The Surface Transportation Board has finalized a rule adding two procedures for resolving small-scale rate disputes to its toolbox: a voluntary arbitration program and a new measure known as a final offer rate review.
The voluntary arbitration program would allow major carriers to arbitrate rail disputes, but will only be available if all seven Class I railroads commit to participating for a period of five years. The final offer rate review, on the other hand, would allow the Surface Transportation Board to decide rates based on either the complainant's or the defendant's final offer.
The board agreed on the procedures as a compromise to quell shippers' and railroad companies' feuding over both options. The final offer rate review option is preferred within the shipper community, while the railroad community has expressed their support for a voluntary arbitration program.
"Both rules have much in common — they both offer relief under similar timeframes, allow for flexibility to use different methodologies, and have the same monetary limits," Surface Transportation Board Chair Martin Oberman said in a statement. "I am confident that either program will provide shippers with access to more meaningful rate relief than was previously available to them."
The rules are meant to solve disputes worth up to $4 million in relief over two years. These low-level disputes, according to the STB's decision, are often too complex and costly to challenge under the board's current framework.
Two members of the five-part panel, Patrick Fuchs and Michelle Schultz, dissented. Fuchs argued that the final offer rate review is "deeply flawed" and allows the board to evade its responsibility of regulating rail carriers' rates by making it entirely dependent on litigants' self-determined rate review methodologies.
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"Without fully analyzing the underlying the problem and available solutions, the board has insufficient basis for turning away from its traditional reliance on methodologies, forgoing its discretion to devise its own remedies, and relying on litigants to do the work of the agency," Fuchs wrote in his dissent.
One major railroad group also took issue with the final offer rate review provision. The Association of American Railroads, which represents the major Class I railroads, claimed the final offer rate review mechanism "flatly exceeds the agency's authority."
“The FORR rule abdicates the agency’s statutory responsibility to determine the maximum reasonable rate. Sound economic principles are abandoned, in favor of an arbitrary procedure that offers no certainty to any stakeholder and instead rewards legal brinksmanship,” Ian Jefferies, AAR's president and CEO, said in a release.
Wheat shippers, however, welcomed the rule. Charlie Vogel, the chairman of the U.S. Wheat Associates Transportation Working Group, said the rule provides "more streamlined processes" for resolving rail disputes.
"These rulings are a welcome sign that rail customers like wheat farmers are being heard," Vogel said in a statement. "The voluntary arbitration program and the FORR process are intended to help give smaller shippers greater ability to challenge rail rates."
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