Marine Highway Transport of Toxic Inhalation Hazard Materials (2012)

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24 Background The danger associated with moving toxic inhalation haz- ard materials is a problem faced all over the world. Interest- ingly, if asked to name a major chemical producing area in the world, places that come to mind might be Houston, Sin- gapore, or one of the large complexes in Germany. An area less likely to be named is the Flanders region of Belgium at the mouth of the Scheldt River system, yet it contains the highest concentration of chemical facilities in Europe and boasts the second-largest chemical cluster in the world at Antwerp. A surge of new vessel construction combined with delay in the retirement of older single-hulled vessels has led to a degree of overcapacity in the tanker shipping sector in Europe. There have also been some high-profile accidents involving danger- ous goods on the Rhine that have driven home the importance of using double-hulled vessels. There was a major accident on the Rhine involving a chemical tanker on January 13, 2011, near the Lorelei at St. Goarshausen that resulted in the death of two crew members and the halting of shipping activity for nearly a month in one direction. Fortunately, the vessel was double- hulled, and this was credited with preventing an environmental disaster. The disruption was significant enough to hold down 2011 inland shipping totals in Germany and Switzerland. The Lorelei is seen as a chokepoint, as it is one of the narrowest points of the Rhine. The vessel was carrying sulfuric acid from the BASF plant in Ludwigshafen to Antwerp, Belgium (51). There is an ongoing investigation into the party responsible for the accident. Clearly, with such a substantial impact on the economy of the Rhine, the accident has increased discussion of safe transport of dangerous goods in Europe. Regulatory and Security Environment In both Europe and Canada, the term “dangerous goods” is used in lieu of “hazardous materials”; yet the meaning is essentially identical. Both chlorine and anhydrous ammonia are essential building blocks of the chemical and agricul- tural product industries, respectively. The Canadians and Europeans have taken substantial steps to standardize and centralize control of the movement of dangerous goods. For Canada, this has meant imposing an unusual amount of fed- eral control on the provinces, which otherwise enjoy substan- tial autonomy. For the European Union (EU), it has meant working within a very old and arcane preexisting structure of bodies and regulations in order to develop a core of standards and practices that would be consistent throughout the EU, despite the sharply different infrastructure endowments of Eastern and Western states. The foundational document for the regulation of danger- ous goods by water in Canada is the Transportation of Dan- gerous Goods Act of 1992 and its subsequent amendments. The equivalent document in the EU is the European Agree- ment Concerning the International Carriage of Dangerous Goods by Inland Waterways (ADN). These documents were extensively reviewed to examine potential applicability to the United States. Both entities have utilized the United Nations (UN) Recommendations on the Transport of Dangerous Goods—Model Regulations in the development of their poli- cies. The UN standards, currently in their 15th iteration, have been evolving since 1956. The UN recommendations do not apply to the bulk transport of dangerous goods in seagoing or inland navigation bulk carriers or tank vessels, which is subject to special international or national regulations (53). There is a substantial difference between a general agree- ment to follow UN recommendations and an actual binding legal structure. European policy in this area has been slow and deliberate in its evolution; however, as of 2011, many formerly non-aligned states, such as Switzerland and for- mer Eastern bloc countries including Serbia, Poland, and Ukraine, have acceded to the agreement. In the past, there has been collaboration between Canada and the EU regarding strategies for the movement of dangerous goods. The North Atlantic Treaty Organization (NATO), in which Canada is a C H A P T E R 4 Movement of Toxic Inhalation Hazard Materials in Europe and Canada

25 very active participant, served as an early forum for collabo- ration between European and Canadian partners in assessing the need to enhance the safety of dangerous goods move- ments. Improper handling of anhydrous ammonia within the former Soviet Union was a major point of contention for Europe during the early 1990s (54). NATO conducted a pilot study in the 1990s to evaluate different options for moving dangerous goods across international borders, tak- ing into account the need to integrate the newly independent states into a cohesive structure. One issue identified early in the process is that there are multiple distinct strategies for moving dangerous goods. A frequent holdup to agreements in moving these products is that different states champion different strategies that might all be equally valid but lead to delays when crossing from one jurisdiction to another (54). The “Pilot Study on the Transport of Dangerous Goods” soon grew into a general Canadian-European forum on dan- gerous goods policies that constituted a series of interna- tional meetings held in Canada and Europe between 1994 and 2000. Given the international security elements tied to certain classes of dangerous goods, NATO may again play a coordinating role in refining international procedures for member states. These early studies examined the recommendations of the UN Committee of Experts on the Transportation of Dan- gerous Goods, the International Maritime Dangerous Goods Code, and the International Civil Aviation Organization’s Technical Instructions, as well as the European Agreement Concerning the International Carriage of Dangerous Goods by Road (ADR) and the ADN. Thus, these meetings occurred after the passage of the Canadian Transportation of Danger- ous Goods Act but significantly in advance of the ratification of the ADN. (The ADR has no overall enforcing authority; in practice, contracting parties carry out checks, and national authorities deal with non-compliance in accordance with their domestic legislation.) (55). The United States currently does not have an analogous overarching structure for the regulation of hazardous material shipments by water, yet this does not suggest that the U.S. system is less strictly enforced. The current structure of the European system emerged from earlier regulation of Rhine commerce. Conversely, in the United States, the Coast Guard has played a unique role in enforcing maritime safety. This, in addition to the concentra- tion of U.S. chemical shipments on the coast (as opposed to inland rivers) may explain why the two systems have devel- oped differently. The likelihood that the European model of regulation will find favor in the United States in the future will depend in part on whether U.S. conditions will grow closer to those of Europe. For example, when compared to the United States, the European inland market is characterized by smaller firm size and a comparatively larger set of actors. In these con- ditions, a standardized protocol is very useful for setting minimal thresholds that can be universally conveyed. If the U.S. inland waterway system were to expand to include more small, owner-operator companies, a standardized protocol would be useful in ensuring that the complexity of regulation does not serve as a barrier to market entry. The following are some of the provisions of the ADN that are most relevant to this analysis: • The ADN requires all shipments of dangerous goods to be accompanied by an expert, designated as an individual who has passed an examination on ADN procedures. • Experts are required to renew their training through refresher courses at 5-year intervals. • A separate training is required for experts who escort dan- gerous materials in gaseous form (or those that enter a gas- eous state on contact with air or water). • In order to be recertified, experts in the carriage of gases must certify that they worked on a Type G tank vessel for at least 1 of the last 2 years. It is interesting to note that there is less explicit mention of handling procedures for chlorine in the ADN than there is for anhydrous ammonia. This may, in part, be due to the diminished role chlorine shipments play in total dangerous good movements in comparison with anhydrous ammonia. Chlorine is a Class 2 material with a UN classification code of 1017 and is listed as a commodity with no excepted quantity; yet, there are no commodity-specific handling instructions. Regulations applicable to transport of chlorine can be found under general provisions for liquid cargo tanks. Market Description Rhine Chemical Shipments At present, the Rhine carries 65 percent of the tonnage of all commodities transported by inland waterways in Europe. Eleven EU member states primarily utilize inland waterways that are tributaries of the Rhine, Elbe, Danube, and Oder river basins (56). The Port of Antwerp is of critical importance in facilitating chemical transport to the Rhine system. After pipelines, barge movements are the largest mode for transport of chemicals from the port, accounting for 34 percent of transport. This compares to a European average of 4 percent for the distribu- tion of chemicals by inland navigation (57). The Central Commission for Navigation on the Rhine (CCNR) has specific authority to specify technical require- ments for vessels operating on the Rhine (56). As confirmed through an interview with CCNR officials at CCNR’s head- quarters in Strasbourg, France, the legal structure that was only recently enacted for the EU has existed on the Rhine through

26 the CCNR since 1971 (56). Chemicals as a general category are increasing; however, the transport of fertilizers is declining on the Rhine due to an overall falloff in European demand. Chemical transport on the European inland waterway network is attractive due to a very high specialization of the tanker shipping industry. Passenger rail in Europe has prior- ity over freight rail, in contrast with the United States, where Class I railroads own and operate the corridors used for pas- senger service. Consequently, the freight rail system in the United States is regarded as the most efficient in the world. In Europe, by contrast, the railway is not viewed as a promising transport mode for the modal shift of dangerous (hazard- ous) cargoes that currently move by truck (58). Furthermore, the railroad does not have the experience and reputation for expertise in the movement of hazardous cargoes, as is the case in the United States. The cost to ship dangerous goods by truck can be very high, so in most cases where a modal shift to water is possible, it has already been realized. The fixed infrastructure of the chemical industry is very important in Europe. Particularly notable are the enormous facilities in Ludwigshafen, Germany—principally BASF, which is one of the largest chemical companies in the world. These chemical industries have located along the Rhine in order to take advantage of it to move not only end products but also raw materials. It is a very well-established market, which allows shippers to realize economies of scale. The broader chemical industry concentrated along the Rhine is supported by a high concentration of refineries in Rotterdam. One major shift that is occurring within Europe is a decline in refining capability with a shift in sourcing to the Middle East. This is tied in large part to the higher shipping cost of European products. There have been two major refinery closures in Germany and another two in France in 2010 alone. The same economic factors that are affecting refined petroleum pro- duction in Europe are also affecting fertilizer production and distribution. The CCNR used to track fertilizers, including anhydrous ammonia, within the general category of chemicals; yet, in recent years it has broken these into two separate categories in order to clearly demonstrate that while overall chemical transport on the Rhine is consistently increasing, fertilizer transport has been consistently falling. The total volume of chemical products transported on the Rhine increased 29 percent between 2004 and 2010, as shown in Figure 9. Danube Shipments An interview conducted by one of the project research- ers with researchers at the University of Belgrade confirmed that the ratification of the ADN is also proving to be a posi- tive development for the Danube-dependent nations (60). For the newly independent states, one of the key difficulties in transporting dangerous goods was the need to integrate procedures with the West. Inland shipping on the Rhine had been largely standardized even prior to the establishment of the ADN; however, the situation was more difficult for shippers on the Danube, who sometimes face contradictory safety requirements for different nations when engaging in international shipments. For example, it was noted that the ADN removed the maximum limits on shipment size, which previously made the transport of some commodities nonvia- ble. The signatories to the agreement, including Serbia, subse- quently passed national laws echoing the main provisions. In general, inland shipping on the Danube has declined in recent years, particularly since the economic crisis; it is hindered by a cargo imbalance as well as deficiencies in infrastructure. It is hoped that with the ADN now in force, additional legal barriers will be minimized. In addition to the provisions of the ADN, there has been a concerted effort for some years now to minimize the move- ment of chlorine and other highly dangerous cargoes. In fact, this has been a principal argument for retaining a core of 70 80 90 100 20 05 = 1 00 110 Transport on the Rhine Chemical industrial production 120 130 140 2010-Q 3 2009-Q 4 2009-Q 1 2008-Q 2 2007-Q 3 2006-Q 4 2006-Q 1 2005-Q 2 2004-Q 3 2003-Q 4 2003-Q 1 Figure 9. Transport of chemical products on the Rhine (59).

27 domestic production within Europe despite high manufac- turing costs. Over-reliance on imports would mean, in many cases, longer supply chains and greater exposure to transport the commodities to the point of consumption. Chlorine and Anhydrous Ammonia Production Strategies in Europe and Canada Changes in the production process of chlorine have begun to have a significant impact on how and where chlorine is produced, particularly in Europe. Anhydrous ammonia production in Canada is particularly important due to the large role played by commercial agriculture. At the same time, large-scale production of agricultural commodities for domestic consumption and export is possible in large part due to the substantial ammonia production within Canada. The following section reviews the chlorine and anhydrous ammonia industries in both Europe and Canada and exam- ines the legal and administrative structure used for safely handling them. The Canadian Ammonia Industry Canada produces approximately 12 percent of global fertil- izers. The industry generates between 4 and 5 million tons of ammonia per year. The vast majority of Canadian ammonia production is concentrated inland, primarily in the province of Alberta. There are only two Canadian ammonia produc- tion units in proximity to water—the Courtright, Ontario, facility that is located near Lake Huron and the Kitimat facil- ity located in British Columbia near the new Port of Prince Rupert. The opening of the Port of Prince Rupert has given Canada an important new avenue for exporting anhydrous ammonia without moving the material through large popu- lation centers. At present, however, there has been almost no anhydrous ammonia shipped through this gateway. Fig- ure 10 shows the location of the main ammonia production facilities in Canada. Given that natural gas constitutes 70 to 90 percent of the total cost of ammonia production, the locations of ammonia production units are closely correlated with major natural gas production areas. In 2010, the United States imported 1,115,857 tons ($441 million) of anhydrous ammonia from Canada, compared with only 95,874 tons ($11 million) of ammonia in aque- ous solution, or 3 percent of the total (61). Table 6 shows Canadian exports of anhydrous ammonia to all countries from 2006 through 2010 in U.S. dollars. For all practical pur- poses, the United States is Canada’s only export partner for anhydrous ammonia. To this point, Canada has not made substantial use of its maritime ports for anhydrous ammonia exports. Table 7 provides a breakdown of provinces of origin for Canadian anhydrous ammonia production. The dominance of shipments from Alberta is obvious. Figure 11 provides a summary of the level of Canadian ammonia production for the last 10 years. In tracking trade statistics, Statistics Canada examines ammonia within the broader category of fertilizers. There are currently 55 manufacturers located within Canada that produce fertilizers such as ammonia (63). North Dakota has Figure 10. Location of ammonia production units in Canada.

28 been the largest single recipient of Canadian fertilizer exports (64). Washington State is the U.S. destination state with the most potential to receive a modal shift to water for fertilizer exports, as it is the third-largest recipient of fertilizer exports and the largest with a significant port and marine highway system. A logical supply chain would be to move ammonia by rail to the Port of Prince Rupert from Albertan factories and then move the shipment by ship or ocean-going barge to the Columbia or Snake River system. Eventually, maritime ship- ments could also be made as far south as California. Chlorine Manufacturing in Canada and Europe Alkali and chlorine manufacturing within Canada has been declining in recent years. As of December 2010, there were only seven manufacturers of chlorine and alkali within Canada— three in Quebec, two in Ontario, one in New Brunswick, and one in British Colombia. Within Europe, the production of chlorine is an impor- tant industry, yet one that is seen as either stagnant or declin- ing. With a stable population, long-term projected demand growth for PVC—heavily used in the housing industry—is modest outside of Eastern Europe. In other cases, higher pro- duction costs have led to greater importation, particularly from regions with lower energy costs. The principal strategy employed by European countries to avoid risk exposure from the transportation of chlorine is to minimize the instances when chlorine needs to be moved. Less than 10 percent of chlorine produced within Europe is moved off site. Europe has a large number of chlorine-producing factories, but most are modest in size—tailored to the needs of a specific indus- trial use. Today, installed capacity for chlorine in Europe exceeds demand. Players say restructuring and closures, particularly of old, small units, are inevitable. The United States has also seen a slowing of chlorine demand yet has retained more long-haul shipments due in large part to the efficacy of the freight rail network. Figure 12 lists the international instruments administered within the UN Economic Commission for Europe (UNECE). The sharply different roles played by anhydrous ammonia in the Canadian and European economies are characterized by a key distinction. In Europe, neither chlorine nor anhy- drous ammonia is manufactured for export abroad, whereas for Canada ammonia is a key export. High manufacturing costs and the difficulty in moving dangerous goods through heavily populated regions have limited the roles that chlorine and ammonia production have played in the European eco- nomic picture. Like the United States, where chlorine pro- duction peaked in 2004 and has been in decline ever since, European chlorine production has been falling in large part 2006 2007 2008 2009 2010 United States 389,454,194 401,087,831 740,998,313 358,981,035 450,235,486 St. Pierre-Miquelon 5,060 13,565 19,373 0 3,169 Greenland 0 326 0 0 0 TOTAL (ALL COUNTRIES) 389,459,254 401,101,722 741,017,686 358,981,035 450,238,655 Table 6. Canadian exports of anhydrous ammonia (U.S. Dollars) (62). 2006 2007 2008 2009 2010 Alberta 313,784,177 315,356,000 621,674,661 268,273,403 346,702,573 Ontario 60,079,685 75,805,006 108,165,079 85,013,348 89,391,346 Manitoba 13,245,013 9,062,759 10,655,268 4,310,901 7,275,441 Saskatchewan 2,265,520 833,552 437,527 1,383,383 6,710,188 Quebec 56,157 0 0 0 155,939 British Columbia 0 30,513 65,778 0 0 New Brunswick 23,641 0 0 0 0 Prince Edward Island 0 0 0 0 0 Nova Scotia 0 0 0 0 0 Nunavut 0 0 0 0 0 Newfoundland and Labrador 0 0 0 0 0 Northwest Territories 0 0 0 0 0 Yukon Territory 0 0 0 0 0 Sub-total (to United States) 389,454,193 401,087,830 740,998,313 358,981,035 450,235,487 Others 5,060 13,892 19,372 0 3,168 Total (all countries) 389,459,253 401,101,722 741,017,685 358,981,035 450,238,655 Table 7. Provinces of origin for Canadian anhydrous ammonia production (62).

29 due to safety and environmental concerns (65). Nevertheless, the general market for chemical shipments on the Rhine has been positive in recent years. The impact of the ADN treaty has been strongly felt within the chemical shipping market, and its impact, according to the CCNR, has been largely positive. The ADN mandated a tran- sition from single-hulled to double-hulled vessels, which has helped create a boom in vessel construction (58). From 2006 to 2010, 280 new tanker vessels were deployed in the Euro- pean market. In order to take advantage of economies of scale, when shipbuilders construct new double-hulled vessels to replace single-hulled ones, they build vessels with much greater capacity than the vessels that are being replaced. To this day, there is an environment of strong investment in new ship construction for inland navigation in Europe, and, due to the double-hulled new builds that have already entered service, the average capacity of the tanker fleet is also increasing. The provisions of the ADN allow single- hulled vessels to continue to operate for some commodities until 2018. Energy usage is a key area of concern for the European chlorine industry. Chlorine production is energy intensive, and with the comparatively higher cost of energy in Europe, there is concern that production could be outsourced to countries that have less efficient processes, thereby increasing the total carbon footprint of European chlorine production. In Europe, electricity accounts for approximately 50 percent of the cost of chlorine and caustic soda production. Figure 12. International instruments administered within the UNECE. Figure 11. Canadian fertilizer production (values in Canadian Dollars) (63).

30 Figure 13 shows the breakdown of chlorine production within Europe in 2008. Table 8 shows the location and capac- ity of chlorine production sites within Europe. Differences from the U.S. System In Europe, the railway is not viewed as a promising trans- port mode for the modal shift of dangerous cargoes that currently move by truck. Furthermore, the railroad does not have the experience and reputation for expertise in the movement of hazardous cargoes that the railroad has in the United States. The cost to ship dangerous goods by truck can be very high, so in most cases where modal shift to water is possible, it has already been realized. The location of the fixed infrastructure of the chemical industry is very important in Europe for determining the modal options available. Conclusions For ammonia production, it is important to understand that 80 percent of global ammonia production is used for fertilizers, and this accounts for the location of major con- sumption points and corridors. The production process for anhydrous ammonia has changed little over the past several decades. Thus, while there is variation in the technology used in the production of ammonia, the most significant deter- minant of where ammonia is produced is the availability of feedstock, principally natural gas. In countries with high gas prices, ammonia production has generally not been expand- ing in recent years. Many countries with copious natural gas reserves have moved into the ammonia market. The Middle East is a notable example where the specialization in ammo- nia production is driven not by agricultural demand but by the ready accessibility to natural gas. For countries that wish to export ammonia, proximity of the production site to water Figure 13. European chlorine production, 2008 (000 Metric Tons) (66). Table 8. Major European chlorine production capacity (66). Company Location Capacity* Akzo Nobel Botlek, the Netherlands 633 Delfzijl, the Netherlands 109 Frankfurt, Germany 167 Ibbenbüren, Germany 125 Anwil Wloclawek, Poland 214 Arkema Fos, France 310 Jarrie, France 170 Lavera, France 350 BASF Ludwigshafen, Germany 385 Bayer Brunsbüttel, Germany 210 Dormagen, Germany 480 Leverkusen, Germany 360 Uerdingen, Germany 240 Borsodchem Kazincbarcika, Hungary 299 Chimcomplex Borzesti, Romania 107 Dow Chemical Schkopau, Germany 250 Stade, Germany 1,585 Ercros Flix, Spain 150 Huelva, Spain 100 Vilaseca, Spain 190 Evonik Degussa Lülsdorf, Germany 136 INEOSChlorVinyls Rafnes, Norway 260 Runcorn, UK 746 Stenungsund, Sweden 120 Wilhelmshaven, Germany 149 Oltchim Râmnicu Vâlcea, Romania 260 Perstorp Pont-de-Claix, France 170 Polimeri Devnya, Bulgaria 124 Rokita Brzeg Dolny, Poland 125 Solvay Rheinberg, Germany 200 Rosignano, Italy 150 Tavaux, France 375 SolVin Antwerp, Belgium 474 Jemeppe, Belgium 174 Martorell, Spain 218 Spolana Neratovice, Czech Republic 135 Syndial Assemini, Italy 153 Tessenderlo Chemie Tessenderlo, Belgium 400 Vestolit Marl, Germany 260 Vinnolit Gendorf, Germany 172 Knapsack, Germany 250 *Thousand Metric Tons/Year Note: Only plants over 100,000 metric tons/year are shown.

31 is also strategic. Thus, while Canada is a substantial ammo- nia producer due to its robust agricultural sector, its ability to become a major ammonia exporter is limited by the fact that most of its ammonia production is concentrated inland, away from deep-water ports or a navigable waterway system capable of transporting ammonia to export terminals. Nev- ertheless, the west coast of Canada is likely to be the most important marine highway for Canadian exports of anhy- drous ammonia to the United States. The growth in ammonia demand has implications for the growth in biofuels (corn ethanol). The intense carbon diox- ide (CO2) release in the course of manufacturing ammonia for fertilizer used in U.S. corn production is one of the key reasons that corn ethanol is not considered to be very prom- ising in substantial net lifecycle reductions in CO2 emissions (well-to-wheels). Nevertheless, while ammonia production is inherently carbon intensive, there are a number of factors that can lower the overall carbon footprint per unit of ammonia. Transportation has not often been discussed in this context; yet it is clear that a country with a carbon minimizing strategy should consider incorporating marine transportation. For the EU, the principal goals regarding transport of anhydrous ammonia and chlorine have been to lessen human exposure while still ensuring that major agricultural and industrial users can secure a sufficient amount of product so as not to undermine the economy. Although it only governs the Rhine Basin, the CCNR is the most established organi- zation within Europe for ensuring safe navigation on inland waterways. One of the key objectives of the CCNR is to ensure the safety of navigation, which makes the regulation of dan- gerous goods shipments a natural priority area. The CCNR’s founding documents were drafted in the 19th century and thus predate many of the nation states that currently consti- tute Europe. For this reason, newer regulations such as the ADN must incorporate the basic framework established by the CCNR. The ADN entered into force in 2008 after having first been agreed to in 2000. It set out to standardize minimum require- ments for dangerous goods shipments such as packaging requirements, placarding, vessel crewing requirements, and vessel inspection requirements. The level of complexity involved in integrating existing practices has meant that standardization efforts have been slow. Nevertheless, full implementation of the ADN prom- ises to significantly affect inland marine shipping of danger- ous goods for the whole of Europe.