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Cash Market Moves             08/10 11:05

   Surface Transportation Board Rules on Market Dominance 

   One of the STB's statutory duties is to adjudicate complaints brought by 
shippers seeking reductions in railroad transportation rates. 

Mary Kennedy
DTN Basis Analyst

   The Surface Transportation Board (STB/Board) announced on Aug. 3, the 
adoption of a final rule to establish a streamlined approach for pleading 
market dominance in rate reasonableness proceedings. The final rule provides an 
option for simplifying the market dominance inquiry, which otherwise can be 
costly and time-consuming, especially in smaller cases. "Today's decision is 
part of the Board's continuing effort to make its rate review procedures more 
accessible, efficient and transparent," said the STB. The rail rate case issue 
has actually been under discussion since late 2013.

   In September 2019, the Board issued a notice of proposed rulemaking (NPRM), 
which laid out a set of factors that could establish a prima facie showing of 
market dominance.(The dictionary defines prima facie as something that has been 
proven or assumed to be true, unless there is evidence presented.) The Board 
received numerous comments on the NPRM, and after careful consideration, the 
Board adopted the rule proposed in the NPRM with certain modifications. The 
final rule sets forth the following seven factors that a complainant must 

   -- The movement has a revenue-to-variable cost ratio of 180% or greater;

   -- The movement would exceed 500 highway miles between origin and 

   -- There is no intramodal competition from other railroads;

   -- There is no barge competition;

   -- There is no pipeline competition;

   -- The complainant has used trucks for 10% or less of its volume (by 
tonnage) subject to the rate at issue over a five-year period;

   -- The complainant has no practical build-out alternative (regardless of 
transportation mode) due to physical, regulatory, financial or other issues (or 
combination of issues).

   The final rule will be effective on Sept. 5 (30 days from publication). Here 
is a link to more details of the final ruling: 


   The Rail Customer Coalition (RCC) is asking Congress to support the 
confirmation of two additional people to the STB so that the board can reach 
its full member complement. STB currently has three members and Congress allows 
the board to have five members.

   In a July 3 letter to the Committee on Commerce, Science and Transportation, 
the RCC said, "As you know the Board plays a vital role in resolving freight 
rail issues and ensuring that goods can efficiently and affordably be shipped 
by rail. Unfortunately, the STB has been operating for several years with only 
three of the five Board members filled by Congress. We urge you and your 
colleagues in the Senate to confirm nominees Michelle A. Schultz and Robert 
Primus as quickly as possible."

   Small and large businesses alike need a fair and transparent system that 
facilitates, rather than hinders, their ability to efficiently move goods to 
market, noted the RCC in the letter. The Staggers Rail Act, which celebrates 
its 40th anniversary this year, helped save the rail industry, and initially 
led to lower rates and a more efficient rail system. "But the Act's benefits 
are no longer so widely shared as a lack of competition among railroads -- due 
to widespread industry consolidation -- has led to steep premiums for the same 
or lower quality of service and the imposition of operational changes without 
concern for their negative impact on shippers," said the RCC.

   The RCC added that, "The confirmation of Ms. Schultz and Mr. Primus will 
allow the Board to live up to its obligations under the Staggers Act and 
continue to pursue sensible reforms that will benefit everyone. Such reforms 
will increase access to competitive freight rail service and market-based 
rates, while cutting red tape and allowing the Board to operate more 

   The current STB board consists of Chairman Ann D. Begeman, Member Patrick J. 
Fuchs and Vice Chairman Martin J. Oberman. The Senate Commerce Committee 
received the nomination of Robert Primus on July 21, while the nomination of 
Michelle A. Schultz has been pending since July 2019.

   Mary Kennedy can be reached at mary.kennedy@dtn.com

   Follow her on Twitter @MaryCKenn

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