#### **Final submission to the FRA-submitted post hearing**

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### US Magnesium LLC

238 North 2200 West - Salt Lake City, UT 84116-2921

801/532-2043 - 800/262-9624 - FACSIMILE 801/534-1407

Before The Department of Transportation-Federal Railroad Administration,
May 13, 2008

Docket: FRA-2006-25169

We appreciate the opportunity to testify here today on the issue of
Safety of Railroad

Tank Car transportation for Hazardous Materials, in particular chlorine.

My name is Dr. Howard I. Kaplan and I am Vice
President-Chemicals&By-Products for US Magnesium LLC. I hold a BS and
PhD in Metallurgy and Materials Science, and have over 35 years
experience with electrolytic production of magnesium and aluminum and 25
years experience in sales and marketing of magnesium and chlorine
chemicals.

US Magnesium would like to address the issues surrounding the safety of
rail car transportation of chlorine. Our testimony will cover the
following issues:

1.  Background of USM

2.  Safety in chlorine production and shipments

3.  Comments on the level of the standards proposed

4.  Timing for the testing and prototyping and service testing

5.  Replacement of non normalized steel cars

6.  Thermal protection systems

7.  Timing of production for new cars

8.  The 286,000 weight limit

9.  Commercial implications of the time frame on fleet management and
    procurement and Railroad speed limitations impacts.

10. Comments on the financial analysis

1**. Background of US Magnesium LLC**

Safe production and shipment of chlorine is critical to the employees
and customers of USM, and safe transportation is required for the safety
of the public. We applaud the efforts of the DOT-FRA to continue to
improve the safety of chlorine shipments

US Magnesium LLC is the only surviving magnesium metal producer in North
America. It is located in Rowley, Utah on the shores of the Great Salt
Lake and employs almost 500 people. USM produces about 55,000 tons of
magnesium currently and similar quantities of chlorine as a co-product.

Magnesium is critical to aluminum alloying for all aluminum sheet such
as cans, truck bodies, aircraft skins and many aluminum castings as
well. Magnesium usage in castings in the automobile industry is growing
and it helps reduce weight and therefore fuel consumption. Magnesium is
irreplaceable in producing Titanium, Zirconium, Beryllium and Uranium
for aircraft, nuclear and chemical uses, and is also important in
military applications such as fuels, explosives and flares. Magnesium is
thus critical for a growing United States economy, it provides several
environmental benefits, and is important in national defense as well.

The benefits of chlorine to the economy and to the national health and
well being are well known and well documented in the NPRM and in this
proceeding by the testimony of the Chlorine Institute and others.
However, it must be noted that without the production, sale and
transport by rail of chlorine from our Rowley plant, it is highly
doubtful that US Magnesium could stay in business. US Magnesium and its
predecessors developed an entirely new technology that allowed chlorine
to be extracted from magnesium chloride and captured for sale as a
co-product of magnesium. Previously, chlorine had been vented to the
atmosphere pursuant to Clean Air Act permits. That venting was wasteful,
uneconomic and not environmentally beneficial. In 1989, the US Magnesium
predecessor company emitted approximately 55,000 tons of chlorine to the
atmosphere. By 2006, that number was reduced to nearly zero.

The inability to safely ship chlorine from our Rowley plant would
possibly result in a closure of the magnesium plant and the accompanying
elimination of the only North American supply of that vital metal. Since
the end user markets for products such as bleach and water treatment
chemicals are so distant from our plant, and because bleach can only be
shipped relatively short distances in the high temperatures of the west,
economics preclude the production of these products at our plant in
favor of safe shipment of chlorine to remote locations. If we were not
able to safely ship chlorine and US Magnesium were able to stay in
business, it would be forced to dispose of the chlorine co-product as it
had in the past. In either case, these are highly unattractive
consequences.

2.  **Safety in chlorine production and shipment**

Recognizing the need for significant improvement in rail car safety, USM
became a member of the New Generation Rail Car Coordination Panel in
2006, along with Dow, Oxy, Bayer, and the Chlorine institute, with the
objective of promoting the development of a significantly improved,
safer rail car. The panel is working on an order of magnitude
improvement in failure resistance versus other proposed rail car
designs, at that time, that had only small improvements in impact
resistance. We anticipate helping to enfold that panel's work into the
FRA proposed new rulemaking to achieve these substantial improvements
for the industry. However there are timing, standards of improvement and
commercial and financial issues that must be addressed and dealt with in
a practical and scientific manner. The uncertainties in the ability to
achieve the proposed levels of improvement in the NPRM and the timing of
when cars can be service tested and proven and then finally be built,
has the potential to cripple an industry that needs cars to continue to
run their businesses and serve customers and the public. Industry must
have cars to deliver product during the interim period. Currently no one
will lease new chlorine cars under any circumstances and any new car
purchase is fraught with uncertainty as to lifetime and ultimate cost.
Concerns about the NPRM, car design, and liability, have caused some
lessors to exit the chlorine car leasing business, thus further
exacerbating the problem.

3.  **Comments on the level of the standards proposed**

The proposed levels of impact resistance must be based on sound science
and realistic levels. Preliminary results of the Next Gen Development
efforts seem to indicate that the 25 mph puncture resistance under the
current testing regime may be practical and achievable. However,
significant additional testing must be done to prove this level and then
prototypes must be made, construction methods and the designs have to be
finalized and construction of cars and service performance must be
judged before a design can be finalized and a car maker(s) can begin
conversion of their production and before negotiations can begin on
pricing and delivery of cars. Similar issues exist if the cars can be
retrofitted rather than built brand new. Realistically, we believe, this
effort will likely take as much as 3+ years to be achieved for 25mph. On
the other hand, the 30mph standard proposed for the heads of the new
cars does not seem to be achievable with the current technology being
investigated, and the justification for this higher level is unclear and
may not be justified as well. It is unlikely that this standard can be
achieved with current technology being studied and significantly longer
time will be required to meet this standard and to complete service
testing and qualifications. We have similar concerns about the Volpe
technology regarding ultimate levels of rupture resistance possible and
timing to achieve final designs.

> **4. Timing for the testing and prototyping and service testing**

Based on the above comments, we believe that the timeline for the
remainder of the development of satisfactory designs must be planned out
more realistically to take into account design and prototyping needs as
well as field-testing and pilot development and service performance
issues. This is a major program, and replacement of some 15,000 rail
cars nationwide should be done only after major testing and service
experience. No changes to existing fleets should be required before the
development is complete and the NPRM must have timing that begins only
when commercially available, fully tested cars can be produced. We are
certain that car manufacturers will have more comments on this issue,
but a two-year period for the finalization of the design and production
is unrealistic and certainly unachievable. We encourage the recent
discussions on proposals for an interim car standard to meet the
immediate commercial needs of the industry, but there has to be some
leeway on the useful life span allowed (i.e. some grandfathering) to
avoid a commercial disaster on new car purchases. More than one car
design must be allowed as well.

5.  **Replacement of non-normalized steel cars**

Based on FRA Sponsored research we do not feel that early replacement of
non-normalized steel cars is justified as these cars show similar
puncture resistance to normalized steel cars. As all the cars will be
replaced on an expedited basis, this requirement seems unjustified. The
almost 3600 non-normalized cars (as estimated by the FRA) will be
difficult to replace on such a tight timetable.

**6. Thermal protection systems**

Part of the NPRM specifies different thermal protection for new cars
versus older ones via a performance specification as compared to a
design specification. We believe that the performance specification
should be extended to older cars as well, that might be retrofitted.

7.  **Timing of production for new cars**

The car manufacturers ultimately must be the ones to comment on the time
frame for replacement. However, we do not believe that a six-year time
frame for replacement of all the cars is realistic or achievable, even
after the design is finalized. And, the replacement period must not
start until final designs are completed and fully service tested and
become commercially available, and the manufacturers have completed
their retooling.

8.  **The 286,000 pound limit**

New chlorine cars under the NPRM will certainly weigh more than existing
cars. In order to insure that cars can continue to carry a full 90-ton
payload, and in order to minimize the number of cars shipped, it is
imperative that the railroads upgrade their infrastructure to insure
they can carry the full 286,000-pound weight. Light loading of cars
increases the number of cars required and increases the safety risk, as
more cars have to be shipped. We support this as part of the NPRM.

9.  **Commercial implications of the time frame on fleet management and
    procurement and railroad speed limitations impacts.**

Again, as noted above, USM fully supports the improvement of rail car
safety in the transportation of chlorine. However, practical business
necessity requires that we maintain sufficient cars throughout the
coming years to operate our business. Thus the time frames for
development and then conversion must be kept achievable. It also must be
recognized that there will be competition among chlorine producers for
the new cars, and that a smaller producer like USM may find itself
commercially disadvantaged by larger producers, and may be unable to buy
or lease cars in a timely manner as required by the NPRM, because of the
larger purchasing power of bigger producers. Some producers like USM
both own and lease cars, and the replacement of the lease cars might not
be under our control, which complicates the issue. The uncertainty of
the timing and the recent AAR attempts to limit new car purchases after
May 1 2008 also complicates the issue and companies like USM will have
to buy cars in the next couple of years before the design becomes
finalized and the ultimate new cars are available. Therefore individual
consideration to each company must be given on replacement schedules
based on fleet makeup, (type of cars and age), quantities of cars
available for purchase or lease, and delivery schedules etc. Arbitrarily
requiring half the fleet to be replaced by 50% of the time as well as
requiring all of the non-normalized steel cars to be replaced early, may
not prove possible to all chlorine producers. There will be car
competition as well from the other TIH car purchasers.

We have not yet commented on the speed and safety requirements for the
railroads. We commend the FRA in including these requirements. We
support all efforts to improve safety via these parts of the NPRM, but
we cannot control the safety of a rail car when it is not in our
possession. The root causes of the recent incidents were reported to be
railroad operational errors as reported by the NTSB, however, as opposed
to the issue of speed. USM and its customers and the public depend on
the continued safe operation by the railroads, and encourage their
comments on the NPRM. The first line of defense against leakage in
transport is the elimination of incidents, which is the responsibility
of the railroads. However, we do wish to point out that regulations
reducing speed and affecting routes and other issues may increase the
time of transport. This effectively increases the number of rail cars we
need to do our business, and this should also be taken into account when
considering timetables and procedures for replacement of rail cars and
in dealing with specific shippers needs.

10. **Comments on the financial analysis**

The analysis of the financial impact of the NPRM on the industry is
flawed. **[All]{.underline}** the railcars in the industry's chlorine
fleet must be replaced or retrofitted. The limited number of 600 lb
proposed AAR interchange specification cars that are currently in
operation most likely cannot be retrofitted. Industry never intended to
convert to these cars as the ultimate solution for impact resistance. If
all new cars are required, they could easily cost as much as \$200,000
each based on current costs for the proposed AAR specification 600lb car
and adding in all the crash resistance materials. For the estimated 6000
cars in chlorine service, this could result in a total cost of \$1.2
Billion alone for just the chlorine industry, not the \$350million costs
estimated in the NPRM for all TIH rail cars. Retrofitting of some
existing cars is possible, but not certain. Therefore the regulatory
impact should consider total replacement of existing cars as the basis,
and should not be based on the non-retrofittable Trinity car, which is
an expensive and impractical short term fix and which provides only a
small incremental improvement over existing cars. We strongly urge the
FRA to validate its sovereignty over rail car designs and to force the
AAR to vacate their interchange rulings which further complicate the
rail car design/specification issue, to no significant advantage to
public safety.

We also believe that existing TIH cars will be more expensive to convert
to other service than in the financial analysis, and that early
retirement of existing cars with unused lives is a further significant
cost of the rulemaking conversion. Short-term purchases of very limited
lifetime intermediate cars will also add to the regulatory cost
significantly. Maintenance costs of the new cars and inspections will
also likely be significantly higher than estimated in the NPRM

The bottom line is, uncertainty in the regulations and the designs and
predicted higher capital costs to temporarily maintain our fleet has
jeopardized US Magnesium's financial situation to the point that future
growth and expansion plans are being jeopardized, as is the future of
the only remaining US magnesium company.

Without the safe rail transportation of chlorine, US Magnesium would
quite possibly go out of business, and the vital chlorine it supplies to
Western United States Bleach producers and repackagers, to
municipalities for water purification, and for production of waste water
treatment chemicals and a variety of other end use needs would not be
available. We support the FRA efforts to maximize safety in chlorine
transportation and look forward to working together with all parties to
achieve optimum safety in the handling of this vital material.

. We have included a background article on our company for your
reference in our submissions as well, and are happy to answer any
questions on these issues.

We want to thank the DOT and the FRA for its time and for its
consideration of our comments.

Attachments:

Light Metals Article