FRA PTC Final Rule to OMB

According to the Office of Management and Budget (OMB) web site, the Federal Railroad Administration (FRA) has submitted their final rule for their amendments to the Positive Train Control (PTC) regulations. The FRA is moving fairly quickly with this rule as the comment period on the NPRM closed in late October of last year.

Readers will remember that I expressed some concerns regarding the amendments relating to the specific wording of the revisions to the regulations governing the removal of track from the PTC regulations based upon the cessation or expected cessation of TIH traffic on a particular line prior to January 1^st, 2016. It will be interesting to see if that wording gets changed.

STB Publishes List of Parties to CF Industries Case

Yesterday the Surface Transportation Board published the list of parties to Docket No. FD 35517, the TIH shipping dispute between CF Industries and three subsidiaries of RailAmerica. Actually the STB is considering this case and the case between PPG and another RailAmerica subsidiary since both cases revolve around similar TIH shipping rules imposed by the railroad companies.

The importance of this list is that each party on the list must provide copies of any submissions to the STB to each representative on the list. It is also an indication of who has a stake in the outcome of this dispute beyond the actual parties listed in the original complaints. The organizations represented on this list are:

Industry

CF Industries, Inc.

PPG Industries, Inc

Arkema Inc.

The Dow Chemical Company

American Chemistry Council

The Chlorine Institute, Inc.

The Fertilizer Institute

Railroads

Indiana & Ohio Railway Company

Point Comfort and Northern Railway Company

Michigan Shore Railroad, Inc

Alabama Gulf Coast Railway LLC

RailAmerica, Inc.

CSX Transportation

Union Pacific Railroad Company

Norfolk Southern Corporation

American Short Line and Regional Railroad Association

Association of American Railroads

This case, along with the Canexus v BNSF case also being considered by the STB will almost certainly have a lasting effect on the relationships between TIH shippers and the railroads. Unfortunately, neither will address the underlying issue causing these conflicts; deciding who has financial responsibility for any catastrophic TIH release that results from a rail accident or a terrorist attack on a TIH rail shipment.

BTW: There was an interesting discussion on RailOrders.com this weekend about the Canexus case. That discussion used my blog post as a starting point for their look at this dispute.

Canexus Says STB Mediation Failed

The Surface Transportation Board yesterday published an Expedited Consideration Request filed by Canexus Chemicals in their TIH rate dispute with BNSF Railway and UP. As I reported in June Canexus had accepted mediation in their dispute, but now report that the mediation effort has not produced any results in resolving the disagreements over the terms of TIH shipments.

Canexus vs BNSF-UP is just one of the disputes currently before the STB asking for a resolution of the inherent conflicts between shippers and carriers when it comes to the shipment of toxic inhalation chemicals via rail. In general, the STB has come down on the side of shippers, requiring railroads to perform their common carrier obligation to ship properly presented shipments.

The case of Canexus vs BNSF-UP is a bit more complicated in that two railroads are involved and it is as much a dispute between them as to which will be forced to provide service over the longest distance for the chlorine shipments from Canexus. At stake is the liability for potential releases enroute and possibly the cost of installing and maintaining a PTC system on portions of lines between the various transfer points.

As I pointed out in my June blog on this topic the STB may be able to narrowly resolve these individual issues (and this will be one of the more complicated ones that they have been called upon to resolve) but real resolution of the more general issues will have to be resolved by legislation and regulation.

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 Looking at Special TIH Rail Handling Rules

This week the conflict between the railroads and chemical industry over the shipping of toxic inhalation hazard (TIH) chemicals via railcars has gone back to the Surface Transportation Board (STB) in the form of a new complaint by filed by a variety of industry advocacy groups and a TIH shipper. On Tuesday the STB received a complaint (NOR 42129) from American Chemistry Council, the Chlorine Institute, the Fertilizer Institute, and PPG Industries concerning the new tariff and standard operating practice (SOP) implemented by RailAmerica, a railroad holding company owning and controlling 40 short-line and regional common and contract railroads (including AGR, the railroad specifically named in the complaint), for handling TIH railcars.

STB Complaint NOR 42129

The complaint challenges the following provisions of the tariff (AGR Tariff 9000) and the RailAmerica TIH/PIH Standard Operating Practice:

• That all TIH commodities will be moved only in dedicated train service;

• That all TIH movements will be handled only by special permit that must be requested and tendered to AGR five days in advance of movement;

• That no more than 3 cars loaded with TIH commodities will be transported in the same dedicated train at any time;

• That the minimum fee for special train service is $15,000 per train;

• That all TIH shipments in dedicated train service shall be moved at no more than 10 miles per hour;

• That a qualified mechanical employee of the RailAmerica railroad accepting a TIH shipment for interchange inspect every TIH car before pulling the car from the interchange track; and

• That employees of the RailAmerica subsidiary railroad accompany the TIH shipment at all times as long as the shipment is on RailAmerica property and until the receiving entity acknowledges receipt of the shipment.

Additionally, the complaining parties filed a request that the STB order RailAmerica to stop enforcing its tariff and SOP until the Board has a chance to act on the original complaint. As of Friday evening the Board has not received a reply from RailAmerica.

Common Carrier Obligations

In recent years the railroads have been attempting to get TIH chemicals exempted from their common carrier obligation to accept all properly packed and tendered shipments. They complain that the potential financial risks from a rail accident resulting in a large scale release could wipe out even the largest Class 1 railroad. The STB has rebuffed previous attempts to establish a specific TIH exemption to this obligation and to charge higher tariffs for TIH chemicals based upon this risk.

The actions described in this motion appear to be a combination of risk reduction measures (for example: slower train speeds reduce the risk of catastrophic release in the event of an accident) and efforts to discourage the shipment of TIH chemicals by railroad (for example: only three TIH railcars per train reduce the number of railcars large scale producers can ship in a given period of time).

TIH Rail Security

As described in the complaint some of the RailAmerica procedures appear to violate the limited number of rail hazmat security requirements that do exist. The complaint notes that the requirement to hold rail cars for the formation of a ‘dedicated train’ is in violation of 49 CFR §174.14(a) and §174.14(b). Additionally the five day shipping notice provides potential attackers with a significant planning window for an attack if they can gain access to the permit request via insiders on either side of the request procedure.

TIH Precedents

If the STB upholds any of the provisions of the RailAmerica TIH handling procedures, we can expect that those procedures will be adapted by other railroads. Depending on the wording of any decision adverse to RailAmerica there is the possibility that only minor modifications to the SOP and tariff will be made to test the limits of the STB ruling as was done in the tariff case between UP and USM.

This is an STB case that will bear following.

National Rail Plan

The Federal Railroad Administration (FRA) recently posted a copy of their Preliminary National Rail Plan (PNRP) to their web site. The production of this preliminary plan was required by the Passenger Rail Investment and Improvement Act of 2008 (PRIIA). According to the Executive Summary (pg 1) of the PNRP:

“This Preliminary Plan lays the groundwork for developing policies to improve the U.S. transportation system. Its goals are consistent with the top goals of the U.S. Department of Transportation’s (DOT): to improve safety, to foster livable communities, to increase the economic competitiveness of the United States, and to promote sustainable transportation. The important attributes of rail—safety, fuel efficiency, and environmental benefits—can meaningfully assist in achieving these goals.”

The FRA is clear that this document does not provide a great deal of detail on how that organization intends to improve rail transportation. They note that the PNRP does not provide details on the development of the National Rail Plan (NRP), but rather “it is designed to create a springboard for further discussion” (pg 2). It does note that the development of the full blown NRP can only take place with “input from the States, and freight railroads, who are expected to provide valuable information and perspectives. The end focus is on the shippers and riders who use the rail system.” It would seem to me that this ‘end focus’ can only be met with input from the ‘shippers and riders’ who will be served by the system. PNRP and Hazardous Chemicals The chemical security community will find little in the PNRP that addresses the safety or security of chemical shipments. The only direct mention of hazardous materials shipments is found on page 13 where there is a brief discussion of the Positive Train Control (PTC) system requirements. If one reads the document closer, however, the following passage (pg 9) addresses a key problem with chemical safety and security issues.

“The privately owned freight rail system, however, must generally finance improvements through current cash flow based on expectations of future demand. Corporate railroads have a responsibility to generate income for their shareholders and look for ways to maximize their return on investment. However, activities that may provide a broad public benefit may not adequately contribute to (and may even harm) efforts to increase revenue or reduce expenses.”

This is one of the key reasons that the railroads have become the key corporate proponents of mandated inherently safer technology. They realize that they alone bear the full liability risk for release of toxic inhalation hazard (TIH) chemicals that are being hauled by the railroads. Shippers, on the other hand, maintain that they use safe shipping techniques and all recent major releases of TIH chemicals have been the result of railroad worker errors. This needs to be a major discussion point in the development of a true National Rail Plan. The liability issue for TIC shipments needs to be addressed in a way that benefits both the shippers and railroads. A starting point for that discussion could be a delineation of liability responsibility along the following lines:

Railroads would be liable for releases due to railroad issues, Shippers would be liable for releases due to packaging issues, and The Federal government would be liable for releases due to terrorist attacks.

A further aid to both the railroads and shippers would be a railroad transportation liability cap similar to that found with terrorism insurance. This would make liability insurance cheaper and easier to obtain for both the railroads and shippers. TIH Routing Issues The other chemical shipping issue that is completely ignored in the PNRP is the routing of TIH shipments around major urban areas. The shipment of these chemicals through cities is both a safety and a security issue. The current PIH routing rules are totally inadequate for keeping through shipments of TIH rail shipments out of major urban areas. While some improvement of the situation can be had by requiring carriers to use alternative routing via other carrier routes, this is not always possible due to the way cities grew up around rail terminals and along rail lines. Rerouting freight rail main lines around urban areas should be a major priority for the NRP. Moving Forward The TIH shipping community in particular and the chemical shipping community in general need to insure that their voices are heard during the development of the National Rail Plan. The FRA has promised to conduct a public outreach program to bring all shareholders into the development process, but due to the critical place rail shipments of chemicals has in the chemical industry, chemical rail shippers need to be proactive in insuring that their voices are heard.