A series of federal regulations designed to more closely monitor rail shipments of hazardous materials, including anhydrous ammonia, are about to be implemented, as are much higher freight rates imposed by railroads for anhydrous shipments.
The Transportation Security Administration, a component of the Department of Homeland Security, announced on Jan. 22 that it will begin tracking rail shipments of Toxic Inhalation Hazard (TIH) materials such as chlorine and anhydrous ammonia as early as February to create a “chain of custody” that “requires secure handoffs when cars change hands.”
The tracking system will use industry data to allow the federal government to determine the location of rail cars carrying TIH materials within minutes. In addition to requiring “documented chain of command handoffs” all along the distribution route, the regulations also identify security procedures for any rail operation that ships or receives TIH materials, and provide for close coordination between TSA and other federal agencies for proper enforcement.
In testimony before the U.S. Senate Committee on Commerce, Science and Transportation, TSA said in mid-January that the measure was necessary because tank cars carrying TIH materials that sat unattended near urban areas posed the highest risk potential as a terrorist target. “It would be irresponsible on our part if we continued to allow toxic materials sitting around for days on end in High Urban Threat Areas,” said John Sammon, TSA’s transportation sector administrator. “That’s not a risk we want to keep taking.”
In December, DHS issued a notice of proposed rulemaking for a package of new security measures that would require freight rail carriers to ensure 100 percent positive hand-off of TIH materials. The rail security package also calls for the appointment of a rail security coordinator to share information with the federal government, and formalizes TSA’s freight and passenger rail inspection authority.
In addition, the security package includes a provision that will allow TSA to impose up to $10,000 in fines per security violations, per day. The proposed rule was posted to the Federal Register on Dec. 21, and will be open for public comment for 60 days from that date. The Pipeline and Hazardous Materials Safety Administration of the DOT also introduced a proposed regulation in late 2006 that would require railroads to analyze safety and security concerns when determining the route for a freight train carrying certain types of hazardous materials.
For its part, the railroad industry seems eager to shed its common carrier status obligation to carry TIH materials such as ammonia, and is significantly raising freight costs for anhydrous shipments. A fertilizer industry source, citing recent freight rate increases for ammonia shipments of at least 25 percent, told Green Markets that ammonia buyers are facing two critical concerns this spring ?Çô whether there will be enough ammonia available to meet the application demands for a huge corn acreage increase, and whether there will be carriers available and willing to haul that ammonia.
One major fertilizer supplier notified some of its customers in January that CSX Transportation had increased rail rates for anhydrous shipments on both CSXT direct and joint line shipments by 35-97 percent, depending on location. This, along with an earlier increase announced by the Norfolk Southern Railroad, was seen as further confirmation that the railroads are reluctant to haul anhydrous ammonia.
CSXT had not returned calls at press time to confirm the increase, and a spokesperson for Norfolk Southern said the company would not comment on its pricing structure. Pat Hiatte, a spokesman for the BNSF Railroad, however, told Green Markets that his company’s freight rates for anhydrous ammonia shipments will go up March 1. Hiatte would not quantify the increase, but said BNSF will publish the new rate structure on its website 20 days prior to the March 1 effective date.
“We are pricing all of our business to reinvestable levels,” said James Barnes, director of media information for Union Pacific Railroad. “That being said, we are paying particular attention to TIH commodities.” Once adopted, Barnes said the proposed TSA regulations and other TIH security proposals under consideration by Congress and the DOT “are likely to result in a significant increase in the costs of transporting and handling TIH commodities.” While noting that the UP is “communicating directly with our affected customers on each movement,” Barnes told Green Markets that the railroad’s prices “will reflect these increased costs and some of the liability associated with the movement of these chemicals.”
“We’re not happy about the prices, or about [the railroad’s] desire to get out of their common carrier obligation to transport ammonia,” said Kathy Mathers, vice president of public affairs for The Fertilizer Institute. “We need the railroads in order to haul ammonia. Obviously any discussion about losing their common carrier status concerns us quite a bit.”
The Association of American Railroads (AAR) President and CEO Edward Hamberger, in testimony before the House Transportation and Infrastructure Committee’s Railroad Subcommittee last summer, said the railroad industry “cannot continue to transport highly-hazardous material under the conditions that currently exist.”
TIH materials represent just 0.3 percent of all rail shipments, according to the AAR, and more than 90 percent of chemical freight is carried by only six carriers. In a January 2007 position paper called Hazmat Transportation by Rail, AAR states that 1.7 to 1.8 million carloads of hazmat are transported each year by rail in the U.S., with two thirds moving in tank cars. In each of the past couple of years, AAR says, railroads have transported just over 100,000 carloads of TIH materials, virtually all in tank cars.
AAR claims that every time a railroad moves one of these TIH shipments, it faces “potentially ruinous liability.” According to AAR, “the revenue that highly-hazardous materials generate does not come close to covering the potential liability associated with this traffic, and the insurance industry is unwilling to insure railroads against the multi-billion dollar risk associated with highly-hazardous shipments.” According to Hamberger, more than half of the railroad industry’s insurance costs stem from delivering dangerous chemicals.
As a result, according to the AAR, “if the government continues to require railroads to transport highly-hazardous materials, railroads’ liability in the event of an accident should be limited. If railroads’ risks are not limited, they will be forced to seek an elimination of their common carrier obligation to carry highly-hazardous traffic, or to challenge its applicability with regard to TIH and other highly-hazardous materials.” AAR concludes that, “Like other transportation providers, railroads should be able to decide for themselves whether to transport, and at what price they are willing to transport, highly hazardous materials.”
But that is a statement that The Fertilizer Institute questions. “The railroads are comparing themselves to other transportation carriers, and that’s just not the case,” Mathers told Green Markets. “They own the tracks and they have certain antitrust protections that other carriers don’t have. So it’s not really comparing apples to apples.”
Mathers said the impacted industries are currently discussing rerouting strategies for TIH materials, and whether additional efficiencies can be achieved through swaps or reducing the amount of mileage required for TIH transportation. Mathers noted that several TFI member companies are currently participating in a Section 333 Conference with the Federal Railroad Administration (FRA) over these issues and others, including new tank car standards. She said that the FRA is expected to release a notice of proposed rule-making for new tank car standards by this summer, with a final rule likely within the year.
TSA Deputy Administrator Robert Jamison said in December that putting the proposed DHS tracking rules in effect would cost the rail industry $162 million over 10 years. The proposed regulations follow closely a series of “recommended security action items” that DHS and DOT issued nearly one year ago for rail shipments of TIH materials. Those voluntary recommendations, published on March 30, 2006, are available at http://hazmat.dot.gov/riskmgmt/hmt/Freight_Rail_Security_Action_Items.pdf.
The TIH tracking regulations may also revive the debate over the required use of inherently safer technologies (IST), a controversial component of some past attempts at chemical site security legislation that would require chemical manufacturers to replace highly toxic chemicals with safer alternatives. AAR has already lobbied Congress to force the IST issue with chemical manufacturers, but the chemical and fertilizer industries are staunchly opposed to any IST mandate.
“There is no substitute for ammonia in the fertilizer manufacturing process or in other industrial processes,” Mathers said. “We agree with FRA on the need for the safe transport of ammonia and other TIH materials, but we disagree on how to get there.” She noted that the highly publicized Canadian Pacific train derailment near Minot, N.D., in January 2002, which caused an ammonia release that killed one local resident and sent dozens of others to the hospital, “did not result from tank car failure. There were other issues at play there.” That accident spawned numerous and ongoing lawsuits against Canadian Pacific.
The TIH tracking regulations are not the only proposal being considered that could affect the transportation of agri-chemicals. According to the Agricultural Retailers Association, the U.S. House also recently approved a homeland security bill that would set a firm deadline for all U.S.-bound cargo to be scanned at foreign ports. The shipping and retail industry is aggressively lobbying the Senate to oppose this legislation, ARA said, because of concerns that it would potentially delay the delivery of pesticides and fertilizers and bring additional costs to the industry.
ARA said the maritime security bill that was signed into law last year requires DHS to conduct test programs at three foreign ports to determine the feasibility of scanning cargo at all ports. Opponents of the House measure hope that Congress will wait for the results of the test programs before setting firm deadlines for scanning programs at foreign ports, ARA said.