The Association of American Railroads is challenging in court a recent U.S. Surface Transportation Board ruling on small rate cases.
The trade association asked the U.S. Court of Appeals for the District of Columbia to review the rule which requires all seven Class 1 railroads to agree to an arbitration process before it can become effective.
The STB recently turned down a request by four Class 1 carriers to stay implementation of the rule.
The U.S. Surface Transportation Board last week denied two petitions seeking reconsideration of agency rules that establish a streamlined approach for pleading market dominance in rate reasonableness proceedings.
STB adopted the rules more than two years ago.
At the time, the STB said, “if demonstrated by a complainant, [it] would constitute a prima facie showing of market dominance.”
The factors the STB said it would consider in such cases 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 truck for 10 percent or less of its volume (by tonnage) subject to the rate at issue over a five-year period; the complainant has no practical build-out alternative due to physical, regulatory, financial, or other issues (or combination of issues).
The petitions for reconsideration were filed by several trade organizations representing railroad shippers.
Their petition claimed the STB “committed material error regarding four aspects of its final rule adopting the streamlined approach.
Also seeking reconsideration was the Association of American Railroads.
In denying the petitions for reconsideration, the STB said the petitioners had “failed to demonstrate material error, but instead merely disagree with the Board’s decision on these issues.”
The U.S. Surface Transportation Board has denied a request by four Class 1 railroads to stay implementation of an agency rule issued last month establishing an arbitration mechanism to settle small rate disputes.
The arbitration program would only become effective if all Class 1 railroads agreed to participate.
CSX, Norfolk Southern, Union Pacific, and the U.S. operating subsidiaries of Canadian National asked the board in late December to delay the deadline for Class 1 railroads to agree or disagree to participate in the arbitration program.
The rule establishing the arbitration program is to take effect on Feb. 3.
The STB has described the arbitration program as one of two approaches it is taking to create new “rate reasonableness” proceedings that regulators contend will streamline the process for shippers and railroads to resolve smaller rate disputes.
The STB gave Class 1 railroads 50 days from the publication of the rule in the Federal Register to commit to participating in the arbitration program for five years. The rule was published in early January.
If all seven Class 1 carriers agree to that, they will be exempt from the Final Offer Rate Review rate challenge process.
Smaller rates are defined by the STB as rate disputes worth up to $4 million in relief over two years.
Under the new FORR procedure, if regulators find a rate to be unreasonable, they “will decide the rate by selecting either the complainant’s or the defendant’s final offer, subject to an expedited procedural schedule that adheres to firm deadlines.
Under the arbitration program, Class I rail carriers would commit for a period of five years to arbitrate rate disputes, under a similarly expedited schedule.
The U.S Surface Transportation Board adopted this week two rules pertaining to rate reasonableness rate case procedures.
The agency said the rules are designed to provide two streamlined approaches for shippers and railroads to resolve smaller rate disputes.
One procedure is a voluntary arbitration program while the other is a new process for rate challenges known as “final offer rate review.”
The STB said both rules are designed to “substantially improve shippers’ access to rate reasonableness reviews for smaller rate disputes.”
Through the new rate reasonableness procedures, the voluntary arbitration program will take effect only if all seven Class Is commit to participating in the program for five years and do so within 50 days of the date of publication of the final rule in the Federal Register.
The STB said if all carriers do so, they will be exempt from the FORR procedure.
When the rulemaking process began in 2019, five Class I carriers filed a joint petition urging the board to exempt them from the FORR procedure.
In return, the Class Is agreed to resolve rate challenges through binding arbitration, a methodology in which the carriers had previously refused to participate for many years.
In November 2021, the board advanced rulemakings in both FORR and the establishment of a voluntary arbitration program. The most recent decision is the culmination of those actions.
Both review mechanisms are limited to rate disputes worth up to $4 million in relief over two years. Under the new FORR procedure, if the board finds a rate to be unreasonable, it will decide the rate by selecting either the complainant’s or the defendant’s final offer, subject to an expedited procedural schedule that adheres to firm deadlines.
The U.S. Surface Transportation Board had advanced new rules for resolving disputes over small rates.
The proposed rules would establish what the Board termed a rate reasonableness processes and establish a voluntary arbitration program for small rate disputes.
In a news release, the STB said the proposed rules continue the efforts of the Board’s Rate Reform Task Force to determine how best to provide a rate review process for small cases.
Public comment on the rules are due by Jan. 14, 2022, and reply comments by March 15, 2022.
Four groups that represent private freight car owners want the U.S. Surface Transportation Board to launch a rule making process to work toward updating the demurrage and accessorial rules governing the railroads’ use and handling of their equipment.
The petition to the STB asks regulators “to promulgate regulations governing the use by the nation’s Class I railroads of freight rail cars supplied to them by rail car owners, shippers, and other non-railroad entities. [A]n update to the rules governing the railroads’ use of private rail cars is long overdue because the railroad industry has evolved to the point that approximately 73 percent of the rail cars in service today nationwide – approximately 1.2 million rail cars—are no longer owned by railroads, but are . . . purchased, or leased, and maintained, by non-railroad entities at little or no cost to the railroads that use them.”
The groups involved are the North America Freight Car Association, the National Grain and Feed Association, the Chorine Institute and the National Oilseed Processors Association.
They say that current STB rules failed to adequately protect the enormous investment private rail car owners have made in their property because the rules fail to provide sufficient incentives for the Class I railroads to use private rail cars efficiently.
The petition said Class 1 railroads are using private cars in irregular service and holding on to them for too long.
The U.S. Surface Transportation Board said this week it has adopted a final rail to establish certain minimum information requirements for demurrage bills from Class I railroads.
The rule regulates billing cycle, shipment, car replacement and credit and debit information.
The minimum-information requirement represents what regulators determined will have the greatest effect on the ability of rail users to review and verify the accuracy of demurrage charges and help to resolve disputes between railroads and their customers.
In a news release the STB said the rule establishes a machine-readable data requirement to ensure that rail users have the option to access machine-readable data containing the minimum information.
In its decision, the STB reiterated its expectation that all carriers take reasonable action to ensure the accuracy of their invoicing processes and that their demurrage charges are warranted.
The rule will become effective on Oct. 6.
Five Class 1 railroads operating in the United States were revenue adequate in 2019 the U.S. Surface Transportation Board has determined.
The railroads included Norfolk Southern, CSX, BNSF, Canadian Pacific’s Soo Line Corporation and Union Pacific.
To be deemed revenue adequate a railroad must achieve a rate of return on net investment equal to at least the current cost of capital for the railroad industry in a given year.
The STB said that in 2019 the rate of return figure was 9.34 percent. It said all five Class 1 railroads it identified exceeded the agency’s calculation of the industry’s cost of capital.
In another development, the STB said it is seeking public comment on a proposed approach developed by its Office of Economics for use in considering class exemption and revocation issues.
The proposed approach would be used to help the STB evaluate market conditions using a variety of metrics related to rail competition.
In a news release, the agency said the proposal would serve as a way to evaluate market conditions governing a commodity, including changes in conditions over time.
However, the STB said it would not serve as a mechanical test for determining whether the commodity exemptions at issue should be revoked or whether a new exemption should be issued.
Public comment is due by Dec. 4 and replies to initial comments are due by Jan. 4, 2021.
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 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.
The Surface Transportation Board has decided to change its railroad performance data reporting rules to include chemical and plastics traffic as a distinct reporting category to the Class I railroads’ weekly reporting for the “cars-held” metric.
In a news release, the STB said the cars-held metric tracks the average number of loaded and empty railcars that have not moved for 48 hours or longer.
Class I railroads already report service performance metrics for a range of commodities on a weekly, semi-annual, and occasional basis.
The STB said the additional data will allow it to be better positioned to monitor chemicals and plastics traffic and detect and mitigate service issues affecting these commodities.
The new reporting rule takes effect on July 20.
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