American Fuel & Petrochemical Manufacturers 1667 K Street, NW Suite 700 Washington, DC 20006 October 9, 2015 Matthew Forister Director Tank Car and HazMat Safety Association of American Railroads 425 Third Street, SW; Suite 1000 Washington, DC 20024 mforister@aar.org 202.457.0480 office 202.457.0486 fax afpm.org Comments on Proposed CPC-1316 Dear Mr. Forister: The American Fuel & Petrochemical Manufacturers (AFPM) writes this letter to express our opposition to the Association of American Railroad s (AAR) proposal unilaterally to amend HM-251, the Pipeline and Hazardous Materials Safety Administration s ( PHMSA ) recently issued rule establishing tank car specifications for class 3 flammable liquids, including crude oil and ethanol. 1 Specifically, the AAR Tank Car Committee has proposed Casualty Prevention Circular (CPC)-1316, which, contrary to HM-251, would require all single tank cars transporting class 3 materials to meet DOT-117 specifications, not just those on, high-hazard flammable trains (HHFTs). The AAR Tank Car Committee, a private entity, lacks the authority to circumvent the railroad s common-carrier obligation and override federal regulation by requiring all tank cars to comply with HM-251. For these reasons, as more fully explained below, AFPM respectfully requests that AAR withdraw proposed CPC-1316. AFPM s Substantial Interest in CPC 1316 AFPM is a national trade association representing more than 400 domestic petroleum refiners and petrochemical manufacturers. AFPM members operate 120 U.S. refineries, comprising more than 95 percent of U.S. refining capacity. AFPM members depend upon a plentiful, affordable supply of crude oil as a feedstock for the transportation fuels and petrochemicals that they manufacture. AFPM members acquire 1 See Hazardous Materials: Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains, 80 Fed. Reg. 26,643 (May 8, 2015). 1
crude oils from multiple sources, including domestic oil produced from the Bakken formation. Our members also manufacture and sell significant volumes of ethanol. Safe, reliable, and economic rail transportation is critically important to our members.. Approximately 10 percent of the crude oil processed by AFPM members is shipped by rail. Rail shipments are of particular importance for the Bakken formation, where about half of crude oil reaches the market by rail. Most ethanol also is transported to market by rail. In fact, for ethanol, there is no practicable alternative to rail transportation due to the geography of manufacturing and customer sites. To ship crude and ethanol, AFPM members lease and own tens of thousands of rail tank cars, a multi-billion dollar investment. Despite representing a significant share of tank cars in the market, AFPM is not a member of the Committee and cannot vote on CPCs or other proposals. The result is that the majority of refiners, including Fortune 500 companies with thousands of tank cars, have no say on the decisions of the Committee. The Proposed CPC Reverses HM-251 Proposed CPC-1316 would require that all tank cars in flammable service meet the thermal protection and top fittings requirements of HM-251. This directly contradicts PHMSA s decision to limit the scope of HM-251 to apply only to HHFTs. PHMSA addressed this precise issue in HM-251 and decided to modify the definition of HHFT to limit the scope of the rule. Initially, in the Notice of Proposed Rulemaking, PHMSA considered requiring that all tank cars in flammable service approximately 130,000 cars would need to be retrofitted. 2 However, PHMSA ultimately decided to limit the scope of the final rule to HHFTs, thereby reduc[ing] the number of tank cars needing ECP brakes from more than 130,000 to 60,231. 3 CPC-1316 would circumvent PHMSA s decision. CPC-1316 is all the more puzzling because it would undo the definition of HHFT that AAR advocated that PHMSA adopt. AAR advocated for the definition of HHFT as a way to focus on the unit train risk while eliminating the inadvertent inclusion of manifest trains. 4 AAR has no authority to undo a regulatory provision that it persuaded a federal agency to adopt. AAR s attempt unilaterally to broaden the scope of HM-251 would have significant cost and resource repercussions for AFPM members. Assuming that all of PHMSA s estimated 130,000 tank cars in flammable service must be retrofitted, CPC-1316 would require an additional 69,769 tank cars be retrofitted, on top of the 60,231 contemplated in HM-251. 5 In addition to the direct costs of retrofitting these tank cars, AFPM members would suffer financial and commercial harm due to their inability to ship raw materials and products while their tank cars are forced off the rails to await retrofitting. Given the high utilization rate of these tank cars, it is extremely unlikely that sufficient tank cars will be available during the retrofit 2 80 Fed. Reg. 26,701 3 Id. 4 80 Fed. Reg. 26,664 (emphasis added). 5 80 Fed. Reg. 26,701 2
schedule to maintain current business activity. CPC-1316 would further reduce the capacity of the nation s crude and ethanol fleet. These significant costs were not factored into the Regulatory Impact Analysis supporting HM-251. Indeed, PHMSA s and FRA s calculations of the costs of the rulemaking assume that the new tank car standards and retrofit requirements will apply only to HHFTs, and not all tank cars in flammable service. Aside from the significant additional costs to the industry associated with retrofitting all tank cars in flammable service, we have significant concerns about whether these retrofits could be completed within the required timeframe. Tank car manufacturers estimate that only 6,400 tank cars can be retrofitted each year. 6 This calls into question whether CPC-1316 is achievable in the time allotted for retrofits. We are aware of no authority that would allow AAR, a private trade association, to undo a PHMSA regulation. In two related circulars, CPC-1317 and CPC-1318, AAR similarly appears to rely on its interchange authority as a justification for imposing these additional requirements. But Congress granted PHMSA exclusive authority to set tank car standards through the Hazardous Materials Regulations (HMR). 7 And, as a federal agency, PHMSA must provide notice and an opportunity to comment before setting a standard. 8 Those substantive and procedural protections would mean little if AAR could unilaterally void and countermand PHMSA regulations. PHMSA Precedent Prohibits AAR s Attempt to Set Tank Car Standards PHMSA has made plain that the AAR Tank Car Committee lacks authority to set tank car standards. In 2009, PHMSA rejected an AAR attempt to use the Tank Car Committee to establish tank car standards for poison by inhalation (PIH) materials. 9 In the PIH rulemaking, PHMSA rejected CPC-1178, which would have require[d] tank cars transporting anhydrous ammonia and chlorine to meet tank car design standards that are more stringent than those specified in the HMR. 10 PHMSA began its analysis by contrasting the broad sweep of the HMR with the more limited roles of the AAR interchange rules and the Tank Car Committee. PHMSA explained that the HMR establish the packaging and mandate safety features, permissible materials and methods of construction, as well as inspection and maintenance standards for tank cars, while the AAR interchange rules govern the tender and acceptance of rail cars among carriers within the general system of railroad transportation. 11 Historically, the AAR Interchange Rules also have addressed 6 This estimate was an increase in current capacity that would likely require a several year ramp up period. See AFPM Comments on the U.S. DOT PHMSA s Notice of Proposed Rulemaking for Hazardous Materials: Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains, Docket No. PHMSA-2012-0082 (HM-251) (Sept. 30, 2014). 7 See, e.g., 49 U.S.C. 5101, 5103(b)(1)(A)(iii). 8 5 U.S.C. 500, et seq. 9 See 73 Fed. Reg. 17,818(Apr. 1, 2008) (proposed rule); 74 Fed. Reg. 1,770 (2009) (final rule). 10 73 Fed. Reg. at 17,824-25. 11 Id. at 17,825. 3
certain subjects, such as rail tank car standards, now covered comprehensively by the HMR. 12 As to the Tank Car Committee, its authority is primarily a ministerial function, designed to ensure that plans to construct, alter, or convert tank car tanks conform to DOT regulations. 13 Moreover, PHMSA reasoned that AAR s attempt to impose more stringent PIH tank car standards through CPC-1178 breached railroads common carrier duty to ship hazardous materials: Railroads, as common carriers, are generally required to provide transportation services in a reasonable manner... Accordingly, interchange requirements, such as Casualty Prevention Circular 1178, that restrict the movement of railroad tank cars that meet DOT standards must be reasonable, and... the burden is on the railroad to establish the reasonableness of the restriction. Two of the factors... in determining the reasonableness of interchange requirements are whether there are Federal safety standards on point and whether a railroad has the ability to seek changes to these standards to meet the safety concerns of the railroad. In fact, DOT has established safety standards for tank cars carrying PIH commodities and, pursuant to this rulemaking, is proposing enhanced standards for tank-head and shell puncture resistance systems for these cars. Through participation in this rulemaking, railroads and other interested parties have the ability to influence the enhanced safety standards ultimately adopted by DOT.... There is, therefore, no reasonable basis for the railroads to implement Casualty Prevention Circular 1178 at this time. 14 PHMSA s reasoning applies equally here. The railroads had every opportunity to participate in the recently completed HM-251 rulemaking process. AAR and its members participated in numerous meetings with DOT, PHMSA, and OMB during the rulemaking process, and filed comments on the very issues covered in CPC-1316. In fact, AAR itself provided the definition of HHFT adopted by the Agencies in HM-251. AAR cannot now make an end-run around the regulatory process. To the extent that AAR attempts to impose CPC-1316, it would represent a violation of the railroads common carrier obligations. 15 12 Id. (emphasis added). 13 Id. (emphasis added). 14 73 Fed. Reg. 17,825 (emphasis added). 15 E.g., Riffin v. STB, 733 F.3d 340, 346 (D.C. Cir. 2013) ( Railroads have not only a right but a statutory common carrier obligation to transport hazardous materials where the appropriate agencies have promulgated comprehensive safety regulations. ) (internal quotation marks and citations omitted). Amending HM-251 through the AAR interchange rules would also constitute an unreasonable practice and impose unlawful rules of interchange in violation of the Interstate Commerce Commission Termination Act. See, e.g., 49 U.S.C. 10702, 11121; North America Freight Car Association v. BNSF et al., NOR-43217 (S.T.B. filed Oct. 9, 2012) (settlement of unreasonable practice claim brought against AAR and railroads for changes made to the interchange rules). 4
Conclusion For the reasons, described above, we believe that CPC-1316 is unlawful, unreasonable, and will undermine the public process by which PHMSA sets tank car standards. AFPM thus requests that AAR withdraw the CPC-1316. Please contact me at 202-457-0480 if you have any questions about our comments. Sincerely, David N. Friedman Vice President Regulatory Affairs cc: Kathryn Thomson, General Counsel, DOT Vasiliki Tsaganos, Acting Chief Counsel, PHMSA Melissa Porter, Chief Counsel, FRA 5