U.S. Supreme Court Order Upholds $350 Million in Rate Relief to Captive Shipper

On May 16, 2011, the Supreme Court of the United States issued an order denying BNSF’s Railway Company’s (“BNSF”) request that the Court review a federal appellate court decision affirming in almost all respects the 2009 decisions of the federal Surface Transportation Board (“STB”) granting Western Fuels Association, Inc. and Basin Electric Power Cooperative (“WFA/Basin”) approximately $350 million in reparations and rate reductions, as estimated by the STB on a present value basis.

In the underlying STB case, Western Fuels Ass’n, Inc. and Basin Elec. Power Coop. v. BNSF Ry., STB Docket No. 42088 (STB decisions served Feb. 18, 2009, June 5, 2009 and July 27, 2009), the STB found that the tariff rates on coal traffic moving from the Wyoming Powder River Basin to WFA/Basin Electric’s Laramie River Station (near Wheatland, Wyoming) were unreasonably high because these rates exceeded the maximums permitted under the Board’s stand-alone cost (“SAC”) constraint.

BNSF filed a petition for review of the STB’s decisions. In May, 2010, the United States Court of Appeals for the District of Columbia Circuit (“D.C. Circuit”) denied BNSF’s petition in all respects except one, remanding a technical SAC calculation issue on the grounds that the STB had not specifically explained its calculation rationale. BNSF Ry. v. STB, 604 F.3d 602 (D.C. Cir. 2010).

BNSF then filed a petition for a writ of certiorari asking the Supreme Court to overturn the D.C. Circuit’s decision. WFA/Basin Electric opposed BNSF’s petition as did the Solicitor General and the STB. In an order denominated BNSF Ry. v. STB, No. 10-742 (U.S. May 16, 2011), the Supreme Court of the United States denied BNSF’s petition.

The reduced WFA/Basin Electric freight rates prescribed by the STB benefit hundreds of thousands of electric consumers in nine western states who pay the transportation costs as part of their monthly electric bills. The case was the first case decided under new SAC rules established by the STB in 2006.

Slover & Loftus LLP represented WFA/Basin Electric in the proceedings at the STB and in ensuing proceedings in the D.C. Circuit and the Supreme Court. The STB has described its relief order in this case as the “the single largest reduction in rail rates ever awarded by this agency.”

Questions on this decision or on railroad maximum rate reasonableness generally, may be directed to John LeSeur, Christopher Mills, Peter Pfohl or any other rail transportation attorney at Slover & Loftus LLP.