No Chemistry for Railroads, Shippers

No Chemistry for Railroads, Shippers

When a federal regulator throws up its hands and admits defeat in trying to pull railroads and key shippers together over a major issue, only one course of action remains: Battle.

The Surface Transportation Board is abandoning its effort to create an “advisory committee” of carriers and customers to tackle one of the most contentious issues in the entire rail industry — shaping a national risk-sharing standard for shipments of toxic inhalation hazard freight.

Those tank car cargoes can create poisonous clouds if released, such as when a train derails and the tank ruptures. Chlorine is the best-known toxic cargo of the group, and was the agent that killed nine people in a 2005 Graniteville, S.C., train crash. But several chemicals count as TIH cargoes.

After the STB conceded last month it could not bring together the two sides even to agree on how to form a panel, or even what its members could legally discuss, the two sides were left to fight out the issue case by case.

And a big fight is brewing.

A powerhouse group of chemical shippers filed a joint complaint formally asking the board to halt a new “standard operating practice” imposed in a March tariff by Alabama Gulf Coast Railway, a short line in the RailAmerica group of 40 small railroads. The tariff requires all TIH shipments to move in dedicated trains with no more than three such railcars at a time, and only with five days’ notice.

That was so much more restrictive than prevailing shipment methods, and could so impede movement for thousands of chemical tank cars plus any other rail traffic sharing the tracks, that shippers warned “the U.S. economy as a whole” could be hurt by the terms.

The American Chemistry Council, Chlorine Institute, Fertilizer Institute and shipper PPG Industries pleaded “injunctive relief must be granted to prevent serious irreparable injury.” The curbs would create “serious logistics disruptions,” they charged, including railcar shortages and potential shutdowns of chemical plants. It would force shippers to use more railcars to keep inventory flowing, and clog the railroad system.

Multiplying the Alabama Gulf Coast tariff across all 40 RailAmerica lines in North America, they said, “The irreparable injury to the entire rail transportation network becomes quite obvious.”

RailAmerica argues a “special interest group” is trying to “halt implementation of enhanced safety measures applying to transportation of chlorine and other toxic and poisonous commodities.” Paul Lundberg, RailAmerica’s chief operations officer, said “Moving toxic materials and poison by rail imposes burdensome, costly and risky obligations on railroads.”

The STB tried to head off this kind of faceoff last August when it announced plans to have a panel advise the board on issues involving the common carrier obligation railroads have to haul even dangerous cargoes and the risks that go with it.

Rail executives have warned for years a major chemical spill of chlorine or some other TIH cargo in a heavily populated area could kill or injure many people and push even the largest railroad into bankruptcy.

Rail officials have pressed members of Congress about the risks, proposing a national risk-sharing pool with public backing similar to that used by nuclear power plants, and tried negotiating a broad deal with shipper groups. In the meantime, several railroads are toughening their public tariffs.

The STB’s move toward an advisory council seemed to have traction for a while. Some companies offered specific candidates, lawmakers nudged regulators to include certain shipper segments, and railroad groups offered ideas for structuring the panel to include differing views of large and small railroads. But shippers and their trade groups, including the National Industrial Transportation League and the American Forest & Paper Association, warned in a joint filing that panel members under the STB’s plan quickly could become involved in issues in ways that violate antitrust law.

Any collective discussion of liability terms “is also very likely to involve discussion of the price (rates) which rail carriers charge” and have a few companies help set terms that affect competitors.

And shippers argue an STB move to broadly redefine railroads’ common carrier obligation on those hazardous cargoes could take the agency outside transportation safety rules set up by other federal arms, and beyond “well-established law” to settle each such case on its own merits.

Unable to bridge the gaps between shippers and railroads, and faced with the antitrust risks, the board said it will not create the advisory panel. Instead, it will “continue to address the liability-sharing issues ... on a case-by-case basis.”

Contact John D. Boyd at jboyd@joc.com.