A task force made up of Surface Transportation Board staff has suggested that the agency embrace a series of initiatives intended to simplify and speed up the process that allows shippers to challenge railroad tariff increases.
The Rate Reform Task Force was created last year as the result of legislation Congress passed in 2015 to reform the STB in the wake of a rail service crisis that saw crops rotting next to tracks because several railroads chose to pursue booming oil and natural gas shipments instead.
The 2015 law expanded the STB from three to five members and gave the board greater flexibility in the way it approves how railroads make rates and how it handles shipper input into the process.
In recent years the rate regulation issue took a back seat to rising concern over a new wave of rail service failures because of the imposition of a new operating model euphemistically termed Precision Scheduled Railroading by its advocates.
Those problems have become so severe for the nation’s rail shippers that they recently attracted the attention of Congress (AA, 7-31-19, P. 1).
Under law, the STB is responsible for approving the maximum rates a railroad can charge, largely based findings of whether the rail company involved is deemed to be revenue adequate.
Adequate revenues are defined as those needed “under honest, economical, and efficient management,” to cover expenses, earn a profit, continue prudent capital outlays and attract sufficient capital for maintenance and improvement of the rail network.”
In the years following rail deregulation in 1980, shippers bitterly observed that the regulatory criteria used by the STB (and its predecessor, the Interstate Commerce Commission) rarely found railroads to be revenue adequate even when they were well known to be highly profitable.
The task force report urges the board to further define long-term revenue adequacy and proposes three structural remedies.
They are: a rate-increase constraint; a reversal of long-standing “bottleneck” decisions to allow shippers to direct long-term revenue- adequate carriers to deliver movements to a feasible interchange of the shipper’s choosing; and creation of needed simplifications of the existing process.
Other recommendations include:
• Proposals to reduce the cost and complexity of small rate disputes.
• Recommendation for legislation that would permit the board to require arbitration of small rate disputes.
• Simplification of the existing Stand-Alone Cost (SAC) test for assessing revenue adequacy.
• Proposing an entirely new rate that considers the cost structure of the defendant carrier itself instead of a hypothetical stand-alone carrier.
• Increasing the accessibility of the Three- Benchmark comparison approach.
• Simplification of the market dominance determination.
None of these recommendations can go into effect until the STB initiates a formal rulemaking procedure, which it has yet to do. That could require more than a year to complete and more years beyond that if the railroads choose to challenge the resulting rules in court, which is not unlikely.
Commenting on the report, Association of American Railroads President Ian Jefferies said it “lacks balance and objective support for many of its conclusions, mischaracterizes the law, and that many of the proposals in the report would move the board backward towards discredited methods of heavy-handed rate regulation.”
