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Grain rates, revenue adequacy for rail at issue in two hearings

 

 

By TIM ALEXANDER

Illinois Correspondent

 

PEORIA, Ill. — Rate regulation of rail transportation of grain and railroad revenue adequacy will be the topics of a pair of upcoming public hearings, the U.S. Surface Transportation Board (STB) announced.

The hearing concerning rates Class 1 freight railroads charge for carrying grain is set for June 10, while a July 22-23 hearing will focus on how the STB should regulate carriers that are "revenue-adequate," according to acting STB Chair Deb Miller.

"The board is long overdue in addressing the fact that no grain shipper has filed a rate case in over 30 years. And, given how much the financial situation has improved for the railroad industry over the last 30 years, it is also time that the board gave meaningful consideration to what it means for a railroad to be revenue-adequate," Miller stated in an STB news release.

The rate regulation hearing will examine ways to make the STB’s rate case process more accessible to grain shippers. Currently, shippers who believe they are being charged exorbitantly may challenge railroads’ rates in front of the board. But many shippers and some lawmakers – including Sen. John Thune (R-S.D.), who has a bill in Congress seeking to streamline the method for shippers to refute freight rail chargers – feel the STB rate case process is too costly and cumbersome to bear.

The STB’s hearing on revenue adequacy will examine whether freight rail carriers are earning sufficient revenue to cover their costs and earn a sufficient return to attract capital. In April 2014, the STB invited public comment on what it means for a railroad to be revenue-adequate and how such as finding should impact regulation of railroads’ rates.

Soy Transportation Coalition (STC) Executive Director Mike Steenhoek feels the upcoming STB hearings are justified and healthy for competition. Though the hearings are central to maintaining a level of transparency between shippers and providers, however, he cautions that too much regulation of grain shipments could steer Class 1 freight rail providers away from grain in favor of shipments of more profitable commodities.

"We do agree that railroads need to achieve sufficient returns on their investment. We want, first and foremost, for rural America to be an attractive place for investment by railroads. Even though they are increasingly profitable, railroads still have finite resources and they are constantly evaluating how best to employ those resources for optimal benefit," Steenhoek explained.

"They have options to invest in (several) corridors of commodities, grain being only one of them. For railroads, grain is not the most important one or biggest by volume. What we don’t want to see happen is to enact some new regulations that all of a sudden will result in railroads regarding ag as less appealing."

The primary reason no shipper has advanced a complaint over freight rail rates with the STB since 1981 is because of the considerable expense – including research, attorney fees and filing fees – of bringing a winnable case in front of the board, according to Steenhoek.

"It seems to me that if a government agency is going to establish itself as a mediator, then the process of seeking that mediation should be accessible," he said. "You shouldn’t have to face financial and time barriers.

"This has been one of the long criticisms of the STB: It can be so excessively expensive that the actual shipper will make a determination that it’s not worth it to file. To me that’s not good government."

Thune’s freight rail reform bill, the STB Reauthorization Act of 2015 (S.808), passed the Senate Commerce Committee in late March. The bill streamlines the ability of the STB to work together to address rate disputes by, among other measures: expanding board membership from three to five members (currently there are just two); allowing greater leeway in communications between members; and changing the rate review process by codifying an arbitration process for certain rate disputes and carrier complaints.

"Providing targeted improvements to the STB ensures that it functions as the regulatory body that Congress envisioned, while not stifling the railroads with additional regulations that can reduce infrastructure investment," Thune said of his bill, which is awaiting the attention of the full Senate.

Miller thanked all affected parties for their submissions during the public comment period on grain transportation rates last year. "Our stakeholders clearly answered our call for thoughtful and meaningful comments. They raised many intriguing ideas and I look forward to being able to explore them further through a face-to-face dialogue," she said. "I also think it is appropriate that we will be holding these hearings close together, as the issues raised in these proceedings are not mutually exclusive. My hope is that the information that we gather from these hearings will ultimately lead to a package of proposals on a number of issues that we have before us."

The public hearings will take place at STB headquarters in Washington, D.C.

5/27/2015