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High Costs Outweigh Benefits of Proposed Crude-by-Rail Rules, Says Report

Proposed federal rules to shore up the safety of crude oil rail transport could cost $60 billion, too costly compared to the benefits, according to a report issued on Wednesday by the Brattle Group for the Railway Supply Institute.

The U.S. Department of Transportation’s (DOT) Pipeline and Hazardous Materials Safety Administration (PHMSA) developed the proposed rules, which include definitions for "high-hazard flammable trains," routing risks, reduced operating speeds and notification of state emergency response commissions (see Shale DailyJuly 24).

Federal officials proposed a two-year deadline to upgrade or retire thousands of tank cars used to haul flammable liquids, such as the Bakken Shale from North Dakota. Tank cars used for less volatile crude supplies and ethanol would have an extra year to make the changes.

The report found the stricter tank car standards could push shipments from railroads. Also, the PHMSA benefit-cost analysis indicated that the "costs always exceed benefits" -- aside from three exceptions.

Two of the exceptions, said Brattle, only occur when the future derailments and spills are projected at "unprecedented levels,” while the third exception only occurs when an assumption about advanced tank car braking systems is used that has been contradicted by research.

"In many of the cases in which PHMSA provides specific estimates, it overstates the benefits and understates the costs of the proposed regulations," Brattle researchers said. "Revising these estimates to reflect available data causes costs to exceed benefits for all of the alternatives considered without exception."

PHMSA's benefit-cost analysis fails to provide any basis for ranking the alternative provisions, the report noted. Brattle’s report recommended that PHMSA conduct research "necessary to improve the quality of its cost-benefit analysis” for future derailments and cargo spills.

If PHMSA were to decide not to pursue more research, Brattle recommended it adopt a "far more cost-effective" alternative that is recommended by the Railway Supply Institute's Committee on Tank Cars. The committee's recommendation covers tank car modifications, new car standards and compliance timelines to help reduce compliance costs.

ISSN © 2577-9877 | ISSN © 2158-8023

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