Federal regulator eliminates Washington State oil train requirements

The Pipeline and Hazardous Materials Safety Administration (PHMSA) has overruled a Washington state limit placed on the vapor pressure of crude oil transported by rail—a limit that could have become a de facto ban on Bakken shale crude from North Dakota and Montana.

The 2019 state law is preempted by federal regulations under the Hazardous Materials Transportation Act, the federal agency, part of the Transportation Department, ruled.

PHMSA said the state law is preempted because it imposed requirements and used a materials classification system that were not substantially the same as federal regulations, and its vapor pressure requirement was an obstacle to accomplishing the purposes of federal law.

The states of North Dakota and Montana sought the PHMSA ruling. The federal agency, in a decision signed by Paul J. Roberti, its chief counsel, agreed that the Washington law was much too restrictive of crude by rail.

“Proponents of the law insist Washington State has a legitimate public interest to protect its citizens from oil train fires and explosions, but in the context of the transportation of crude oil by rail, a State cannot use safety as a pretext for inhibiting market growth or instituting a de facto ban on crude oil by rail within its borders,” PHMSA said.

The agency also worried that other states would be tempted to come up with their own vapor pressure regulations, further complicating the regulatory picture.

Debatable safety measure

The state law placed a limit of 9 psi on crude to be unloaded in the state. The North Dakota Industrial Commission in 2014 required operators to separate light hydrocarbons from Bakken crude oil and set a 13.7 psi limit on crude oil vapor pressure.

PHMSA has considered the idea of setting vapor pressure limits on crude but has not done so.

PHMSA noted in the Washington case that a study conducted by Sandia National Laboratories led the agency to conclude that vapor pressure limits would not lessen the risks associated with transporting crude by rail. The Sandia study was completed in August 2019 and included Bakken crude in its tests.

PHMSA took comment in the Washington from a range of interested parties. Separate from North Dakota, Montana, and Washington, the attorneys general of 10 states filed a joint comment favoring preemption, as did 32 members of Congress, while the AGs of four states jointly opposed preemption.

North Dakota, limited in its pipeline infrastructure for oil sales, has for several years shipped crude oil by rail westward to Washington refineries as well as eastward to refineries along the Delaware River.

Of the five refiners in Washington, four have been buying crude by rail, almost all of it from North Dakota. The four are Phillips 66 Co. at its Ferndale refinery, Marathon Petroleum Corp. at its Anacortes refinery, BP PLC at its Cherry Point refinery, and Par Pacific Holdings Inc. at its Tacoma refinery, which it acquired in early 2019.