Railroads, Shippers Draw Battle Lines Over Proposed STB Rule
Railroads and shipper groups have sketched their strategy for a potentially historic Surface Transportation Board battle over the future of rail competition, with comments to the agency as well as taking steps to recruit allies.
Both sides’ filings were the initial formal responses to STB’s proposal in July to grant customers served by one railroad for the first time in U.S. rail history to gain access to competition if a second carrier is available within 30 miles. The proposal, in response to a 2011 petition from the National Industrial Transportation League shipper group, would reverse a 1985 regulatory decision supported by the railroads, in which a shipper proposal to get access to a single carrier was denied.
STB’s proposal, known as reciprocal switching, would force a single-serving railroad to move a second carrier’s freight cars to the customer to create the competitive choice.
Because intermodal moves, including trucking, are about half of rail shipments, motor carriers’ economics and service could be affected by the outcome.
UPS Inc., one of the largest intermodal users with 3,000 daily loads on the rail network, stated its opposition to STB’s plan, while NITL is part of the Shipper Alliance for Rail Competition, one of two coalitions seeking change.
“UPS’ experience in other contexts leads us to conclude that implementation of a new reciprocal switching scheme will lead to decreased network velocity, diminished capital investments into the freight rail network and deteriorating rail intermodal service levels.
"If rail intermodal service levels fall below UPS time-in-transit obligation standards, we would have no business option but to move these containers and trailers back onto the highway, thus defeating the efficiency objectives of intermodal transportation.”
Rail allies include unions that envision lower pay and deteriorating working conditions, and conservative groups such as the Competitive Enterprise Institute.
“The board is correct that reform of its reciprocal switching regulations is needed because the current rules and related precedent effectively act as a bar to [competitive] relief rather than as a standard under which relief can be granted,” said the Shipper Coalition for Railroad Competition, including NITL and trade groups representing automotive, chemical and some grain shippers.
The Alliance for Rail Competition, whose members include Western grain shippers, is “supporting the regulations proposed in this proceeding and calling on the board to adopt changes making switching remedies more effective.”
That group said, “For many single-served shippers, the possibility of shifting their business to another railroad is the only hope the shipper has of getting reasonable rates and/or a reasonable level of service quality from the railroad they currently use.”
However, that group noted that in sprawling states such as Montana, where BNSF Railway controls 95% of all rail shipments, a second railroad might be hundreds of miles away — too far under STB’s proposal.
Some coal shippers also favor the changes as do individual household names, such as Kraft Heinz Corp.
“The rules are unlawful,” the Association of American Railroads said in its filing, contending the move would “turn the existing regulatory regime upside down.”
“They ignore the statutory language that requires a showing of necessity for a switching order,” AAR’s filing said. To back their position, the railroads argued that there were few cases that showed shippers wanted multicarrier access to their facilities and that steps such as mergers, technological advances and improved rail financial health led to improvements that made the added access unnecessary for sole-served customers.
In addition, the carriers argued that the rules would disrupt operations as well as increase delays and congestion. The carriers also contended that “artificial competition for marketplace decisions involving the routing of traffic and setting of rates” would result, reducing revenue.
“The decision refers repeatedly to the board’s discretion under statute as justification,” AAR said. “The board has failed to set forth a coherent rationale for moving from a model of access as a remedy for harm to a model where access can be granted without a demonstration of need.”
STB hasn’t said what its next step will be to further its review, and no timetable has been set for a decision.
