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.

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.

Replies to Comments on UP STB Petition

Last Friday the Surface Transportation Board (STB) posted three formal replies to the comments received on the Union Pacific petition for ‘clarification’ of their common carrier obligation to provide rate quotes to US Magnesium for the transport of chlorine gas to facilities with ‘adequate supplies’ of chlorine from suppliers located significantly closer to the facility than the US Magnesium ship point in Utah. Those replies in support and opposition to the UP petition came from: Union Pacific Association of American Railroads American Chemistry Council Union Pacific Reply UP says that ‘attacks’ on the UP petition fall into two categories; the Board lacks jurisdiction, and UP is trying to manipulate markets. UP rejects both types of claims. UP maintains that the board has the jurisdiction to determine if the US Magnesium request for rates is ‘reasonable’. The problem with this interpretation is that there is no ‘reasonable’ requirement for requesting a rate. The reasonable standard is only applied to the request for ‘service’ that would possibly come after the rate was established. UP questions the legitimacy of the claims of ‘market manipulation’ when the current rules already manipulate the rail service markets. UP notes that it is not able to make legitimate business decisions about the use of their manpower and equipment because of their ‘common carrier’ obligation. They note that the liability issues associated with carriage of TIH chemicals like chlorine would normally call for a business decision to avoid carrying that chemical Finally, UP maintains that it is requesting a narrow ruling from the STB that the request for rates to these four (out of 35 requested) destinations was not reasonable based on the combination of distance, HTUA’s traversed, and availability of alternate supply. This contradicts it’s wider request to “clarify the extent of UP's common earner obligation with regard to transporting chlorine” in its petition for a declaratory order. Association of American Railroads The AAR reply looks at some of the legal issues raised in various replies to the UP petition. Generally they hold that the legal issues raised against the petition do not adequately reflect the case law which actually supports the UP petition. They quote a variety of precedents that indicate that STB has the sole authority to decide the reasonableness standard for requests for service. They note two potentially important points; the ‘reasonable’ standard may be raised in a request for rates case, and that the Board may hold a higher safety standard than that set forth in current safety regulations. The real meat of the AAR argument is found in its concluding statement:

“In determining the reasonableness of the request to transport TIH materials, the Board should apply the relevant legal principles and address the public policy concerns set forth above and as more fully discussed in Ex Parte No. 677 (Sub- No. 1). The AAR also respectfully requests that the Board act as expeditiously as possible to issue the policy statement urged by the AAR in Ex Parte No. 677 (Sub- No.l) which would allow a carrier to impose reasonable liability-sharing arrangements on shippers as a condition of moving TIH materials.”

This argument makes it look like the UP petition is an attempt to make the STB reach a ruling on last year’s hearings on the common carrier obligation to carry TIH chemicals. It makes it clear that what the railroads are actually looking for is a method to require that TIH shippers share in the liability burden of those shipments. American Chemistry Council Reply The ACC reply is actually a ‘joint’ reply of the ACC and six other organizations representing groups of shippers that rely on the railroads for shipment of hazardous chemicals including a variety of TIH chemicals. As in their earlier comments the ‘Joint Shippers’ oppose the UP petition. Here they note that both TSA and DOT in their comments affirm that there is no safety or security reason to support the petition. They object to many of the claims about liability issues raised by the AAR and other railroad commentors, noting that UP did not make that claim in their original petition so the issue cannot be legitimately raised in the reply to petition comments. My Comments on the Comments One of the main claims in UP’s petition was that there were adequate supplies of chlorine available to the potential recipients of the US Magnesium chlorine shipments that were from closer sources of supply so the risks associated with the longer shipments were not ‘reasonable’. A number of commentors noted that the assertion of adequate supplies was not, in fact, true. UP made no effort in their reply to comments to address this apparent conflict in factual claims. In effect this allows the counter claim to invalidate the basis for the UP claim. In my mind this is the fatal argument against the UP petition. If there are not adequate supplies available from closer sources and TSA-DOT assert that there are adequate regulations to protect the longer shipments, then the STB has little recourse but to find that the US Magnesium request was reasonable and UP must provide the requested rates. We will now wait for the STB decision on the petition. Hopefully it will come faster than the still open STB Ex Parte 677 and 677(sub no1) that attempted to address the issue of common carrier obligations for TIH shipments and the liability issues associated with those shipments. Of course, an early resolution to those two earlier issues would probably have prevented this petition from being filed.

TSA and DOT Replies to UP STB Petition – 04-10-09

Ten days ago the comment period ended on the UP petition to the Surface Transportation Board (STB) to avoid quoting tariff rates for the transportation of chlorine over long distances and through high-threat urban areas (HTUA) when adequate sources were available from closer sources. On the last day of that comment period both TSA and DOT, at the request of STB, submitted their comments on the UP Petition. TSA Opposes UP Petition TSA starts out by observing that the “the issues involved in the petition transcend common carrier rates; they involve issues of safety and security” (pg 1). They then proceed to explain why the safety and security procedures put into place by TSA and DOT have the safety and security issues covered. TSA notes that the two agencies have “analyzed the risks to safety and security of transporting chlorine and other hazardous materials by rail and established comprehensive regulatory programs to address these risks” (pg 3). They address the safety and security issue by stating that:

“When rail shipments conform to the TSA and DOT regulations, the risks of transporting chlorine by rail are appropriately mitigated and such movements can take place without posing unnecessary safety and security risks.”

TSA also takes exception to the claim by UP that they have urged rail carriers to limit the shipping miles and HTUA exposure to TIH shipments. They note that their regulatory efforts to “enhance rail transportation security were not intended to inhibit transportation” (pg 4). They emphatically state (pg 6) that: “TSA has not urged, and its rules provide no basis for, freight railroad carriers to discontinue the transportation of such shipments.” They conclude (pg 6) that:

“Granting the petition will not enhance transportation security and safety and may have adverse unintended consequences. Future rail security and safety enhancements should be accomplished through DHS and DOT rule makings.”

DOT Opposes Petition DOT simplifies the UP petition to a single issue. They note that “the railroad is effectively seeking to avoid its common carrier obligation to quote rates to ship the material [chlorine] to certain locations (pg 2). They dismiss the safety issue by stating (pg 2) that: “Compliance with existing regulatory safeguards would appropriately mitigate the relevant risks.” The DOT response reminds STB that “only Congress, by the passage of legislation addressing the risks associated with the rail movement of PIH materials, can modify a common carrier's obligation to transport such materials” (pg 4). They then note (pg 4) that: “Congress has rejected railroads' repeated requests for the enactment of legislation that would either eliminate the railroads' common carrier obligation to transport PIH materials or cap the railroads' liability for transportation incidents involving the movement of PIH materials.” DOT concludes (pg 15) that:

“Accordingly, there is no reason for the STB to entertain pleas to avoid the basic common carrier obligation or the application of the rules designed to ensure the safe and secure fulfillment of that obligation. DOT therefore recommends that STB dismiss the UP's petition.”

My Comments on the Comments With both TSA and DOT unequivocally recommending against the approval of the UP petition, there does not seem to be much leeway for the STB to do any thing but requiring UP to provide the requested rates. To me the issue was simple, the law required UP to provide the rate quote and the STB does not have the authority to change or void that law. Only the courts can void laws and only Congress can change them. It is interesting to note that both agencies provided railroads with the potential arguments for future attacks on the requirement to transport TIH chemicals. The TSA opening is just a tiny crack that may be shut in the near future. The DOT opening, on the other hand knocked down an entire wall and installed a new door. TSA noted (pg 3) that: “In discharging its responsibilities as the lead federal agency for transportation security, TSA is developing other rulemakings to make further enhancements to rail transportation security.” This seems to contradict their earlier claim that they had established “comprehensive regulatory programs”. It’s a small opening, but an opening none the less. DOT establishes a whole new potential argument by stating (pgs 14-15) that:

“Consequently, as both a legal and a practical matter, the task of initial route selection is best left to the railroads, based on all the factors set out in the Routing Rule, and any potential modifications to a carrier's routing decisions [emphasis added] should only be made according to the regulations implementing Congressional judgment.”

This would seem to allow a railroad, in a limited number of instances, to conclude that there is no safe route available for the shipment of TIH chemicals. The argument would require extensive preparation and the manipulation of data supporting the 27 criteria outlined in the PHMSA rail routing rule. To avoid charges of collusion, the railroad in question would have to control all potential routes through the high-risk areas. It does not appear that the Federal Railroad Administration could exercise their review authority to require a railroad to use a route that the railroad deemed to be unsafe or un-secure since their authority is limited to requiring the use of an alternate route. Final Note: Today is the day that UP is supposed to file their response to all of the replies and comments submitted to the STB. While there have been a wide variety of interesting and apparently valid arguments submitted by a number of commentors, to my mind the only two that count are the DOT and TSA comments as they both undercut the basic arguments made by UP. I don’t see any way that STB can determine that these two agencies are wrong in their areas of expertise. It will be interesting to see how UP deals with this. I do not think that there is any way that UP can counteract the DOT and TSA arguments. They would also have a hard time maintaining their claim that there are other adequate sources of chlorine in face of the responses from the Chlorine Institute and various chlorine suppliers. I think that the smartest thing that UP could do in this instance would be to formally withdraw their petition and prevent the STB from ruling. This would leave the way open for potential future challenges.

Replies to UP STB Petition – 04-10-09

Last Friday was the last day for comments on UP’s petition. Two Federal agencies (the Department of Transportation and the Transportation Security Administration) file their replies. Fourteen non-governmental replies were also received; three in support, nine in opposition and one that took no actual stand on the petition. The two agency replies will probably have more affect on the outcome of this proceeding, so I will deal with those separately in a posting later this week. After all, we still have ten days to wait for Union Pacific’s reply/response to the postings made to date. Then the inevitable wait for the STB decision. Instead of reviewing each of the comments in turn, as I normally do, I’ll look at the major pro and con arguments raised by all commentors. Anyone wanting to read them all can use the link provided below: In Support – American Short Line and Regional Railroad Association Association of American Railroads CSX Transportation In Opposition – Occidental Chemical Corp Shell Chemical LP Westlake Chemical Buckeye Technologies CF Industries Inc Dow Chemical DuPont PPG Joint Shippers No Stand – Springfield Terminal Railway General Observations It is not too surprising that all of the shipper comments are in opposition to the UP petition. They all have vested interests in the continuation of the broad application of the common carrier obligation. Likewise, it should not surprise anyone that the railroads would support the petition; if the STB finds for the UP petition the railroads will have a way to avoid at least some TIH shipments. The railroads have made no secret of their desire to avoid the potential liability issues associated with accidents or terrorist attacks resulting in a significant release of TIH chemicals in a densely populated area. The Springfield Terminal Railway manages to make the liability issue point without actually supporting the UP petition, or opposing it for that matter. Their middle road appears to be a pragmatic examination of the issue. They make the point that: “Rail, it appears, is the safest means of transport for these materials. It is incumbent upon all affected parties - shippers, producers and carriers - to be involved in final solutions to the risks that such transport presents.” Supporting Arguments The railroad comments filed in the last two days of the comment period address many of the same issues identified in the original UP petition. Since I have already covered those arguments I will ignore them in this posting. Instead it will be interesting to look at the issues that UP failed to include in their argument. The liability issue is never directly addressed in the UP petition. The AAR addresses this point after pointing out that the common carrier rule requires that railroads must provide service for all reasonable requests. They note that that ‘reasonable request’ is defined on a case-by-case basis by the STB. They then ask if a service request reasonable if it could result in the financial ruin of the railroad and the rail industry:

“Should an incident involving the rail transportation of TIH materials result in a release of TIH materials in or near a large populated area, the affected rail carrier could face billions of dollars in claims and potential financial ruin, jeopardizing the ‘financial soundness’ of the rail industry as well as the ‘public health and safety.’”

ASLRRA claims that each “railroad must determine whether the risk of carrying the material is reasonable in light of its ability to sustain and respond to a serious TIH unintended discharge in its operating territory”. They carry that argument to its natural conclusion; they expect the STB to adopt a standard that the “common carrier obligation docs not require Class II and Class III rail carriers to quote a rate to transport T1H hazardous materials within an HTUA if the carrier determines that it cannot do so without unreasonable risk to itself or the surrounding community”. CSX makes a novel claim in support of the petition. They note that the increasing security and safety requirements covering the transportation of the TIH chemicals place an additional burden on the railroads transporting those chemicals. They then make the claim that: “Federal policy cannot impose more and more special handling requirements and simultaneously preserve a common carrier obligation with traditional service obligations.” Opposing Arguments A number of commentors have disputed the UP’s assertion that there is an adequate supply of chlorine within 300 miles of the locations in question. In addition, Dow Chemical and other commentors note that not all chlorine is the same. Dow states that “Therefore, an industrial chlorine user may need to qualify the chlorine it purchases to ensure that it meets that user's required specifications. If not, the user must purchase from another source, which may not be the closest source.” Shell notes that there are other reasons why a consumer might want sources outside of the immediate area. They note that consumers could “see increased risk of disruption and idling of facilities due to sole supply source force majeure events or even planned shutdowns”. Other commentors have noted that weather in the Gulf Coast region is a major cause of force majeure events in that area, further reinforcing the need to have potential sources outside of the area. Further, most commentors noted that even if there were adequate supply available in the area it would not be appropriate for the Board or railroads to decide who a supplier can sell to or a consumer to buy from. Dow notes that: “UP's Petition would erect barriers to entry and the free flow of commerce by empowering either individual rail carriers or the Board to decide who can and cannot compete in particular markets. The implications of this are staggering.” Another common objection is that UP has not shown legal cause to abrogate its common carrier obligation. In fact, the letter from ‘Joint Shippers’, a group of seven associations of chemically related firms, notes that UP appeared to have confused two separate common carrier obligations; the “duty to provide rates and service terms ‘on request,’ 49 U.S.C. 11101 (b)” and the “duty to provide service ‘on reasonable request,’ 49 U.S.C. 11101(a)”. Joint Shippers claim that there are no provisions to refuse to provide ‘rates and service terms’ which is what UP did in this case. A number of commentors claim that UP requested the wrong form of relief from their common carrier obligations. Dupont notes that the “only means provided by Congress for a blanket elimination of the common carrier obligation, as requested by UP, is to obtain an exemption pursuant to 49 U.S.C. § 10502(a)”. The STB has provided commodity based exemptions in the past, but, according to the CF Industries filing, only “upon finding that they will encourage competition, promote energy conservation, and/or further other aspects of the national rail transportation policy”. None of those objectives is alleged in this case. Nearly all of the commentors have attacked the safety issues raised in the UP petition. Many note that the railroad industry has claimed in previous board testimony {Ex Parte Nos. 677 and 677 (Sub-No.1)}, that they routinely transport TIH chemicals safely. Buckeye Technologies notes that:

“Having successfully participated in preserving the right to transport chlorine and other chemicals by rail through the middle of the District of Columbia, it is odd for UP to now seek selective discretion to ignore its common carrier obligations in other metropolitan areas.”

Westlake Chemical concludes that “UP's real motivation for filing the Petition must not be safety - it can only be economic - or else UP would have sought to be permitted to cease all such routings, not just the ones that it seized on for purposes of its Petition”. Finally, commentors have addressed the safety and security issues raised in the UP petition. CF Industries claims that “, the Board has been delegated no authority to regulate either railroad transportation safety or security generally or the transportation of hazardous materials specifically, as recent court decisions have unequivocally confirmed”. PPG adds that:

“Absent any evidence by UP that existing DOT and TSA regulations are unsatisfactory or inadequate, the Board must consider those regulations to embody the appropriate balance between safety and security considerations and the public need for the transportation of TIH commodities.”

My Comments on the Comments This is already an overly long posting, so I’ll save my comments for the next entry in this series of blogs. That should be posted later this week.

Replies to UP STB Petition – 04-03-09

There were four new replies for the Union Pacific petition posted to the Surface Transportation Board site. None of the replies were from people directly associated with specific petition, but all felt that they could be affected by precedent set by this action. The replies came from: Nevada Nuclear Waste Task Force Old World Industries Citizens for Rail Safety National Association of Chemical Distributors Nevada Nuclear Waste Task Force Reply The NNWTF opposes the UP petition and is concerned because of the precedents that could be established shipping other dangerous cargo. Their position is best stated by this statement from their filing: “What is of great concern is that the petition by the UP suggests that it should have the power to decide when and where cargo is too risky to haul and, when it does so, that it has no duty to present facts supporting those conclusions to the public, public entities, and shippers.” The NNWTF noted that UP failed to seek more appropriate remedies for this issue. If the shipment of chlorine over long distances or through HTUA were so unsafe, they should have requested an embargo on those shipments from the Federal Railroad Administration (FRA). If they felt that the rules and standards for such shipments were inadequate they should have made their appeal to FRA and DOT. Not having done either, the NNWTF maintains that UP has no standing to request this ruling from the STB. Old World Industries Letter As another manufacturer/shipper of TIH chemicals OWI feels that “inexplicable stance that the Union Pacific has taken, is detrimental to the industries that depend upon the manufacturing and sale of TIH commodities”. They request that “STB mandate that the rate proposal in question be provided by the Union Pacific and tendered to the company that has been unduly hindered in their attempt to conduct business as provided by the law”. Citizens for Rail Safety Reply The CRS reply, other than the address and signature, is a duplicate of the NNWTF reply. National Association of Chemical Distributors Reply The NACD feels that the “UP petition to limit, or provide an exception to, their obligation to transport chlorine m this particular case is a threat to-the entire common carrier obligation to transport TIH materials”. Given the near monopoly that railroads have, the NACD notes that the “common carrier obligation exists for the specific purpose of requiring the railroads to provide service to shippers when they would otherwise choose not to do so because it would be unprofitable or inconvenient”. My Comments on Comments It is always politically interesting to watch form letter campaigns take place. Organizations have a right to make their opinions known to legislators and executive branch agencies during the deliberations leading up to legislative or regulative actions. The individual members of those organizations also have that right. But, neither legislators nor executive branch agencies are swayed by duplicative mailings of identical comments. The only way such mass mailings can be anywhere near effective is for there to be politically significant numbers of identical mailings; two mailings are never politically significant. For two different organizations, operating in two different issue subject areas, to use duplicate mailings makes one question the legitimacy of those organizations as independent political advocates. One does not have to be a conspiracy theorist to jump to the conclusion that these two organizations are tools of a single organization, individual or agency. Sadly, these duplicative mailing cheapen the legitimate arguments made. The failure of UP to seek more appropriate redress to the situation raises substantive questions about the legitimacy of the petition.

TSA Extension Request Granted

On March 25th, the Surface Transportation Board published a ‘decision’ on Docket # FD 355219, the Union Pacific petition for a declaratory order. Actually the decision was on the TSA request for an extension of the time to file comments. The STB granted the TSA request for an extension of the time limit until April 10th. This also necessitated a change to the date by which UP must file any replies or rebuttals to comments submitted on the docket; that date was delayed until April 30th. The delay in my reporting this is due to the fact that I just found where STB posts their decisions on their web site. Needless to say it is in a different place than where they post the filings. Once I figured the site out it seems logically organized. This is one of the problems with the thousands of different government web sites. There is no common structure to the organization of the sites. A visitor has to spend a significant amount of time trying to figure out the logic of the organization for that site. In any case, there is now an additional 10 days for us to follow possible submissions to this docket. We are expecting to see a TSA reply and an FRA reply. There is no telling who else might put their two-cents worth in (actually I guess it would be fourty-three cents worth now).

Replies to UP STB Petition – 03-27-09

Last week there were two additional replies to the Union Pacific petition before the Surface Transportation Board (STB) to allow UP to refuse to provide tariff rate quotes for chlorine transport routes. As noted in my last blog one reply was from Olin Corp (a copy of the reply is now posted). The latest reply came from two unions; The Brotherhood of Railroad Signalmen (BRS) and the Brotherhood of Maintenance of Way Employes [sic] Division (BMWED/IBT). Both replies weighed in against the UP petition. Olin Corp Reply Olin Corp is a major chlorine producer/shipper. Olin asserts that the reason for the UP petition is to “gain an unfair advantage in a commercial dispute between UP and USM [US Magnesium]”. They recommend that the STB deny the UP petition and order UP to provide the requested rates to USM. They also note that the issue of TIH shipments and common carrier obligations is already an issue before the STB (Ex Parte No 677) and should be decided in that venue not this petition. Finally, they note that the safety and security of TIH shipments through High Threat Urban Areas (HTUA) are a matter for Federal Railroad Administration (FRA) and TSA to regulate, not STB. BRS BMWED/IBT Reply These two unions represent railroad employees that perform ground side installation and maintenance for the railroads. They assert that the risk and safety aspects of the UP petition should be addressed through the FRA rulemaking process mandated by last year’s Rail Safety Improvement Act (RSIA). They also raise the issue that allowing Class 1 railroads to stop carrying TIH chemicals would allow them to avoid installing Positive Train Control Systems on the lines which would have been required by RSIA. Finally, they note that allowing Class 1 railroads to arbitrarily stop carrying TIH would not stop the shipment of these chemicals. It would merely shift those shipments to higher risk modes of transportation, Class 2 and Class 3 railroads and trucks. My Comments on Replies Since Olin is a major chlorine producer/shipper it is not unexpected that they would side with US Magnesium in this dispute. The level of vehemence in their filing (carefully couched in legal terms of course) is somewhat surprising for someone that is not an actual party to the dispute. Equally surprising is their reference back to Ex Parte No 677 as the potential resolution to the TIH and Common Carrier Obligation issue. It seemed clear that when STB held these hearings last year that there was no real expectation that they would take any concrete actions. If they had tried to impose an exception it would have certainly ended up in the courts on the same day. The only way a substantive change could be made in this issue would be by Congress changing the law and that is a political hot potato that no one is willing to touch. It was surprising to see these two particular unions filing a reply in this case. I had a hard time seeing their interest in the issue since their people were not directly involved in handling these shipments. But this is not a court case, so there is no requirement for having ‘standing’ in the dispute to file a reply; the STB did after all request public comments. Reading through their reply it became clear that they do have a stake in the decision. When you get to the part about the PTC systems, it is there members that would be responsible for installing and maintaining those systems. Given the long stretches of ‘dark track’ out west (particularly) if UP could avoid shipping chlorine (and other TIH chemicals) on these tracks they could avoid installing PTC systems along those lines. Tomorrow is the current deadline for comments on the petition. Of course there is a request for an extension of the time limit before the STB. Since that came from the TSA, whom the STB requested provide input, it is likely that it will be granted. And we still have to hear from the FRA, the other agency invited to file comments. Then there will be a second deadline to allow UP to counter reply. We still have a ways for this to go before STB finally makes a decision on this ‘emergency’ case.

Chlorine Institute Response to UP Petition

Last week I reported on the initiation of declaratory order proceedings by the Surface Transportation Board. Those proceedings were initiated in response to a petition by the Union Pacific Railroad (UP). On Thursday the Chlorine Institute (CI) filed a response to the original petition by UP. In their response CI claims that the UP petition is based on “incomplete facts, as well as facts that are untrue and that the UP should know to be untrue”. CI claims that the petition is actually “a request for an exemption to the UP's common carrier obligations”. Claims and Counter-Claims The original petition by UP was a request for approval to not provide a rate quote on a series of shipment of chlorine gas from a redacted shipper in Utah to customers in Louisiana and Texas. The petition claimed that there were adequate chlorine resources within 300 miles of each of the customers and that the UP route to serve these shipments would have required the chlorine to transit four high-threat urban areas (HTUAs) while the closer alternative sources would not have required transit of any additional HTUAs. The CI counter claims that “there simply is not enough chlorine produced in the Gulf Region to meet demand. Some portion of Northeastern, Western and even Canadian production needs to be utilized to fulfill Gulf Coast demand”. Further, they note that UP is cognizant of this fact since “UP delivers 250,000 tons of chlorine per year to one of these destinations in a move that covers more than 800 miles”. Common Carrier Obligations The railroad industry for the last couple of years has been trying to avoid having to carry poisonous inhalation hazard (PIH) chemicals. They have openly expressed their concerns about their potential liability exposure in the event of an accident or terrorist attack that resulted in the catastrophic release of a PIH chemical in an HTUA or other large urban area. Unfortunately, they have a ‘common carrier obligation’ to carry any properly offered shipment. Since railroads are effectively monopolies in most of the area that they serve they are regulated by the Federal government. The Surface Transportation Board is the government agency that is responsible for overseeing the railroad rate setting process and serves as a resolution agency for disputes between carriers and shippers. Based on the claims and counter-claims to date it appears that what the UP has been attempting to do is to establish an acceptable reason to avoid their common carrier obligation with respect to PIH chemicals. Apparently they are attempting to establish that a combination of alternative supply and safety-security concerns are adequate reasons not to establish a new PIH service. Establishing this precedent would allow the railroads to use these and similar arguments to avoid carrying PIH chemicals on other routes. The STB has asked the Federal Railroad Administration (FRA) and the Transportation Safety Administration (TSA) to weigh in on the safety and security arguments presented by UP. It will be interesting to see how the new Administration deals with this issue.