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- Rail Construction Price Reduction Strategy
- General Overview
- Review Legal Considerations
- STB Bottleneck Case Decision
- All Materials Cited Herein Are Derived From Publicly Available Sources
PART ONE
LINE CONSTRUCTION PRICE REDUCTION STRATEGY
- Line Construction Has Been Pursued By Coal Shippers That Are Captive At Destination, But Enjoy Competition At Origins
- Lines Are Built To Break Destination Captivity
- GOAL: Obtain "Holy Grail" Competition-Set Origin-To-Destination Rates/Service Terms
RAIL LINES BUILT/
UNDER CONSTRUCTION*
Utility
Alabama Power
Alabama Power
Associated Electric
Detroit Edison
Entergy
Hastings Utilities
Houston Lighting & Power
MidAmerican Energy
Nebraska Public Power Dist.
Public Service Co. of Oklahoma
Savannah Electric
Union Electric
Western Farmers |
Plant
Gaston
Miller
Thomas Hill
MERC Dock
Nelson
Whelan
Parish
Council Bluffs
Gentleman
Northeastern
McIntosh
Joppa
Hugo |
* Source: AAR Comments, STB No. 41242 (October 15, 1996), and trade press articles.
RAIL LINE CONSTRUCTION AAR CLAIMS HAS BEEN "THREATENED" OR IS "CREDIBLE"**
Utility
CINergy
CLECO
Commonwealth Edison
Gainesville
Georgia Power
Georgia Power
Georgia Power
Grand Island
Grand River Dam Authority
Kansas City Power & Light
Kansas City Power & Light
Kansas City Power & Light
Lower Colorado River Authority
MidAmerican Energy
Nebraska Public Power Dist.
Southwestern Elec. Power
Southwestern Elec. Power
Sunflower
TVA
Union Electric
Union Electric
UtiliCorp.
Wisconsin Electric |
Plant
Gibson
Rodemacher
Joliet
Deerhaven
Bowen
Wansley
Yates
Platte
GRDA
Iatan
LaCygne
Montrose
Fayette
Neal
Sheldon
Flint Creek
Welsh
Holcomb
Kingston
Labadie
Sioux
Sibley
Pleasant Prairie |
**Source: AAR Comments, STB No. 41242 (October 15, 1996).
LINE CONSTRUCTION DETAILS
| Utility/Plant |
Line Length |
Incumbent
Rail Carrier |
New Carrier |
| Alabama Power/Gaston |
7.5 miles |
NS |
CSX |
| Alabama Power/Miller |
1.5 miles |
CSX |
BN |
| Associated Elec./Thomas Hill |
17 miles |
None |
BN |
| Detroit Edison/MERC Dock |
.5 miles |
BN |
UP |
| Entergy/Nelson |
4 miles |
KCS |
UP |
| Hastings Utils./Whelan |
.5 miles |
BN |
UP |
| Houston L. & P./Parish |
10.7 miles |
BN |
UP |
| MidAmerican/Council Bluffs |
3 miles |
BN |
UP |
| Nebraska P.P.D./Gentleman |
9.2 miles |
BN |
UP |
| P.S. of Okla./Northeastern |
11 miles |
UP |
BN |
| Savannah Elec./McIntosh |
2.5 miles |
CSX |
NS |
| Union Elec./Joppa |
4.5 miles |
UP |
BN |
| Western Farmers/Hugo |
14 miles |
Kiamichi |
TOE |
RAIL LINE CONSTRUCTION -- TYPES
| Private Construction/Operation |
Common Carrier Construction/Operation |
| Hastings Utilities |
Alabama Power |
| Nebraska Public Power Dist. |
Associated Electric |
| Public Service of Oklahoma |
Detroit Edison/MERC |
| Houston Lighting & Power |
Entergy |
|
MidAmerican |
|
Savannah Electric |
|
Union Electric |
|
Western Farmers |
PRIVATE vs. COMMON CARRIER LINE CONSTRUCTION (FORM)
| Topic |
Private |
Common Carrier |
| Who Builds |
Non-Carrier |
Common Carrier |
| Who Operates Over |
Carrier Not Providing Common Carrier Service |
Carrier Providing Common Carrier Service |
| STB Approval Necessary |
No |
Yes |
| Source of Legal Authority |
Case Law
ICC Term. Act |
49 U.S.C. Section 10901 |
BN CHALLENGES PRIVATE LINE CONSTRUCTION APPROACH?
| CASE: |
BN petitions STB for declaratory ruling that HL&P line is subject to STB jurisdiction (May 7, 1996) (F.D. No. 32949) |
| HL&P/UP POSITION: |
HL&P building traditional exempt private line |
| BN POSITION: |
STB has jurisdiction where line is "integral part" of UP's PRB-to-Destination service |
| RESOLUTION: |
Citing new "developments," BN drops case (August 29, 1996) |
IS LINE CONSTRUCTION AN OPTION FOR YOU?
- Financial Roadblocks?
- Political Roadblocks?
- Legal Roadblocks?
- Other Options Better?
LEGAL FACTORS TO CONSIDER
| Item |
Private Build |
Common Carrier Build |
| Land Acquisition |
State Law |
State Law |
| Rail Crossing Approval |
State Law |
STB |
| Environmental Approvals |
Fed/State Law |
STB/Fed/State Law |
| Other Gov't Approvals |
Fed/State/Local Law |
Fed/State/Local Law |
| Timing of Approvals |
Fed/State/Local Law |
STB/Fed/State/Local Law |
| Rate Base |
Fed/State Law |
Fed/State Law |
| Parent/Sub. |
N/A |
Fed/State/Local Law |
| Common Carrier Duties |
N/A |
Fed. Law |
| Liability |
Fed/State/Local Law |
Fed/State/Local Law |
| Oversight Post-Construction |
Fed/State/Local Law |
Fed/State/Local Law |
STB APPROVAL PROCESS WFEC R.R. EXAMPLE
| NEPA Compliance: |
Oct., 1994 -- WFEC invokes third-party contractor process under NEPA
Dec., 1994 -- WFEC requests E.A.
Jan., 1995 -- ICC grants E.A. request
Aug., 1995 -- ICC issues E.A. for comment
Nov., 1995 -- ICC issues post-E.A.
Feb., 1996 -- STB issues final Env. NEPA
Approval
|
| Petition to Build Rail Line: |
Dec., 1994 -- WFEC files exemption petition
Feb., 1995 -- ICC conditionally grants petition
Sep., 1995 -- ICC denies petitions to reopen conditional approval
Feb., 1996 -- STB approves WFEC exemption petition |
| Petition to Cross Incumbent Carrier: |
Feb., 1995 -- WFEC files crossing petition
June, 1995 -- Kiamichi files reply; WFEC files rebuttal
Feb., 1996 -- STB approves WFEC crossing petition |
KEY CONSTRUCTION PRECEDENTS
At The ICC/STB:
- STB favors rail construction
- Has approved all "utility build-ins"
- Has approved all utility build-in rail crossings and set fair crossing fees
- Has significant experience with NEPA process
- Has been through "litigation mill"
In The Courts:
- Not many appeals of ICC/STB decisions
- Associated Electric Case, 33 F.3d 980 (8th Cir.,1994), ICC exemption/environmental review findings upheld in utility build-in case
- Condemnation Cases -- no state court "disasters" reported to date
TWO STB CROSSING CASE DECISIONS
| STB Jurisdiction: |
STB can order one common carrier to cross another and can set crossing fee if parties cannot agree on fee (49 U.S.C. Section 10901(d)) |
| ICC/STB Cases: |
MERC Case (F.D. No. 32433, August 11, 1995) -- BN asks for $605,000 annual crossing fee; ICC sets fee at single lump sum crossing fee at $35,000 (approx.)
OPPD Case (F.D. No. 32630, August 1, 1996) -- BN asks for $28.2 million single lump sum crossing fee; STB sets single lump sum crossing fee at $5,320 |
THE BOTTLENECK RATE CASE COMPLAINTS
- CPL v. SP, filed April 12, 1994 (Coleto Creek Station)
- PPL v. Conrail, filed August 4, 1994 (Brunner Island, Montour, Martins Creek, Sunburry Stations)
- Western Resources v. Santa Fe, filed July 15, 1995 (Lawrence and Tecumseh Stations)
- MidAmerican v. UP, filed Sept. 28, 1995 (Neal Station)
BOTTLENECK RATE CASE STRATEGY
(1) Obtain Maximum Rate Prescription Over the Bottleneck Line Segment
(2) Then, Play-off Carriers in Contract Negotiations
THE STB BOTTLENECK DECISION
* Decision Served December 31, 1996
* STB Pronounces Set of "Governing [Legal] Principles"
* Applies "Principles" to CPL, MidAmerican and PPL Facts
* Dismisses Bottleneck Relief Requests in Each Case
GOVERNING STB PRINCIPLES
* Where the Involved Carriers Offer Only Origin- to-Destination COMMON CARRIER RATES, the Shipper's Only Maximum Rate Remedy is to Challenge the Origin-to-Destination Rate
* Where a Shipper and a Carrier First Enter into a RAIL TRANSPORTATION CONTRACT Over a Non-Bottleneck Line Segment, a Shipper May Challenge an EXISTING Applicable Bottleneck Segment Rate
* UNCLEAR Whether a Shipper Must in All Instances Obtain a COMPETITIVE ACCESS ORDER to Force a Bottleneck Carrier to Provide a Challengeable Bottleneck Segment Rate
STATUS OF DECIDED BOTTLENECK CASES
At STB:
- Shipper petitions for clarification/reopening pending
- STB says decision on petitions by April 15, 1997
In Court:
- Four shipper appeals (WCTL, NITL, CPL, MidAmerican)
- Three carrier appeals (AAR, Conrail, UP)
- Cases consolidated in Eighth Circuit (St. Louis)
LESSONS LEARNED FROM BOTTLENECK CASE
* Bottleneck Case Theory Presumed Dead for Present Time
* Successful Shipper Appeals May Revive Theory
* Railroad Industry Sends Signal to Utility Industry
-- Back Off Access
* Political Fallout -- Remains to be Seen
* BNSF Merger Appeal -- May Address Some Bottleneck Legal Issues
ORIGIN-TO-DESTINATION CASES GO ON
WTU v. BN Case:
- Decided May 3, 1996 (STB No. 41191)
- PRB-to-Oklaunion BN route
- Rate prescribed at $13.68 per ton
- Rate equals 180% of variable cost, 12.3 mills in shipper cars
- $17 million in annual savings
- BN appeal in D.C. Circuit pending
Other Pending STB Cases:
- APS v. Santa Fe (No. 41185)
- PEPCO v. CSX (No. 41989)
- PPL v. Conrail, et al. (No. 41295)
STB BOTTLENECK CASE PROCEEDINGS
- Defendant Carriers Filed Motions to Dismiss
- ICC/STB Let Cases Sit in "Holding Patterns"
- August, 1996 -- STB Asks for Comments on "Generic Issues"
- October, 1996 -- STB Hears Oral Argument
BOTTLENECK LINE SEGMENT LENGTH
Utility
CPL
Western Resourcecs
MidAmerican
PPL |
Length (Miles)
16
44
90
150 |
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