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"RAIL-HAUL '97"
WASTE-by-RAIL: Legal Landscape
Crystal City, Arlington, VA
October 1, 1997
C. Michael Loftus
Slover & Loftus
1224 Seventeenth St., N.W.
Washington, DC 20036
I. INTRODUCTION
A. Background/Perspective
- Specializing in rail transportation -- 20
years
- Primarily coal
- Several assignments w/MSW
- Currently working w/Mesquite Regional
Landfill
B. Primarily Commercial transactions but also
regulatory practice before ICC/STB, arbitration activity and sometimes, court
cases
C. Areas to be Addressed
- Basic legal forms of rail service
- Major contract terms
- rates
- competitive - attractive
- non-competitive - high
- rate adjustment
- RCAF(U)
- RCAF(A)
- service commitments
- enforcement
- term
- legislative movements for changes in
railroad regulation of potential importance
II. BASIC LEGAL CONTEXT
A. Contract Service
- Negotiated written agreements
- Not subject to STB regulation
- Parties rights and obligations as set forth in
contract (means care must be taken to deal with all important terms -- can't
fall back on STB)
- Resolution of Problems arising under
contracts
- arbitration (frequently required under
terms of contracts)
- court
- Since 1980 - The norm today
- Cover vast majority of traffic
B. Common Carriage
- Railroads obligated to provide by law
- What type of service?
- reasonable request
- reasonable, based on types of service
provided to other rail shippers, especially MSW and comparable shippers
- Rates
- Railroad's choice, but, if market dominant,
must be reasonable under law
- Market Dominance - absence of effective
competition
- May be challenged with STB -- has power to
prescribe rates but, no lower than 180 of variable costs
- Why MSW shippers may care about common
carriage
- Contract term/risk
- May sign, e.g., 5-10 year deal for
movement(s) where distances or other factors make trucking
non-competitive
- leverage exists for initial contracts because
not committed to Landfill
- but -- once landfill investment made -- rail
investment made -- when contract(s) expire if (happy day) market allows higher
tipping fees -- railroad may be in position to capture most of benefit
- e.g., APS 10 year contract expired (cc
rate: $6.31; STP rate: $3.54; plus 20+ million in reparations)
- Could also be important if railroad attitude
toward shipping MSW sours
III. MAJOR CONTRACT ISSUES
A. Rates
- For TOFC/COFC generally very low due to
competition from trucks
- For bulk commodities moving to fixed points
over long distances, generally substantially higher due to no or limited
competition
- Circumstances of movement will dictate where
MSW movements fall
B. Rate Adjustment
Frequently difficult issue
- Railroads like to use e.g.,
RCAF(U)
- Result is that as costs go down, profit margin
goes up significantly
- E.g., In 1995, A signs 5-year
contract for rate at e.g. 150% of variable costs -- costs go down, but
rate adjustment index causes rate to go up -- after 2 years rate at 165% of
variable costs
but....
In 1997, B gets rate for new contract at 150% --
... B may have advantage over A
- most frequent defense to this risk is to limit
term
- also want to negotiate best adjustor possible,
etc.
C. Service commitments
- very important, as current situation with UP
demonstrates
- special concern for MSW that may be subject to
rules concerning prompt movement -- also simple fact is the MSW just keeps
coming
IV. LEGISLATIVE MOVEMENTS
ARC -- open access
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