INVESTIGATION AND SUSPENSION DOCKET NO. 9132 WHEAT, KANSAS AND OKLAHOMA TO TEXAS GULF PORT Decided February 7, 1977 Reduced rates on wheat for export from 42 Santa Fe origins in north central Oklahoma and six points in central Kansas to Houston, Galveston, Beaumont, and Texas City, Tex., found shown to be just and reasonable, consistent with the antipreference-prejudice proscription of section 3(1) of the act, and not in violation of our orders in docket Nos. 31098 and 33447. Proceeding discontinued. Richard E. Weicher for respondent. William R. Allen, Jr., for intervener in support of respondent. REPORT AND ORDER OF THE COMMISSION VICE CHAIRMAN CLAPP: Due and timely execution of our functions under section 15(8) of the Interstate Commerce Act imperatively and unavoidably requires the omission of an initial decision. Requested findings not specifically discussed in this report nor reflected in our findings and conclusions have been considered and found not justified or resolution thereof not necessary for the proper disposition of this proceeding. By schedule filed to become effective July 22, 1976, the Atchison, Topeka and Santa Fe Railway Company published in supplement 76 to Tariff 5655-J, I.C.C. No. 15193, section 4, reduced rates1 on export shipments of wheat from 42 origins in north central Kansas to Houston, Galveston, Beaumont, and Texas City, Tex. All origins and destinations are served by Santa Fe in singleline service. The reductions were not extended to Corpus Christi, Tex., which presently take the same rates as the four north Texas ports. Santa Fe does not serve Corpus Christi. Petitions for suspension were filed by interests associated with the port of Corpus Christi, Tex. The schedules were initially suspended, but by order of division 2 the suspension was vacated but the investigation continued. The reduced rates went into effect on August 28, 1976. Hearing was held October 13-15 and October 19-21, 1976, at Washington, D.C. Evidence in support of the proposal was offered by respondent Santa Fe, several country elevators or their representatives, and intervener Union Equity Cooperative Exchange, and in opposition by Louis Dreyfus Corporation, Producers Grain Company and Nueces County Navigation District No. 1. 1Except as otherwise indicated rates and rate differences are stated in cents per 100 pounds. RESPONDENT'S EVIDENCE Respondent submits that the proposed rates are designed to remove unduly large spreads or disparities in the export wheat rates from competing country origins. The origin relationships which went into effect in 1968 at the Ex Parte No. 256 freight rate level were generally accepted by farmers and merchandisers. In succeeding years inflationary pressures dictated imposition of percentage freight rate increases and the cumulative effect of these increases through Ex Parte No. 313 resulted in rate spreads between competing origin stations which were significantly greater than those established in 1967. The distortions which crept into the origin relationships contributed to a greatly expanded movement of wheat by motor carrier from the considered origins to Enid, Okla., and to the port of Houston, Tex., both of which are important markets for wheat grown in the origin territory. A considerable volume of evidence was adduced concerning the basis underlying the rates established in 1968. Respondent's explanation of the thinking that went into establishment of the rates is somewhat equivocal, but considering the record as a whole it appears that the distances from the country origins to Enid and to the Texas Gulf as well as the competitive influences of rival rail carriers were all taken into account in the setting of the rate pattern. Enid in 1968 at the Ex Parte No. 256 level had a rate of 30 cents. Points east, northeast, and thereof took higher rates. Thus points such as Hillsdale, Nash, Red Rock, and Marland took a rate of 32 cents, while Tonkawa took 33 cents. Points in Oklahoma north of a line drawn from Osage Junction in the east through White Eagle, Blackwell, Medford, and Cherokee to Avard, in the west, were all grouped at 34 cents. Points in Kansas were given a rate of 35 cents (Kiowa and Hunnewell) and the balance (Anthony, Spring, South Haven, and Arkansas City) 36 cents. Points in Oklahoma on the two branches extending west from Waynoka were assigned a rate of 36 cents. Rates at points on the Santa Fe branch extending northwest from Enid to Kiowa thence southwest via Alva and Waynoka thence northeast to Buffalo and southwest to Shattuck increased as one moves away from Enid and the Texas Gulf. The exception to this pattern occurred at Alva-Avard and four allied stations which took a 34-cent rate though they were more distant from Enid and the gulf than Kiowa which took a 35-cent rate. The Rock Island Railroad serves Alva and Santa Fe felt compelled to establish a rate no higher than maintained by its rival. With few exceptions the rates applied to several stations. On the two lines extending west from Waynoka there were numerous stations in the same rate group. There is considerable confusion and uncertainty concerning the basis used in constructing the 1968 rates on the three lines extending south from Anthony, South Haven, and Arkansas City, Kans., and all converging at Ponca City, thence south to Red Rock as well as points on the branch to the east thereof, namely Fairfax, Osage Junction, and Ralston. The Kansas points were assigned rates of 35 or 36 cents, points in Oklahoma as far south as White Eagle as well as Fairfax, Osage Junction, and Ralston, 34 cents, while Marland and Red Rock took 32 cents. In short it appears that respondent treated these stations in much the same fashion as it did those in the territory northwest of Enid, that is, as one moves northeast from an east-west line drawn through Enid the rates increase though as noted in the preceding paragraph numerous stations are placed in the same rate group especially the 34-cent group which covers at least 15 stations in the general area from the Kansas line south to Ponca City and Ralston. Shipments from this area may move over Santa Fe tracks to Enid, but the route is quite circuitous and it is apparent that rates in this area were not based on Santa Fe miles to Enid. Wheat originating at Santa Fe stations in what may be termed the Ponca City area must move south from Ponca City at least 60 miles to Guthrie, Okla., thence northwest about 60 miles to Enid. From the easternmost stations of Fairfax, Osage Junction, and Ralston freight would move south to Shawnee, Okla., thence east to Oklahoma City, then north via Guthrie to Enid. The distance would be about 150 miles. The Rock Island Railroad has a line extending south from Kansas through Medford, Okla., and then on into Enid. This line bisects respondent's Ponca City rate group and Santa Fe felt it could not attract traffic for Enid if its rates were higher than those of the carrier operating over the short route. Shipments to Enid from Fairfax, Osage Junction and Ralston would not appear to be subject to Rock Island competition, but there is a suggestion that cross-country truck competition may have been important in determining their rate. Santa Fe's 1968 rates were established following a readjustment by Rock Island in the same area. Apparently respondent's initial filing would not have accorded equality to Corpus Christi, but as finally approved the rates applied at the same level to Houston, Galveston, Beaumont, Port Arthur, and Corpus Christi. In addition the rates from the Kansas origins applied to at least one Louisiana port, namely Ama. The price the farmer receives for his wheat is reduced by the rail freight rate from origin to the gulf coast market place. Accordingly an elevator at a station which enjoys a rate lower than or a competing elevator in a nearby community has an advantage in the purchase or storage of wheat. This is true because the elevator with the lower rate deducts less from the gulf coast bid than does the elevator which has the higher rate. Respondent refers to several pairs of communities where the rate disparity was larger than warranted by the respective distances of the communities from Enid or the gulf coast. The Alva-Avard group at the Ex Parte No. 256 level had a rate of 34 cents. The Kiowa group, adjacent to the north, had a rate of 35 cents. The distance from the northernmost station (Loder) in the Alva-Avard group to Kiowa is about 6.3 miles. There is no elevator at Loder. The distance from Kiowa to Alva is 18 miles while to Avard it is 29 miles. Prior to the contested reductions and because of the general increases from Ex Parte No. 256 through Ex Parte No. 313, the rates were 67 and 72.5 respectively or a spread of 5.5 cents in favor of Alva-Avard. The supplement 76 adjustment made no change at Alva-Avard, but reduced the rate at Kiowa to 68 cents. The group to the south of Alva-Avard may be referred to as the Waynoka group. Waynoka is about 9 miles from Avard. This was a large group and until the contested adjustment the same rates applied from Waynoka, Shattuck, and Buffalo even though the last two points were about 60 and 40 miles west of Waynoka. At the Ex Parte No. 256 level the rate from this group was 36 cents or 2 cents higher than Alva-Avard. However, because of the application of the various ex parte increases though Ex Parte No. 313 the rate became 74 cents or 7 cents greater than that at Alva-Avard. The adjustment under review accords Waynoka a rate of 68 cents. In making the adjustments under review respondent determined that if the elevators to the north, south, and west of Alva-Avard were to compete with the latter they must be able to meet the price which the favored elevator operator is able to offer the grower. Assuming a Texas gulf coast bid of $3.08 a bushel, growers selling to Alva-Avard or for that matter any other elevator taking the same rate would realize a greater price for his wheat than would be the case if he sold to elevators at Kiowa or Waynoka where because of the higher rail freight rates more would be deducted from the gulf coast bid. Under the rates in effect prior to August 28, 1976, elevator operators at the less favored locations would meet the price offered by the favored elevators, but would either cut their margin of profit or use motor carrier service with its attendant lower rates to reach the market place. A related yet somewhat different problem came to pass at Enid and points to the north thereof. Enid is a large grain transit terminal and Union Equity the intervener supporting respondent maintains a large elevator at this point. On shipments trucked to Enid, the owner of the grain is paid the Texas gulf coast bid less the rail rate from Enid to the gulf. Prior to the adjustments here under consideration the rate from Enid at the Ex Parte No. 313 level was 60.5 cents. Hillsdale the first station to the north of Enid, about 13 miles, took a rate of 64.5 cents or 4 cents higher. Respondent states that because of the proximity to Enid the Hillsdale elevator operator could truck his grain to Enid for something less than the additional 4 cents applicable to Hillsdale. Under the proposed adjustment Hillsdale takes a rate of 61 cents or 0.5 cent higher than the Enid rate which was not changed. At the Ex Parte No. 313 level Ponca City and numerous other stations in Oklahoma on the three lines that converge at this point took a rate 6.5 cents higher than Enid. This spread of 6.5 cents encouraged shippers to use cross-country motor carrier service to Enid. Respondent submits that if inbound trucking to Enid can be made less attractive then outbound trucking will decline. Respondent does not know the cost of trucking from Hillsdale or the Ponca City area to Enid, but it believes that reduction of the spreads will accomplish the goal of attracting more traffic to Enid. In addition to correcting disparities between origin stations, respondent hopes that the reductions will discourage what is said to be the ever increasing trend of county elevators to rely on motor carriage. It submitted a study (exhibit 7) designed to portray the impact of truck competition on movements from the origin territory to the Texas gulf ports, particularly Houston, and to show the modest participation of Corpus Christi in the receipt of traffic from the origin area. The study shows the movement of wheat in cars and tons from the 48 considered origins to Beaumont, Corpus Christi, Galveston, Houston, and Port Arthur, separately, for 1973, 1974, and 1975. Similar information is shown for all other destinations under the category "others." The exhibit does not identify such destinations, but the underlying work papers disclose that most shipments were destined to Enid with some going to Fort Worth, Tex., and Wichita, Kans. Most of the Enid and Fort Worth shipments will eventually move to the Texas gulf. Total originations for the 3 years were 585,029, 541,452, and 684,838 tons, respectively. For the year 1975 under the category "others" there are shown not only the number of cars but also the number of truckloads which moved pursuant to Santa Fe's Truck Substitution Allowance Tariff. There were a total of 3,118 substituted service truckloads from Anthony, Hillsdale, Gage, Mooreland, Ralston, Blackwell, Nardin, Deer Creek, Clyde, Gibbon, Cherokee, Jet, Kildare, and Marland, all of which moved to Enid. In 1973, there were direct rail shipments from 32 origins to at least one gulf port, from 33 origins in 1974, and from 20 origins in 1975. There were shipments to Houston from 28 points in 1973, 30 points in 1974, and 16 points in 1975, while to Corpus Christi there were shipments from 15, 6, and 3 origins, respectively. In 1974, shipments to all gulf ports except Corpus Christi totaled 211,183 tons. In 1975, despite a larger wheat crop in Oklahoma, shipments to the same ports again excluding Corpus Christi, totaled 102,783 tons. The sharp decrease is attributed to truck competition. Shipments to Corpus Christi totaled 16,517 tons in 1973, 3,093 tons in 1974, and 3,644 tons in 1975. In 1975, the Corpus Christi traffic accounted for about 3.5 percent of the tonnage moved to the other gulf ports. If shipments to Corpus Christi are compared to all exhibit 7 traffic, the former account for about 0.5 percent of total shipments from the considered origins. Exhibit 8 was designed to show insofar as possible the number of cars of Santa Fe wheat with an Oklahoma origin exported through the ports of Houston, Beaumont, Corpus Christi, Galveston, and Port Arthur. As indicated the study was designed to show wheat with an Oklahoma origin. For this purpose the study reflects two categories of origins. The first includes shipments from an origin in Oklahoma as well as shipment from an Oklahoma transit point. With respect to the Oklahoma transit traffic only those shipments were counted where any one of the transit applications submitted in support of an outbound movement from the transit station referred to an Oklahoma origin. Respondent concedes that this could result in an overstatement of the actual volume of Oklahoma originations or it could result in an understatement. The second category of shipments are those transited in Texas but which had an Oklahoma origin. Respondent admits that this category may overstate the quantity of grain with an Oklahoma origin because in the surrender of transit billing to cover outbound movements from the Texas transit stations, a single entry reflecting inbound billing with an Oklahoma origin resulted in assigning the whole of the outbound movement to an Oklahoma origin. The study is designed to reflect traffic from all Oklahoma origins and there is no way to separate shipments from the 42 affected origins. The following table shows the number of cars from an Oklahoma origin or an Oklahoma transit station, and the percentage they comprise of the whole study, to the named ports for the period 1973-1975: |