The Regulatory Score is Now Railroads 1,234, Shippers 1

Implications:   The Surface Transportation Board's decision to declare rate relief for chemical maker DuPont in a captive shipper rate case is not unprecedented, but it  is stunning.   DuPont is eligible for rate relief up to $3 million over a five-year period. Not a deal-breaker for the Class 1's, but not chump change, either.   Railroads may not be sweating the STB just yet. Still, this decision leaves open the possibility that a new day is dawning--and that is not good news for the rails.

Analysis:   Pigs fly. Gasoline hits record low prices. The Chicago Cubs win the World Series. And the Surface Transportation Board rules against a railroad.
  Only one of those longshots came in. For those still guessing, the STB this week ordered CSX Transportation to reduce rates it was charging chemicals giant DuPont in six lanes it was operating in a captive shipper case.
  DuPont will be eligible for reparations totaling as much as $3 million over a five-year period.
  No less authority than STB Chairman Charles D. Nottingham declared in announcing the decision that it "freight rail customers can rest assured that the STB will take effective action to strike down unreasonably high rail rates."
  Maybe rail customers can rest assured. But first you're going to have to wake them up after they all fainted after learning of this unanimous 3-0 STB decision.
  For practically it's entire 14-year existence (and the existence of the old Interstate Commerce Commission before that), the Surface Transportation Board has been the Class 1 railroads' best friend. Whether it's determining whether railroads are "revenue adequate"--an outdated arcane system dating back to the early 1900s--or other rate cases, the STB nearly has always sided with the railroads.
 A cynic would say that's why the route from the STB offices to the executive suites of the Class 1 railroads has been so well-traveled by former STB (and, before that, ICC) officials. Calling the STB a farm team of the railroads is not unreasonable.
  Before every shipper runs out to file an unreasonable rate case at the STB, one ought to be aware of the specific wrinkles in this DuPont case.
  First off, this was not truly a captive shipper case. There was nominal truck competition in some of these lanes. But as the STB said in its ruling, "Although trucks are used occasionally to move the plastic powder to this origin and destination, the record evidence leads us to conclude that trucking does not provide effective competition for this movement."
  The specific routes in question where rate reductions of between 5 to 40 percent may be in order, are mostly in the East where CSX operates. This was hardly a case involving massive amounts of coal moving out of the Power River Basin in Wyoming. Those utilities and coal customers are truly captive shippers.
  Still, according to respected rail analyst Tom Wadewitz of JP Morgan, this decisions opens the door for other rate challenges against North American railroads, most notably the Union Pacific, the largest of the Class 1 North American roads.
  The board issued its ruling in STB Case Nos. 42099, 42100 and 42101. They are available at www.stb.gov., under "Decisions and Notices," beneath the date 6/30/08.