Thursday, January 28, 2010

STB Finds for USM in Chlorine Rate Dispute

Today the Surface Transportation Board released their decision on one of three on-going chlorine shipping rate disputes between US Magnesium and Union Pacific (EB 40441). The STB found that the UP rates were “unreasonably high” and directed UP to establish new rates that do not exceed rates prescribed in this decision. While this case will likely have some effect on some rail transportation rates for similar TIH chemicals, the Board declined to “resolve the significant policy issue of PTC investment” (pg 17). The Board noted that they do not “require a shipper to provide the carrier with a return on an investment the carrier has not yet made” and noted that “UP has not sufficiently demonstrated the precise amounts that could be reasonably ascribed to USM’s traffic”. Finally, the Board stated that the Three-Benchmark proceeding agreed to by both parties is not an appropriate proceeding to resolve such a complex issue. In short, USM wins another tactical victory (with two similar battles still underway), but the final outcome of the war is still far from resolved. I’m sure that other chlorine and TIH producers are closely watching these developments.

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