Lawsuits putting the squeeze on the U.S. Department of Transportation, DOT, to ban the use of aging DOT-111 rail cars could spread to impact the demand for Bakken crude, says a U.S. legal specialist on energy transportation.
The litigation by three environmental groups may signal their intention to “increasingly target non-railroad midstream and crude end-users under state law,” said Alex Obrecht, a lawyer with the U.S. firm of BakerHostetler, writing in Mondaq, a Canadian business briefing of global legal analysis.
That, in turn, could “stall new infrastructure development,” with negative consequences for the Bakken, he said.
Obrecht said that regardless of the potential merits of the lawsuits, one theme rings clear: “Players in the Bakken will continue to spend time and money overcoming logistical as well as legal obstacles to transporting their product to market.”
On the national level, he said, DOT will require more stringent mechanical and safety standards for tank cars carrying crude oil, leaving only one uncertainty: When will the more stringent standards be required?
Obrecht said the lawsuits, filed by the Sierra Club, Earthjustice and ForestEthics, add to the list of challenges facing Bakken producers and midstream companies, who already face transportation woes related to inadequate pipeline structure, railroad capacity, tank car supply, rail accidents and new regulations.
The complaints
Obrecht noted that Sierra filed two lawsuits in September challenging different aspects of CBR transportation: First, on the national level, seeking to stop the transportation of crude in “allegedly outdated and safe tank cars” and, secondly, at the state level accusing a local agency of “illegally permitting a rail-to-truck facility.”
He said the challenge asking for an “emergency order prohibiting the shipment of Bakken crude” on older DOT-111 cars, and arguing the cars pose an “imminent hazard,” trailed behind earlier developments.
The DOT, through the Pipeline and Hazardous Materials Safety Administration and the Federal Railroad Administration, has already addressed “many” of the concerns raised in the suit, Obrecht said.
The petitioners, in their Sept. 11 filing with the United States Court of Appeals for the 9th Circuit, pressured the court to order the DOT to act on a Rail Car Petition, arguing the DOT had taken an unreasonable amount of time to respond.
The 9th Circuit denied the request for an expedited decision, but ordered the DOT to propose a timeline - likely in early 2015 - to the Rail Car Petition.
The second lawsuit targets a permit to transfer crude oil from trains to trucks issued to Inter-State Oil Co., a fuel and lubricants distributor located outside of Sacramento, California.
In that suit, the Sierra Club asked the court to revoke Inter-State’s permit and declare a violation of the California Environmental Quality Act, which Obrecht said was not the first legal challenge of its kind.
He said a San Francisco Superior Court judge recently dismissed a similar suit against a Kinder Morgan facility outside of Richmond, California, on timeliness grounds.
