On July 24, the Pipeline and Hazardous Materials Safety Administration (PHMSA) published an invitation to comment on a preemption application submitted by the States of North Dakota and Montana.  The States’ application asks PHMSA to override vapor pressure limits for crude by rail imposed by the State of Washington.  New Washington law, which became effective on July 28, 2019, prohibits loading or unloading crude oil from a rail car unless the vapor pressure is lower than nine pounds per square inch.  The law also requires facilities receiving crude by rail to provide “advance notice” of the “type” and “vapor pressure” of the crude.  According to North Dakota and Montana, the new law effectively targets Bakken crude—thought by some to be more volatile—and should be preempted by the Hazardous Materials Transportation Act, which PHMSA administers.

North Dakota and Montana make two types of preemption argument.  First, they claim that the Washington requirements are “not substantively the same” as PHMSA’s requirements; the Hazardous Materials Transportation Act expressly preempts state laws to that effect.  See 49 U.S.C. § 5125(b).  Second, they claim that the Washington law poses an “obstacle” to carrying out PHMSA’s regulations for crude by rail.  The Hazardous Materials Transportation Act also expressly preempts any state laws that create such obstacles, see 49 U.S.C. § 5125(a)(2), but it borrows this concept of “obstacle” or “conflict” preemption from the Supreme Court’s application of the Supremacy Clause of the U.S. Constitution.  U.S. Const. art. VI, cl. 2.  Like many federal statutes, the Hazardous Materials Transportation’s preemption provision reduces the uncertainty and costs created by differences in state rules.  See, e.g., Geier v. Am. Honda Motor Co., 529 U.S. 861, 873 (2000) (explaining that the National Traffic and Motor Vehicle Safety Act “suggests an intent to avoid the conflict, uncertainty, cost, and occasional risk to safety itself that too many different safety-standard cooks might otherwise create”).

This is not the first time that vapor pressure limits have come to PHMSA’s attention.  In 2015, the State of New York petitioned the agency to enact a federal limit of nine pounds per square inch for all crude by rail.  PHMSA accepted preliminary comments on the concept of a national vapor pressure limit in early 2017, but it effectively tabled that plan after receiving significant technical and legal criticism (here and here) of the proposal.  As industry explained then, and as Montana and North Dakota argue now, these sort of state limits might entail costly pretreatment at or near the wellhead, and the petition did not seem to address the problem of how or where to transport light ends that exceed the vapor pressure limit.  PHMSA also received significant criticism of the assumed link between vapor pressure and the risk of ignition or explosion in case of an accident.

The Bakken accounts for the vast majority of crude moved by rail in Washington (almost 16 million barrels in the first quarter of 2019), and roughly as much crude moves by rail there as by pipeline (which generally comes from Canada).  PHMSA’s decision will likely have implications beyond the state of Washington.  Four other states—California, Illinois, Maine, and Maryland—joined Washington and New York in supporting the 2015 petition for federal vapor pressure limits.  These states, and perhaps others, might pass similar legislation if PHMSA decides against preemption.  Oregon, for instance, has also passed recent legislation imposing fees and planning requirements on crude by rail carriers.  For shippers, refiners, and producers, a patchwork of state regulation on crude by rail might prove just as onerous as the national limit declined by PHSMA.

Comments on the preemption application are due August 23, 2019, with rebuttal comments due on September 23, 2019.

Photo of Catherine D. Little Catherine D. Little

Catherine Little has been advising oil and gas pipelines, terminals and LNG facilities on energy and environmental administrative law for over 25 years at all levels of federal, state and local government, with particular emphasis on regulatory compliance, litigation and enforcement defense and administrative adjudication under the Pipeline Safety Act, Natural Gas Act, Clean Water Act (including wetlands), Oil Pollution Act and National Environmental Policy Act. Her team has sought appellate review for enforcement matters with favorable results and works closely with industry and regulators alike to obtain favorable results for their clients. Catherine also regularly counsels clients with respect to pipeline construction and design issues, permitting, confidential investigations, spill and release reporting and response.

Photo of Annie M. Cook Annie M. Cook

Annie Cook’s practice focuses on administrative, environmental, and oil and gas transportation laws. Annie counsels clients on regulatory issues, compliance and litigation strategy, construction and siting, and permitting and enforcement defense relating to the Pipeline Safety Act, the Natural Gas Act, the Clean Water Act, the Oil Pollution Act, National Environment Policy Act, TCSA, and related state and local laws.  Her team also represents clients regarding related transportation security issues and in responding to inquiries and investigations from the Department of Transportation’s Office of Inspector General.. Annie’s clients include owners and operators of oil and natural gas pipeline and related storage, terminal, and LNG facilities as well as other energy industry stakeholders.

Photo of Robert E. Hogfoss Robert E. Hogfoss

Bob Hogfoss has been counseling clients on compliance issues, litigation and enforcement defense, administrative adjudication and environmental litigation for over 30 years. Bob’s practice focuses exclusively on energy, environmental and administrative law, with emphasis on Pipeline Safety Act, Clean Water Act, Oil Pollution Act, National Environment Policy Act, RCRA, CERCLA and TSCA issues. His clients include oil and natural gas pipelines, chemical manufacturers, and the pulp and paper industry. Bob and his team have a reputation for resolving not prolonging legal issues. He served as a law clerk to Hon. Diarmuid F. O’Scannlain of the US Court of Appeals, Ninth Circuit, from 1986-87.

Photo of Houston Shaner Houston Shaner

Houston Shaner helps his clients secure cost-effective outcomes, from shaping regulations in the notice-and-comment phase through permitting, daily compliance and internal investigations. And when his clients require litigation, Houston is ready to defend their interests in court or before agencies.