Viewed as the most significant freight rail legislation since the Staggers Rail Act of 1980, the bill is expected to include several major provisions important to grain, feed and grain product shippers and receivers, as well as farmer-customers.
The NGFA has been working closely with the Senate committee's staff over most of the past year in providing the input of agricultural interests during negotiations in developing the bill, which also involved freight railroads and a variety of other non-agricultural rail shipper interests. If approved as expected by the Senate committee, the bill likely will not be considered by the full Senate until early 2010, given current demands for Senate floor time for consideration of health care and budget legislation.
Over the weekend, published reports concerning the 64-page bill discussed some of the major provisions important to the grain, feed and processing industry. They include the following:
- Revamping of Surface Transportation Board: The federal Surface Transportation Board (STB), which has jurisdiction over freight rail regulation, 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)…." 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. The STB would be reauthorized for five years.
- Revise National Rail Policy: The bill would reprioritize national rail transportation policy to place more emphasis on the importance of rail competition, 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.
- Service Expectations: The bill would require rail carriers to publish reasonable common-carrier service expectations, including cycle times, transit times and switching frequency.
- Arbitration: 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 periodically to review this monetary-damage limit and revise it "as appropriate."
- Paper Barriers: The bill would make it easier for shippers to challenge so-called "paper barriers," in 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.
- Freight Rail Rate Disputes: The bill would increase the damages shippers could collect from carriers under the STB's simplified guidelines for resolving small- and medium-sized freight rail rate disputes. Small 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 utilizing 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, and had urged the STB to increase the rate relief caps to $3 million and $10 million, respectively.
- 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. Further, the new bill would 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.
- Terminal Access: While 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, it could only do so in "exceptional circumstances." The hurdle is high, as the shipper first would be required to demonstrate that the access would not: 1) impede the efficient operation of the existing terminal or the owning carrier's overall rail network; or 2) negatively affect service to any other customers and is 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.
- 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.