The Surface Transportation Board (STB) released a series of new initiatives to improve its process for reviewing freight rail rates. The announcements follow the release of a report by STB’s Rate Reform Task Force that found that the board’s decades-old rate review procedures are unworkable and have failed to address the negative impacts of massive changes within the freight rail industry.
Building on the work of the task force, the board is proposing rules to establish a new rate review option for smaller cases and provide a streamlined market dominance process that could be used in any rate review proceeding.
STB established the Rate Reform Task Force in January 2018 to recommend improvements to the board’s existing rate review processes and to propose new rate review methodologies that are more attuned to the realities of the current transportation world. The task force reached out to the transportation community through informal meetings with representatives of shippers and carriers as well as academics, practitioners and other interested parties throughout the country.
Through frank conversations with diverse stakeholders, the Rate Reform Task Force developed a greater understanding about the challenges involved with STB’s existing rate review methodologies, along with changes that could improve them and ideas for new methodologies.
The final proposal from STB would establish a new rate review option for smaller cases, the Final Offer Rate Review (FORR), that utilizes procedural limitations to constrain the cost and complexity of a rate case. The proposed rule would include principle-based, non-prescriptive criteria to allow for innovation with respect to rate review methodologies.
To decide a case brought under FORR, STB would select either the complainant’s or the defendant’s final offer, subject to an expedited procedural schedule that adheres to firm deadlines and results in a board decision 135 days from the filing of a complaint.
The proposed relief for cases brought under FORR would be subject to a two-year limit on rate prescriptions (unless the parties agree otherwise), with a proposed cap of $4 million.
STB’s proposed streamlined market dominance approach is designed to reduce the burden on rate case parties by establishing that a complainant can make a prima facie showing of market dominance when the complainant has demonstrated that:
- The movement has a revenue-to-variable cost ratio of 180% 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.
- The complainant has used trucks for 10% or fewer of its movements 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).
“We applaud the members of the STB for their thoughtful leadership and commitment to getting our nation’s freight rail policies back on track. Chemical manufacturers across the country have been negatively impacted by excessive freight rail charges and lack of competitive rail service for too long,” American Chemistry Council president and chief executive officer Cal Dooley said.
“The board’s proposed reforms are a positive step toward improving how the STB addresses freight rail problems, and we look forward to working with the commissioners and their staff on modernizing and streamlining outdated regulations,” Dooley added.