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The Secretary of Transportation to Conduct a Study on the Levels and Strucnire of Insurance for Railroad Carriers That Transport Hazardous Materials

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The Secretary of Transportation to Conduct a Study on the Levels and Strucnire of Insurance for Railroad Carriers That Transport Hazardous Materials THE SECRETARY OF TRAN SPORTATI ON WASHINGTON. DC 20590 November 29, 2017 The Honorable John Thune Chairman, Committee on Commerce, Science, and Transportation United States Senate Washington, DC 20510 Dear Mr. Chairman: Enclosed is the Rail Liability Study as required by Section 73 10 of the "Fixing America's Surface Transportation Act of 2015" (Publi c Law 11 4-94). The Act requires the Secretary of Transportation to conduct a study on the levels and strucnire of insurance for railroad carriers that transport hazardous materials. The U.S. Department of Transpo1tation, through the Pipeline and Hazardous Materials Safety Administration, has completed the study and issues this letter and the attached Report to prcsem its findings. Sim il ar letters have been sen t to the Ranking Member of the Senate Committee on Commerce, Science, and Transportation and to the Chairman and Ranking Member of the House Committee on Transportation and In fra structure. Enclosure THE SECRETARY OF TRANSPORTATION WASHINGTON. DC 20590 November 29, 2017 The Honorable Bi ll Nelson Ranking Member, Committee on Commerce, Science, and Transportation Uni ted States Senate Washington, DC 205 10 Dear Senator Nelson: Enc losed is the Rail Liability Study as required by Section 7310 of the "Fixing America's Surface Transportation Act of 2015" (Public Law 114-94). The Act requires the Secretary of Transportation to conduct a study on the levels and stmcture of insurance for railroad carriers that transport hazardous materials. The U.S. Department of Transportation, through the Pi pe line and I lazardous Materials Safety Administration, has completed the study and issues this lcner and the attached Report to present its findin gs. Simi lar letters have been sent to the Chairman of the Senate Committee on Commerce, Science, and Transportation and to the Chairman and Ran king Member of the I louse Committee on Transportation and In frastmcture. Sincerely, Enclosure THE SECRET ARY OF TRANS PORT A TION WASHINGTON. DC 20590 November 29, 20 17 The Honorable Bi ll Shuster Chairman, Committee on Transportation and In frastructmc U.S. House of Representati ves Washington, DC 20515 Dear Mr. Chairman: Enclosed is the Rail Liability Study as required by Secti on 73 10 of the "Fixing America's Surface Transportation Act of 20 15" (Pub li c Law 1 14-94). The Act requires the Secretary of Transportation to conduct a study on the levels and structure of insurance for railroad carriers that transport hazardous materi als. The U.S. Department of Transportation, through the Pipeline and Hazardous Materials Safety /\dministration, has completed the study and issues thi s letter and the attached Report to present its findings. Similar letters have been sent to the Ranking Member of the I louse Committee on Transportation and Infrastructure and lo the Chairman and Ranking Member of the Senate Committee on Commerce, Science, and Transportation. Sincerely, Enclosure THE SECRETARY OF TRANSPORTATION WASH INGTON. DC 20590 November 29, 2017 The Honorable Peter DeFazio Ranking Member, Committee on Transportation and Infrastructure U.S. House of Representatives Washington, DC 205 15 Dear Congressman DeFazio: Enclosed is the Rail Liability Study as required by Section 73 10 of the "Fixing America's Surface Transportation Act of 2015" (Public Law 114-94). The Act requires the Secretary of Transportation to conduct a study on the levels and structure of insurance fo r railroad carriers that transport haza rdous materials. The U.S. Department of Transportation, through the Pipeline and I lazardous Materials Safety Adm ini stration, has completed the study and issues thi s letter and the attached Report to present its findings. Similar letters have been sent to the Chairman of the House Committee on Transportation and Infrastructure and to the Chaim1an and Ranking Member of the Senate Committee on Commerce, Science, and Transportation. Sincerely, Enclosure U.S. Department 1200 New Jersey Avenue, SE of Transportation Washington, DC 0590 Pipeline and Hazardous Materials Safety Administration Hazardous Materials by Rail Liability Study Report to Congress A Report Pursuant to Section 7310 of the Fixing America’s Surface Transportation (FAST) Act Contents List of Tables ..................................................................................................................................3 List of Figures .................................................................................................................................3 Acronyms and Abbreviations .......................................................................................................4 Executive Summary .......................................................................................................................6 1 Introduction ..........................................................................................................................13 Purpose ...................................................................................................................................... 13 Background ............................................................................................................................... 14 2 Current Levels and Structure of Insurance .......................................................................26 Overview ................................................................................................................................... 26 Liability Framework ................................................................................................................. 26 Insurance Level and Structure ................................................................................................... 30 Common Carrier Mandate and Rail Pricing.............................................................................. 34 3 Necessary and Appropriate Levels of Insurance ...............................................................36 Overview ................................................................................................................................... 36 The Risk of Rail Hazardous Material Incidents ........................................................................ 36 Efficiency of Risk Allocation in Hazmat Freight Rail Market ................................................. 46 Summary ................................................................................................................................... 52 4 Alternative Insurance Models .............................................................................................55 Overview ................................................................................................................................... 55 Requirements for Minimum Levels of Financial Responsibility .............................................. 56 Insurance Pooling Among Railroads ........................................................................................ 61 Secondary Liability Pool Funded by Shippers .......................................................................... 64 Government Provides Direct Insurance .................................................................................... 77 Other Liability and Insurance Issues ......................................................................................... 79 Summary ................................................................................................................................... 85 5 Conclusion .............................................................................................................................87 5Appendix A Fast Act Language ................................................................................................89 5Appendix B Request for Comment Questions............................................................................. 2 List of Tables Table 1. Railroad Profiles by Class (2012 Data) ......................................................................................................... 15 Table 2. Average Railroad Statistics by Class (2012 Data) ......................................................................................... 15 Table 3. Rail Hazardous Materials Shipments as a Share of Total (2012) .................................................................. 16 Table 4. Hazardous Material Rail Shipment Share by Hazard Class (2012) ............................................................... 17 Table 5. Key Freight Rail Transportation Agencies and Authorities ........................................................................... 21 Table 6. Top-Level Causes of Rail Incidents Involving Hazmat (2001-2016) ............................................................ 39 Table 7. Hazmat Incidents Differentiated by Railroad Class and Location (2001-2016) ............................................ 39 Table 8. Table of Minimum Liability Insurance Coverage (volumes in tonnes per year) ........................................... 66 List of Figures Figure 1. Indexed Ton-Miles for Hazardous Materials and Crude Oil and Ethanol (1995-2014) ............................... 18 Figure 2. Refinery Receipts of Crude Oil by Rail (2010-2015) ................................................................................... 19 Figure 3. Refinery Receipts of Crude Oil by Method of Transportation (2010-2015) ................................................ 20 Figure 4. Indexed Ton-Miles for Rail Freight, Hazardous Materials, and Chlorine
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