(The following article by Peter Johnson was posted on the Great Falls Tribune website on October 12.)GREAT FALLS, Mont. -- The federal Surface Transportation Board will conduct a hearing on Nov. 2 in Washington, D.C., to discuss concerns involving shipping of grain by rail. One of those topics figures to be whether railroads charge unfair rates to shippers in so-called captive markets like Montana. A captive market is where shippers are served by just one railroad. Board chairman Chip Nottingham announced the hearing Wednesday at a meeting in Great Falls after spending several hours Tuesday meeting with Montana agricultural leaders. The hearing will be at 10 a.m. in Room 760, the STB hearing room, at its headquarters in the Mercury Building, 1925 K St. N.W., Washington, D.C. Nottingham also said the regulatory agency will study possible overcharging and alternative methods of helping captive shippers that were suggested by a new Governmental Accountability Office report. U.S. Sen. Conrad Burns, R-Mont., who invited Nottingham to Great Falls and called for the GAO study along with seven other senators, welcomed the STB chairman's pledge to look into the issue of railroads overcharging captive shippers. Burns said he was pleased that progress seems to be occurring on a crucial issue to Montana farmers and other shippers. "In agriculture, especially in states like Montana without competitive shipping, we sell wholesale, buy retail and pay the freight both ways," Burns said. He said he does not want to go back to the days when railroads were more regulated, but said the STB has not done a good job in its role of setting fair and reasonable rates in areas that lack rail competition. "The board also has a habit of holding hearings rather than taking action," Burns said, saying it is typical of Washington agencies that suffer from "paralysis by analysis" — collecting data for studies that sit with inches of dust on top of them. Burns' Democratic opponent, state Sen. Jon Tester of Big Sandy, issued a release Wednesday saying: "High rail-freight rates stop economic development and hurt Montana agriculture. "I want to reduce freight rates so farmers' money stays here if they ship out of state," said Tester, an organic grain farmer. He added that Burns "has long paid lip-service to Montanans on the captive shipper issue, without delivering results." The GAO report urged the STB to make its rate appeals process cheaper and quicker. Nottingham acknowledged that it can cost $3 million in legal fees to appeal a major rate case, which can take five to seven years to resolve. The GAO report also suggested that the STB study alternative ways to make rates and service more fair for shippers in markets that lack competition. Nottingham said he's willing to take on such a major study, but will need more congressional financing. The GAO did praise the 1976 and 1980 deregulation measures for reviving a railroad industry that had been in financial crisis and for lowering shipping rates in much of the country. Nottingham said he's "been given the impression that our courthouse door is not fully open" to hear complaints quickly and affordably. He promised to go forward with the study GOA suggested, though he added, "these are not quick fixes." He also said the regulatory agency will announce its own proposals in the next few months to: -- Expedite decisions on major rate challenges -- Ensure that railroads aren't overcharging when they adjust rates based on higher fuel costs -- Make it easier for small shippers to file rate complaints. Burns said that the threshold under which grain growers and other small shippers can file complaints under STB's proposed new regulations still are too low. He said he will urge the board to raise the threshold to allow more grain shippers to have access to the expedited process. Nottingham said the agency's proposed change would limit claims to $200,000 in expedited cases filed by small shippers. Since rail costs can amount to as much as one-third of the revenue farmers earn, that might not be a high enough threshold for larger Montana growers, he conceded. Burns said he will pursue his separate amendment to the 2007 Transportation Department spending bill that would require the STB to issue new regulations, making it easier for small shippers to appeal rates that railroads charge. The Burns amendment, which awaits full Senate action in November, also would require the STB to reconsider its so-called "bottleneck" decision. That 10-year-old decision allows railroads to refuse to provide service to midway points where shippers could then transfer their commodities to a competing railroad. State Rep. John Witt, R-Carter, told Nottingham and Burns that he supports efforts to investigate overcharging by railroads. Witt suggested they broaden their effort to encourage railroads to maintain and use north-south rail routes and spurs in Montana. Retaining spurs would help smaller farm communities keep jobs and remain vital, he said. Additionally, repairing and using major routes, like BNSF's from Great Falls to Helena, could be a matter of homeland security. If a major railroad trestle on BNSF's busy east-west route was destroyed, it would be a disaster to area producers who could not transfer their grains for several months, he added. Jon Stoner, president of the Montana Grain Growers Association and a Havre farmer, said his group is "very energized at the new STB chairman's refreshing attitude of taking on these issues. "The GAO report more clearly defines the board's power to determine fair and reasonable transportation rates and to rectify problems that it sees," he added.
Ladies and Gentlemen...The GAO report:
http://www.gao.gov/new.items/d06898t.pdf#search=%22%20%22GAO-06-898T%20%22%22
Please note that the writer for the Great Falls Tribune has taken it upon himself to redefine a "captive Shipper" to include any lumber yard served by the Wisconsin & Southern. Why do journalists do this? Why can't they write the story straight?
In the GAO report you'll find the definition to be an entity that lacks a "reasonable" transportation alternative. The alternative certainly doesn't have to be a railroad, trucks move freight just fine. In fact, they move a lot more of it than the railroads do.
greyhounds wrote: Ladies and Gentlemen...The GAO report: http://www.gao.gov/new.items/d06898t.pdf#search=%22%20%22GAO-06-898T%20%22%22 Please note that the writer for the Great Falls Tribune has taken it upon himself to redefine a "captive Shipper" to include any lumber yard served by the Wisconsin & Southern. Why do journalists do this? Why can't they write the story straight?
Pete Johnson has been practicing his trade in Journalism far, far longer than you ever had anything to do with railroading. He's the better professional at what he [still] does.
As I stated on the other economic thread, I have read the GAO report and found it educational yet a bit frustrating. There really doesnt seem to be a clearcut method of addressing the overcharge issue at this time.
The R/VC is flawed, as pointed out by the report. Any productivity gains are to be split with the shipper. It appears that the new threshold is the 300% R/VC figure, based on their language. That seems to be the figure they find most threatening.
Personally, I think that at some point in time any Federal funding for railroad capacity will be tied to captive shippers and passenger trains. It will make an interesting decision making process in the board rooms, won't it?
The more I think about it, the R/VC 180% had to have been set up as it was intentionally. The process discourages rate review. The Staggers Act gain the rails a pass to get their acts together. Interestingly the rates overall have reduced over time.
Interesting topic
ed
greyhounds wrote: Ladies and Gentlemen...The GAO report: http://www.gao.gov/new.items/d06898t.pdf#search=%22%20%22GAO-06-898T%20%22%22 Please note that the writer for the Great Falls Tribune has taken it upon himself to redefine a "captive Shipper" to include any lumber yard served by the Wisconsin & Southern. Why do journalists do this? Why can't they write the story straight? In the GAO report you'll find the definition to be an entity that lacks a "reasonable" transportation alternative. The alternative certainly doesn't have to be a railroad, trucks move freight just fine. In fact, they move a lot more of it than the railroads do.
This is a good place to start a discussion on what reforms are needed, if any, to the STB process for rate reasonableness. I notice in the report the GAO is wisely carful not to define a capitve shipper to closely. They use "proxies" with BEA's served by one railroad or r/c ratios over 180. If this logic was taken to a point the GAO does not intend a bookstore in Albuqureqe would be captive because the were only served by the BNSF even though all of their shipments came in by truck. As another example, their are many chemical shipments moving from the Houston Ship Channel at r/c ratios > 180 even though the shipper is served by two railroads. Many of these same shipments would move by truck or barge or barge/truck or swapped out if the rail rate gets too high.
The STB is still going to need to look at each situation to decide if their is a reasonable amount of competition from other railroads, modes, markets or products. As an example WV coal must compete with other coal sources from all over the world. When the NS or CSXT set rates to tidewater the cost of coal from Austrailia, S. Africa, etc. into Shanghi is a very important issue.
MP173 wrote: As I stated on the other economic thread, I have read the GAO report and found it educational yet a bit frustrating. There really doesnt seem to be a clearcut method of addressing the overcharge issue at this time. The R/VC is flawed, as pointed out by the report. Any productivity gains are to be split with the shipper. It appears that the new threshold is the 300% R/VC figure, based on their language. That seems to be the figure they find most threatening. Personally, I think that at some point in time any Federal funding for railroad capacity will be tied to captive shippers and passenger trains. It will make an interesting decision making process in the board rooms, won't it? The more I think about it, the R/VC 180% had to have been set up as it was intentionally. The process discourages rate review. The Staggers Act gain the rails a pass to get their acts together. Interestingly the rates overall have reduced over time. Interesting topic ed
The r/c 180 threshold was set by negotiations between the NIT League and the AAR when Staggers was passed in 1980. That was over a quarter of a century ago and the railroads had lots of unsued capacity so costing based on incremental costs was useful. Today many lanes are at capacity. If you are a shipper wanting to put a new batch of 25 cars a week over a sold out line you do not want to pay the incermental cost to take your shipments. Paying for single track to double track for 25 cars per week gets very expensive.
bobwilcox wrote: MP173 wrote: As I stated on the other economic thread, I have read the GAO report and found it educational yet a bit frustrating. There really doesnt seem to be a clearcut method of addressing the overcharge issue at this time. The R/VC is flawed, as pointed out by the report. Any productivity gains are to be split with the shipper. It appears that the new threshold is the 300% R/VC figure, based on their language. That seems to be the figure they find most threatening. Personally, I think that at some point in time any Federal funding for railroad capacity will be tied to captive shippers and passenger trains. It will make an interesting decision making process in the board rooms, won't it? The more I think about it, the R/VC 180% had to have been set up as it was intentionally. The process discourages rate review. The Staggers Act gain the rails a pass to get their acts together. Interestingly the rates overall have reduced over time. Interesting topic ed The r/c 180 threshold was set by negotiations between the NIT League and the AAR when Staggers was passed in 1980. That was over a quarter of a century ago and the railroads had lots of unsued capacity so costing based on incremental costs was useful. Today many lanes are at capacity. If you are a shipper wanting to put a new batch of 25 cars a week over a sold out line you do not want to pay the incermental cost to take your shipments. Paying for single track to double track for 25 cars per week gets very expensive.
MichaelSol wrote: The 180% R/VC standard is based on marginal cost theory, not incremental costs which, judging by your use of it, you mean to include fixed costs.
The 180% R/VC standard is based on marginal cost theory, not incremental costs which, judging by your use of it, you mean to include fixed costs.
We and our customers used marginal and incremental as synoyms. It was not a theory but generating paid freight bills for my employer. The Staggers negotiators were the Class I CEOs and a dozen or traffic managers from firms like DuPont, ADM and US Steel. I don't think they made the distinction either.
bobwilcox wrote: MichaelSol wrote: The 180% R/VC standard is based on marginal cost theory, not incremental costs which, judging by your use of it, you mean to include fixed costs. We and our customers used marginal and incremental as synoyms. It was not a theory but generating paid freight bills for my employer. The Staggers negotiators were the Class I CEOs and a dozen or traffic managers from firms like DuPont, ADM and US Steel. I don't think they made the distinction either.
bobwilcox wrote:This is a good place to start a discussion on what reforms are needed, if any, to the STB process for rate reasonableness.
MichaelSol wrote: bobwilcox wrote: MichaelSol wrote: The 180% R/VC standard is based on marginal cost theory, not incremental costs which, judging by your use of it, you mean to include fixed costs. We and our customers used marginal and incremental as synoyms. It was not a theory but generating paid freight bills for my employer. The Staggers negotiators were the Class I CEOs and a dozen or traffic managers from firms like DuPont, ADM and US Steel. I don't think they made the distinction either. Well, the shipper that has those 25 carloads that has to pay for the second mainline isn't paying just marginal costs if he's carrying the cost of the second mainline. That's a fixed cost carried by the system. His marginal cost is no different than the marginal cost of an identical train on the existing mainline. The fully distributed costs at that point in time, if apportioned out, would be higher for both shippers if the second mainline has to be built to accomodate the second shipper, but their marginal costs have no reason to be different.
I for one, would find this an interesting discussion. I hope it doesn't stall out over semantics.
Thanks to Chris / CopCarSS for my avatar.
MP173 wrote:I agree Murph. It is clear that certain issues need to be addressed, on both sides. Bob made a very good point about 180% being a hurdle at a point in time that is much different than today. I agree with Michael that the 25 extra cars per week shouldnt go to provide revenue for the 2nd mainline. It would be quite an investment to increase your capacity...would want to make sure of it before approving that project.ed
What really happens is that you go to Finance Department to get on the list of capital projects. They will want to what will be the profitablility of the new traffic you can handle because you have gone from one track to two tracks. They will also want to take a look to see if operating costs will go down. Then they do their rate of return number crunching and you see how competitive your project is with the other projects looking for funding. The problem is the project list is a lot longer than what the Finance people can raise money for.
Bob:I see your point. It would have to be a combination of increases in revenue plus a reduction of unit costs. It would be interesting to see one of those proposals and the simulations and economic models used.
That is what i find interesting about Rob Kreb's big gamble on the BNSF's transcon line. He made the case for the investment and then waited and waited and waited....finally it came. Did he make the correct choice? Short term...probably not. The stock got pummelled by the Wall Street crowd. Long term???without a doubt the right choice.
bobwilcox wrote: MP173 wrote:I agree Murph. It is clear that certain issues need to be addressed, on both sides. Bob made a very good point about 180% being a hurdle at a point in time that is much different than today. I agree with Michael that the 25 extra cars per week shouldnt go to provide revenue for the 2nd mainline. It would be quite an investment to increase your capacity...would want to make sure of it before approving that project.ed What really happens is that you go to Finance Department to get on the list of capital projects. They will want to what will be the profitablility of the new traffic you can handle because you have gone from one track to two tracks. They will also want to take a look to see if operating costs will go down. Then they do their rate of return number crunching and you see how competitive your project is with the other projects looking for funding. The problem is the project list is a lot longer than what the Finance people can raise money for.
I think you're right.
They're going to raise the rates to ration the capacity. Sell it to the highest bidder.
But they'll want more of that high revenue freight, so they'll add capacity. But they'll add it incramentally by picking the low hanging fruit first. They'll work on the worst bottlenecks first and then go on down the list adding capacity as traffic and finances warrent.
Building extra railroad capacity is a risky thing. If you buy real estate you might loose money on your investment, but you'll be able to get some money out. The cost of building that track is sunk and aside from the scrap/resale value of the rail, it's totally commited and you can't pull it out. If the traffic doesn't materialize as projected you just peed away several hundred million dollars.
What's happening is a logical, reasoned, business like approach to the need to increase US railroad capacity.
The worst thing that could happen is for the government to try to set the prices. It can not possibly know how to do that.
And I do agree, marginal costs and incramental costs are synonyms in common use.
Murphy Siding wrote: Without being *forced* to, by the Government, would railroads and *captive* shippers be able to work out some compromise on freight rates, that everybody could live with? What incentives would each side have, to negotiate in good faith?
My - I seriously doubt it. The railroad is likely going to try for the cost of operating the line as a stand-alone, while the shippers are going to push for averaging the cost over the entire system, including those high-density, money-making mainlines. Both have arguable positions.
But why limit this to just Montana grain shippers? I live near over 100 miles of track with 'captive shippers' - there's only one railroad here, and the odds of another railroad building in are so slim as to be nonexistant (yes there are trucks, but this is about railroads). In fact, word has it that the current railroad is looking to get out of running the line. What percentage of shippers fall into this realm? Seventy-five? Eighty?
Larry Resident Microferroequinologist (at least at my house) Everyone goes home; Safety begins with you My Opinion. Standard Disclaimers Apply. No Expiration Date Come ride the rails with me! There's one thing about humility - the moment you think you've got it, you've lost it...
Yes, and they have.
First, there is a need to understand that in any marketing/distribution channel there is a natural conflict between any buyer and any seller. The buyer naturally wants a lower price and a better good and/or service. The seller naturally wants a higher price and less of an offering in terms of the good and/or service being sold.
This conflict is good because it creates a friction that leads to inovations that improve the channel. Each member is always searching for a better way.
In our salient example, Montana wheat, the BNSF's incentive to compromise is the need to see that the farmers (wheat ranchers?) survive in business and continue to produce wheat for the railroad to haul. The wheat ranchers? incentive to compromise is to have a railroad that can move their wheat efficiently.
Unfortunately, the politicains are involved. Their incentive is to get/retain power.
Let the market work it out. People on all sides will be PO'd because they didn't get what they wanted and they had to compromise. But it will be a far better solution than the government could come up with.
MP173 wrote: He made the case for the investment and then waited and waited and waited....finally it came. Did he make the correct choice? Short term...probably not. The stock got pummelled by the Wall Street crowd. Long term???without a doubt the right choice.
He made the case for the investment and then waited and waited and waited....finally it came. Did he make the correct choice? Short term...probably not. The stock got pummelled by the Wall Street crowd. Long term???without a doubt the right choice.
No. Timing is everything on investments, and it doesn't matter that "some day" something may finally generate revenue. When "some day" is in fact defines whether an investment is a good one or not -- a positive or negative IRR.
Rob Kreb's "investments" generated increased fixed charges and decreased income. The internal rate of return was enormously negative and will remain negative for all time. Had the same investment been made in 2001 or later, the IRR would have been positive.
But, it wasn't, and that investment represents a substantial and permanent net financial loss to the Burlington Northern SF Railway.
greyhounds wrote: Let the market work it out. People on all sides will be PO'd because they didn't get what they wanted and they had to compromise. But it will be a far better solution than the government could come up with.
They did negotiate and they did compromise. They agreed on the 180% R/VC standard as a fair delineation of captivity and rate reasonableness and when the burden was supposed to shift to railroads.
The marginal cost ratio standard was reached as a compromise through negotiation and enacted by "politicians" without change as what the shippers and rail industry had agreed on.
Then one of the parties breached the agreement.
Guess which one.
MP173 wrote:I agree Murph. I agree with Michael that the 25 extra cars per week shouldnt go to provide revenue for the 2nd mainline. ed
To do this would be classified as "fully alocated cost". This was one of the passenger railroads favorite tools to justify abandonments and train off petitions. Finally, the ICC (and also the STB) forced these "bad actors" to use the realistic value of "avoidable costs" which were the value of the incremental costs that the railroad would directly save. For example, it costs more to maintain track for ClassV than it does for Class III. That difference would be an example of avoidable costs.
These 25 cars per week in our example, requiring a capacity increase that would be a second track - to have the rate set to "fully pay" for that expansion would be a "fully allocated cost". The next shipper to add traffic to that line would not pay for that capacity expansion and you can be sure that the original shipper paying that full allocation is going to object -- fiercly.
Fully alocating costs has its place. Rates is not one of them.
kenneo wrote: MP173 wrote:I agree Murph. I agree with Michael that the 25 extra cars per week shouldnt go to provide revenue for the 2nd mainline. ed To do this would be classified as "fully alocated cost". This was one of the passenger railroads favorite tools to justify abandonments and train off petitions. Finally, the ICC (and also the STB) forced these "bad actors" to use the realistic value of "avoidable costs" which were the value of the incremental costs that the railroad would directly save. For example, it costs more to maintain track for ClassV than it does for Class III. That difference would be an example of avoidable costs. These 25 cars per week in our example, requiring a capacity increase that would be a second track - to have the rate set to "fully pay" for that expansion would be a "fully allocated cost". The next shipper to add traffic to that line would not pay for that capacity expansion and you can be sure that the original shipper paying that full allocation is going to object -- fiercly. Fully alocating costs has its place. Rates is not one of them.
Example:
Take your typical PNW small time lumber mill. They might be able to fill 10 centerbeams a week when times are good. Those subsequently loaded centerbeams can and do end up just about everywhere on the North American rail network. But that same little mill is located at the end of a 25 mile spur line over 90 lb jointed rail laid back in steam days. The original Class I has sold the line to a shortline operator, and predictably the shortline has deferred as much as they can to the point of no return.
Here's the two extremes -
To keep this line in service, should the shortline itself bear the entrire cost of minimal rehab and charge the fully allocated cost to the one mill?
Or, since the output of the mill ends up throughout the NA rail grid, shouldn't the costs of minimal rehab be borne by the entire NA rail grid?
Most macro economists would say the latter, for this reason - Our transportation system is not predicated on fully allocated costs, rather it is predicated on spreading such costs nationwide via the various transport trust funds, with an equivalence of incremental costing borne by State and local supplements to federal user fee funding. When all players are given access to the national transport system, there is a net comprehensive gain for all - that "bridge to nowhere" in Alaska certainly has as much legitimacy to access federal highway dollars for a portion of it's cost as any other 'bridge to nowhere" located in Anywhere USA, because it would be available for all to use. And there are literally thousands of such "bridges to nowhere" througout the USA, and each in their small way contribute to the fluidity of the US transportation system.
The US rail industry, being a private integrated system, fails to realize this axiom. It is willing to lop off the small players to focus on the volume producers, seemingly forgetting that those small players add up to rather decent volumes when taken collectively. Conversely, when the small players are neglected, the cumlative effect is a significantly negative one on the bottom line, but perhaps more importantly the neglect usually leads to some rather loud complaining via the communication avenues affored to us by our representative style government.
Oh, and those small players vote. Which is why we are heading back to regulation.
MichaelSol wrote: greyhounds wrote: Let the market work it out. People on all sides will be PO'd because they didn't get what they wanted and they had to compromise. But it will be a far better solution than the government could come up with. They did negotiate and they did compromise. They agreed on the 180% R/VC standard as a fair delineation of captivity and rate reasonableness and when the burden was supposed to shift to railroads. The marginal cost ratio standard was reached as a compromise through negotiation and enacted by "politicians" without change as what the shippers and rail industry had agreed on. Then one of the parties breached the agreement. Guess which one.
Would *forccing*(?) the railroads to abide by the 180% standard solve the problems the captive shippers want solved?
Murphy Siding wrote: MichaelSol wrote: greyhounds wrote: Let the market work it out. People on all sides will be PO'd because they didn't get what they wanted and they had to compromise. But it will be a far better solution than the government could come up with. They did negotiate and they did compromise. They agreed on the 180% R/VC standard as a fair delineation of captivity and rate reasonableness and when the burden was supposed to shift to railroads. The marginal cost ratio standard was reached as a compromise through negotiation and enacted by "politicians" without change as what the shippers and rail industry had agreed on. Then one of the parties breached the agreement. Guess which one. Would *forccing*(?) the railroads to abide by the 180% standard solve the problems the captive shippers want solved?
I have posted the following about "what captive shippers want" before, and I think it summarizes a perfectly reasonable position -- they want clarity and predictability in the existing system. They are not demanding re-regulation of railroads, demolition of current profitability, or anything else. Just simple, clear, honest enforcement of the law.
Joint Written Testimony of the American Chemistry Council, American Farm Bureau Federation, American Soybean Association, Colorado Wheat Administrative Committee, The Fertilizer Institute, Idaho Barley Commission, Idaho Wheat Commission, Kansas Wheat Commission, Montana Wheat & Barley Committee, National Association of Wheat Growers, National Barley Growers Association, National Council of Farmer Cooperatives, National Farmers Union, National Grain and Feed Association, National Grain Sorghum Producers, The National Industrial Transportation League, North Dakota Grain Dealers Association, North Dakota Public Service Commission, the North Dakota Wheat Commission, South Dakota Wheat Commission, Texas Wheat Producers Board, Washington Barley Commission, Washington Wheat Commission, Alliance for Rail Competition, Consumers United for Rail Equity. Ex Parte No. 646, Rail Rate Challenges in Small Rate Cases, Before the Surface Transportation Board, July 24, 2004. "Simplicity is crucial. Complexity and undue uncertainty drive up the cost of any litigation, including litigation before the Board, and given the smaller amounts at stake by definition in a “small rate case,” complexity and cost will terminally chill the exercise of the statutory right to reasonable rates for the very large majority of captive users of rail services. In this regard, the Board’s experience in Stand-Alone Cost cases is an object lesson in what should not happen in small rate case proceedings. "Since the Interstate Commerce Commission decided the first Stand-Alone Cost case eighteen years ago, the complexity, size and cost of a SAC case before the agency has increased astronomically. But instead of guarding against complexity in small rate cases, the Board’s current small rate case rules invite complexity at the very outset: they define little, rule nothing out, and identify virtually no standards for decision. "While this gives the Board maximum flexibility and discretion, it makes it impossible for potential complainants to know whether small rate case procedures will be used; what evidence will be considered; how long the case will take; and what the case will cost. These problems, formidable in the best of cases, become insurmountable when combined with defendants’ litigation incentives to make small rate cases long, complex and expensive in order to discourage future complaints. The issue was summed up by Chairman Nober in recent Congressional testimony: the uncertainty of the small rate case procedures “appears to be a major reason why no cases have been brought using the small-case process.” "Clarity is similarly important. If parties are going to avail themselves of the rate complaint process, they need the assurance of a system featuring relatively straightforward eligibility and substantive standards, so that they can predict to some reasonable degree what cases qualify for small rate case procedures and which rates are likely to be found unreasonable. "This does not mean that the outcome of small rate case litigation must be perfectly and entirely predictable. It does mean that the eligibility for small rate cases should be clearer and that processes for determining eligibility should be defined. It also means that the substantive inquiry should be sufficiently transparent to allow exercise of reasonable, though necessarily imperfect, judgment. "Most importantly, clarity and predictability will enhance the potential of private settlements, since both parties will be able to make more accurate assessment of their risks. Where there is good reason to conclude that rates are reasonable, neither side has an incentive to litigate. Where rates appear unreasonable, regulatory uncertainty should not protect the status quo. And where cases fall between these points, clarity promotes negotiated solutions. In short, if the small rate case process becomes clearer, it is even more likely that customers and suppliers will conduct balanced negotiations leading to private resolutions rather than Board-ordered relief. "Finally, it is most important for the Board’s rules on small rate cases to establish a process under which a complainant can be assured of expeditious action. Unlike coal movements that generally continue for years and even decades, small rate cases are likely to involve movements that may last for only a few years. The need to spend two years litigating rates for a movement that may last only three to five years would discourage most if not all potential complainants. Moreover, increased litigation time usually means increased litigation cost. "The Board’s current small rate case standards do not appropriately balance the rights of shippers and carriers. The complexity, uncertainty and cost that are inherent in the current small case procedures and standards, combined with the astronomical cost, time and uncertainty of a Stand-Alone Cost case, make it virtually impossible for any captive shippers, other than the largest coal shippers, to exercise their right to a reasonable rate under the ICC Termination Act. "As Chairman Nober testified before Subcommittee on Railroads of the House Committee on Transportation and Infrastructure on May 20, 2003, “shippers who feel they have been charged an unreasonable rate have a right to have that complaint heard by the Board in a fair, impartial, expeditious and economical manner. That is part of our fundamental charge from the Congress. That is not the case now ....” Nober Testimony, May 20, 2003, p. 9. ... "As Chairman Nober testified on May 20, 2003 to the Railroad Subcommittee of the House Committee on Transportation and Infrastructure, railroads have been known to spend $5 million on each rate case, while a shipper’s spendi
A reasonable question is why the STB acknowledges the problems, promises to do something about them, but then never does.
Former STB Chair Linda Morgan became a railroad lobbyist, joining Union Pacific's law firm, Covington & Burling. C&B partner Michael Hemmer was named VP-Law Union Pacific Railroad in 2002.
Roger Nober, STB Chairman from 2002 until 2006, is a Washington lobbyist for BNSF as a member of the Law Firm of Steptoe & Johnson whose rail clients include three of the four largest Class Is and the Association of American RailroadsNober's chief of staff, John Scheib, left the STB to work as counsel at Norfolk Southern. Dennis Starks, an STB staff attorney, went to work for the Association of American Railroads.The STB staff is filled with employees with ties to the railroads, including associate general counsel Ray Atkins, previously a railroad lawyer.
Roger Nober's former boss at the House Transportation & Infrastructure Committee -- Jack Schenendorf -- is a registered UP lobbyist.
The former head of the Federal Railroad Administration, Betty Monro, departed under a cloud due to a relationship with UP's chief lobbyist.
Murphy Siding wrote: I take that as saying the shippers want a quicker, cheaper resolution to rate disputes from the Surf Board?
MichaelSol wrote:As the formula was designed to cover all variable costs, plus recover fixed costs and profit, one question is whether the proportion of fixed costs has risen, or fallen, as railroads have approached their capacity. It seems reasonable that such costs, in proportion, would have fallen over the past 20 years. Those are the only ones that really count in the formula, since the formula already grants 100% of all the variable costs of the service. Whether those costs go up or down, the railroad recovers them all. It is the fixed cost allocation that governs the implications of the formula as it stands.
What Mr. Sol continualy fails to understand is that you can not allocate fixed cost.
greyhounds wrote: MichaelSol wrote:As the formula was designed to cover all variable costs, plus recover fixed costs and profit, one question is whether the proportion of fixed costs has risen, or fallen, as railroads have approached their capacity. It seems reasonable that such costs, in proportion, would have fallen over the past 20 years. Those are the only ones that really count in the formula, since the formula already grants 100% of all the variable costs of the service. Whether those costs go up or down, the railroad recovers them all. It is the fixed cost allocation that governs the implications of the formula as it stands. What Mr. Sol continualy fails to understand is that you can not allocate fixed cost.
greyhounds: Can you explain what you mean in laymen's terms for me please?
Michael-
Would you know if the majority of Montana's farmers will be voting for or against Senator Burns ?
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