(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, Feb 17 (Reuters) - Five hundred and ninety one days have passed since a train carrying crude oil derailed and incinerated the town of Lac Megantic in Quebec.
In that time, the U.S. Department of Transportation (DOT) has still not finalised new safety rules on tank car standards and operational controls for trains carrying highly flammable liquids.
DOT started working on new rules in April 2012 -- more than a year before the devastating fire at Lac Megantic in July 2013, which claimed the lives of 47 people -- so the process has so far taken 1,041 days.
DOT has now sent a draft to the Office of Management and Budget (OMB) for final review and revisions but does not expect the final rule to be gazetted until May 12.
Even then, new tank car standards could be phased in over several years by 2017/18, and oil shippers are pressing for an even longer transition period.
If the timetable now sticks, it will have taken at least six years to implement new standards for tank cars that were recognised as necessary back in 2012. It is an astonishing example of regulatory failure.
This is unacceptably slow. While regulators, lobbyists and lawyers for crude shippers have been sparring in Washington over whether new standards are necessary, and how long the industry should be given to comply with them, crude-carrying trains have been derailing and catching fire with frightening frequency.
On Monday, a crude-carrying train operated by CSX railroad derailed in West Virginia, setting at least 14 tank cars ablaze and forcing the evacuation of two nearby towns.
On the day before, a train operated by Canadian National Railway and carrying 100 tank cars of crude derailed in a remote part of northern Ontario and caught fire.
Since Lac Megantic, there have been at least 11 other serious derailments across the United States and Canada involving trains shipping large volumes of oil, according to a tally published by the Congressional Research Service (“U.S. rail transport of crude oil: background and issues for Congress”, Dec 2014).
Serious incidents involving crude-carrying trains posing a significant threat to life, property and the environment are occurring on average once every seven weeks.
Between 2006 and April 2014, there were 16 significant accidents involving high-hazard trains carrying crude oil or ethanol. In total 281 tank cars derailed, nearly 5 million gallons of crude or ethanol were released when the tank cars were breached, and there were 48 fatalities, according to the U.S. National Transportation Safety Board (NTSB).
So far, most of the derailments have occurred in remote areas and small rural communities, lessening their impact, both in terms of physical damage and political sensitivity. But it is only a matter of time before a train derails in a major urban area like Chicago or Albany, both of which are rail centres handling large numbers of oil trains, causing mass casualties.
No other industry would be allowed to tolerate such an appalling safety record.
The problem has been extensively chronicled in accident investigation reports by the NTSB dating as far back as 1992.
Unlike the pressure tank cars used to transport other highly flammable or poisonous liquids, the DOT-111 design tank cars which carry most crude and ethanol cannot reliably contain their load in the event of an accident.
DOT-111 tank cars lack full head shields to prevent end-on punctures in the event of a collision. Their tank walls are significantly thinner. There is no requirement for them to have thermal protection to protect against fire. And many have fittings which shear off in accidents, according to NTSB (“Rail accidents involving crude oil and ethanol releases,” April 2014).
NTSB has repeatedly warned DOT-111 tank cars are not suitable for carrying flammable loads like crude and ethanol. Canada has already mandated their accelerated phase-out following Lac Megantic.
But the United States is still arguing over who should have primary responsibility for improving train safety and how long shippers should be given to phase out unsafe tank cars.
Oil shippers argue the railroads need to do a better job of keeping trains and tank cars on the rails, while railroads argue shippers need to use better tank cars that will not catch fire.
Obviously, the solution requires both. In an ideal world, tank cars should never come off the rails; the number of derailments has indeed been alarmingly high. But accidents happen and it is critical that when they do, tank cars should contain their contents safely until emergency responders can deal with the situation.
Attempts to address the safety problem have become bogged down by fighting over whether crude is really a highly flammable liquid (the answer to that question should be obvious by now); whether DOT-111 tank cars are up to the job (the answer is clearly no); and how quickly DOT-111 tank cars should be phased out of crude service (within three years or up to a decade).
Railroad operators have made relatively speedy progress in agreeing new rules and operating procedures for trains carrying large volumes of crude and ethanol which went into effect in August 2013 (“Circular OT-55-N: Recommended railroad operating practices for transportation of hazardous materials”).
Procedures for “key trains” include lower speed limits, heightened safety protocols which give such high-hazard trains priority over all other traffic on the network and require more frequent track inspections, as well as routing them around densely-populated urban areas where possible.
Crude oil shippers have responded much more slowly, arguing that crude is not especially dangerous and they should be given much longer to phase out DOT-111s.
The problem is exacerbated by the allocation of liability. Most DOT-111 tank cars are owned by shippers rather than the railroads themselves. But in the event of an accident, it is the railroad which is held responsible.
As common carriers, railroads must accept any cargo, including crude, provided it is offered in a tank car with an approved design, which at the moment includes DOT-111s.
As some railroad executives have noted, every time they accept a dangerous consignment such as chlorine, ammonia or a large number of oil tank cars, the potential liabilities mean they are quite literally betting the company. In contrast, shippers are largely exempted from liability.
If the U.S. government insists on a new rule that phases out DOT-111 tank cars from crude oil and ethanol service, the costs will largely fall on the shippers, who will have to replace their tank cars.
Little wonder oil shippers have tenaciously fought proposals for an accelerated phase out of DOT-111s from oil and ethanol service, raising concerns about the rule-making process itself and citing limitations on how quickly more tank cars could be ordered.
Aggressive lobbying and lawyering has slowed the regulatory response to the problem in the United States. But it is a short-sighted approach which is putting the entire oil-by-rail industry in jeopardy.
With serious accidents running at one every seven weeks or so, it is only a matter of time before one occurs in a big urban area and causes mass casualties. In the politically charged aftermath, the entire crude by rail will be at risk.
It is time to remove the lawyers and lobbyists from the process and reach a top-level political and business decision between the DOT and chief executives from both the railroads and the shipping companies to accelerate the phase out of dangerous DOT-111 tank cars and protect the entire industry. (Editing by Ruth Pitchford)