Rail Industry Prepares for Evolving Regulations After LNG-by-Rail Rule Overturned

In Sierra Club v. U.S. Department of Transportation, the U.S. Court of Appeals for the D.C. Circuit vacated a 2020 rule by the Pipeline and Hazardous Materials Safety Administration (PHMSA) that allowed the transportation of liquefied natural gas (LNG) by rail without a special permit or approval.  Environmental nonprofits, a collection of states, and the Puyallup Tribe of Indians challenged the rule, arguing that PHMSA failed to comply with the National Environmental Policy Act (NEPA) by not preparing an environmental impact statement (EIS), and that PHMSA did not sufficiently consider the safety risks of transporting LNG by rail.

Benefits of the Rule

The vacated rule sought to facilitate the transport of LNG in DOT-113 class tank cars, which are designed to carry cryogenic liquids. These types of cars have specific safety features to reduce the risk of damage following a collision, derailment, or breach of container. PHMSA required the cars to be upgraded with a thicker outer tank, stronger steel, and special monitoring equipment with additional braking technology.

Basis of the Challenge and Court’s Ruling

The petitioners questioned the safety of the cars, suggesting that a derailment could lead to explosions, intense fires, and the release of extremely cold vapor clouds of LNG. The court agreed that the probability of such incidents, while low, carried severe consequences that warranted further environmental scrutiny. The court also agreed that PHMSA ignored risks associated with including multiple LNG cars within a single train without a required speed limit. Because PHMSA failed to prepare an environmental impact statement. The court concluded that “transporting LNG by rail entails a potent combination of risk and extreme danger that plainly has a significant impact on the environment” and that PHMSA’s decision not to prepare an EIS was “arbitrary and capricious.” The court therefore vacated the LNG rule and remanded to the agency for further proceedings.

What Lies Ahead

Without the 2020 rule in place, rail transport of LNG will continue requiring special permits on a case-by-case basis. The court’s ruling reinforces environmental and public safety concerns, while also posing logistical challenges for companies aiming to expand LNG distribution via rail. The rail industry will await new developments in the agency’s proceedings regarding the transportation of LNG, and will continue to focus on operational protocols, safety risk factors, and emergency response measures to address environmental and community concerns.