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Liability of anhydrous spills worry railroads

By ANN HINCH
Assistant Editor

WASHINGTON, D.C. — Though major American railroads actually haul a small proportion of their annual freight as toxic inhalation hazard (TIH) materials – including anhydrous ammonia – they are petitioning the federal Surface Transportation Board (STB) for the right of refusal to do so, or at least for limited legal liability for those shipments.

Earlier this year, the Assoc. of American Railroads (AAR) brought the issue before the STB, requesting to be released from a longtime federal common carrier obligation that requires railroads to haul TIH materials. The STB indicated it would make a decision this month.

Hauling a TIH can “literally put you in a ‘bet the company’ situation,” explained Tom White, director of editorial services for the AAR, based in Washington, D.C. The AAR represents all Class 1 large railroads in the United States and some short lines; White said AAR members ship more than 90 percent of the rail freight in the U.S. and represent the largest railroads in Canada and Mexico, as well.

He said the rail business is unique in that it is required to carry anything presented for shipment, provided it meets certain standards – whether the rail carrier wants to or not.

“We cannot say no when it comes to moving anything, virtually,” White said. He added that chemical manufacturers and customers can choose to make or buy TIH materials, but “the only one without any choice in the whole scenario is the railroad. We are compelled to move the stuff.”

Out of approximately 33 million carloads of freight transported by AAR members in a year, he said 1.7 million are hazardous materials, or hazmat; of those, only about 100,000 cars are filled with TIH materials – and of those, he said 80 percent are chlorine and anhydrous. He said 99.96 percent of all hazmat hauled by rail moves without incident.

“We carry it as safely as possible,” White said. “But, the danger is still there, and if you do have an accident, the liability is enormous. One accident can potentially leave you subject to hundreds of millions of dollars of liability.”

Foremost in railroad executives’ memories is surely the Graniteville, S.C., wreck of January 2005, in which a Norfolk Southern train hauling chlorine gas was improperly track-switched and hit a parked train near Avondale Mills. According to an article in the Augusta Chronicle, 60 tons of the gas leaked, killing nine people and injuring hundreds more. White said AAR members are, in fact, not seeking release from their common carrier obligation; what they want is either shared or limited liability for such incidents. He cited as an example The Price-Anderson Act, which limits liability for the nuclear industry for incidents involving radioactive materials when they happen in connection with government contracts.

Steve Sullivan, vice president and executive director of the American Short Line & Regional Railroad Assoc. (ASLRRA), said his organization’s position on the common carrier obligation is similar to AAR’s. The ASLRRA represents classes 2 and 3 regional and local, or short line, railroads.

“We’re unified on this topic,” he said. “This is important, as it stands, to all railroads. The short line railroad will touch one in every four hazardous material cars.”

There are several ways the STB could share or limit liability to railroads, Sullivan said.

For example - create an insurance pool with a liability cap, to which railroads, manufacturers and customers contribute; or, allow the railroads to come up with a formula to increase shipping rates to cover premiums and liability.

As it is, railroads cannot increase these rates without STB permission. Sullivan said railroads have to show operating costs and other suggested increases, and justify them through several “tests” to gain approval. He said this isn’t easy; White added if rail rates top a certain level, customers can appeal to the STB. (Both organizations are prevented from involvement in rate-setting by anti-trust laws, according to White.)

“When you’re talking about risk, there’s no way to quantify that,” Sullivan said.

This is the first time the AAR has appealed the common carrier obligation, according to White.

He said railroads face mounting difficulty securing liability insurance and when they can get it, the premiums are high.

Part of this is the increased threat of potential terrorist strikes against rail freight. White said this is also a worry of the railroads, which he said have no problem hauling non-TIH substitutes for chlorine and anhydrous ammonia (such as urea) – in fact, he said the only completely safe way to haul TIH materials is to not haul them at all.

He said railroad companies do worry about the safety of the communities through which they haul freight, especially large metro areas where a Graniteville-type incident would likely harm far more people. Sullivan added after news of that collision and Sept. 11, Americans also worry more about what passes through their towns.
“People are very acutely aware of what’s traveling by rail,” he said. “There’s nothing wrong with that.”

11/5/2008