UP and USM to Settle

In the continuing saga of disagreements between U.S. Magnesium (USM) and the Union Pacific Railroad (UP) about the cost of shipping railcars of chlorine gas, we seem to have reached a point where the two sides have decided to go back to two-party talks to resolve the issue. The Surface Transportation Board (STB) announced today that, on two separate action before it, Board Proceedings are (on Docket #’s NOR 42115 0 and NOR 42116 0) being held in abeyance pending settlement talks between the two parties. These actions were requested jointly by both parties on March 11th. USM originally filed complaints with the STB on June 25th, and October 9th, 2009 challenging the reasonableness of rates for the shipment of chlorine gas from the USM plant in Rowley, UT to customers in California and Nevada. Two other complaints (UP v USM and USM v UP) over similar issues (to different customer locations) had both been resolved by the Board in favor of USM. While this may allow for a resolution of these particular rate disputes (that remains to be seen) it still does not provide any guidance to the hazmat shipping community or railroads on how the Board intends to handle the issue of TIH shipment rates. This issue will need to be addressed in the near future as many railroads maintain that they need to recover substantial portions of the costs for the installation of Positive Train Control (PTC) systems from the TIH shippers. This is due to the fact that the current FRA rules require installation of PTC systems on freight-only Class 1 mainlines only if TIH shipments are made on those lines. As part of this stay ruling, the Board will require a status report on the two-party talks be filed on May 18th and every 30 days there after until the problems are formally resolved. The issues may yet have to be resolved by the STB.

UP Seeks Review of STB USM Ruling

The Surface Transportation Board web page announced today that they had been served notice that the Union Pacific Railroad Company (UP) had filed a court action in the US Court of Appeals for the District of Columbia seeking a judicial review of the Boards recent decision in the matter of US Magnesium (USM) vs UP (STB Docket NOR 42114). Readers of this blog will recall that the original complaint by USM complained about the high rates they were forced to pay for the rail transport of chlorine from their facility in Utah. The case was decided earlier this month in USM’s favor. UP had complained that the Boards decision had been based upon an arbitrary and unfair decision about which rate comparisons were used to determine whether the rates were excessive. I haven’t read the actual complaint from the Court of Appeals, but that is probably the basis of this action. The chlorine rail transport rate issue continues.

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.