Dan Elliot didn’t exactly light the room on fire in late May when he told shippers the Surface Transportation Board would act soon to respond to their railroad pricing concerns. The STB commissioner told the North American Shipper Association’s annual conference that he would work to balance their concerns with the railroads’ need to earn enough profit to invest back into their networks.
Although his comments appeared well-intentioned, Elliot’s timeline of “soon” did little to inspire hope from a regulatory agency many shippers say moves too cautiously.
That “soon” is now. Mirroring the reception Elliot received in Chicago, shippers are pleased the STB plans to make it easier for them to challenge rates, but are dismayed the agency is tiptoeing — at best — toward taking on another controversial issue: competitive switching.
The STB in November put off a decision on a proposal, made by the National Industrial Transportation League, to allow shippers with no other feasible transportation alternative to switch their goods from one rail line to a competing network if the interchange was within 30 miles.
“We continue to explore whether there are policy changes the board could adopt that would promote more rail-to-rail competition and thereby allow competition and the demand for services to establish reasonable rates for transportation by rail, and thus minimize the need for federal regulatory control,” the STB stated in a July 25 decision.
The agency invited shippers and railroads to weigh in on the issue by late February, and it could be several years before the STB rules, NITL President and CEO Bruce Carlton said. “This is going to be a very long road,” he said. “I hope I live long enough to see it.”
Shippers likely will benefit from the agency’s proposal to cut the cost and time of shipper appeals by no longer requiring them to “design a hypothetical railroad to judge a railroad’s real world rates,” according to the decision from the three-member board.
The board also wants to double the relief shippers can collect under the Simplified-Stand Alone Cost model, a method of determining a railroad’s operating cost, and ultimately, whether the shipper is being overcharged.
Lastly, the STB wants to simplify another pricing analysis process, and to raise the interest rate on reparations railroads must pay shippers when their rates are found to be unreasonable.
The proposals come after the STB last year lowered the filing fees for complaint cases to $350 from $20,600. A hearing at the Senate Commerce Committee in 2010 on the need for more railroad competition helped spur the push to give smaller shippers better access to pricing relief.
The STB also is looking to help shippers and railroads settle disputes without having to take the costly and time-consuming path through court proceedings. Despite both sides expressing support of increased arbitration, there is still disagreement about how carriers will get to the table to negotiate on demurrage, accessorial charges, and misrouting and mishandling of railcars. Under the current proposal, railroads, unlike shippers, would have to opt-out of the arbitration process, instead of having the choice to opt-in.
The “unbalanced” measure could prevent a carrier from seeking a resolution over demurrage with a shipper, said John Scheib, Norfolk Southern Railway’s general counsel. Shippers counter that carriers can opt-out of an arbitration proceeding by filing the necessary paperwork, a statement the Association of American Railroads rejected.
Shippers and carriers also disagree about how many arbitrators there should be for each dispute and how they should be chosen. Shippers generally agree that one arbitrator is sufficient for small cases and three will be needed for larger disputes.
Finding an arbitrator with the right credentials and unbiased background should prove tricky. Carriers, for instance, have criticized Canada for a program that uses arbitrators with limited understanding of the rail industry, STB Commissioner Francis Mulvey said.
Louise Rinn, general counsel for Union Pacific Railroad, said she has had “a frustrating time” finding a single arbitrator in a current dispute with a shipper. She said many of the arbitrators in the STB’s pool have been paid to testify for the shippers against the railroads, while there is little information on the background of other listed potential arbitrators. The STB also might tweak its proposed $200,000 cap on awards.
The push for arbitration, which can trigger conciliation even before the third-party officially steps in, is part of a larger federal initiative to reduce expensive, drawn-out lawsuits. That should clearly benefit a resource-strapped STB, but such low-hanging changes, including the recent effort to make it easier for shippers to contest rates, are unlikely to satisfy shippers’ appetites for more rail competition. Fortunately for shippers, even though the STB’s path to a decision on railroad switching is slow chugging, there’s still one looming down the tracks.