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11/20/2012


Rail News: Federal Legislation & Regulation
AAR calls on STB to reintroduce indirect competition as coal rate case factor; Mulvey to retain board seat after term expires



The Association of American Railroads (AAR) has petitioned the Surface Transportation Board (STB) to initiate a rulemaking that would reintroduce indirect competition as a factor in determining if the the board has jurisdiction to consider rate cases involving the transportation of coal to power plants. Specifically, the indirect competition would involve product and geographic competition for fuel used to generate power, AAR officials said in a statement issued yesterday.

The STB has jurisdiction over rail rates only where a carrier is "market dominant," or does not face effective competition, they said. In locations where railroads face effective competition, current law allows the market to determine rail rate levels.

Although the STB previously found it difficult to determine whether indirect competition was present in a given case, there now is ample public information available that would allow the board to determine where indirect competition in wholesale power markets exists and whether it places downward pressure on coal transportation rates, particularly given low natural gas prices in recent years, AAR officials said.

"Considering that nearly two-thirds of all rate cases brought before the board over the last 15 or so years involved coal, we believe the STB should consider the now easily available evidence in relevant coal rate cases," said AAR President and Chief Executive Officer Ed Hamberger. "Where indirect competition is present, we believe it should be factored into any board determination of whether to review the level of rail rates for coal."

Prior to 1998, the STB considered indirect competition in rate cases, but then decided it was too difficult or burdensome to collect the necessary information, according to the AAR.

"We're hopeful that the STB will take note of the additional data that is now available and of the changes in the energy market, and consider the petition and propose a rule that would allow parties to present evidence of indirect competition in individual rate cases," said Hamberger.

Meanwhile, STB Vice Chairman Francis Mulvey announced yesterday that he hasn't identified a departure date following the expiration of his term at year's end. According to the board's governing statute, a sitting member can serve up to one year beyond their term unless a successor is nominated by the president, confirmed by the Senate and officially sworn in.

A board member the past eight years, Mulvey originally was nominated to the board by President George W. Bush in November 2003 and was confirmed by the Senate in May 2004.

"To ensure that the board continues to have a full complement of members and to reduce any gap that may occur between the end of my service and the appointment of a new board member, it has always been my intent to continue serving at the board after the Dec. 31 expiration of my term," said Mulvey in a prepared statement.

Mulvey was designated as the STB's acting chairman in March 2009 and served in that capacity until August 2009. He currently serves as vice chairman and oversees the board's review of its Uniform Rail Costing System.

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