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Surface Transportation Board issues two proposed rulemakings

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The Surface Transportation Board (STB) has been busy lately. The Board issued two proposed rulemakings on September 30, while an August decision regarding fuel surcharges has led a coalition of shippers’ interests to ask the Board to reconsider its decision.

Railroads’ Cost of Capital

On September 30, the STB issued a notice of proposed rulemaking addressing how it determines the railroad industry’s cost of capital. It is proposing an additional model, called “Step MSDCF” into its methodology for calculating the cost of capital.

The Board explained that it determines the railroad industry’s cost of capital each year and it uses that figure in a variety of regulatory proceedings. The cost of capital consists of the weighted average of the cost of debt and the cost of equity.

There are two models that the STB uses, and the Board is proposing to add Step MSDCF as a third model. When used with the two existing models, “[Step MSDCF] would enhance the robustness of resulting cost-of-equity estimate” during times when railroads undertake significant operational changes, STB said.

Comments on this notice are due by November 5 and replies are due by December 4. More information is available here.

STB seeks to amend rail performance data reporting rules governing chemicals and plastics shipments

The Board issued a second notice of proposed rulemaking on September 30 to amend the rules governing railroad performance data reporting for chemicals and plastics traffic. The Board is seeking to have chemicals and plastics traffic become a distinct reporting category in the Class I railroads’ weekly reporting of the “cars-held metric.” The metric tracks the average number of loaded and empty railcars that have not moved for 48 hours or longer, the STB said.

The change would help the Board track service conditions. The Board’s proposed rulemaking is due in part to a petition filed by the American Chemistry Council.

“The Board believes that reporting of this data for chemical and plastics traffic would give the agency and stakeholders better visibility into the fluidity of this traffic segment. With this data, both the Board and its stakeholders would be better positioned to detect and mitigate emerging service issues affecting chemicals and plastics shipments,” STB said.

Comments are due by December 6 and replies are due by January 6, 2020. More information can be found here.

STB should revisit fuel surcharge issue: shippers

On August 29, the Board opted to discontinue a proceeding on fuel surcharges, Ex Parte 661, because it could not reach a consensus on how to address the issue of fuel surcharges. 

The proceeding was on whether the STB should remove a safe harbor provision under current fuel surcharge rules. The safe harbor provision enabled rail carriers to measure changes in fuel costs, and the safe harbor index couldn’t be challenged for its reasonableness because it had undergone the public comment process. 

But shippers have contended that the railroads took advantage of the program and profited greatly from it. The Western Coal Traffic League, the American Public Power Association, the Edison Electric Institute, the Freight Rail Customer Alliance and the National Rural Electric Cooperative Association asked the Board to reconsider its decision and even consider a notice of proposed rulemaking to address the issue.

“The Board’s statutory responsibility is to regulate and eliminate unreasonable carrier practices, not to arbitrarily brush them aside. On reconsideration, the Board should vacate its Decision and publish a notice of proposed rulemaking (“NPRM”) proposing remedial rules to stop (or reduce) carriers’ ongoing fuel surcharge profiteering,” the groups said in a September 18 filing.

The issue of fuel surcharges was also in the courts this week. In a related but non-Board action, as many as 30 companies have filed lawsuits against BNSF (NYSE: BRK), Union Pacific (NYSE: UNP), CSX (NYSE: CSX) and Norfolk Southern (NYSE: NSC) on claims that the railroads profited from excessive fuel surcharges that were administered between 2003 and 2008. 

Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.