WASTE-by-RAIL: Legal Landscape

Crystal City, Arlington, VA
October 1, 1997

C. Michael Loftus
Slover & Loftus
1224 Seventeenth St., N.W.
Washington, DC 20036


A. Background/Perspective

  • Specializing in rail transportation -- 20 years
  • Primarily coal
  • Several assignments w/MSW
  • Currently working w/Mesquite Regional Landfill

B. Primarily Commercial transactions but also regulatory practice before ICC/STB, arbitration activity and sometimes, court cases

C. Areas to be Addressed

  • Basic legal forms of rail service
    • contract
    • common carrier
  • Major contract terms
    • rates
      • competitive - attractive
      • non-competitive - high
    • rate adjustment
    • RCAF(U)
    • RCAF(A)
    • service commitments
    • enforcement
    • term
    • legislative movements for changes in railroad regulation of potential importance


A. Contract Service

  • Negotiated written agreements
  • Not subject to STB regulation
  • Parties rights and obligations as set forth in contract (means care must be taken to deal with all important terms -- can't fall back on STB)
  • Resolution of Problems arising under contracts
    • arbitration (frequently required under terms of contracts)
    • court
  • Since 1980 - The norm today
  • Cover vast majority of traffic

B. Common Carriage

  • Railroads obligated to provide by law
  • What type of service?
    • reasonable request
    • reasonable, based on types of service provided to other rail shippers, especially MSW and comparable shippers
  • Rates
    • Railroad's choice, but, if market dominant, must be reasonable under law
  • Market Dominance - absence of effective competition
  • May be challenged with STB -- has power to prescribe rates but, no lower than 180 of variable costs
  • Why MSW shippers may care about common carriage
  • Contract term/risk
  • May sign, e.g., 5-10 year deal for movement(s) where distances or other factors make trucking non-competitive
  • leverage exists for initial contracts because not committed to Landfill
  • but -- once landfill investment made -- rail investment made -- when contract(s) expire if (happy day) market allows higher tipping fees -- railroad may be in position to capture most of benefit
  • e.g., APS 10 year contract expired (cc rate: $6.31; STP rate: $3.54; plus 20+ million in reparations)
  • Could also be important if railroad attitude toward shipping MSW sours


A. Rates

  • For TOFC/COFC generally very low due to competition from trucks
  • For bulk commodities moving to fixed points over long distances, generally substantially higher due to no or limited competition
  • Circumstances of movement will dictate where MSW movements fall

B. Rate Adjustment

Frequently difficult issue

  • Railroads like to use e.g., RCAF(U)
  • Result is that as costs go down, profit margin goes up significantly
    • E.g., In 1995, A signs 5-year contract for rate at e.g. 150% of variable costs -- costs go down, but rate adjustment index causes rate to go up -- after 2 years rate at 165% of variable costs


In 1997, B gets rate for new contract at 150% -- ... B may have advantage over A

  • most frequent defense to this risk is to limit term
  • also want to negotiate best adjustor possible, etc.

C. Service commitments

  • very important, as current situation with UP demonstrates
  • special concern for MSW that may be subject to rules concerning prompt movement -- also simple fact is the MSW just keeps coming


ARC -- open access

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