Trailing Canada, U.S. to push own standards for oil shipping

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Posted: Saturday, April 26, 2014 12:00 am

After Canada issued stringent new rules this week for the transportation of oil by rail, federal regulators in the United States said they would push forward their own tank standards next week, potentially resolving a critical safety issue that has been mired in regulatory limbo for years.

The Department of Transportation’s proposed rules would include “options for enhancing tank car standards,” said Kevin Thompson, a spokesman for the department.

Analysts said the agency could release its rules by the summer after review by the White House Office of Information and Regulatory Affairs.

Since a train carrying crude oil derailed and exploded in Canada last July, devastating a small town about 10 miles from the border with the United States, authorities in both countries have come under strong pressure to toughen regulations and improve the oversight of these hazardous shipments.

But while Canada has moved quickly after the accident, which killed 47 people in Lac Megantic, Quebec, regulators in the United States have been much slower to act. The lag has angered members of Congress, as well as local and state officials, who have called for stronger action to enhance rail safety, including bolstering the tank cars used to transport crude oil.

On Wednesday, Canadian regulators said they would require emergency plans from the railroads on responding to catastrophic explosions, and would quickly retire older models of tank cars used to carry crude oil and ethanol. Canada seeks to be “a model of world-class safety,” said Lisa Raitt, the country’s transportation minister.

Canada also took a decisive step to force shippers to use a stronger model of tank car within the next three years. The new model is based on a standard developed by the railroad industry in 2011. It effectively sets a new benchmark in the United States as well given how much traffic crosses through both countries.

Barry Prentice, a transportation professor at the Asper School of Business at the University of Manitoba in Winnipeg, said that the horrors of the Lac Megantic tragedy resonated throughout Canada, forcing the federal government to act.

“This is an issue that everybody across the country has become sensitized to,” he said. “The government needs to feel like it’s doing something.”

Updating the design of the tank cars — DOT-111s, dating from the 1960s — has been a far more vexing question for regulators in the United States despite warnings by safety officials for more than 20 years that those tank cars were prone to rupture in a derailment.

New standards have languished in a slow rule-making process since 2011, when railroads requested that regulators toughen tank car standards. The National Transportation Safety Board, in 2009, said defects on these cars contributed to the explosion of an ethanol train that killed one person in Cherry Valley, Ill. The Pipeline and Hazardous Materials Safety Administration formally initiated the process in September 2013 but has been under pressure to release its new rules quickly.

Visiting Casselton, N.D., where an oil train exploded in December, Transportation Secretary Anthony Foxx said Thursday that tank cars needed to be retrofitted with better protections or replaced, but he provided no details about the proposed new standards. “Our rule-making process requires that we go through several steps, and that’s what we’re going through,” he said.

The rules will be published in the Federal Register once they have been reviewed and will then be opened for public comments for a period of 60 days.

The issue is particularly vexing because it pits three powerful industries — oil companies, railroads, and shipping companies — whose interests do not always align even as they do business together. All have at one point or another sought to deflect blame on the accidents and explosions. By law, railroads cannot turn down any product from being shipped on their rails.

Also, while many trains carrying oil have derailed in the United States, they have generally done so far from populated areas, though the derailment near Casselton happened right outside of town.

There are more than 94,000 tank cars used to transport crude oil and ethanol in service in Canada and the United States. About 14,000 of them were built after 2011 based on the new industry standard, referred to as CPC-1232, and comply with the new Canadian rules. A further 55,000 of those have been ordered through 2015, according to Thomas D. Simpson, president of the Railway Supply Institute, a trade group for railcar suppliers and owners.

But the absence of a federal U.S. standard was complicating matters for shippers and oil companies. Canadian National Railway and Canadian Pacific said this year that they would charge higher rates for customers that move crude in railcars built before October 2011.

“We are in a tough position here,” Simpson said. “We want to take steps to remove the risk, but no one has given us a direction on what steps to take.”

Further complicating the issue, the Association of American Railroads, which helped set the new tank car standards in 2011, has since called for even tougher standards. The association said in November that the government should develop more stringent regulations and aggressively phase out or refit old tank cars, including the CPC-1232. It is unclear whether those proposals are part of the rules being considered.

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