(The following story by John D. Boyd appeared on The Journal of Commerce website on February 2, 2010.)
WASHINGTON, D.C. — The Surface Transportation Board, in a split decision, ruled that Union Pacific Railroad charged “unreasonably high” rates to chlorine shipper U.S. Magnesium, allowing the customer to recoup up to $1 million over five years.
STB Chairman Daniel R. Elliott, who was appointed by President Obama, joined with fellow Democratic appointee Francis P. Mulvey to rule in the customer’s favor after determining that “UP has market dominance over the movements of chlorine by tank car” in the lanes of Rowley, Utah, to delivery points in Arizona of Eloy and Sahuarita.
This was the first of three rate cases USM filed against UP that the board has ruled on. USM is the only domestic producer of primary magnesium, which it pulls from the Great Salt Lake, and chlorine is a byproduct of its process.
The STB majority allowed UP to charge over 300 percent of its variable costs on those lanes, but said UP’s rates of $13,396 per car for the Eloy movement, and $10,410 on the Sahuarita run went far over the allowed levels.
The board rejected UP’s effort to build into rates the costs it anticipates to install an automated “positive train control” system on tracks and equipment hauling chlorine, which is one of a group of toxic inhalation hazard chemicals. Congress ordered railroads to install PTC before 2016 on tracks shared with passenger trains, and lanes hauling TIH materials that can form a poisonous cloud if accidentally released.
However, “we do not generally require shippers to provide carriers a return on investments not yet made,” the board majority said in the ruling. And UP “has not demonstrated here that PTC investments are sufficiently defined” to say what portion would be for the USM shipments.
Charles D. Nottingham, the Republican member of the three-person board, lodged a lengthy dissent, much of it focused on problems the STB has in assessing costs that railroads face in taking on the risk of hauling the deadly TIH loads.
He said the board has been aware of the data problems for at least a year and is undertaking a review of its intricate Uniform Rail Costing System to eventually make a fix. But in this case, UP faced “a significant procedural disadvantage.” Even so, he said USM failed to make its case with him.