Coal-fired utilities back STB effort on rail ‘paper barriers’

Union Electric, d/b/a Ameren Missouri, was among several parties filing Dec. 18 opening testimony at the U.S. Surface Transportation Board in a case where the board has proposed certain changes to its review process related to “paper barriers” for entry of competing railroads.

The board on Nov. 1 had issued a Notice of Proposed Rulemaking (NPRM) in this case. In the NPRM, the board proposed to expand disclosure requirements related to rail line leases or sales that would create new paper barriers. Ameren Missouri said it is generally in agreement with the purpose and goals of the rule changes proposed in the NPRM, but has concerns about the application of the proposed rules and the limited avenue to address existing harm. Ameren Missouri believes the board can and should take further action to address the anti-competitive impact of paper barriers.

Ameren Missouri, which hauls a lot of coal to four coal-fired power plants in Missouri, said it strongly supports the board’s decision to scrutinize the paper barrier issue in the context of the nation’s transportation needs. While there could be limited circumstances in terms of scope and time that an interchange commitment could facilitate the sale or lease of a line to a new short line, paper barriers inevitably harm competition because they preclude otherwise available rail service and/or limit a shipper’s rail options, the utility noted.

“The impact of a paper barrier on a rail-served facility can include harmful effects such as elimination of rail service, increased costs, and reduction in rail service quality,” it said. “These impacts affect not only the facility itself, but local communities in which the facility operates.”

Ameren Missouri believes the board should critically evaluate each proposed paper barrier due to competitive concerns. The board’s duties are not limited to proposed paper barriers, however, the utility added. When a complaint is filed, the board also must ensure that pre-existing paper barriers do not transgress the National Transportation Policy (NTP), cause a violation of the Interstate Commerce Act, or harm the public interest. “Yet, to date, the Board has avoided ruling against any existing paper barrier,” the utility said.

Arkansas Electric also offers ideas for change

Another major coal-fired entity, the Arkansas Electric Cooperative, filed its own Dec. 18 comments in this case. As a matter of good public policy, the board should properly consider the extent to which the transfer of lines by Class I railroads to short line operators may play a role in altering the status quo in the railroad industry to introduce greater reliance on market forces to promote improved service and productivity. Decisions about the nature and extent of reporting requirements and the scrutiny of interchange commitments need to be made in light of such policy considerations, the cooperative said.

Requiring that Class I railroads provide additional information about proposed interchange commitments should be regarded as a means to an end, not an end in itself, it added. The board ought to use such reporting requirements as tools to support an effective policy related to short-line spin-offs. As part of such a policy, the board should reconsider its current practice of allowing interchange commitments to preserve the incumbent’s market power even when such market power works against specific statutory objectives, the cooperative said. Such objectives include maximizing the role of competition and demand for services, and minimizing the role of regulation, in establishing reasonable rates, a sound rail system, and sound economic conditions in transportation. This is particularly appropriate as the revenue adequacy objective is achieved, it said.

In particular, the cooperative said the board should develop a policy to disapprove or limit an interchange commitment if it has such characteristics as:

  • Foreclosing a more efficient routing via an alternative carrier, even though such foreclosure does not result from a competitive “abuse” other than the enforcement of the interchange commitment;
  • Preserving control by a carrier even when it provides inadequate service;
  • Preserving control by a carrier over a line serving traffic that the carrier has demarketed (for example, where the carrier has adopted policies that reduce or limit service for that traffic so that it can emphasize service for other more lucrative traffic); and/or
  • Preserving control by a carrier over a facility or resource that would be more effectively utilized if service via an alternative connecting carrier were available.

Norfolk Southern says new policy misdirected

One of the railroads filing a Dec. 18 comment, Norfolk Southern, wrote: “NS contends that the current disclosure rules on interchange commitments provide sufficient notice to all interested parties to enable them to determine whether to challenge the use of the exemption process in a particular transaction. However well-intentioned the proposed additional disclosures are, the proposed rules appear to be an overly engineered solution that addresses something that does not appear to be problematic.”

The collection of the information suggested by the proposed rule is not necessary for the proper performance of the functions of the board, said NS. Rather than minimizing regulatory control over the rail transportation system, the board proposal seems to be an unnecessary measure to provide information for the benefit of shippers whose competitive situation will not change as a result of the proposed sale or lease transactions between the affected Class I rail carrier and its short-line partners, NS said.

“Further, certain of the proposed items to be disclosed serve little informational purpose other than to expose commercial aspects of the negotiations between the short line and its connecting carrier or to expose a shipper’s commercially sensitive information to its competitors,” NS added. “In the context of the NS’s lease credit arrangements, which constitute the bulk of the interchange commitments referenced by the Board, the proposed additional disclosures make even less sense.”

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.