SURFACE
TRANSPORTATION BOARD
ROLE IN PERFORMANCE
OVERSIGHT
Presentation by C. Michael
Loftus
Before
the
Edison Electric Institute
General Subject
Area Committee
(SAC)
Loews L'Enfant Plaza Hotel,
Washington, DC
November 2-4, 1997
Meeting
I.
INTRODUCTION
A.
Will discuss topic in context of the service crisis involving UP/SP in Western
U.S.
-- in particular, coal transportation
B. Will
focus first on individual shipper's (i.e., a utility shipping coal)
rights when railroad fails to provide service.
C. Will then
expand the focus to STB's role where there is a massive service failure
affecting a large number of shippers or a region of U.S.
D.
Will review what STB decided in its Decision served late Friday, October 31,
1997 in Ex Parte 573.
II. THE
PROBLEM
-- Failure of railroad to
provide required transportation
III. LEGAL
CONTEXT
A. Contract
Service (§ 10709)
1. Virtually all coal transportation today is in
contract service
2. Contract service not subject to Interstate Commerce
Act
a. parties have only those obligations provided by
terms of contract
b. exclusive remedy for breach is action in state or
federal court unless otherwise agreed
3. So, if you have a contract, go to its terms to
determine:
a. railroad's obligations on service; and
b. any remedies specified for failure to perform
4. Contract terms are typically confidential, but
certain aspects of service commitments generally known:
a. cycle time standards
b. make-up
c. liquidated damages
5. Real problem in serious service failure situation is
that utility doesn't want liquidated damages -- wants coal
6. Two court cases pending claiming material breach of
service commitments
a. Entergy - 13 million tons (White Bluff and
Independence plants in Arkansas)
b. Empire District Electric Company
7. In both cases (which we are handling), utilities
seek damages and termination of contract
B. Common Carrier Service
1. Aware of only three significant coal movements
involving common carrier service at present
2. Two involve prescribed rates
a. West Texas Utilities -- STB found BNSF rate
unreasonably high
b. Arizona Public Service Company/PacifiCorp (Cholla
Station) -- STB found BNSF rate unreasonable
c. PEPCO (Dickerson Station) -- CSXT now in litigation
at STB (Eastern movements)
d. Our firm counsel in each of those situations
3. § 11101 "shall provide transportation or
service on reasonable request."
-- fulfill "reasonable" contract obligations
"before responding to reasonable requests for common carrier service not a
violation
BUT commitments that deprive railroad of ability to respond to
reasonable requests for common carrier service are not reasonable
4. New statutory language -- essentially no case law
for guidance
5. Basically, common carrier obligation in time of
constrained resources is non-discriminatory treatment:
-- 150 units of demand
-- 100 units of supply
everyone should get 2/3
6. Remedy if common carrier obligation violated -- go
to STB -- file complaint
IV. STB'S ROLE IN SERVICE
EMERGENCY -- § 11123
A. "(a) When the Board determines that shortage of
equipment, congestion of traffic, unauthorized cessation of operations, or
other failure of traffic movement exists which creates an emergency situation
of such magnitude as to have substantial adverse effects on shippers, or on
rail service in a region of the United States, or that a rail carrier providing
transportation subject to the jurisdiction of the Board under this part cannot
transport the traffic offered to it in a manner that properly serves the
public, the Board may, to promote commerce and service to the public, for a
period not to exceed 30 days" . . . [take various actions]
B. Traditional use of this power limited to
bankruptcy-type situations
C. With UP/SP situation in the West, STB first started
hearing about the problems in Merger Oversight Proceeding
D. Because that proceeding was focused on conditions
Board imposed to alleviate anti-competitive effects (i.e., economic
effects) of merger, Board initiated new proceeding Ex Parte 573, Rail
Service in the Western United States on October 2, 1997 to consider service
situation
E. On
October 15, 1997, Board ordered UP/SP to file weekly reports with
service-related information
F. On October 27, 1997, Board had 12-hour
hearing
1. UP:
-- admitted problems
-- apologized
-- said it has turned corner
-- released contract obligations where it believed
doing so would help service situation
2. FRA - generally supported UP/SP
3. UTU - situation improving, beware safety problems
associated with directed service
4. Coal Shippers
-- N.M.A.
-- WCTL
-- LCRA (UP contract obligations released)
-- San Antonio (UP contract obligations
released)
-- WCTA
-- Southern Companies (UP contract obligations
released)
-- Entergy (contract obligations not released)
-- AEP (contract obligations not released)
5. Basically explained problems and supported UP/SP
service plan
-- i.e., leave UP/SP to work it for additional
45 - 60 days
6. Rob Krebs (BNSF)
-- BNSF had many of same problems
-- BNSF is currently capacity constrained
-- BNSF believes it could help out in Houston
G. STB's 10/31/97 Service Order
1. Finds service emergency
2. Declines to impose broad service orders
3. Imposes limited rights for Tex-Mex in, and around
Houston
4. Ordered UP/SP to report on responses to individual
shipper complaints by 11/14/97
5. Requires additional information for UP/SP weekly
reports
6. Scheduled hearing for 12/3/97 for UP/SP
report |