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Yesterday, the Surface Transportation Board (STB) announced it issued a rulemaking that will improve procedures used to decide large railroad rate cases.

The board replaced a percent-reduction rule with a “maximum markup methodology” to calculate maximum rates; adopted an “average total cost” approach to allocate revenue from cross-over traffic; shortened the case analysis period to 10 years; changed a method to forecast operating expenses to account for future productivity; adopted an unadjusted uniform rail costing system to determine if a rail rate is below a jurisdictional floor; and implemented new standards to govern when to reopen rate cases.

The rule changes — which update guidelines adopted by the board 20 years ago — will ensure that standards for deciding whether a rate is too high and setting a rate relief floor are “applied fairly and in conformity with the agency’s statutory responsibilities,” the STB said.

During the past few years, critics claimed the STB’s rate dispute resolution process was expensive and time consuming, with cases typically taking three years or longer to resolve at an estimated cost of more than $3 million for each party, the board said. The new rules place restraints on the evidence and arguments parties can submit in a particular case.

The rulemaking will “reduce litigation costs, create incentives for private settlement of disputes, and shorten the time required to develop and present large rail rate cases to the board,” said STB Chairman Charles Nottingham in a prepared statement. “The procedures established in this rulemaking will save shippers and railroads millions of dollars per case in consultant and legal fees.”

Now, STB members plan to turn their attention to reforming procedures and standards governing small rate disputes. Final comments on proposed guidelines are due by year’s end.