NGFA proposal to the STB could benefit shippers of ethanol, DDGS

By Erin Voegele | July 10, 2014

On July 7, the National Grain and Feed Association announced it submitted an extensive proposal to the Surface Transportation Board, urging the STB to establish new rules and procedures that captive grain shippers could use to challenge rail freight rates they believe are unreasonable. The proposal could benefit the shipment of ethanol and distillers grains coproducts.

In December, STB issued a decision inviting public comments on how to ensure its rates compliant procedures are accessible to grain shippers and provide effective protection against unreasonable freight rail transportation rates. According to the NGFA, the STB initiated the proceeding, in part, due to previous filing by the NGFA that indicated current procedures for challenging unreasonable rail rates are unworkable for agricultural shippers.

Information published by the NGFA specifies that the under the Staggers Rail Act of 1980, shippers may change a rail rate that exceeds 180 percent of the rail carrier’s variable cost of providing the service, as long as there is not effective intermodal competition for the transportation movement. NGFA noted it performed an economic analysis for five commodities using 2012 aggregated rail rate data and found that Class I carriers exceeded that 180 percent threshold on nearly 31 percent of corn shipments, 65 percent of ethanol shipments, 49 percent of wheat shipments, 43 percent of soybean shipments and 21 percent of soybean meal and soybean hull shipments.

The proposal submitted by the NGFA to the STB aims to establish a new rate-reasonableness methodology, referred to as the “agricultural commodity maximum rate methodology. According to the NGFA, its objectives in proposing the new methodology are to simplify the process to challenge unreasonable rail rates while reducing the cost of bringing a rate to challenge and expediting the timeliness of STB decisions.  

Additional information on the specifics of the methodology are available in a statement published by NGFA and in a public version of the NGFA’s filing with the STB.