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on November 1, 2016

NGFA urges revision, finalization of STB proposal

The Surface Transportation Board is proposing modernization of the rules governing reciprocal switching for freight railroads

The National Grain and Feed Association (NGFA) has submitted a 20-page statement strongly commending the Surface Transportation Board (STB) for proposing a much-needed modernization of its rules governing reciprocal switching for freight railroads.

The NGFA also made several recommended changes to the agency's proposed rules, and urged that it proceed to issue final rules "with all deliberate speed" given that the proceeding has been underway for more than five years. In its statement, the NGFA praised the STB in particular for proposing to eliminate a 30-year agency precedent that requires rail users, as a precondition to seeking a reciprocal switching order from the agency, to demonstrate that the origin railroad unwilling to offer switching was intentionally engaging in anticompetitive conduct. The NGFA noted that this "smoking gun" stipulation largely was responsible for shippers not filing any requests for reciprocal switching since the late 1980s. The NGFA said the current STB commissioners had concluded correctly that neither of the two statutes pertaining to reciprocal switching require a finding that the rail carrier has engaged in anticompetitive conduct.

Reciprocal switching generally refers to situations in which a Class I railroad that has physical access to a specific shipper's facility switches traffic from the facility to another railroad that does not have physical access, in exchange for compensation in the form of an access fee (typically a per-car switch charge).

In its statement, the NGFA also supported the STB's proposal to make reciprocal switching decisions on a case-by-case basis, but urged the agency to recognize that grain elevators and other agricultural facilities are in rural geographic areas where the nearest interchange with another railroad may be 100 miles or more away. Given that agricultural shipping needs can vary markedly from year-to-year based upon a wide range of factors, including weather and crop growing conditions and changing market demand, the NGFA urged the STB to provide guidance that it generally would set a maximum interchange distance of 100 miles from the facility's location, but allow individual shippers to argue for a longer distance on a case-by-case basis.

The NGFA also urged the STB to:

  1. allow shippers to challenge unjustifiably high switching charges, even if the two railroads agree to such access fees.  "...Rail carriers should not have an unfettered ability to economically cut off access to markets by agreeing to switching charges that exceed a reasonable level" and thereby "undermining the national freight rail network," the NGFA said;
  2. eliminate or greatly simplify the requirement that shippers prove that a carrier is market dominant if arguing that reciprocal switching relief should be granted to provide competitive rail service;
  3. deem that a working interchange for switching traffic from one railroad to another exists if such an interchange existed as of the date of the proposed rule (July 27, 2016) so that carriers seeking to avoid competition would not be incentivized to remove such an interchange to avoid switching traffic to a competing carrier;
  4.  not exempt Class II and III shortline railroads from the reciprocal switching rules, given their increasing size and regional importance for agricultural shippers; and
  5.  adopt expedited procedures and timelines for considering requests for reciprocal switching relief.

View NGFA's full comments here.

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