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U.S. Magnesium will recoup up to $1 million over five years under a Surface Transportation Board ruling that Union Pacific Railroad charged the chlorine shipper "unreasonably high" rates.
The shipper's victory in the first of three cases it has against UP at the regulatory agency came in a split decision, with STB Chairman Daniel R. Elliott, appointed by President Obama, and fellow Democratic appointee Francis P. Mulvey determining "UP has market dominance over the movements of chlorine by tank car" on lanes from Rowley, Utah, to delivery points in Arizona of Eloy and Sahuarita.
U.S. Magnesium is the only domestic producer of primary magnesium, which it pulls from the Great Salt Lake. Chlorine is a byproduct of its process.
The STB majority still allowed UP to charge more than 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. UP disagreed, sharply criticized the board's procedures and vowed to appeal.
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 toxic inhalation hazard 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. And UP "has not demonstrated here that PTC investments are sufficiently defined," the board said.
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 railroads face in transporting the deadly toxic inhalation hazard loads and accurately comparing freight rates.
He said the board has known of the data problems for at least a year and is undertaking a review of its intricate Uniform Rail Costing System to make a fix. In the meantime, however, UP faces "a significant procedural disadvantage," he said.
Meanwhile, the data problem still hangs over STB actions. "The specific weakness in URCS ... may be shaping the outcome of pending and anticipated cases involving TIH," Nottingham wrote.