Source: http://openjurist.org/437/f3d/1240/ppl-montana-llc-v-surface-transportation-board
Timestamp: 2015-10-10 15:00:33
Document Index: 317187528

Matched Legal Cases: ['§ 10704', '§ 10707', '§ 10707', '§ 10701', '§ 10707', '§ 10704']

437 F3d 1240 Ppl Montana Llc v. Surface Transportation Board | OpenJurist
437 F. 3d 1240 - Ppl Montana Llc v. Surface Transportation Board HomeFederal Reporter, Third Series437 F.3d
437 F3d 1240 Ppl Montana Llc v. Surface Transportation Board 437 F.3d 1240
PPL MONTANA, LLC, Petitionerv.SURFACE TRANSPORTATION BOARD and United States of America, RespondentsBNSF Railway Company, Intervenor.
No. 04-1369.
Argued: November 17, 2005.
Decided February 17, 2006.
John M. Cutler, Jr. argued the cause and filed the briefs for petitioner.
Raymond A. Atkins, Attorney, Surface Transportation Board, argued the cause for respondent. With him on the brief were Robert H. Pate, III, Assistant Attorney General, U.S. Department of Justice, Robert B. Nicholson and John P. Fonte, Attorneys, Ellen D. Hanson, Deputy General Counsel, Surface Transportation Board, and Thomas J. Stilling, Attorney. Rachel D. Campbell, Attorney, entered an appearance.
Richard E. Weicher, Michael E. Roper, Samuel M. Sipe, Jr., and Anthony J. LaRocca were on the brief for intervenor.
PPL Montana, LLC (PPL) filed a complaint with the Surface Transportation Board, alleging the rail rates charged by intervenor BNSF Railway Company (BNSF) were unreasonably high. The Board disagreed and dismissed the complaint. PPL now petitions for review. Finding no basis for upsetting the Board's decision, we deny the petition.
* When a shipper files a rate complaint, see 49 U.S.C. §§ 10704(b), 11701, the Board is charged with determining whether the carrier targeted by the complaint has "market dominance," id. § 10707(b)—that is, whether there is "an absence of effective competition from other rail carriers or modes of transportation for the transportation to which a rate applies," id. § 10707(a).1 If so, the carrier's rate for the captive traffic must be "reasonable." Id. § 10701(d)(1). If the Board determines the rate is unreasonable, see id. § 10707(c), it may prescribe the maximum rate that can be charged, id. § 10704(a)(1).
The Board determines reasonableness according to the "constrained market pricing" (CMP) principles enunciated in COAL RATE GUIDELINES, NATIONWIDE, 1 I.C.C.2d 520, 1985 WL 56819 (1985) (GUIDELINES), aff'd sub nom. Consol. Rail Corp. v. United States, 812 F.2d 1444 (3d Cir.1987).2 GUIDELINES indicates that CMP meets the Board's "dual objectives of providing railroads the real prospect of attaining revenue adequacy while protecting captive coal shippers from `monopolistic' pricing practices." Id. at 524-25, 1985 WL 56819. CMP consists of three main constraints on a railroad's rates: revenue adequacy, management efficiency, and stand-alone cost (SAC). Id. at 534-46, 1985 WL 56819.
A SAC analysis seeks to determine the lowest cost at which a hypothetical efficient carrier could provide service to the complaining shipper or a group of shippers that benefits from sharing joint and common costs. Id. at 528, 1985 WL 56819; see also id. at 529, 1985 WL 56819 ("The stand-alone cost, as we define it here, approximates the full economic costs, including a normal profit, that need to be met for an efficient producer to provide service to the shipper(s) identified."). The Board assumes away barriers to entry and exit so as to treat the otherwise non-competitive railroad industry as a contestable market. Id. at 528-29, 1985 WL 56819. Under the SAC constraint, then, the rate at issue can be no higher than what the hypothetical carrier would have to charge to provide the needed service while fully covering its costs, including a reasonable return on investment. Id. at 528-29, 542-43, 1985 WL 56819. In this way, under the Board's watchful eye,
railroads functioning in a noncompetitive market will be required to price as if alternatives to their services were available. That is, their rates will be judged against simulated competitive prices. As a result, the efficiencies of a contestable market will serve as the guide for establishing maximum rates on captive coal traffic.
Id. at 542, 1985 WL 56819. The SAC test is a means to insure that a captive shipper does "not bear the costs of any facilities or services from which it derives no benefit." Id. at 523, 1985 WL 56819; see id. at 528, 1985 WL 56819.
To proceed under the SAC constraint, a complaining shipper designs and presents to the Board a hypothetical stand-alone railroad (SARR) to serve the traffic group; the traffic group may contain both the complaining shipper's traffic—the issue traffic—as well as other traffic selected to take advantage of the "benefits of any inherent production economies." Id. at 543-44, 1985 WL 56819; see also, e.g., MCCARTY FARMS, INC. v. BURLINGTON N., INC., 2 S.T.B. 460, 466-67, 1997 WL 472908 (1997). The ability to group traffic of different shippers is "essential" to the theory of contestability. GUIDELINES, 1 I.C.C.2d at 544, 1985 WL 56819. As the Board has not seen a need to set general restrictions on the "traffic that may potentially be included in a stand-alone group," id., a complainant is afforded flexibility in selecting a traffic group for its SARR, see, e.g., ARIZ. PUB. SERV. CO. V. ATCHISON, TOPEKA & SANTA FE RY. CO., 2 S.T.B. 367, 381, 1997 WL 420253 (1997) ("In a SAC analysis, the complaining shipper may select any subset of available traffic to determine the least cost at which that subset of traffic could be served independently of other traffic."). Nevertheless, the potential traffic draw is "open to scrutiny in individual cases," and "[t]he proponent of a particular stand-alone model must identify, and be prepared to defend, the assumptions and selections it has made." GUIDELINES, 1 I.C.C.2d at 544, 1985 WL 56819. The Board then compares the SARR's costs to the revenues the SARR can expect from the traffic group; if the latter is greater, the Board can conclude the challenged rate levels are too high. See, e.g., MCCARTY FARMS, 2 S.T.B. at 467, 1997 WL 472908.
PPL ships coal by rail via BNSF from mines in Wyoming's Powder River Basin to PPL's Corette generating facility at Billings, Montana. In July 2000,