Rail Cases Mount at STB

Rail Cases Mount at STB

Shipper complaint cases against railroads are piling up at the Surface Transportation Board, despite the latter’s efforts to head them off through mediation.

Cases range from challenges by single customers over rail rates on specific commodity hauls, mainly coal and chemical shipments, to a wide-ranging dustup over “mileage equalization” fees assessed by the railroads on shipper-owned tank cars when a different and longer route is used to get the equipment back to point of origin.

Some complaints target railroad fuel surcharges, underscoring that the STB’s past efforts to deal with that issue on certain cargoes were not enough to erase customer concerns.

There is even a fight brewing over dust; some coal customers are fighting efforts by BNSF Railway and Union Pacific Railroad to clamp down on the dust that rolls off loaded coal hopper cars out of the Power River Basin mines in Wyoming. The dust builds up in the trackbed, the railroads say, and eventually dislodges track. Carriers are spending a significant amount of money to dig out the dust to avoid a repeat of two major derailments in 2005 on the nation’s busiest coal line.

Many of the cases were filed this year, as the rail industry waits to see if Congress will finish the job it started last year to toughen federal oversight of railroads and reset the competition rules more toward the customers.

The flurry of cases has Wall Street’s attention. Throughout 2009, stock analysts and railroad CEOs kept a close eye on legislation in the House and Senate to strip railroads of a limited immunity they enjoy from antitrust challenges.

That legislative effort eventually was suspended, pending comprehensive rail regulatory reform that came out of the Senate Commerce Committee in December. The legislation doesn’t have antitrust language, but is opposed by railroads because, they say, it would hurt rail earnings.

Many observers say the Senate’s fast-shrinking 2010 legislative calendar could shove the rail bill aside until a new Congress is seated next year. “The nightmare scenario is that it gets attached late in the process to some unrelated, must-pass legislation,” one railroad source told The Journal of Commerce.

While that legislation hangs over the often-testy relations between railroads and some major customers, JP Morgan transportation analyst Tom Wadewitz also is watching the growing stack of customer complaints.

He told the National Association of Rail Shippers in May that the STB docket includes important rate cases such as Seminole Electric vs. CSX Transportation and NRG Power Marketing vs. CSX, both over coal charges; Total Petrochemical vs. CSX; and Arkansas Electric Power Cooperative vs. BNSF and UP.

In a measure of how much shippers are turning up the heat, analyst Edward Wolfe of Wolfe Trahan said a shipper source indicated a new case filed in June against CSX by chemical shipper M&G Polymers USA might be part of a growing trend.

DuPont’s successful challenge of CSX rates in 2008 and 2009 at the STB, the source said, “has given shippers increased confidence to bring rate cases against the rails.”

Wolfe said the source also speculated CSX was drawing so many challenges after “trying to catch up with more material rate increases” in recent years.

The list of complaints also includes Cargill vs. BNSF over fuel fees on farm products, a long-running dispute between Entergy Arkansas and UP over coal shipments, and a combination filing by Cargill, Exxon Mobil and other shippers against a host of railroads over the mileage equalization issue.

The STB has been building a record of success in helping resolve some shipper-railroad disputes before they reach the case-filing stage, STB Chairman Daniel R. Elliott told the National Industrial Transportation League this month. The parties in the mileage equalization issue are discussing mediation to resolve it.

The agency, however, doesn’t publish any results of such efforts to guide the rest of the market in types of issues and how they were handled.

Rep. James L. Oberstar, D-Minn., chairman of the House Transportation and Infrastructure Committee, also wants to make it easier for rail customers to launch major rate cases by removing a costly obstacle that he said is an “egregious” STB burden on shippers.

Customers in major cases currently have to pay economists to build a theoretical “standalone” railroad, and then show they could operate it with significantly lower freight pricing. As of now, the Senate bill would not eliminate that process, but Oberstar told The Journal of Commerce he is working to change that before the bill goes to a final vote in Congress.

Contact John D. Boyd at jboyd@joc.com.