Surface Transportation Board Update

Industrial Minerals Association – North America

2011 Annual MeetingTransportation Committee

Commissioner Francis P. Mulvey September 13, 2011

STB Basics

• Independent economic regulatory agency for railroad industry

• Jurisdiction overRailroad rate and service disputesRailroad mergers and acquisitionsRail line abandonments and constructionFreight/passenger rail relationships

Limited Jurisdiction Over Motor Carriers

• Many industrial minerals move via truck• STB has limited jurisdiction over motor

carriers– Motor carrier pooling of traffic, services or

resources reviewed by STB

– Motor carrier rate bureaus subject to STB jurisdiction; STB disapproved all bureaus in 2007, making them subject to antitrust laws

– Household goods movers subject to STB and FMCSA jurisdiction

STB Structure

• Comprised of 3 Board members

• Ann Begeman joined STB May 2011

• Transportation backgrounds– Mulvey: House T&I staff, GAO DOT IG– Elliott: United Transportation Union – Begeman: Senate Commerce Committee

STB STAFF

• Highly educated professional staff - lawyers, economists, financial analysts, environmental and railroad operational specialists

• Named #1 small agency - annual federal employee survey for past 2 years

• “One of the most obscure corners of the federal government . . . . train geeks and experts” Washington Post

Industrial Minerals Rail Shipments

• Significant gross revenue contributor for Class Is (2010) – Non-metallic minerals - $1.3B

– Metallic ores - $404M

– Stone, clay, glass - $1.2B

• Above traffic is 11% of total rail tons originated in U.S. (2010)

• Crushed stone, sand, gravel carloads above 2009, but not yet at pre-recession levels

Industrial Minerals Rail Shipments

• Many industrial minerals shipments exempt from STB regulation due to truck competition– E.g., sand, gravel, clay, concrete, stone, hydraulic cement,

salt

– Non-exempt products include lime, soda ash

• Many industrial minerals historically move below 180 R/VC, the rate regulation threshold– Metallic ores – 82% of non-intermodal movements < 180

– Non-metallic minerals – 54% of non-intermodal movements < 180

– Stone & Glass – 59% of non-intermodal movements < 180

– Vast majority of intermodal movements of industrial minerals < 180

STB Interaction with Industrial Minerals Industry– FMC Wyoming v. UP (2000) case challenged

soda ash rates

– Proposed New England Transrail line would carry aggregates and industrial minerals

– Minerals traffic an issue in railroad mergers, e.g., UP/SP, UP/Chicago Northwestern, RailAmerica/RailTex, CN/Great Lakes Transp.

– Southwest Gulf RR obtained Board approval to build a new rail line in TX primarily to serve a limestone quarry

General Rail Industry Trends

• Data on rail traffic volumes is mixed– Carload and intermodal volumes down .8%

and .5% respectively for week ending 8/27/11– Strong YTD volumes result in gains compared to

YTD 2010

• Traffic volume growth and weather can impact service – Dwell time has risen, train speed has fallen– Car delays and car supply issues have increased

Congressional Agenda re STB issues (Senate)

• Dominated by budget• STB Reauthorization bill - reintroduced Jan.

2011, no movement lately• Railroad antitrust bill – voted out of Senate

Judiciary Cmte March 2011• PTC

– Senate bill would remove 10,000 miles from PTC by changing date to determine TIH movements

– FRA proposed rule would reduce TIH miles – Issues re PTC cost allocation currently before STB

Congressional Agenda (House)

• T&I Chairman John Mica– Multi-year transportation spending bill still

pending; Mica supports one final extension– FAA bill showdown over summer; extension

expires 9/16– Review DOT high speed rail grants, RRIF loans– Freight RR capital spending, tax credits

• Railroad Subcommittee Chairman Bill Shuster– Focus on Amtrak, high-speed rail, reduced

regulation

Major recent STB decisions

• BNSF coal dust tariff – found unreasonable (new challenge to revised tariff filed recently)

• Entergy paper barrier case – STB denied request for alternative route but found shipper had a right to svs from alternate carrier for certain mines (reconsideration request pending at Board)

• Filing fees – reduced for most types of complaints

Hearing on Exemptions

• Hearing held in February 2011

• Railroads– Exemptions fostered growth

– Railroads face intense competition from other modes on exempt commodities

• Shippers (Auto, Forest/Paper, Cement)– Changes in industry support reexamination

– High rates in certain exempt commodities

• Board considering testimony

Hearing on Competition in the Railroad Industry

• 2 days in June 2011

• Testimony from railroads, shippers, members of Congress, gov’t agencies, freight forwarders, Wall Street

• Wide range of issues discussed– Competitive access, “bottleneck” issues, reciprocal switching

– Alternative route prescriptions

– Financial state of rail industry

– Impact of policy changes

– Rail rate trends

– Competition for non-captive shippers

– Accessibility of Board procedures

• Board considering testimony now

Major STB Matters Pending

• Large rate cases pending– AEPCO v. BNSF/UP (coal)– DuPont v. NS (chemicals)– Total Petrochemicals v. CSXT (chemicals)– M&G Polymers v. CSXT (chemicals)– Intermountain Power v. UP (coal)– Sunbelt Chlor Alkali v. NS/UP (chemicals)

• Tariff issues – e.g., fuel surcharges, tank car routing, weather-related weight charges

Many pending rulemaking proceedings/requests

• Demurrage liability (warehousemen)

• PTC reporting requirements (UP)

• Reciprocal switching (NITL)

• Amtrak emergency routing

• Changes to mediation/arbitration procedures

• Procedures for confidential waybill data in small rate cases

Recent Mediated Cases

• Several large rate cases settled recently– NRG v. CSXT, three Dupont v. CSXT

cases, two U.S. Magnesium v. UP cases, South Mississippi Electric Power v. NS

• Mediation reduces Board and party expenses

• Board seeking funding from Congress to expand mediation services

STB RCPA Office

• Available to resolve smaller disputes informally

• Reach out to RCPA before formal complaint

• Works for large and small shippers

• Good resolution rates with Class I and many short line carriers

Additional Announced STB Initiatives

• Update to Uniform Rail Costing System– Internal evaluation continuing

– Budget

• Increased Transparency– Decision digests

– Oral arguments/hearings

• More active monitoring of industry– Increased audits

– Increased reporting

Future of STB

• Fate of reauthorization legislation

• Funding level for agency

• Increased rail traffic

• Opportunities for Board to address important railroad/shipper issues stemming from hearings

• Stay tuned . . .

Thank youAny Questions?