Canexus v BNSF to Mediation

I have been waiting to see something on the Surface Transportation Board’s web site about the hearing that was to have been held last week in the matter of Canexus v BNSF. Readers will recall a number of posts here about the complaint that Canexus filed asking the STB to compel BNSF to provide a tariff rate for transport of chlorine from an interline point near their North Vancouver chlorine production facility to another interline point in Kansas City, MO. Today I found the reason that there was no hearing information; Canexus reversed their earlier decision and accepted the Boards offer of mediation to resolve the issue.

While it certainly makes sense for Canexus, BNSF and UP to reach a consensus settlement of the issues in this case, it will do little to resolve the central issues raised by the various parties to the dispute. Actually, it probably is not within the authority of the STB to resolve all of these issues. Ultimately it will be up to Congress to address the inherent conflicts between TIH shippers, railroads and the security and safety regulations addressing those shipments.

To review, some of those issues include:

● The right of captive shippers to get reasonably priced TIH transportation services to all of their customers;

● The need for railroads to be compensated for the costs of transporting TIH shipments, including protection against the potential liability costs associated with an accidental or deliberate catastrophic release of the contents of a TIH railcar;

● Determining which railroad is responsible for selecting the safest, most secure route for TIH shipments when multiple railroads must be involved in the shipment; and

● Resolution of the inherent conflicts between safety/security routing rules and PTC coverage requirement rules.

Oral Arguments in Canexus v BNSF Set for Thursday

Last week the Surface Transportation Board set a time for this Thursday for oral arguments in the dispute between Canexus and BNSF about the rail transportation of chlorine gas from a Canexus facility in North Vancouver, BC to Kansas City, MO.

In their decision on oral arguments the STB made provisions to cancel those proceedings if the three parties to the dispute (Canexus, BNSF, and UP) agreed to Board supervised mediation in the dispute as requested by BNSF. In a filing submitted to the Board yesterday, Canexus declined to participate in such mediation, noting that this was not, in their opinion, a dispute about interline locations, but a failure of BNSF to provide requested delivery services.

It will be interesting to see if UP uses their 20 minutes to pursue their recommendations to the Board that the STB use this case as a basis to begin establishing a comprehensive policy for the transportation of TIH chemicals. One of the more controversial components of the policy that UP suggests should be included would be distance threshold for TIH shipments. UP suggests that any request for a TIH rail shipment of more than 1000 miles would have to be submitted to the STB to justify that the shipment “is in the public interest and cannot be avoided through a less risky or less expensive alternative” (page 7 of UP reply to STB’s initial order).

Complex TIH Transportation Issues of Canexus v BNSF

This week both BNSF and UP have filed responses to the complaint Canexus Chemicals Canada initiated with the Surface Transportation Board (STB) about the transportation of chlorine from the Canexus facility in North Vancouver, BC to Kansas City, MO. As I noted in my initial blog on this issue, this is a TIH routing issue made complex by TIH routing regulations, PTC regulations and previous STB rules.

Background Information

Canexus produces chlorine gas at its chlor-alkali facility in North Vancouver, BC. It has customers for that chlorine in the Southeast United States. There is no single railroad that can provide delivery service of that chlorine from source to customer. Some of those customers receive delivery service from UP. Canexus had negotiated a delivery contract with UP for those customers with UP accepting the chlorine shipments at an interchange location in Kansas City, MO. BNSF has declined to provide service from the Northwest to Kansas City for that interchange; countering with a proposed interchange with UP in Washington or Oregon. Canexus maintains that BNSF has a common carrier obligation to provide that service to Kansas City.

Complexities

First issue, BNSF does not actually service the production facility in British Columbia. That initial rail service is provided by CN. BNSF does provide service from an interchange with CN in Canada, but CN also provides service directly to the Mid-Western United States where there is a potential interchange with UP at St. Paul, MN. Other non-BNSF interchange options include interline arrangements through CP. So, BNSF maintains that, with other options for the required service to customers in the Southeast United States, they should not be compelled to provide the requested service.

The second issue is the high-cost of TIH transport. BNSF notes that the liability issues associated with a potential chlorine release and the requirements for the installation of positive train control equipment on lines with TIH service both increase the costs of providing TIH service. BNSF notes that they are not currently able to charge TIH shippers rates that would cover these increased costs.

The third issue involved in this dispute is the regulatory requirement for railroads to conduct TIH route planning that minimizes the safety and security risks associated with such shipments.

In its response to the Boards requirement to respond to the Canexus complaint BNSF states:

“Normally, the originating carrier exercises that preference by selecting the long haul in order to maximize its revenue division and contribution. But in the case of TIH/PIH, the normal commercial incentive to maximize contribution is not always controlling. The risk of liability, and the increased capital and operating costs from transporting TIH/PIH traffic far outweigh the potential revenue contribution and therefore BNSF logically seeks to minimize its potential exposure by minimizing its length of haul.”

While not as clearly stated in the UP response to the same order, UP has attempted to shorten its segment of the chlorine transport by accepting an interchange at Kansas City instead of in Washington or Oregon by directly negotiating a delivery contract with Canexus.

BNSF has filed a motion with the Board to refer this dispute to a mediation panel as is typically used in disputes about selecting interchange locations. They note that if the Board so orders, it will voluntarily extend its current arrangements for chlorine shipments to Kansas City until the end of July.

Oral Arguments Ordered

Yesterday the STB issued a conditional decision calling for oral arguments to be presented on June 23rd. It will not hold those arguments if both UP and Canexus agree to the mediation proposed by BNSF. UP and Canexus have been ordered to respond to the mediation proposal by June 20th.

STB Response to Canexus Complaint

On Wednesday the Surface Transportation Board (STB) published their ‘decision’ in the Canexus v BNSF complaint about rail transportation of chlorine. This decision is not a final action in any sense of the term; it is merely a notice to BNSF that it must formally reply to the complaint by June 15^th. Additionally, because of the time issue raised in the Canexus complaint the Board provided notice that if a hearing is necessary it would be scheduled for June 23^rd.

The Board apparently agrees with my initial assessment that this may end up being a TIH routing issue. It has notified UP, the second railroad involved in this conflict, that it should “submit a pleading addressing its legal obligation, if any, to interchange with BNSF at Spokane and Portland”.