The U.S. Surface Transportation Board has rejected a petition by the Association of American Railroads to consider product and geographic competition when analyzing whether rail rates for coal transportation are reasonable.
The STB stopped including non-transportation factors in its analysis in 1998.
The agency filed its petition in November, saying that indirect competition from sources outside transportation modes was adversely affecting rail rates. Product competition would involve, AAR said, shippers deciding to use a substitute product to avoid dealing with the railroads, and geographic situations would consist of cutting out the railroad by either obtaining coal from a different source or shipping it to an alternate destination. The STB ruled it can only recognize direct competition from modal sources in a market dominance analysis.
In its ruling, the board stated that looking into indirect competition would tax its limited resources. Analyzing non-transportation issues would take time away from looking into transportation related issues.
Shippers also would lose if non-transportation factors were included in analysis.
“The harm of including indirect competition in the market dominance inquiry could be ‘substantial and irreparable’ to the shipper community,” according to the ruling, “in that shippers would be dissuaded from bringing valid rate complaints to the board so as to avoid the substantial burdens associated with litigating indirect competition issues.”
Edward Hamberger, AAR’s president and chief executive officer, was incredulous that the STB could decide against allowing other factors into its decision-making process.
"We simply do not understand how the STB can refuse to acknowledge that the way Americans are getting their electricity is changing,” he said in a statement. “The electric-generating marketplace is undergoing a powerful transformation that the STB decision doesn’t take into account The availability and low price of natural gas are greatly influencing what kind of energy is being used today by electric utilities.”
He also pointed out that natural gas is replacing coal as the standard electricity-generating fuel, and by not taking this non-transportation competition into account, the board is automatically siding with shippers.
Norfolk Southern Railway expressed support of AAR’s claim to the board, saying recent non-transpiration factors have lead to a higher cost of coal in the Eastern United States than elsewhere in the country. This has forced utilities to either get coal from other regions or pursue alternative energy options, putting constraints on coal transportation rates.
The Concerned Captive Coal Shippers, the Western Coal Traffic League and National Mining Association, and the American Public Power Association all filed opposition to AAR’s claim. Consumers United for Rail Equity said in its petition AAR failed to show how the current energy environment constrained rail rates. - Jon Ross