Market Matters Blog

STB Needs to Make Timely Decision on Revenue Adequacy, Grain Rates

Mary Kennedy
By  Mary Kennedy , DTN Basis Analyst
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A BNSF train heads east on the Northern Transcon. (DTN photo by Mary Kennedy)

MINNEAPOLIS (DTN) -- The Surface Transportation Board needs to quickly move ahead with a comprehensive set of proposals for railroad grain shipping rates and rail revenue adequacy in order to create more certainty for both shippers and railroads, the former acting chairman of the STB told attendees at this year's National Grain and Feed Association Ag Transportation Summit. The event was held Aug. 4-5 in Rosemont, Illinois.

Deb Miller, former acting chairman of the STB, told attendees at the summit that, in her opinion, "The STB should move forward with a comprehensive package of all current proposals before the board and not piecemeal them one by one." Miller said that "shippers and railroads need more certainty as some of the issues have been open for years."

The STB is currently reviewing whether to establish a new process that agricultural commodity shippers could use to challenge freight rates they believe are unreasonable or unlawful under the Staggers Rail Act of 1980. It is also reviewing how it annually determines whether a rail carrier is revenue adequate -- that is, whether it is earning sufficient revenue to cover its costs and earn a reasonable return sufficient to attract capital.

Shippers and railroads had until Aug. 6 to submit new or additional comments to the STB on these two key issues before the board. The STB also held two hearing prior to the public comment period deadline. The first, on June 10, addressed the rail transportation of grain and rate regulation review. A second hearing addressing railroad revenue adequacy was held July 22-23.

Miller told attendees at the NGFA Transportation Summit last week that she was "amazed by the level of complexity for a shipper to bring a rate case before the board." She said that she felt there were "fairly simple" things the board could do to make the process more helpful. She said that "many shippers have complained that it's not easy to get tariff rates, especially those that are password protected." The current process is unclear if a group of shippers, rather than just one shipper, could bring a rate case before the board, which would spread out the legal costs, she said.

In a June 23 filing commenting on the June 10 STB hearing, a group of shippers said that they "concur with the NGFA, the Alliance for Rail Competition, and the U.S. Department of Agriculture that the board's current rail rate reasonableness rules are not usable to test the reasonableness of railroad rates for the transportation of agricultural commodities. For the multitude reasons explained by these parties, the current rules are too costly, too unwieldy, too time consuming and provide no opportunity for relief to the vast majority of captive rail shippers of agricultural commodities." The group included the National Oilseed Processors Association, South Dakota Grain and Feed Association, Wisconsin Agribusiness Association, Michigan Agri-Business Association and Minnesota Grain and Feed Association among other state shipper organizations. http://goo.gl/…

Miller also talked at the NGFA summit about the second issue at hand concerning rail revenue adequacy. She said that as railroads have become more revenue adequate, there needs to be a "different approach" to the issue.

Current STB Chairman Dan Elliot said at the June 22 hearing, "Now that the industry is both financially healthier and restructured with fewer large railroads, the STB needs to examine core practices to meet the goals Congress has laid out for the agency," Elliot said. "The board's reexamination of its economic regulatory policies does not mean that significant changes to these policies are in order."

Miller noted the comments from the Association of American Railroads (AAR) made it clear that re-regulation of the railroad industry "was bad."

In their comments at the July 22 hearing, the AAR urged the STB to "beware of upending numerous national economic goals if they choose to pursue re-instituting revenue caps on freight rail companies." AAR President and CEO Edward R. Hamberger testified, "Now comes a handful of interest groups that want you to cut their transportation costs by direct government intervention at the expense of the greater good. Let's call it what it is: They want you to institute a regime of wide-ranging price controls on freight railroads."

Miller said at the NGFA summit that the rail industry is a mix of public and private ownership with private companies fully funding their own business. However, she was quick to point out that what happens on one rail line can affect other networks and that since networks are shared, there is still a "common carrier obligation."

According to Wikipedia, a common carrier "offers its services to the general public under license or authority provided by a regulatory body. The regulatory body has usually been granted 'ministerial authority' by the legislation that created it. The regulatory body may create, interpret, and enforce its regulations upon the common carrier (subject to judicial review) with independence and finality, as long as it acts within the bounds of the enabling legislation."

Miller said that the resolution on the proposals could take place by the end of this year.

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow Mary Kennedy on Twitter @MaryCKenn

(AG/ES)

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