With the increase of crude oil being transported by rail, the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”) and the Federal Railroad Administration (“FRA”) started an Operation Classification program in August 2013 to investigate whether Bakken crude oil taken from cargo tanks en route to rail loading facilities was properly classified in accordance with federal regulations.
This program includes unannounced spot inspections, data collection, and sampling at strategic terminal and transloading locations that service crude oil. In addition, PHMSA and FRA have issued safety alerts concerning the safe transport of crude oil by rail, including an alert released on January 2, 2014, relating to the flammability of North Dakota Bakken crude oil.
The three Notices of Probable Violations with fines totaling $93,000 are the first issued as a result of Operation Classification’s surprise inspections from August to November 1, 2013, at various locations, with samples taken from cargo tanks that deliver crude oil to rail loading facilities, storage tanks at the facilities, and from the pipeline connecting the storage tank to the rail car.
In testing these samples, the regulators found that 11 out of 18 samples taken from cargo tanks were not properly identified and labeled. As a result of these findings, the regulators have expanded their evaluations to include testing for Reid Vapor Pressure, corrosivity, hydrogen sulfide content and composition/concentration of the entrained gases in the material.
Shippers are required to use nine hazard classes as a guide to properly classify their hazardous materials. See 49 CFR §173.2. Proper classification is required to ensure that the material is placed in the proper packaging and that the risk is accurately communicated to emergency responders who need to follow the proper protocol when handling a spill or other situation.
In a statement released on February 4, 2014, along with the Notices of Probable Violations, Transportation Secretary Anthony Foxx expressed his support for the fines, stating that the fines “should send a message to everyone involved in the shipment of crude oil: You must test and classify this material properly if you want to use our transportation system to ship it.”
In mid-January, Secretary Foxx met with representatives of the oil and rail industries, who voluntarily agreed to take steps to avoid derailments, to work on a speed reduction plan, and to re-route trains around high-risk areas. For information on this meeting, see our prior blog, “U.S. Department of Transportation meets with oil and rail industry leaders to discuss transport safety issues.”
This post was written by Barclay Nicholson (barclay.nicholson@nortonrosefulbright.com or 713.651.3662) from Norton Rose Fulbright's Energy Practice Group.
