Washington state requires railroads to show they could afford ‘worst case’ oil train spill

Repost from the Bellingham Herald

Washington asks if railroads could afford $700M oil train spill

By Samantha Wohlfeil, February 13, 2016 6:28 AM
Smoke rises from railway cars carrying crude oil that derailed in downtown Lac-Megantic, Quebec, on July 6, 2013. A large swath of the town was destroyed and 47 people killed in what became the worst oil train derailment in North America.
Smoke rises from railway cars carrying crude oil that derailed in downtown Lac-Megantic, Quebec, on July 6, 2013. A large swath of the town was destroyed and 47 people killed in what became the worst oil train derailment in North America. Paul Chiasson Associated Press

HIGHLIGHTS
•  Three new rail safety rules scheduled to take effect March 11
• Railroads must show they have means to pay for a ‘reasonable worst case spill’
• Railroads disagree with new rule methods and question state authority

Railroads that haul oil trains through Washington state will need to report whether they could afford around $700 million to pay for a derailment and spill, under a recently finalized state rule.

As announced Feb. 9, the requirement is one of three oil train safety rules the state Utilities and Transportation Commission crafted as required under legislation that state lawmakers passed in 2015.

The new rules, which take effect March 11:

▪ Require signs with basic safety information be posted at private rail crossings along routes that carry full or empty oil trains.

▪ Allow certain cities such as Bellingham, Aberdeen, Spokane, Tacoma, and Richland to opt into a state rail crossing inspection program to get free assistance with inspections.

▪ Require railroads to include financial information in their annual report to the UTC to show if they could address a “reasonable worst case spill” of oil.

Reasonable worst case

The portion of the rule most heavily scrutinized during a months-long comment process was the requirement to show financial ability to pay for a reasonable worst case spill. The rule required commission staff to first define what a “reasonable” worst case spill looks like, and second, calculate what cleaning that up might cost.

THEY DIDN’T WANT THE WORST CASE. THEY WANTED SOMETHING REASONABLE.
Jason Lewis, Utilities and Transportation Commission transportation policy adviser

Railroads objected to the proposed spill scenarios, and argued that the requirement to show whether they could afford cleanup was pre-empted by federal law.

Johan Hellman, on behalf of BNSF, wrote Sept. 21, 2015, that the company was concerned with a draft that had defined the reasonable worst case spill as half the train’s contents, and had set minimum cleanup costs at $400 per gallon.

“We find both the definition and the minimum cost to be greatly exaggerated,” Hellman wrote.

The worst case calculation was refined to be based on the fastest speed an oil train travels, but both BNSF and Union Pacific Railroad continued to object to the requirement.

In a Dec. 7 letter to the commission, Melissa Hagan argued on behalf of Union Pacific that requiring the railroad to detail the insurance it carries, along with its ability to pay for the reasonable worst case cleanup, would “compromise the integrity of Union Pacific’s confidential business records” and was “blatantly discriminatory.”

Other people who commented said the rule didn’t go far enough in its estimates for how much oil could spill and how much those damages could cost.

State Sen. Christine Rolfes, D-Kitsap County, told the commission she thought the reasonable worst case spill amount was “far too conservative” and the estimated cleanup cost seemed “excessively low.”

Dale Jensen, spill prevention preparedness and response manager for the state Department of Ecology, also wrote to say an estimated $400 per gallon cleanup cost would cover only a “portion of the overall costs of an oil spill” and “in the event of a worst case spill, the true cost of damages incurred could certainly exceed the level established within the proposed rule.”

The commission agreed with Jensen but said the legislation refers to a “reasonable” worst case, not an absolute worst case spill.

Calculating the reasonable worst

In crafting the rule, commission staff looked to federal rule-making by the Pipeline and Hazardous Materials Safety Administration and Federal Railroad Administration, and to the actual worst derailment of ethanol or crude oil in North America, which happened in Lac-Megantic, Quebec.

“Quebec was a terrible tragedy that really put a lot of these types of regulations more in the public eye,” said Jason Lewis, who helped craft the rule as transportation policy adviser for the commission.

In Quebec, a parked, unmanned 72-car train loaded with Bakken crude oil rolled downhill, reaching 65 mph before crashing into the downtown and killing 47 people in July 2013. Sixty-three cars derailed and about 1.6 million gallons of oil leaked.

THE WORST OIL TRAIN DERAILMENT IN NORTH AMERICA OCCURRED IN LAC-MEGANTIC, QUEBEC, WHERE 63 CARS OF A 72-CAR BAKKEN CRUDE OIL TRAIN DERAILED AT 65 MPH, KILLING 47 PEOPLE.

Although Quebec is the worst oil train derailment to date, Washington state legislators specifically asked the commission to find a “reasonable” worst case scenario for the financial reporting requirement, Lewis said.

“They didn’t want the worst case. They wanted something reasonable,” Lewis said. “It’s an ambiguous term that we really had to work to define.”

The commission looked to other state rules and used PHMSA and FRA logic to scale down from the incident in Quebec, Lewis said.

The final rule says to take the maximum oil train speed (usually 45 to 50 mph), divide it by 65 (the speed in Quebec), and account for kinetic force to get the estimated percentage of the train’s cargo they should be prepared to clean up.

To illustrate, assume the longest BNSF crude oil unit train transported in 2015 was 110 tank cars and that those trains go 45 mph at their fastest.

Under the new formula, the railroad needs to show whether it has the means to pay for a theoretical spill of 47.9 percent of that oil.

Each tank car has a maximum volume of 30,000 gallons, so the train could carry at most about 3.3 million gallons.

At a cleanup cost of $400 per gallon, the new guidelines want to know if the railroad could pay $632.3 million.

If that train were to go 50 mph at its fastest, the reporting amount would be closer to $781 million.

$632.3 million to $781 million
Amount railroads need to show they could pay for a spill in Washington state if their fastest 110-car oil train goes 45 to 50 mph

UTC staff also took into account that supertanker vessels that can carry 84 million gallons of oil through Puget Sound are required to get certificates of financial responsibility through Ecology that cap out at $1 billion, Lewis said.

“If we went much higher in terms of total release or cost of cleanup, it would be difficult to justify a higher cap,” Lewis said.

BNSF challenged similar legislation in California, claiming in court that federal rules pre-empt state laws that try to regulate rail.

When asked whether BNSF would similarly challenge Washington’s rules or still had concerns about the worst case scenarios, BNSF spokeswoman Courtney Wallace wrote that BNSF was committed to work in good faith with Washington to promote safety.

WE HAVE NEVER EXPECTED TAXPAYERS TO ASSUME THE EXPENSE OF A CLEANUP AFTER A DERAILMENT, AND WE STAND BY THE PRACTICES THAT HAVE ALLOWED US TO KEEP THAT RECORD TO DATE.
Courtney Wallace, BNSF spokeswoman

“Nothing is more important to us than safely moving all of the commodities we carry, including crude oil. BNSF is a common carrier and our operations are governed by the Interstate Commerce Commission Termination Act, which generally pre-empts state and local regulations of railroads,” Wallace wrote to The Bellingham Herald.

“BNSF has a strong record of corporate responsibility,” Wallace wrote. “We have never expected taxpayers to assume the expense of a cleanup after a derailment, and we stand by the practices that have allowed us to keep that record to date. BNSF is financially sound with a long history, substantial assets and a track record of being a responsible corporate citizen.”

Because the rule only requires railroads to show whether they could afford that level of spill in their annual report to the commission, rather than requiring they carry a certain level of coverage, the commission believes the rule does not conflict with federal laws.

Annual reports from the railroads are due to the UTC in May.

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