Western Fuels Association, Inc. and Basin Electric Power Cooperative (“WFA/Basin Electric”) have prevailed in a major railroad rate case victory before the federal Surface Transportation Board (“STB”), with approximately $350 million in reparations and rate reductions granted as estimated by the STB. Slover & Loftus LLP represented WFA/Basin Electric in the case, which the federal Surface Transportation Board described as the “the single largest reduction in rail rates ever awarded by this agency.”
The case, Western Fuels Ass’n, Inc., and Basin Elec. Power Coop. v. BNSF Ry., STB Docket No 42088 (STB served Feb. 18, 2009), involved a complaint alleging that BNSF Railway Company’s (“BNSF’s”) tariff rates on coal traffic moving from the Wyoming Powder River Basin (“PRB”) 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. The Board’s SAC constraint requires a shipper to model a hypothetical stand-alone railroad (“SARR”). If SARR revenues exceed SARR costs, the complainant shipper is entitled to rate relief.
WFA/Basin Electric demonstrated that they were entitled to substantial rate relief. The STB determined that the rates imposed on the traffic by BNSF since October 2004, at levels well above 500% of direct costs, were unreasonably high and unlawful, and it ordered BNSF to implement the rate relief provided. For 2009, the STB estimated that the rates would need to be reduced by approximately 60%.
While the decision is still on appeal, BNSF has established new, lower rates for the Basin Electric traffic to comply with the STB’s rate relief decision going forward, and it has paid reparations for overcharges for past movements totaling approximately $120 million. The reduced Basin Electric freight rates will benefit hundreds of thousands of electric consumers in nine western states, who bear the burden of 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. A copy of the full decision and accompanying STB press release may be found at WFA/Basin Electric and release.
Questions on this decision or on railroad maximum rate reasonableness generally, may be directed to John LeSeur, Chris Mills, Peter Pfohl or any other Slover & Loftus LLP attorney.