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Coal's relationship with rails, regulators highlighted amid rulemaking activity

While the National Coal Transportation Association became increasingly active on issues before the U.S. Surface Transportation Board this year, its executive director said the coal sector has a solid relationship with the board and the railroad companies.

The board is considering several issues, including those pertaining to the railroad rate reform process, demurrage and revenue adequacy, according to John Ward. Ward began serving the association, or NCTA, as executive director in early May. At the NCTA's September business meeting, experts said the board, or STB, was seeking to address several issues that could benefit the coal sector.

Some of these issues may be decided in 2020, while others could take longer to address given their legal and technical nature, Ward said.

"As a general overall theme, we appreciate that the STB has become active in this space, and as general principles, we're encouraging the STB to come up with rulemaking revisions that keep in mind the principles of reciprocity, accessibility and procedures that allow the expeditious resolution of disputes," Ward said in an interview.

The NCTA is "very pleased" the board is actively exploring issues that pertain to coal producers, Ward said. He noted how diligent members have been with four days of open hearings this year discussing revenue adequacy as well as demurrage and accessorial fees.

"We're not certain where the process is going to end up or how long it's going to take, but we're very appreciative that they are making the effort," Ward said.

Among several other considerations, the board is also discussing its railroad revenue adequacy calculations. Railroads were allowed to charge commodities more when they were struggling financially, Ward said. But now that the rail companies are healthier, stakeholders are discussing potential reforms to how the STB determines whether the revenue is adequate. Regulators are also evaluating the method used to determine the railroads' cost of capital, which plays into the revenue adequacy calculation.

"STB's really got their plate full," Ward said. "They've got a number of these proceedings that are really interrelated."

Additionally, the Association of American Railroads has called on the board to settle a dispute that arose a few years ago regarding coal dust from train cars and potential regulation under the Clean Water Act. Environmental groups had claimed that coal dust from rail cars was polluting local waterways and should be regulated or even prohibited. The litigation was ultimately settled before the courts determined whether the regulation could apply.

But the Association of American Railroads is now requesting that the STB settle the issue and assert that its authority preempts other entities' ability to impose another regulation, something the NCTA also supports, Ward said.

The coal sector and railroads still rely heavily on one another despite coal's decline and subsequently smaller contribution to the latter's revenues. The coal industry appreciates railroads' efforts to provide service and help the industry work through problems, according to Ward. While the producers and shippers may have differences, the overall relationship is healthy.

"It's clear that coal remains a very important part of the railroad's business," Ward said. "We've seen no indication that coal has been written off."