In a conference call with members of the media on Sept. 30, American Petroleum Institute (API) President and CEO Jack Gerard outlined comments the association presented later that day to the U.S. Department of Transportation (DOT). The API and Association of American Railroads (AAR) were responding to proposed changes from DOT relating to shipment of crude by rail.

“Safety is a core value for America’s oil and natural gas industry, and our goal is always zero incidents,” Gerard told reporters. He said that while railroads have recently played a more significant role in the transport of crude oil, and that 99.998% of the time railroads perform that role without incident, the API and railroads are working together “to identify best practices and other things that would contribute to further squeezing out that 0.002%.”

Reaching the goal of zero incidents, Gerard said, requires a “comprehensive approach,” which he compared to a three-legged stool.

The first leg of the stool is prevention, Gerard said. “Looking at accident prevention, we support the use of enhanced braking capabilities for trains that carry large volumes of flammable liquids. We also encourage regulators to evaluate whether the development of new standards or processes could reduce the number of accidents that occur.”

The second leg is response to incidents. “PHMSA [Pipeline and Hazardous Materials Safety Administration, within DOT] currently does not provide the railroad companies the clarity they need to develop comprehensive and consistent plans for spill response,” said Gerard. “We encourage PHMSA to provide detailed guidance in this area so the railroads can assess their current plan and assure they meet or exceed the desired standards.”

In one of three sets of comments it sent to DOT, API said: “The current set of regulations provides vague requirements with no measurable outcome or standard of performance. While flexibility is always necessary and overly prescriptive measures rarely have the desired effect, some level of industry specific guidance should be provided to help companies determine whether their plans are adequate and effective.” The API went on to suggest that DOT work with the industry to gain a better understanding of the operating environment and the challenges specific to it, and that DOT consider adopting the “response zone” concept required for pipeline operators.

“The oil and natural gas industry has worked closely with the EPA [U.S. Environmental Protection Agency], the Department of Interior and the Coast Guard on these issues for decades. There’s a wealth of knowledge and experience from which PHMSA can pull, and we will gladly make our experts in spill response planning available to PHMSA to aid in this work,” Gerard said.

The third and final leg, Gerard said, is mitigation, to which the API has devoted the majority of its efforts. Mitigation includes proper testing and classification of crude oil being shipped, as well as tank car design. To this end, API recently published a new set of recommended practices for testing and classifying crude oil for rail shipment and loading into tank cars. The new set of standards, Gerard said, “was developed in just a few months by experts from the oil and natural gas industry, the railroad industry, our regulators, PHMSA, and Transport Canada. It represents the best thinking of both the private sector and regulators on the procedures that should be used to ensure proper classification in crude oil for rail shipment.

“We encourage PHMSA to incorporate this new industry standard into its regulations to ensure the greatest possible safety enhancements,” he said.

Gerard also said API disagreed with both the lowered speed limit PHMSA proposed for trains carrying crude oil and DOT’s claim that crude oil produced from the Bakken Shale is more volatile than other light crudes and should perhaps be subject to different shipping standards.

“We have talked with our colleagues in the rail community as well because we understand the impacts across the entire rail system, if you arbitrarily lower a speed without adding any real value or any real benefit to safety enhancement,” Gerard said. “To arbitrarily create a speed restriction doesn’t add to safety. We share the view of our rail colleagues that slowing the entire system down may be unnecessary. We’d need someone to demonstrate to us the safety enhancement that really creates.”

Tank car updates

Gerard said that the API worked with AAR to develop joint comments regarding tank car design. “Our commitment to safety has led us to build tank cars since 2011 to voluntary standards that exceed current requirements, and we support additional upgrades to the tank car fleet that will yield meaningful safety benefits,” he said.

According to Gerard, the joint comments emphasize recommended changes for both existing tank cars and newly constructed cars. Recommended changes for existing cars include:

  • Retrofitting with advanced pressure relief valves, with added protection for the valves on top and bottom; and
  • Addition of full-height head shields, jackets and thermal blankets to non-jacketed cars.

“For new construction, we support a car with these same features along with a one-half-inch thick shell,” Gerard said. This proposed shell thickness differs from PHMSA’s earlier proposal to require a nine-sixteenths-inch thick shell, which Gerard said the API considered, and came to the conclusion that “the unintended consequences would negate any additional safety benefit by requiring more trains to pull the same volume of crude.”

The most problematic part of PHMSA’s existing car retrofit plan, Gerard said, is its proposed timeline, which includes a phase out within two years of older DOT-111 tank cars. Due to limits of shop capacity and other resources needed to retrofit existing tank cars, the proposed timeline is “not feasible,” Gerard said.

“In fact, PHMSA’s timeline could harm consumers by disrupting the production and transportation of goods that play major roles in our economy, including chemicals, gasoline, crude oil and ethanol,” Gerard said. “A recent study by ICF International estimates that the consumer cost impact under the PHMSA rule could reach $22.8 billion over 10 years. Now that’s assuming the Keystone XL Pipeline is approved. Without the Keystone XL Pipeline, the constraints are even more severe, and could cost consumers up to $45.2 billion.

“It is no exaggeration to say that given the shop capacity limitations that exist, PHMSA’s current proposals could stifle North America’s energy renaissance and curtail substantial volumes of U.S. and Canadian oil production,” he said.

In response, the API developed a timeline Gerard called “aggressive, but achievable.” The proposal includes allowing facilities involved in the retrofit from six to 12 months to ramp up shop capacity in preparation for the retrofit. Then, DOT-111 tank cars would be retrofitted during the next three years, while newer CPC-1232 tank cars continue deliveries. Once the DOT-111 cars have been retrofitted, they can resume delivery while the CPC-1232 cars undergo retrofits.