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Riverkeeper Calls for Robust Nationwide Review of Crude-by-Rail Insurance Industry

Comments submitted on a federal agency assessment of insurance availability and liability rules for hazardous waste transport by rail.

Lynchburg, Virginia crude oil train derailment in April of 2014.

Lynchburg, Virginia crude oil train derailment in April of 2014.

On December 4, 2015, President Obama signed legislation entitled, “Fixing America’s Surface Transportation Act of 2015” (the FAST Act). Among many provisions in the FAST Act, Congress included a number of new requirements for railroads and rail transport safety, especially for hazardous materials, crude oil, and petroleum products.

Federal regulators have recently noted that “shippers and rail companies are not insured against the full liability of the consequences of incidents” involving large volumes of flammable liquids. Class I railroads, like CSX, typically maintain insurance at the $25-50 million level, far below the likely cost of cleanup, reconstruction and compensation for loss of life and property damage in the event of a major spill.

One key section (Section 7310) calls on the U.S. Department of Transportation (DOT) to conduct a study of the levels and structure of insurance for railroad carriers transporting hazardous materials. The DOT, and its sub-agency the Pipeline and Hazardous Material Safety Administration (PHMSA), must finalize and publish a report detailing the results of the study and recommendations for addressing liability issues with rail transportation of hazmat to Congress by April 2017.

Recently, PHMSA asked the public for general advice on what levels, structures, and types of insurance might be required for railroads transporting hazardous materials, and what their study should ultimately look like. In responding to that request, Riverkeeper submitted comments on September 9, 2016, calling on the agency to look at a host of considerations:

  • Burdening the Public. Where, when, and – importantly – why, after recent rail disasters, have taxpayers been burdened with the costs of responding to and cleaning up oil and hazardous material spills.
  • Unlimited Liability. Many parts of the oil and gas industry have liability limits – capping what a company will have to pay in the event of a spill (assuming there is no negligence). We asked DOT to consider what unlimited liability for railroads would look like.
  • Scope of Coverage. Given the myriad effects that could result from an oil train or hazmat derailment disaster, we asked DOT to ensure that insurance coverage be required for everything – from loss of life to business, environmental, and property damages.

Riverkeeper also raised questions about negligence, local conditions and needs, and industry risk apportionment. Read Riverkeeper’s full comments here. (Click here for the full federal docket).

Overall, Riverkeeper called upon the agency to treat this issue as more than just a cost-risk economic study.

Over the past several years, we have observed the dire realities and inherent risks associated with the transport of hazardous materials by rail. The disaster in Lac Megantic led to 47 lives lost, dozens of children orphaned, an entire community devastated and several billions of dollars – and counting – of social, economic and environmental impacts. We have seen the real, human consequences of derailments across the nation, we have seen drinking water intakes closed, and we have seen massive ecological impacts have yet to be fully realized.

In short, this issue – the liability limits and insurance needs of the industry – is not just about the cost of risk measured against the cost of insurance. There is a very real, very human cost to the shipment of hazardous materials by rail that has never been analyzed nationally; we asked that PHMSA comprehensively and carefully review the issue of insurance and liability in this sector.

Meanwhile, here in New York State, during the 2015 and 2016 NYS Legislative sessions, Riverkeeper worked with Assembly and Senate bill sponsors, legislative staff and advocates from other environmental organizations to advocate for passage of S.5751A (Avella)/ A.07625 (Fahy), a state bill that would require any storage facility or vessel handling crude oil in New York State present evidence that they have enough insurance to cover their statutory liabilities for any petroleum spill. Railroad companies transporting crude oil within the state would be required to submit information regarding their ability to pay in the event of a crude oil spill connected with that transport.

This important piece of legislation would be the first New York State law to require that parties profiting from crude oil transport in New York demonstrate what financial surety they have to cover their liability for any damages that a transport accident might cause.

In 2015 and 2016, the New York State Assembly passed this legislation – twice – with a large bipartisan majority (137 to 2 in 2015, and 135 to 6 in 2016). Despite urging Senate leadership to allow a vote during either legislative session, that vote was never allowed. The New York State legislature has had and continues to have the opportunity to act in the interests of its communities, public safety, and the environment. Riverkeeper will actively support the re-introduction and passage of this legislation in the 2017 session. We will urge our elected officials to take action on this bill, both to ensure that New Yorkers are not left with the burden of footing the bill in the event of a major spill, and to give the companies handling oil in New York State a financial incentive to make their operations as safe as possible.

Visit our Crude Oil Transport Campaign Hub to learn more and get involved.

See a timeline of crude oil accidents and disasters here.

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