent transportation);
  • Sampling methods that ensure that a representative sample of the entire mixture, as offered, is collected;
  • Testing methods that enable classification of the material under the HMR;
  • Quality control measures for sample frequencies;
  • Duplicate sampling methods or equivalent measures for quality assurance;
  • Criteria for modifying the sampling and testing program; and
  • Testing or other appropriate methods used to identify properties of the mixture relevant to packaging requirements (e.g., compatibility with packaging, identifying specific gravity for filling packages).12

Although the regulatory language leaves much clarity to be desired—for example, the rule does not specify an acceptable "frequency" of sampling and testing—there is a silver lining. The agencies will allow compliance with American Petroleum Institute Recommended Practice 3000 ("RP-3000") to satisfy the first six requirements listed above.13

But the agencies stress that "the boiling point test specified in [RP-3000] does not align with the requirements currently authorized in the HMR."14 Offerors must still use the boiling point testing methods prescribed by 49 C.F.R. § 173.120 for crude oil and § 173.115 for flammable gases.

Additionally, the rule imposes new requirements for documentation, retention, review, and dissemination of the sampling and testing program. Offerors must now:

  • Certify in individual shipping papers that the new sampling and testing requirements have been met;15
  • Document the program in writing (electronic or hardcopy);
  • Retain a copy of the program for at least a year or while the program is in effect;
  • Review the program at least annually and ensure that updates are made as necessary to reflect changed circumstances;
  • Make a copy of the program available to all employees responsible for its implementation;
  • If the program is revised, provide an updated copy to all employees responsible for the program's implementation;16 and
  • Maintain a copy of the program documentation for inspection by DOT.17

Even with potential legal challenges to the rule brewing, offerors should implement a compliance plan to meet the rule's new classification requirements. At a minimum, offerors should implement RP-3000 as a baseline protocol, ensure boiling point testing that complies with 49 C.F.R. §§ 173.120 and 173.115, and develop new standards for the documentation, retention, review, and dissemination of a sampling and testing program.

Footnotes

[1] Just four days after DOT announced the rule, the inspector general opened an investigation into PHMSA's progress in implementing congressional mandates and recommendations from other agencies, including the National Transportation Safety Board. Sean Reilly, TRANSPORTATION: IG Will Assess Pipeline Safety Agency's Record for Past Decade, E & E Publishing (May 5, 2015), http://www.eenews.net/eenewspm/2015/05/05/stories/1060018023. The inspector general claims the rule's issuance and the investigation are not related. Id.

[2] The rule defines a high-hazard flammable train as "a single train transporting 20 or more loaded tank cars of a Class 3 flammable liquid in a continuous block or a single train carrying 35 or more loaded tank cars of a Class 3 flammable liquid throughout the train consist." Final Rule at 380.

[3] See Blake Sobczak, TRANSPORT: Another Derailment and Another 'Gamble' for Oil Train Industry, E & E Publishing (May 7, 2015), http://www.eenews.net/energywire/2015/05/07/stories/1060018129.

[4] The rule will become effective 60 days after its imminent publication in the Federal Register—so early July. Final Rule at 2.

[5] See Final Rule at 10-11.

[6] An offeror is defined as "(1) Any person who does either or both of the following: (i) Performs, or is responsible for performing, any pre-transportation function required under this subchapter for transportation of the hazardous material in commerce. (ii) Tenders or makes the hazardous material available to a carrier for transportation in commerce." 49 C.F.R. § 171.8.

[7] "For transportation purposes, classification is ensuring the proper hazard class, packing group, and shipping name are assigned to a particular material." Final Rule at 29.

[8] See, e.g., Final Rule at 77, 232.

[9] See Press Release, PHMSA's Ongoing Bakken Investigation Shows Crude Oil Lacking Proper Testing, Classification (Feb. 4, 2014), available at http://phmsa.dot.gov/pv_obj_cache/pv_obj_id_371A67DC46BB6526F585828C4F16FA18F26E0000/filename/PHMSA%2001-14.pdf.

[10] 49 U.S.C. § 5123(a)(1)-(2).

[11] Id. at § 5124(a).

[12] To be codified at 49 C.F.R. § 173.41(a). See Final Rule at 381-82.

[13] Final Rule at 229, 234.

[14] Final Rule at 229 (emphasis added).

[15] To be codified at 49 C.F.R. § 173.41(b). See Final Rule at 382.

[16] To be codified at 49 C.F.R. § 173.41(c). See Final Rule at 382.

[17] To be codified at 49 C.F.R. § 173.41(d). See Final Rule at 383.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions