Rail Safety Regulation and Transport Brokers’ Liability 2014 Conference on Transportation Innovation and Cost Savings By Heather C. Devine (Partner)

Do Rails Provide Safe Transport? U.S. National Transportation Safety Board 1 : 8 significant oil train accidents in the U.S. and Canada in the past year all involving trains hauling crude oil The risks are elevated when you combine dangerous goods with aging rail infrastructure and a decline in safety standards [1] The Associated Press, “Lynchburg, Virginia train derailment spills crude oil into James River” (30 April 2014), online: CBC News.

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CANUTEC Registration System (“CRS”) 1 A national advisory service that assists emergency response personnel in handling dangerous goods emergencies on a 24-hour basis. operated by the Transportation of Dangerous Goods Directorate of Transport Canada.  1,000 emergency situations per year; 25,000 telephone calls per year [1] Transport Canada, “CANUTEC: Services” (April 26, 2012) online: Government of Canada ; Transport Canada, “CANUTEC” (March 31, 2014) online: Government of Canada. 4

Train Derailments & Safety Concerns : 1.Lac Megantic (July 2013) Rethinking the Federal Rail Safety Regulatory Regime 2.Lynchburg Virginia (April 2014) Spurring stricter regulations?

Lac Megantic 1 July 6, 2013 a 73-car train carrying crude oil derailed in downtown Lac Megantic The resulting explosion killed 47 people and destroyed the town’s core [1] Transport Canada, “Report and Recommendations of the Transportation of Dangerous Goods General Policy Advisory Council (GPAC) Emergency Response Assistance Plan (ERAP) Working Group Relation to Class 3 Flammable Liquids” (31 January 2014), online: Transport Canada.

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Transportation of Dangerous Goods Act, 1992 Applies to all handling, offering for transport and transporting of dangerous goods by any means of transport, both inter and intra- provincially  Harmonized across Canada [1] R v Cariboo Pulp and Paper Co., [2008] BCJ no 2034, 261 BCAC 171 at para 27 (BCCA).

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Classification of Dangerous Goods The consignor/shipper has the responsibility of ensuring that all dangerous goods have been properly classified before allowing the carrier to take possession of the goods for transport 1 [1] Transportation of Dangerous Goods Regulations, SOR/ at s ClassDivisionCharacteristics 3 Flammable Liquids No divisionA Flammable liquid with a closed-up flash point less than or equal to 60.0° C

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The Aftermath of Lac Mégantic: Enhancing Safe Shipping Measures

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Transportation Safety Board Recommendations 3 key safety issues for the Canadian rail system 1 : 1.Vulnerability of DOT 111 tank cars to sustain damage 2.Route planning and analysis for trains carrying dangerous goods 3.Requirements for ERAP [1] Transport Canada, “Report and Recommendations of the Transportation of Dangerous Goods General Policy Advisory Council (GPAC) Emergency Response Assistance Plan (ERAP) Working Group Relation to Class 3 Flammable Liquids” (31 January 2014), online: Transport Canada.

DOT 111 Rail Tank Cars 1 228,000 DOT-111 cars in service in N.A. (70% of all tankers) 92,000 carry flammable liquids [1] Canadian railways to replace or fix DOT-111 tank cars used for internal use, Ross Marowits, The Canadian Press, Tuesday March 25, 2004

Minister of Transport: New Standards for Rail Tank Cars 1 New DOT 111 tank cars to be built with thicker steel requirements Retrofit: $70K New car: $100k Will also enhance the classification regime for the transport of dangerous goods [1] Transport Canada, “New Standards for Rail Tank Cars” (January 10, 2014), online: Canada News Centre ; see also Ross Marowits, The Canadian Press, Tuesday March 25, 2004.

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Emergency Directive pursuant to s. 33 of the Railway Safety Act This included specific operating procedures for certification 1 Transport Canada issued Ministerial Order obligating railway companies to establish rules for permanent compliance with the emergency directive requirements [1] Transport Canada, “Transport Canada announces emergency directive to increase rail safety” (July 23, 2013), online: Transport Canada News Releases 2013 ; Transport Canada, “Minister Raitt marks National Railway Day” (November 7, 2013), online: Transport Canada News Releases 2013.

Transport Canada approved updated Canadian Rail Operating Rules 1 More stringent operational safety requirements for railway companies including: Unattended locomotives secured Handbrake testing Securement requirement for unattended trains and equipment Strict conditions on air brake use Minimum of 2 crew operating freight train with dangerous goods [1] Transport Canada, “Updated Canadian Rail Operating Rules (CROR)” (January 27, 2014), online:. 19

Protective Direction No. 32 pursuant to s. 32 of the Transportation of Dangerous Goods Act, Directed rail companies to share yearly information on nature and volume of goods being transported with municipalities (like Hamilton) [1] Transport Canada, “Protective Direction No. 32” (November 20, 2013), online: Transport Canada Protective Direction ; see also Transport Canada, “Harper government acts to increase transportation of dangerous goods information sharing between rail companies and municipalities” (November 20, 2013), online: Transport Canada News Releases 2013.

Transport Canada collaborated with Canadian Municipalities to discuss railway and transport of dangerous goods 1 Improving risk assessments Emergency planning and response capability Increasing insurance requirements for railways and shippers [1] Transport Canada, “Minister Raitt announces new rail and dangerous goods requirements: Strengthening transportation safety for Canadians and their communities” (June 27, 2014), online. 21

Transport Canada changes to Transportation Information Regulations, effective July 15, Class I and Class II rail carriers required to report leading indicator data to Transport Canada Used to proactively identify and address safety risks before accidents occur [1] Government of Canada, “Transportation Information Regulations” (June 27, 2014), online:. 22

Pending Proposed Amendments: Railway Safety Management System Regulations 1 “identify an accountable executive” Includes local railway companies Transportation of Dangerous Goods Regulations New standards for means of containment 2 [1] Government of Canada, “Railway Safety Management System Regulations” (June 27, 2014), online: Backgrounders. [3] Government of Canada, “Regulations Amending the Transportation of Dangerous Goods Regulations (Update of Standards),” (November 16, 2013), online: Canada Gazette.

Emergency Response Assistance Plan (ERAP) 1 : Addresses what to do in the event of a transportation accident For dangerous goods that require special expertise and response equipment to respond to an incident Provide support to first responders [1] Transport Canada, “Protective Direction No. 32” (November 20, 2013), online: Transport Canada Protective Direction ; see also Transport Canada, “Harper government acts to increase transportation of dangerous goods information sharing between rail companies and municipalities” (November 20, 2013), online: Transport Canada News Releases 2013.

Railway Safety Administrative Monetary Penalties Regulations 1 Introduced penalties as an additional enforcement tool to improve railway safety Transport Canada able to fine railway companies for violations to the Railway Safety Act [1] Government of Canada, “Proposed Railway Safety Administrative Monetary Penalties Regulations” (May 16, 2014), online:. 25

Railway Safety Administrative Monetary Penalties Regulations Penalty is based on the severity of the act and its consequences Max for violation of a rule made under the Regulation: Individual: $125,000 Corporation: $250,000 26

Transport Canada launched second stage of consultations with stakeholders to define specifics of new regime 1 Strengthen the liability and compensation regime Ensure railways and shippers are held accountable in the event of an incident. [1] Government of Canada, “Government of Canada acts to better protect communities and taxpayers in the event of rail accidents” (August 1, 2014), online:. 27

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Lynchburg, Virginia 1 17 / 105 oil tankers on the CSX Transportation train bound for the Virginia coast derailed Three of the oil tankers fell into the river [1] Ralph Vartabedian, “No serious impacts after Virginia oil train derailment, officials say” (2 May 2014), online: Los Angeles Times.

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U.S Department of Transportation Emergency Order 1 : each railroad operating trains containing more than 1,000,000 gallons of Bakken crude oil, OR approximately 35 tank cars, must notify the appropriate State Emergency Response Commissions (SERCs) of expected movement of such trains [1] Rail Resource, “DOT issues emergency order requiring railroads carrying crude oil to notify SERC” (7 May 2014), online: Rail Resource. 32

Notifications to State Emergency Response Commissions (SERCs) must include 1 : estimated volumes of Bakken crude oil being transported frequencies of anticipated train traffic the route through which Bakken crude oil will be transported contact information for at least one responsible party [1] Rail Resource, “DOT issues emergency order requiring railroads carrying crude oil to notify SERC” (7 May 2014), online: Rail Resource. 33

Joint Safety Advisory, Number Issued by the Federal Railroad Administration (FRA) and Pipeline and Hazardous Materials Safety Administration (PHMSA) Requires that Bakken crude oil be shipped in tank cars with the highest level of integrity available [1] Rail Resource, “DOT issues emergency order requiring railroads carrying crude oil to notify SERC” (7 May 2014), online: Rail Resource. 34

Future Projects: Approximately a dozen plans to accelerate oil shipments via rail to the North West United States Focused on sourcing North Dakota and Alberta oil shipments to a string of refineries dotted along or near the U.S. western coastline 1 [1] Yadullah Hussain, “Oil by rail: Canada’s way out west?” (11 July 2013), online: Financial Post.

“The projects are designed to transport fuel from the Bakken oil formation in North Dakota, but the infrastructure could also be used to export Canadian tar sands oil.” 1 The combined oil-by-rail projects could add up to 720,000 barrels per day [1] Yadullah Hussain, “Oil by rail: Canada’s way out west?” (11 July 2013), online: Financial Post.

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Strict Regulations + Noteworthy Train Derailments  Increase in Truck Transportation of Oil ?

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Canadian Trucking Alliance (TA) 1 Frequency and severity of most incidents involving trucks is extremely low Dangerous goods are shipped in a single small container VS Multiple tank cars on trains [1] Truck News, “CTA issues white paper exploring transportation of dangerous goods by truck” (26 November 2013) online: Truck News.

CTA: Measures for Accident Reduction 1 A universal mandate requiring trucks to be equipped with an electronic recording device Manufacturing standard requiring all new heavy trucks to be equipped with a roll stability system Mandatory activation of truck speed limiters [1] Truck News, “CTA issues white paper exploring transportation of dangerous goods by truck” (26 November 2013) online: Truck News.

What does this mean for brokers? Brokers have traditionally been largely unregulated However, these new regulations and directives do indirectly and sometimes directly affect brokers E.g. protective directions under S.32 of the Transportation of Dangerous Goods Act, 1992, can cover persons “offering for transport” dangerous goods 42

Unregulated brokers have always been subject to common law Governing the principal-agent relationship, negligence, and breaches of contract Liability can arise due to negligence, negligent misrepresentation and breach of contract Broker must make the role as agent clear, exercising diligence in selecting the carrier, only taking liability for breach of that obligation, and not that of the carrier 43

What can a broker do to avoid liability? Keep up to date on regulations and directives affecting the relevant transport industry Contractually avoid their ambit, or ensure compliance if avoidance is impossible All relationships should be governed by written contract Distinguish the roles of shipper, broker and carrier Ensure all parties are in compliance with laws Shift liability and adequate insurance obligations to others 44

What can a broker do to avoid liability? Perhaps most importantly, brokers should develop and impose their own policies and procedures for self regulation Ensuring their protected from liability Keep a paper-trail of all regulatory compliance and liability avoidance 45

Thank You montréal  ottawa  toronto  hamilton  waterloo region  calgary   vancouver  beijing  moscow  london Heather C. Devine (905)