Arkansas Electric loses bid for STB reconsideration of rail case

In a decision made Nov. 19 and released on Nov. 26, the U.S. Surface Transportation Board denied an effort by Arkansas Electric Cooperative to reopen a case involving rail transport of coal for the Independence power plant in Arkansas.

In a decision served on March 15, 2011, the board found that Independence – a coal-fired plant co-owned by Entergy Arkansas Inc., Entergy Services Inc. and Arkansas Electric Cooperative (AECC) – had a statutory right to coal transport service by BNSF Railway Co. (BNSF) and Missouri & Northern Arkansas Railroad Co. Inc. (MNA) from northern Powder River Basin (PRB) mines and could thus obtain a transportation alternative to the service currently provided by Union Pacific Railroad Co. (UP) and MNA from southern PRB mines.

The board also in the March 2011 decision considered the complainants’ separate request that the board prescribe a through route for service by BNSF, at an interchange with MNA, for coal transport from the southern PRB mines. The board ultimately denied that second request because the complainants had neither established that service problems that the Independence power plant experienced were due to anticompetitive conduct nor demonstrated that the proposed BNSF/MNA through route to the southern PRB mines was better or more efficient than the current UP/MNA route.

On April 4, 2011, AECC filed a petition for reconsideration, asking the board to revisit and reopen part of the case. In its reconsideration petition, AECC contended that the board materially erred by:

  • failing to either consider or properly credit certain AECC evidence;
  • describing one standard for relief in its June 26, 2009, decision (June 2009 Decision), but then applying another standard in its March 2011 decision that AECC contends is “contrary to the statute and regulations”; and
  • failing “to protect MNA from adverse actions by UP that are likely to remove MNA as a prospective competitor in the future.”

AECC specifically took issue with the board’s use of the Uniform Railroad Costing System (URCS) to assign costs to the routes, the comparison of routing terrain, and the conclusion that the parties agreed on the need for “significant upgrades” of the proposed route’s physical plant and interchange facilities.

UP and MNA argued, in their April 25, 2011, replies, that the petition should be denied because AECC has not identified any material error in the board’s March 2011 decision. UP contended that the findings the board made regarding adjustments to URCS were consistent with standing board policy and that AECC mischaracterized the record regarding the topographical inferiority of the proposed BNSF/MNA route. UP also argued that the board’s June 2009 decision and March 2011 decision are consistent with each other and the applicable legal standards. MNA contended that the board did not ignore AECC’s evidence in light of references it made to the “totality of the evidence” and the record of evidence supplied by all of the complainants.

Arkansas Electric tried to add ‘new’ evidence to case

On June 29, 2011, AECC filed a motion for leave to file a supplement in support of its petition for reconsideration. In its motion, AECC claimed that a statement filed by UP in another docket demonstrated that “during the service disruption that began in 2005 UP actually increased its shipments of southern PRB coal to other customers, while the Independence plant suffered a huge shortfall.”

AECC alleged that this UP statement is new evidence that demonstrates:

  • “there was no widespread inability on [UP’s] part to deliver established volume levels to existing customers”;
  • “the Board was misled in thinking that the scope of the service failure experienced by Independence ‘affected the shipping public generally’”; and
  • “the service disruption that Independence suffered in 2005 and 2006 was the result of competitive abuse – even under the restrictive definition of that term the Board used in this case.”

On July 19, 2011, UP filed its reply opposing the AECC motion to supplement. UP argued that AECC’s motion should be denied as its newly discovered information could have been obtained long before the board issued its March 2011 decision. In support, UP alleged that AECC could have obtained this newly discovered information from the following sources: annual UP reports released to the public in 2005 and 2006; a press release and magazine article published in 2007; a 2008 pleading that was filed twice in this proceeding; this proceeding’s discovery period; and the National Coal Transportation Association website, to which AECC has access as a member.

The STB said in the Nov. 19 decision that it will deny AECC’s motion to file a supplement to its petition for reconsideration, because the newly discovered evidence AECC has identified in its motion does not meet a board standard for new evidence. While the UP statement filed in another docket was made public after the board decision in this matter, the board determined that the service data contained in that statement were available to AECC long before the board’s March 2011 decision. For example, the fact that UP increased coal shipments to other customers during the timeframe at issue is plainly evident from UP’s 2005 Annual Report, which was publicly available as of March 2006, the board noted. Accordingly, the board found that the UP statement is not “new evidence” for reconsideration purposes.

The board added: “In its March 2011 Decision, the Board noted that the three alleged service disruptions (with the earliest disruption dating back more than 15 years before these proceedings were initiated) were attributable to natural disasters and significant line disruptions. The Board observed that there was no evidence in the record that UP’s service inadequacies were specific to [Independence], or that BNSF would not have similarly provided adversely affected service to the facility. The Board also found that evidence regarding UP’s service response during the 1997 period (e.g., the acquisition of additional cars and rerouting empty cars to address service inadequacies) contradicted the complainants’ allegations of competitive abuse. The Board found that the record bearing on the complainants’ allegations that UP refused to allow MNA and BNSF to establish a through route that could lessen service issues during the 1997 disruption did not provide sufficient support for the complainants’ claims.”

The board did give one to Arkansas Electric on the UCRS argument. “Although we believe that the best approach to resolving this controversy would be using round-trip numbers generated by URCS, we will instead use the approach offered by AECC (i.e., focusing exclusively on the variable cost of the loaded portion of the movements) as the differences in relative variable costs between the two approaches are immaterial,” it wrote. “Set forth below is our calculation, using 2009 URCS unit costs indexed to 2012 levels, of the relative characteristics of the alternative routes.”

The board added: “The relationship between the routes is very similar to the one demonstrated using the approach the Board initially adopted. The proposed route via BNSF/MNA for the coal bound for ISES has slightly lower variable costs than the current route. And again, both the current UP/MNA and proposed BNSF/MNA routes have higher variable costs than the direct UP/MNA route. Weighing the totality of the evidence before us, we again find that the proposed BNSF/MNA route has not been shown to be a superior route to serve [Independence]. We again base this finding on a combination of factors.”

STB denies motion, Mulvey says cases like this need attention

In sum, AECC has failed to demonstrate the material error or new evidence that would justify reconsideration of the board’s March 2011 decision, so the board said it denied the AECC petition for reconsideration.

In a closing comment, board Vice Chairman Francis Mulvey wrote: “This case has been before the Board, in one fashion or another, for more than 4 years. The Board has grappled with the impact of an interchange commitment with restrictive terms that was included in UP’s lease of this line to MNA. The lease transaction was approved 20 years ago by the Board’s predecessor, the Interstate Commerce Commission, at a time when the railroad industry was in a very different economic condition. The issue before the Board at this juncture is whether the Board erred in finding that the complainants failed to demonstrate that their proposed new route including a third-party carrier is superior to the existing UP/MNA route so as to warrant a through route prescription. On this issue, I agree that the evidence continues to support the Board’s conclusion that the complainants failed to meet that burden. But I also believe that the difficult issues raised by cases involving long-standing interchange commitments highlight the need for the Board to carefully scrutinize transactions that include such contractual terms.”

About Barry Cassell 20414 Articles
Barry Cassell is Chief Analyst for GenerationHub covering coal and emission controls issues, projects and policy. He has covered the coal and power generation industry for more than 24 years, beginning in November 2011 at GenerationHub and prior to that as editor of SNL Energy’s Coal Report. He was formerly with Coal Outlook for 15 years as the publication’s editor and contributing writer, and prior to that he was editor of Coal & Synfuels Technology and associate editor of The Energy Report. He has a bachelor’s degree from Central Michigan University.