Complex TIH Transportation Issues of Canexus v BNSF

This week both BNSF and UP have filed responses to the complaint Canexus Chemicals Canada initiated with the Surface Transportation Board (STB) about the transportation of chlorine from the Canexus facility in North Vancouver, BC to Kansas City, MO. As I noted in my initial blog on this issue, this is a TIH routing issue made complex by TIH routing regulations, PTC regulations and previous STB rules.

Background Information

Canexus produces chlorine gas at its chlor-alkali facility in North Vancouver, BC. It has customers for that chlorine in the Southeast United States. There is no single railroad that can provide delivery service of that chlorine from source to customer. Some of those customers receive delivery service from UP. Canexus had negotiated a delivery contract with UP for those customers with UP accepting the chlorine shipments at an interchange location in Kansas City, MO. BNSF has declined to provide service from the Northwest to Kansas City for that interchange; countering with a proposed interchange with UP in Washington or Oregon. Canexus maintains that BNSF has a common carrier obligation to provide that service to Kansas City.

Complexities

First issue, BNSF does not actually service the production facility in British Columbia. That initial rail service is provided by CN. BNSF does provide service from an interchange with CN in Canada, but CN also provides service directly to the Mid-Western United States where there is a potential interchange with UP at St. Paul, MN. Other non-BNSF interchange options include interline arrangements through CP. So, BNSF maintains that, with other options for the required service to customers in the Southeast United States, they should not be compelled to provide the requested service.

The second issue is the high-cost of TIH transport. BNSF notes that the liability issues associated with a potential chlorine release and the requirements for the installation of positive train control equipment on lines with TIH service both increase the costs of providing TIH service. BNSF notes that they are not currently able to charge TIH shippers rates that would cover these increased costs.

The third issue involved in this dispute is the regulatory requirement for railroads to conduct TIH route planning that minimizes the safety and security risks associated with such shipments.

In its response to the Boards requirement to respond to the Canexus complaint BNSF states:

“Normally, the originating carrier exercises that preference by selecting the long haul in order to maximize its revenue division and contribution. But in the case of TIH/PIH, the normal commercial incentive to maximize contribution is not always controlling. The risk of liability, and the increased capital and operating costs from transporting TIH/PIH traffic far outweigh the potential revenue contribution and therefore BNSF logically seeks to minimize its potential exposure by minimizing its length of haul.”

While not as clearly stated in the UP response to the same order, UP has attempted to shorten its segment of the chlorine transport by accepting an interchange at Kansas City instead of in Washington or Oregon by directly negotiating a delivery contract with Canexus.

BNSF has filed a motion with the Board to refer this dispute to a mediation panel as is typically used in disputes about selecting interchange locations. They note that if the Board so orders, it will voluntarily extend its current arrangements for chlorine shipments to Kansas City until the end of July.

Oral Arguments Ordered

Yesterday the STB issued a conditional decision calling for oral arguments to be presented on June 23rd. It will not hold those arguments if both UP and Canexus agree to the mediation proposed by BNSF. UP and Canexus have been ordered to respond to the mediation proposal by June 20th.