Page images
PDF
EPUB

Hoerner Waldorf can avoid the higher rates by shipping via Portland. Such arguments are clearly insufficient to justify the substantial rate increases which have taken place here, especially where the shipper has no recourse to another mode of transportation and where all of the cost evidence in this proceeding shows that the commodity rates formerly in effect were clearly compensatory. While it is true that the shipper has routing alternatives whereby it could continue to ship its product to the same destination at the same rate, nevertheless, the burden is upon the railroad to justify its rate increase on this particular route. This it manifestly has not done and it is certainly no answer to the imposition of unjust and unreasonable rates to say that the shipper may avoid the payment of such rates by shipping via a longer and significantly more circuitous route.

We find that the carrier has failed to meet its burden under section 15(8) of establishing the justness and reasonableness of the rate increases it has put into effect over the Silver Bow route.

3. Standards for route closing. It is well settled that a route is commercially closed when a change in the rates via that route renders it as a practical matter uncompetitive for traffic which can move over alternative routes. Atlantic Coast Line R. Co. v. Southern Ry. Co., 321 I.C.C. 314 (1963). When a carrier proposes the commercial closing of a route without the consent of all parties thereto or authorization by the Commission, as in this case, that carrier has the burden of proof that such closing is in the public interest. See section 15(3). In defining what constitutes "the public interest" the Commission has recognized that the term "means more than a mere general reference to public welfare, or to a desire of a particular carrier or carriers to gain additional traffic" or to the preference of shippers for something that would simply be more convenient or available for them, and has declared that consideration must be given "to the interest of the general public as manifested by the traffic moved over the routes proposed to be closed, as well as to the carriers which participate in those routes."" Respondent concedes that its cancellation of pulpboard commodity rates from Schilling via Silver Bow to California commercially closes this route to Hoerner Waldorf. However, it argues that this commercial route closing leaves many other routes, 'Liquefied Petroleum Gas To and Within The South, 309 I.C.C. 389 (1960). "Western Pacific R. Co. v. Camas Prairie R. Co., 316 I.C.C. 795 (1962).

8

'Liquefied Petroleum Gas, supra, p. 404; see Cotton from the Southwest to Southern Territory, 302 I.C.C. 637, 653 (1958).

via Portland and Klamath Falls, Oreg., Bieber, Calif., and Spokane, Wash., collectively referred to as Portland or the Portland gateway, over which Hoerner Waldorf may move its traffic from Schilling to California destinations at commodity rates identical to those canceled over Silver Bow. It characterizes Hoerner Waldorf's traffic over Silver Bow as "token" shipments made only for the purpose of supporting its efforts to obtain a rate reduction via Portland in a related case, docketed as docket No. 36418, Hoerner Waldorf v. Union Pacific R.R. It points out that even though Hoerner Waldorf has had facilities at Schilling since 1957 and even though the Silver Bow route and rates have been available since November 1961, protestant did not use the Silver Bow gateway at all during a 14-year period from November 1961 to February 1976. Further, from February 1976 until the commercial closing of the Silver Bow route in December of that year, protestant moved only 87 cars via the Silver Bow gateway. This amounted to only 8.6 percent of its 1976 Schilling-California traffic. According to respondent, Hoerner Waldorf could avoid any economic harm from the imposition of higher class and commodity rates over the Silver Bow route by simply shifting this portion of its traffic to its preferred Portland gateway, over which the lower commodity rates still apply. The UP acknowledges that, as a result of its tariff change, Hoerner Waldorf will be deprived of pulpboard commodity rates at 65 stations in California and 7 stations in Nevada on the UP, Southern Pacific Transportation Company and and Western Pacific Transportation Company. However, it points out that protestant has not shown a single receiver at any of those points and argues that the possibility of a potential receiver is no basis for present economic harm to Hoerner Waldorf.

Hoerner Waldorf follows certain shipping restrictions in connection with its plant at Salinas, a point on the Southern Pacific, which necessitates the routing of this traffic via Portland and precludes UP participation in it. Moreover, protestant concedes that, to insure itself an adequate supply of cars in times of car shortage, it must favor its originating carriers, the Burlington Northern Railroad and the Chicago, Milwaukee, and St. Paul Railroad. These lines can only obtain their long haul from Schilling to California via the Portland gateway. Respondent observes that protestant has so preferred these other lines that it shipped over

1oFor its part Hoerner Waldorf alleges that the commercial closing of this route was effected so that the shortest route over Silver Bow would not be available for the purpose of computing rail costs and relative mileages in this related proceeding.

1,000 cars, or 92.4 percent of its California traffic via Portland in 1976, a practice which did not prevent it from increasing its penetration of the California pulpboard market from a customary 10 percent to 17 percent of its Schilling production. Thus, respondent concludes, routing via Portland has certainly been no hindrance to this shipper's ability to market its Schilling pulpboard in California. and cancellation of pulpboard commodity rates via Silver Bow has not changed Hoerner Waldorf's situation in any meaningful way. What the UP leaves unsaid is that imposition of higher class and commodity rates via Silver Bow closes the shortest and most energy efficient route from Schilling, Mont., to southern California. Further, by commercially closing this route, the railroad short-haul's itself on pulpboard traffic from Schilling to Southern California. Respondent's own calculations show that, to seven California destinations," including protestant's plant at Fullerton, Calif., the average length of haul over the next shortest route mileage is approximately 23 percent longer than via Silver Bow. To six of those destinations,12 the average cost to the railroad for the longer haul may increase by as much as 30 percent. Thus, the UP finds itself in the strange and unusual position of attempting to short-haul itself by preserving the longest and most expensive routes from Montana to southern California (via the Portland and Klamath Falls Gateways) and canceling the shortest and most efficient route (via Silver Bow and Ogden). Its action comes shortly after Congress in section 15(3) of the act (as revised by the Railroad Revitalization and Regulatory Reform Act of 1976) has directed that, in determining whether a route closing is in the public interest, we should most carefully compare the distance and expense involved before and after the proposed route closing and consider any reduction in energy. consumption which may result from it. Here the average distance to be traversed following the commercial route closing is significantly longer, the attendant use of energy is necessarily greater, and the expense to the railroads for performing the extra service may increase appreciably.

A witness for the respondent has stated that one of the reasons for the UP's cancellation of Hoerner Waldorf's pulpboard commodity rates via Silver Bow was that:

*** the formal complaint filed by protestant in I.C.C. docket No. 36418 against rates on pulpboard from Washington, Oregon, Idaho, and Montana to destinations in

"Anaheim, Carson, Colton, Corona, Fullerton, Los Angeles, and Pomona. 12Anaheim, Colton, Corona, Fullerton, Los Angeles, and Pomona.

California involves a contention that the mileage via the Union Pacific joint route to Southern California from Schilling is less than the short tariff route mileage from some other North Coast pulpboard producing points, i.e., Lewiston, Idaho to the Southern California destinations.

Certainly, the filing of a pleading before this Commission is not a reason for commercially closing a route.

We regard protestant's traffic which moved over the Silver Bow route in 1976 as neither "token" nor as insignificant, but as traffic: shipments which, for the first time, moved by the shortest route from origin to destination. Respondent states that it does not expect to see another car of Hoerner Waldorf's pulpboard traffic cross Silver Bow once the litigation in a companion case, docket No. 36418, is concluded. However, the UP has certainly not demonstrated on this record that such movement would have ceased but for its closing of the most direct route from Schilling, Mont., to southern California. Respondent argues that this traffic represented only 8.6 percent of Schilling's California production for the year 1976. It cites no authority to the effect that the continued existence of a route depends upon the amount of production shipped over it. Indeed there is none, as we have never so held.

On the record before us we cannot say that UP's use of the term "public interest" amounts to anything more than the most general reference to the public welfare and a desire-whatever its motives to short-haul itself on pulpboard traffic from Schilling, Mont., to southern California. Obviously, the UP has not shown that the routes it intends to retain:

a. are shorter, more direct and efficient than the route to be closed-clearly the opposite is true;

b. are less costly, involve less switching, fewer yard interchanges, and shorter transit times than the route to be closed-again the opposite is true;

c. promote economy and efficiency of operation-Union Pacific intends to close the most economic and efficient route available to the traffic in question.

These are standards which we have traditionally taken into account when considering whether to allow a railroad to restrict the routing of traffic. See Liquefied Petroleum Gas To and Within The South, 309 I.C.C. 389 (1960); Routing, Coal from Origins on Louisville & N.R., 313 I.C.C. 752 (1961); Tennessee, A & G. Ry. Co. Cancellation of Routing, 300 I.C.C. 515 (1957). The UP has not met one of them. The route it intends to close commercially is needed to provide adequate and more more efficient and more economical transportation than the routes it proposed to retain.

We hold that respondent has not met its burden under section 15(3) of showing that the commercial route closing it has effected is in the public interest.

FINDINGS

1. We find that respondent has market dominance over the involved service;

2. We find that the tariff changes in issue have not been shown to be just and reasonable;

3. We further find that the route closing has not been shown to be in the public interest;

4. We further find that this decision is not a major Federal action significantly affecting the quality of the human environment within the meaning of the National Environtal Policy Act of 1969;

It is ordered, That respondent be, and it is hereby, required to cancel the schedules described in our order of December 30, 1976, in this proceeding, on or before 35 days from the date of the service of this report and order, upon not less than 1 day's notice to this Commission and to the general public by filing and posting in the manner prescribed by the Commission under section 6 of the Interstate Commerce Act;

It is further ordered, That this proceeding be, and it is hereby, discontinued.

APPENDIX A

The statements of the parties Hoerner Waldorf Corporation

Hoerner Waldorf (the shipper or protestant) explains that it is a division of Champion International Corporation, and that it owns and operates a paper mill at Schilling, Mont., approximately 12 miles west of Missoula, Mont., where it is engaged in the manufacture and shipment of pulpboard, not corrugated or indented, STCC 26311-16. Its mill at Schilling began operation in 1957 with a pulping capacity of 250 tons per day. By 1960, the mill had the capacity to produce 350 tons of pulpboard daily and additional expansion in 1966 brought the Schilling mill up to a capacity of 1,000 tons a day. The mill underwent further expansion in 1976. The dominant portion of the Schilling mill's finished product has usually been shipped to markets east and southeast of Montana. However, in 1967 Hoerner Waldorf purchased two corrugated box plants in Southern California located at Fullerton and Salinas, together requiring annually 55,000 tons of the type of pulpboard produced at 357 I.C.C.

« PreviousContinue »