Shippers put hopes on new regulatory process

Washington, 12 August (Argus) — Shippers of coal, corn and other agricultural products say an overhaul of federal rail regulations could help their long-term profitability.
Appearing at a Senate hearing in Sioux Falls, South Dakota, yesterday, rail shippers said they have long suffered from high rail rates and an overly onerous process for challenging them.
Senate Commerce, Science and Transportation Committee chairman John Thune (R-South Dakota) said he called the hearing to learn how legislation he spearheaded — the Surface Transportation Board Reauthorization Act of 2015— is being implemented.
The new law mandated changes to STB, granting it new investigative powers and charging the board with creating more efficient ways for shippers to challenge rates. The overhaul was needed, Thune said, because “Congress did not get it right on the first try.”
Previously, the STB did not have authority to initiate investigations of issues of national or regional significance.
STB chairman Dan Elliott said the board is on target to meet deadlines in the statute. He said he hopes the board will issue a new rate case methodology later this month that will be beneficial to farmers, grain elevator operators, and agricultural shippers.
“I am acutely aware that the board’s rate complaint procedures need to be more accessible to grain shippers, and smaller shippers generally, and provide effective protection against unreasonable rates,” Elliott said.
Missouri River Energy Services chief executive Tom Heller pointed to a rate to haul coal that BNSF imposed in 2014, which Heller argued would have cost electricity consumers an additional $1bn by 2024.
Basin Electric Cooperative and the Western Fuels Association filed a complaint to STB against BNSF in 2004. The shippers spent more than $10mn and 10 years on the case before reaching a settlement with BNSF in May 2015, Heller said.
Heller and other shippers raised concerns about the board’s “stand alone cost” test methodology, which requires a shipper challenging a rate to create a hypothetical railroad against which actual rates are compared. The test dates from 1985, 10 years before the STB was created.
“It had its place and time in 1985, but a lot of things have changed since 1985,” Heller said.
Heller said shippers are “not sure we want to throw the whole thing out” but think the methodology can be made simpler and less expensive. Heller compared the process with requiring an electricity consumer to construct a hypothetical electric utility in order to challenge an electricity rate.
The stand-alone cost test “is too costly for a regular shipper, let alone a farmer,” said Troy Knecht, vice president of the South Dakota Corn Growers Association.
Railroads have said that the rates shippers pay finance improvements to their networks that improve service.
STB member and South Dakota native Ann Begeman said she had heard about the board’s “glacial pace” before joining it. “But to experience it first-hand, in a position from which I expected to positively influence that pace through collaboration with my fellow members — I was in for a big surprise.”
The new law expanded the board’s size to five members from three, but there could be only two sitting members by the end of the year. Begeman is in a hold-over period and will have to leave at the end of the year if not re-nominated. Lawmakers are unlikely to consider any nominations for the two empty seats on the board before the November elections.
Freight Rail Customer Alliance executive director Ann Warner said she is encouraged by implementation of the new law to date. “The board is staying on track,” she said.

Full article »