Monday, August 14, 2017

Fifty shades of shipper vexation

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Fifty shades of shipper vexation

The 50 shades of vexation venting from self-described captive shippers over delay by the Surface Transportation Board (STB) in considering their petitions to dilute rail regulatory freedoms is matched only by their asserting last year a contradictory 50 shades of encouragement that the Board do just that.

As with so much lately, the reason is Donald J. Trump. Shippers fear the likelihood Trump will nominate for two empty STB seats a pair of free-market zealots hell-bent on further condoning capitalistic acts among consenting adults in contravention of more regulation-minded nominees, which these shipper groups anticipated had Hillary Clinton been elected.

When Senate Commerce Committee Chairman John Thune (R-S.D.) shepherded into law in 2015 the Surface Transportation Board Reauthorization Act codifying decades-long shipper sought STB reforms, and expanding the STB from three voting members to five, shipper groups were euphoric in anticipation of regulatory decisions going more their way.

The National Industrial Transportation League and other alliances of chemicals, coal and grain shippers—fellow travelers in schemes enlisting government to help one pay less—envisioned a STB gang of five more favorable to their wants than the current gang of three that sided with their assorted grievances against railroads no less than, gulp, 50% of the time.

Self-described captives in the Bible Belt seemed prepared to erect new churches bearing Thune’s name; those in California ached to name a legal marijuana variety for Thune; and others sounded ready to label a craft beer in his honor.

Liza Doolittle’s “just you wait” admonition to Henry Higgins quite well reflected the then shipper state of grace and patience. The STB of Republican Ann Begeman and Democrats Dan Elliott and Deb Miller should, shippers beseeched, delay decision making on controversial shipper petitions until two new regulators, courtesy of Senator Thune’s “deliverance” legislation, were in place.

Envisioned by these shippers was an enlarged five-member STB anxious to inscribe in a new book of regulatory decisions fresh obligations and restrictions on railroads. Memorializing in regulations the existence of captive shippers was a primary want, accomplished by eviscerating such nonsense as notions of product and geographic competition, which, combined with available alternative transport modes, makes obsolete any definition of shipper captivity.

Oh, what a heretic was that James V. Springrose, a vice president of grain-shipping giant Cargill, who, back in 1979, declared that “all shippers have alternatives to rail … the captive shipper is captive only because the alternative charges even higher rates than their rail counterpart.”

These shipper groups, clutching rally monkeys portending a changed direction by the gang of five, just knew an augmented STB would never spew such baloney as did STB predecessor Interstate Commerce Commission (ICC) in 1966: “Shippers are in a position to deny the business to [the railroads] by substituting transportation or product.” Hogwash then, hogwash now, they chanted.

Then came Election Day, 2016. No matter one’s opinion of politics, personalities or sensitivities, a pejorative certainty abruptly permeated shipper euphoria—that Trump would nominate, and the Senate would confirm, two new regulators not so enamored with the shipper regulatory agenda.

Equally wicked to these shippers was that a third laissez-faire disciple could materialize, as current STB member Deb Miller’s term expires Dec. 31, meaning Trump could nominate, in addition to two new Republicans for the two vacant STB seats, a Democrat equally enamored with dismantling the administrative state.

Egad. Déjà vu. Weren’t two of the most deregulation-minded members of the old ICC—economists Darius Gaskins and Marcus Alexis—Democrats? Another former ICC member and Democrat, Betty Jo Christian, had said, “The ICC should get out of the business of running railroads and let the marketplace function.”

Experiencing the foreboding of Christians in the Coliseum, the Western Coal Traffic League (WCTL) filed with the STB on Aug. 11 a petition (downloadable at the link below) asking the agency to “terminate its regulatory freeze” in four pending proceedings.

Embracing a faith that past performance is no guarantee of future results, the WCTL is expressing a yen for the devil they know out of greater fear that a new majority will now be solidly in the deregulation camp.

Here are the four proceedings on which action is sought by the WCTL ahead of nomination and confirmation of new STB members:

• Implementing alternative methods to determine maximum allowable freight rates charged so-called captive shippers.

• A long-promised public hearing on a controversial $1 million STB-contracted study to assess the STB’s methodology for its Stand-Alone Cost (SAC) test used to determine maximum reasonable rates.

• Evaluating what constitutes revenue adequacy and its influence in attracting capital for new investment in plant and equipment, as the determination affects maximum freight rates.

• Setting standards under which railroads may impose fuel surcharges, especially on so-called captive shippers.

Also sought by the WCTL in its Aug. 11 petition is more-prompt STB action on a pending NITL petition to permit so-called competitive switching at certain sole-served facilities, which would allow shippers a second railroad choice. Other than chemicals shippers at limited locations with belt-like railroads performing switching, it is not clear just what other shippers could benefit or how such switching would work.

The WCTL, waving the “justice delayed is justice denied” slogan, could alternatively summoned the promise of former President Benjamin Harrison—a U.S. Senator when railroad regulation was first debated in 1887: “What we want of a commission is a tribunal to which a man who thinks he has a grievance against a railroad company can go and tell his story and then go home and attend to his business and the commission will do the rest.”

In fact, the STB is doing just that—but not on the shipper-preferred time table. There are no statutory deadlines attached to the four proceedings the WCTL seeks to hasten.

Railroads would do well to remind Begeman, who controls the docket, of an observation by the late Supreme Court Justice Antonin Scalia when teaching law at the University of Chicago: “Deregulation is not just a matter of altering government activity; rather, it represents a fundamental shift in social philosophy from government interventionism toward … willingness to rely on the free market to benefit society.”

Looking at this latest regulatory kerfuffle from afar, it hosts an element of the perennial New York Yankees-Boston Red Sox rivalry. Indeed, decades ago, ICC Commissioner Clyde B. Aitchison observed that transportation rate disputes began “when one primitive man undertook to carry the belongings or person of the other across a stream or along a trail and the two haggled over the barter.”

Frank N. Wilner, Contributing Editor

Frank N. Wilner is author of six books, including, Amtrak: Past, Present, Future; Understanding the Railway Labor Act; and, Railroad Mergers: History, Analysis, Insight. He earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been assistant vice president, policy, for the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and director of public relations for the United Transportation Union. He is a past president of the Association of Transportation Law Professionals. Wilner drafted the railroad section of the Heritage Foundation’s Mandate for Change (Volumes I and II), which were policy blueprints for the two Reagan Administrations; and was a guest columnist for the Cato Institute’s Regulation magazine.

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