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By Rachel Leven
May 11 — The clock is ticking for railroads, energy companies, public interest groups and others to sue the Transportation Department over its final rule governing shipment of crude oil by rail, and so far only one group has challenged the rule.
The American Petroleum Institute filed a lawsuit against the rule May 11, and several other industry and public interest groups that have expressed concerns on everything from brake to disclosure requirements said they are considering their legal and legislative options. Transportation Secretary Anthony Foxx said that lawsuits over individual provisions wouldn't necessarily hold up implementation of the entire rule, but an attorney told Bloomberg BNA the lawsuits could cause compliance confusion for industry.
“Our history with rules is that, when challenged, the courts have historically focused on the area of challenge and not necessarily the entire rule. That remains to be seen,” Foxx said May 1, responding to a question regarding the impact of potential legal challenges on brake requirements by railroads. “I’m hopeful that the rail industry will accept this rule, will follow this rule and help America become a safer place as well as Canada, but we believe strongly that our rule will stand up.”
The Transportation Department released the final rule May 1. The rule aims to mitigate damages associated with Class 3 flammable liquid train derailments by issuing requirements for tank cars and operation practices for this type of service. The rule, which the department estimates would cost railroads, energy companies and others $2.5 billion and would beget benefits of up to $2.9 billion, was published in the Federal Register May 8 thereby starting the 60-day period that lasts through July 7 where groups are allowed to sue under the Administrative Procedure Act.
The Pipeline and Hazardous Materials Safety Administration led development of the rule (RIN 2137-AE91) as this type of transportation became more frequent, the number of related derailments increased and environmental, property and public health damages increased public scrutiny on the issue. However, in its final Regulatory Impact Analysis the agency highlighted that the rate of flammable liquid by rail shipment accidents is down nearly 13 percent over the last 10 years.
The petroleum institute petitioned the U.S. Court of Appeals for the D.C. Circuit May 11 to review the rule (American Petroleum Institute v. United States , D.C. Cir., No. 15-01131, petition filed, 5/11/15).
The court should set aside and remand requirements for when tank cars used in flammable liquid transport must be retrofitted, as well as certain brake requirements and the related installation timeline for them, according to the institute.
Operational requirements for tank cars used in flammable liquid service that don't meet retrofitting or brake requirements should also be set aside and remanded, the petition said.
A spokesman for the Association of American Railroads said it is still considering its options regarding the rule, while the Railway Supply Institute told Bloomberg BNA it was still reviewing the rule. Electronic brake requirements likely will be a central issue in industry lawsuits, and they already are a part of API's.
On the May 1 release date of the rule, all three groups sent statements to media identifying the requirement that “high-hazard flammable unit trains” use electronically controlled pneumatic brakes as an area of concern. The brake requirement would force the use of unjustified technology or slow the entire rail network by forcing longer trains to travel at speeds of less than 30 miles per hour, several industry groups said.
Tom Simpson, president of the supply institute, highlighted the provision in a May 9 statement to Bloomberg BNA as an area of continued concern.
But the united industry front won't necessarily be replicated on other issues within the rule. For example, Simpson's group already said that the phaseout time frame for tank cars was “aggressive” but realistic, while API challenged the timeline in its lawsuit.
Additionally, some public interest groups are consider filing lawsuits over the rule. Earthjustice, for one, is “seriously considering” challenging the rule, Patti Goldman, a managing attorney for Earthjustice, told Bloomberg BNA.
“These tank cars are far too hazardous to leave on the rails shipping this oil,” Goldman said, declining to confirm anything beyond that.
Devorah Ancel, staff attorney for the Sierra Club, said “everything is on the table” at this point, including resolving issues with the rule through actions on Capitol Hill. She reiterated the group's May 1 comments that notification requirements and speed limits listed in the final rule were not stringent or inclusive enough.
There is the potential for several individual or joint lawsuits in different U.S. circuits against the Transportation Department, sources told Bloomberg BNA. For example, Ancel declined to rule out acting separately from Earthjustice in terms of lawsuits, but the environmental groups have joined together in the past to sue the Obama administration over crude-by-rail safety issues.
Meanwhile, industry groups specifically didn't respond to Bloomberg BNA's question on whether they were considering joint lawsuits challenging the rule. However, Alexander Obrecht, an associate at Baker & Hostetler LLP, told Bloomberg BNA that some industry groups may choose to sue individually or separately, if they choose to challenge the rule.
The petroleum institute challenged the rule by itself.
“I think there has been some fracturing of the interests and they have not been as cohesive as they had been previously,” Obrecht said. “But it could be decided that there is enough overlap of interests that they would file a joint lawsuit.”
Obrecht also highlighted that environmental groups previously have challenged the administration on this issue in the U.S. Court of Appeals for the Ninth Circuit, rather than the U.S. Court of Appeals for the D.C. Circuit. However, the courts could choose to consolidate the cases since they would be over the same rule, which would allow a judge to make a “coherent ruling” and which would be in the agency's favor, he said.
Obrecht also confirmed Foxx's statement that a challenge to one provision of the rule wouldn't necessarily mean delayed implementation of the entire rule. Obrecht emphasized that lawsuits can be difficult for industry trying to comply with the rule since its difficult to predict how the court will rule.
“Generally the best course of action is to prepare as if the rule will go into effect as it was issued,” Obrecht said.
To a certain extent, one provision of the rule is already being litigated. Earthjustice, the Sierra Club and ForestEthics sued the Transportation Department in December over Foxx's decision not to immediately ban use of older DOT-111 tank cars from Bakken crude oil transportation.
The cars have been called too puncture-prone and not safe enough for this transportation by a federal safety board and by environmental groups. The case is stayed through May 12, at which point the different parties involved or the court could determine appropriate next steps in the case, Earthjustice's Goldman said (Sierra Club v. United States , 9th Cir., No. 14-73682, case stayed, 1/20/15).
Goldman, who is an attorney on the lawsuit, said it is possible this case could move forward and environmental groups could file a separate challenge to the now final rule.
American Petroleum Institute, Railway Supply Institute and the American Fuel and Petrochemical Manufacturers are intervenors on behalf of the federal government in the case.
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The American Petroleum Institute's May 11 petition for review is available at http://www.bloomberglaw.com/public/document/American_Petroleum_Institute_v_US_Docket_No_1501131_DC_Cir_May_11.
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