STB issues ANPR related to handling of railroad rate cases

An Advanced Notice of Proposed Rulemaking (ANPR) was issued by the Department of Transportation’s Surface Transportation Board (STB) last month, which outlined measures to expedite its handling of rate cases.

This ANPR stems from Section 11 the Surface Transportation Board Reauthorization Act of 2015 (passed by Congress late last year), which, the STB noted, instructs the STB to “initiate a proceeding to assess procedures that are available to parties in litigation before courts to expedite such litigation and the potential application of any such procedures to rate cases.”

Prior to the release of this ANPR, the STB said it held informal meetings with practitioners, consultants, and stakeholders with significant experience in rate reasonableness cases to discuss ways to move these cases, particularly Stand Alone Cost (SAC) rate cases, more quickly, including ways in which procedures for streamlining court litigation could be applied. And the STB added that based on its own experience in processing rate cases, coupled with input with the informal meetings it has held, it intends to formally dive into various ideas to expedite those cases.

“We appreciate Congress’ focus on expediting our SAC rate cases. Section 11 of the Reauthorization Act prompts us to work creatively with our stakeholders to explore ways to fast-track these important, but highly-complex matters. Our informal meetings were a very productive first step, and we look forward to receiving further stakeholder input,” said STB Chairman Daniel R. Elliott III in the ANPR.

Comments for this ANPR are due on August 1, with replies due by August 29.

Rate cases, challenges, processes, and procedures have lone been front and center in the freight railroad sector. Shippers have long cited a need to further protect them from they describe as unreasonable rail rates. The STB has encouraged shippers over time to “use a simplified alternative to a Full-[Stand Alone Cost] analysis that is economically sound, yet provides a less complicated and less expensive way to challenge freight rates by discarding the requirement that shippers design a hypothetical railroad to judge a railroad’s real world rates,” the Board wrote in the decision issued in July 2012, in Rate Regulation Reforms, EP 715.

In June 2011, the STB held a public hearing that explored the state of competition in the railroad industry, as well as possible policy alternatives to facilitate more competition.

That hearing followed previous efforts led by members of Congress and railroad shipper groups to “re-regulate” the freight railroad industry on the grounds that there are multiple barriers to competitive access for captive shippers such as improving the rate challenge process at the STB, getting relief from what shippers view as monopoly pricing power held by the railroads, establishing the STB as an independent agency and giving the STB investigative authority, creating a strong rail customer service advocate to help resolve shippers’ concerns, and protecting rail shippers and maintaining reasonable rates in non-competitive situations, among others.

But from the railroads’ perspective, pricing power is a necessity, because in order to be able to make investments into their networks and infrastructure, railroads need to maintain their current pricing leverage, which has been firmly intact for 16 years.

Tony Hatch, principal of New York-based ABH Consulting, said that the recent ANPR is not necessarily a big deal but added that it is the sign of a trend that could be viewed as one.

Hatch said that of late some of the STB’s views could be somewhat viewed as more “pro-shipper” than in the past, coupled with efforts related to streamlining regulations, which has been one of President Obama’s late efforts to generate more economic growth. 

“Everyone has been saying for a while that these rate cases are too complicated for all sides,” he said. “To some degree they would favor railroads with their big legal departments, but for the small and medium sized companies it can be more challenging, due to things like the complexity of a standalone rate case and the amount of time it takes. That at least has been the long held [belief]. As for streamlining, it is hard to argue against why one would want to do that, but it is also a sign of a more activity on this.”