BEFORE THE 

SURFACE TRANSPORTATION BOARD . 

STB EX PARTE NO. 575 

REVIEW OF RAIL ACCESS AND COMPETITION ISSUES - 

RENEWED PETITION OF THE WESTERN COAL TRAFFIC LEAGUE 

COMMENTS OF THE 

U.S. DEPARTMENT OF AGRICULTURE 

Bruce I. Knight 

Under Secretary 

Marketing and Regulatory Programs 

U.S. Department of Agriculture 

Washington, D.C. 20250 

Date: January 2,2008 
A UTHORZTY AND INTEREST 

The Secretary of Agriculture is charged with the responsibility under the 

Agricultural Adiustment Act of 1938 and the Agricultural Marketing Act of 1946 to 

represent the interests of agricultural producers and shippers in improving transportation 

services and facilities by, among other things, initiating and participating in Board 

proceedings involving rates, charges, tariffs, practices, and services. 

Agricultural producers benefit from a competitive transportation environment 

because the price they receive for their commodities is net of transportation costs, and the 

transportation cost of agricultural products can be more than one-half of the landed cost. 

Our interest lies in preserving an efficient and competitive transportation sector that 

effectively serves U.S. agriculture. 

USDA CONCERNS WITH THE BOARD'S DECISION 

USDA thanks the Board for its decision regarding the use of contractual 

interchange commitments.' In this decision, the Board decided to increase its scrutiny of 

new interchange commitments, but examine existing interchange commitments on a caseby-case basis only upon a shipper bringing a regulatory challenge. 

The proposed rule is a good first step toward alleviating overly restrictive terms in 

new interchange commitments, but falls short of expectations because of the cost burden 

it places on shippers who may want to challenge existing interchange commitments. 

USDA urges the Board to review all existing contractual interchange commitments- 

' Contractual interchange commitments are included in contracts for the sale or lease of a rail 

line. The terms of such commitments can restrict the ability of the purchaser or tenant to 

interchange traffic with competitors of the seller or landlord railroad. 
without requiring a shipper challenge-in order to promote competition, efficient 

movement of rail traffic, and discourage unnecessary charges and penalties that may 

restrain trade. 

USDA is concerned that the Board's decision regarding existing interchange 

commitments may prevent rail-to-rail competition from developing, rather than 

encouraging competition. It appears the decision may protect overly restrictive 

interchange commitments by requiring shippers to challenge interchange commitments at 

considerable expense, including lawyer and consultant fees, rather than the Board 

reviewing such agreements first. 

The Rail Transportation ~olic 3 requires the Board to ensure effective 

competition between rail carriers and with other modes. Thus, USDA urges the Board to 

require rail carriers to file with the Board all existing interchange commitments, and that 

the Board will then review these commitments for propriety and conformance with the 

law. After review, USDA recommends that the Board modify terms in existing 

interchange commitments if appropriate and if it can be done without voiding the entire 

agreement. An alternative would be to give the railroads involved the option of 

nullifying any of the more restrictive terms of the interchange commitments that may be 

contained in such agreements. 

USDA agrees with the Board that, in some cases, it might better serve the public 

interest to allow more restrictive terms in interchange commitments than are normally 

ideal rather than risk losing rail service on those lines. In addition, USDA recognizes the 

value of a contract in perpetuity for those commitments involving lease transactions and 

ICC Termination Act of 1995,§ 10 10 1. 
realizes that seeking to modify terms will not be easy or without controversy. 

The social and economic benefits arising from the rail network, as a whole, can be 

reduced by overly restrictive interchange commitments because rail camers not only 

compete with, but complement, one another. Restrictions on interchange, which may be 

in the private interest of two railroads, may not be in the interest of the network as a 

whole. 

In addition, past interchange commitments were reached without the input of 

affected shippers or disclosing the presence of interchange commitments to shippers (or 

the Board) before gaining Board approval of the transaction. Shippers have a vital 

interest in these interchange commitments and had they been involved in the process, the 

majority may have agreed with the terms of reasonably constructed interchange 

commitments rather than lose rail service entirely. 

USDA recommends that those terms in interchange commitments that directly 

affect shippers' ability to interchange with other railroads be publicly available. Past 

non-disclosure of interchange commitments has reinforced the impression that these 

commitments may prevent rail-to-rail competition and that the type and size of the 

penalties for interchanging with a third canier may restrain trade rather than reimbursing 

the sellinglleasing carrier for the fair value of the line. Good public policy would seem to 

dictate that only those terms that directly affect shippers' ability to interchange with other 

railroads be publicly available. 

USDA is also concerned that the Board has described the nature of these 

interchange commitments as "vertical"-between two companies that do not compete 

with each other, but rather provide services at different points in a distribution chain- 
rather than "horizontal"-between two competitors (Decision at page 10). As both 

carriers involved in an interchange commitment provide rail haulage of freight, they are 

not in different stages of production but produce the same service, even if the service is 

provided over different line segments. Thus, USDA is concerned that the courts may 

view some of the more restrictive interchange commitments as possibly preventing 

potential competition. Such an outcome could be unpredictable and rail service could be 

disrupted. 

Limited exceptions to antitrust law have been allowed by the courts in the past, 

but require the barriers to be reasonable, as limited as possible, and that the public 

benefits must outweigh the anti-competitive effects. USDA has heard from agricultural 

shippers that they are concerned that sale and lease contracts of rail lines containing 

existing interchange commitments may contain unreasonable restraints to trade. USDA 

believes that this perception is born from a lack of shipper knowledge of the terms of the 

barriers and a lack of cost-effective shipper recourse. This perception also arises from 

unreasonably long terms for some interchange commitments and line values that may be 

set too high. 

Interchange commitments that limit the ability to interchange traffic with other 

railroads restrict the access of shippers and producers to all available markets. Limited 

market access interferes with the ability of agricultural producers and shippers to obtain 

the best price for their products and increases their transportation costs. This may result 

in reduced producer income and negatively impact the economic well being of nearby 

communities. Restrictions to market access can also result in inefficient transportation of 

agricultural products. 
Respectfully submitted, 

Under secretary 

Marketing and Regulatory Programs 

U.S. Department of Agriculture 

Washington, D.C. 20250 
CERTIFICATE OF SERVICE 

I, Bruce Blanton, certify that on this 27th day of December, 2007, I caused a copy of the 

foregoing document to be served by first-class mail, postage prepaid, on all parties of 

record in STB Ex Parte No. 575. 

Bruce Blanton 

Deputy Administrator 

Transportation and Marketing Programs 

U.S. Department of Agriculture 

Washington, D.C. 20250