New York State, and various groups located in New York, have recently taken several actions related to a growing concern over the transport of crude oil and related products by rail within New York, particularly the growing number of rail cars coming through the Port of Albany.
This movement is fueled by the July, 2013, derailment of rail cars carrying crude oil in Lac-Mégantic, Québec, as well as derailments in Alabama and North Dakota, and recently, in Selkirk, New York. It is also fostered in New York by a significant increase in crude oil imports by rail into the Port of Albany and certain permit applications submitted to the New York State Department of Environmental Conservation (NYSDEC) related to the handling of such petroleum products. Also noted by activists is the type of crude oil being transported by these rail cars. The crude oil coming through New York is thought to be mostly from the Bakken Shale in North Dakota, which has a lower flash point than other crude oil products, raising concerns about the potential for a serious accident in New York.
Specifically, the following actions have been taken:
- January 28, 2014: Governor Cuomo Issues Executive Order 125. This Order directs several State agencies to petition applicable Federal agencies with jurisdiction on a few topics. Those topics include seeking an upgrade tanker car and rail line safety regulations, an assessment of federal agency needs and risks, and that Federal agencies pre-deploy appropriate spill response equipment and resources to New York. Executive Order 125 also directs State agencies to conduct an assessment of New York’s rules related to the transport of crude oil products by rail ship and barge. Several State agencies have followed up on this directive.
- February 7, 2014: Riverkeeper, Scenic Hudson and the Natural Resource Defense Council issue a press release supporting Executive Order 125 and seeking further action from New York. These groups ask for a moratorium on transporting crude oil by rail through New York, and a prohibition on the use of DOT-111 tank cars for transport of crude oil in New York. Further, they demand a full environmental review of Global Partners’ application to the NYSDEC to modify its Clean Air Act permit to allow Global Partners to heat heavy crude at its Albany facilities, as well as other relief related to crude oil transport in New York.
- February 12, 2014: NYSDEC, in response to public interest on crude oil at the Port of Albany, holds a public information session regarding Global Partners’ application to modify its Clean Air Act permit to heat heavy crude at its Albany facilities.
- February 19, 2014: Center for Biological Diversity serves 60 day notice of intent to sue the US Coast Guard and US Environmental Protection Agency (EPA) in relation to endangered species and the potential impacts from a crude oil spill. The Center intends to file suit if the US Coast Guard and EPA do not give sufficient consideration of impacts to endangered and threatened species in developing and implementing the New York and New Jersey Area Contingency Plan for multi-agency prevention of and response to oil and hazardous waste spills in the New York Harbor and lower Hudson River. This notice, which is a precursor to a Federal citizen’s suit, was issued due to the “unprecedented boom in the transport of oil through the [New York] region by rail and barge,” which notably includes “particularly explosive oil produced by hydraulic fracturing of the North Dakota Bakken Shale,” and possible heavy tar sands bitumen from Canada. The Center for Biological Diversity believes that these agencies have failed to sufficiently consider impacts to endangered species from potential rail or barge spills of petroleum products, and their cleanup, in developing the Area Contingency Plan which is intended to manage responding to and cleaning up spills.
- February 20-28, 2014: State and Federal regulators conduct an “inspection blitz” for rail yards in Albany and Buffalo, finding three (3) instances of defective steel wheels and three (3) instances of defective brakes on 120 tanker cars in the Albany yard.
- March 4, 2014: Governor Cuomo sends a letter to the US Department of Transportation (USDOT) and the US Department of Homeland Security (USDHS) urging Federal officials to take several additional actions to protect New York. The Governor asks these agencies to expedite and strengthen rail safety standards and require reporting of derailments. He also asks for increased inspections and more clear identification and tracking of rail cars carrying crude oil. The letter was in response to “two minor derailments in New York,” (a February 25, 2014, derailment in Ulster County involving empty rail cars that had recently off loaded crude oil and a February 28, 2014, derailment at the Selkirk Rail Yards of thirteen (13) rail cars fully loaded with crude oil), notwithstanding that “neither incident resulted in spills or injuries.” Specifically, the Governor asked for four action items:
- Incorporate the voluntary agreement between the Federal Railroad Administration (FRA) and railroad companies into mandatory regulations;
- Require reporting of any “incident” in which crude oil is transported within one hour to FRA and NYSDOT;
- Require additional information on placards for cars carrying crude oil; and
- Add crude oil to the list of hazardous materials tracked by the USDHS.
All of New York’s actions, however, are overshadowed by an extremely broad Federal pre-emption of regulation of safety and transport of oil, limiting State and local regulation to only very limited circumstances, by number of Federal regulatory activities in this area that have been in the works for several months before New York began investigating the issue, and by a voluntary agreement between industry and USDOT to incorporate additional protections.
Federal agencies have issued four administrative rulemakings or orders, with a proposed rulemaking expected to soon follow. In August, 2013, the FRA issued an Emergency Order establishing additional requirements for attendance and securement of freight trains on mainline track and siding. The Order was issued in response to the July 2013, derailment in Québec, and seeks to implement additional measures to avoid derailments or other incidents related to failure to properly secure trains.
On September 6, 2013, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued an advance notice of proposed rulemaking to consider revisions to the Federal Hazardous Materials Regulations applicable to the transportation of all hazardous materials by rail. The Administration is considering a number of proposals to more effectively regulate transport of hazardous materials, including additional regulations for DOT 111 tank cars used to transport crude oil, which have been problematic in the recent crude oil incidents.
On November 20, 2013, the PHMSA issued Safety and Security Plans for Class 3 Hazardous Materials transported by rail, which publication served as a safety advisory and follow up to the August, 2013, safety advisory. This safety advisory urged rail operators to ensure that the required safety and security plans required by Federal Hazardous Materials Regulations are in place, and that they address the safety issues raised in the August 2013, Emergency Order. The safety advisory also put the regulated community on notice that the PHMSA and FRA are assessing regulated entities’ compliance with the Emergency Order and the safety advisory, including via “Operation Classification,” which includes several components, including unannounced inspections and testing to verify the material classification and packing group assignments for petroleum crude oil. Operation Classification also includes increased audits of safety and security plans, and inspections for compliance with all new directives.
On February 21, 2014, rail operators and the USDOT, FRA and PHMSA entered into a voluntary agreement incorporating additional protections related to the transport of crude oil. The Agreement requires operators to conduct at least one (1) additional rail inspection per year for track where crude oil is transported, and to install additional brakes to slow trains faster. Operators will also be required to use the Rail Corridor Risk Management System to identify and use the safest routes to transport crude oil, and to commit to slower speeds in designated high threat urban areas. The Voluntary Agreement imposes these requirements as early as late March, 2014.
Most recently, on February 25, 2014, USDOT used its authority to issue emergency orders immediately imposing regulations without a hearing, which Emergency Order in this instance applies to all persons transporting petroleum crude oil 3 of packing groups I, II or III. The Order mandates proper testing and classification of petroleum products before transport. It also requires Class 3 petroleum crude oil to be treated as Packing Group I or II hazardous material only until further notice, and authorizes inspections to enforce these actions. The Order also imposes penalties for failure to comply. This order was amended on March 6, 2014, to clarify its requirements, including the requirement to test crude oil for flash point and other qualities to ensure it is properly classified for transport.
These recent Federal regulatory actions, intended to address the very same concerns raised by New York related to crude oil transport by rail, constitute additional requirements beyond the robust existing regulations that govern proper classification, labeling, packaging and transport of hundreds of hazardous materials ranging from explosives and toxic substances to radioactive materials, should ensure that any risk presented by transport of crude rail is effectively addressed. New York and its regulatory agencies will have further opportunity to influence the regulations in effect over this industry; however, it is likely that further action will occur on this issue through various Federal agencies. The West Firm will continue to follow activities in this sector to advise its clients and the industry on compliance with existing and new regulations, as well as the impact this activity has on New York State.