Wednesday, June 3, 2009

UP STB Petition Still Pending

It has been almost three weeks since I last wrote about the UP petition to the Surface Transportation Board to be allowed to deny a request from US Magnesium to provide a tariff quote for the transportation of chlorine to four sites on the Gulf Coast. We are still waiting for the STB decision, but there have been some additional informational filings in the case culminated recently by another response from UP. The comments were received from: Hasa AMVAC Chemical Altivia Corp Hasa Comments Hasa notes that they object to the idea that regulated railroads may decide from whom Hasa may purchase chlorine. Hasa routinely refuses to buy chlorine from the closest potential supplier because that supplier is a direct competitor in the manufacture of sodium hypochlorite. Hasa believes that allowing railroads to dictate choice of suppliers is anti-competitive. Hasa is a customer of US Magnesium. AMVAC Chemical Comments AMVAC believes that they should have the right to buy chlorine from whatever supplier provides the best mix of quality, price and service. They believe that allowing railroads to override their decision based on a putative closer supply is anti-competitive. AMVAC is also a consumer of chlorine purchased from US Magnesium. Altivia Corp Comments Altivia is one of the potential customers for US Magnesium chlorine for whom UP has refused to provide a tariff quote. Altivia notes that they qualified US Magnesium as a supplier (receiving a rail car of chlorine last year). They note that changing market conditions and supply situation make it clear that they are going to have to rely on suppliers outside of their local area in the near future. That is the reason that they sought to qualify US Magnesium as a supplier. UP Reply to Comments UP is not objecting to the filing of late comments on their petition as they as their purpose “in asking the Board to institute this proceeding was to create a full discussion of the issues”. They agree that sellers and buyers of chlorine want to maximize their business success by selecting appropriate customers and suppliers. However, Union Pacific objects to allowing “chlorine buyers and sellers to conscript Union Pacific in that effort, and to shift the risks and costs of their decisions onto Union Pacific and the public at large”. They also note that none of the new comments shows claims that UP’s refusal to ship would cause anyone to “suffer any substantial hardship if the Board granted Union Pacific's Petition”. My Comments on Comments None of the new comments presents any really new information. The fact that Altivia is one of the customers to whom UP is refusing to ship does add some weight to their argument. This reply from UP goes to the heart of their reason for wanting to be able to refuse chlorine shipments (and TIH shipments in general); UP is not able to re-coup their added insurance expenses for handling TIH chemicals. What they ignore is that the accident history that insurance companies use to establish those rates is almost universally the result of failures of the railroads and/or their employees to follow established rules and procedures. In my not-so-humble opinion, I think what should have been done is for UP to have established a tariff rate for these shipments that would have included reimbursement for ‘reasonable’ insurance costs. US Magnesium would likely have filed an objection to those rates (as they have recently done in another case with UP) and the STB could have addressed the actual issue. Instead UP trumped up this claim of ‘safety and security’ as a basis for claiming an ‘unreasonable request’ basis for refusing to comply with Federal rules on providing shipping rates ‘upon request’. The UP claim of failure to show potential ‘substantial hardship’ is a hollow claim. Both US Magnesium and Altivia showed how their business could be harmed by the UP action. Meanwhile, we continue to watch and wait for the STB to render their decision.

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