American Oil and Gas Reporter - April 2016 - 27

WASHINGTONWATCH
Rail Transport Rule
Places Unfair Requirements
On Truck Transport
The oil and natural gas industry often finds itself at odds with
proposed regulations. Agencies must abide by procedures for notice and public comment on new rules or proposed changes in rules.
Seldom does any one party succeed in getting an agency to accept all the suggestions included in its comments. Yet there is a
process, and unhappy parties eventually can use legal recourse
if an agency does not support its actions with reasoned decision
making.
However, all crude oil producers, regardless of how the crude
oil is transported, now find themselves subject to sampling and
testing requirements that were presented in a rule making that was
limited to high-volume rail transport. Not only did producers lack
notice and an opportunity to comment, but the Department of
Transportation's Pipeline Hazardous Materials and Safety Administration is exerting its regulation where producers would argue PHMSA lacks jurisdiction.
The Independent Petroleum Association of America participated in a notice of proposed rule making put forth by PHMSA,
which it, in coordination with the Federal Railroad Administration, ultimately issued as a final rule in May 2015. Hazardous Materials: Enhanced Tank Car Standards and Operational Controls
for High-Hazard Flammable Trains addresses "the unique risks
associated with the growing reliance on trains to transport large
quantities of flammable liquids."
PHMSA received comments with more than 109,000 signatures submitted by nongovernment organizations, individuals, industry stakeholders, and government entities or representatives
on various aspects of the NOPR. The rule became effective July
7, 2015.
The title of the NOPR is limited to rail transport. Truck transportation is mentioned in the final rule only as an alternative to
rail transport that would be affected by the proposed rule.
The American Petroleum Institute developed Recommended
Practice 3000, Classifying and Loading of Crude Oil into Rail Tank
Cars, which discusses how to establish a sampling and testing
program, and provides an example of such a program. Yet PHMSA
is providing guidance to industry that its new regulations
"established requirements for shippers in all modes of
transportation to develop and carry out a sampling and testing
program for all unrefined petroleum-based products." PHMSA
says the new regulations were "adopted in the hazardous
materials regulations," omitting the full reference to "enhanced
tank car standards and operational controls for high-hazard
flammable trains."
Safe transport of a hazardous material entails responsibilities.
Crude oil producers know what they produce, if for no other reason
than such descriptions are necessary to sell the crude oil, which
many producers do at the point of production. IPAA does not
question the need for appropriate individuals to know the
qualities and make-up of the crude. However, IPAA does
question how federal requirements can be imposed and enforced
without the opportunity for comment on how best to achieve the
goals of a sampling and testing program.

"The Pipeline Hazardous Materials and
Safety Administration is exerting its
regulation where producers would argue

PHMSA lacks jurisdiction.

Where RP 3000 allowed for industry input and government
approval of a system for rail transport, producers not using rail
transport were provided no opportunity to develop a similar
recommended practice for crude oil sampling and testing for crude
transported on trucks for eventual transportation by pipeline.
PHMSA's mission to oversee transportation of hazardous
liquids is much cleaner when focused on the transporter. The final
rule on tank car standards and operational controls for trains is
an example. However, IPAA argues that by reaching back
directly to the producer using truck or pipeline transport,
PHMSA is reaching too far. Yet that is exactly what PHMSA
enforcement agents are doing. These enforcement actions are
taking place at the same time PHMSA is conducting some outreach
to tell producers about testing and sampling requirements,
about which most producers are totally unaware.
The distinction between state and PHMSA jurisdiction also
is of concern in a pending final rule on transporting hazardous
liquids and a NOPR on the safety of natural gas transmission and
gathering pipelines. In both proceedings, PHMSA is exerting
jurisdiction over gathering lines, which traditionally have been
regulated by states.
In the hazardous liquids NOPR, IPAA commented in early
January, "While certainly a laudable concern, and one shared by
IPAA, an interest in promoting pipeline safety does not provide
a legitimate basis for extending PHMSA's regulatory authority
beyond its permissible statutory reach."
The gas transmission NOPR is another area where IPAA will
be pushing for safety, but not at the expense of PHMSA extending
its jurisdiction beyond its statutory reach.
❒

SUSAN GINSBERG is vice
president of crude oil and natural gas regulatory affairs for
the Independent Petroleum
Association of America. She
covers legislation and regulation, focusing on the CFTC
and FERC. Her experience in
natural gas regulatory affairs
spans 25 years.
APRIL 2016 27

American Oil and Gas Reporter - April 2016

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