Emergency order requires testing and classification of crude oil transported by rail

On February 25, 2014, the U.S. Department of Transportation (DOT) issued an emergency order requiring rail shippers of crude oil to test the crude’s makeup before shipping it and to classify the crude as Packing Group I (high danger) or Packing Group II (medium danger) hazardous material until further notice.

The DOT’s emergency order recognizes that the misclassification of petroleum crude oil as a Packing Group III (low danger) material is an “imminent hazard…that presents a substantial likelihood that death, serious illness, severe personal injury, or a substantial endangerment to health, property, or the environment may occur.” This order requires that any person who wants to ship by rail a “large bulk quantity of petroleum crude oil” must conduct testing to verify its classification and must retain these records. “At a minimum, the tests shall be capable of determining the petroleum crude oil’s flash point; boiling point; corrosivity to steel and aluminum; presence and content of compounds such as sulfur/hydrogen sulfide; percentage presence of flammable gases; and the vapor pressure at 50°C.” To further ensure safety, Packing Group III can no longer be used for crude oil, requiring crude to be classified as either Packing Group I or Packing Group II material, both of which require the use of a stronger tank car than Packing Group III.

This order results from the dramatic growth in the quantity of petroleum crude oil being shipped by rail in recent years, with the resulting increase of incidents involving trains carrying crude. Recent incidents include (a) a December 30, 2013 derailment of 21 tank cars in Casselton, North Dakota resulting in an explosion which required the evacuation of 1,400 people; (b) a November 8, 2013 derailment of more than 20 cars in a 90-car petroleum crude oil train near Aliceville, Alabama; and (c) the catastrophic accident in Lac-M├ęgantic, Quebec, Canada on July 6, 2013 when an unattended freight train derailed, resulting in multiple explosions and fires and the deaths of more than 40 people. The Canadian authorities investigating the Lac- M├ęgantic incident analyzed the Bakken petroleum crude oil from nine of the undamaged tank cars and found that the crude had been incorrectly labeled Packing Group III rather than Packing Group II.

In the months after these incidents, the Pipeline and Hazardous Materials Safety Administration (PHMSA) and Federal Railroad Administration (FRA) have issued several safety alerts and advisories, including:-
  • FRA’s Emergency Order No. 28 (EO 28) establishing securement requirements for certain unattended trains and rail equipment, including petroleum crude oil unit trains;
  • PHMSA and FRA’s Safety Advisory 2013-06 recommending that railroads and shippers evaluate their processes to ensure that hazardous materials such as petroleum crude oil be properly classed and described and that safety and security plans be reviewed; and
  • PHMSA and FRA’s supplemental Safety Advisory 2013-07 emphasizing the importance of proper characterization, classification, and selection of Packing Group for the crude being shipped.
In addition, in August 2013, PHMSA and FRA started their Operation Classification program, which includes “unannounced inspections requesting samples of the transported petroleum crude oil and testing the oil samples to verify” that the materials being shipped have been properly classified and described.

For additional information on Operation Classification, click here; and for information on meetings between the DOT and representatives of the railroads and oil industry, click here.

This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.