June 22, 2020

PHMSA Issues Final LNG By Rail Regulation

Holland & Knight Energy and Natural Resources Blog
Dianne R. Phillips
Energy and Natural Resources Blog

The U.S. Department of Transportation's (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) issued on June 19, 2020, its Final Rule for publication in the Federal Register. Once the Final Rule takes effect 30 days after publication, the Hazardous Materials Regulations, 49 C.F.R. Parts 171 to 180, will be amended to allow transport of liquefied natural gas (LNG) by rail under certain conditions. This rulemaking authorizes the transportation of LNG by rail in DOT-113C120W specification rail tank cars with enhanced outer tank requirements, subject to all applicable requirements and certain additional operational controls.

The Final Rule is the culmination of a long process that was coordinated with the Federal Railroad Administration (FRA) and began with the Association of American Railroads' (AAR) petition for rulemaking filed with PHMSA in January 2017, docketed as PHMSA-2017-0020. Next, the matter appeared in the Fall 2018 Unified Regulatory Agenda, but, as reported, the topic didn't really gain traction until President Donald Trump issued his April 2019 Executive Order. Thereafter, PHMSA was hard at work — first in connection with a Special Permit request and finally with its request for comment on a proposed rulemaking. (See previous Holland & Knight blog, PHMSA Issues NPRM for LNG by Rail, Nov. 6, 2019.)

Despite support from the AAR and the American Short Line and Regional Railroad Association (ASLRRA), attorneys general from 15 states and the District of Columbia filed comments in opposition of the proposal, claiming PHMSA failed to consider adequately the "greater risk of catastrophic accidents" as well as the "environmental and climate impacts of allowing LNG to be shipped in rail tank cars." The National Transportation Safety Board (NTSB) also weighed in with comments urging PHMSA to adopt sufficient "operational controls" (similar to those imposed in special permits issued by PHMSA) and require additional data on the safety of the proposed DOT-113 tank cars prior to proceeding. All of these comments are addressed in the Final Rule package, and PHMSA made changes to the proposal in response including adding requirements for tank car construction and operational controls. In addition, PHMSA relied upon recent studies performed by the FRA related to fire performance and impact tests of the specialty rail cars to support its decision.

Given the new, enhanced design elements required for the DOT-113 rail cars, which must be specially manufactured, it is likely going to be some time before we see these trains on the rails. In addition, opponents may not be satisfied with the new requirements. Only time will tell if this latest step will be the last.

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