STB Won’t Extend Reciprocal Switching Proceeding

The U.S. Surface Transportation Board has denied a request by the Association of American Railroads to delay the proceedings in a reciprocal switching inquiry.

The STB said on Friday it would continue its planned schedule for the review, including public hearings that begin on March 15.

AAR had sought to extend the schedule for the proceeding by 75 days.

In its decision, the STB said it found “that the amount of notice and time for preparation provided was sufficient and that AAR’s alternative request for extension of the comment deadline would hinder the ability of the Board and the hearing participants to review parties’ submissions before the hearing.”

STB Issues Final Rule Regarding Rate Cases

The U.S. Surface Transportation Board this week adopted a rule designed to streamline its approach to cases in which one or more parties is arguing market dominance led to an unreasonable rate.

In a news release, the STB said that market dominance cases can be costly and time-consuming, especially in smaller cases.

The rule adopted this week, which becomes effective Sept. 5, was initially proposed in September 2019 and lays out the factors

that could establish a prima facie showing of market dominance. Those include:

• The movement has a revenue-to-variable cost ratio of 180 percent or greater;
  • The movement would exceed 500 highway miles between origin and destination;
  • There is no intramodal competition from other railroads;
  • There is no barge competition;
  • There is no pipeline competition;
  • The complainant has used trucks for 10 percent or less of its volume (by tonnage) subject to the rate at issue over a five-year period; and
  • The complainant has no practice buildout alternative (regardless of transportation mode) due to physical, regulatory, financial or other issues.

The STB said complainants who provide evidence of one or more of these

would have the option to use the non-streamlined market dominance approach to prove market dominance.

Under either approach, defendant railroads would continue to have the opportunity to rebut a complainant’s evidence, they added.

The STB also announced that it would soon initiate a proceeding to further explore the adoption of various commodity-specific thresholds, including for chlorine and agricultural products.

STB Withdraws Proposed Rule Change

The U.S. Surface Transportation Board has withdrawn a notice of proposed rulemaking that would have incorporated a third model in its methodology for calculating the cost-of-equity component of the railroad industry’s cost of capital.

Each year, the STB determines the railroad industry’s cost of capital, then uses the figure in a variety of regulatory proceedings.

The proposed changed to how it figures those things, was proposed last fall.

The STB said it was considering using an additional model, referred to as the Step Multi-Stage Discounted Cash Flow Model, to complement its use of Morningstar/Ibbotson Multi-Stage Discounted Cash Flow Model and the Capital Asset Pricing Model in determining the cost-of-equity component of the cost of capital.

In announcing its decision to drop the rulemaking process, the STB said it was acting in response to public comment on the proposal.

Shipper Supports Effort to Drop Line Sale Condition

An intermodal shipper is supporting the efforts of CSX and Canadian National to persuade the U.S. Surface Transportation Board to drop a condition that it imposed in approving a line sale in New York State.

The STB in approving the sale of the CSX Massena Line to CN had required the parties to drop a clause in the sale contract that prohibits CN from negotiating direct interchange agreements with the Finger Lakes Railway and the New York, Susquehanna & Western in Syracuse, New York.

Atlantic Container Line said the acquisition of the Masena Line by CN could reduce transit times for shipments by 24 hours.

“We are concerned that these anticipated benefits will not be achieved if the transaction is not able to move forward,” the company said in its letter to the STB.

CSX and CN have said that the sale could fall through due to STB’s insistence on the interchange prohibition.

CSX has said it fears it will lose interchange business if CN if able to reach interchange agreements with short line railroads in Syracuse.

STB Finalizes Rule on Demurrage

The U.S. Surface Transportation Board has amended its regulations governing the class exemptions for certain miscellaneous commodities, such as paper products and steel scrap, and boxcar transportation to clearly state that demurrage continues to be subject to regulation.

In a news release the STB said the rule change, which becomes effective April 3, reflects longstanding court and agency rulings that these exemptions do not apply to the regulation of demurrage.

It is also intended to clarify the regulation of demurrage, which is a fee charged to a shipper who fails to load or unload freight within an agreed upon period of time.

The new STB rule partially revokes the class exemption that covers certain agricultural commodities so that the exemption will not apply to demurrage regulation.

As a result, the agency said, the exemption for agricultural commodities will be consistent with similar class exemptions covering non-intermodal rail transportation, they added.

The rule change was first announced by the STB last October.

STB Turns Away Bid to Invalidate Fuel Surcharges

A bid by a coalition of rail shipper to invalidate what they described as unfair fuel surcharges has been turned aside by the U.S. Surface Transportation Board.

The agency this week denied the coalition’s petition for reconsideration of its earlier decision to close a case against fuel surcharges brought by a shipper.

The agency had earlier ruled “that any fuel surcharge program applied to regulated traffic must be based on attributes of a movement (such as mileage) that directly affect the amount of fuel consumed.”

The STB created what it termed a “safe harbor” index based on the Highway Diesel Fuel Index that railroads could use to create fuel surcharges.

In creating the index, the STB said the index has been the subject of extensive “notice and comment scrutiny” and therefore it would no longer be subject to challenges from shippers.

However, shippers continue to argue that the fuel surcharges are exorbitant fees and in some instances railroads have sought to recover amounts “over and above” their actual increased fuel costs.

Railroads have contended that the fuel surcharges are a means to recoup their fuel costs.

The STB had ruled in 2006 that if a fuel surcharge was used as “a broader revenue enhancement measure, it is mislabeled” and it prohibited surcharges created from the percentage of a base shipping rate.

In its ruling this week, the STB said a shipper’s petition for reconsideration “rested on various claims of material error.”

The shippers had wanted the agency to reconsider an earlier decision to discontinue a proceeding due to lack of substantial feedback from stakeholders.

The STB’s decision only affects rail traffic subject to regulation. Traffic that is not regulated continues to see shippers seeking relief from fuel surcharges.

Last fall more than two dozen companies filed lawsuits against various Class 1 railroads alleging they had conspired to charge excessive fuel surcharges to increase their profits.