The Surface Transportation Board (STB) on Jan. 15 issued a nearly decade-long-delayed decision concluding that “there is no basis to hold that Union Pacific (UP) acted unlawfully in how it compensated complainants for its use of their tank cars, and that the empty repair move charge adopted by UP in 2015 is not unlawful or an unreasonable practice.” The decision is effective Feb. 14, 2025. UP on April 25 filed a response to the plaintiffs’ petition for reconsideration (download below).
The Board’s decision in North America Freight Car Association; American Fuel & Petrochemicals Manufacturers; The Chlorine Institute; The Fertilizer Institute; American Chemistry Council; Ethanol Products, LLC D/B/A Poet Ethanol Products; Poet Nutrition, Inc.; and Cargill Incorporated v. Union Pacific Railroad Company, Docket No. NOR 42144 (download below) only partially grants complaints filed by the North America Freight Car Association (NAFCA) and several other associations and individual complainants regarding UP’s charges for movement of empty, privately owned tank cars to repair facilities.
The decision, STB noted “clarifies UP’s obligations regarding charges moving forward and directs UP not to charge for moving private tank cars to and from repair shops unless it can demonstrate that car providers are reimbursed for those expenses. All other aspects of the complaints are denied … The decision further finds that the complainants are not entitled to reparations for the payment of past empty repair move charges, as they did not use the methods available to them to seek compensation for the empty repair move costs imposed by UP. The decision also finds that, in the future, the burden will be on UP to demonstrate that it is adequately compensating car providers if it chooses to continue to impose empty repair move charges.”
“Historically, railroads have been required to furnish the railcars necessary to provide their rail service,” STB explained. “Tank cars, however, are almost entirely privately owned in the current market. On Jan. 1, 2015, UP adopted an empty repair move charge for privately owned tank cars. On March 31, 2015, NAFCA and several other complainants filed a complaint with the Board, alleging that UP had engaged in an unreasonable practice and violated its common carrier obligation by failing to pay them for UP’s use of their tank cars when providing rail service and by imposing the January 2015 charge for moving their tank cars when empty to repair facilities. Several associations and individual complainants later filed similar complaints that were embraced into the docket.”
The decision “better encourages an appropriately sized fleet of tank cars because it ensures that, going forward, car providers will be adequately compensated for their investments if UP decides to continue charging separately for empty tank car repair moves,” STB noted. “The Board will not specify what method of compensation UP must use should it continue to charge for empty tank car repair moves. UP may satisfy this obligation either by charging full-mileage rates with mileage allowances or by charging zero-mileage rates that are properly discounted for use of private tank cars. The Board does not rule out the possibility of some other approach. Whatever method UP chooses, in any subsequent litigation addressing the existence or adequacy of that compensation, UP will carry the burden of proving that it has provided adequate compensation for empty tank car repair moves. Meeting this burden may require use of a dual- rate scale (i.e., UP furnishing both a zero-mileage rate and a rate in a railroad supplied tank car) so that the differential can be compared and compensation for use of the private car can be readily evaluated. Given the likelihood that car providers would initiate such litigation, this allocation of the burden to UP could be a departure from the Board’s usual practice of placing the burden on the party who initiates a case and seeks relief from the Board … Allocating the burden of proof in this way is both lawful and appropriate.”
Board Members Karen Hedlund and Michelle Schultz commented with separate expressions. Board Member Patrick Fuchs concurred in part, and dissented in part, with a separate expression. Chairman Robert Primus said STB stakeholders “deserve timely adjudication and I regret the extraordinary amount of time it was with the Board. However, this was an extremely difficult and complex matter, and I applaud the Board for bringing about a fair and reasonable solution that I believe provides administrative certainty moving forward.”
“It … bears noting that the delay in this case is especially distasteful given that the Decision imposes relief only prospectively, and that Union Pacific up to this point has maintained what the Board ultimately determined to be an unearned financial windfall for an exasperating period of time.“ Hedlund commented.
“I agree with and join the decision issued by the Board in this case,” commented Schultz. “In preserving the ability of tank car owners and railroads to use zero-mileage rates, the Board continues to respect and protect the ability of stakeholders to create their own solutions without the need for government intervention. Private solutions by industry participants often achieve better outcomes than those created by the Board because industry participants are closer to the issues and are in the best position to know how to meet their needs. I write separately only to acknowledge the amount of time this decision took. Parties should be able to expect that matters brought before the Board will be decided within a reasonable amount of time, and that did not occur here. I do not think that fault for the delay in this case rests at the feet of any one person, but the Board as a whole. The delay in issuing this decision is inexcusable, and the Board must endeavor to act more quickly in issuing its decisions.”
“I concur with today’s decision that the Board has authority to adjudicate a car-service compensation claim and that UP’s imposition of the Item 55-C empty repair move charge is not an unreasonable practice …” Fuchs commented. “However, I respectfully dissent in part because I find that Complainants have met their burden to show that UP has failed to compensate Complainants for the use of their tank cars in violation of the carrier’s car-service obligations and thus that UP did not meet the compensation-prerequisite in imposing Item 55-C.
“I also disagree with the prospective burden-shifting and directive in the Decision because, among other things, the Board’s merits findings ought to have been sufficient to guide parties. Any industry-wide change intended by the Decision is better considered through a broader public process in which the Board could benefit from the views of additional affected entities … Complainants have shown that UP fell short of its legal obligations under the car-service statute when it imposed Item 55-C … In addition to the absence of a dual-rate scale and mileage allowance payments, Complainants provide evidence that UP did not view the new car ownership costs as tied to any rate discount or ongoing compensation effort. As the Decision notes, a UP employee with direct knowledge of the imposition of Item 55-C stated on the record that the carrier viewed line-haul rates and the empty repair move charge as ‘mutually exclusive.’ … In other words, UP’s new imposition of car ownership costs (i.e., the empty repair move charge) resulted in no change to the line-haul rate that … would have been discounted for similar costs. This dynamic casts doubt about whether the requisite compensation existed at the time UP imposed Item 55-C and supports the view that UP was pricing the relevant line-haul rates to what the market would bear (or, alternatively, the maximum reasonable rate limit) regardless of car ownership considerations …
“Finally, notwithstanding the above disagreement, I strongly agree with my colleagues that this proceeding took far too long. Reflecting on ways the Board can improve its practices in the future, I find aspects of the demurrage and embargo proceedings instructive … With the benefit of hindsight, I surmise that, in 2014, when UP imposed Item 55-C, a transparent and public examination of this new practice may have helped provide needed guidance to industry participants and facilitate private sector solutions, potentially mitigating the need for litigation.”
Wilner Commentary
“None of the STB members voting were in place when the case was first brought in 2015,” comments Railway Age Capitol Hill Contributing Editor Frank N. Wilner, author of Railroads & Economic Regulation: An Insider’s Account. “The STB does not indicate why the case festered for so long, even though it had no statutory deadline. Timeliness is mentioned in separate expressions. This decision—as yesterday’s decision on CN’s acquisition of Iowa Northern—has separate expressions, indicating turmoil among Board members who, until recently, have been in near collegial lockstep.
“Had the case instead favored shippers, UP could have been on the hook over time for tens of millions of dollars. This makes the decision—based on a record totaling some 3,000 pages—every bit as important as a major rate case. That it has taken so long to decide, been so expensive in legal and expert-witness expenses for shippers, and again mostly favors the railroad, explains why shippers have quit bringing cases before the STB. Of course, it can be counter-argued that shippers historically bring weak cases.
“Most significant about this instant decision is its inconsistency. While the STB majority ruled UP had acted lawfully in the past, the majority imposed a requirement that UP must change its practices in the future unless it can prove compliance with the law. This begs two questions: 1) How the STB majority justifies the prospective requirement after just declaring UP acted lawfully in the past; and 2) Just which part of this decision will serve, and why, as precedent in future cases involving other railroads.”
