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December 02, 2014
Proposed Department of Transportation Rule Could Cost $60 Billion According to Brattle Economists

A report authored by Brattle economists finds that a new rule for rail tank car standards proposed by the U.S. Department of Transportation (DOT) could cost more than $60 billion due to tank cars modifications, lost tank car service time, and possible increased shipping costs. Brattle’s report, which was undertaken on behalf of the Railway Supply Institute’s Committee on Tank Cars (RSI-CTC), reviewed the Pipeline and Hazardous Materials Safety Administration’s (PHMSA) Draft Regulatory Impact Analysis for its Notice of Proposed Rulemaking regarding “Hazardous Materials: Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains” for the purpose of providing constructive comments.

The report, “A Review of the Pipeline and Hazardous Materials Safety Administration’s Draft Regulatory Impact Analysis,” analyzed data on the current and proposed fleet of rail tank cars in North America. It showed that PHMSA underestimated the overall costs while at the same time overstated benefits in several key areas by overestimating accident rates and gallons spilled per incident. Perhaps most importantly, PHMSA did not account for the loss of crude oil and ethanol production that could occur if tank cars cannot be modified in time to comply with the schedule proposed modification deadlines.

The report noted that the indirect effects of PHMSAs proposed regulations could be severe:

  • Decreases in crude oil production would likely translate to higher prices at the pump as costs are passed on to consumers. These effects would be magnified in geographic regions where production drops.
  • Given the U.S. requirements to blend gasoline with ethanol, a reduction in ethanol production may also impact the availability and price of gasoline.
  • An overly aggressive timetable for modifications would greatly constrain shop capacity for work on other types of rail cars, including hoppers, gondolas, and box cars, which could result in shortages for transport of other commodities.

For additional information on RSI-CTC’s comments and recommendations to PHMSA, please visit the committee’s website. The report is available for download here.