Thursday, March 19, 2009

Chlorine Institute Response to UP Petition

Last week I reported on the initiation of declaratory order proceedings by the Surface Transportation Board. Those proceedings were initiated in response to a petition by the Union Pacific Railroad (UP). On Thursday the Chlorine Institute (CI) filed a response to the original petition by UP. In their response CI claims that the UP petition is based on “incomplete facts, as well as facts that are untrue and that the UP should know to be untrue”. CI claims that the petition is actually “a request for an exemption to the UP's common carrier obligations”. Claims and Counter-Claims The original petition by UP was a request for approval to not provide a rate quote on a series of shipment of chlorine gas from a redacted shipper in Utah to customers in Louisiana and Texas. The petition claimed that there were adequate chlorine resources within 300 miles of each of the customers and that the UP route to serve these shipments would have required the chlorine to transit four high-threat urban areas (HTUAs) while the closer alternative sources would not have required transit of any additional HTUAs. The CI counter claims that “there simply is not enough chlorine produced in the Gulf Region to meet demand. Some portion of Northeastern, Western and even Canadian production needs to be utilized to fulfill Gulf Coast demand”. Further, they note that UP is cognizant of this fact since “UP delivers 250,000 tons of chlorine per year to one of these destinations in a move that covers more than 800 miles”. Common Carrier Obligations The railroad industry for the last couple of years has been trying to avoid having to carry poisonous inhalation hazard (PIH) chemicals. They have openly expressed their concerns about their potential liability exposure in the event of an accident or terrorist attack that resulted in the catastrophic release of a PIH chemical in an HTUA or other large urban area. Unfortunately, they have a ‘common carrier obligation’ to carry any properly offered shipment. Since railroads are effectively monopolies in most of the area that they serve they are regulated by the Federal government. The Surface Transportation Board is the government agency that is responsible for overseeing the railroad rate setting process and serves as a resolution agency for disputes between carriers and shippers. Based on the claims and counter-claims to date it appears that what the UP has been attempting to do is to establish an acceptable reason to avoid their common carrier obligation with respect to PIH chemicals. Apparently they are attempting to establish that a combination of alternative supply and safety-security concerns are adequate reasons not to establish a new PIH service. Establishing this precedent would allow the railroads to use these and similar arguments to avoid carrying PIH chemicals on other routes. The STB has asked the Federal Railroad Administration (FRA) and the Transportation Safety Administration (TSA) to weigh in on the safety and security arguments presented by UP. It will be interesting to see how the new Administration deals with this issue.

1 comment:

Anonymous said...

Would be great if you have time to dig into what has happened in the secret meetings at FRA, shielded from anti-Trust violations under the FRA's Section 333 authority, between shippers and/or carriers of TIH cargoes, the aim of which was/is to reduce risk by shortening the length of TIH routes. DHS was reportedly alarmed by the lengths of these (not sure DOT was).... If there is a single positive risk-reduction result of these meetings (i.e., Bush Admin trying to show the industry can reduce risks voluntarily without government mandates), where is the evidence?

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