This article is the second in a three-part series that began with " Off the Tracks: A Data-Driven Analysis of Crude-by-Rail Liability Factors, Exposure, and Potential Solutions," which was published on December 19, 2015.
In Part One of this series, we analyzed factors that influence liability for crude-by-rail (CBR) incidents. But knowing the liability factors leads to a second question: What is my monetary exposure?
Rail transportation has a strong operational safety record. And the CBR industry—in response to a meteoric rise in crude oil traffic—has leveraged rail's proven track record to refine risk-management techniques in response to past incidents. Should a CBR incident occur, however, the analysis below provides a benchmark to evaluate potential monetary exposure.
Unit-train scale CBR incidents are a new phenomenon, and there is not yet a statistically meaningful dataset of regulatory fines, settlements, and jury verdicts. For that reason, we have expanded our inquiry to include the consequences of not only CBR incidents, but also those involving other railborne hazardous materials as well as passenger train derailments involving injuries and fatalities. This expanded inquiry better illustrates the extent of potential liability associated with CBR incidents.
CBR incidents could lead to two general categories of monetary exposure: (1) regulatory enforcement (via fines, penalties, capital expenditures, and cleanup costs), and (2) litigation (via trial verdicts and settlements). To give a broad sense of potential liability parameters, Exhibit 1 presents data we have compiled for "minimum total liability," which accounts for costs imposed both by regulatory penalties and by litigation. "True" numbers are likely higher due to settlements and legal bills that are not consistently disclosed, as well as cleanup and remediation costs.
Exhibit 1: Minimum Total Liability Data for Selected Tank Car Hazmat Incidents, Passenger Derailments, and a Large Urban Explosion and Fire, Million USD
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