Crude oil prices are now approaching what pundits believe is likely to be the bottom phase in the current market cycle. Due to the price downturn, the arbitrage window that drives a substantial portion of crude-by-rail (“CBR”) shipping volumes is closed. Yet once the price recovery begins, producers and refiners will again avail themselves of CBR’s speed and flexibility, and the market will see oil carload volumes recover accordingly. As such, we believe the current time presents an ideal opportunity to assess CBR risk and liability issues to help guide operators, shippers, and regulators as they prepare for an upswing in activity likely to begin in late 2016.
This article is the first in a three-part series and will address the primary factors that influence CBR liability: from factors that influence relatively ordinary fines to the factors that arise in the worst-case scenario. Part Two in the series will analyze the monetary magnitude of liability risks that accompany the liability factors outlined in Part One. And Part Three will offer insights into how BakerHostetler can help railroads, terminal operators, and crude oil shippers fine-tune their risk management strategies and reduce legal exposure as CBR activity begins to recover. Continue Reading