Analysts think this ruling might hurt the railroads’ pricing ability.
http://www.forbes.com/feeds/ap/2008/07/01/ap5173387.html
“A regulatory ruling that said CSX Corp. was charging “unreasonably high rail rates” to ship chemicals for DuPont Co. could hurt historically strong railroad pricing, a JPMorgan analyst said Tuesday.”
Anyone have more details of this case?
Your thread title is misleading and presumptive.
The STB ruled in favor of one single shipper in regards to a single case.
DuPont alone is the shipper…your title suggests that a group of “shippers” have won something…not the case at all, although this ruling may help set a precedent for later cases.
A more accurate title would be…
STB rules in favor of DuPont in a Captive Shipping Case.
Just a suggestion, of course…
Well, we’re off to a good start here I see.
The thread title is based on the content of the Forbes.com article, which itself carries the title of “Rate Ruling Seen Hurting Railroads”.
So I suppose I could change the thread title to “STB ruling good omen for captive shippers” with maybe a (?) thrown in for good measure since it is a highly subjective topic. Of course, this is all a bit of a sidetrack. I was hoping this topic wouldn’t get tied up in editorial minutia. But thanks for the suggestion edblysard - I’ll be sure and pass it on to the Associated Press, since they originated the storyline.
What I really want to know is if anyone else who participates on this forum has some inside knowledge of the captive shipper issue and if these STB rulings often lead to a domino effect?
It is not mentioned in the article, but I wonder if part of this problem was not DuPont’s status as a captive shipper but the nature of the cargos they were shipping. I’d certainly want a substantial premium for accepting a tank car of some of the stuff they ship.
Can you say methyl-ethyl-instant death?
(Ahem) How about “STB ruling sets stage for Open Access” ?[:-,]
Does anyone know if the rate Dupont was being charged was in effect before TCI launched their attack on CSX?
I would not mind if we could once again have FM’s music on the forum.
NOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOOO!!!
You’ll see the same people over and over.
This is one of the first cases handed down under the “small case” rules that took the STB 20 years to finally implement, September, 2007, and yes, its a big deal, and yes, anyone with a clue realizes its significance for all captive shippers.
As the STB itself states:
“Today’s unanimous decisions demonstrate the Board’s dedication to resolving disputes between railroads and their customers in an accessible, affordable, and expeditious manner. Freight-rail customers can rest assured that the Board will take effective action to strike down unreasonably high rail rates.”
“Decided under the Board’s new small rate dispute resolution process (set forth in a rulemaking in September 2007 called Simplified Standards for Rail Rate Cases, STB Ex Parte 646 (Sub-No.1)), these three decisions were issued ahead of the agency’s deadline. The filing fee to bring cases like these is $150, and DuPont will be entitled to reparations and reduced rates totaling up to $1 million per case, or a total of up to $3 million for the three cases over a five-year period.”
STB Newsletter. http://www.stb.dot.gov/__85256593004F576F.nsf/0/9DD2FA7E02C39F4F8525747800692D77?OpenDocument
The ultimate significance of the DuPont cases is the implementation of the “Simplified Standard” rate case method, which was provided for in the original Staggers Act and for which the STB could never quite get around to setting up rules of implementation; successive STB Chairpersons reassuring Congress, year after year, “we understand the importance of the so-called “small shipper” dilemma in filing rate cases”, and “we are very nearly to the point of being able to consider thinking about actually doing something about implementing a procedure and when we do, we’ll let you know …”. These Chairpersons then moving on to become officers at various Class I railroads.
The ICC had set up a fairly decent procedure for all rate cases, and then a Federal Judge bolloxed the whole methodology in the McCarty Farms case – the shipper’s nightmare case of regulatory reform that took nearly 20 years of litigation; ostensibly to teach the shippers just how expensive a rate case would be if anyone dared to challenge the rail industry on rates. Out of that disaster came three distinct standards to be applied by the ICC/STB as to how to handle rate cases, culminating in the “Stand Alone Cost” model standard, a complicated and expensive modeling of a hypothetical cost structure that was supposed to yield for the STB a clear resolution of what a high rate was or wasn’t. The result was akin to trying to do your dishes in a mud puddle.
The costs of such litigation generally came in the area of $5 million for the shipper, and the hypothetical nature of the evidentiary standard left the result almost wholly discretionary as to which set of expensive experts the STB chose to believe. The complexity of the litigation left it in the hands of a very few law firms and experts; and after McCarty Farms, few shippers saw any merit in rate challenges unless they happened to have $5 million they wanted to throw a
Not really. Open Access favors shippers/receivers that can use unit type trains from a single originating point to a single destination point.
A “captive shipper” with small volume shipments that need to go by rail going to many destinations may find that when everyone can access you, no one will want to (or afford to).
Jeff
CO… no, don’t say that! Legend has it that if those words are spoken to much, they just may ressurect,(dare I say it?) … FM!!!
Thanks Michael. I had a feeling you’d be the one to provide reasoned analysis and documentation of this issue.
I am somewhat confused on one item. If the original Staggers Act “deregulated” the railroads, yet the STB has always had a mandate to establish rate case oversight, what was the Staggers Act all about anyway? Or did it just take the threat of reregulation to prod the STB into finally implementing the rate case oversight authority after 30 years? With this new rate case oversight, what is so different about railroading under Staggers compared to railroading prior to Staggers? Is it just that under Staggers railroads can go ahead and make rate decisions (and only if a rate is challenged does the STB step in), whereas before Staggers railroads had to file for every single rate standard months or years prior to being okayed? Is that a fair assessment? Or is it much more complicated?
Secondly, I never quite understood the SAC (Stand Alone Cost) model. SAC as I understood it was a method for determining rates by hypothesizing the construction of a competing rail line to a captive shipper. Why would anyone want to pay for the construction of a second rail line to a single shipper if that meant the original line would go dormant? Wouldn’t it have made more sense to calculate the cost of a second rail company paying the first rail company for access over the existing line to serve that one shipper? Is that more in line with the new “Simplified Standard” methodology? If so, is that the “open access” the other guys are referring to?
No, Futuremodal was permanently banned by the Moderator in Chief upon the complaint of a Class I exec. His interesting perspective on railroading will not be heard here, courtesy of Kalmbach’s respect for the industry. Free and open discussion of controversial viewpoints is not the purpose of these forums. And Futuremodal had plenty of controversial viewpoints. But, you will need to go elsewhere for that. This is private property, for which the owners are absolutely entitled to a particular viewpoint.
My understanding is that Dave agreed to stop posting, due to the unfriendly responses his posts drew. I occasionally see his name on weekends as he stops by to read forum discussions.
Norman Saxon, you may find this thread interesting-
http://cs.trains.com/forums/534586/ShowPost.aspx
He was the victim of the cyberstalking of approximately five individuals, who would invariably pile on to any thread Dave posted to, edblysard being the most consistent, with objectionable, off-topic, and personally extraordinarily offensive remarks. Somehow, those always made it past the censors. Dave indicated to me he was “banned”.
And since Dave stopped posting, Mr Blysard has been a model of good behavior.
His tangible ongoing personal hatred of Dave, resulting in censorship of ideas to which his response represents a “model” of some sort, being apparently in some worlds an ideal resolution by which we are all deprived of some interesting ideas.
Having been the victim of Dave’s vitriol on a number of occasions, he seemed to have a low regard for those who did not see the wisdom of his words. He could also be quite doctrinaire and unbending at times.
Same here on Dave getting personal on his attacks if you did not MARCH LOCKSTEP WITH HIM. He repeatadly attacked me for proving why Bi Modal another of his Pet IDeas would not work in the US. The only reason why Triple Crown makes it work is Simple called they have it specialized into hauling Auto parts in and Cereal out with the occasional backhaul of empty racks for auto parts. That is why the Ice Cold Express could not make it as a dedicated train and as for Swift I talked to a couple of the drivers there and they pulled out NOT due to higher rates which were still cheaper than pulling them by there own trucks they lost the Account needed in the PNW to get the backhauls back to Southern CA. With no reloads they decided to have their own trucks haul the loads up that way they could have them pulling out with other frieght.
Norman, the purpose of the SAC calculation was to set a valuation on the trackage, and from that to determine a basis for that portion of the railroads costs would accrue from the trackage. As someone has already pointed out “Open Access” would benefit large shippers, but sm