American Oil and Gas Reporter - June 2015 - 125

inch tank shell, 11-gauge jacket, and 0.5inch full-height head shield. The rule requires HHFTs to have in place a functioning two-way, end-of-train device or
a distributed power braking system.
DOT says trains meeting the definition
of a high-hazard flammable unit train (a
single train with 70 or more tank cars
carrying Class 3 flammable liquids) with
at least one tank car with Packing Group
One materials must be operated with an
electronically controlled pneumatic (ECP)
braking system by Jan. 1, 2021.
Under the new rules, HHFTs must
keep their speed under 50 miles an hour
in all areas, and any HHFTs containing
any tank cars not meeting the enhanced
tank car standards are restricted to 40 mph
in high-threat urban areas. Railroads operating HHFTs must perform routing analyses that consider, at a minimum, 27 safety
and security factors, DOT says, including
track type and grade. They also must provide state, local, tribal and/or regional officials a point of emergency contact.
Those who offer crude oil for transport
by rail must carry out sampling and testing
programs for all unrefined petroleumbased products, the new standards state.
Shippers must certify that hazardous materials subject to the program are packaged
in accordance with the test results, document
the testing and sampling program outcomes,
and make that information available to
DOT personnel when requested.

Legislative Fix
Six Democratic lawmakers report they
are introducing the Hazardous Materials
Rail Transportation Safety Improvement
Act of 2015, which they say would reduce
the risks to communities near railroad
tracks by speeding replacement of older
tank cars by providing financial assistance
to shippers.
The bill would place a $175 per shipment fee on older tank cars used to transport crude oil. According to the Senate
website, about 55,000 DOT-111s would
be subject to the fee, and the tax break
would cover as much as 15 percent of
the expense of upgrading rail cars. It also
would make available a tax credit for
companies that upgraded their newer
CPC-1232 cars to the higher standards.
A 2014 study by the Railway Supply
Institute cited by the senators estimates
that modifying the tank car fleet will
cost more than $4 billion. The report
adds tank cars often are not owned by
the railroads, but by the companies producing oil, ethanol and other flammable
liquids moved by rail.
Sponsoring the legislation are Senators
Ron Wyden, D-Or., Chuck Schumer, DN.Y., Dianne Feinstein, D-Ca., Bob Casey,

D-Pa., Jeff Merkley, D-Or., Sherrod
Brown, D-Oh., and Mark Warner, D-Va.
Under the bill, some of the revenues
raised by the shipment fees would be allocated to communities and first responders
to provide training and establish dedicated
funds for cleanup costs.
Industry Response
In a statement filed just after the new
regulations were released, API President
and Chief Executive Officer Jack Gerard
urged the government to examine the
new standards to ensure science showed
each change would provide a meaningful
improvement in safety.
"A thoughtful, comprehensive and datadriven safety approach is critical to improving
on the 99.997 percent safety record of
freight rail to reach our goal of zero accidents," Gerard says. "Accident investigations
consistently show that more must be done
to prevent derailments by enhancing the
inspection and maintenance of train tracks,
axles, and other railroad equipment."
The Association of American Railroads
praises the new tank car standards, but
says DOT doesn't have evidence to support
mandating ECP brakes, and it also insists
the brakes will not prevent accidents.
"The DOT couldn't make a safety
case for ECP, but forged ahead anyhow,"

says AAR President and CEO Edward
R. Hamberger. "This is an imprudent decision made without supporting data or
analysis. I have a hard time believing the
determination to impose ECP brakes is
anything but a rash rush to judgment."
He adds that DOT should be devoting
resources to addressing the underlying
causes of rail accidents, which he says
don't include brakes. "Unjustified regulations such as this trigger a reallocation
of investments that will not generate the
kind of safety benefits the industry and
the public expects," he says.
The American Fuel & Petrochemical
Manufacturers says its members have
demonstrated their willingness to work
with DOT in improving safety by investing
more than $4 billion in rail car upgrades.
AFPM Executive Vice President Brendan Williams says the association intends
to work with DOT to implement the new
standards, but cautions that "this aggressive
retrofit schedule is unrealistic and may
be disruptive to transporting crude oil to
markets across the country."
"Now that tank car specifications have
been addressed, AFPM suggests that it is
long overdue for DOT to show similar
concern for the root causes of train derailments: track integrity and human
error," Williams says.
❒

Industry Associations Criticize
ONRR's Revised Valuation Rule
WASHINGTON-A proposed rule
change on valuation for federal royalty
reporting and payments by oil and gas
lessees both on- and offshore would overturn rules that have been in place since
2000, and are misguided in several aspects,
assesses an industry coalition.
The American Petroleum Institute, Independent Petroleum Association of America and National Ocean Industries Association submitted comments jointly in
response to the Office of Natural Resources
Revenue's proposal to amend federal oil
and gas valuation regulations. ONRR released the proposed changes in January.
While API, IPAA and NOIA say the
agency's efforts to improve the regulatory
process governing royalty valuations are
welcome, particularly its proposal to expand options to use index pricing for
natural gas, they contend key facets of
the proposed rule have fundamental flaws.
They argue that many provisions lack a
reasoned basis and would place both offshore and onshore lessees in uncertain
positions with respect to royalty reporting
and payment obligations.

"ONRR's proposal in several respects
amounts to unjustified changes to the
regulatory scheme in an unabashed attempt
to benefit federal coffers beyond the royalties fairly, and legally, due from federal
leases," the industry associations contend.
"Additionally, we believe ONRR has understated the cost to industry significantly.
For example, ONRR has assigned no
cost to applying its proposed 'default
provision,' or to moving arm's-length
percentage-of-proceeds contracts from
the unprocessed to the processed gas regulations, when these and other changes
certainly will have negative cost consequences on the regulated community."
According to the group's comments,
many of ONRR's proposals are legally
suspect under the principle that the agency
must provide at least as much, if not
more, compelling justification to change
them than it had in adopting the regulations
in the first place. The industry coalition
asserts the proposed rule, which it says
is "largely based on mere fiat and unbounded discretion," fails to meet this
burden.
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American Oil and Gas Reporter - June 2015

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