ILMA Compoundings June 2019 - 34

COUNSEL COMPOUND

Railroad Interchanges
and the STB
By Jeff Leiter

F

or several years, ILMA has been
engaged on behalf of its members
on rail transportation issues.
Independent lubricant manufacturers,
along with most rail shippers, have
seen the freight railroads across the
U.S. come under increasing pressure
to drive down costs and operate
more efficiently to meet shareholder
expectations. "Precision railroading"
has become the business model for
these railroads. Because of increasing
friction over fees and service issues
between the freight railroads and their
customers, ILMA is an active member
of the Rail Customer Coalition (RCC)
here in Washington, D.C.
Freight railroads typically operate on
their own tracks, and then exchange
rail cars with other railroads to move
freight from shippers located on their
tracks to receivers located on the other
railroads' tracks. This "interchange"
of rail cars by the freight railroads
traditionally has been negotiated
between the two connecting railroads.
Interchange issues increasingly have
been a focus of the RCC.
The interchange negotiations
between the freight railroads have
been breaking down, and the railroads
increasingly are turning to the Surface
Transportation Board (STB), the federal agency that oversees railroad rates
and practices, to mediate their disputes.
Last August, Union Pacific Railroad,
which operated over commonly used
tracks with BNSF Railway in the west,
asked the STB to intervene and require
a particular method of operation,
pending arbitration of the railroads'
rights under their track-use contract.
The STB refused to issue a preliminary

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JUNE 2019

| COMPOUNDINGS | ILMA.ORG

injunction, finding that Union Pacific
had not made a showing that it would
suffer irreparable harm without the
requested action from the agency.
A similar controversy between two
Canadian carriers operating in the
U.S. - Canadian Pacific Railway
(CP) and Canadian National Railway
(CN) - is now before the STB. Their
dispute involves the operationally
complex Chicago Terminal, a critical
rail hub in North America and for
many ILMA members.
CP and CN have interchanged rail
cars at CP's Spaulding Yard on Chicago's west side since 2010. CP brings
rail cars for transfer to other railroads
into its Bensonville Yard in Chicago.
CP sorts the cars destined to receivers
on CN at Bensonville, and then takes
those rail cars over its tracks 17 miles
to Spaulding Yard, where CN then
picks them up. CN takes the rail cars
from Spaulding Yard to its Kirk Yard
in Chicago. The process is reversed for
freight traffic originating on CN and
destined to CP.
CN and CP now disagree as to
which location is the best for the
interchange. CN recently canceled the
two carriers' interchange agreement
and notified CP to deliver interchange
cars to it at the Kirk Yard. CP said
CN's directive was unacceptable, and
it filed a formal complaint with the
STB, asking the agency to issue a
preliminary injunction requiring CN
to continue the interchange at the
Spaulding Yard.
The dispute continues, with CN
telling the STB that there is no need
for a preliminary injunction. CN
offered a compromise, adding to the

STB that CP's expenses of interchanging at the compromise location do
not rise to the level of "irreparable
harm." CP subsequently responded to
the STB, contending CN's position
requiring it to operate over CN's
tracks for 84 miles is "unreasonable."
Finding a middle ground in the
Chicago Terminal likely will be difficult
for the two freight railroads and the
STB. While the federal statute governing interchanges requires each carrier
to make available "reasonable, proper,
and equal facilities that are within its
power to provide for the interchange of
traffic," the issue is turning into which
freight railroad has the legal preference
to designate the preferred interchange
point. Historically, it has been the
receiving carrier, subject to reasonableness and other considerations.
Now, it appears that the STB is
being asked to weigh the freight
railroads' respective arguments and
determine which railroad's preference
is "reasonable." The RCC and ILMA
are watching closely because simply
adding or subtracting one train a day in
each direction on any particular route
through an exchange point may have
consequences for shippers and receivers. While it may reduce congestion
in some rail yards, it can slow other
railroads' trains and increase costs.
ILMA will continue to follow this
issue. If you have rail service issues,
please contact the ILMA office.
Leiter serves as general
counsel to ILMA, representing
the Association since 1981.
He may be reached at
202-466-6502 or jleiter@bmalaw.net.
http://www.ILMA.ORG
ILMA Compoundings June 2019

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