LNG by Rail: PHMSA Finalizes Temporary Reg Rollback (Updated)

DOT-113C120W9 LNG tank car. (Chart Industries Photograph)

The Pipeline and Hazardous Materials Safety Administration (PHMSA) will suspend its July 24, 2020, authorization of liquefied natural gas (LNG) transport in DOT-113C120W9-specification rail tank cars, pending the earlier of either completion of a companion rulemaking evaluating potential modifications to requirements governing the rail transport of LNG, or June 30, 2025. The final rule on the temporary suspension takes effect Oct. 31, 2023, according to PHMSA’s notice in the Federal Register’s Sept. 1 edition (download below). The Railway Supply Institute (RSI) responds.

“PHMSA, in coordination with the Federal Railroad Administration [FRA], is amending the Hazardous Materials Regulations [HMR] to suspend authorization of liquefied natural gas (LNG) transportation in rail tank cars,” PHMSA said in a Sept. 1 statement to Railway Age. “There has been no transportation of LNG by tank car since the previous administration finalized the 2020 Rule that allowed it, and PHMSA is not aware of any orders to build the required rail cars to transport it. The suspension will ensure no rail tank car transports LNG before updated research on safety is completed or a revised rulemaking is completed by June 30, 2025, whichever is earlier. This suspension will minimize potential risks to public health, safety and the environment.”

The 2020 final rule (scroll down for a download) authorized transporting LNG in DOT-113C120W specification tank cars “with enhanced outer tank requirements, subject to all applicable requirements and certain additional operational controls.” The enhancements would be indicated by the suffix “9” (DOT-113C120W9). The rule stemmed from a 2019 Executive Order, “Promoting Energy Infrastructure and Economic Growth,” which required PHMSA to treat LNG the same as other cryogenic liquids and allow it to be transported in approved rail tank cars. PHMSA reported in the final rule that a “recent expansion in U.S. natural gas production has increased interest in a programmatic approach to using appropriately the nation’s rail infrastructure to facilitate efficient transportation of LNG.”

Before the rule was enacted, the HMR permitted rail transport of LNG only on an ad hoc basis, “as authorized by the conditions of a PHMSA special permit (49 CFR 107.105) or in a portable tank secured to a rail car pursuant to the conditions of an FRA approval,” according to PHMSA.

On Nov. 8, 2021, PHMSA reversed course, issuing a Notice of Proposed Rulemaking (NPRM) suggesting the temporary suspension of the 2020 final rule (scroll down for a download). The proposed pause prompted not only the RSI to weigh in (against), but also the Republican members of the House Transportation and Infrastructure Committee (against) and a coalition of attorneys general from 14 states and Washington, D.C. (for). Those groups, plus more than 10,500 private individuals, environmental groups, government officials, the rail industry and other stakeholders, submitted comments.

Why has PHMSA now finalized the temporary suspension? The agency explained in the Federal Register that it is “suspending recent amendments to the Hazardous Materials Regulations (HMR; 49 CFR parts 171–180) authorizing transportation of … liquefied natural gas (LNG) in DOT-113C120W9 specification rail tank cars while it conducts a thorough evaluation of the HMR’s regulatory framework for rail transportation of LNG in a companion rulemaking under Regulatory Identification Number (RIN) 2137–AF54, and determines whether any modifications are necessary.” PHMSA noted that rail tank cars have not been used to transport LNG since the 2020 rule authorizing it, and “there is considerable uncertainty regarding whether any would occur in the time it takes for PHMSA to consider potential modifications to existing, pertinent HMR requirements.” PHMSA said this temporary suspension “guarantees no such transportation will occur before its companion rulemaking has concluded or June 30, 2025, whichever is earlier.”

PHMSA explained its decision would:

1. Avoid “potential risks to public health and safety or environmental consequences (to include direct and indirect greenhouse gas (GHG) emissions) that are being evaluated in the companion rulemaking under RIN 2137–AF54.”
2. Allow “for the completion of ongoing testing and evaluation efforts undertaken in collaboration with FRA, as well as further consideration of the recommendations from external technical experts of the National Academy of Sciences, Engineering, and Medicine (NASEM).”
3. Assure “an opportunity for the potential development of any mitigation measures and operational controls for rail tank car transportation of LNG.”
4. Reduce “the potential for economic burdens by ensuring that entities avoid ordering rail tank cars for transporting LNG compliant with current HMR requirements when the companion rulemaking may adopt alternative requirements.”
5. Enable “potential opportunities for stakeholders and the public to be apprised of, and comment on, the results of ongoing testing and evaluation efforts.”

PHMSA noted, however, that rail transport of LNG “may still be permitted as authorized by the conditions of a PHMSA special permit (SP) under § 107.105, or in a portable International Organization for Standardization (ISO) tank secured to a rail car pursuant to the conditions of an FRA approval under § 174.63.”

In a Sept. 1 statement to Railway Age, RSI President Patty Long said “[t]he extended hold of the rule for transporting LNG by rail is disappointing. Transporting LNG has a proven safety record, and with our country continuing to face rising energy prices, we should be incentivizing critical infrastructure that can provide additional capacity to the U.S. We should not have to rely on foreign sources of LNG to meet demand in certain parts of the country. LNG has been safely shipped by other modes of transportation for decades, including ships and trucks. More than 435 million shipments of hazardous materials are transported every year under HMR, and the safety record of transporting hazardous materials by rail is factually outstanding. Shipping LNG in a robust and especially built cryogenic tank car makes sense and will provide a safer, more efficient, and more environmentally friendly method of transportation for LNG.”

Background

In January 2020, PHMSA established a joint LNG Task Force with FRA, which it said would “undertake testing and evaluation activity on the transportation of LNG that could inform potential future regulatory actions, as appropriate.” The task force “identified and undertook 15 tasks to synthesize ongoing research and outreach activities,” PHMSA reported in the Federal Register’s Sept. 1 edition. Those tasks included “empirical review of international LNG transportation, safety and security route risk assessments, a re-evaluation of the costs and benefits of electronically controlled pneumatic (ECP) brakes, and the validation of emergency responders’ opinions and needs.” While the task force initially expected to complete the work by late 2021, much of it was “interrupted or delayed” due to the COVID-19 pandemic and “because of subsequent modification of the scope of its activities,” according to PHMSA.

Concurrently, PHMSA and FRA partnered with the National Academy of Sciences, Engineering, and Medicine to conduct a study on the rail transport of LNG through a committee of the Transportation Research Board (TRB). According to PHMSA, TRB began work in mid-July 2020. That same month, PHMSA issued is final rule, which was required to be finalized no later than 13 months after the date of the 2019 Executive Order; it became effective Aug. 24, 2020. The move was “swiftly followed by several petitions for judicial review,” PHMSA reported. “Specifically, six environmental groups, a coalition of attorneys general for 14 states and the District of Columbia, and the Puyallup Tribe of Indians filed separate petitions for review challenging the July 2020 Final Rule. All the petitioners asked the court to vacate the July 2020 Final Rule, alleging violations of the Hazardous Materials Transportation Act (HMTA; 49 U.S.C. 510 2012;5127), the Administrative Procedure Act (APA; 5 U.S.C. 553 et seq.), and the National Environmental Policy Act (NEPA; 42 U.S.C. 4321 et seq.).” Those petitions, PHMSA reported, were consolidated within a single proceeding in the U.S. Court of Appeals for the District of Columbia Circuit, “with the court granting PHMSA’s motion to place the petitions in abeyance while PHMSA reviewed the July 2020 Final Rule. PHMSA submitted the latest status report in that proceeding in early June 2023. The Court lifted the abeyance on July 18, 2023.”

According to PHMSA, the TRB issued its Phase II Report on Sept. 9, 2022, which “examined bulk shipments of LNG by other modes of transportation (including vessel and highway) to identify the basic principles used in those modes for safety assurance. It also examined the effectiveness of regulatory requirements and industry practices (e.g., pertaining to speed and routing, as well as other operational controls applicable to high-hazard flammable trains) intended to assure the safe transportation of bulk rail shipments of other hazardous materials.”

TRB’s first recommendation “suggested launching an LNG safety assurance initiative before LNG tank cars are put in service,” according to PHMSA. “The safety assurance initiative would actively monitor initial plans for and early patterns of LNG traffic activity, including the locations and routes of shipments, the number and configuration of tank cars in trains, and reports of incidents involving a tank car or train carrying LNG.” The second and final recommendation “suggested that PHMSA and FRA should review the DOT-113C120W9 tank car specification to ensure that it adequately accounts for the cryogenic and thermal properties of LNG that could contribute to a tank release in the event of a rail incident and potential cascading impacts therefrom.” According to PHMSA, TRB “emphasized the value in assessing each of the following: the capacity of the pressure relief devices on the new DOT-113C120W9-specification tank cars to vent a sufficient amount of LNG when the tank car is engulfed in an LNG fire in derailment conditions, including a rollover event; the effects of adding more and different types of insulation in the annular space to ensure sufficient performance of the multilayer insulation system when the tank car is exposed to heat flux and direct flame impingement from an LNG fire; and the potential for the outer tank of the DOT-113C120W9 tank car to experience cryogenic brittle failure and loss of vacuum insulation when exposed to an LNG pool fire.”

In response to those recommendations, PHMSA reported subsequently adjusting its LNG Task Force testing activity “by modifying its ongoing worst-case analysis modeling and quantitative risk assessment efforts to address the DOT-113C120W9-specification design element concerns raised by the TRB.”

“In light of the new information received from the TRB reports and PHMSA’s completed research and ongoing tests,” PHMSA reported in the Sept. 1 Federal Register, it was suspending “the regulations adopted in the July 2020 Final Rule to allow PHMSA sufficient time to complete its analysis to reconsider the determinations made in the July 2020 Final Rule.”

According to PHMSA, the LNG Task Force has completed “most of its testing and evaluation activities (as modified in response to the TRB Phases I and II Reports).” Of the remaining activities, PHMSA said it expects to complete its “enhanced quantitative risk analysis and worse case analysis modeling” no later than third-quarter 2023. “This analysis has taken longer than expected because it was modified first to address concerns in the TRB Phase I Report in June 2021 and then again in response to the TRB Phase II Report issued in September 2022,” PHMSA reported. “PHMSA is in the process of contracting for performance of each of the following remaining tasks: (1) enhanced impact testing directed toward evaluating post-weld, heat-treated seams from a DOT-113C120W9-specification tank car in response to the TRB Phase I Report; and (2) enhanced train dynamic simulations to better capture effects from use of distributed power and buffer car placement within a train consist transporting LNG in response to the TRB Phase I Report.”

PHMSA said it also working with the National Transportation Safety Board “to learn all it can” from the Feb. 3, 2023, Norfolk Southern (NS) derailment in which 38 railcars derailed, including 11 tank cars carrying combustible liquid and flammable gas hazardous materials (none were carrying LNG). It also said it seeks to “determine whether the lessons learned [from that derailment] should inform rail transportation of other hazardous commodities such as LNG.”

PHMSA: NPRM Comments ‘Unconvincing’

PHMSA received more than 10,500 sets of comments on its Nov. 8, 2021, proposal to temporarily suspend the 2020 final rule. There were comments requesting an immediate, permanent ban of LNG by rail; expressing general support for the Notice of Proposed Rulemaking (NPRM); and alleging “chilling of near-term demand for LNG transportation by rail tank car pursuant to the July 2020 Final Rule,” that LNG by rail improves safety, that there are environmental benefits from LNG by rail, that “PHMSA is overstepping its authority by attempting to regulate oil and gas production,” that “PHMSA did not meet its evidentiary burden under the APA [Administrative Procedure Act] for temporary suspension of the July 2020 Final Rule,” and that PHMSA’s proposal “will have miscellaneous adverse consequences for regulated entities, the U.S. economy, and national security”; among others.

PHMSA reported in the Federal Register’s Sept. 1, 2023, edition that it found some comments “unconvincing.” They are:

• Comments Alleging “Chilling of Near-Term Demand For LNG Transportation by Rail Tank Car Pursuant to the July 2020 Final Rule.” According to the agency, it received several comments “on the NPRM’s observations of increased uncertainty regarding whether there will be near-term demand for rail tank car transportation of LNG pursuant to the July 2020 Final Rule.” CSX was among them. The Class I railroad noted in its comments that “it had several projects in development to transport LNG by rail in or before 2024, and that ‘[t]he continued investment in and pursuit of those projects, which require design, permitting, and construction with long lead times, would be impaired if the July 2020 Final Rule were suspended indefinitely, delaying them potentially for years and harming CSX’s reliance interests and imposing costs and lost business opportunities on CSX and its partners’ (emphasis added),” PHMSA reported. “CSX subsequently met with PHMSA on February 17, 2022, and elaborated on their written comments by noting that those projects had been shelved and that the issuance of the NPRM was the occasion for those decisions.” Additionally, PHMSA reported, Jeff Landry, Attorney General for the State of Louisiana, joined by 22 State Attorneys General, similarly contend that “the proposed rule itself is the cause of the regulatory uncertainty of which it complains’ (emphasis in original) in that it ‘discourages companies from making any capital investment in LNG by rail, specifically the DOT-113C120W9 specification tank cars that the 2020 Rule authorized.’” (The states are: Alabama, Alaska, Arizona, Arkansas, Florida, Georgia, Idaho, Indiana, Kentucky, Mississippi, Missouri, Montana, Nebraska, New Hampshire, Ohio, South Carolina, South Dakota, Texas, Utah, Virginia, West Virginia, and Wyoming.)

According to PHMSA, these comments are “unconvincing statements of the near-term commercial viability of rail tank car transportation of LNG pursuant to the July 2020 Final Rule.” It said that the suspension proposed in the NPRM and adopted in the Final Rule “is not ‘indefinite’ as characterized by CSX; rather, it is time-limited to the earlier of a date certain (June 2025) or to the completion of the milestone of issuing a final rule in the companion rulemaking under RIN 2137–AF54. Even if the NPRM affected one or more of CSX’s nascent projects exploring rail tank car transportation of LNG, CSX or other entities could have applied for, and may still apply for, an alternative regulatory vehicle (e.g., an SP under § 107.105, or an FRA approval for rail transportation via portable tank) to allow work to proceed on those projects during the suspension period.” PHMSA reported that it “is unaware of CSX, its collaborators in those projects, or any other entities having pursued alternatives.” Additionally, “in its written comments and again during its February 17, 2022, meeting with PHMSA, CSX personnel acknowledged that the choice of package (i.e., the particular DOT-specification rail tank car or ISO tank) employed in rail transportation of LNG is merely one decision within a multi-step, multi-year project development and execution chain involving, among other things, the construction of origin facilities and off-loading facilities, and the acquisition of one or more enabling Federal and State permits. The projects CSX and others may have been pursuing were prolonged, highly contingent processes in which there are multiple potential bases for material delay or cessation of a project throughout the development cycle.” That said, PHMSA noted that it “understands the shelving of CSX’s or any other entities’ projects following the proposal of a time-limited, temporary suspension for which there could be alternative rail transportation methods evinces less an alleged ‘chilling’ of investment than the significant uncertainty discussed in the NPRM regarding whether there would be any commercially viable projects for rail transportation of LNG in the near-term.”

PHMSA also reported that it “understands that a variety of forces have created—and will continue to create throughout the suspension period—headwinds for the near-term commercial viability of any project for rail transportation of LNG.” According to the agency, the NPRM “explained that the near-term commercial prospects for LNG by rail (which the July 2020 Final Rule had acknowledged were uncertain at its issuance) had grown even more uncertain due to near-term structural changes in international markets including (1) massive investment in greatly increased export capacity by competing providers such as Qatar, and (2) reduced demand for LNG customers seeking to reduce their GHG emissions.”

According to PHMSA, the comments submitted “did not attempt to rebut this evidence, or PHMSA’s finding that the near-term commercial uncertainty for rail transportation of LNG had increased. Further, the structural headwinds for rail transportation of LNG are likely to accelerate in the near future, as the U.S. Energy Information Administration (EIA) predicts that the capacity of pipeline-supplied U.S. LNG export terminals are expected to increase significantly beginning around 2025 which some analysts note could depress the offtake prices for LNG in the international export market—which could divert demand for LNG exports that could have been serviced by LNG by rail.” Further, PHMSA reported, “the supply shocks of the conflict in Ukraine have highlighted both in the United States and abroad the volatility of natural gas prices and fragility of international LNG market supply, accelerating movement among historical consumers of natural gas toward renewable energy and reduced reliance on LNG exports.” Additionally, “domestic consumption of natural gas in the United States is expected to fall in the next decade due to increasing electrification driven by consumer preferences and Federal and State policy initiatives to reduce GHG emissions,” according to PHMSA. “Durably high commodity (e.g., steel) prices and interest rates would also tend to discourage capital investment in the manufacture of a new fleet of DOT-113C120W9-specification tank cars for dedicated commercial LNG service.”

In sum, PHMSA said it “finds this recent evidence, coupled with the evidence discussed in the NPRM, augurs uncertainty regarding the commercial prospects for rail transportation of LNG that will continue beyond the originally proposed suspension period and into the longer suspension period adopted in this final rule.” It noted that following the “conclusion of the (temporary) suspension period, stakeholders would be able to evaluate whether the commercial prospects for rail tank car transportation of LNG pursuant to the July 2020 Final Rule merit pursuing.”

• Comments Contending That LNG Transport By Rail Improves Safety. PHMSA pointed out that a “temporary suspension would mean that any safety benefits would only be unavailable for the suspension period—i.e., until the end of June 2025 (at the latest) … Further, any such potential, time-limited comparative advantage turns on whether any rail transportation of LNG pursuant to the July 2020 Final Rule would in fact have occurred during the suspension period.” Market conditions “now and in the near future,” PHMSA reported, “do not support demand to transport LNG in rail tank cars. That demand, which was uncertain at issuance of the July 2020 Final Rule has become only more uncertain since given the commercial headwinds facing the development of that market. Further, any time-limited comparative advantage from leaving the July 2020 Final Rule undisturbed would also be mitigated by the availability of other regulatory vehicles (FRA approvals and PHMSA SPs) that entities can pursue during the suspension period.”

According to PHMSA, “[u]ncertainty regarding whether the July 2020 Final Rule’s authorization of rail transportation in DOT-113C120W9-specification tank cars ensures adequate protection of public safety has only increased since the time of issuance of each of the July 2020 Final Rule and the NPRM proposing its suspension.” It pointed out that the July 2020 Final Rule “acknowledged that its authorization of rail transportation of LNG in the new DOT-113C120W9 tank car did not turn only on the tank car itself; rather, a number of other factors (including, but not limited to, the material properties of LNG and natural gas, the quantity of LNG that will be moved by rail, the routes involved, the availability of emergency response planning resources, etc.) affected the risks involved in rail tank car transportation of LNG.”

PHMSA said that it has revised the LNG Task Force’s testing and evaluation activities and that work continues. After completing those activities, PHMSA said it “must evaluate the results and determine whether and how to make permanent modifications to the HMR governing rail transportation of LNG.”

Additionally, PHMSA said, comments “touting the inherent safety advantages” of LNG transport by rail “miss the larger safety issue toward which much of the LNG Task Force testing evaluation activity is directed. Natural gas in liquid form, undisturbed within a DOT-113C120W9 tank car is a very stable material that will not combust unless it vaporizes which only happens if the material warms. Further, any vapor present in the outage of the tank car will be of a concentration that is too high to combust. Rather, the principal safety concern—highlighted by PHMSA in the July 2020 Final Rule, in the NPRM and comments thereon, and in TRB’s evaluation of safety risks associated with rail transportation of LNG—pertains to consequences should either there be a release of LNG to atmosphere, or a tank car be exposed to harsh conditions during an incident or accident. LNG releases can expose personnel and materials to extreme cold (as low as –120 °C or −260 °F) and can be an asphyxiant within a confined space. When released to the atmosphere (as a result of a puncture of the inner and outer tanks during an accident or incident), liquid methane will convert to a gas that has a relatively low auto-ignition point (about 540 °C or 1000 °F) in addition to being highly combustible when exposed to an ignition source such as fire or electrical sparking. When methane ignites, it burns at very high temperatures (about 1330 °C, or 2426 °F), potentially resulting in exposure of personnel and materials—including (potentially) undisturbed DOT-113C120W9 tank cars adjacent to an LNG pool fire to significant radiant heat hazards. Although PHMSA had undertaken (via the LNG Task Force) a robust testing regime to develop a fulsome understanding of those potential, significant hazards of LNG when transported by rail tank car in parallel with the development and issuance of the July 2020 Final Rule, the subject matter expert recommendations within each of the TRB’s Phases I and II Reports underscore the value in obtaining that understanding from completing enhanced testing and evaluation activities before LNG begins moving in DOT-113C120W9 rail tank cars pursuant to the July 2020 Final Rule. A temporary suspension gives the LNG Task Force and PHMSA an opportunity to complete that critical work.”

PHMSA said it also “disagrees that suspension of the July 2020 Final Rule would discourage investment in enhanced, DOT-113C120W9-specification tank cars for use in rail transportation of any cryogenic liquid hazardous materials—not just LNG.” (RSI asserted this in its comments.) PHMSA said it acknowledges that “the HMR (at 49 CFR part 179 Subpart F) contemplates use of DOT-113C120W9-specification tank cars for transportation of other materials authorized for transportation in the DOT-113 series tank cars in that DOT–113C120W9 tank cars will also meet and exceed the minimum DOT-113C120W standard.” However, PHMSA said, “factors influencing whether to invest in new DOT-113C120W9-specification tank cars for use in transporting those other cryogenic liquids are very different from the factors driving decision making on investing in those tank cars for LNG service.” It provided this example: “[T]hose other cryogenic liquid hazardous materials would likely be destined for more mature domestic and international markets than the (currently) speculative domestic and international market for LNG transported by rail tank car. Perhaps for this reason, PHMSA is aware of at least one entity having submitted an order for construction of new DOT-113C120W9-specification tank cars for cryogenic ethylene service—even as, over three years after the July 2020 Final Rule issued, PHMSA is unaware of a single order from a commercial entity for a new DOT-113C120W9 specification tank car for LNG service.”

• Comments Alleging That PHMSA’s Proposal Will Have “Miscellaneous Adverse Consequences for Regulated Entities, the U.S. Economy, and National Security.” The claim that “temporary suspension of the July 2020 Final Rule could affect U.S. household energy prices or the geopolitical balance of power strains credulity given that no DOT-113C120W9 tank cars intended for commercial LNG service have been sold and the commercial viability of such rail tank car transportation is increasingly uncertain,” PHMSA said. “Additionally, RSI’s concern that PHMSA could invoke changing market dynamics to modify longstanding HMR requirements for other hazardous materials is misplaced. Unlike other hazardous materials, the rail tank car transportation of LNG is not a mature market—in fact, as discussed elsewhere in this Final Rule, no such market has emerged in over three years since the July 2020 Final Rule issued and a market may not emerge at all. Nor does PHMSA’s decision to temporarily suspend the July 2020 Final Rule hardly address merely ‘hypothetical concerns’; rather … the potential safety and environmental hazards associated with LNG could be significant, and it is PHMSA’s responsibility under the HMTA [Hazardous Materials Transportation Act] to evaluate and adjust the HMR to ensure its transportation by rail tank car is conducted in a manner that protects public safety and the environment. Additionally, PHMSA’s decision in this Final Rule to adjust pertinent HMR requirements on a time-limited basis and before any rail tank car transportation of LNG commences (or is likely to commence), minimizes the risk of stranded investments or lost business opportunities for regulated entities should PHMSA’s ongoing evaluation of the safety and environmental risks and benefits merit imposing additional or conflicting safety requirements in the companion rulemaking under RIN 2137–AF54.”

Additionally, PHMSA reported, “the final rule addresses any potential public safety and environmental risks from rail tank car transportation of LNG via a generic, nationwide, time-limited suspension following notice-and-comment rulemaking is a more appropriate approach than utilizing the emergency order authority recommended by RSI. The July 2020 Final Rule was a legislative rule that itself was the product of notice-and-comment rulemaking, and the APA [Administrative Procedure Act] establishes a presumption that a subsequent legislative rule providing for its modification (to include its temporary suspension) should similarly involve notice-and comment rulemaking … In addition, PHMSA’s emergency order authority may be difficult to assert on a time-limited, precautionary, nationwide basis like the temporary suspension adopted in this Final Rule. Each of PHMSA’s § 107.339 emergency order authority and the Secretary’s authority to address imminent hazards under 49 U.S.C. 5122(b) are seldom exercised. A finding of ‘imminent harm’ may make it more difficult for any controls addressing that harm to be removed later based on PHMSA’s evaluation of whether and how to amend pertinent HMR requirements in a companion rulemaking under RIN 2137–AF54.”

Download PHMSA’s July 24, 2020, Final Rule Here:

Download PHMSA’s Nov. 8, 2021 NPRM Here: