STB REFUSES TO APPLY RULEMAKING PROCEEDING TO RATE TEST ISSUES

STB REFUSES TO APPLY RULEMAKING PROCEEDING TO RATE TEST ISSUES    The U.S. Surface Transportation Board has denied requests to address, in a rulemaking-type proceeding, issues arising in the application of stand-alone cost tests that are used to evaluate the reasonableness of common carriage rates that railroads charge captive shippers.
   The requests were raised by Union Pacific Railroad and the Burlington Northern and Santa Fe Railway. The reasonableness of several of the rates charged by UP and BNSF on western coal traffic are being challenged in proceedings pending before the STB. The railroads wanted the STB to address several issues regarding the stand-alone cost (SAC) tests).
   The SAC tests seek to determine the lowest cost at which a hypothetical, efficient railroad could provide the transportation service needed by the complaining shipper. Under the SAC test, the complaining shipper designs a hypothetical railroad specifically tailored to serve its needs and the needs of other traffic it designates. The costs of building and operating the hypothetical railroad are then compared to the revenues that such a system could expect to earn. If a shipper demonstrates a stand-alone railroad would earn more than necessary to cover all of its costs (including a reasonable return on investment), the shipper is entitled to rate relief.
   The railroads contended to the STB that the long-term traffic forecasts required by multi-year SAC analyses are inherently unreliable and that a one-year SAC analysis should be used instead. The railroads also asked the STB to adopt procedures to prevent a complaining shipper from attributing to the stand-alone railroad an unrealistic share of traffic that would need to be handled by more than one railroad, or to preclude revenues from other traffic. Also, the railroads asked the board to reconsider its determination not to make an adjustment in SAC cases that the railroads argued would be necessary to reflect the accelerated recovery of investment that investors would demand from the hypothetical railroad.
      The STB, while acknowledging that the railroads have raised significant issues about how the SAC test should be applied in maximum rate reasonable adjudications, the board concluded that it would address the SAC test cases on an individual basis.