Potential Customer Impact of PHMSA’s Proposed Flammable Liquids Rulemaking

Announcement Number: CN2014-29
Categories: General Announcements
Posted Date: September 9, 2014

To Our Customers,

As your business partner, Union Pacific is writing to highlight how pending regulatory changes could adversely affect the company’s ability to provide the service you have come to expect. On August 1, 2014, the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued a notice that it was considering new rules governing the transportation of all flammable liquids in what it calls high-hazard flammable trains (HHFT). The proposed rule would impose a variety of restrictions on any train with 20 or more tank cars of flammable liquids. These new rules contain provisions covering everything from tank car design and braking systems to train speed restrictions and commodity testing.

There are three specific areas of the proposed rule that you should understand: 1) the scope of the commodities covered by the proposed rule; 2) proposed braking system requirements; and 3) train speed restrictions.
 
1) Scope: The scope of the proposed rule is broad. As presently written, it covers all tank cars containing flammable liquids in an HHFT, not just crude oil. The rule then defines all trains with 20 or more cars of flammable liquids as HHFTs, without consideration of whether the cars are in a manifest or unit train. It also assumes cars spread throughout a manifest train are just as hazardous as cars in a single block. Together, the rule on commodities covered and definition of HHFT applies to 2.5 times the number of Union Pacific trains than if the rule applied to crude oil only. This means the number of customers affected significantly increases—including many who do not ship flammable liquids.

2) Braking Systems: One proposal included in the rule is the requirement of Electronically Controlled Pneumatic (ECP) brakes in new and retrofitted tank cars being used in HHFTs. ECP brakes are a costly addition to rail cars and locomotives that have yet to be proven effective for large-scale use. As recently as 2008, the FRA conducted a rulemaking proceeding on ECP brakes. After an extensive cost benefit analysis, the FRA concluded that it could not justify a requirement for use of ECP. In a recent filing in response to a similar proposal in Canada, the Railway Association of Canada concluded that a requirement for ECP brakes would pose significant compatibility and reliability issues. These conclusions are consistent with Union Pacific’s own tests of ECP.

3) Speed Restrictions: The proposed rule would also impose a speed limit on HHFTs until all cars in that train meet the new tank car standards. Currently, Union Pacific restricts the speed on trains moving 20 or more cars of crude oil to 40 mph in high-threat urban areas. The proposed rule could, at a minimum, extend the existing 40 mph speed limit to all HHFTs in high-threat urban areas. At maximum, the proposed rule would impose a nationwide 40 mph speed limit on all HHFTs regardless of location.

An arbitrary national speed limit on all flammable liquids, which make up less than 3 percent of Union Pacific’s total shipments, would have wide-felt reverberations throughout both our network and the entire national rail system. Here are some of the ways it would affect Union Pacific’s customers:

  • Speed restrictions applicable to HHFTs would directly impact the speed of all traffic on a line.
  • Velocity as measured by the Association of American Railroads (AAR) would be reduced across the entire network, with some areas seeing up to a two- to four-mph decrease. This would increase transit times and create congestion.
  • The growth capacity on major segments of our network would be severely reduced or eliminated, restricting our ability to grow with our customers in the coming years. 
  • Disruptions, like severe weather, would have a larger impact on our service levels and the recovery would take longer.  
  • Two of the most impacted corridors include:
    • Southern California – Chicago via the Sunset corridor, which is a particularly important route for our intermodal customers; and
    • Chicago and Upper Midwest – Texas/Mexico, which handles large volumes of intermodal, automotive, grain, coal, sand and manifest traffic.
  • It could require years and hundreds of millions, if not billions, of dollars in additional capital expenditures to restore the capabilities of today's system and the service you have come to expect.

Union Pacific supports the goal of increasing rail safety. Over the last three years, the rail industry has undertaken a variety of actions to improve crude oil transportation safety. We continue working with our customers, the U.S. Department of Transportation (DOT) and other railroads to maximize rail safety without forfeiting the customer benefits provided by a fluid rail network. However, we are concerned that the proposed measures in this rule could substantially reduce our ability to support your growth, and therefore your ability to meet your customers’ needs.

Union Pacific will be participating in the comment process for the proposed rule through AAR and as an individual corporation. Union Pacific will seek to narrow the applicability of the rule by excluding some categories of flammable liquids and certain train configurations and by limiting any speed restrictions to high-threat urban areas. Also, the rail industry reached an agreement with the American Petroleum Institute on standards for new and retrofitted tank cars. The PHMSA rule as drafted is not consistent with those standards, and our comments will support our agreed-upon standards. Finally, we will argue against the requirement of ECP and will demonstrate that similar benefits can be achieved using existing technologies.

You will be receiving additional information from our team in the coming days, including instructions on how you can participate in the comment process to ensure your views are heard.

We welcome your thoughts on this important topic. Thank you for your business.

Sincerely,

Rendition Original | Lance Fritz Signature

Lance Fritz
President and COO