Western Coal Traffic League Challenges BNSF and UP Tariff Pricing of Coal

Date: May 06, 2005

The Western Coal Traffic League ("WCTL") has filed a complaint in federal district court in Dallas seeking a declaratory ruling that BNSF and UP's tariff pricing schedules for Powder River Basin ("PRB") coal movements do not constitute lawful common carriage. WCTL seeks an injunction against the tariff rates being applied and a ruling that the tariff rates are not immune from application of the antitrust laws, among other remedies. This complaint follows a Department of Justice request, apparently in response to an inquiry from Congressman Sensenbrenner, Chairman of the House Judiciary Committee, for information from BNSF and UP regarding their PRB coal tariffs.

The complaint arises out of the announced movement by both western carriers to common carrier rates in lieu of contract rates for PRB coal. BNSF was the first to move to common carrier pricing; and after UP followed suit, BNSF republished its tariff and followed UP's practice of limiting access to customers only. The tariff schedules offered by the carriers contain many indicia of contracts, including multi-year commitments, minimum volume commitments and fixed rates.

WCTL complains that the common carrier pricing scheme leaves the utilities shipping PRB coal without a competitive transportation market. They allege the tariffs are unlawful based on the guaranteed rate provisions offered in exchange for a term and volume commitment, and that limitation of access to the rates to customers only is unlawful under Section 11101 of the ICC Termination Act ("A rail carrier shall also provide to any person, on request, the carrier's rates and other terms of service").

WCTL's shift to an antitrust focus is most interesting. With the STB making rate case litigation less rewarding by its rulings over the past several years, antitrust opens a new front provided that the "Keogh Doctrine," which immunizes carrier conduct subject to regulatory agency remedial procedures from antitrust scrutiny, can be overcome. If WCTL is successful, however, any ruling would be limited to the form of tariff used for PRB coal pricing. This could drive BNSF and UP to completely open tariffs, frustrating their intent to avoid price signaling, and to shorter term rate commitments. Ironically, WCTL could find itself back at the STB, if the court were to refer to the Board for its views the core issue of whether a tariff with a multi-year commitment, minimum volume commitments and fixed rates is unlawful under the ICC Termination Act.

This complaint is evidence of the growing frustration of the shipper community with the raw exercise of market power by the railroads and the lack of a viable consumer protection program at the STB.

For more information, please contact Marty Bercovici at 202-434-4144 or bercovici@khlaw.com.