Shippers Lose STB Rate Review Option
Railroads Prevail Over Ag Shippers in STB Rate Case Dispute
OMAHA (DTN) -- Grain elevators and others with smaller shipping volumes likely won't get a more streamlined process to settle rate differences with railroads after a federal appeals court ruling.
The Eighth Circuit Court of Appeals on Tuesday ruled the Surface Transportation Board (STB) overstepped its authority by trying to streamline rate dispute settlements between railroads and shippers.
The ruling favors the nation's largest railroads, which sued over the new rate rules. The ruling will limit the ability of shippers to challenge railroad freight rates in situations involving smaller shipping volumes.
Major agricultural groups and other industries that rely on railroads to move commodities lost their arguments defending the STB rule. The National Grain and Feed Association, The Fertilizer Institute, the Corn Refiners Association, the American Chemistry Council and the National Industrial Transportation League all intervened in the case to support the STB's Final Offer Rate Review (FORR), which was finalized at the end of 2022.
Union Pacific Railroad filed the lawsuit, along with the American Association of Railroads, which lobbies for the major railroad companies.
The three-judge panel in the Eighth Circuit ruling cited the Supreme Court's Loper Bright decision in June as well as the Administrative Procedures Act to rule Congress did not grant the STB the right to streamline the way railroads and shippers settle disputes over shipping rates. The appeals court also stated the new rate review process requires the STB to choose either the rates proposed by the railroad or the shipper without the board conducting an analysis of its own.
Federal statutes require railroads to establish reasonable rates when they do not have effective competition. But shippers also have long complained about the length of the process, the "three benchmark test" and the extensive procedural costs that can outweigh what could be gained if the STB agrees and lowers the railroad rates.
The American Chemistry Council and The Fertilizer Institute in a joint brief made the case that the STB needs a way to review shipping rates for small cases, an issue the board has sought to address for 40 years. To provide "meaningful access" to rate reviews for small cases, the board adopted a new method, the FORR. The chemistry and fertilizer groups stated FORR provides accessibility advantages which increases access for shippers with small cases. The two groups cited that the FORR process reduces non-litigation expenses that discourage shippers from bringing small rate cases.
"Specifically, the expense that shippers incur from paying the challenged rate, instead of an alternative contract rate, discourages claims," the fertilizer and chemistry associations stated in their brief. They added, "Consequently, while the case is pending, the shipper must pay a premium under the challenged rate or not ship at all and thus lose business due to the high costs."
The National Grain and Feed Association also filed a motion to intervene in the case but did not file a brief. The association stated it is disappointed by the court's ruling. "NGFA appreciates the STB's efforts to streamline the rail rate dispute process. We strongly encourage the Board to revisit the rule and continue to find an avenue for agricultural shippers to challenge rail rates in a timely and cost-effective manner."
Supporting the railroads with an amicus brief was the Washington Legal Foundation, which celebrated the ruling. The group stated the ruling limits the STB's authority by requiring railroads to arbitrate rate disputes.
"The Eighth Circuit's decision correctly holds that the Surface Transportation Board lacked statutory authority to promulgate the Final Rule," said John Masslon, WLF's senior litigation counsel.
CSX and the U.S. subsidiaries of the Canadian National Railway (Grand Trunk Corporation and Illinois Central Railroad Company) also filed similar lawsuits against the STB in the Eleventh and Seventh Circuit Courts of Appeal.
Just last week, Sen. Tammy Baldwin, D-Wis., called on the STB to review exemptions on certain products that prevent shippers from seeking recourse at the STB. Those include products such as paper, forest products, manufactured goods and food products. Baldwin said businesses and farmers rely on fewer rail carriers and are seeing rates affected. Revoking the exemptions would allow shippers of those goods to "begin to address unreliable rail service and the high rail shipping costs," Baldwin said.
See, "Three Class I Railroads Appeal to Federal Courts Over STB Arbitration Rule,"
Chris Clayton can be reached at Chris.Clayton@dtn.com
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