UP STB Filings Update – 03-25-09

Two new filings were posted to the STB web site on the UP declaratory order proceedings (FD 35219). On Friday a TSA filing was posted. On Monday a filing from US Magnesium was posted. With each new posting the situation gets more complicated. Request for Delay The Transportation Security Administration filing was a request for delay. TSA was one of the two federal agencies (the Federal Railroad Administration was the other) mentioned in the STB notice of initiation of declaratory order proceedings as potentially having information valuable in the proceedings. Additionally, the STB notified the TSA by letter that they were ‘invited and encouraged’ to provide specific input about the security issues raised by UP. The TSA filing states that:

“The issues the petition raises are complex and require a review of how they relate to TSA regulations and policies. It will be difficult to complete TSA's analysis and coordinate our comments with other components within the Department of Homeland Security, and submit the comments to the Board by March 31, 2009.”

The TSA requested that the filing date be extended until April 10th, 2009. While I am not a lawyer, I do not see how complicated the transportation security issues are in this case. Union Pacific claims that they have been asked to reduce the number of PIH shipments through HTUA. That has certainly not been the intent of the only freight rail regulation that TSA has published to date. Either there has been private communications made to UP to that effect or there have not. In either case the STB needs to be told. What I suspect is taking place is that the Obama Administration is taking a hard look at the hazmat rail routing issue. There have certainly been vigorous calls for tougher restrictions on TIH shipments through HTUA among some supporters of the Administration. TSA comments in this case may provide a window to watch how the new administration is planning on proceeding on this issue. Shipper Self-Identified It seemed a little odd to me that in the original public filing UP redacted the name of the shipper that had originally requested the rates for these chlorine shipments; there just are not that many chlorine producers in Utah. Yesterday, US Magnesium filed a reply to the UP petition and identified themselves as the chlorine producer. Their filing includes a request for the STB to compel UP to provide the common carrier rates originally requested by US Magnesium. The identity of the chlorine producer adds another peculiar twist to the issue. US Magnesium produces chlorine as a byproduct of their magnesium production. They harvest (for want of a better word) magnesium chloride from the Great Salt Lake and separate it into its two constituent components. As their magnesium production increases, so does their chlorine production. To make matters more complicated, US Magnesium is the only domestic magnesium producer. According to their filing US Magnesium had requested new chlorine shipment rates for shipping chlorine from their facility in Utah to 35 cities where potential customers existed. They wanted these rates so that they could quote delivered chlorine costs to potential customers in these cities. UP initially provided rates to all but seven of the cities. Subsequent to its filing of the petition to the STB, UP provided tariff rate to three of the seven cities (Dupo, Ill; Festus, MO; and Memphis, TN). Looking at the supporting documents that US Magnesium included in their filing it may be that they inadvertently encouraged UP to file their original petition. In a copy of a January 16th letter to UP (Appendix A) US Magnesium raised the possibility of questioning the fairness of UP rates for chlorine transport. In the next to last paragraph of the letter Howard Kaplan (VP, US Magnesium) writes:

“US Magnesium and UP have reached mutually satisfactory solutions in previous negotiations. We remain open to reasonable solutions and encourage UP to join together with US Magnesium again in developing an acceptable negotiated solution. If such does not occur we see a distinct possibility that US Magnesium will reluctantly decide to seek a rate reasonableness determination from the Surface Transportation Board.”

UP may have decided that filing their petition could fulfill a two fold purpose; pre-empt the rate fairness filing and establish the precedent that there are limits to the carriers obligation to provide carriage for TIH chemicals. Note: Yesterday US Magnesium filed a correction to their earlier reply. It was a minor correction to a footnote in their original submission that appears to be of now major consequence. Moving Forward We still have to hear from the Federal Railroad Administration. If, as I suspect, the motivation for the delay request by TSA is the Obama Administration reviewing their stance on the hazmat routing issue, I would be very surprised if we did not see a similar request for delay from the FRA before the week is out. Other chlorine shippers are sure to chime in with their views on the common carrier obligation issue. This morning the STB filings web page showed that Olin was filing a reply to the UP petition, but no document was attached. I expect that that document will be available later today. I also expect supporters of more aggressive route restrictions to provide supporting comments for the UP petition. This issue has the potential to be a precedent setting matter. If the STB rules in favor of the UP petition, it will certainly lead to multiple requests from other carriers to avoid the carriage of TIH chemicals through HTUA.