WASHINGTON – The National Grain and Feed Association (NGFA) – the nation’s largest organization of rail shippers and receivers of grain, feed, feed ingredients and grain products – today joined 15 other national agricultural producer and agribusiness organizations in commending action by a key Senate committee on a significant rail reform bill.
Then NGFA and other agricultural groups on Dec. 16 had notified the Senate Commerce, Science and Transportation Committee that the bill (S. 2889) would “bring needed reform” to the federal Surface Transportation Board (STB), which is responsible for providing regulatory oversight of freight railroads. It also would “improve competitive conditions and transparency in the rail industry” and result in “meaningful relief” for agricultural rail shippers and receivers, they said. Further, the organizations said the bill would “provide improved mechanisms” and greater opportunity for agricultural shippers and receivers to challenge rail rates, service and rail practices that they believe to be unreasonable.
The Senate committee on Dec. 17 by voice vote approved the bill, which is viewed as the most significant freight rail legislation since Congress enacted the Staggers Rail Act in 1980. The NGFA said the bill likely will undergo additional fine tuning before being considered in 2010 on the Senate floor, including potential language that could modify the railroads’ antitrust exemption that is being developed by Sen. Herb Kohl, D-Wis., and others. Meanwhile, the House Transportation and Infrastructure Committee, chaired by Rep. James Oberstar, D-Minn., is expected to develop its own version of rail reform legislation in 2010.
NGFA President Kendell W. Keith noted that while the Senate bill does not contain all the changes to U.S. rail policy advocated by the NGFA, it does provide some “meaningful corrections” to current law and “hopefully will set the stage for a more balanced regulatory environment.” In particular, he cited provisions of the bill that would require the STB to establish a binding arbitration system to resolve rail rate, rail practice and common-carrier service complaints from shippers; empower the STB to launch investigations of rail practices; require rail carriers to publish reasonable service expectations for shippers relying on common-carrier rates; increase the amount of damages shippers could collect from carriers if prevailing in unreasonable freight rate cases under streamlined procedures; and revise the national transportation policy to place more emphasis on the importance of rail competition, prohibiting predatory pricing and ensuring reasonable freight rates where rail competition is lacking.
Keith also said there will be an opportunity to seek further enhancements to the bill once the legislative process shifts to the Senate floor and to the House.
Established in 1896, the NGFA consists of more than 1,000 member companies consisting of grain elevators; feed and feed ingredient manufacturers; grain and oilseed processors and millers; integrated livestock and poultry operations; biofuels plants; exporters and other grain-related businesses. NGFA-member companies operate more than 6,000 facilities and handle more than 70 percent of the U.S. grain and oilseed crop.
In a joint statement issued on the eve of the Senate committee’s consideration of the bill, the NGFA and other agricultural and agribusiness organizations wrote that they believed the measure will “better balance shipper needs for reasonable (freight) rates and service with railroad needs for adequate revenues, and provide for a fair, expeditious, accessible and cost-effective regulatory process. The railroads need adequate revenues to reinvest in capacity, but there also is a need to facilitate a more normal business-to-business relationship between shippers and carriers,” the groups said. “The bill will assist in reaching that goal.”
The agricultural producer and agribusiness organizations also commended Senate Commerce, Science and Transportation Committee Chairman John D. (Jay) Rockefeller IV, D-W. Va., and Ranking Member Sen. Kay Bailey Hutchinson, R-Texas, for their bipartisan leadership efforts to craft a “fair and reasonable compromise” bill that “balances the needs” of agricultural shippers and railroads, and provides solutions to “real-world rail challenges.” The groups also commended Sens. Frank Lautenberg, D-N.J., and John Thune, R-S.D., the chairman and ranking member of the Senate committee’s Surface Transportation and Merchant Marine Infrastructure, Safety and Security Subcommittee, and committee member Sen. Byron Dorgan, D-N.D., for their extensive efforts in developing the bill. All five are co-sponsors of the rail bill.
“Nearly 30 years have passed since passage of the Staggers Rail Act (of 1980), and our nation needs new rail transportation policy to reflect the reality of the marketplace in the 21st century” for both railroads and shippers, the NGFA and other organizations wrote. “We look forward to working with Sen. Rockefeller and his colleagues in moving this important legislation to the finish line.”
In addition to the NGFA, other national agricultural producer and agribusiness organizations signing the letter were: the Agricultural Retailers Association, American Farm Bureau Federation, American Soybean Association, National Association of Wheat Growers, National Chicken Council, National Corn Growers Association, National Cotton Council, National Council of Farmer Cooperatives, National Farmers Union, National Oilseed Processors Association, National Sorghum Producers, National Turkey Federation, USA Dry Pea and Lentil Council, and USA Rice Federation.
The NGFA provided the following summary of key provisions of the 63-page Senate bill important to agricultural freight rail shippers:
Ø Revamping the STB: The STB would be increased to five members from its current three, with a requirement that the two new members have private-sector “professional or business experience (including agriculture or other rail customers)….” The STB also would be empowered to investigate rail practices on its own initiative, rather than only in reaction to receiving a formal complaint. The agency’s Office of Public Assistance, Governmental Affairs and Compliance also would be authorized to mediate rail disputes, monitor rail carrier operations, ensure legal compliance and facilitate communication among stakeholders. The bill also would require the STB to create a new position – rail customer advocate – to assist in investigating and resolving shipper complaints on service and rate issues, as well as to review rail cost and efficiency data.
The bill also would cap filing fees for all complaints filed with the STB to be the same as the fee for filing a federal district court case, which currently is $350. Further, the STB would be removed from the U.S. Department of Transportation and become an independent federal agency, similar to the structure that exists for the Commodity Futures Trading Commission and the STB’s predecessor – the Interstate Commerce Commission (ICC). The STB would be reauthorized for five years.
Ø Revise National Rail Policy: The bill would reprioritize national rail transportation policy to place more emphasis on the importance of rail competition, prohibiting predatory pricing and ensuring that freight rates are reasonable if competition is lacking. The STB would be given authority to investigate rail rates even in the absence of a shipper complaint.
Ø Service Expectations: The bill would require rail carriers to publish reasonable service expectations for every common carrier rate, including cycle times, transit times and switching frequency.
Ø Arbitration: Significantly, the bill would require the STB within one year after enactment to establish a binding arbitration process to resolve rail rate, rail practice and common-carrier service complaints. For rail rate disputes to be arbitrable, the carrier would be required to have market dominance, which under the Staggers Rail Act is a rate that is 180 percent or more over the railroad’s variable cost. After a party filed a formal complaint, the STB would have 30 days to determine whether the case is to be arbitrated. The arbitration process would be expeditious, with the arbitrator selected by the disputing parties required to issue a decision within 30 days after the disputing parties submit their arguments and evidence. The bill also would require the STB to select arbitrators having private sector transportation, economic regulation, professional or business experience, including agriculture. The maximum payment of monetary damages in an arbitration award could not exceed $250,000 per year for a two-year period, although the agency would be authorized to review this monetary-damage limit periodically and revise it “as appropriate.”
Ø Paper Barriers: The bill would make it easier for shippers to challenge so-called “paper barriers,” under which a Class I carrier through interchange commitments can restrict or preclude the ability of a purchaser or tenant railroad to interchange traffic with railroads other than the seller or landlord railroad. The new bill would allow shippers to challenge these interchange commitments at the STB, and sets up a framework for eliminating existing paper barriers – but only to the extent they conflict with current law.
Ø Freight Rail Rate Disputes: The bill would increase the damages shippers could collect from carriers under the STB’s expedited, simplified guidelines for resolving small- and medium-sized freight rail rate disputes. Small freight rail rate cases brought under the so-called “three-benchmark” procedure would be eligible for damages of up to $1.5 million over five years, instead of the STB’s current cap of $1 million. Medium-sized rate disputes filed under the STB’s so-called “simplified stand-alone cost” procedure would be eligible for damages of up to $10 million over five years, rather than the STB’s current cap of $5 million. During the STB’s 2008 rulemaking, in which the agency established these “simplified” rate proceedings, the NGFA and other shipper groups had estimated that the costs alone of bringing rate cases under the “three-benchmark” and “simplified stand-alone cost” procedure could range from $1.75 million to $4 million, respectively, and had urged the STB to increase the rate relief caps to $3 million and $10 million, respectively.
The Senate bill’s sponsors say these changes will increase to 82 percent the volume of regulated freight rail traffic that would be eligible for consideration under these two simplified rate proceeding methods.
Ø Bottleneck Rates: Carriers would be required to quote a freight rate for each segment of a so-called “bottleneck” shipment, in which a single carrier serves an origin or destination facility but another carrier has the ability to serve a portion of the movement from a nearby interchange point. The bill would require the STB to establish a new rate-reasonableness process for bottleneck rates based upon an efficient component pricing methodology and other factors. This methodology would be designed to provide shippers with the right to “reasonable” rate quotes over the bottleneck portion of the movement and provide a method for shippers to challenge what they believe to be unreasonable rates. These provisions are designed to address a STB decision in the 1990s in which the agency determined that a carrier owning the bottleneck segment is not required to quote a rate for only that segment unless the carrier that could handle the remaining movement will provide the shipper with a rate for that portion. However, the bill provides considerable protection for carriers to ensure any economic harm is limited.
Ø Reciprocal Switching and Terminal Access: The bill would authorize the STB to require a railroad to make its terminals available to a competing carrier to provide access for captive traffic and would revoke a mid-1980s decision (known as the Midtec Paper ruling) by the STB’s predecessor – the ICC – that requires shippers to prove that a railroad is engaged in anti-competitive conduct. But the bill would create a relatively high barrier, providing terminal access only in “exceptional circumstances” and requiring the shipper to first demonstrate that the access: 1) would not impede the efficient operation of the existing terminal or the owning carrier’s overall rail network; or 2) would not adversely affect service to any other customers; and 3) would be in the public interest. These criteria would need to be met before the STB could order a carrier to provide terminal access to another carrier.
Ø Rail Mergers: The bill would require mergers and acquisitions between Class I and II rail carriers to receive the same scrutiny by the STB as transactions between Class I carriers currently receive. Such review would encompass potential impacts of a merger on public health, safety, environment, and intercity and passenger rail service.
Ø STB Studies: The STB would be required within six months of the bill’s enactment to complete several studies and provide reports to Congress. The required studies would include those on rail practices, including switching, penalties, surcharges, demurrage and accessorial charges; a rail car interchange study, including rules adopted by the Association of American Railroads; and a study on the use of replacement cost as a basis for determining a carrier’s revenue adequacy calculation.
Source: NGFA News Release
