RAILROADS (U.S. STB RATE REGULATION & “CAPTIVE SHIPPERS”) / U.S. Surface Transportation Board orders BNSF Railway Co. to delay revaluation in its assets “to transition the revaluation over seven years to reduce the possible impact on captive shippers”. U.S. STB notes that Berkshire Hathaway, Inc. in its 2010 purchase of the railroad company had “failed to obtain agency authorization for its purchase of BNSF, as required under federal law.”

U.S. STB press release available here.

This is part of the ongoing regulatory battle between Class I railroads and “captive shippers” over rates in the wake of 1980 Staggers Act and related so-called “deregulation”. 

RAILROAD (SHIPPER CHALLENGES TO RAILROAD RATES) / U.S. Surface Transportation Board issues a final decision, in Ex Parte No. 715, in which its makes a sweeping revision of the framework under which rail shippers may challenge a railroad’s rates. Major re-write of the rules. Concise summary by Thompson Hine LLP.

U.S. STB press release available here. U.S. STB text of decision available here.

And excellent summary by Karyn A. Booth, Esq., Sandra L. Brown, Esq., and Jeffrey O. Moreno, Esq. of Thompson Hine LLP available here.

RAILROADS (STREAMLINING RATE COMPLAINT CASES) / The Surface Transportation Board (U.S. STB) changes the rules on two forms of rate complaint proceedings to make the procedural offerings to reduce the time, complexity and cost of cases in which a party wishes to complain about rail rates to the U.S. STB.

“Rate Regulation Reforms.”

 July 24, 2013. Final Rules.

“The Surface Transportation Board (Board) changes some of its existing regulations and procedures concerning rate complaint proceedings. The Board previously created two simplified procedures to reduce the time, complexity, and expense of rate cases. The Board now modifies its rules to remove the limitation on relief for one simplified approach, and to raise the relief available under the other simplified approach. The Board also makes technical changes to the full and simplified rate procedures; changes the interest rate that railroads must pay on reparations if they are found to have charged unreasonable rates; and announces future proceedings on options for addressing cross-over traffic and on proposals to address the concerns of small agricultural shippers. The purpose of these actions is to ensure that the Board’s simplified and expedited processes for resolving rate disputes are more accessible.”

RAILROADS (U.S. STB Chair’s Policy Agenda) / U.S. STB Chairman Speech – U.S. Surface Transportation Board Chairman Daniel R. Elliott III speech to the North American Rail Shippers Association about U.S. STB priorities, including changes to the Uniform Rail Costing System, National Industrial Transportation League proposal to increase rail-to-rail competition through required reciprocal switching, U.S. STB-proposed new rules to clarify liability for railcar demurrage, and the Rail Customer and Public Assistance Program and arbitration / mediation initiatives.

Speech text available here.

RAILROADS (U.S. SURFACE TRANSPORTATION BOARD) / “The Surface Transportation Board announced today that it has adopted final mediation and arbitration rules that establish a new arbitration program under which shippers and railroads may agree in advance to voluntarily arbitrate certain types of disputes with clearly defined liability limits in matters coming before the agency. The changes to existing mediation rules establish procedures under which the Board may order parties to participate in mediation in certain types of disputes before the Board, on a case-specific basis.”

This is a significant step in the U.S. Surface Transportation Board’s efforts to promote alternative dispute resolution as between shippers and railroads. 

It is the culmination of U.S. STB’s invitation of public comment on the subject back in 2010, a notice of proposed rulemaking in 2012, and now a decision and notice. 

See summary here

Complete formal decision of U.S. STB here.

RAILROAD (U.S. STB) / The U.S. Surface Transportation Board issued a decision in which it ruled that the Union Pacific Railroad’s tariff rules for carrying toxic-by-inhalation (TIH) and poisonous-by-inhalation (PIH) loads were NOT reasonable. In particular, the tariff required a shipper to indemnify Union Pacific for all liabilities related to carrying the TIH / PIH except for those caused by the Union Pacific’s negligence.

U.S. STB ruled that this demand was overbroad, as it would have required the shipper to indemnify the railroad against forces outside the shipper’s control – acts of God and circumstances caused by third parties.

April 30, 2013 press release available here and U.S. STB decision available here.

 A law firm that represented many of the shippers in this petition, Thompson Hine LLP, has a good blog summary written by Kathryn A. Booth, Esq., Sandra L. Brown, Esq. and Jeffrey O. Moreno, Esq. available here.

SURFACE TRANSPORTATION BOARD (RAILROAD REVENUES & FREIGHT PRICE INDEX) / The Surface Transportation Board (STB) is publishing the annual inflation-adjusted index factors for 2012 used by the railroads to adjust their gross annual operating revenues for classification purposes – a reminder of the limitation on the extent to which the 1980 Staggers Act actually “de-regulated” this industry.

“… This indexing methodology insures that railroads are classified based on real business expansion and not from the affects of inflation. 

“Classification is important because it determines the extent to which individual railroads must comply with STB reporting requirements. 

“The STB’s annual inflation-adjusted factors are based on the annual average Railroad’s Freight Price Index which is developed by the Bureau of Labor Statistics (BLS). The STB’s deflator factor is used to deflate revenues for comparison with established revenue thresholds….”

The base year for railroads is 1991. 

“Indexing the Annual Operating Revenues of Railroads” 

April 8, 2013. Notice.

U.S. SURFACE TRANSPORTATION BOARD / Association of American Railroads, including its constituent Class I members, petitioned the U.S. STB for “Clarification and Additional Information” on its notice of proposed rulemaking proposing methodological changes to the “General Purpose Costing System” administered by the U.S. STB for Class I railroads. See earlier post of this blog on this subject here.

Earlier post on Uniform Railroad Costing System Notice of Proposed Rulemaking available here.

See text of petition here.

In a context of seeking “clarification” and “additional information” pertaining to the basis of the proposed rule, the AAR and its members identify their main point of concern.

Gist of their request: “The NPR proposes certain changes to the Board’s general purpose costing system, the Uniform Railroad Costing System (“URCS”). Specifically, the NPR proposes to eliminate the so-called “make-whole” adjustment that accounts for the economies of scale realized from larger shipment sizes in the URCS Phase III calculation. The NPR proposes to replace the make-whole adjustment with changes to URCS Phase II and Phase III and would require modification of related reporting requirements.”

REMARKS / Next round in National Industrial Transportation League (leading shippers group) to require by U.S. Surface Transportation Board rule to require that railroads enter into reciprocal switching arrangements some so-called “captive shippers.” U.S. STB denied earlier effort in 2011.

NIT League characterizes this proposal as enabling a shipper to obtain “a competing bid for their business from another Class I railroad” on the basis of their earlier proposed rulemaking that the U.S. STB denied in 2011.

2011 petition available (Ex Parte 705) here.

2011 denial document available here.

New petition is called Ex Parte 701.

Good summary, in an otherwise unsigned client alert, by Thompson Hine LLP available here.

UPCOMING / Railroad “de-regulation” vs. alleged “re-regulation” pertaining to Toxic-by-Inhalation / Poisonous-by Inhalation (TIH / PIH) railroad tariffs – CF Industries: U.S. Surface Transportation Board should require railroads to get U.S. STB approval before altering terms on which they handle TIH / PIH rail cars. COMMENTS: As with the reciprocal switching proposal – this does not take place in a context of a truly free market with robust competitive alternatives available to shippers. Denial of CF Industries’ petition arguably would leave it subject to “take-it-or-leave-it” posture with railroads as it relates to the terms of TIH / PIH shipments.

There is a lot involved in this proceeding, and more than can be concisely addressed here about the railroads’ reply brief filed February 27, 2013. Free copy available here.

This post focuses on the application made by CF Industries to the U.S. STB seeking it to require that railroads obtain approval prior to making any changes in tariff terms relating to shipment of TIH / PIH loads.

The gist of each side is captured in the railroads’ brief this week:

“… the Railroads would need to obtain prior Board approval and written support for such changes from FRA, PHMSA, and TSA. This request runs contrary to the Staggers Act. The Staggers Act provided railroads with rate freedom, which includes practices. In essence CF is asking that the Railroads file their tariffs with the Board for approval before those tariffs become effective.”

A U.S. STB resolution worth watching for.

Legal take-away:

On CF Industries’ petition for a declaratory order It is hard to agree with the railroads’ argument that all terms of TIH / PIH freight carriage amount to a question of “rate freedom”. More than economics and price are at stake in the concerntration of TIH / PIH rail cars on a particular train consist or other operational details relating to safety.

Consistent with this safety versus economics fault line in the petition for declaratory order, on January 28, 2013 the U.S. STB asked the Transportation Security Administration and the U.S. DOT hazardous materials safety agency (PHMSA) for comment on the operational terms (“3-car limit” “priority train service” terms) and for TIH / PIH involved in the companion proceeding to this one.

Practical take-away:

I have no way at this point of envisioning the end-game here.

The railroads fighting these two proceedings contend with their “common carrier” status and related obligation to carry properly tendered loads in the TIH / PIH category. And the chemical and related TIH / PIH shippers cast themselves as “captive” customers to the railroads with no good alternatives either inside the rail sector or outside it with other modes.