Earlier this week DOT’s Pipeline and Hazardous Material
Safety Administration (PHMSA) published a request for comments in the Federal
Register (81 FR
48885-48886) to seek public comments on its on-going study addressing
liability issues with rail transportation of hazardous materials. This study
was required by §7310
of the Fixing America's Surface Transportation (FAST) Act of 2015 (PL 114-94).
Study Requirements
The FAST Act required PHMSA to prepare a report on the
current state of “of insurance for railroad carriers transporting hazardous
materials” {§7310(a)}
as well as addressing what level and type of insurance would be necessary to
both “allocate risk and financial responsibility
for claims” {§7310(b)(2)(A)} and “ensure that a railroad
carrier transporting hazardous
materials can continue to operate despite the risk of an
accident or incident” {§7310(b)(2)(B)}.
Public Input
In support of this study and report requirement PHMSA is
soliciting public input on response to nine specific topics. They include:
• The current level,
structure, and type of liability insurance coverage (including self-insurance
and retentions) available for hazardous materials transportation by rail;
• The appropriateness of the
current levels of liability insurance coverage for hazardous materials
transportation by rail;
• The drivers of the
current coverage limits for hazardous materials transportation liability
insurance;
• The impact of foreign
requirements related to insurance and liability coverage;
• Data relating to, any previous or
current initiatives for sharing the cost of
insurance and/or legal liability for hazardous material by rail incidents
between shipper and carrier;
• Alternative approaches from other
industries that may be applicable to liability and insurance related to
hazardous materials transportation by rail;
• Alternative programs
that impose fees to fund secondary liability coverage and/or create liability
caps;
Written comments may be submitted via the Federal
eRulemaking Portal (www.Regulations.gov;
Docket # PHMSA-2016-0074). Comments should be submitted by September 9th,
2016.
Commentary
Railroads have long maintained that they bear the bulk of
the potential liability for accidents involving the transportation of hazardous
material by rail. While their safety record for hazmat transportation is pretty
impressive the possible consequences of a major hazmat release in a rail
accident can be quite large. This was more than adequately demonstrated a few
years back during the derailment of a crude oil train in Quebec, Canada where
large portions of the center of a town were incinerated.
There have been a number of attempts by the railroad to get
the Surface Transportation Board to allow railroads to charge hazmat shippers a
liability premium for shipments of hazardous material.
Hazmat shippers, on the other hand, note that the majority
of railroad accidents are the result of deficiencies in railroad operations,
either errors committed by railroad employees, or failure to adequately
maintain railroad equipment (most often the actual rail lines). Shippers do not
feel any obligation to assume any measure of liability for accidents caused by
railroad errors.
Hopefully, the PHMSA report will include a look at the three
different types of liabilities related to hazmat shipments; shipped-product
safety liability, railcar maintenance liability and operational liability.
Shippers are responsible for the proper classification,
packaging and marking of hazmat shipments. They generally argue that their
liability should be limited to the results of errors associated with those
responsibilities. Railroads argue that the inherent characteristics of
hazardous materials increase the potential consequences and costs associated
with railroad accidents. Since they are required by law to accept any properly
classified, packaged and marked hazardous material shipment, railroads argue
that the liability for the increased cost of the consequences of a hazmat
release should be borne, at least in part, by the shipper.
The PHMSA report to Congress needs to clearly identify the
issues of joint and severable liability for the consequences for hazardous
material releases during railroad accidents. PHMSA is clearly not going to be
able to resolve the issue; that is going to be an issue for either Congress or
the Courts.
To ensure that PHMSA has all of the information necessary to
adequately inform Congress about this hazmat shipping liability issue, the chemical
industry will need to ensure that they are fully involved in the comment
process. They need to fully document what they what they see as the limits of
their liability in a hazmat release and what steps they take to protect
themselves against the costs associated with that liability.