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NGFA recommends STB actions on rail rates

Additional recommendations are to reform shipper challenges of unreasonable freight rail rates.

The National Grain & Feed Assn. (NGFA) on Nov. 12 submitted two statements to the Surface Transportation Board (STB) largely supporting, but outlining recommendations to improve further, the agency’s proposals designed to reform the process available to shippers to challenge unreasonable freight rail rates.

In its first statement, NGFA supported the agency’s proposal to implement a streamlined “final-offer rate review” process that would provide rail customers with a more workable approach to challenge unreasonable freight rail rates within an expedited time frame.

“NGFA member companies believe unreasonably high rail rates have become more prevalent and significant given the rapid consolidation of the North American freight rail marketplace and the implementation of the so-called ‘precision scheduled railroad’ operating model by six of the seven Class I railroads, which reinforces the importance and timeliness” of STB’s proposal, NGFA wrote. “As NGFA’s rail arbitration system has shown, merely having realistic access to an effective forum for resolving disputes in a timely, fair and cost-effective manner can help discipline business conduct without cases ever being filed.”

NGFA noted that, in 2014, it had developed and submitted to STB its own version of a new, simplified rate challenge methodology intended to be workable for agricultural rail users. Subsequently, a 2015 report by the National Academy of Sciences’ Transportation Research Board also found the STB rate challenge processes to be complex, time consuming and costly, with no agricultural shipper having filed a rate challenge in nearly 40 years.

“The NGFA continues to strongly support efforts by (STB) to improve its rules for reviewing the reasonableness of railroad rates and to make them more workable, accessible and useful for agricultural shippers,” NGFA wrote.

NGFA recommended that STB make several improvements to its “final-offer rate review” process proposal before issuing a final rule, including removing the proposed $4 million cap on rate relief over a two-year period and developing guidance for shippers on how to utilize the new process effectively. They are outlined here.

NGFA recommended that STB make the following improvements to its proposal before issuing a final rule, including: eliminating the cap on rate relief, developing guidance on a final-offer process, legal justification of STB’s proposal and expanding the application of the final-offer process to Class II and III railroads.

Eliminate the cap on rate relief. While STB’s proposed $4 million ceiling on rate relief would be sufficient for many grain and processed commodity shippers, NGFA recommended that the agency eliminate the cap and instead provide a longer procedural schedule for cases in which the potential rate relief is relatively high and the relevant circumstances involved are more complex.

Developing guidance on final-offer process. NGFA supported the STB proposal to develop and provide guidance to rail customers, particularly smaller shippers, on how to utilize the proposed final-offer procedures, including more detail on the potential criteria and statutory standards the agency will use when determining the outcomes of rate cases.

Legal justification for the STB proposal. In response to “saber rattling” by the Association of American Railroads and several of its Class I railroad members to take legal action to prevent STB from pursuing the proposal, NGFA provided ample legal justification to support the agency’s approach.

Expand application of the final-offer process to Class I and III railroads. NGFA recommended that STB not limit rail customers’ ability to utilize the final-offer procedures to challenge only unreasonable rates charged by Class I railroads. “The basic fairness of the proposed standards and the simplicity and flexibility of the proposed processes are conducive to applying (them) to Class II and III railroads,” NGFA said, noting the substantial geographic reach of several such shortlines.

NGFA concluded by thanking STB for the priority attention it is devoting to reforming its rate-challenge process and urging it to issue a final rule “expeditiously.”

In a second statement submitted to STB on Nov. 12, NGFA strongly supported – but recommended several significant changes to – the agency’s proposal to develop and adopt a streamlined approach that shippers could use to demonstrate that a freight railroad has “market dominance” over a given transportation movement, which is a prerequisite before a rail customer can challenge the reasonableness of a rail rate.

Among other things, NGFA recommended that STB improve its method for calculating whether a railroad revenue-to-variable cost ratio exceeds 180%, which must be met before a rate can be challenged, as well as modifying its proposed standard for determining whether trucks offer a cost-competitive alternative to rail for hauling grains and other agricultural products.

TAGS: Policy
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