By Randy Gordon, President and CEO
The federal Surface Transportation Board (STB) on Nov. 24 announced it will initiate a rulemaking in coming months on whether to establish a voluntary rail rate arbitration program within the agency’s existing rail arbitration system.
The agency did not issue a proposal nor a timeline for obtaining public comment on such a program, indicating instead that it would do so “in a subsequent decision.”
The NGFA on Aug. 20 had submitted a 14-page statement to the STB recommending that it initiate a rulemaking and seek further public comment on a joint petition submitted by five Class I railroads that would create a rail rate arbitration program. The U.S. Department of Agriculture also encouraged the STB to initiate a rulemaking.
However, NGFA said the STB should proceed with a rulemaking on the petition only if doing so does not delay the agency’s issuance of a final rule implementing a new, streamlined regulatory process that shippers could use to challenge unreasonable rail rates – known as the “final offer rate review” (FORR) procedure. STB officials have told the NGFA in recent weeks that issuing a final rule on FORR remains a top priority.
In addition, NGFA in its August statement advised the STB that it still had significant concerns about two major aspects of the railroads’ rail rate arbitration petition that likely may prove to be insurmountable. Those involve the insistence of the five railroads that they be granted a waiver from the STB that would prevent their freight rates from being challenged under FORR so long as they agree to participate in the proposed rate arbitration approach, and that arbitration decisions rendered under such a system generally be kept confidential.
In its Nov. 24 announcement, the STB noted it “favors the resolution of disputes through alternative dispute resolution whenever possible…, and also has been actively working to expand access to rate relief, particularly for smaller disputes” – a reference to the FORR rulemaking that began on Sept. 12, 2019. The Association of American Railroads already has warned that it likely will challenge the legality of FORR in court. Under the proposed FORR procedure, a rail customer could file a rate complaint at the STB and submit what it considers to be a reasonable rate using whatever methodology it chooses to justify its rate offer. Likewise, the defendant railroad could utilize its choice of methodology to justify its current rate or offer a different rate that it believes is lawful. The STB then would choose between the two rate offers based upon the evidence presented (in essence, picking a winner and loser), utilizing a streamlined and more cost-effective process that generally would resolve the rate case within 135 days.
As reported in the Aug. 7 NGFA Newsletter, five Class I railroads (the Canadian National Railway, CSX Transportation Inc., Kansas City Southern Railway Co., Norfolk Southern Corp. and Union Pacific Railroad Co.) on July 31 submitted a 45-page petition to the STB urging that it create a separate set of rules under its existing voluntary, binding rail arbitration program to resolve rail rate complaints between carriers and their customers. Only the BNSF and Canadian Pacific Railways did not join the petition.
In its statement to the STB, NGFA also: 1) reiterated its long-standing belief in, commitment to, and support of arbitration to resolve commercial disputes, including with railroads; 2) cited NGFA’s major concerns with the joint petition’s unconditional FORR waiver and confidentiality of arbitration decisions; 3) identified those aspects of the joint petition that NGFA believes have merit for agricultural shippers that constitute its membership; and 4) provided several additional recommended revisions to the petition that NGFA believes are reasonable and would improve, strengthen and be essential to any successful rail rate arbitration program developed by the STB.
Concerning the railroads’ demand for a FORR waiver, NGFA said its members generally do not support an arbitration program that would eliminate the ability of a rail shipper to file a formal rate complaint using any of the STB’s legally available rate-reasonableness methodologies, including FORR if and when it is finalized. Concerning the railroad petitioners’ call for confidentiality of rail rate arbitration decisions, NGFA noted that such a proposal is the “antithesis” of NGFA’s transparent public Arbitration System (for both rail and non-rail cases), as well as the STB’s existing voluntary arbitration procedures, both of which require publication of decisions that are available publicly. “NGFA’s experience has been that the prospect of a public decision often provides a significant incentive for the involved parties to settle the dispute, often prior to the substantive start of the arbitration process,” NGFA wrote.