May 2, 2024

Chemical Transporters Face Ongoing Challenges from EPA's Focus on "Transit-Related" Activity

Holland & Knight Alert
Andy Emerson | Jameson B. Rice | Meaghan A. Colligan | Alexandra E. Ward | Amy O'Brien


  • The U.S. Environmental Protection Agency (EPA) issued its final Safer Communities by Chemical Accident Prevention Rule (SCCAP Rule) in March 2024, removing hotly contested proposed language that would have imposed a 48-hour limit on how long a chemical containing certain hazardous substances could be held in transit and could have had drastic impacts on the country's chemical transport, tank cleaning and transportation depot industry.
  • Nonetheless, the EPA's reference to recent case law in the SCCAP Rule outlining business practices and factors that could trigger what is considered "in-transit"-related activity leaves open risk of EPA authority and involvement in the transportation industry.
  • This Holland & Knight alert provides an overview of the SCCAP Rule and those factors.

Chemical transport, tank cleaning and transportation depot operators breathed a sigh of relief in March 2024 when the U.S. Environmental Protection Agency (EPA) dropped provisions from a proposed rule when it issued its final Safer Communities by Chemical Accident Prevention Rule (SCCAP Rule) that would have imposed a 48-hour limit on how long a chemical containing certain hazardous substances could be held in transit before it was considered a stationary source subject to the EPA's Risk Management Plan (RMP) regulations at 40 C.F.R. Part 68. However, the EPA referenced existing case law in its rulemaking that may still present a substantial challenge to industry practice.

Commentors and industry observers expressed significant concerns in their comments on the proposed rule that such provisions would be highly disruptive to the global bulk chemical shipping industry, which relies on chemical transport facilities to provide elasticity in the transportation market by temporarily holding intermodal tank containers and liquid tank trailers containing products for brief periods while en route to their ultimate destinations at customer facilities. At the crux of their concerns was the potential impact on the existing regulatory construct for chemical transportation depots that, since the 1970s, have generally been sufficiently governed by regulations overseen by the U.S. Department of Transportation (DOT). Further, the EPA's regulations are not typically tailored to address the unique challenges related to facilities in which chemical products are held for brief periods, with little to no processing or waste generation, in varying locations and under varying circumstances – nor is what it means to be a "transportation facility" always readily apparent under existing guidance.

The EPA's Office of Land and Emergency Management appears to have heard commentors and acknowledged the difficulty in applying RMP rules to these facilities by removing this time limit provision. At the same time, recent case law suggests that regional EPA officials will continue to try to tighten the definition of what it means for a chemical container to be "in transit," and facility operators should take heed of the four factors identified in the U.S. District Court for the Eastern District of Washington's recent decision in U.S. v. Multistar Industries to determine whether the EPA may consider their facilities to be stationary sources subject to various EPA regulations.

The RMP Rule

The RMP regulations are intended to protect communities from chemical accidents at industrial facilities. Specifically, the Clean Air Act (CAA) requires facilities that use certain toxic or flammable substances to develop and submit an RMP to EPA. During the Obama Administration the RMP Rule was amended to implement additional requirements for industry compliance, including provisions relating to accident prevention and disclosure of on-site chemicals. The Trump Administration repealed many of these requirements in 2019.

As announced on Feb. 27, 2024, the EPA's latest revisions to the RMP regulations restored many Obama-era requirements including that: 1) facilities find the "root cause" of accidents instead of the "proximate cause," 2) compliance audits be conducted by third parties and 3) facility owners conduct field exercises every 10 years. The SCCAP Rule also incorporates several new provisions, including:

  • Facilities must report on natural hazards caused by climate change, such as flood or extreme weather, that could lead to an accident.
  • Certain facilities must conduct a Safer Technology and Alternatives Analysis (STAA) that requires them to determine whether newer equipment or management practices would reduce the risk of accidents.
  • Over 620 oil refineries and chemical manufacturers have been designated as "higher risk," including facilities located within 1 mile of another facility or that have had an accident in the past five years and must study whether it is practicable to switch to "inherently safer" technologies or designs and implement "at least one practicable passive measure or similarly protective active or procedural measure."
  • The 27 percent of oil refineries that use hydrofluoric acid (HF) must study switching to safer alternatives and take "at least 1 passive measure" to reduce risk (notably, the EPA stopped short of banning the use of HF altogether, recognizing that "the practicability of these potentially safer alternatives is situation-specific, and owners and operators are usually in the best position to make these determinations").
  • Workers must be permitted to recommend to an operator that a process be shut down, and qualified operators must be permitted to shut down a process "based on the potential for a catastrophic release" (this is less stringent than the language in the Proposed Rule, which would have allowed any worker to refuse to do something that "could reasonably result in a catastrophic release").
  • There must be a source of standby or backup power for monitoring equipment in the event of a power loss.

Facilities will have three years to comply with most of the requirements and an additional year to update their RMPs with EPA coordination.

Storage Incident to Transportation: 48-Hour Requirement

The EPA ultimately decided to drop language from the final SCCAP Rule that would have considered a transportation container part of a stationary source if it was disconnected from the motive power that delivered it to the site for 48 hours or more (48-Hour Requirement). This language in the proposed rule sought to apply a specific time frame to interpret the term "storage not incident to transportation," which is a term commonly used in DOT regulations that is not otherwise defined in the RMP regulations.

Industry commentors expressed concerns with the proposed 48-Hour Requirement, including that:

  • Requiring transloaders to move quickly may increase the risk of accidental release.
  • The proposed definition of "stationary source" would conflict with DOT requirements and create confusion.
  • If the EPA were to institute a time frame requirement, it would need to be longer than 48 hours to be practicable.
  • Any safety concerns should be mitigated by the requirement that railcars designed to transport hazardous materials must meet rigorous design specifications.

The EPA acknowledged the validity of the commentors' concerns with respect to this provision and removed it from the final SCCAP Rule. Instead, the EPA encouraged regulated entities and implementing agencies to continue to rely on EPA guidance for determining whether a transportation container is considered a stationary source. The EPA specifically referenced the 1998 RMP rule amendments, which explain that a container is in transport as long as it is attached to the motive power that delivered it to the site. Other EPA guidance indicates that transportation containers will be considered a stationary source when they are: 1) not used incident to transportation, 2) connected to equipment at a stationary source, 3) no longer attached to the motive power that delivered them to the site and 4) left on a stationary source's site for short- or long-term storage.

The EPA also pointed to recent judicial opinions that have outlined a fairly narrow set of factors to consider when determining whether a transportation container is "in transit," including the decisions in United States v. Multistar Industries, 2023 WL 1802387 (E.D. Wash. Feb. 7, 2024), and Aberdeen Carolina & Western Railway v. North Carolina Department of Air Quality, 16 EHR 07190 (May 22, 2017), both of which held that railcars containing hazardous chemicals are a "stationary source" under the CAA.

In Multistar Industries, the Eastern District of Washington held that railcars containing Trimethylamine (TMA) were a stationary source under the CAA and the Emergency Planning and Community Right to Know Act (EPCRA). According to the court, Multistar accepted delivery of TMA at its facility in Washington state from a Florida-based TMA producer, and the TMA is stored in railcars at Multistar's facility until the producer directed Multistar to deliver it to the customer. Multistar then transloaded the TMA from the railcars to Multistar motor vehicles and delivered it to the ultimate customer. In determining that the railcars constituted stationary sources, the court looked to four factors:

  • Length of Time at Facility. A key factor in the court's determination that the railcars constituted a stationary source was the fact that they sat on Multistar rails for between six days and 26 weeks after delivery.
  • Connection to Motive Power. The court emphasized that the railcars sat at the Multistar facility unconnected from any mode of power. The court cited the 1998 RMP Rule amendments, which explain that a container is in transit as long as it is connected to the motive power that delivered it to the site. As such, it concluded that a transportation container not connected to motive power is not in transit and, thus, is a stationary source.
  • Primary Purpose of the Facility's Operation. Multistar and the federal government presented competing interpretations of the "Warehousing Services Agreement" (Agreement) that governed the relationship between Multistar and the TMA producer. The government argued that the "railcar storage fee" and "railcar terminal fee" paid to Multistar for each day that the railcars sat on Multistar's rails were proof that storage, not transportation, was the primary purpose of Multistar's operations. In contrast, while Multistar conceded that the Agreement contemplated storage, it disagreed with the government's characterization of storage as the "express purpose" of the Agreement rather than transportation. Ultimately, the court sided with the government and ruled that the railcars were used as storage outside the scope of transportation.
  • Bill of Lading. In ruling that the EPCRA transportation exemption does not apply, the court emphasized that the first bill of lading expired upon delivery to Multistar and that the second bill of lading covered only the TMA while it was transloaded and shipped to the ultimate customer. Accordingly, the court ruled that there were no active shipping papers covering the railcars while they were stored at Multistar and, therefore, the railcars were not in transit.

Though the court did not address the government's and Multistar's competing interpretations of whether civil penalties are mandatory for violations of the CAA and EPCRA, it did reduce the statutory penalty from more than $782 million to its ultimate assessment of $850,000 in damages (equal to $125 per day for multiple violations). The court also imposed compliance and reporting requirements, predetermined penalties and a mandatory dispute resolution process, which led to $37,600 of additional fines in January 2024 for Multistar's failure to submit an RPM with the EPA.

Though Multistar has appealed, with briefing in the case ongoing, if it is not successful, those in the industry should anticipate continued pressure on this front from the EPA – and there is a real potential that the EPA may seek to bring actions against additional organizations to further constrict the exemption from regulations for storage incident to transportation.

Considerations and Next Steps

The SCCAP Rule will have a significant impact on how regulated businesses operate. Companies should ensure that they have a full understanding of the requirements of the RMP regulations and develop plans to comply with its provisions.

Holland & Knight's environmental and transportation attorneys can assist regulated entities with evaluating the impacts and applicability of the RMP Rule to their businesses and developing and implementing comprehensive compliance plans. For more information, contact the authors or another member of the firm's Environmental and Transportation teams.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.

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