Ag Groups Urge STB to Implement Changes to Railroad Regulations

The NGFA and the other agricultural organizations also called on the STB to consider establishing a percentage-based revenue-to-variable cost threshold, under which shippers could challenge switching charges imposed by carriers.  The groups noted that switching charges, which allow shippers to switch traffic to the lines of a competing carrier, have increased from $100 to more than $500 per car in approximately the last three years, creating an economic barrier to competition.  Specifically, the groups proposed that once the switch charge exceeded a percentage-based regulatory threshold level, rail carriers should bear the burden of proving that the charge is reasonable.

The agricultural groups also cited numerous unreasonable business practices imposed by railroads that adversely affect the competitiveness of the agricultural and food industries.  These include “exorbitant” charges assessed for overloaded railcars; penalties imposed for accumulations of snow and ice on railcars in transit, as a result of weather conditions beyond shippers’ control; requirements that shippers indemnify carriers for any loss and damage to agricultural facilities, even those caused by the carrier or its employees; minimum volume commitments imposed by railroads as a precondition for obtaining an assured supply of railcars; and fuel surcharges instituted by some carriers that far exceed the actual level of fuel price increases they incur. 

They also cited so-called “mileage equalization” practices imposed by railroads on tank cars used to transport vegetable oils, corn syrup, liquid feed ingredients and other agricultural products.  These railroad-dictated practices allow carriers to route shipper-owned tank cars excessively long distances – for the logistical convenience of the railroad.  But the carriers’ mileage payments to shipper car owners for use of the cars reflect only the most direct mileage route, forcing the owner to incur the additional uncompensated costs for car maintenance, repair and depreciation.

Further, while expressly excluded by the STB from its rail competition proceeding, the NGFA and the other agricultural groups cited the “significant problem” posed by interchange commitments between Class I railroads and short line carriers.  These so-called “paper barriers” impede competition by restricting the ability of a purchaser or tenant railroad to interchange traffic with carriers other than the seller or landlord railroad.  The agricultural organizations called on the STB to not allow such interchange agreements to last forever, and that they should be time-limited when the original transaction is consummated.

Finally, the agricultural groups commended the STB for initiating a separate proceeding to explore ways to improve its existing arbitration service as a way of resolving disputes between shippers and carriers.  The NGFA has operated a rail arbitration service for member companies since 1998 to handle specific types of rail-related disputes involving whole grains, oilseeds, feed ingredients and processed products, which it noted has “proven to be a useful mechanism to either formally solve problems or to encourage business dialogue that can lead to quicker business solutions that make sense for both parties.”

The NGFA plans to testify at a June 22 public hearing scheduled by the STB as part of its rail competition proceeding.