June 26, 2023

STB orders BNSF to send more coal trains to Montana mines


The Surface Transportation Board backed Navajo Transitional Energy Company’s (NTEC) request to compel BNSF to ship more coal from NTEC’s mine in Montana.

However, the decision wasn’t unanimous, and it reflects the lack of direction that the board has in trying to determine whether a Class I railroad is fulfilling its common carrier obligation to ship goods upon a reasonable request, according to the two dissenting STB members.

NTEC had asked STB in April to enact an emergency service order against BNSF because the company claimed that the railroad is not meeting its end of the bargain to ship the volumes of coal that NTEC wants shipped.

NTEC was seeking to transport export coal from its Spring Creek mine in Big Horn County, Wyoming, to Westshore Terminal, located at Roberts Bank in British Columbia, Canada. The company said it needs BNSF to guarantee that it will provide service so that NTEC’s customers can have sufficient time to arrange for the ocean transport of the coal.

But BNSF (NYSE: BRK) countered that an emergency service order is not warranted because its use should be only for true emergencies. The railway also said implementing an emergency service order could adversely affect other rail shippers, including other coal producers, and it said legal precedent allows for some discrepancy over how a railroad handles rail service requests under the common carrier obligation because of external factors that can complicate rail shipments.

STB’s 3-2 decision, rendered Friday, sided with NTEC and calls for a preliminary injunction requiring BNSF to transport 4.2 million tons of coal from the Spring Creek mine to the Westshore Terminals export facility in British Columbia in 2023. 

The board found that NTEC prevailed on the four-part test for granting injunctive relief, and it determined that NTEC’s request for service was reasonable and that NTEC could suffer irreparable harm because of potential damage to its reputation as a dependable supplier of coal. Although concerns were raised during the proceeding that BNSF might not be able to meet the needs of other shippers if it meets NTEC’s request, STB said the record establishes that BNSF can comply with the injunction and still meet other shippers’ needs.  

As a result of the board’s decision, BNSF has been directed to transport an additional 1 million tons of coal in 2023 as train sets and crews become available, and it wants BNSF to submit weekly status reports on the number of trains moved.

This order would translate into requiring BNSF to move 23 trains per month of NTEC’s coal, effective immediately, and an additional six trains per month when train sets and crew become available, STB said in a news release announcing the decision.

“The common carrier obligation is a core tenet of the Board’s regulation of the freight railroad industry and is a pillar of the railroads’ responsibility to our country’s economy,” STB Chairman Marty Oberman said in the Friday release. “Today’s decision reflects the majority’s finding that the common carrier obligation requires a railroad to provide service on a customer’s request that is within the railroad’s capacity to provide.”  

Oberman also pointed to previous statements in which the board said that the common carrier duty reflects the well-established principle that railroads are held to a higher standard of responsibility than most private enterprises.

But STB’s decision wasn’t unanimous, with board members Patrick Fuchs and Michelle Schultz arguing that the board’s decision further adds to the lack of clarity over how best to apply the common carrier obligation in shipper-railroad service disputes.

“The Decision is a poor vehicle for setting common carrier policy nationwide. It endeavors to define the common carrier obligation in terms of the carrier’s current capacity while eschewing an adequate explanation and analysis that might guide future litigants. The Decision’s failed short cut — its attempt to use purported admissions related to draft contracts — instead affects fundamental rail carrier and shipper commercial relationships,” Fuchs said in STB’s decision. 

“Using a preliminary injunction proceeding, the Decision positions the Board to intervene much more frequently with an incomplete factual record and unexplored policy and legal questions. Though NTEC may be satisfied with prevailing immediately in some way in this matter, while maintaining the possibility of winning its underlying case later, the ramifications of the Decision will harm many other shippers that do not receive similar status from the Board,” Fuchs continued.

Schultz said in her dissent that the decision “muddies the concept of the common carrier obligation” because of uncertainties over what the board might consider in determining the railroad’s capacity. Schultz pointed to STB’s reliance on private negotiations and draft contracts between the parties in order to base BNSF’s compliance with meeting its common carrier obligation. 

“NTEC has not demonstrated that it is likely to suffer irreparable harm in the absence of injunctive relief, and the Board’s analysis of the merits of this case is deeply flawed,” Schultz said. “But beyond the legal deficiencies in the Decision, I am concerned that the Decision will create great uncertainty as to how the Board determines the level of service required to meet a railroad’s common carrier obligation, and how the Board determines a railroad’s capacity to provide that service.” 

BNSF didn’t have a comment on the decision.

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