Tuesday, May 5, 2009

Replies to Comments on UP STB Petition

Last Friday the Surface Transportation Board (STB) posted three formal replies to the comments received on the Union Pacific petition for ‘clarification’ of their common carrier obligation to provide rate quotes to US Magnesium for the transport of chlorine gas to facilities with ‘adequate supplies’ of chlorine from suppliers located significantly closer to the facility than the US Magnesium ship point in Utah. Those replies in support and opposition to the UP petition came from: Union Pacific Association of American Railroads American Chemistry Council Union Pacific Reply UP says that ‘attacks’ on the UP petition fall into two categories; the Board lacks jurisdiction, and UP is trying to manipulate markets. UP rejects both types of claims. UP maintains that the board has the jurisdiction to determine if the US Magnesium request for rates is ‘reasonable’. The problem with this interpretation is that there is no ‘reasonable’ requirement for requesting a rate. The reasonable standard is only applied to the request for ‘service’ that would possibly come after the rate was established. UP questions the legitimacy of the claims of ‘market manipulation’ when the current rules already manipulate the rail service markets. UP notes that it is not able to make legitimate business decisions about the use of their manpower and equipment because of their ‘common carrier’ obligation. They note that the liability issues associated with carriage of TIH chemicals like chlorine would normally call for a business decision to avoid carrying that chemical Finally, UP maintains that it is requesting a narrow ruling from the STB that the request for rates to these four (out of 35 requested) destinations was not reasonable based on the combination of distance, HTUA’s traversed, and availability of alternate supply. This contradicts it’s wider request to “clarify the extent of UP's common earner obligation with regard to transporting chlorine” in its petition for a declaratory order. Association of American Railroads The AAR reply looks at some of the legal issues raised in various replies to the UP petition. Generally they hold that the legal issues raised against the petition do not adequately reflect the case law which actually supports the UP petition. They quote a variety of precedents that indicate that STB has the sole authority to decide the reasonableness standard for requests for service. They note two potentially important points; the ‘reasonable’ standard may be raised in a request for rates case, and that the Board may hold a higher safety standard than that set forth in current safety regulations. The real meat of the AAR argument is found in its concluding statement:
“In determining the reasonableness of the request to transport TIH materials, the Board should apply the relevant legal principles and address the public policy concerns set forth above and as more fully discussed in Ex Parte No. 677 (Sub- No. 1). The AAR also respectfully requests that the Board act as expeditiously as possible to issue the policy statement urged by the AAR in Ex Parte No. 677 (Sub- No.l) which would allow a carrier to impose reasonable liability-sharing arrangements on shippers as a condition of moving TIH materials.”
This argument makes it look like the UP petition is an attempt to make the STB reach a ruling on last year’s hearings on the common carrier obligation to carry TIH chemicals. It makes it clear that what the railroads are actually looking for is a method to require that TIH shippers share in the liability burden of those shipments. American Chemistry Council Reply The ACC reply is actually a ‘joint’ reply of the ACC and six other organizations representing groups of shippers that rely on the railroads for shipment of hazardous chemicals including a variety of TIH chemicals. As in their earlier comments the ‘Joint Shippers’ oppose the UP petition. Here they note that both TSA and DOT in their comments affirm that there is no safety or security reason to support the petition. They object to many of the claims about liability issues raised by the AAR and other railroad commentors, noting that UP did not make that claim in their original petition so the issue cannot be legitimately raised in the reply to petition comments. My Comments on the Comments One of the main claims in UP’s petition was that there were adequate supplies of chlorine available to the potential recipients of the US Magnesium chlorine shipments that were from closer sources of supply so the risks associated with the longer shipments were not ‘reasonable’. A number of commentors noted that the assertion of adequate supplies was not, in fact, true. UP made no effort in their reply to comments to address this apparent conflict in factual claims. In effect this allows the counter claim to invalidate the basis for the UP claim. In my mind this is the fatal argument against the UP petition. If there are not adequate supplies available from closer sources and TSA-DOT assert that there are adequate regulations to protect the longer shipments, then the STB has little recourse but to find that the US Magnesium request was reasonable and UP must provide the requested rates. We will now wait for the STB decision on the petition. Hopefully it will come faster than the still open STB Ex Parte 677 and 677(sub no1) that attempted to address the issue of common carrier obligations for TIH shipments and the liability issues associated with those shipments. Of course, an early resolution to those two earlier issues would probably have prevented this petition from being filed.

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