[Federal Register Volume 81, Number 157 (Monday, August 15, 2016)]
[Rules and Regulations]
[Pages 53935-53957]
[FR Doc No: 2016-19406]

=======================================================================
-----------------------------------------------------------------------

DEPARTMENT OF TRANSPORTATION

Pipeline and Hazardous Materials Safety Administration

49 CFR Parts 173 and 179

[Docket No. PHMSA-2016-0011 (HM-251C)]
RIN 2137-AF17

Hazardous Materials: FAST Act Requirements for Flammable Liquids
and Rail Tank Cars

AGENCY: Pipeline and Hazardous Materials Safety Administration (PHMSA),
DOT.

ACTION: Final rule.

-----------------------------------------------------------------------

SUMMARY: The Pipeline and Hazardous Materials Safety Administration is
issuing this final rule to codify in the Hazardous Materials
Regulations certain mandates and minimum requirements of the FAST Act.
Specifically, the FAST Act mandates a revised phase-out schedule for
all DOT Specification 111 tank cars used to transport unrefined
petroleum products (e.g., petroleum crude oil), ethanol, and other
Class 3 flammable liquids. The FAST Act also requires that each tank
car built to meet the DOT Specification 117 and each non-jacketed tank
car retrofitted to meet the DOT Specification 117R be equipped with a
thermal protection blanket that is at least \1/2\-inch thick and meets
existing thermal protection standards. Further, the FAST Act mandates
minimum top fittings protection requirements for tank cars retrofitted
to meet the DOT Specification 117R.

DATES: Effective: August 15, 2016.

ADDRESSES: Docket: You may view the public docket online at http://www.regulations.gov or in person at Dockets Operations, M-30, Ground
Floor, Room W12-140, 1200 New Jersey Avenue SE., Washington, DC 20590-
0001 between 9 a.m. and 5 p.m. Monday through Friday, except Federal
holidays.

FOR FURTHER INFORMATION CONTACT: Michael Ciccarone,<PHONE_NUMBER>,
Standards and Rulemaking Division, Pipeline and Hazardous Materials
Safety Administration, U.S. Department of Transportation, 1200 New
Jersey Avenue SE., Washington, DC 20590-0001.

SUPPLEMENTARY INFORMATION: The FAST Act instructs the Secretary of
Transportation to issue conforming regulatory amendments immediately or
soon after the FAST Act's date of enactment (December 4, 2015). Because
the actions taken in this final rule simply codify these non-
discretionary statutory mandates, PHMSA finds that timely execution of
agency functions would be impeded by the procedures of public notice
that are normally required by the Administrative Procedure Act.
Further, PHMSA sees no reason to delay regulatory action, as we are
simply implementing the non-discretionary provisions contained in
Sections 7304, 7305, and 7306 of the FAST Act. PHMSA finds that public
notice is impracticable and is implementing these changes under the
``good cause'' exemption of the Administrative Procedure Act, 5 U.S.C.
553(b)(3)(B), thus amending the regulations without advance notice and
opportunity for public comment.

Abbreviations and Terms

AAR Association of American Railroads
APA Administrative Procedure Act
CFR Code of Federal Regulations
CPC Casualty Prevention Circular
DOT Department of Transportation
EA Environmental Assessment
FAST Act Fixing America's Surface Transportation Act of 2015
FR Federal Register
FRA Federal Railroad Administration
HHFT High-Hazard Flammable Train
HMR Hazardous Materials Regulations
HMT Hazardous Materials Table

NEPA National Environmental Policy Act
NPRM Notice of Proposed Rulemaking
NPV Net Present Value
NTSB National Transportation Safety Board
OMB Office of Management and Budget
PG Packing Group
PHMSA Pipeline and Hazardous Materials Safety Administration
RFA Regulatory Flexibility Act
RIA Regulatory Impact Analysis
RIN Regulation Identifier Number
RSI Railway Supply Institute
TDG Transportation of Dangerous Goods
U.S.C. United States Code

Table of Contents

I. Background
II. Good Cause Justification
III. Section-by-Section Review
IV. Regulatory Analyses and Notices
    A. Statutory/Legal Authority for This Rulemaking
    B. Executive Order 12866, Executive Order 13563, and DOT
Regulatory Policies and Procedures
    C. Executive Order 13132
    D. Executive Order 13175
    E. Regulatory Flexibility Act, Executive Order 13272, and DOT
Procedures and Policies
    F. Unfunded Mandates Reform Act of 1995
    G. Paperwork Reduction Act
    H. Regulation Identifier Number (RIN)
    I. Environmental Assessment
    J. Privacy Act
    K. Executive Order 13609 and International Trade Analysis
    L. Executive Order 13211

I. Background

    On May 8, 2015, PHMSA (also ``we'' or ``us''), in consultation with
the Federal Railroad Administration (FRA), published the final rule
``Hazardous Materials: Enhanced Tank Car Standards and Operational
Controls for High-Hazard Flammable Trains'' (hereafter ``HM-251 final
rule''). The HM-251 final rule was an integral part of the Department's
comprehensive approach to ensure the safe transportation of energy
products. Specifically, the HM-251 final rule amended the Hazardous
Materials Regulations (HMR; 49 CFR parts 171-180) by defining certain
trains transporting large volumes of Class 3 flammable liquids as
``high-hazard flammable trains'' (HHFT) and imposing certain
operational restrictions, such as speed restrictions, braking systems,
and routing.\1\ The HM-251 final rule also adopted requirements into
the HMR for sampling and testing programs to ensure the proper
classification of unrefined petroleum-based products transported under
the HMR. Furthermore, the rule codified new tank car design standards--
namely the DOT Specification 117 (DOT-117), DOT Specification 117P
(DOT-117P), and DOT Specification 117R (DOT-117R)--and established a
phase-out schedule for existing DOT Specification 111 (DOT-111) tank
cars by requiring use of either a DOT-117, DOT-117P, or DOT-117R tank
car by certain dates for the transport of Class 3 flammable liquids in
an HHFT.\2\ For more information on the HM-251 final rule, please refer
to its publication in the Federal Register [80 FR 26643; May 8, 2015],
as well as the information under Docket No. PHMSA-2012-0082 at the
Federal eRulemaking Portal, www.regulations.gov.
---------------------------------------------------------------------------

    \1\ The HM-251 final rule defined an HHFT as a train comprised
of 20 or more loaded tank cars of a Class 3 flammable liquid in a
continuous block or 35 or more loaded tank cars of a Class 3
flammable liquid across the entire train.
    \2\ ``DOT-117P'' tank cars are newly manufactured tank cars or
tank cars retrofitted to meet the performance criteria in Sec.
179.202-12. ``DOT-117R'' tank cars are tank cars retrofitted to meet
the retrofit standard in Sec.  179.202-13.
---------------------------------------------------------------------------

    On December 4, 2015, President Barack Obama signed legislation
entitled ``Fixing America's Surface Transportation Act of 2015,'' or
the ``FAST Act.'' See Public Law 114-94. The FAST Act includes the
``Hazardous Materials Transportation Safety Improvement Act of 2015''
(see Sections 7001 through 7311) and instructs the Secretary of
Transportation (hereafter ``Secretary'') to make specific regulatory
amendments to the tank car design standards and phase-out schedule
codified in the HM-251 final rule.

A. Retrofit Schedule (FAST Act Section 7304)

    Section 7304 of the FAST Act mandates a commodity-specific phase-
out of all DOT-111 tank cars used to transport Class 3 flammable
liquids. Specifically, paragraph (a) mandates the phase-out regardless
of train composition and requires that, by the dates specified in
paragraph (b), all tank cars used to transport Class 3 flammable
liquids meet the DOT-117, DOT-117P, or DOT-117R requirements. Paragraph
(b) of Section 7304 mandates a commodity-specific phase-out schedule
for DOT-111 tank cars used to transport unrefined petroleum products
and ethanol--irrespective of the Packing Group (PG) \3\ assigned--as
well as other Class 3 flammable liquids based on their PGs.
---------------------------------------------------------------------------

    \3\ Packing Group (as defined in 49 CFR 171.8) is a grouping
according to the degree of danger presented by hazardous materials.
Packing Group I indicates great danger; Packing Group II, medium
danger; Packing Group III, minor danger.
---------------------------------------------------------------------------

    The phase-out schedule mandated in paragraph (b) outlines various
compliance end-dates, on or after which the DOT-111 tank car (including
DOT-111 tank cars built to the Association of American Railroads' (AAR)
Casualty Prevention Circular 1232 standard (CPC-1232)) is no longer
authorized to transport Class 3 flammable liquids. Please refer to
Section III, ``Section-by-Section Review,'' in this rule for more
information on the applicable end-dates of the new phase-out schedule.
See Table 1 below for a comparison of the retrofit schedule of the HM-
251 final rule with the schedule imposed by the FAST Act:
---------------------------------------------------------------------------

    \4\ Applies only to tank cars in an HHFT configuration.
    \5\ Applies to a single tank car containing the denoted
commodity.
    \6\ If these cars are not retrofitted by January 1, 2017 the
owners must file a report with the Department on the number of tank
cars that they own that have been retrofitted and the number that
have not yet been retrofitted.
    \7\ The FAST Act is applicable to ``unrefined petroleum products
in Class 3 flammable service, including crude oil.'' For the
purposes of this phase out table, we use ``Crude'' for these
materials.

 Table 1--Comparison of HM-251 Tank Car Phase-out Schedule vs. FAST Act
                           Phase-out Schedule
             [Tank cars in Class 3 flammable liquid service]
------------------------------------------------------------------------
                                   HM-251 phase-out   FAST Act phase-out
      Tank car type/service          deadline \4\        deadline \5\
------------------------------------------------------------------------
Non-jacketed DOT-111s...........  PG I--January 1,    Crude \7\--January
                                   2018 \6\.           1, 2018
                                  PG II--May 1, 2023  Ethanol--May 1,
                                                       2023
                                  PG III--May 1,      Flammable PG I--
                                   2025.               May 1, 2025 **
                                                      Flammable PG II/
                                                       III--May 1, 2029
                                                       *
Jacketed DOT-111s...............  PG I--March 1,      Crude--March 1,
                                   2018.               2018
                                  PG II--May 1, 2023  Ethanol--May 1,
                                                       2023
                                  PG III--May 1,      Flammable PG I--
                                   2025.               May 1, 2025 **
                                                      Flammable PG II/
                                                       III--May 1, 2029
                                                       *
Non-jacketed CPC-1232s..........  PG I--April 1,      Crude--April 1,
                                   2020.               2020

                                  PG II--July 1,      Ethanol--July 1,
                                   2023.               2023
                                  PG III--May 1,      Flammable PG I--
                                   2025.               May 1, 2025 **
                                                      Flammable PG II/
                                                       III--May 1, 2029
                                                       *
Jacketed CPC-1232s..............  May 1, 2025.......  Crude oil--May 1,
                                                       2025
                                                      Ethanol--May 1,
                                                       2025
                                                      Flammable PG I--
                                                       May 1, 2025 **
                                                      Flammable PG II/
                                                       III--May 1, 2029
                                                       *
------------------------------------------------------------------------
** Extendable up to May 1, 2027, if the Secretary finds that
  insufficient retrofitting shop capacity will prevent the phase-out of
  tank cars not meeting the DOT-117, DOT-117P, or DOT-117R by the
  deadline.
* Extendable up to May 1, 2031, if the Secretary finds that insufficient
  retrofitting shop capacity will prevent the phase-out of tank cars not
  meeting the DOT-117, DOT-117P, or DOT-117R by the deadline.

    The requirements of Section 7304 of the FAST Act differ from the
HM-251 final rule in two ways. First, the HM-251 final rule required
Class 3 flammable liquids to be transported in DOT-117, DOT-117P, or
DOT-117R tank cars only if these tank cars are used in an HHFT, whereas
the FAST Act removed the linkage between tank car specification and
train composition, instead mandating that any Class 3 flammable liquid
be transported in a DOT-117, DOT-117P, or DOT-117R tank car by the
dates specified. (The FAST Act does not change the HM-251 final rule's
definition of HHFT as it applies to the operational controls specified
in the rule.) Second, the phase-out schedule in the HM-251 final rule
was based on the PG of the Class 3 flammable liquid, among other
factors, whereas the phase-out schedule imposed by the FAST Act is
commodity-specific for unrefined petroleum products (including crude
oil) and ethanol and based on a commodity's PG only for other Class 3
flammable liquids.
    Paragraph (d)(1)(A) of Section 7304 requires the Secretary to take
immediate action to revise the date-specific deadlines in the HMR to
align with those in the FAST Act. This rule responds to that mandate.

B. Thermal Protection Blanket (FAST Act Section 7305)

    Section 7305 of the FAST Act requires tank cars built to meet the
DOT-117 specification and each non-jacketed tank car retrofitted to
meet the DOT-117R specification be equipped with an ``insulating
blanket'' at least half inch thick and approved by the Secretary in
accordance with 49 CFR 179.18(c). Paragraph (a) of Sec.  179.18
requires tank cars required to be equipped with thermal protection to
be equipped with a thermal protection system meeting a certain
performance standard (i.e., a pool fire for 100 minutes; and a torch
fire for 30 minutes) and paragraph (b) contains the technical
requirements for conducting a thermal analysis to verify a system's
compliance with paragraph (a)'s performance standard. As paragraph (c)
of Sec.  179.18 indicates, the Department maintains a list of thermal
protection systems already verified to meet the performance standard
and for which completion of a thermal analysis is not required. PHMSA
maintains the list and for a thermal protection system to be added to
the list, a manufacturer must first conduct the qualification tests in
Appendix B to Part 179 of the HMR. The manufacturer must then provide
the test procedures and results to PHMSA, which in consultation with
FRA reviews the submitted test procedures and results. If the agencies
find that the tests and results demonstrate that the system meets the
performance standard of paragraph (a), the thermal protection system is
added to the referenced list of tank car thermal protection systems
that do not require test verification.
    PHMSA notes, that while the FAST Act refers to the blanket as an
``insulating blanket,'' for the purposes of clarity within the HMR,
PHMSA is using the term ``thermal protection blanket.'' The FAST Act
intends for the blanket to be designed and approved to withstand fire
conditions as opposed to being ``insulating material'' that is designed
solely to maintain the temperature of the lading during transportation
and neither designed nor approved to withstand fire conditions.
    The HM-251 final rule did not specifically require that these tank
car specifications include a thermal protection blanket as part of the
thermal protection system; rather, it required that the specification
tank cars meet the performance standard specified in Sec.  179.18 of
the HMR, which requires that a tank car have sufficient thermal
resistance so that there will be no release of tank car lading, except
through the pressure relief device, when subjected to a pool fire for
100 minutes and a torch fire for 30 minutes. Section 179.18 does not
require the use of a thermal protection blanket for a tank car that is
required to be equipped with thermal protection, nor does it prohibit
their usage, provided the thermal protection blanket meets the
section's performance requirement. In drafting the HM-251 final rule,
PHMSA and FRA projected that a thermal protection blanket would be the
likely option chosen for a DOT-117 tank car to comply with the thermal
protection requirement, and the use of thermal protection blankets is
consistent with the HM-251 Regulatory Impact Analysis (RIA), which
assumed the thermal blanket would be the method used to achieve the
thermal protection requirements in 179.18.\8\ Although PHMSA and FRA
acknowledged that new alternate technologies to thermal protection
blankets may become available for meeting the performance requirement
of that rule, the analysis projected that thermal protection blankets
would be the technology of choice and included their cost, along with
the removal and replacement of jackets (for jacketed DOT-111 cars), in
the retrofit costs.
---------------------------------------------------------------------------

    \8\ See HM-251 Final Rule RIA, p. 172-173.
---------------------------------------------------------------------------

    The FAST Act takes a slightly different approach and instructs the
Secretary to require a thermal protection blanket of at least \1/2\-
inch-thick material on both cars built to meet the DOT-117 standard and
non-jacketed DOT-117R cars. This constitutes a prescriptive standard
for a thermal protection blanket that meets the performance standard
specified in Sec.  179.18. This rule implements this statutory
requirement in conformance with the FAST Act; therefore, a thermal
protection blanket meeting Sec.  179.18(c) is now a

requirement for the DOT-117, as well as for the DOT-117R if the tank
car undergoing retrofitting is non-jacketed.
    Paragraph (a) of Section 7305 requires the Secretary to amend the
HMR to reflect these thermal protection requirements within 180 days of
the FAST Act's enactment. This rule responds to that mandate.

C. Top Fittings Protection (FAST Act Section 7306)

    Section 7306(a) of the FAST Act specifies minimum requirements for
top fittings protection on tank cars built to meet the DOT-117R. The
HM-251 final rule did not require top fittings protection as part of
the DOT-117R retrofit requirement because the costs involved appeared
to be greater than the expected safety benefits.\9\ PHMSA noted in the
preamble to the HM-251 final rule that a task force of the AAR Tank Car
Committee was evaluating potential advancements in existing top
fittings protections that could prove cost effective and, along with
the FRA, urged industry to consider enhancements that would apply to
both new and retrofitted tank cars.
---------------------------------------------------------------------------

    \9\ See HM-251 Final Rule, 80 FR at 26676.
---------------------------------------------------------------------------

    The FAST Act outlines self-executing performance standards for
protective housings and pressure relief valves and does not mandate a
rulemaking for these requirements. However, the statutory language
mandates minimum requirements for top fittings protections for the DOT-
117R tank car not currently in the HMR. Codifying these statutorily-
mandated minimum requirements in the HMR provides greater clarity for
the regulated community and ensures that the HMR is consistent with the
FAST Act.

D. International Harmonization

    As a result of the FAST Act, the U.S. retrofit schedule for DOT-111
tank cars is more closely aligned with the schedule that Transport
Canada has set.\10\ Prior to the FAST Act, certain differences existed
between the tank car provisions of the HMR and Transport Canada's
corresponding Transportation of Dangerous Goods (TDG) Regulations.
Specifically, in the HM-251 final rule, the U.S. retrofit schedule was
based on several factors, including the Class 3 flammable liquid's PG
assignment and tank car construction (e.g., whether the tank car is
jacketed or non-jacketed). However, the HM-251 final rule was not
commodity-specific; the applicable phase-out date for DOT-111 tank cars
transporting crude oil or ethanol in an HHFT could vary significantly
depending on the material's PG assignment. For example, under the HM-
251 final rule, tank cars transporting PG I crude oil in an HHFT would
need to be retrofitted or newly manufactured DOT-117R, DOT-117P, or
DOT-117 tank cars at an earlier date than tank cars in an HHFT
transporting crude oil assigned to PG II or PG III. Moreover, per the
HM-251 final rule, a train transporting crude oil or ethanol but not
meeting the definition of an HHFT is not required to utilize
retrofitted or newly manufactured tank cars conforming to the DOT-117R,
DOT-117P, or DOT-117.
---------------------------------------------------------------------------

    \10\ Transport Canada is the Canadian equivalent of DOT, with
broad oversight authority for all modes of transportation, including
the rail transportation of hazardous materials.
---------------------------------------------------------------------------

    Conversely, Transport Canada implemented a phase-out schedule that
was commodity-specific (in addition to consideration of tank car design
factors). The TDG Regulations mandate that flammable liquid commodities
identified as crude oil or ethanol cannot be transported in a TC/DOT-
111 in accordance with Canada's phase-out schedule, irrespective of PG
assignment. For example, in order to be used to transport crude oil,
TDG Regulations require retrofit of a non-jacketed TC/DOT-111 tank car
by Canada's first compliance date (May 1, 2017), regardless of the
crude oil's PG assignment. Furthermore, under the TDG Regulations, the
TC/DOT-117 applies to a single tank car. Transport Canada's TDG
Regulations do not include a definition for an HHFT.
    As mandated by the FAST Act, in this final rule, PHMSA is
implementing a commodity-specific phase-out schedule for the transport
of unrefined petroleum products and ethanol in DOT-111 tanks cars,
irrespective of the PG assigned. Moreover, the FAST Act mandates the
complete phase out of DOT-111 cars for flammable liquids, as opposed to
just tank cars transported in HHFTs. Therefore, with respect to being
commodity-specific and the applicability of the new standards to a
single tank car, this final rule amends the HMR to further align with
Transport Canada's corresponding TDG Regulations. There are, however,
still some differences between the HMR and TDG Regulations related to
tank car standards and the retrofit schedule. For additional discussion
of international harmonization issues, please refer to Subsection K,
``Executive Order 13609 and International Trade Analysis.''

II. Good Cause Justification

    PHMSA is issuing this final rule without an opportunity for public
notice and comment as is normally provided under the Administrative
Procedure Act (APA), 5 U.S.C. 553. The APA authorizes agencies to
dispense with certain notice and comment procedures if the agency finds
good cause that they are impracticable, unnecessary, or contrary to the
public interest. See 5 U.S.C. 553(b)(3)(B). In this instance, PHMSA
finds that there is good cause to dispense with notice and comment
because it would be impracticable and unnecessary.
    ``Good cause'' exists in impracticable situations when notice
unavoidably prevents due and required execution of agency functions or
when an agency finds that due and timely execution of its functions
would be impeded by the notice otherwise required by the APA. The FAST
Act requirements covered in this rulemaking are all non-discretionary,
and two of the three FAST Act sections addressed in this rulemaking are
self-executing (see Sections 7304 and 7306). PHMSA's actions in this
final rule merely codify in the HMR these FAST Act requirements based
on the authority of the Secretary to implement the statute.\11\ This
final rule addresses congressional mandates that lay out specific
requirements or instruct the Secretary to issue conforming regulatory
amendments immediately or soon after the FAST Act's date of enactment.
Given the statute's timeline for issuing conforming regulations, PHMSA
finds that due and timely execution of agency functions would be
impeded by the process of public notice and comment. As such, notice
and comment procedures are ``impracticable'' within the meaning of the
APA, 5 U.S.C. 553(b)(3)(B). Furthermore, in making these ministerial
and technical amendments PHMSA is not exercising discretion in a way
that could be informed by public comment. The FAST Act does not provide
PHMSA the flexibility to withdraw, change or revise this rule in
response to adverse public comment. As such, notice and comment
procedures are ``unnecessary'' within the meaning of the APA, 5 U.S.C.
553(b)(3)(B).
---------------------------------------------------------------------------

    \11\ The Secretary has delegated this authority to PHMSA. See 49
CFR 1.97.
---------------------------------------------------------------------------

    This final rule is effective on the day of publication in the
Federal Register. The APA requires agencies to delay the effective date
of regulations for 30 days after publication, unless the agency finds
good cause to make the regulations effective sooner. See 5 U.S.C.
553(d). In addition to the previously discussed good cause to publish
this rulemaking without advance notice and opportunity for public
comment to implement the specific and non-discretionary mandates

of the FAST Act, PHMSA finds good cause to make the regulations
effective prior to 30 days.
    The DOT Regulatory Policies and Procedures [44 FR 11034; February
26, 1979] provide that, to the maximum extent possible, DOT operating
administrations should provide an opportunity for public comment on
regulations issued without prior notice. Per the criteria specified in
this policy, PHMSA finds that providing an opportunity for public
comment cannot reasonably be anticipated to result in the receipt of
useful information. This rule simply implements certain non-
discretionary measures of the FAST Act; therefore, PHMSA is unable to
adjust the text of the rule to account for any public comment. Section
7304 (expanding the tank car requirements to all flammable liquids) and
Section 7306 (requiring top fittings protection) are self-executing and
do not technically require regulatory action; Section 7304 (adjusting
the retrofit timeline) is non-discretionary and required immediately;
and Section 7305 (requiring \1/2\ inch thermal protection) is non-
discretionary and required no later than 180 days from the FAST Act's
enactment. Further, due to the non-discretionary nature of Sections
7304, 7305, and 7306 of the FAST Act, PHMSA is without authority to
withdraw, change or revise this rule in response to adverse public
comment. For these reasons, PHMSA is not providing an opportunity for
public comment.

III. Section-by-Section Review

Part 173

Section 173.241
    Section 173.241 provides the bulk packaging requirements for
certain low hazard (i.e., PG III) liquid and solid materials.
Specifically, paragraph (a) provides the specifications of rail tank
cars that may be used to transport hazardous materials when directed to
this section by Column (8C) of the Sec.  172.101 Hazardous Materials
Table (HMT). To execute the mandate in Section 7304 of the FAST Act, in
this final rule we are revising paragraph (a) to prohibit the use of
DOT-111 tank cars (including CPC-1232 tank cars) for Class 3 (flammable
liquid) material in PG III, regardless of whether the cars are in HHFT
service, unless they meet the DOT-117P performance standard or the DOT-
117R retrofit standard. The phase-out must occur by the date in Table
2:

                 Table 2--Phase-Out Schedule for DOT-111 Tank Cars in Class 3, PG III Service *
----------------------------------------------------------------------------------------------------------------
                                                                      DOT-111 (including cars built to the CPC-
                Material                  Jacketed or non-jacketed    1232 standard) not authorized on or after
                                                  tank car
----------------------------------------------------------------------------------------------------------------
Class 3, PG III (flammable liquid)       Jacketed and Non-jacketed.  May 1, 2029.
 material.
----------------------------------------------------------------------------------------------------------------
* Note: For unrefined petroleum products and ethanol, see Tables 3 and 4 below, as applicable.

Section 173.242

    Section 173.242 provides the bulk packaging requirements for
certain medium hazard (i.e., PG II and III) liquid and solid materials.
Specifically, paragraph (a) provides which specifications of rail tank
cars may be used to transport hazardous materials when directed to this
section by Column (8C) of the Sec.  172.101 HMT. Consistent with the
mandate in Section 7304 of the FAST Act, in this final rule we are
revising paragraph (a) to prohibit the use of DOT-111 tank cars for
Class 3 (flammable liquids) in PG II and III, regardless of whether the
cars are in HHFT service, unless they meet the DOT-117P performance
standard or the DOT-117R retrofit standard. The phase-out must occur by
the dates in Table 3 according to material type and tank car design
factors:

                                   Table 3--Phase-Out Schedule for DOT-111 Tank Cars in Class 3, PG II and III Service
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                         Jacketed or non-jacketed                                                    DOT-111 Built to  CPC-1232 not
               Material                          tank car              DOT-111 Not authorized on or after                authorized on or after
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unrefined petroleum products (e.g.,     Non-jacketed.............  January 1, 2018...........................  April 1, 2020.
 crude oil) \12\.
                                        Jacketed.................  March 1, 2018.............................  May 1, 2025.
Ethanol...............................  Non-jacketed.............  May 1, 2023...............................  July 1, 2023.
                                        Jacketed.................  May 1, 2023...............................  May 1, 2025.
Other Class 3, PG II and III            Jacketed and Non-jacketed  May 1, 2029...............................  May 1, 2029.
 (flammable liquid) material (other
 than unrefined petroleum products or
 ethanol).
--------------------------------------------------------------------------------------------------------------------------------------------------------

Section 173.243

    Section 173.243 provides the bulk packaging requirements for
certain high hazard (i.e., PG I) liquids and dual hazard materials.
Specifically, paragraph (a) provides which specifications of rail tank
cars may be used to transport hazardous materials when directed to this
section by Column (8C) of the Sec.  172.101 HMT. Consistent with the
mandate in Section 7304 of the FAST Act, in this final rule we are
revising paragraph (a) to prohibit the use of DOT-111 tank cars for
Class 3 (flammable liquids) in PG I, regardless of whether the cars are
in HHFT service, unless they meet the DOT-117P performance standard or
the DOT-117R retrofit standard. The phase-out must occur by the dates
in Table 4 according to material type and tank car design factors:
---------------------------------------------------------------------------

    \12\ Unrefined petroleum products refers to hazardous
hydrocarbons that are extracted from the earth and have not yet been
processed to such an extent that the properties of the product are
known and consistent.

                                       Table 4--Phase-out Schedule for DOT-111 Tank Cars in Class 3, PG I Service
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                         Jacketed or non-jacketed                                                    DOT-111 Built to  CPC-1232 not
               Material                          tank car              DOT-111 Not authorized on or after                authorized on or after
--------------------------------------------------------------------------------------------------------------------------------------------------------
Unrefined petroleum products (e.g.,     Non-jacketed.............  January 1, 2018...........................  April 1, 2020.
 crude oil).
                                        Jacketed.................  March 1, 2018.............................  May 1, 2025.
Class 3, PG I (flammable liquid)        Jacketed and Non-jacketed  May 1, 2025...............................  May 1, 2025.
 (other than unrefined petroleum
 products).
--------------------------------------------------------------------------------------------------------------------------------------------------------

Part 179

Section 179.202-6

    Section 179.202-6 requires a tank car built to meet the DOT-117 to
have a thermal protection system. Consistent with the mandate in
Section 7305 of the FAST Act, in this final rule we are revising this
section to require that the thermal protection system include a thermal
protection blanket with at least a \1/2\-inch-thick material that meets
Sec.  179.18(c).

Section 179.202-11

    Section 179.202-11 provides a table of specification requirements
for the DOT-117 tank car. Consistent with the mandate in Section 7305
of the FAST Act, in this final rule we are revising the table to make
clear that a thermal protection blanket (in accordance with Sec.
179.202-6) is a requirement of the DOT-117 tank car.

Section 179.202-12

    Section 179.202-12 provides the performance standards for a DOT-
117P tank car. For greater understanding by the regulated community, in
this final rule we are revising the heading of Sec.  179.202-12 to more
clearly indicate that the performance standard requirements apply to
the DOT-117P tank car.

Section 179.202-13

    Section 179.202-13 provides performance standards for retrofit of
DOT-111 tank cars (i.e., standards for a DOT-117R tank car). Consistent
with the mandate in Section 7306 of the FAST Act, in this final rule we
are revising the top fittings protection requirements in paragraph (h)
to include minimum standards for the protection of pressure relief
devices, valves, or fittings.

IV. Regulatory Analyses and Notices

A. Statutory/Legal Authority for This Rulemaking

    This final rule is published under the authority of Federal
Hazardous Materials Transportation Law (49 U.S.C. 5101 et seq.).
Section 5103(b) of Federal Hazmat Law authorizes the Secretary to
prescribe regulations for the safe transportation, including security,
of hazardous material in intrastate, interstate, and foreign commerce.

B. Executive Order 12866, Executive Order 13563, and DOT Regulatory
Policies and Procedures

1. Background
    As previously discussed, the HM-251 final rule amended the HMR by
defining certain trains transporting large volumes of Class 3 flammable
liquids as HHFTs and setting forth regulations (i.e., speed
restrictions, braking systems, and routing) for their operation. The
HM-251 final rule also adopted into the HMR requirements for sampling
and testing programs to ensure the proper classification of unrefined
petroleum-based products. Furthermore, it codified new tank car design
standards and established a phase-out schedule of legacy tank cars
(e.g., DOT-111 tank cars) by requiring use of either a DOT-117, DOT-
117P, or DOT-117R specification tank car by certain dates for the
transport of Class 3 flammable liquids in HHFTs.
    The FAST Act instructs the Secretary to make specific regulatory
amendments to the aforementioned tank car design standards and phase-
out schedule codified in the HM-251 final rule. The FAST Act
requirements addressed in this final rule are non-discretionary. This
final rule revises the newly adopted regulations in the HM-251 final
rule to align with the FAST Act. The specific amendments in this final
rule are identified in Table 5 below and discussed briefly in the text
that follows. Table 5 summarizes the affected population, costs, and
benefits:

      Table 5--Summary of Affected Population, Costs, and Benefits
------------------------------------------------------------------------

------------------------------------------------------------------------
Need and Basis for the Rule............  Congressional Mandate: FAST Act
                                          provisions.
Applicability..........................  Rail tank car manufacturers;
                                          tank car owners and lessors;
                                          railroad operators; shippers,
                                          offerors, and rail carriers.
Affected Population....................  19,757 Flammable Liquid Tank
                                          Cars.
                                         73,374 Crude and Ethanol Tank
                                          Cars.
Total Costs (7% Discount)..............  $520 million.
Annualized Costs (7% Discount).........  $49 million.
Costs (Qualitative)....................  Out-of-Service Time.
Benefits (Qualitative).................  Improved puncture resistance.
                                         Increased thermal
                                          survivability.
                                         Enhanced protection of top
                                          fittings.
------------------------------------------------------------------------

Retrofit Schedule

    The FAST Act instructs the Secretary to make specific regulatory
amendments to the tank car design standards and phase-out schedule
established by the HM-251 final rule. Section 7304 of the FAST Act
mandates a phase-out of all DOT-111 tank cars used to transport
flammable liquids, thereby requiring that these tank cars meet the DOT-
117, DOT-117P, or DOT-117R in part 179 of title 49, regardless of train
composition. This differs from the HM-251 final rule, which required
flammable liquids previously transported in a DOT-111 tank car to be
transported in a DOT-117, DOT-117P, or DOT-117R tank car only when
these tank cars were configured as part of an HHFT.

Thermal Protection Blankets

    Section 7305 of the FAST Act mandates that each tank car built to
meet the DOT-117 and each non-jacketed tank car retrofitted to meet the
DOT-117R be equipped with a thermal protection blanket of at least \1/
2\-inch-thick material that meets Sec.  179.18(c) of the HMR.\13\ Under
the HM-251 final rule, a thermal protection blanket was not required,
but it was an authorized means of providing the required thermal
protection for a DOT-117 tank car and in the regulatory impact analysis
it was assumed to be the means of compliance that likely would be used
by manufacturers.
---------------------------------------------------------------------------

    \13\ The HM-251 final rule did not require that these tank car
specifications include a thermal protection blanket as part of the
thermal protection system, but rather required that the
specification tank cars meet the performance standard specified in
Sec.  179.18.
---------------------------------------------------------------------------

Top Fittings Protections

    Section 7306 of the FAST Act specifies minimum requirements for top
fittings protection on tank cars built to meet the DOT-117R--including
a protective housing for the top fittings and the pressure relief
device--and allows for an alternative protection system. The FAST Act
outlines self-executing performance standards for top fittings
protection requirements. Codifying these minimum requirements in the
HMR provides clarity for the regulated community on the statutory
requirements for top fittings.

Executive Orders

    Executive Orders 12866 (``Regulatory Planning and Review'') and
13563 (``Improving Regulation and Regulatory Review'') require agencies
to regulate in the ``most cost-effective manner,'' to make a ``reasoned
determination that the benefits of the intended regulation justify its
costs,'' and to develop regulations that ``impose the least burden on
society.'' This final rule was mandated by congressional action, and
the provisions in this action are non-discretionary.
    Executive Order 13610 (``Identifying and Reducing Regulatory
Burden''), issued May 10, 2012, urges agencies to conduct retrospective
analyses of existing rules to examine whether they remain justified and
whether they should be modified or streamlined in light of changed
circumstances, including the rise of new technologies. DOT believes
that streamlined and clear regulations are important to ensure
compliance with important safety regulations. As such, DOT has
developed a plan detailing how such reviews are conducted.\14\
---------------------------------------------------------------------------

    \14\ Department of Transportation's plan for retrospective
regulatory reviews is available online at: http://www.dot.gov/regulations/dot-retrospective-reviews-rules.
---------------------------------------------------------------------------

    This final rule is designated as economically significant, and was
reviewed by the Office of Management and Budget (OMB). The final rule
is considered a significant regulatory action under the Regulatory
Policies and Procedures order issued by the DOT [44 FR 11034; February
26, 1979]. In this section, PHMSA addresses the economic impact of this
final rule.
2. Need for Rule
    The FAST Act instructed the Secretary to make specific regulatory
amendments to the aforementioned tank car design standards and phase-
out schedule established by the HM-251 final rule. The FAST Act changes
adopted in this final rule are non-discretionary. Regardless, the need
for the changes adopted in this final rule remains consistent with that
in the HM-251 final rule and the HM-251 RIA. Specifically, both the HM-
251 final rule and this final rule are designed to lessen the
consequences of train accidents involving the unintentional release of
flammable liquids. The purpose of the regulations for enhanced tank car
standards is to prevent spills by keeping flammable liquids, including
crude oil and ethanol, in rail tank cars and to mitigate the severity
of incidents should they occur.
    Finally, as previously explained, the requirements of Sections
7304, 7305, and 7306 of the FAST Act are non-discretionary and, in some
cases, statutorily self-executing, thus superseding the recently
published HM-251 final rule. It is good practice to adjust the HMR to
align with the current statutory mandates. PHMSA seeks to reduce
confusion within the regulated industries and other members of the
public by eliminating inconsistency between the statutory mandates and
existing regulatory mandates.
3. Baseline/Affected Entities
    When examining the cost and budgetary impacts of the provisions in
the FAST Act that revise the HM-251 final rule, PHMSA specifically
focuses on the cost these changes will impose related to the baseline
safety level set by the HM-251 final rule. In other words, the costs
considered are only those that are new and add to the previous costs
considered in the HM-251 RIA.
    Both the HM-251 final rule and this final rule would impact PHMSA
stakeholders, including rail tank car manufacturers; tank car owners
and lessors; railroad operators; shippers, offerors, and rail carriers;
companies that manufacture, transport, or use flammable liquids; and
emergency responders. More specifically, owners and lessors of
flammable liquid tank cars, shippers of flammable liquids, and
railroads that transport flammable liquids would be affected by this
rulemaking. Below is a summary of the affected entities for the
specific actions adopted in this final rule. Specifically, for this
analysis we look at the number of tank cars to gauge impact. We discuss
the affected entities separately below because the number varies for
each requirement.
Retrofit Schedule
    Table 6 is derived from the HM-251 RIA (Table TC2). It represents
PHMSA's estimate of the number of DOT-111 and CPC-1232 tank cars that
would need to be retrofitted for crude and ethanol service in
HHFTs.\15\
---------------------------------------------------------------------------

    \15\ This only includes crude and ethanol tank cars and assumes
a 28 percent retirement rate.

  Table 6--Estimated Quantity of DOT-111 Tank Cars in Need of Retrofit
------------------------------------------------------------------------
                  Tank car type/service                     Fleet size
------------------------------------------------------------------------
Non-Jacketed DOT-111 tank cars in PG I service..........          11,637
Non-Jacketed DOT-111 tank cars in PG II service.........          18,493
Jacketed DOT-111 tank cars in PG I and PG II service....           2,356
Non-Jacketed CPC-1232 tank cars in PG I and PG II                 15,895
 service................................................
Jacketed CPC-1232 tank cars in PG I, PG II service, and           24,933
 all remaining tank cars carrying PG III materials in an
 HHFT (pressure relief valve and valve handles).........
                                                         ---------------
    Total...............................................          73,314
------------------------------------------------------------------------

    The FAST Act modifies the retrofit schedule, accelerating deadlines
for unrefined petroleum products in PGII and relaxing the schedule for
retrofitting DOT-111 tank cars transporting Class 3 flammable liquids
other than unrefined petroleum or ethanol. These modifications to the
schedule would neither affect the number of cars retrofitted nor the
per unit cost of retrofits, instead only affecting the timing of the
retrofits. As a result, the cost differential of this adjustment is a
matter of the difference in the value of discounting a year or two for
a subset of cars, which is negligible. For this analysis, we assume the
same

distribution of crude and ethanol tank cars as in Table 6 even though
it could be argued that given the current economic conditions these
numbers overestimate the needed tank car fleet.\16\ Specifically, the
number of tank cars in crude oil or ethanol service that need to be
retrofit is likely an overestimate due to lower oil prices, expected
future additions to the fleet, reduced tank car demand, an existing
tank car surplus, decreased fleet utilization rates, and decreased
leasing rates. The Progressive Railroading article cited above notes
recent changes in the market for tank cars, driven primarily by a
substantial drop in crude oil prices, including that tank car
utilization has gone from near 100 percent utilization in June of 2014
to 77 percent utilization in 2015, has resulted in a surplus of 80,000
tank cars. Orders for new tank cars have dropped significantly and the
current tank car surplus indicates that unless energy prices rebound,
tank car utilization will be well below 100 percent, meaning that fewer
cars will be needed to haul crude oil than the industry predicted in
2014. In addition, the AAR weekly rail traffic report from May 7, 2016,
noted U.S. Class I railroads originated 63,261 carloads of crude oil in
the first quarter of 2016, down 21,664 carloads or 25.5 percent from
the fourth quarter of 2015 and down 49,828 carloads or 44.1 percent
from the first quarter of 2015.\17\
---------------------------------------------------------------------------

    \16\ Progressive Railroading Article: http://www.progressiverailroading.com/rail_industry_trends/article/Outlook-2016-Rail-car-forecast-by-Richard-Kloster-46701.
    \17\ https://www.aar.org/newsandevents/Press-Releases/Pages/2016-05-11-railtraffic.aspx.
---------------------------------------------------------------------------

    In addition to modifying the retrofit schedule for crude and
ethanol tank cars covered in the HM-251 final rule, the FAST Act
requires all DOT-111 flammable liquid tank cars to meet the DOT-117/
117R tank car specification based on a retrofit timeline. In comments
and appeals to the HM-251 final rule, interested parties estimated that
approximately 40,000 additional tank cars would need retrofitting if
the retrofit requirements were expanded to all flammable liquids. On
September 30, 2014, the Railway Supply Institute (RSI) provided a fleet
projection for the end of 2015 in their comments to the HM-251 NPRM
docket. Table 7 summarizes the RSI projections:

                  Table 7--RSI Projected Flammable Liquids Tank Car Fleet as of the end of 2015
----------------------------------------------------------------------------------------------------------------
                                                                                Other
                            Sub-fleet                                Crude oil       Ethanol *       flammable
                                                                                liquids *
----------------------------------------------------------------------------------------------------------------
Non-jacketed DOT-111s...........................................          23,090          27,037          24,790
Jacketed DOT-111s...............................................           7,016              88           9,413
Non-jacketed CPC-1232s..........................................          21,993             751           2,944
Jacketed CPC-1232s..............................................          35,408              23           1,975
                                                                 -----------------------------------------------
    Totals......................................................          87,507          27,899          39,122
----------------------------------------------------------------------------------------------------------------
* Note: Ethanol and Other Flammable Liquids car counts are based on AAR counts of cars that shipped at least one
  carload of the commodity in question over the period from January 1, 2013 through April 30, 2014. If an
  individual car switched services during this period, that car will be counted as part of more than one fleet.

    In the HM-251 Final Rule RIA, PHMSA assumed that all legacy tank
cars would be either retrofit or retired. Retired cars were assumed to
be scrapped rather than transferred to other service. The Agency also
assumed that any new car built for crude and ethanol service would be a
DOT-117 regardless of whether the car was to be used in manifest
service or unit train service. The Agency did not assume that CPC-1232
cars would continue to be built for manifest crude and ethanol service.
The Agency's reasoning was that any crude or ethanol car would probably
end up in HHFT service at some point even if some portion of those
commodities would be hauled by manifest trains. The figures in the
Crude and Ethanol columns of Table 7 therefore represent the estimated
size of the total crude and ethanol fleets, not just the portion of
those fleets destined for HHFT service.
    PHMSA will continue to evaluate the market conditions that drive
industry decisions regarding the tank car fleet. Most recently, the
tank car market has seen a growing tank car surplus, along with
decreasing fleet utilization rates and decreased leasing
rates.18 19 Furthermore, as stated in the note to Table 7,
for ``Other Flammable Liquids'' \20\ (OFL) the car counts are based on
AAR counts of cars that shipped at least one carload of the commodity
in question over the period from January 1, 2013 through April 30,
2014. This is the same approach to counting tank cars that was utilized
in the HM-251 RIA. The concern is that if an individual car switched
services (e.g., from ethanol to another flammable liquid) during this
period, that car would be counted as part of more than one fleet. In a
February 29, 2016, letter to PHMSA, RSI reiterated the difficulty in
formulating accurate tank car fleet estimates, particularly when tank
cars are likely being shifted between different types of service.\21\
As such, we believe that counting tank cars in this manner double
counts an individual car if that car switched services during the
period. Such double counting may be temporary, however. If the shipping
demand increases for crude oil, switching between services may become
much less prevalent.
---------------------------------------------------------------------------

    \18\ See http://www.progressiverailroading.com/virtualmag/pr1215/files/14.html.
    \19\ See http://www.wsj.com/articles/demand-for-key-types-of-railway-cars-falls-amid-declining-output-1429908476.
    \20\ ``Other Flammable Liquids'' means any material meeting the
definition of a flammable liquid as defined in Sec. Sec.  172.120
and 173.121 excluding those classified under proper shipping names
related to crude and ethanol.
    \21\ See [insert RSI letter into the docket].
---------------------------------------------------------------------------

    Based on this discussion, PHMSA will continue to use the crude and
ethanol fleet size estimated in the HM-251 RIA acknowledging that those
tank car numbers may now be an over-estimation. Regarding the
additional flammable liquid tank cars that are included in the scope of
this rule based on the FAST Act requirements, we are using the RSI
estimate as a basis for determining the fleet size but are modifying it
based on the factors discussed above (i.e., potential double counting
inflating the fleet estimate and falling demand for cars in crude oil
service). We estimate the total OFL fleet size is between 20,000 to
30,000 tank cars. We arrived at this estimate by making two
adjustments: Remove the Canadian fleet, which was estimated to account
for 25.7 percent of cars in the HM-251 final rule RIA (see page 80);
and, reduce the remaining U.S. fleet by 10 percent to adjust for double
counting due to switching service (as referenced

in the note to Table 7 above).\22\ This reduction puts the affected OFL
fleet estimate in the middle of the 20,000-30,000 range (26,161 in
table below). The estimates in Table 8 below were obtained by
multiplying the figures in Table 7 by 0.743 (1 - 0.257 = 0.743) and
0.90 (1 - 0.10 = 0.90), sequentially. For the purposes of this
analysis, we define the flammable liquid tank car population affected
by these provisions as follows in Table 8.
---------------------------------------------------------------------------

    \22\ Starting with the RSI data in Table 7, we sequentially take
out 25.7% to remove the Canadian fleet and then take out 10% of the
remainder to adjust for double counting due to switching service.

 Table 8--PHMSA Projected Flammable Liquids Tank Car Fleet used for FAST
                         Act Cost Determination
------------------------------------------------------------------------
                                                         Other flammable
                       Sub-fleet                             liquids
------------------------------------------------------------------------
Non-jacketed DOT-111s.................................            16,577
Jacketed DOT-111s.....................................             6,294
Non-jacketed CPC-1232s................................             1,969
Jacketed CPC-1232s....................................             1,321
                                                       -----------------
    Total.............................................            26,161
------------------------------------------------------------------------

    PHMSA uses the fleet estimates for OFL in Table 8 as the basis for
the cost estimates related to OFL in this rule. While the HM-251 final
rule requirements captured OFL that were transported in an HHFT
configuration, PHMSA did not expect OFL to be transported in HHFT
service therefore no costs or benefits were assigned to those materials
in the HM-251 RIA. The key difference between the HM-251 final rule and
the FAST Act requirements that are being adopted in this action is that
the latter covers all flammable liquid cars regardless of train
composition. Therefore, these tank cars are considered in this analysis
and will require full retrofits--including not just top fittings
protection and thermal protection blankets, but also full height head
shields, full jackets, improved bottom outlet valve handles, and high
capacity pressure relief valves--to meet the FAST Act requirement that
all flammable liquid cars meet the DOT-117R.
Thermal Protection Blankets
    The FAST Act requires that each tank car built to meet the DOT-117
and each non-jacketed tank car retrofitted to meet the DOT-117R be
equipped with an ``insulating blanket,'' which as clarified above, we
have defined here to mean a thermal protection blanket. This
requirement is consistent with the assumptions made for meeting the
DOT-117R in the HM-251 RIA. Although PHMSA acknowledged that new
alternate technologies to existing thermal protection blankets may
become available for meeting the performance requirement of that rule,
we assumed that the jacketed CPC-1232 cars were equipped with a thermal
protection system meeting Sec.  179.18 and there was no associated
retrofit cost. Thus, for crude and ethanol cars, thermal protection
blanket costs are already accounted for; hence, this FAST Act
requirement does not add additional costs for these cars. Neither the
FAST Act nor these complying regulations require jacketed cars to be
retrofitted with thermal protection, so associated costs would not be
borne regardless of the assumptions made in the HM-251 rulemaking
analysis.
    Section 7305(b) of the FAST act provides a savings clause that
states ``[n]othing in this section shall prohibit the Secretary from
approving new or alternative technologies or materials as they become
available that provide a level of safety at least equivalent to the
level of safety provided for under subsection (a).'' As the regulatory
text is written, the prescriptive standards for thermal protection
blankets are applied for new DOT-117 and DOT-117Rs. The section related
to DOT-117Ps is not revised thus if an entity were able to provide a
design that exceeded the prescriptive standard for a thermal protection
blanket in the FAST act and FRA were to approve that design as a
DOT117P they could innovate.
    The thermal protection blanketing provision will only affect those
non-jacketed flammable liquid cars in need of retrofit. Specifically,
we estimate 18,546 tank cars (comprised of the non-jacketed legacy DOT-
111 and non-jacketed CPC-1232 tank cars in OFL service listed in Table
8) will be affected.
Top Fittings Protection
    The HM-251 final rule did not require modification or addition of
top fittings protections to meet the DOT-117R. The FAST Act requires
enhanced top fittings protections for all retrofit cars. Tank cars
built to the CPC-1232 industry standard are already equipped with top
fittings protections; therefore, this new cost only applies to legacy
DOT-111 tank cars transporting crude oil and ethanol, as well as those
transporting OFL that are now included in our scope per the FAST Act.
In total, we estimate 55,357 tank cars (13,905 crude tank cars, 18,581
ethanol tank cars, and 22,871 OFL tank cars) will be affected (see
Tables 6 and 8, above).
4. Summary of Costs
    PHMSA applies the same retrofit costs that were applied in the HM-
251 RIA to all cars being retrofitted (all CPC-1232 tank cars and the
DOT-111 tank cars that are not retired). The unit retrofit costs used
in the HM-251 RIA are applied to OFL tank cars, along with the
estimated cost of installing top fittings protection. The unit costs,
including out-of-service time, were estimated at $38,923 for a non-
jacketed DOT-111 tank car.\23\ The addition of top fittings protection
raises this cost to $43,508. For a jacketed DOT-111 tank car, the unit
cost of retrofitting in the HM-251 RIA was $28,123. With top fittings
protection, this cost rises to $32,708 per car. PHMSA assumes these
cars will be retrofitted in the final 5 years of the allowed timeframe
(i.e., between 2025 and 2029). Table 10 describes the cost and
modifications needed by fleet and tank car type. PHMSA estimates that
76 percent of the total costs of the FAST Act tank car retrofit
requirements accrue to the non-jacketed DOT-111 tank cars. In addition,
we apply a $4,585 per car cost to account for the cost of enhancing top
fittings protection on the legacy DOT-111 tank cars (both jacketed and
non-jacketed).\24\ The per unit cost for

each tank car type is listed below in Table 10 below.
---------------------------------------------------------------------------

    \23\ Given the decrease demand for DOT-111 tank cars since the
publication of HM-251 final rule, costs associated with out-of-
service time may be lower than originally estimated due to
underutilization of the fleet.
    \24\ See RSI letter to PHMSA [add link to docket].
---------------------------------------------------------------------------

Retirements
    As noted above, we assume that 28 percent of OFL tank cars would be
retired rather than retrofit. For the HM-251 RIA virtually all
retirements were forced early retirements because the retrofit timeline
was aggressive, especially for legacy DOT 111 tank cars. The FAST Act
deadline is substantially more lenient, and as a result, the Agency
believes it appropriate to consider natural retirements as well as
forced early retirements. We use the fleet age profile used in the 2015
HM-251 RIA to estimate retirement costs to identify the number of cars
in each year from 2016 to 2028 that would reach the end of their useful
life. We then assume that the remainders of the 28 percent of retired
cars are forced to retire in 2029. Given the longer time horizon for
FAST Act compliance the Agency believes this treatment is appropriate.
Natural retirements will occur over the nearly decade and a half, and
tank car lessors and operators will have more time to plan for moving
some of the fleet that is not worth retrofitting into other service
rather than scrapping the cars.
    We conduct this analysis by assuming, absent FAST Act requirements,
that a retired non-jacketed DOT-111 tank car would be replaced with a
non-jacketed CPC-1232 and a retired jacketed DOT-111 tank car would
have been replaced with a jacketed CPC-1232 tank car. In addition, we
assume that industry would have built improved CPC-1232 tank cars for
OFL service--with pressure relief valves (PRVs) and bottom outlet valve
(BOV) handles that would meet DOT-117 requirements. The non-jacketed
cars would (obviously) not have jackets, but would have a 1/2 inch
shells and half height head shields. The jacketed cars would have 7/16
inch shells and jackets with thermal protection and top fittings
protection. The only difference between these cars and a DOT-117 tank
car is an eighth of an inch of shell thickness, which PHMSA estimates
to be a $3,000 higher cost for the DOT-117 tank car compared to a
jacketed CPC-1232 tank car in the HM-251 Final Rule RIA.\25\
---------------------------------------------------------------------------

    \25\ We assume that these cars would have been built with HM-251
conforming pressure relief valves (PRV) and bottom outlet valve
handles (BOV) and FAST Act conforming top fittings protection. We
assume that adding better PRV and BOV handle would not add
appreciably to the cost of a car when done at the manufacturing
stage. As noted above, all CPC-1232 tank cars are built with
conforming top fittings protection so that assumption carries
through here.
---------------------------------------------------------------------------

    As we found in the development of the HM-251 final rule analysis,
tank car purchase prices are difficult to obtain. One way to
approximate them is to use modified retrofit costs for upgrading a car
from one type to another. As noted, the cost difference between a DOT-
117 and a jacketed CPC-1232 is approximately $3,000, because the only
difference between the two cars is the thickness of the tank shell. The
differential for a non-jacketed CPC-1232 is more complicated because it
lacks several components found on the jacketed car. However, the
unjacketed CPC-1232 has a thicker shell (1/2 inch rather than 7/16
inches) than the unjacketed CPC-1232 and would therefore only need
sixteenth of an inch of shell thickness ($1,500). The non-jacketed CPC-
1232 also has half height head shields. To be fully upgraded to the
DOT-117 standard, the required additions would be a jacket with full
height head shields (rather than half height), thermal protection, and
a sixteenth of an inch of shell thickness. The retrofit costs for a
non-jacketed CPC-1232 are presented below as a starting point for a new
car differential. PHMSA modifies these by:

     Eliminating costs of the BOV and PRV, under the
assumption that when done at the manufacturing stage swapping out
one part for another would have minimal cost;
     Subtracting $1,000 from the cost of a jacket and head
shields to account for repurposing the steel that would have been
used for the non-jacketed CPC-1232 half height head shield into half
of a full height head shield;
     Adding $1,500 to increase the shell thickness by a
sixteenth of an inch (half the cost of increasing the shell
thickness of a CPC-1232 by an eighth of an inch); and,
     Increasing the learning curve efficiency to 15 percent
because manufacturing efficiencies for new builds should be greater
than for retrofits.\26\

    \26\ Because components can be added in the most logical and
time efficient sequence during the manufacturing process. With the
retrofit process certain components may have to be removed to apply
thermal protection and a jacket and then reattached.

 Table 9--Retrofit Costs for the Non-Jacketed, DOT CPC-1232NJ (Option 3
               Tank Car) and New Car Differential Estimate
------------------------------------------------------------------------
                                                              New car
             Retrofit option               Retrofit cost   differential
                                            from HM-251        cost
------------------------------------------------------------------------
Bottom outlet valve handle retrofit cost          $1,200              NA
Pressure relief valve retrofit cost.....          $1,500              NA
Thermal protection retrofit cost........          $4,000          $4,000
Full jacket retrofit cost with half              $23,400         $22,400
 height head shields....................
Extra shell thickness...................              NA          $1,500
                                         -------------------------------
    Unadjusted Total....................         $30,100         $27,900
Learning curve cost reduction...........             10%             15%
                                         -------------------------------
    Adjusted Total......................         $27,090         $23,715
------------------------------------------------------------------------

    This yields a car cost differential of $23,715 between a non-
jacketed CPC-1232 tank car and a DOT-117 tank car. We apply this cost
to natural retirements to reflect the differential cost between
purchasing a non-Jacketed CPC-1232 and a DOT-117. For jacketed DOT-111s
that age out of the fleet, we use the cost differential between a
jacketed CPC-1232 and a DOT-117 ($3,000). For early retirements, we use
the car cost differential plus the cost of having to buy a new DOT-117
earlier than planned--$20,649 for a non-jacketed early retirement and
$16,716 for a jacketed car.
    We also reassessed the cost of early retirements, which is
dependent on the average remaining service life for the cars retired
early. For the HM-251 rule this average was 1.9 years for non-jacketed
DOT-111s and 1.3 years for jacketed DOT-111s. Due to the overall DOT-
111 age distribution, the cars

retired for OFL service have a higher average remaining life. For non-
jacketed DOT-111s the average is 2.87 years of remaining life, and for
jacketed DOT-111s the average is 2.28 remaining years of life.\27\ This
raises the early retirement cost for both car types to those presented
in Table 10 below. A summary of all OFL cost parameters are presented
below.
---------------------------------------------------------------------------

    \27\ Years of remaining service life were calculated in the same
manner as the HM-251 RIA (See pages 162-163). Due to the differing
age distributions of the OFL fleet compared to the crude and ethanol
fleets the average remaining life is higher for OFL.

                  Table 10--Unit Costs for FAST Act Requirements, Other Flammable Liquids Fleet
----------------------------------------------------------------------------------------------------------------
                                                                               Top fittings
                          Sub-fleet                               HM-251        protection      Total cost  per
                                                               retrofit cost       cost               car
----------------------------------------------------------------------------------------------------------------
Non-jacketed DOT-111........................................         $38,923          $4,585             $43,508
----------------------------------------------------------------------------------------------------------------
Jacketed DOT-111............................................          28,123           4,585              32,708
----------------------------------------------------------------------------------------------------------------
Non-jacketed CPC-1232.......................................          28,034               0              28,034
----------------------------------------------------------------------------------------------------------------
Jacketed CPC-1232...........................................           3,374               0               3,374
----------------------------------------------------------------------------------------------------------------
Non-jacketed DOT-111 Scheduled Retirement...................                                              23,715
-------------------------------------------------------------                                -------------------
Jacketed DOT-111 Scheduled Retirement.......................                                               3,000
-------------------------------------------------------------                                -------------------
Non-jacketed DOT-111 Early Retirement.......................                                              44,364
                                                                                (23,715 + 20,649)
-------------------------------------------------------------                                -------------------
Jacketed DOT-111 Early Retirement...........................                                              19,716
                                                                                (16,716 + 3,000)
----------------------------------------------------------------------------------------------------------------

    These unit costs are applied to the fleet figures presented in the
Table 11 below. For retirements, the cost of natural retirements is
applied to the figures in the columns showing retirements for years
2016-2028. Early retirement costs are applied to the 2029 figures in
the columns showing retirements. Retrofit costs are estimated by
applying the retrofit unit costs above to the corresponding car-type
retrofit column in the table below.

                              Table 11--Type of Flammable Liquid Retrofit and Retirements Based on FAST Act Requirements *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                          Retrofit  non-     Retrofit     Retrofit  non-     Retrofit                         Retire
                                                           jacketed  DOT  jacketed  DOT-   jacketed  CPC   jacketed  CPC   Retire  non-   jacketed  DOT-
                                                                111             111            1232           1232 J       jacketed  111        111
--------------------------------------------------------------------------------------------------------------------------------------------------------
Baseline................................................          16,577           6,294           1,969           1,321          26,161  ..............
Baseline adjusted for retirements **....................          11,935           4,532           1,969           1,321           4,642           1,762
2016....................................................  ..............  ..............  ..............  ..............             384             146
2017....................................................  ..............  ..............  ..............  ..............             261              99
2018....................................................  ..............  ..............  ..............  ..............             202              77
2019....................................................  ..............  ..............  ..............  ..............             101              38
2020....................................................  ..............  ..............  ..............  ..............             129              49
2021....................................................  ..............  ..............  ..............  ..............             156              59
2022....................................................  ..............  ..............  ..............  ..............              93              35
2023....................................................  ..............  ..............  ..............  ..............             156              59
2024....................................................  ..............  ..............  ..............  ..............             318             121
2025....................................................           2,387             906             394             264             374             142
2026....................................................           2,387             906             394             264             291             110
2027....................................................           2,387             906             394             264             220              84
2028....................................................           2,387             906             394             264             202              77
2029....................................................           2,387             906             394             264           1,755             666
--------------------------------------------------------------------------------------------------------------------------------------------------------
* FAST Act other flammable liquid retrofit requirements start in 2025 and end in 2029.
** Total of years for each type.

    Total cost estimates are presented in Table 12 below. These costs
are obtained by applying the unit costs in Table 10 to the fleet
figures in Table 11.

                       Table 12--Analysis of Costs for Other Flammable Liquid Retrofit and Retirements For FAST Act Requirements *
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Retrofit CPC      Retrofit      Retire  non-       Retire
                  Year                    Retrofit  non-     Retrofit      non-jacketed   jacketed  CPC-  jacketed  DOT-   jacketed DOT-    Total cost
                                           jacketed  111   jacketed  111       1232            1232             111             111
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016....................................              $0              $0              $0              $0      $9,106,560        $438,000      $9,544,560

2017....................................               0               0               0               0       6,189,615         297,000       6,486,615
2018....................................               0               0               0               0       4,790,430         231,000       5,021,430
2019....................................               0               0               0               0       2,395,215         114,000       2,509,215
2020....................................               0               0               0               0       3,059,235         147,000       3,206,235
2021....................................               0               0               0               0       3,699,540         177,000       3,876,540
2022....................................               0               0               0               0       2,205,495         105,000       2,310,495
2023....................................               0               0               0               0       3,699,540         177,000       3,876,540
2024....................................               0               0               0               0       7,541,370         363,000       7,904,370
2025....................................     103,853,596      29,633,448      11,045,396         890,736       8,869,410         426,000     154,718,586
2026....................................     103,853,596      29,633,448      11,045,396         890,736       6,901,065         330,000     152,654,241
2027....................................     103,853,596      29,633,448      11,045,396         890,736       5,217,300         252,000     150,892,476
2028....................................     103,853,596      29,633,448      11,045,396         890,736       4,790,430         231,000     150,444,606
2029....................................     103,853,596      29,633,448      11,045,396         890,736      77,858,820      13,130,856     236,412,852
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Non-discounted Total          889,858,761
                                                                                -----------------------------------------------
                                               NPV 7% Discount Rate          405,750,881
                                                                                -----------------------------------------------
                                               NPV 3% Discount Rate          629,195,653
--------------------------------------------------------------------------------------------------------------------------------------------------------
* FAST Act other flammable liquid retrofit requirements start in 2025 and end in 2029.

    For the cars already accounted for in the HM-251 RIA, the only
additional cost is to modify top fittings protection for the DOT-111
tank cars. As previously stated, PHMSA assumed in the HM-251 RIA that
thermal protection blankets would be used to satisfy the thermal
protection requirements in the HM-251 final rule and acknowledges that
tank cars built to the CPC-1232 standard are equipped with top fittings
protection meeting the requirements of the FAST Act. As mentioned
above, we assume a unit cost of $4,585 per car for this modification.
Table 13 presents the costs of further modifying these cars. Again,
discounted NPV is calculated by setting 2016 as year 1.

                  Table 13--Cost for Crude and Ethanol Retrofit Based on FAST Act Requirements
----------------------------------------------------------------------------------------------------------------
                                                                   Non-jacketed   Jacketed  DOT-
                              Year                                    DOT-111           111            Total
----------------------------------------------------------------------------------------------------------------
2016............................................................     $20,233,605              $0     $20,233,605
2017............................................................      33,122,040       3,287,445      36,409,485
2018............................................................               0       7,225,960       7,225,960
2019............................................................               0               0               0
2020............................................................      22,938,755               0      22,938,755
2021............................................................      40,068,315               0      40,068,315
2022............................................................      23,273,460         288,855      23,562,315
2023............................................................          90,554               0          90,554
Non-discounted Total............................................     139,726,729      10,802,260     150,528,989
NPV 7%..........................................................     105,440,453       8,949,802     114,390,255
NPV 3%..........................................................     123,203,667       9,946,375     133,150,042
----------------------------------------------------------------------------------------------------------------

    As summarized in Table 14, total discounted costs for all
provisions are about $520 million over 20 years at a 7 percent discount
rate and $762 million at a 3 percent discount rate. The potential
benefits of these changes are discussed further below.

 Table 14--Total Costs of FAST Act Requirements (20 Year and Annualized)
------------------------------------------------------------------------
              Cost category                   NPV 3%          NPV 7%
------------------------------------------------------------------------
Cost for Crude and Ethanol Retrofit (20     $133,150,042    $114,390,255
 Year)..................................
Cost for Flammable Liquid Retrofit and       629,195,653     405,750,881
 Retirement (20 Year)...................
                                         -------------------------------
    Total (20 Year).....................     762,345,695     520,141,136
Annualized Cost.........................      51,241,605      49,097,644
------------------------------------------------------------------------

    PHMSA has made a number of assumptions regarding the cost of these
requirements, including the following:

     Tanks cars built to the CPC-1232 industry standard are
equipped with top fittings protection that conforms to the FAST Act
requirement, and therefore would not need top fittings-related
retrofits due to the FAST Act requirement.
     Adding new top fittings protection that conforms to the
FAST Act would not add

significant weight to cars, and hence PHMSA does not estimate any
additional track maintenance and fuel consumption costs for cars on
which top fittings are modified.
     The analysis does not account for the fuel and track
maintenance costs for the OFL tank car retrofits. These retrofits
occur near the end of the 20-year analysis period; hence, any fuel
and maintenance costs would only accrue for a few years and would be
heavily discounted.
     The analysis assumes the same 28 percent retirement
rate for OFL tank cars as was assumed for the crude and ethanol cars
in the HM-251 RIA but considers both natural and forced early
retirements.
     Adding top fittings protection would not affect the
retirement decision (i.e., adding top fittings protection to crude,
ethanol, or OFL tank cars would not result in retirement of a higher
proportion of these cars).
     The size of the crude oil fleet remains unchanged
despite the recent drop in crude oil production and shipments by
rail, which is expected to persist at least in the near term.
     OFL service cars would be replaced with a CPC-1232 in
the absence of this regulation (and the Fast Act), since the rail
industry supported plans to build jacketed CPC-1232 cars and began
to build them for crude and ethanol service prior to the
promulgation of the HM-251 final rule.\28\ As a sensitivity analysis
below, we assess costs assuming OFL service cars would be built to
the higher DOT-117 standards promulgated in the HM-251 final rule in
absence of this rule.
---------------------------------------------------------------------------

    \28\ Jacketed CPC-1232 tank cars have been built for OFL
service. PHMSA estimates that approximately 2,000 of these tank cars
are currently used in this service on a quarterly basis. See also
American Chemistry Council (ACC) comments from 2014 at https://www.regulations.gov/document?D=PHMSA-2012-0082-0219. ACC stated
``that the chemical industry has been purchasing tank cars built to
the CPC 1232 standard for several years and they support provisions
that would require all new DOT 111 tank cars to meet the CPC 1232
standard with the exception of thermal protection. ACC noted that
thermal protection should be considered a commodity specific
addition that is not appropriate in all cases''.

    The estimated retrofit costs of the rule, by provision, are
presented in Table 15 below. The costs in this table exclude retirement
costs.

                            Table 15--Estimated Non-Discounted Cost Breakdown of the FAST Act Tank Car Retrofit Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                Discounted
                                                                                Tank cars     Cost per tank    \30\ total      % of total
             Service type                    Tank car type         Modification needed     impacted \29\        car            cost            costs
                                                                                (thousands)
--------------------------------------------------------------------------------------------------------------------------------------------------------
Crude and Ethanol....................  Non-jacketed DOT-111....  Thermal Blanket \31\...          30,475          $4,585    $105,440,453              25
                                                                 Top Fittings
                                                                  Protection..
                                       Jacketed DOT-111........  Top Fittings Protection           2,356           4,585       8,949,802               2
                                       Non-jacketed CPC-1232...  Thermal Blanket........          15,895              NA               0               0
                                       Jacketed CPC-1232.......  .......................          24,993              NA               0               0
Flammable Liquid \32\................  Non-jacketed DOT-111      Tank Retrofit..........          11,425          43,508     231,618,001              52
                                        \33\.                    Thermal Blanket........
                                                                 Top Fittings
                                                                  Protection..
                                       Jacketed DOT-111 \34\...  Tank Retrofit..........           4,335          32,708      66,089,575              15
                                                                 Top Fittings
                                                                  Protection..
                                       Non-jacketed CPC-1232...  Tank Retrofit..........           1,885          28,034      24,633,837               6
                                                                 Thermal Blanket........
                                       Jacketed CPC-1232.......  Tank Retrofit..........           1,265           3,374       1,986,551             0.4
--------------------------------------------------------------------------------------------------------------------------------------------------------

5. Sensitivity Analysis of Costs
---------------------------------------------------------------------------

    \29\ Numbers are derived from Table 25 for crude and ethanol and
Table 47 for flammable liquids from the RIA.
    \30\ These costs are NPV discounted at 7%.
    \31\ PHMSA assumed that to meet the performance standard
specified in Sec.  179.18 each tank car built to meet the DOT-117
specification and each non-jacketed tank car retrofitted to meet the
DOT-117R specification would do so using a thermal protection
blanket; thus no cost for thermal protection blankets is added for
the fleet included in the HM-251 scope.
    \32\ Costs associated with retiring older OFL tank cars are not
incorporated into this table, but are incorporated in the figures
presented elsewhere in this section (see Table 11).
    \33\ Includes retirement costs.
    \34\ Includes retirement costs.
---------------------------------------------------------------------------

    In the above analysis, the cost applied to early retirements is
based on the industry continuing to build CPC-1232 cars (both jacketed
and unjacketed) for OFL service. Industry could also build to the
higher DOT-117 standards when replacing retired OFL service cars. We
consider an alternative cost analysis that assumes industry voluntarily
replaces retired legacy cars with DOT-117s based on the following:

     The industry was already ordering DOT-117 tanks cars
for crude and ethanol service prior to publication of the final
rule.\35\
---------------------------------------------------------------------------

    \35\ See http://www.railwayage.com/index.php/mechanical/freight-cars/tank-car-of-the-future-among-greenbrier-railcar-contracts.html.
---------------------------------------------------------------------------

     Replacing retired cars with a DOT-117 tank car would
enable tank car owners and leasers to switch cars between crude,
ethanol, and OFL service, thereby ensuring fuller utilization in
periods where demand wanes in one segment of the industry and demand
in another service is high.

    This sensitivity analysis assumes that natural retirements are
replaced with DOT-117s at no additional cost and costs applied to early
retirements are the costs associated with buying a car earlier than
planned. The unit costs associated with this sensitivity analysis are
presented in Table 16 below.

    Table 16--Unit Costs Used in Sensitivity Analysis of FAST Act Requirements, Other Flammable Liquids Fleet
----------------------------------------------------------------------------------------------------------------
                                                                                Top fittings
                            Sub-fleet                                 HM-251        protection    Total cost per
                                                                   retrofit cost       cost             car
----------------------------------------------------------------------------------------------------------------
Non-jacketed DOT-111............................................         $38,923          $4,585         $43,508
----------------------------------------------------------------------------------------------------------------
Jacketed DOT-111................................................          28,123           4,585          32,708
----------------------------------------------------------------------------------------------------------------
Non-jacketed CPC-1232...........................................          28,034               0          28,034
----------------------------------------------------------------------------------------------------------------

Jacketed CPC-1232...............................................           3,374               0           3,374
----------------------------------------------------------------------------------------------------------------
Non-Jacketed DOT-111 Scheduled Retirement.......................                                               0
-----------------------------------------------------------------                                ---------------
Jacketed DOT-111 Scheduled Retirement...........................                                               0
-----------------------------------------------------------------                                ---------------
Non-jacketed DOT-111 Early Retirement...........................                                          20,649
-----------------------------------------------------------------                                ---------------
Jacketed DOT-111 Early Retirement...............................                                          16,716
----------------------------------------------------------------------------------------------------------------

    We applied these costs to the OFL fleet retrofit and retirement
schedule presented above. Table 17 summarizes costs for the OFL fleet
using the alternative baseline as a sensitivity analysis. Table 18
summarizes the total cost of the rule using the alternative baseline
and includes costs associated with retrofitting the crude and ethanol
fleet with top fittings protection. This sensitivity analysis found the
cost of the rule to be about 12 percent less if industry were to build
DOT-117 tank cars rather than CPC-1232 tank cars in absence of the FAST
Act.

                  Table 17--Sensitivity Analysis of Costs for Flammable Liquid Retrofit and Retirements Based on FAST Act Requirements
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                           Retrofit CPC      Retrofit      Retire  non-       Retire
                  Year                    Retrofit  non-     Retrofit      non-jacketed   jacketed  CPC-  jacketed  DOT-   jacketed DOT-    Total cost
                                           jacketed  111   jacketed  111       1232            1232             111             111
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016....................................              $0              $0              $0              $0              $0              $0              $0
2017....................................               0               0               0               0               0               0               0
2018....................................               0               0               0               0               0               0               0
2019....................................               0               0               0               0               0               0               0
2020....................................               0               0               0               0               0               0               0
2021....................................               0               0               0               0               0               0               0
2022....................................               0               0               0               0               0               0               0
2023....................................               0               0               0               0               0               0               0
2024....................................               0               0               0               0               0               0               0
2025....................................     103,853,596      29,633,448      11,045,396         890,736               0               0     145,423,176
2026....................................     103,853,596      29,633,448      11,045,396         890,736               0               0     145,423,176
2027....................................     103,853,596      29,633,448      11,045,396         890,736               0               0     145,423,176
2028....................................     103,853,596      29,633,448      11,045,396         890,736               0               0     145,423,176
2029....................................     103,853,596      29,633,448      11,045,396         890,736      36,238,995      11,132,856     192,795,027
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               Non-discounted Total          774,487,731
                                               NPV 7% Discount Rate          342,699,585
                                               NPV 3% Discount Rate          541,748,518
--------------------------------------------------------------------------------------------------------------------------------------------------------

  Table 18--Sensitivity Analysis of Costs for FAST Act Requirements (20
                          Year and Annualized)
------------------------------------------------------------------------
              Cost category                   NPV 3%          NPV 7%
------------------------------------------------------------------------
Cost for Crude and Ethanol Retrofits (20    $133,150,042    $114,390,255
 Year)..................................
Cost for Other Flammable Liquid Retrofit     541,748,518     342,699,585
 and Retirement (20 Year)...............
                                         -------------------------------
Total Discount Cost (20-Year)...........     674,898,561     457,089,840
Annualized Cost.........................      45,363,784      43,146,047
------------------------------------------------------------------------

6. Summary of Benefits
    The implementation of this final rule ensures that all Class 3
flammable liquids are packaged in tank cars meeting improved
specifications, thus reducing the likelihood that a train transporting
any volume of flammable liquids will release such liquids should it
derail. This final rule also reduces the consequences of an incident
should one occur by diminishing the number of tank cars likely to be
punctured and the subsequent release of flammable liquids in a
derailment. The goals of this rule are thus consistent with those of
the HM-251 final rule. Specifically, both the HM-251 final rule and
this final rule are designed to lessen the consequences of train
accidents involving the unintentional release of flammable liquids. The
main difference is that this rule is simply intended to align the HMR
with the non-discretionary mandates of the FAST Act. The purpose of the
regulations for enhanced tank car standards is to prevent spills by
keeping flammable liquids, including crude oil and ethanol, in rail
tank cars and to mitigate the severity of incidents should they occur.
Below we qualitatively discuss the benefits of each requirement
addressed in this rule individually and provide a final discussion of
the combined benefits of the provisions.

Retrofit Schedule
    The FAST Act mandates a new phase-out schedule for DOT-111 tank
cars--including DOT-111 tank cars constructed to the CPC-1232 industry
standard--used to transport unrefined petroleum products (e.g.,
petroleum crude oil), ethanol, and other Class 3 flammable liquids,
irrespective of train composition. We estimate that the FAST Act's
phase-out schedule impacts approximately 25,000 tank cars. With regard
to benefits, these 25,000 tank cars will realize improved puncture
resistance, enhanced thermal survivability, and increased top fittings
protection. While these 25,000 tank cars would not travel in large
blocks of cars like HHFTs, they would see benefits in potentially
avoiding releases.
Thermal Protection Blankets
    The FAST Act mandates that each tank car built to meet the DOT-117
standard and each non-jacketed tank car retrofitted to meet the DOT-
117R standard be equipped with a thermal protection blanket with at
least \1/2\-inch-thick material that meets Sec.  179.18(c). In the HM-
251 final rule, PHMSA required all cars in HHFT service be equipped
with an 11-gauge jacket but did not require a particular thermal
protection material or thickness, instead requiring that a thermal
protection system (which includes a pressure relief device) meet the
performance standard of Sec.  179.18. Although PHMSA acknowledged that
alternative technologies to thermal protection blankets exist (e.g.,
intumescent paint) and that others may become available for meeting the
performance requirement of that rule, PHMSA assumed that thermal
protection blankets would be the technology of choice and proactively
included their cost in the retrofit costs. Thus, for crude and ethanol
cars, thermal protection blanket benefits are already accounted for;
hence, this FAST Act requirement does not add additional retrofit
benefits for these cars. The FAST Act does add thermal protection
blankets to other tank cars used for OFL. Consequently the entire
flammable liquid fleet will now realize benefits from this requirement.
    A thermal protection blanket provides benefits in the form of
thermal protection, which prevents the temperature of the tank car from
reaching 800[emsp14][deg]F, the temperature at which the shell becomes
malleable and its mechanical properties degrade. At temperatures above
800[emsp14][deg]F, the shell will thin as a result of the hoop stress
caused by the increasing pressure in the tank. After a period of time
with excessive pressure, the thinning wall will fracture and result in
a failure of the tank.
    As established in Sec.  179.18 of the HMR, a thermal protection
system serves to prolong the survivability of a tank exposed to a pool
or torch fire by limiting the heat flux into the tank material and its
lading, thereby delaying the increase of pressure in the tank. The
National Transportation Safety Board (NTSB) has acknowledged that the
absence of adequate thermal protection could lead to a higher
likelihood of release and thermal tearing of tank cars.\36\ Conversely,
the presence of adequate thermal protection (i.e., a thermal protection
blanket) should lead to a lower likelihood of these events.
---------------------------------------------------------------------------

    \36\ http://www.ntsb.gov/safety/safety-recs/recletters/R-15-014-017.pdf.
---------------------------------------------------------------------------

Top Fittings Protection
    The HM-251 final rule did not require top fittings protections to
meet DOT-117R. The FAST Act requires enhanced top fittings protection
for all retrofitted cars. The top fittings protection consists of a
structure of specific design requirements intended to minimize damage
to the service equipment. Top fittings protection will minimize the
shearing off of and damage to valves and fittings on the top of the
tank car when involved in a derailment scenario. The NTSB has
acknowledged that the absence of top fittings could lead to a higher
likelihood of release.\37\ The benefits of top fittings protection will
now be realized by the entire flammable liquid fleet.
---------------------------------------------------------------------------

    \37\ http://www.ntsb.gov/safety/safety-recs/recletters/R-12-005-008.pdf.
---------------------------------------------------------------------------

Combined and Quantified Benefits
    The FAST Act mandates a new phase-out schedule for DOT-111 tank
cars--including DOT-111 tank cars constructed to the CPC-1232 industry
standard--used to transport unrefined petroleum products (e.g.,
petroleum crude oil), ethanol, and other Class 3 flammable liquids,
irrespective of train composition. In addition, the FAST Act mandates
that each tank car built to meet the DOT-117 and each non-jacketed tank
car retrofitted to meet the DOT-117R be equipped with a thermal
protection material having a minimum \1/2\-inch thickness that meets
Sec.  179.18(c). Furthermore, the FAST Act specifies minimum top
fittings protection requirements for tank cars retrofit to meet the
DOT-117R.
    As previously mentioned, the HM-251 final rule required Class 3
flammable liquids to be transported in a DOT-117, DOT-117P, or DOT-117R
tank car only if these tank cars were configured as part of an HHFT.
The FAST Act instructed the Secretary to require that all Class 3
flammable liquids be transported in either a DOT-117, DOT-117P, or DOT-
117R tank car, whether or not the flammable liquid is transported as
part of an HHFT. Applying these requirements to individual tank cars
expands the scope of the impacted tank cars, which will reduce the
overall probability and quantity of a Class 3 hazardous liquid material
release and will minimize the consequences of an incident should one
occur, including deaths and injuries.
    In the HM-251 RIA, PHMSA addressed the risks posed by unit trains
or trains with large blocks of tank cars containing flammable liquids.
The FAST Act modifies the retrofit schedule, accelerating deadlines for
unrefined petroleum products in PGII and relaxing the schedule for
retrofitting DOT-111 tank cars transporting Class 3 flammable liquids
other than unrefined petroleum or ethanol. Consistent with the FAST
Act, this rule requires that all tank cars used to transport Class 3
flammable liquids meet either the DOT-117, DOT-117P, or DOT-117R in
part 179 of the HMR, irrespective of train composition.
    Enhancing crude and ethanol tank cars with better top fittings
protection, and all flammable liquid tank cars on manifest trains with
top fittings protection, jackets, thermal protection systems, full
height head shields, and better outlet valves, will reduce the
likelihood of release in the event of a derailment. As a result, fewer
car punctures and fewer releases of material will occur, thereby
mitigating the associated damages. This rule is therefore expected to
reduce the damages to society associated with release of Class 3
flammable liquids in rail transportation.
    The benefits of applying these requirements to trains carrying
large quantities of crude and ethanol (i.e., HHFTs) were estimated in
the HM-251 final rule RIA, though those estimated benefits do not
include the benefit of improved top fittings protection for tank cars
that are retrofit. As noted in that document, the estimated
effectiveness rates do not include any benefits from additional top
fittings protection, because those benefits are relatively small and
uncertain and would apply only to new construction (HM-251 RIA page
184). As a result, we did not estimate benefits of top fittings
protection for the cars and fleet covered in this final rule based on
the prior HM-251 analysis. PHMSA focusses the following benefits
discussion and estimation for this final rule on

requirements for tank cars carrying flammable liquids on manifest
trains only to comply with the 117, 117P, or 117R specification.
    PHMSA assumes the upgrades to the OFL cars produce identical
effectiveness to those estimated in the HM-251 analysis for a
comparable car upgrade--i.e. upgrading or replacing a non-jacketed DOT-
111 would reduce the probability of release by an equivalent amount
whether the car is hauling crude, ethanol, or some OFL. Given the
variation of the properties of materials within this packing group this
assumption may or may not be valid. Some materials may have different
flash points or other properties that enhance or reduce risk, when
compared to crude or ethanol. In addition, some of these products, such
as acrylonitrile stabilized, if ignited, produce fumes or smoke while
burning that is far more toxic than those produced by crude and
ethanol. Thus, for some packing group 3 materials, a fire resulting
from a release that is ignited may pose much higher risks of injury to
nearby populations than a crude or ethanol fire would pose. OFL
products, such as paint, may pose lower risk of injury to nearby
populations than a crude or ethanol fire would pose.
Challenges and Data Limitations
    The wide variety of materials within Packing Group 3 poses a
challenge to monetizing benefits for OFL. There are over 500 Class 3
materials, and the properties of these materials vary widely. Although
the flammable properties of these materials may be similar to crude and
ethanol, the type and extent of contamination of the natural or human
environment that results from accidental release may be completely
different, depending on the commodity involved. In addition, even if
the flammable properties of the liquids were identical, the average
spill size of the incidents affected by this rule is substantially
smaller than the average spill size of incidents involving HHFTs (7,027
gallons compared to 84,000 gallons). Given uncertainties about fixed
and variable costs of spills, PHMSA may not be able to produce valid
per gallon cost estimates for a roughly 7,000 gallon spill based on the
HHFT rule estimates. We do not believe it is meaningful to use the per
gallon spill cost estimates developed in the HM-251 analysis to
monetize damages and costs of the releases affected by this rule since
those estimates were based on research and data involving crude and
ethanol spill damages. As a result, we do not monetize benefits for
this final rule. We instead present a break-even analysis that
identifies how large the per gallon cost or damage of a spill would
need to be for this rule's benefits to equal its costs. We do this by
estimating the likely number of events that may occur over the analysis
period, the likely average size of these events, and by assuming that
the mitigation of the size of events that will result if all OFL tank
cars are upgraded to the DOT-117R standard or replaced with new DOT-117
cars is the same as the mitigation levels estimated in the HMR-251
final rule's regulatory impact analysis for tank cars used on HHFTs.
Incident History
    PHMSA identified train derailments that involved OFL products over
the last decade for which data is complete (2006-2015), and presents
this data in the table below (ordered by date). This table presents the
average release and damages reported in incident report forms. We found
54 events over the past ten years resulting in a total quantity
released of 379,464 gallons. Based on this dataset, the average spill
size is 7,027 gallons. This is much smaller than the average crude/
ethanol spill, which was estimated at 83,602 gallons.

   Table 18--Summary of Class 3 Hazardous Material Derailments With Release Involving Other Flammable Liquids,
                                         Excluding Crude Oil and Ethanol
                                                   [2006-2015]
----------------------------------------------------------------------------------------------------------------
                                                                                Average of
                                                   Total number    Total gallons     quantity         Sum of
                      Year                         of incidents      released        released        reported
                                                                                (gallons)     damages ($) *
----------------------------------------------------------------------------------------------------------------
2006............................................               3             124              41         $99,565
2007............................................              11         117,300          10,664       6,465,335
2008............................................               3           6,132           2,044         187,350
2009............................................               6          17,350           2,892       1,416,713
2010............................................               5          56,390          11,279       2,844,842
2011............................................               4          28,339           7,086       1,575,490
2012............................................               8         105,400          13,175       6,959,474
2013............................................               8          13,703           1,713      10,842,912
2014............................................               4          14,726           3,681       2,558,530
2015............................................               2          20,000          10,000         263,476
                                                 ---------------------------------------------------------------
    Total.......................................              54         379,464        ** 7,027      33,213,687
----------------------------------------------------------------------------------------------------------------
* Damages as reported on the DOT form 5800.1. It should be noted PHMSA did not have a record of any fatalities
  in this time period. These may not include all actual damages, such as costs to the environment and valuations
  for injuries.
** This average is calculated by totaling all release data and dividing by total number of incidents in the last
  10 years (it is not the average of averages).

Forecasting Future Events
    A valid way to predict the number of future derailment events would
be to look at the rate of events per volume shipped, potentially also
controlling for other factors, over a number of years and project that
rate forward based on a forecast of future volume shipped. This was how
PHMSA projected future derailments in the HM-251 RIA. However, PHMSA
was not able to develop such a forecast for OFL due to resource and
data limitations. We would need to map each commodity, in the table of
derailments above, to the corresponding Waybill Sample Standard
Transportation Commodity Code (STCC Code) in order to obtain the volume
of Class 3 flammable liquids shipped by rail per year. In addition,
while production forecasts for energy products are available, no such
forecast is available for the vast majority of OFL products. Thus, even
if PHMSA did estimate a volume-based incident rate, there is no future
volume forecast to

which this rate can be applied to obtain a forecasted number of events.
    As a result, PHMSA uses a basic model to project future events: we
calculate the number of events over 10 past years and project that
``rate'' forward for the 20-year analysis period. Specifically, we note
that 54 events occurred over ten years. The 20-year analysis period is
twice as long as the 10-year historic period evaluated, so PHMSA simply
multiplies the 54 events by two to obtain an estimate of 108 future
release events over 20 years. We spread these events equally over the
20-year analysis period at 5.4 releases per year.
Event Size and Total Annual Release Estimate
    The 54 events analyzed produced a total quantity spilled of 379,464
gallons of product released, resulting in an average of 7,027 gallons
of product released per incident. Combining this figure with the
forecasted number of events above (5.4 releases per year) provides an
estimated average annual volume of 37,946 gallons released per year
(5.4 releases per year multiplied by 7,027 gallons per release). We
note that one OFL incident involved a large number of injuries--56
requiring hospitalization and another 139 requiring treatment but no
hospitalization--and this incident involved a release from a DOT-105
tank car. This incident was not included in the incident table above
because the OFL product was not shipped in a DOT-111. A second event
involving the same material, acrylonitrile stabilized, this time in a
DOT-111, resulted in 4 non-hospitalized injuries. Such events are
evidence of the wide variety of materials being shipped and the
different risks they pose to human health and the environment. This
particular substance is toxic in addition to being flammable, and hence
produces toxic fumes when burned. As a result, medical attention is
necessary to treat anyone exposed to the fumes released by fires
involving this product. Although the typical release involving OFL is
small, for some substances in this hazard class, the impacts on people
and the environment may be substantially more severe than for crude and
ethanol. For other products the impacts may be fairly benign.
Estimated Reduction in Quantity of OFLs Released
    In order to estimate the reduction in product released as a result
of upgrading OFL tank cars to the DOT-117R/117 standard, PHMSA followed
the same procedure and used the same effectiveness rates used in the
HM-251 analysis. We calculated the ratio of each car type upgraded by a
given year as a percentage of the total OFL fleet. The table of these
calculations is presented below.

                                            Table 19--Other Flammable Liquid Fleet Upgrade Share by Car Type
--------------------------------------------------------------------------------------------------------------------------------------------------------
                    Year                       111NJ to 117R %   111J to 117R %   1232NJ to 117R %   1232J to 117R %   111NJ to 117 %     111J to 117 %
--------------------------------------------------------------------------------------------------------------------------------------------------------
2016........................................              0.00              0.00              0.00              0.00              1.47              0.56
2017........................................              0.00              0.00              0.00              0.00              2.47              0.94
2018........................................              0.00              0.00              0.00              0.00              3.24              1.23
2019........................................              0.00              0.00              0.00              0.00              3.62              1.38
2020........................................              0.00              0.00              0.00              0.00              4.12              1.56
2021........................................              0.00              0.00              0.00              0.00              4.71              1.79
2022........................................              0.00              0.00              0.00              0.00              5.07              1.92
2023........................................              0.00              0.00              0.00              0.00              5.66              2.15
2024........................................              0.00              0.00              0.00              0.00              6.88              2.61
2025........................................              9.12              3.46              1.51              1.01              8.31              3.15
2026........................................             18.25              6.93              3.01              2.02              9.42              3.57
2027........................................             27.37             10.39              4.52              3.03             10.26              3.90
2028........................................             36.50             13.85              6.02              4.04             11.04              4.19
2029........................................             45.62             17.32              7.53              5.05             17.74              6.74
2030........................................             45.62             17.32              7.53              5.05             17.74              6.74
2031........................................             45.62             17.32              7.53              5.05             17.74              6.74
2032........................................             45.62             17.32              7.53              5.05             17.74              6.74
2033........................................             45.62             17.32              7.53              5.05             17.74              6.74
2034........................................             45.62             17.32              7.53              5.05             17.74              6.74
2035........................................             45.62             17.32              7.53              5.05             17.74              6.74
--------------------------------------------------------------------------------------------------------------------------------------------------------

    These figures are multiplied by the corresponding effectiveness
rate as pulled from the HM-251 analysis, reproduced below.

                   Table 20--HM-251 Effectiveness Rates
------------------------------------------------------------------------
                                                             Percent
------------------------------------------------------------------------
               Effectiveness Rates, Enhanced Jacketed CPC
------------------------------------------------------------------------
111 non-jacketed to 1232 w jacket.....................              45.9
CPC non-jacketed to jacketed..........................              31.0
111 jacketed to CPC jacketed..........................              37.6
CPC jacketed to CPC jacketed..........................               1.0
------------------------------------------------------------------------
                    Effectiveness Rates, New DOT-117
------------------------------------------------------------------------
111 non-jacketed to AAR 2014..........................              50.4
CPC non-jacketed to AAR 2014..........................              36.8
111 jacketed to AAR 2014..............................              42.8

jacketed 1232 to AAR 2014.............................              16.2
------------------------------------------------------------------------

    As a reminder, a retrofit tank car cannot be equipped with a
thicker shell, so the DOT 117R standard is the equivalent of a jacketed
CPC-1232 with some modest improvements--specifically an improved high
capacity pressure relief valve and a bottom outlet valve design that
reduces the probability of damage during derailment. Therefore, legacy
DOT-111 tank cars that are retrofit improve by the factor represented
by the ``Effectiveness Rates, Enhanced Jacketed CPC'' rows in the table
above. These effectiveness rates can be interpreted as reductions in
the probability that a tank car will release in a derailment, or the
reductions in the expected amount of release product in a derailment.
For cars that are retired and replaced with a new tank car, the
effectiveness rates includes all the retrofit components--jacket,
thermal protection, full height head shields, etc., but also an
increase in shell thickness to 9/16'', which further reduces the
probability of release. A retired and replaced tank car therefore
experiences the higher effectiveness rate presented in the
``Effectiveness Rates, New DOT-117'' rows in the table above. The
products of the upgrade shares by type and the effectiveness rates are
summed across rows to obtain an effectiveness rate for the OFL fleet
upgrades. The individual effectiveness products and total effectiveness
rate are produced in the table below.

                                                              Table 21--Total Effectiveness Rates by Car Type and Type of Upgrade *
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------