Comments on Proposed CPC-1317 (top fittings) and CPC-1318 (thermal blankets)

American Fuel & Petrochemical Manufacturers 1667 K Street, NW Suite 700 Washington, DC 20006 September 25, 2015 202.457.0480 office 202.457.0486 fax afpm.org Via Electronic Mail and Certified Mail Matthew Forister Director Tank Car and HazMat Safety Association of American Railroads 425 Third Street, SW; Suite 1000 Washington, DC 20024 mforister@aar.org Comments on Proposed CPC-1317 (top fittings) and CPC-1318 (thermal blankets) Dear Mr. Forister: The American Fuel & Petrochemical Manufacturers (AFPM) objects to the Association of American Railroads (AAR) unilaterally attempting to amend HM-251, the recently finalized rule governing the tank car specifications for shipments of class 3 flammable liquids, including crude oil and ethanol. 1 Specifically, the AAR Tank Car Committee has proposed Casualty Prevention Circular (CPC) 1317 and CPC 1318, which would respectively set tank car specifications for top fittings and thermal blankets. The Pipeline and Hazardous Materials Safety Administration (PHMSA) rejected these proposed tank car specifications only a few months ago in the final HM-251 rule, finding that they would add $1 billion in costs without any corresponding safety benefit. Federal law and common sense make clear that the AAR Tank Car Committee, a private entity, lacks the authority to override a federal agency s recent regulation and impose a billion dollars more in costs on the shipper community. 2 For these reasons, as more fully explained below, AFPM respectfully requests that AAR withdraw proposed CPC 1317 and CPC 1318. 1 See Hazardous Materials: Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains, 80 Fed. Reg. 26,643 (May 8, 2015). 2 Top fittings protections and thermal blankets are not the types of specifications for which standardization is required to facilitate a smooth handoff of tank cars from one railroad to another. Nor are CPC 1317 and CPC 1318 analogous to CPC 1232, a consensus standard developed among shippers, railroads and tank car owners, which began as an effort to enhance crude oil and ethanol tank car safety. PHMSA s Hazardous Materials Regulations (HMR) are the appropriate means to provide a uniform and exclusive standard for tank car specifications. 1

AFPM s Substantial Interest in CPC 1317 and 1318 AFPM is a national trade association of more than 400 petroleum refiners and petrochemical manufacturers throughout the United States. 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. As manufacturers, AFPM members acquire crude oils from multiple sources, with a growing proportion coming from domestic sources, including oil produced from the Bakken formation. Ethanol is also a critical commodity for refiners because the Renewable Fuel Standard ( RFS ) of the Clean Air Act requires ethanol to be blended into gasoline. Safe, reliable, and economic rail transportation of crude oil and ethanol from source to refinery plays a vital role in ensuring the efficient, economical, and continuous operation of our refining and petrochemical operations, which provides uninterrupted supplies of fuels and chemical products to a global economy. Approximately 10 percent of the crude oil processed by AFPM members arrives by rail. Rail shipments are of particular importance for the Bakken formation, where about half of crude oil reaches the market by rail. As a result of the RFS mandate, AFPM members are also impacted by the transportation of ethanol from plant to terminal, since most ethanol 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. In order 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 several refiners, including Fortune 500 companies with thousands of tank cars, have no say on the decisions of the Committee. Even those AFPM members who belong to other shipper organizations on the Committee have a limited role to play: the railroads control a supermajority of votes on the Committee. The Proposed CPCs Overturn Key Aspects of HM-251 Proposed CPC 1317 would require top fittings protections for existing tank cars that undergo retrofits pursuant to HM-251. During the public comment period, AAR advocated for such a requirement, while AFPM and other shipper organizations opposed it as unnecessary in light of other safety features on tank cars. 3 PHMSA agreed with AFPM in the final HM-251 rule and chose not to include top fitting protections as part of any retrofit requirement. 4 PHMSA found that the costliness of such a retrofit is not supported with a corresponding Sept. 30, 2014). 3 Compare AAR Comments on HM-251 (filed Sept. 30, 2014) with AFPM Comments on HM-251 (filed 4 80 Fed. Reg. at 26,674. 2

appropriate safety benefit. 5 In particular, PHMSA has not required additional top fittings protection for retrofits because the costs of retrofitting existing cars exceed the safety benefits by $500 million to $1 billion.... 6 Proposed CPC 1318 would require thermal blankets on tank cars shipping class 3 flammable liquids, undoing another integral part of HM-251. In the rulemaking process for HM- 251, AAR advocated for thermal blankets, while AFPM s position was that the thermal protection system need not specifically include a thermal blanket as long as the existing and/or retrofitted equipment (e.g., valves, insulation, etc.) allows the car to survive a 100-minute pool fire. 7 Again, PHMSA agreed with AFPM: PHMSA is not requiring a particular system, but instead is requiring that a thermal protection system meet the [100 minute pool fire] performance standard of 179.18 and include a reclosing PRD for new construction of the DOT 117 specification tank car. 8 As PHMSA explained, [t]he 100-minute survival time is the existing performance standard for pressure tank cars equipped with a thermal protection system and was established to provide emergency responders with adequate time to assess a derailment, establish perimeters, and evacuate the public as needed, while also giving time to vent the hazardous material from the tank and prevent an energetic failure of the tank car. 9 We are aware no authority that would allow AAR, a private trade association, to undo a PHMSA regulation. In the CPCs at issue, AAR cites its interchange authority as a justification for imposing thermal blankets and top fittings. But Congress granted PHMSA exclusive authority to set tank car standards through the Hazardous Materials Regulations (HMR). 10 And, as a federal agency, PHMSA must provide notice and an opportunity to comment before setting a standard. 11 Those substantive and procedural protections would mean little if AAR establishes the precedent that it may 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. 12 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. 13 5 Id. 6 PHMSA, Final Regulatory Impact Analysis [Docket No. PHMSA-2012-0082] (HM-251) Hazardous Materials: Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains; Final Rule Office of Hazardous Material Safety, at 148 (May 2015). 7 Compare AAR Comments, at 40 with AFPM Comments, at 31. 8 80 Fed. Reg. at 26,761. 9 Id. 10 See, e.g., 49 U.S.C. 5101, 5103(b)(1)(A)(iii). 11 5 U.S.C. 500, et seq. 12 See 73 Fed. Reg. 17,818(Apr. 1, 2008) (proposed rule); 74 Fed. Reg. 1,770 (2009) (final rule). 13 73 Fed. Reg. at 17,824-25. 3

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. 14 Historically, the AAR Interchange Rules also have addressed certain subjects, such as rail tank car standards, now covered comprehensively by the HMR. 15 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. 16 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. 17 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, including meetings discussing thermal blankets and top fittings protections. AAR filed comments on the very issues covered in CPC 1317 and CPC 1318, top fittings and thermal blankets. PHMSA s thorough rejection of AAR s comments provides no basis for the railroads to make an end-run around the regulatory process. To the extent that AAR attempts to impose CPC 1317 and CPC 1318, it would represent a violation of the railroads common carrier obligations. 18 14 Id. at 17,825. 15 Id. (emphasis added). 16 Id. (emphasis added). 17 73 Fed. Reg. 17,825 (emphasis added). 18 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 4

AAR Admits that the Tank Car Committee Lacks Jurisdiction AAR s pending administrative appeal of HM-251 confirms that the Tank Car Committee lacks authority to impose CPC 1317 and CPC 1318. On June 12, 2015, AAR filed with DOT an administrative appeal of HM-251. 19 That appeal requests that PHMSA modify the final rule to require a thermal blanket, reiterating the arguments from AAR s earlier comments. 20 The railroads would have no need to appeal if the Committee could simply use AAR s interchange rules to modify the regulation. AAR s appeal is an admission that only PHMSA may modify the rule s specifications for tank cars such as thermal blankets. Conclusion CPC 1317 and CPC 1318 are unlawful, unreasonable and undermine the public process by which PHMSA sets tank car standards. AFPM requests that AAR withdraw the CPCs. 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 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). 19 AAR Appeal of HM-251 (filed June 12, 2015). 20 Id. at 3. 5