Monday, May 11, 2009

US Magnesium Cries Fowl

While we are still waiting on the decision from the Surface Transportation Board on the petition from Union Pacific about providing chlorine shipment rates, US Magnesium has taken the unusual step of filing a rebuttal to the UP reply to comments on their original petition petition. The reason that USM took this step is that they noted “several significant misstatements of fact” in the UP reply. In its reply UP noted that USM would not suffer financially because of not being able to ship to the four destinations in question because USM was not in the business of manufacturing chlorine; its principle product was magnesium. For example, on page 8 of its reply UP stated: “USM essentially confirmed that UP's decision would not have a meaningful impact on USM”. Then again on page 10 UP claims: “Neither USM nor any other party has shown that UP's decision not to transport USM shipments to the four destinations will have a significant impact on its business or the broader chlorine marketplace.” In its rebuttal USM notes that the sale of chlorine is key component of their business. They note that they clearly explained this in their reply to the UP petition when they stated (pg 6) that: “Without the sales of chlorine produced by its operations it is possible that the Rowley facility would close.” They go on to explain in their rebuttal that:
“USM also clearly stated [pg 6] that it must have the ability to ship chlorine to the four Gulf Coast destinations for which UP has refused to provide rates due to the unpredictability of the market for magnesium, which in turn can make USM's chlorine production highly variable in a given year. Such variability requires USM to have the ability to ship chlorine to the Gulf Coast where the demand for chlorine is the greatest and customers located there are capable of absorbing unexpected volumes. This enables USM's magnesium production to ramp up to meet demand.”
USM questions UP’s claim (in footnote 12 on page 9) that: “rail transportation of chlorine is just one of USM's options for eliminating an unwanted byproduct of its primary activities”. USM noted in their original reply that their previous option of venting to the atmosphere is no longer authorized by environmental regulations. They go on to state in this rebuttal (pg 2) that clearly this assertion by UP is not “remotely supported by USM's reply to UP's Petition.” As I noted in my earlier blog UP’s failure to effectively counter the questioning of the facts in its original petition made in a variety of replies to that petition will make it difficult for STB to rule in their favor. These two rebuttals to claims of fact in UP’s reply make a favorable STB ruling even less likely. Now, while we wait for the STB ruling on the petition, it will be interesting to see if UP files an additional rebuttal.

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