Chemical companies who use rail transportation are on the verge of gaining additional access to relief from unreasonable rail freight rates. Many chemical companies who use rail transportation have long complained of unreasonably high rates. Although they have the right under federal law to challenge these rates before the Surface Transportation Board, bringing a rate challenge has become too costly and time-consuming to be a practical option for many of them, especially if they do not have large traffic volumes. To address this issue, the Board is proposing significant reforms to its rate review process and is seeking public input on its proposals.
On September 12, 2019, the Board issued two proposed rules that would reform its current rail freight rate review process to make it more streamlined and accessible. It also announced a hearing to explore policy changes that would make certain rate-related remedies available to shippers where a railroad earns adequate revenues.
Final-Offer Rate Review
The Board proposed a rule establishing a final-offer process for challenging the reasonableness of railroad rates in smaller cases. Under this process, the complainant and defendant each would submit a final offer of a reasonable rate under an expedited procedural schedule and the Board would decide a case by selecting the best offer, without making any modifications. The Board would make its selection based upon which offer it considers best reflects national rail transportation policies, statutory requirements and basic economic principles.
The Board has invited interested parties to submit comments on the proposed final-offer rule by November 12, 2019, and reply comments by January 10, 2020.
Market Dominance Streamlined Approach
The Board also proposed a rule that would streamline the market dominance component of rate cases. To challenge a rate, a shipper must show that the railroad has market dominance (i.e., a lack of effective competition) over the traffic to which the rates apply. Over time, market dominance presentations have grown costly and time-consuming, resulting in a significant burden to rate case litigants. The proposed rule allows a complainant to establish a rebuttable presumption of market dominance by demonstrating certain factors. It also limits the size of market dominance submissions.
The Board has invited interested parties to submit comments on the proposed market dominance rule by November 12, 2019, and reply comments by January 10, 2020.
The Board has announced a December 12, 2019 hearing to receive input on policy changes related to the determination that a carrier earns adequate revenues and the rate-related remedies available when a carrier is revenue adequate. The Board has long held that a railroad’s revenue adequacy operates as a constraint on its rates.
Persons wishing to speak at the hearing should file a notice of intent to participate no later than October 31, 2019. Written testimony and written submissions must be filed by November 26, 2019.