Texas Municipal Power Agency v. STB, Et Al

USCA Case #12-1087 Document #1405205 Filed: 11/15/2012 Page 1 of 173
No. 12-1087
ORAL ARGUMENT NOT YET SCHEDULED

__________________
IN THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT
__________________
TEXAS MUNICIPAL POWER AGENCY, Petitioner
v.
SURFACE TRANSPORTATION BOARD and

UNITED STATES OF AMERICA, Respondents,
and BNSF RAILWAY COMPANY, Intervenor.

__________________
ON PETITION FOR REVIEW OF AN ORDER OF

THE SURFACE TRANSPORTATION BOARD
__________________
JOINT APPENDIX
__________________
William L. Slover
OF COUNSEL: Kelvin J. Dowd
Stephanie M. Archuleta
Slover & Loftus LLP SLOVER & LOFTUS LLP
1224 Seventeenth Street, N.W. 1224 Seventeenth Street, N.W.
Washington, D.C. 20036 Washington, D.C. 20036
(202) 347-7170 (202) 347-7170
Filed: November 15, 2012 Attorneys for Petitioner Texas

Municipal Power Agency
INDEX TO JOINT APPENDIX
Document Description Page
Texas Municipal Power Agency v. Burlington Northern and Santa

Fe Ry., 6 S.T.B. 573 (2003) (excerpts) ............................................................ JA001

Fe Ry., 7 S.T.B. 803 (2004) (excerpts) ............................................................ JA008

Fe Ry., STB Docket No. 42056 (STB served Oct. 29, 2004) .......................... JA016
TMPA’s Petition for Enforcement of Decision, Texas Municipal

Power Agency v. Burlington Northern and Santa Fe Ry., STB
Docket No. 42056 (filed Dec. 17, 2010).......................................................... JA018
BNSF Reply to TMPA’s Petition for Enforcement of Decision,

Texas Municipal Power Agency v. Burlington Northern and
Santa Fe Ry., STB Docket No. 42056 (filed Jan. 6, 2011) .............................. JA068
TMPA Letter, Texas Municipal Power Agency v. Burlington

Northern and Santa Fe Ry., STB Docket No. 42056
(filed Jan. 18, 2011) ......................................................................................... JA130

Santa Fe Ry., STB Docket No. 42056 (STB served July 27, 2011) ................ JA135
TMPA Petition for Reconsideration, Texas Municipal Power

Agency v. Burlington Northern and Santa Fe Ry., STB Docket
No. 42056 (filed Aug. 16, 2011) (excerpts) ..................................................... JA140
Reply of BNSF Railway Company to Petition for Reconsideration,

Fe Ry., STB Docket No. 42056 (filed Sept. 6, 2011) (excerpts) ..................... JA144

Santa Fe Ry., STB Docket No. 42056 (STB served Jan. 20, 2012) ................ JA148
i
TMPA’s Petition to Reopen and Modify Rate Prescription, Texas

Municipal Power Agency v. Burlington Northern and Santa Fe Ry.,
STB Docket No. 42056 (filed Apr. 20, 2012) (excerpts) ................................ JA151
Reply of BNSF Railway Company in Opposition to TMPA’s Petition

to Reopen and Modify Rate Prescription, Texas Municipal Power Agency
v. Burlington Northern and Santa Fe Ry., STB Docket No. 42056
(filed May 10, 2012) (excerpts) ....................................................................... JA157
Railroad Accounting Principles Board, Railroad Accounting

Principles, Final Report, Vol. 2 – Detailed Report
(Sept. 1987) (excerpts) ..................................................................................... JA160
ii
TEXAS MUNICIPAL POWER V. THE BNSF RY. CO. 573
STB DOCKET NO. 42056
TEXAS MUNICIPAL POWER AGENCY

v.
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY
COMPANY
_____________
Decided March 21, 2003
_____________
The Board finds that the defendant railroad has market dominance over the
transportation at issue and that the challenged rate is unreasonably high. A
maximum reasonable rate is prescribed and reparations are ordered.
TABLE OF CONTENTS
ACRONYMS USED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579
I. PRELIMINARY MATTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581
II. MARKET DOMINANCE INQUIRY . . . . . . . . . . . . . . . . . . . . . . . . . 582

A. Quantitative Threshold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 582
B. Qualitative Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583
III. RATE REASONABLENESS STANDARDS . . . . . . . . . . . . . . . . . . . 585

A. Constrained Market Pricing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 585
B. SAC Test . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 586
IV. STAND-ALONE COST ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . 587

A. Configuration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587
B. GCRR Traffic Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 588
1. Eligible Traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 589
a. Single-Carrier Contract Term Where No Rerouting . . . . 590
b. Rerouted Traffic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 591
i. Rerouting Dimensions . . . . . . . . . . . . . . . . . . . . . . . . 592
ii. Rerouting Principles . . . . . . . . . . . . . . . . . . . . . . . . . 594
iii. Application to This Case . . . . . . . . . . . . . . . . . . . . . 595
6 S.T.B.
JA001
roads would be needed along the entire length of the railroad, the cost of grading
the Eagle Butte-to-Campbell line, the cost of excavating a tunnel, and the
equipment that would be needed to prepare the roadbed. For the most part, we
find in favor of TMPA on these matters.
For the size of the contingency fund that would be needed (to cover
unforeseen expenses that might arise during construction), we use the figure
advocated by BNSF (10% of construction costs), a figure we have used in prior
SAC cases. Regarding bridges, we agree with TMPA on the number that would
be needed, but use BNSF’s evidence on the cost of constructing those bridges,
which is based on nationally recognized construction standards.
Concerning the cost of engineering services for the GCRR, we find TMPA’s
evidence unsupported and we use BNSF’s evidence with some adjustment. And
we use BNSF’s evidence on the cost of the land that the GCRR would need,
because its evidence is based on a more detailed study of comparable land
values.
e. DCF Analysis
The DCF analysis compares the stream of revenues that would be generated
by the GCRR to the stream of costs that the GCRR would incur, discounted to
a common point in time. To do that, the DCF model computes and distributes
the total cost of the GCRR over the 20-year analysis period, thus determining the
amount of revenues that would be needed by the GCRR to cover its operating
expenses, meet its tax obligations, recover its investment, and obtain an adequate
return on that investment.
The results of our DCF calculations are shown in Appendix E, Table E-1.
Under the current rate structure, in each year of the first 11 years of the 20-year
SAC analysis period, the GCRR would generate greater revenues than it would
need to cover all the costs that would be incurred in and assigned to each year;
but in the remaining years the GCRR would somewhat under-recover. However,
as Table E-1 indicates, the sum of the present values of over-recoveries exceeds
the under-recoveries, thus demonstrating that the existing rate level is too high.
The last column of Table E-1 shows the percentage amount that the GCRR rate
structure would need to be reduced in each of the first 11 years, so that over the
entire 20-year period the GCRR would earn just enough to cover all its costs and
earn a reasonable return of its investment.
6 S.T.B.
JA002
608 SURFACE TRANSPORTATION BOARD REPORTS
CONCLUSIONS
Based on our review of the evidence submitted by the parties, we find that
we have jurisdiction to review the reasonableness of the challenged rate from the
PRB mine origins of Caballo Rojo and Cordero to TMPA’s Gibbons Creek
Steam Electric Station. The rate produces R/VC ratios that exceed the 180%
jurisdictional threshold and TMPA does not have an effective transportation
alternative for the transportation.
In our SAC analysis, we find that the SAC rate would be lower than the
challenged rate until the year 2012. Accordingly, we find the challenged rate to
be unreasonable and we prescribe a maximum reasonable rate through the year
2011. The prescribed rate is to be set at the higher of the SAC rate or the
regulatory rate floor (the 180% R/VC rate level), as shown in Table 3 (for
movements from the Caballo Rojo mine) and Table 4 (for movements from the
Cordero mine). We are not able to compute the regulatory rate floor beyond
2001, as we do not have the variable cost information needed to compute that for
later periods. (The parties should calculate this rate floor, in a manner consistent
with the procedures and findings contained in Appendix A, as the necessary
information for each time period becomes available.)
6 S.T.B.
JA003
Table 3
Caballo Rojo to Iola, Texas
180% STB
Tariff SAC Rate SAC R/VC Prescribed
Year Rate Reduction Rate Rate Rate
2001 Q2 $19.09 4.66% $18.20 $17.60 $18.20
2001 Q3 19.28 4.40% 18.43 17.69 18.43
2001 Q4 19.39 4.14% 18.59 16.96 18.59
2002 19.55 5.52% 18.47

2003 20.06 3.36% 19.39 To be Higher of
2004 20.64 2.85% 20.05 determined SAC rate
2005 21.26 3.84% 20.44 by the parties or
2006 21.89 3.01% 21.23 once variable 180% R/VC
2007 22.53 3.08% 21.84 costs for each rate.
2008 23.18 2.76% 22.54 year are
2009 23.88 2.15% 23.37 known.
2010 24.60 1.47% 24.24
2011 25.33 0.56% 25.19
2012 26.09 0.00% 26.09

2013 26.88 0.00% 26.88
2014 27.68 0.00% 27.68
2015 28.51 0.00% 28.51
2016 29.37 0.00% 29.37
2017 30.25 0.00% 30.25
2018 31.16 0.00% 31.16
2019 32.09 0.00% 32.09
2020 33.05 0.00% 33.05
2021 Q1 33.05 0.00% 33.05
6 S.T.B.
JA004
Table 4
Cordero to Iola, Texas
180% STB
Tariff SAC Rate SAC R/VC Prescribed
Year Rate Reduction Rate Rate Rate
2001 Q2 $19.09 4.66% $18.20 $17.26 $18.20
2001 Q3 19.28 4.40% 18.43 17.33 18.43
2001 Q4 19.39 4.14% 18.59 17.03 18.59
2002 19.55 5.52% 18.47

2003 20.06 3.36% 19.39 To be Higher of
2004 20.64 2.85% 20.05 determined SAC rate
2005 21.26 3.84% 20.44 by the or
2006 21.89 3.01% 21.23 parties once 180% R/VC
2007 22.53 3.08% 21.84 variable rate.
2008 23.18 2.76% 22.54 costs for
2009 23.88 2.15% 23.37 each year
2010 24.60 1.47% 24.24 are known.
2011 25.33 0.56% 25.19
2012 26.09 0.00% 26.09

2013 26.88 0.00% 26.88
2014 27.68 0.00% 27.68
2015 28.51 0.00% 28.51
2016 29.37 0.00% 29.37
2017 30.25 0.00% 30.25
2018 31.16 0.00% 31.16
2019 32.09 0.00% 32.09
2020 33.05 0.00% 33.05
2021 Q1 33.05 0.00% 33.05
Finally, we award reparations to TMPA for the unreasonable portion of the

rate that it has paid prior to this rate prescription taking effect. The amount of
reparations for movements in the 2nd, 3rd and 4th Quarters of 2001 are shown
in Table 5. The parties should determine what reparations, if any, are due after
the 4th Quarter 2001 until this rate prescription takes effect. Interest is also
6 S.T.B.
JA005
APPENDIX E — DISCOUNTED CASH FLOW COMPUTATION
In applying the SAC test, we compare the estimated revenues that the GCRR
would earn over the 20-year analysis period to the estimated costs of
constructing and operating the hypothetical rail system. As in prior cases, a DCF
analysis is used to discount the GCRR’s 20-year stream of estimated revenues
and costs to a common point in time. In this appendix, we discuss various issues
affecting the DCF calculation not addressed elsewhere in this decision.
The results of the DCF calculation are shown in Table E-1 below. Column
8 shows that, under the current rate structure, the GCRR’s total revenues over the
20-year SAC analysis period would be $208.1 million more than the GCRR
would need in order to recover all its costs, including a reasonable return on its
investment. Column 10 shows the amount by which the GCRR’s total revenues
would need to be reduced in the period 2001 through 2011 so as to avoid any
over- or under-recovery in the full 20-year SAC analysis period, while
column 11 expresses that amount as a percentage reduction. We base our rate
prescription and award of reparations for TMPA on that percentage reduction.
6 S.T.B.
JA006
Table E-1
GCRR CASH FLOW
(millions of dollars)
Year Capital Annual Total Annual Annual Annual Cumula- Required Required Percent
Costs Operating Annual Revenues Over/ Over/ tive Revenue Revenue Rate
& Costs Costs Under Under Over/ Reduc- Reduc- Reduc-
Taxes Payment Payment Under tion tion tion
(current) (present Payment (present (current)
value) (present val.)
val.)
(1) (2) (3) (4) (5) (6) (7) (8) (9) (10) (11)
2001* $339.4 $309.8 $649.2 $694.5 $45.4 $45.4 $45.4 $30.6 $30.6 4.40%
2002 460.1 390.8 851.0 926.9 75.9 66.8 112.2 45.0 51.2 5.52%
2003 469.0 402.1 871.2 916.9 45.7 36.3 148.5 24.4 30.8 3.36%
2004 478.1 413.4 891.6 931.0 39.4 28.3 176.8 19.1 26.6 2.85%
2005 487.5 428.1 915.5 970.8 55.3 35.8 212.7 24.1 37.3 3.84%
2006 497.0 437.9 934.9 978.6 43.8 25.6 238.2 17.2 29.5 3.01%
2007 506.7 453.7 960.4 1,006.4 46.0 24.3 262.5 16.3 31.0 3.08%
2008 516.7 468.8 985.6 1,027.7 42.1 20.1 282.6 13.5 28.4 2.76%
2009 526.9 483.7 1,010.6 1,043.9 33.3 14.3 296.9 9.7 22.4 2.15%
2010 537.4 499.4 1,036.7 1,059.8 23.1 9.0 305.8 6.0 15.5 1.47%
2011 548.0 515.5 1,063.6 1,072.5 9.0 3.2 309.0 2.1 6.1 0.56%
2012 559.0 532.0 1,091.0 1,084.9 (6.1) (1.9) 307.1 0.0 0.0 0.00%
2013 570.2 549.2 1,119.4 1,099.0 (20.4) (5.8) 301.2 0.0 0.0 0.00%
2014 581.6 566.5 1,148.1 1,110.2 (38.0) (9.8) 291.4 0.0 0.0 0.00%
2015 593.3 584.1 1,177.4 1,126.6 (50.8) (11.8) 279.6 0.0 0.0 0.00%
2016 605.3 604.7 1,210.1 1,149.7 (60.3) (12.7) 266.9 0.0 0.0 0.00%
2017 617.6 624.4 1,242.0 1,170.8 (71.2) (13.5) 253.4 0.0 0.0 0.00%
2018 630.1 643.8 1,273.9 1,192.0 (81.8) (14.0) 239.3 0.0 0.0 0.00%
2019 643.0 664.2 1,307.2 1,217.4 (89.9) (13.9) 225.4 0.0 0.0 0.00%
2020 656.1 685.9 1,342.0 1,246.8 (95.2) (13.3) 212.1 0.0 0.0 0.00%
2021** 166.1 174.7 340.8 311.7 (29.1) (4.0) 208.1 0.0 0.0 0.00%
* 2001 data is for the 2nd, 3rd, and 4th quarters of the year.
** 2021 data is for only the 1st quarter of the year.
NOTE: The DCF model limits the revenue reductions in 2001through
2011 to 67% of the overpayments in order to offset the underpayments
that would occur in 2012 through 2021.
6 S.T.B.
JA007
STB DOCKET NO. 42056

v.
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY
COMPANY
Decided September 24, 2004
Upon reconsideration, the Board modifies the rate prescription and

reparations award in this proceeding.
BY THE BOARD
In this proceeding, Texas Municipal Power Agency (TMPA) challenged
the reasonableness of the rate charged by The Burlington Northern and Santa
Fe Railway Company (BNSF) for transportation of coal in unit trains from
certain mine origins in the Powder River Basin (PRB) of Wyoming to
TMPA’s Gibbons Creek Steam Electric Station at Iola, TX. In Texas Mun.
Power Agency v. The Burlington N. & S. F. Ry. Co. 6 S.T.B. 573 (2003)
(TMPA 2003), the Board found that BNSF has market dominance over that
transportation and that the challenged rate was unreasonably high. Based
upon a stand-alone cost (SAC) analysis, the Board prescribed maximum
reasonable rates through the year 2011 and awarded reparations to TMPA.
TMPA and BNSF have each filed timely petitions for reconsideration of
various aspects of that decision. They ask the Board to reconsider various
substantive determinations made in TMPA 2003 and to correct several
asserted technical errors. The issues raised, which are discussed in turn below,
involve:
< whether BNSF should have been required to formally establish a rate
for transportation in shipper-supplied railcars and to use those cars in
place of its own railcars (Section I);
< the variable costs associated with maintenance-of-way, return on

road property and depreciation, and locomotive fuel expense
(Section II);
< those portions of the SAC analysis addressing rerouting of traffic,

revenue forecasts, locomotive fueling expense, general and
administrative expenses, bridges, utility relocation, road resurfacing,
at-grade crossings, and fencing (Section III);
< the asserted technical errors (Section IV); and
7 S. T. B.
JA008
< the scope of the rate prescription (Section V).

Three industry associations—Western Coal Traffic League (WCTL),
National Industrial Transportation League (NITL), and North America Freight
Car Association (NAFCA) (collectively, the “associations”)—have filed
petitions to intervene in support of TMPA’s request for reconsideration with
respect to the first set of issues listed above. The associations will be allowed
to participate as amici, but not intervene as parties to this private rate dispute.
As amici, they may present their views on, and support of, issues raised by
TMPA in its petition for reconsideration. They will not, however, have
access to confidential information; nor will they be allowed to broaden the
issues in the proceeding. See Arizona Pub. Serv. Co. & Pacificorp v. The
Burlington N. & S. F. Ry. Co., 7 S.T.B. 71 (2003).
As discussed below, upon reconsideration we correct two technical errors
in the SAC computation and we revise the SAC analysis in one respect (a
modest increase in the level of executive salaries) to conform with the record
in this case. We revise the rate prescription and reparations accordingly, and
we clarify that the rate prescriptions extend to all mine origins in TMPA’s
complaint. The remaining reconsideration requests are denied.
DISCUSSION AND CONCLUSIONS
A party may seek to have the Board reconsider a decision by submitting a

timely petition that presents new evidence or changed circumstances that
would materially affect the case or that demonstrates material error in the
prior decision. 49 U.S.C. 722(c); 49 CFR 1115.3 (timely administrative
appeals). Where, as here, a petition is timely filed within 20 days after the
service date of the prior decision, the prior decision does not become
administratively final for purposes of seeking judicial review until the Board
has acted on the administrative appeal. See American Farm Lines v. Black
Ball, 397 U.S. 532, 541 (1970); ICC v. Brotherhood of Locomotive Engineers,
482 U.S. 270, 284-85 (1987).
The Board encourages parties to file timely administrative appeals where
they believe the Board has erred in some respect. The courts favor such
administrative reconsideration, as it is a more expeditious and efficient means
of achieving corrections or adjustments than resort to the federal courts in the
first instance. See Commonwealth of Pennsylvania v. ICC, 590 F.2d 1187,
1194 (D.C. Cir. 1978); B. J. Alan Co. v. ICC, 897 F.2d 561, 562-63 n.1 (D.C.
Cir. 1990). And even where judicial review is later sought, the reconsideration
process can assist the court’s review process by providing a further
exploration of the issues in advance. See American Farm Lines, 397 U.S. at
541; McCarty Farms, Inc. v. STB, 158 F.3d 1294, 1301 n.1 (D.C. Cir. 1998)
(further Board decision was “helpful to the court”).
On the other hand, the Board generally does not consider new issues
raised for the first time on reconsideration where those issues could have and
should have been presented in the earlier stages of the proceeding. Moreover,
the term “new evidence” refers to evidence that was not reasonably available
to the party when the record was developed, and not simply newly raised. See
7 S. T. B.
JA009
TMPA’s witnesses had spent 5 days traveling along the BNSF route that
would be replicated by the GCRR’s route from the PRB through Texas, and
from their visual observations they concluded that only 20% of the line was
fenced. TMPA also submitted photographs to show the lack of fencing.
TMPA notes that the Board relied on similar evidence in PPL Montana, LLC
v. Burlington N. & S. F. Ry. Co., 6 S.T.B. 286, 316-17.
Here, BNSF’s evidence was the better evidence of record. TMPA’s
evidence consisted of two pages of workpapers purporting to summarize its
witnesses’ inspection of unspecified portions of the ROW, along with
miscellaneous photographs (some of which note that there are no fences
shown) in an unlabeled section of its rebuttal workpapers. The photographs
appear to have been taken at four locations on the ROW (all on the same
subdivision within 80 miles of each other), but with no organized sampling
procedure for the remainder of the ROW. Given that both parties agree that at
least 25% of the ROW is unfenced, a handful of photographs showing
sections with no fencing was not sufficient support for TMPA’s claim that
fully 80% is unfenced. Thus, TMPA’s evidence was simply not on par with
the evidence in PPL, where the shipper supported its fencing contentions with
detailed, organized observations in 20 pages of workpapers.
IV. Technical Errors

Several technical errors in the numbers used by the Board in TMPA 2003
have been brought to our attention by the parties. First, the parties agree that
the wrong value was used for system-average locomotive depreciation. The
Board used a figure of $0.00000105, instead of the correct value of
$0.00006377. The parties should correct this mistake when they calculate the
variable costs in future years.
Second, as BNSF has noted, the Board mistakenly separated construction
costs for Rails and for Other Track Materials (OTM), when it should have
combined them for input into DCF accounts. This error resulted in the
application of the wrong asset-life assumptions to OTM costs, as well as the
costs for Ballast, Track Labor & Equipment, and Fences and Roadway Signs.
This error is corrected herein.
Finally, BNSF notes that the MOW figure reported in the decision and
used in the DCF analysis ($83.3 million) conflicted with the MOW figure
provided to the parties in the Board’s electronic workpapers ($87.8 million).
The Board inadvertently inserted the wrong table into the decision’s appendix
(one that did not reflect the final determination of the Board) and provided the
parties with some electronic workpapers showing the wrong numbers as well.
The DCF analysis then incorrectly used the $83.3 million figure to calculate
the maximum reasonable rate and reparations.
For the reasons discussed in the decision, see TMPA 2003, 6 S.T.B. at
696-697, the Board generally relied on the evidence submitted by BNSF to
develop MOW expenses. However, BNSF’s MOW cost estimates were
based, in part, on the number of track miles the GCRR would have, and the
Board had restated the total track miles from BNSF’s estimate of 2,546 down
to 2,401. The Board therefore accepted BNSF’s total MOW expense (of
7 S. T. B.
JA010
$93,025,753), but reduced that expense by roughly 5.6% due to the smaller
SARR network. This error is corrected here. The correct figure of
$87,800,819 is shown in our new electronic workpapers at “STB Restated
MOW1” spreadsheet “STB Restatement.”
V. Scope of Rate Prescription
The challenged BNSF rate applied to coal movements to TMPA’s

Gibbons Creek plant from 16 named PRB mines: Antelope, Buckskin, Belle
Ayr, Black Thunder, Caballo, Caballo Rojo, Coal Creek, Cordero, Dry Fork,
Eagle Butte, Glovis Point, Jacobs Ranch, North Antelope, North Rochelle,
Rawhide, and Rochelle. TMPA’s complaint was not limited to specific
mines,34 and its SAC evidence covered all 16 mines. Moreover, it is
undisputed that there are no other feasible means of transporting coal from the
PRB to the Gibbons Creek plant. Thus, the rate prescription in this case—the
higher of the SAC rate or the 180% R/VC regulatory floor—should apply to
movements from any of the 16 mines. However, the findings and ordering
paragraph in TMPA 2003, 6 S.T.B. at 608, 612-13 (2003) only mentioned the
two mines from which TMPA’s traffic had moved during the 9-month time
period covered by the evidentiary record (Caballo Rojo and Cordero).
In its petition for reconsideration, TMPA asks that the rate prescription
not be limited to the traffic from those two mines. In fact, it was the Board’s
intention that the rate prescription extend to any mines from which traffic
might move, so long as those mines were covered by both the complaint and
the SAC analysis. In TMPA 2003, 6 S.T.B. at 582-83, the Board expressly
stated that, if Gibbons Creek traffic were to move in the future from other
mines, the prescription would apply so long as the 180% R/VC jurisdictional
threshold was met, and that the parties should themselves make the
determination whether the threshold was met using the variable costing
procedures and findings contained in Appendix A of that decision. In other
words, the order was intended to be self-effectuating: only if the parties could
not agree on the computation of the variable cost of a movement would there
be any need to return to the Board.
BNSF argues that the Board has no authority to assess the reasonableness
of a challenged rate until we have determined that the revenues for the
movement exceed the R/VC threshold contained in the statute. That,
however, is not our reading of the relevant statutory provisions. Under the
statute, we must make an affirmative finding that the rail carrier has “market
dominance,” 49 U.S.C. 10707(b), which is defined as “an absence of effective
competition from other rail carriers or modes of transportation for the
transportation to which a rate applies,” 49 U.S.C. 10707(a). Once the Board
makes that qualitative finding, we may then proceed to examine the
reasonableness of the rate. 49 U.S.C. 10707(c). There is no requirement that
the Board make an independent quantitative determination of the R/VC ratio
34
The prior decision erroneously stated that the complaint named only 4 mines. TMPA 2003,
6 S.T.B. at 581 n.3.
7 S. T. B.
JA011
for a movement; rather, we are precluded from finding market dominance

only if the defendant carrier proves that the rate charged results in an R/VC
below 180%. 49 U.S.C. 10707(d)(1)(A). Thus, absent a railroad showing
that the R/VC level for a movement is below 180%, the Board may proceed to
examine the reasonableness of a rate for a movement for which there is no
competitive alternative.
The railroad is not disadvantaged by the rate prescription extending to all
of the mines that were embraced in the complaint and the SAC analysis. The
railroad is protected by the terms of the prescription itself, which assures that
the prescribed rate cannot fall below the 180% R/VC floor for any movement
in any year. Indeed, by their nature rate prescriptions apply to future
movements, before the information necessary to calculate the variable costs of
those future movements is known. Thus, even as to the two mines from
which traffic had already moved, the parties were directed to make the
appropriate variable cost calculations for future years based on the guidance
provided in the Board’s TMPA 2003 decision regarding how those costs are to
be determined. If the parties cannot agree on the proper R/VC calculation
from another mine even with that guidance, either party may return to the
Board to have the dispute resolved.
BNSF argues that this approach represents a departure from precedent.
In Wisconsin Power & Light Co. v. Union Pac. R.R., 5 S.T.B. 955 (2001)
(WPL)—where, as here, the Board’s decision addressed only two of the
multiple mine origins covered by the complaint, as traffic had only moved
from two mines during the period covered by the evidentiary record—the
Board stated that, for shipments from the other mines, the parties should
return to the Board only if they could not agree on what the 180% R/VC rate
floor should be. See WPL at 960 (2001). In any event, to the extent that there
has been a change in Board policy, we are persuaded that the better policy is
for a rate prescription to be self-effectuating where a mine is embraced in
both the original complaint and the SAC evidence. There is no sound legal or
public policy reason why TMPA should be required to re-litigate its rate
complaint, in whole or in part, to obtain the benefit of the rate prescription
when it shifts traffic from one of the mines covered by its rate complaint to
another mine covered by that same complaint.
VI. Recalculated DCF
The DCF analysis compares the stream of revenues that would be

generated by the traffic group to the stream of costs that the GCRR would
incur, discounted to a common point in time. To do that, the DCF model
computes and distributes the total cost of the GCRR over the 20-year analysis
period, thus determining the amount of revenues that would be needed by the
GCRR to cover its operating expenses, meet its tax obligations, recover its
investment, and obtain an adequate return on that investment.
The results of our revised DCF calculations are shown in Table 1 below.
As that table shows, in the first 10 years of the 20-year SAC analysis period,
the traffic group would generate greater revenues than the GCRR’s revenue
requirements; but thereafter the annual revenues are forecast to fall below the
7 S. T. B.
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GCRR’s revenue requirements. The sum of the present values of over-

recoveries exceeds the under-recoveries, thus demonstrating that the existing
rate level is too high. The last column of Table 1 shows the percentage
amount by which the revenues from the traffic group would need to be
reduced so that over the entire 20-year SAC analysis period this traffic group
would generate just enough revenue to cover the GCRR’s revenue
requirements. The rate prescription for TMPA’s Gibbons Creek traffic
reflects that percentage reduction.
Table 1
Revised DCF Analysis
(millions of dollars)
GCRR BNSF Percent

Revenue Forecast Present Rate
Year Requirements Revenues Difference Value Cumulative Reduction
2001 661.0 694.5 33.5 33.6 33.6 2.36%

2002 866.4 926.9 60.6 53.3 86.9 3.19%
2003 886.0 916.9 30.9 24.5 111.4 1.64%
2004 905.8 931.0 25.2 18.1 129.5 1.32%
2005 929.1 970.8 41.7 27.0 156.5 2.10%
2006 947.8 978.6 30.8 18.0 174.6 1.54%
2007 972.7 1,006.4 33.7 17.8 192.3 1.63%
2008 997.2 1,027.7 30.5 14.5 206.9 1.45%
2009 1,021.6 1,043.9 22.4 9.6 216.5 1.05%
2010 1,047.0 1,059.8 12.8 5.0 221.5 0.59%
2011 1,073.1 1,072.6 (0.5) (0.2) 221.3 0.00%
2012 1,099.8 1,084.9 (14.9) (4.7) 216.5 0.00%
2013 1,127.5 1,099.0 (28.5) (8.2) 208.4 0.00%
2014 1,155.5 1,110.2 (45.3) (11.7) 196.7 0.00%
2015 1,183.9 1,126.6 (57.3) (13.4) 183.3 0.00%
2016 1,215.8 1,149.7 (66.1) (13.9) 169.4 0.00%
2017 1,246.9 1,170.8 (76.1) (14.5) 155.0 0.00%
2018 1,278.0 1,192.0 (85.9) (14.7) 140.2 0.00%
2019 1,310.4 1,217.4 (93.1) (14.4) 125.8 0.00%
2020 1,344.3 1,246.8 (97.5) (13.6) 112.2 0.00%
2021 341.2 311.7 (29.5) (4.0) 108.2 0.00%
* 2001 data is for the 2nd, 3rd, and 4th quarters of the year.
** 2021 data is for only the 1st quarter of the year.
NOTE: The DCF model limits the revenue reductions in
2001through 2010 to 49% of the overpayments, in order to offset the
underpayments that would occur in 2011 through 2021.
7 S. T. B.
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Under the revised SAC analysis, the prescribed rate is the higher of the
SAC rate, as shown in Table 2, or the regulatory rate floor (the 180% R/VC
rate level), which the parties should compute in a manner consistent with the
procedures and findings in TMPA 2003, 6 S.T.B. at 614-44 (2003). (As
discussed above, the Board cannot calculate the regulatory rate floor for
movements from 14 of the challenged mine origins, or for any of the mines
beyond 2001, as we do not have the necessary variable cost information.)
Table 2
Revised Rate Prescription
STB
Tariff SAC Rate SAC Prescribed
Year Rate Reduction Rate Rate
2001 Q2 $19.09 2.54% $18.61 Higher of SAC rate
2001 Q3 19.28 2.36% 18.83 or
2001 Q4 19.39 2.18% 18.97 180% R/VC rate
2002 19.55 2.36% 19.09

2003 20.06 3.19% 19.42 Higher of
2004 20.64 1.64% 20.30
2005 21.26 1.32% 20.98 SAC rate
2006 21.89 2.10% 21.43 or
2007 22.53 1.54% 22.18 180% R/VC rate
2008 23.18 1.63% 22.80
2009 23.88 1.45% 23.53
2010 24.60 1.05% 24.34
2011 25.33 0.00% 25.33
2012 26.09 0.00% 26.09
2013 26.88 0.00% 26.88
2014 27.68 0.00% 27.68
2015 28.51 0.00% 28.51
2016 29.37 0.00% 29.37
2017 30.25 0.00% 30.25
2018 31.16 0.00% 31.16
2019 32.09 0.00% 32.09
2020 33.05 0.00% 33.05
2021 Q1 33.05 0.00% 33.05
Finally, based on the revised SAC analysis, we restate the reparations

awarded to TMPA for the unreasonable portion of the rate that it has paid
prior to this revised rate prescription taking effect. The amount of reparations
for movements in the 2nd, 3rd and 4th quarters of 2001 are shown in Table 3.
7 S. T. B.
JA014
Table 3
Revised Reparations
Tons Tariff Amount Prescribed Rate Reparations

Rate Paid
2Q2001 454852 $19.09 $8,683,119 $18.61 $218,329
3Q2001 524538 19.28 7319128 18.83 $236,042
4Q2001 455980 19.39 8841450 18.97 $191,512

Totals 1,291,370 $24,843,697 $645,883
The parties should now re-calculate what reparations, if any, are due after
the 4th Quarter 2001 until this revised rate prescription takes effect. Interest
is also awarded in accordance with 49 CFR 1141.
This decision will not significantly affect either the quality of the human
environment or the conservation of energy resources.
It is ordered:
1. The rate prescription and reparations award for movements of the
issue traffic are revised as discussed above and set forth in Tables 2 and 3 of
this decision.
2. This decision is effective October 27, 2004.
By the Board, Chairman Nober, Vice Chairman Mulvey, and
Commissioner Buttrey.
7 S. T. B.
JA015
35232 SERVICE DATE – OCTOBER 29, 2004

SEC
SURFACE TRANSPORTATION BOARD
DECISION
STB Docket No. 42056

v.
THE BURLINGTON NORTHERN AND SANTA FE RAILWAY COMPANY
October 29, 2004
NOTICE TO THE PARTIES:
A decision by the Board, in the above proceeding, decided on September 24, 2004, and
served on September 27, 2004, did not properly calculate the rate prescription for 2002 through 2010.
Table 2 (on page 31) inadvertently used the prior year’s SAC rate reduction, as shown in Table 1, to
calculate the rate prescription for each of those years. For example, the calculation of the rate
prescription for 2003 used the percent rate reduction for 2002, rather than the percent rate reduction
for 2003. Table 2 below should replace the table included in the decision. Please correct your copy
accordingly. All other information remains unchanged.
Vernon A. Williams
Secretary
JA016
STB Docket No. 42056
Table 2
Revised Rate Prescription
STB
Tariff SAC Rate SAC Prescribed
Year Rate Reduction Rate Rate
2001 Q2 $19.09 2.54% $18.61 Higher of SAC rate
2001 Q3 19.28 2.36% 18.83 or
2001 Q4 19.39 2.18% 18.97 180% R/VC rate
2002 19.55 3.19% 18.93

2003 20.06 1.64% 19.73 Higher of
2004 20.64 1.32% 20.37
2005 21.26 2.10% 20.81 SAC rate
2006 21.89 1.54% 21.55 or
2007 22.53 1.63% 22.16 180% R/VC rate
2008 23.18 1.45% 22.84
2009 23.88 1.05% 23.63
2010 24.60 0.59% 24.45
2011 25.33 0.00% 25.33

2012 26.09 0.00% 26.09
2013 26.88 0.00% 26.88
2014 27.68 0.00% 27.68
2015 28.51 0.00% 28.51
2016 29.37 0.00% 29.37
2017 30.25 0.00% 30.25
2018 31.16 0.00% 31.16
2019 32.09 0.00% 32.09
2020 33.05 0.00% 33.05
2021 Q1 33.05 0.00% 33.05
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BEFORE THE
Complainant, Docket No. 42056
V.
- „ ENTERED^
Office of Proceedings
BNSF RAILWAY COMPANY
JAN 6 2011
Defendant. Partof
Publlc Record
BNSF'S REPLY TO TMPA'S PETITION

FOR ENFORCEMENT OF DECISION
BNSF Railway Company ("BNSF") hereby replies in opposition to the Petition For
Enforcement of Decision ("Petition"),filedby Texas Municipal Power Agency ("TMPA") on
December 17,2010.
I. INTRODUCTION
TMPA asks the Board to "direct BNSF to not charge (through March 31,2021) more
than the rate listed in tfae 'SAC Rate' and 'Tariff Rate' columns of [tfae Board's] decisions served
September 27,2004 and October 29,2004." Petition at 5. TMPA claims that under the prior
decisions in tfais case, BNSFfaasbeen "barredfi'omcharging any rate higfaer tfaan tfaat listed as
tfae 'SAC Rate' [in tfae September 27, 2004 and October 29,2004 decision] for years 2011-
2021." M a t 4 .
TMPA cites no language in tfae Board's decisions supporting its claim tfaat BNSF's rates
are constrained after 2010 by tfae referenced decisions. Instead, TMPA's argument appears to be
tfaat tfae logic of tfae Board's SAC analysis requires a limitation on BNSF's rates after 2010 even
if tfae Board did not specify sucfa a limitation: "[I]f tfae Board allows BNSF to cfaarge a rate
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faigfaer tfaan tfaat sfaown in tfae SAC rate or Tariff rate column of tfae TMPA decisions for the
2011-2021 period, then the 20-year DCF analysis will be unlawfiiUy unbalanced." Petition at 11.
TMPA's Petition should be denied. Tfae Board's rate prescription in tfais case is
tmambiguous. Tfae Board expressly prescribed rates only for tfae period 2Q 2001 tfarougfa 2010.
Tfae scope of a rate prescription in a rate reasonableness case is govemed by tfae specific
language in tfae Board's decision, not by tfae SAC assumptions underlying tfae rate prescription.
By its very terms, tfae rate prescription in tfais case expired at tfae end of 2010.
TMPA asks tfaat tfae Board "clarify" tfaat tfae rate prescription extends beyond 2010
(Petition at 5-6), but tfae Board cannot "clarify" tfae rate prescription to say sometfaing
inconsistent witfa tfae plain language of tfae prescription. TMPA's Petition migfat be construed as
a request to reopen tfae Board's decisions for tfae purpose of modifying the rate prescription. But
TMPAfaasnot provided valid grounds for a reopening. Tfaere was no legal flaw in tfae Board's
decision to prescribe a rate only tfarougfa 2010. Tfae DCF results showed substantial under-
recovery of SAC costs after 2010, so it was entirely reasonable for the Board to limit tfae rate
prescription to tfae period 2001-2010. Tfae Board properly used its "netting" procedure to ensure
tfaat over tfae rate prescription period (2001-2010), TMPA would receive only tfae amount of rate
relief to wfaicfa it was entitled.
NorfaasTMPA identified any facts tfaat would support a modification of tfae rate
prescription now to extend it for 10 more years. To tfae contrary, substantial cfaanges in
economic conditions make it clear tfaat an extension of tfae rate prescription would not be
appropriate. Most important, fiiel pricesfaavegone up far more tfaan expected wfaen tfae SAC
evidence was prepared in tfais case. As sfaown by BNSF's witnesses Messrs. Baranowski and
Fisfaer, if tfae original DCF analysisfaadaccurately anticipated fiiel cost increases, tfaere would
JA069
faave been no rate prescription at all, even for tfae period 2001-2010. Indeed, tfae fact tfaat tfae
enormous increases in fiiel prices after 2001 (tfae base year for fiiel prices used in tfae SAC
analysis) have not been reflected in the rates tfaat TMPA has been paying means that TMPA has
already received a large windfall during tfae 10 years in wfaicfa tfae rate prescriptionfaasbeen in
effect.
Finally, if tfae Board were to modify tfae existing rate prescription to extend it beyond tfae
year 2010, tfae Board would be required to prescribe a rate at tfae higfaer ofthe SAC maximum
rate or 180 percent of URCS variable costs. The rate that BNSF is currently cfaarging TMPA is
below tfae Board's jurisdictional tfaresfaold and could not be supplanted by a different, lower rate.
Altfaougfa TMPA makes no sfaowing regarding tfae level of tfae jurisdictional tfaresfaold rate, it
incorrectly asserts tfaat tfae jurisdictional tfaresfaold sfaould be calculated using tfae movement-
specific adjustments specified in tfae prior decisions. Petition at 2 note 1. But tfae Board
determined in 2006 tfaat tfae jurisdictional tfaresfaold would no longer be calculated in rate
reasonableness cases using movement-specific adjustments. Tfae Board's jurisdiction over
railroad rates is now determined using system-average URCS. BNSF's current rate is less tfaan
180 percent of BNSF's URCS variable costs and is tfaerefore beyond tfae Board's rate
reasonableness jurisdiction.
II. BACKGROUND
TMPA's Petition involves a rate prescription establisfaed by tfae Board in a decision in
tfais case served on Marcfa 24,2003, as modified in decisions served on September 27,2004 and
October 29,2004. In the March 24,2003 Decision {"2003 Decision"), tfae Board evaluated
TMPA's SAC evidence on tfae reasonableness of BNSF's rates for tfae transportation of coal
from tfae Powder River Basin ("PRB") to TMPA's coal fired electric generating facilities at lola.
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Texas. After resolving numerous disputes between tfae parties on tfae underlying SAC cost and
revenue assumptions, tfae Board concluded tfaat "we find tfae cfaallenged rate to be unreasonable
and we prescribe a maximum reasonable rate tfarougfa tfae year 2011." 2003 Decision, at 33.
Tfae Board's SAC analysis sfaowed tfaat on a present value basis, tfae stand-alone
railroad's ("SARR") revenues exceeded its costs by $208.1 million over tfae 20-year DCF period.
2003 Decision, at 159; see also Table E-1, line 2021, at page 160. However, revenues exceeded
costs only for tfae years 2001 tfarougfa 2011. Tfaerefore, only tfae rates for 2001-2011 exceeded
maximum reasonable rates, and only tfaose rates needed to be reduced in order to eliminate tfae
$208 million SARR over-recovery.
At tfae time of tfae 2003 Decision, tfae Board applied the percent reduction methodology to
determine tfae extent to wfaicfa a rate tfaat exceeds a reasonable maximum rate needed to be
reduced. Under tfae percent reduction metfaodology, tfae revenues generated on all movements in
a particular year, including tfae issue traffic movements, are reduced by a fixed percentage. Tfae
percentage reduction varies eacfa year based on tfae amount of tfae overcfaarge in tfae year and tfae
total amoimt of SARR over-recovery that needs to be eliminated. Rates are reduced only for the
years in wfaicfa tfaere was an overcfaarge. Tfae annual percentage reductions necessary to
eliminate the $208.1 million SARR over-recovery were set out in Table E-1, column 11. See
2003 Decision, at \60.
The Board applied tfaese percentage rate reductions to tfae cfaallenged rates in Table 3
(Caballo Rojo) and Table 4 (Cordero). See 2003 Decision, at 34, 35. Tfae cfaallenged rate is
referred to as tfae "Tariff Rate." Tfae cfaallenged rates for fiiture years were determined by tfae
Board based on BNSF's pricing autfaority 90042. See 2003 Decision, at 27 note 64. The column
titled "SAC Rate" in Tables 3 and 4 identifies the rate produced by applying tfae appropriate
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percentage reduction to the challenged rate. For the years 2012-2021, the "SAC Rate" is the
same as the "Tariff Rate" because tfae cfaallenged rate for tfaose years did not exceed a reasonable
maximum rate. Tfae far rigfat column in Tables 3 and 4 set out tfae "STB Prescribed Rate," wfaicfa
is described as tfae "Higfaer of SAC rate or 180% RA^C rate." A prescribed rate was establisfaed
only for tfae years 2001-2011.
BNSF and TMPA asked for reconsideration of tfae 2003 Decision on various grounds.
Among otfaer tilings, TMPA cfaallenged the geographic scope of tfae Board's rate prescription,
i.e., tfae mine origins covered by tfae rate prescription. However, TMPA did not cfaallenge or ask
tfae Board to reconsider its decision to prescribe a rate only for tfae years in wfaicfa SAC revenues
exceeded SAC costs. In a decision served September 27,2004, tfae Board addressed tfae parties'
petitions for reconsideration.
First, in describing the 2003 Decision, the Board explained tfaat "[b]ased upon a stand-
alone cost (SAC) analysis, tfae Board prescribed maximum reasonable rates tfarougfa tfae year
2011 and awarded reparations to TMPA." Decision served September 27,2004, at 1
{"September 2004 Decision"). However, tfae Board found on reconsideration tfaat itfaadmade a
few tecfanical errors in its 2003 SAC calculations and it modified tfae SAC calculations and rate
prescription to conform to its tecfanical corrections. Id. at 2. Tfae tecfanical corrections reduced
tfae amount of tfae SARR overcfaarge from $208 million to $108 million and reduced SAC
revenues below SAC costs for 2011, Id. at 30, Table 1. Tfae Board did not make any cfaanges to
tfae procedures used to calculate tfae rate reduction or tfae rate prescription. Tfae modified rate
prescription is set out in Table 2 of tfae September 2004 Decision. September 2004 Decision, at
31, Table 2. As a result of tfae tecfanical corrections, tfae rate prescription period was sfaortened to
2001-2010.
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A montfa later, the Board discovered that it had made a clerical error in generating Table
2 in the September 2004 Decision. As tfae Board explained, tfae Board "did not properly
calculate tfae rate prescription for 2002 tfarougfa 2010." See Decision served October 29,2004, at
1 {"October 2004 Decision"). Tfae Board corrected its clerical error and republished Table 2.
The rate prescription period did not cfaange. As in the September 2004 Decision, the prescription
period ran from 2001 tfarougfa 2010. See October 2004 Decision, at 2, Table 2, Column "STB
Prescribed Rate."
During tfae rate prescription period, BNSF cfaarged TMPA tfae rates prescribed in tfae
October 2004 Decision. As tfae end of tfae rate prescription period approacfaed, BNSF's Assistant
Vice President, Coal Marketing, Robert Brautovicfa, contacted TMPA in September 2010 to
initiate commercial discussions about tfae service BNSF would provide after tfae rate prescription
expired. As explained by Mr. Brautovicfa in tfae attached verified statement, BNSF and TMPA
faad discussions about a possible rail transportation contract but no agreement was reacfaed.
BNSF tfaerefore establisfaed a common carrier rate tfaat would become effective on January 1,
2011.
As explained by Mr. Brautovicfa, BNSF deliberately set tfae common carrier rate at a level
tfaat would be below tfae Board's jurisdictional tfaresfaold in order to avoid continued litigation
over TMPA's rates. On December 13,2010, BNSF establisfaed a rate of $30.85 per ton plus a
fiiel surcfaarge, based on the most recent available URCS for the year 2008. Subsequently, tfae
Board issued its 2009 URCS. In order to remain below tfae jurisdictional tfaresfaold based on tfae
newly issued 2009 URCS, on December 24,2010, BNSF reduced tfae rate to $29.70 per ton and
eliminated the fiiel surcharge.
-6-
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III. ARGUMENT
A. The Plain Language Of The Board's Decisions In This Case Makes Clear
That The Board Did Not Prescribe Rates Beyond 2010.
By asking tfae Board to "direct BNSF to not cfaarge (tfarougfa Marcfa 31, 2021) more tfaan
tfae rate listed in tfae 'SAC Rate' and 'Tariff Rate' colunms of [tfae Board's] decisions served
September 27,2004 and October 29,2004," Petition at 5, TMPA is eitfaer contending tfaat tfae
Board prescribed tfae maximum reasonable rates tfaat BNSF could cfaarge TMPA tfarougfa Marcfa
31,2021, or suggesting tfaat tfae Board sfaould now impose sucfa a prescription. But neitfaer
altemative is warranted.
As to the first altemative, there is no ambiguity about tfae scope of tfae rate prescription in
tfais case. In tfae original 2003 Decision, tfae Board stated tfaat "we prescribe a maximum
reasonable rate through the year 2011." 2003 Decision, at 33 (empfaasis added). On
reconsideration, tfae Board explained tfaat itfaad"prescribed maximum reasonable rates through
the year 2011." September 2004 Decision, at 1 (empfaasis added). In tfae September 2004
Decision, tfae Board made certain technical corrections to tfae underlying SAC calculations, but
tfae Board did not cfaange in any way tfae rate prescription procedures. Tfae tecfanical corrections
sfaortened tfae rate prescription period by a year, eliminating 2011 as part of tfae rate prescription
period. A montfa later, tfae Board noted tfaat itfaadmade a clerical error in tfae September 2004
Decision in "calculat[ing] tfae rate prescription/or 2002 through 2010." October 2004 Decision,
at 1 (empfaasis added).'
' The correction of tfae clerical error did not change tfae rate prescription period.
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Tfae Board's clear language describing tfae temporal scope of tfae rate prescription was
reinforced by tfae cfaart setting out tfae prescribed rates. Tfae rate prescription cfaart in eacfa of tfae
tfaree decisions contains a column titled "STB Prescribed Rate." See 2003 Decision, at 34, 35;
September 2004 Decision, at 31; October 2004 Decision, at 2. In each of these cfaarts, tfae STB
Prescribed Rate column specifies eitfaer a dollar/ton rate or states that the prescribed rate would
be tfae "Higfaer of SAC rate or 180% RA^C rate." But tfae Prescribed Rate column of tfae cfaart is
filled in only for tfae years 2001-2010 (or 2001-2011 in tfae prior 2003 Decision). For eacfa year
after 2010 (or 2011 in tfae prior 2003 Decision) tfae STB Prescribed Rate column is blacked out
clearly sfaowing tfaat tfaere is no prescribed rate.
TMPA conspicuously avoids any reference to tfae language actually used by tfae Board to
describe tfae scope of tfae rate prescription. Instead, TMPA argues tfaat BNSF's rates must be
limited to tfae "SAC Rate" or "Tariff Rate" set out in Table 2 of tfae October 2004 Decision,
regardless of wfaat tfae Board actually said about the scope of its prescription, because tfae logic
of tfae underlying SAC analysis requires sucfa limitation: "[I]f tfae Board allows BNSF to cfaarge
a rate higfaer tfaan tfaat sfaown in tfae SAC rate or Tariff rate column of tfae TMPA decisions for
tfae 2011-2021 period, tfaen tfae 20-year DCF analysis will be unlawfiilly unbalanced." Petition at
11.
TMPA cannot rely on tfae supposed logic of tfae underlying SAC analysis to override tfae
plain language of tfae Board's actual rate prescription. Prescribed rates do not flow automatically
from a SAC analysis. Rate prescriptions are an exercise of tfae Board's discretionary autfaority to
prescribe rates under 49 U.S.C. § 10704(a)(l).^ Tfae Board cannot prescribe a rate unless tfae
^ "[I]n contrast to reparations - to wfaicfa a complainant tfaatfaaspaid an unreasonably

faigfa rate for past movementsfaasa statutoryrigfatto be awarded - tfae complainantfaasno similar
r i ^ t to a rate prescription for future movements. Ratfaer, tfae Boardfaasdiscretion as to wfaetfaer
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SAC analysis sfaows that the challenged rate exceeds a reasonable maximum rate. Assuming tfaat
there is sucfa a sfaowing, tfae issues of wfaetfaer to prescribe a rate and wfaat precise form a
prescription will take is up to tfae Board. Tfaus, wfaile a Board rate prescription is a result ofa
SAC analysis sfaowing tfaat a rate is unreasonablyfaigfa,tfae assumptions in tfae SAC analysis
cannot override tfae scope of a rate prescription as determined by the Board.
In Western Fuels Ass'n, Inc. & Basin Elec. Power Coop. v. BNSFRy. Co., STB Docket
No. 42088 (Sub-No. 1) (STB served July 27,2009) {"WFA/Basin"), the petitioners made tfae
same argument tfaat TMPA makesfaere,namely tfaat tfae Board must be deemed to faave
prescribed rates tfaat conform to tfae assumptions used in the SAC analysis, otherwise the SAC
analysis would become unbalanced - i.e., traffic group revenues would no longer equal SAC
revenue requirements. See WFA/Basin, at 7. According to WFA/Basin, sucfa an imbalance
would "result in a windfall for BNSF, as BNSF would be able to collect more tfaan tfae SAC costs
from tfae traffic group, and tfaus violate core SAC principles." Id.
The Board rejected WFA/Basin's claim that tfae prescribed rates, expressed as an RA^C
ratio under tfae Board's MMM rate reduction approacfa,faadto be defined by reference to tfae
underlying SAC assumptions. Tfae Board explained tfaat it uses numerous assumptions,
including cost and revenue forecasts, in tfae SAC analysis to determine a proper rate prescription.
Id. at 8. But once the Board uses tfaose assumptions to come up witfa a rate prescription, tfae
Board puts tfae SAC analysis aside. Tfae prescribed rates are defined by tfae Board's rate
prescription order ratfaer tfaan by tfae assumptions underlying tfae SAC analysis.
Tfae controlling effect given to rate prescriptions as formulated by tfae Board is vividly
illustrated by West Texas Utilities Company v. The Burlington Northern and Santa Fe Railway
or not to prescribe rates for future movements." AEP Texas North Co. v. BNSFRy. Co., STB
Docket No. 41191 (Sub-No. 1), at 18 (STB served May 15,2009) {"2009 AEP Texas Decision").
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Company. STB DocketNo. 41911 (STB served May 29,2003) {"2003 WTUDecision"). There
tfae Board made it clear that the scope of a rate prescription is defined only by tfae language used
by tfae Board to specify tfae prescription. Tfae Board in 1996faadprescribed rates at tfae
jurisdictional tfaresfaold of 180 percent of variable costs. At the time ofthe rate prescription, tfae
maximum reasonable rate as determined by tfae SAC analysis was below tfae jurisdictional
tfaresfaold. However, by 2003, tfae SAC maximum ratefaadrisen to a level tfaat exceeded tfae
jurisdictional tfaresfaold. Since BNSF was entitled by law to cfaarge tfaefaigfaerofthe SAC
maximum rate or the jurisdictional threshold, BNSF sougfat from tfae Board "a declaration tfaat
tfae prior decision prescribed tfae maximum reasonable rate at tfaefaigfaerof tfae SAC rate or tfae
jurisdictional tfaresfaold." 2003 WTU Decision, at 2.
Tfae Board denied BNSF's request for a "declaration" tfaat would define tfae 1996 rate
prescription in a way tfaat was inconsistent witfa tfae plain language of tfae rate prescription it faad
actually imposed. Even tfaougfa tfae Board agreed witfa BNSF tfaat itfaadbeen an error in 1996 to
limit BNSF's rates to tfae jurisdictional tfaresfaold in periods wfaen the SAC maximum rate
exceeded the tfaresfaold, tfae Board recognized tfaat it would be improper to retroactively redefine
tfae rate prescription. As tfae Board explained, "[t]fae prior decision was unambiguous, faowever,
so it is inappropriate to declare that it said sometfaing different from what it clearly said." 2003
WTU Decision, a t l .
In this case, TMPA asks that the Board "clarify" that the rate prescription extends beyond
2010 (Petition at 5-6). But the Board cannot "clarify" tfae rate prescription to say sometfaing that
is inconsistent with tfae plain language of tfae prescription. Tfae Board prescribed rates in tfais
case tfarougfa 2010, so tfae rate prescription by its very terms ended at tfae end of 2010. TMPA's
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JA077
suggestion tfaat tfae Board sfaould give effect to a non-existent prescription for tfae post-2010
period is unavailing.
As tfaere is no maximum reasonable rate tfaat has been prescribed beyond 2010, BNSF is
tfaerefore free to cfaarge "any rate" tfaat it deems appropriate. 49 U.S.C. § 10701(c). TMPA
could, of course, seek to cfaallenge tfae reasonableness ofa new rate established by BNSF if it
could establisfa tfaat BNSFfaasmarket dominance over tfae traffic. But wfaere, as here, the rate in
question does not exceed tfae statutory jurisdictional tfaresfaold, quantitative market dominance
does not exist.
B. TMPA Has Identified No Grounds To Reopen The Prior Decisions In This

Case To Extend The Rate Prescription Beyond 2010.
As explained above, tfae Board unambiguously limited tfae rate prescribed in this case to
tfae period 2001-2010 and did not prescribe a rate beyond 2010. Tfae Board cannot interpret or
enforce its prior decision in a way tfaat is inconsistent witfa tfae plain language of that decision.
As discussed above, in tfae 2003 WTU Decision tfae Board rejected a request by BNSF to faave
tfae Board define tfae 1996 rate prescription in a way tfaat was inconsistent witfa tfae clear language
of tfae 1996 decision. However, in tfaat case tfae Board concluded that the legal flaw in the 1996
rate prescription was so obvious that it would be appropriate to treat BNSF's petition as a request
for a reopening of tfae prior decision to modify tfae rate prescription on grounds of material error.
2003 WTU Decision, at 3.
Tfae resemblance between tfae 2003 WTU Decision and the current situation extends only
so far as the parties' requests for relief. Here, unlike WTU, there was no obvious legal flaw in
the Board's prior rate prescription that would justify treating TMPA's petition as a request to
reopen the rate prescription based on material error. Indeed, as discussed below, it is clear that
the Board did not commit material error in limiting tfae rate prescription to tfae period 2001-2010.
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JA078
Moreover, in ligfat ofthe substantial changes in economic conditions since 2003, there would be
no factual grounds to support a request for reopening to extend tfae rate prescription for 10 more
years. Tfaerefore, even if tfae Board were to constme TMPA's Petition as a request to reopen tfae
prior rate case to extend tfae prior rate prescription, it wouldfaaveto deny tfaat request because
TMPA has failed to allege facts that would justify extending tfae prescription.
1. The Board Did Not Commit Material Error In Limiting The Rate
Prescription To The Period 2001-2010.
A party may request the reopening ofa final decision, including a rate prescription, on
grounds of material error. 49 U.S.C. § 722(c); 49 C.F.R. § 1115.4. But to justify a modification
of a rate prescription based on material error, there must be a legal flaw in the underlying
decision. It is not enough tfaat tfae Board migfatfaavereacfaed a different result in tfae prior
decision if itfaadit to do over again. Tfae interests of finality and repose require tfaat tfae
proponent of a reopening sfaow tfaat tfaere was a legal flaw in tfae prior decision.
In tfae 2003 WTU Decision, tfae goveming statute gave BNSF tfae rigfat to cfaarge rates up
to a maximum reasonable rate, and tfae 1996 rate prescription violated that statutory right. As the
Board explained, "[i]f the SAC rate rises above tfae jurisdictional tfaresfaold in any year, tfae
railroad sfaouldfaavetfae rigfat to cfaarge a rate up to tfaat maximum reasonable rate." 2003 WTU
Decision, at 3. Because it was material error tofaavelimited tfae rate prescription to tfae
jurisdictional tfaresfaold wfaen tfae statute gave BNSF tfaerigfatto cfaarge afaigfaerrate, tfae Board
reopened tfae 1996 decision and modified tfae rate prescription on a prospective basis.
In contrast, no statute was violatedfaerein limiting tfae rate prescription to tfae period
2001-2010. A sfaipper does notfaavea statutory rigfat to a prescription of future rates. Section
10704(a)(1) states tfaat if tfae Board finds tfaat a rate "does or will violate tfais p a r t . . . tfae Board
may prescribe tfae maximum rate...." 49 U.S.C. § 10704(a)(1) (empfaasis added). Tfae Board
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JA079
faas repeatedly acknowledged tfaat tfae prescription of a rate for future periods is discretionary.
See, e.g., 2009 AEP Texas Decision, at 18. Tfaerefore, TMPA did notfaavea rigfat to any rate
prescription, let alone a rate prescription beyond 2010.
The Board's decision to limit the rate prescription to the period 2001-2010 was
reasonable. Tfae SAC analysis indicated tfaat tfae cfaallenged rate exceeded a reasonable
maximum rate only tfarougfa 2010. After 2010, tfae SAC analysis sfaowed tfaat tfae SARR would
generate insufficient revenue to cover its costs. Rates tfaerefore needed to be reduced to a
maximum reasonable level only for tfae period 2001-2010. Moreover, in setting tfae maximum
reasonable rates for tfae years 2001-2010, it was appropriate for tfae Board to use its "netting"
procedures to ensure tfaat SARR revenues would be reduced only by an amount necessary to
eliminate tfae $108 million over-recovery.
Indeed, BNSF does not believe tfaat tfae Board wouldfaavefaadtfae legal autfaority to
prescribe rates for tfae 2011-2021 period. Tfae statute gives tfae Board discretion to prescribe
rates only wfaere tfae Boardfaasfound tfaat tfae cfaallenged rate "does or will" violate tfae statute.
49 U.S.C. § 10704(a)(1). For tfae years 2011-2021, tfae Board found tfaat tfae challenged rates did
not exceed reasonable maximum rates and tfaerefore did not violate tfae statute. Tfaerefore, tfae
legal predicate for a rate prescription for tfae years 2011-2021 simply did not exist.
But tfae Board does not need to reacfa tfae question of its legal autfaority to prescribe rates
in periods wfaen tfae cfaallenged rate is not found to exceed reasonable maximum rates. Even if
tfae Boardfaadtfae legal autfaority to prescribe rates for tfae period 2011-2021, it cfaose not to do
so. It is irrelevant wfaether tfae Board in 2003 could have prescribed rates for tfae period 2011 -
2021. In a reopening based on material error, tfae only question is wfaetfaer tfae Board's prior
decision not to prescribe rates for tfae entire 20-year period was legally flawed. Particularly in
13
JA080
light ofthe discretionary nature ofa rate prescription, there was no legal flaw in the Board's
decision to limit tfae rate prescription to tfae period during wfaicfa rates were found to exceed
reasonable maximum rates and leave it to TMPA to seek an extension ofthe rate prescription in
tfae future if future conditions warranted sucfa an extension.
2. TMPA Has Identified No Factual Grounds For An Extension Of The

Rate Prescription For Ten More Years.
Even if TMPA's Petition were treated as a request to reopen and modify tfae rate
prescription, TMPA failed to present any factual evidence tfaat would justify an extension of tfae
rate prescription. In a recent decision in tfae long-mnning dispute involving BNSF's rates for
AEP Texas, tfae Board made it clear tfaat a shipper seeking to impose a rate prescription based on
a prior SAC analysis bears the burden of showing that tfae assumptions underlying tfae original
SAC analysis remain valid. TMPAfaaspresented no sucfa evidence.^
In tfae AEP Texas case, tfae Board's 2009 SAC analysis sfaowed tfaat BNSF's rates for tfae
issue traffic would exceed a reasonable maximum rate in tfae year 2020. 2009 AEP Texas
Decision, at 19. For a number of reasons, tfae Board did not prescribe a rate for 2020. However,
tfae Board stated tfaat "[sjfaould the forecasts in the SAC analysis for 2020 be bome o u t . . . AEP
Texas may seek to reopen tfais proceeding under 49 U.S.C. 722(c) to obtain appropriate rate
relief." Id. Tfaus, AEP Texas migfat be able to obtain a rate prescription for tfae year 2020, but
sucfa a rate prescription would be appropriate only if AEP Texas could sfaow tfaat tfae assumptions
and forecasts underlying tfae original SAC analysisfaadbeen "bome out." If tfae facts faad
cfaanged significantly, a reopening to impose tfae rate prescription would not be appropriate.
^ Tfae more recent rate case involving AEP Texas relates to a cfaallenge to rates for
movements tfaat were not covered by tfae rate prescription discussed in tfae 2003 WTU Decision.
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JA081
Here, tfae rate prescription sougfat by TMPA is based on SAC calculations done in 2003
using evidence submitted in 2001-2002. In Major Issues In Rail Rate Cases, STB Ex Parte No.
657 (Sub-No. 1) (STB served Oct. 30,2006) {"Major Issues"), tfae Board decided to limit rate
prescriptions to 10 years, recognizing tfaat "cfaanges in market conditions render[] obsolete tfae
underlying assumptions in older SAC analyses well before tfae 20-year analysis period has
ended." Major Issues, at 62. Nearly a decade has passed since tfae Board did its original SAC
analysis in tfais case yet TMPA has presented no evidence that tfae assumptions underlying tfae
original SAC analysis remain valid.
Indeed, TMPA could not possibly make sucfa a sfaowing. Dramatic cfaanges in fuel costs
alone make it clear tfaat tfae assumptions in tfae original SAC analysisfaavenot been "bome out."
As explained by BNSF's witnesses Messrs. Baranowski and Fisfaer, locomotive operating cost is
tfae single largest SARR operating expense and fuel cost is tfae primary component of locomotive
operating costs. Fuel costs used in tfae original SAC analysis came from 2001, before tfae
unprecedented fuel cost increases later in tfae decade, peaking in 2008. Figure 3 in tfae
Baranowski/Fisfaer V.S. sfaows tfaat fuel costs increased at a rate tfaat was mucfafaigfaertfaan tfae
rate assumed in tfae Board's SAC analysis. Based on actual fuel prices, tfae SARR's operating
costs wouldfaavebeen muchfaigfaertfaan expected and the SARR wouldfaavebeen entitled to
generate far more revenue in all years of tfae SAC analysis to offset tfaose costs tfaan tfae Board
assumed in its original SAC calculations.
Indeed, in ligfat of tfae enormous fuel cost increases tfaat were not reflected in tfae Board's
original SAC analysis, TMPAfaasit backwards wfaen it claims tfaat BNSF will eam a windfall if
tfae rate prescription is not extended. Messrs. Baranowski and Fisfaer sfaow tfaat as a result of
unexpected fuel cost increases since 2001, TMPAfaasbenefitted over tfae past 10 years from
15
JA082
substantial rate reductions tfaat, in hindsight, were completely unjustified. In fact, ifthe original
SAC analysis had accurately anticipated the fuel prices that BNSF actually experienced, no rate
prescription at all would have been justified.^
C. BNSF's Current Rate Is Below The Board's Jurisdictional Threshold And

Cannot Be Supplanted By The SAC Rate From The Board's Prior Decision.
For tfae reasons discussed above, BNSF does not believe tfaat any extension of tfae rate
prescription in tfais case would be warranted. However, if tfae Board did reopen tfae prior
decisions to extend tfae rate prescription, tfae Board would have to make it clear that BNSF is
entitled to cfaarge tfaefaigfaerof tfae SAC maximum reasonable rate or 180 percent of BNSF's
URCS variable costs. Tfae Board's 2003 WTU Decision discussed above, as well as tfae prior
decisions in tfais case, recognize tfaat tfae Board cannot prescribe a rate below tfae jurisdictional
tfaresfaold of 180 percent of URCS variable costs.
BNSF's witnesses Messrs. Baranowski and Fisher show tfaat based on tfae most recent
available URCS costs, BNSF's January 1,2011 rate for tfae issue traffic is below tfae
jurisdictional tfaresfaold for all mine origins. Depending on tfae mine origin, BNSF's rate varies
from 166 percent of URCS variable costs to 174 percent. In Major Issues, tfae Board recognized
tfaat by establisfaing an URCS-based jurisdictional tfaresfaold. Congress intended "to create an
adminisfratively quick and easy-to-determine regulatory safefaarborfor tfae railroads.... [I]f a
railroad cfaooses to price its traffic witfain tfais safefaarbor,it sfaould not need to worry about
regulatory intervention." Major Issues at 51. That statement is directly applicable to tfae
'^ If tfae Board were to extend tfae rate prescription, and BNSF believes tfaere would be no
basis for sucfa a decision, tfae Board would need to treat BNSF's evidence on tfae cfaanges in fuel
costs over tfae past decade as grounds to conduct a broader reopening to consider tfae vast array
of cfaanged circumstances since 2001. Under tfae Board's current rules, tfae Board would also lift
tfae prescriptive effect of tfae rate prescription wfaile tfae issue is being considered.
16
JA083
situation here. As explained by Mr. Brautovicfa, BNSF establisfaed tfae level of tfae current
TMPA rates witfa specific reference to tfae most current URCS variable costs in order to yield
rates tfaat would fall below tfae Board's jurisdictional tfaresfaold and tfaereby foreclose tfae
possibility of continued rate litigation. Tfaere can be no doubt tfaat sucfa a course of action to
secure a regulatory safefaarboris permissible under the goveming statute.
In a footnote in its petition, TMPA acknowledges, as it must, that tfae Board does not
faave autfaority to require BNSF to charge rates below the jurisdictional tfaresfaold. But TMPA
states tfaat "BNSF must prove that its RA^C exceeds [sic] 180% and tfais must be done under tfae
metfaodology used in tfais case, including movement specific adjustments." Petition at 2 note 1.
TMPA is incorrect on tfae issue of metfaodology. Current law requires tfaat variable costs for
jurisdictional tfaresfaold purposes be based on unadjusted URCS costs. Wfaile tfae Board used
movement-specific adjustments to determine tfae jurisdictional tfaresfaold in tfae original decision
in tfais case and instructed tfae parties to use tfaat approacfa to determine tfae jurisdictional
tfaresfaold in applying tfae rate prescription, the Board subsequentiy decided to discontinue the use
of movement-specific adjustments. In Major Issues, tfae Board concluded tfaat "[i]n an individual
rate reasonableness proceeding, we will use our existing URCS model, witfaout furtfaer
movement-specific adjustment, to make tfae jurisdictional inquiry and to set tfae floor for rate
relief." Major Issues, at 61.
If tfaere were a rate prescription in effect in tfais case, tfae Board sfaould constme its
decision in Major Issues to discontinue use of movement-specific adjustments as automatically
overriding tfae Board's instmction in 2003 to use movement-specific adjustments in calculating
tfae jurisdictional tfaresfaold for rate prescription purposes. But it is not necessary to address tfaat
question since by its very terms, tfae rate prescription in tfais case lasted only until 2010. Tfae
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JA084
Board's instmction to apply movement-specific adjustments in implementing the rate
prescription tfaerefore expired witfa tfae rate prescription. The question before tfae Board now is
wfaetfaer tfae Board sfaould reopen its prior decision and prescribe rates for anotfaer 10 years. It
would make no sense to use a superseded metfaod of calculating variable costs for any new rate
prescription. If tfae Board were to decide now tfaat a rate prescription sfaould be establisfaed for
an additional 10 years, tfae Board must apply its current metfaod for calculating variable costs.
Indeed, in Major Issues, tfae Board went so far as to conclude tfaat the use of movement-
specific adjustments was a "flawed approach" to determining the Board's jurisdiction over
railroad rates. Major Issues, at 76. Therefore it would be arbitrary and capricious for tfae Board
to require tfae parties to continue using tfae movement-specific adjustments from tfae original
decision to determine tfae Board's jurisdiction over BNSF's rates today.
Several factors led tfae Board to conclude in Major Issues tfaat tfae use of movement-
specific adjustments in rate reasonableness cases was "flawed" and tfaat tfae Board's jurisdiction
sfaould be assessed using system-average URCS costs. Tfaree factors are particularly important
faere. First, tfae Board concluded tfaat tfaere was a conceptual flaw in tfae use of movement-
specific costs witfa system-average variability factors. Major Issues, at 53. Tfae Board
recognized tfaat tfae use ofa system-average variability factor to determine tfae variable costs ofa
faigfa-density line, sucfa as lines used for coal transportation, will likely understate variable costs.^
Tfae Board eliminated tfae analytic flaw produced by tfae disconnect between movement-specific
^ As tfae Board noted, "tfae Board recognized tfais conceptual disconnect in [Public
Service Co. of Colorado D/B/A Xcel Energy v. The Burlington Northern and Santa Fe Railway
Company, STB Docket No. 42057 (STB served June 8, 2004)], altfaougfa it did not permit tfae
railroad to use tfais argument as a weapon to attack the movement-specific adjustments proposed
by tfae sfaipper, because tfae railroad itself sougfat movement-specific adjustments tfaat appeared to
suffer the same analytic flaw." Major Issues, at 55.
18
JA085
adjustinents and system-average variability factors by disallowing all movement-specific
adjustments.
Second, tfae Board concluded tfaat "selective replacement of system-average costs witfa
movement-specific costs may bias tfae entire analysis, rendering tfae modified URCS output
unreliable." Major Issues at 52. Tfae Board noted tfaat "as a matter of econometric tfaeory,
piecemeal or incomplete adjustments to URCS are suspect." Id. As in otfaer cases wfaere
movement-specific adjustments were proposed, tfae Board used movement-specific adjustments
in tfae 2003 Decision in tfais case for only a subset of variable cost inputs. Tfae Board's decision
in Major Issues to eliminate all movement-specific adjustments ensured tfaat all variable cost
inputs would be consistently determined using system-average URCS costs.
Tfaird, the Board concluded tfaat tfae "immense costs and complexity of [movement-
specific] adjustments to URCS conflicts witfa wfaat Congress intended in adopting tfae 180%
RA^C limitation on Board rate review: to create an administratively quick and easy-to-determine
regulatory safefaarborfor tfae railroads." Major Issues, at 51. As explained by BNSF's
witnesses Messrs. Baranowski and Fisfaer, tfae Board's concems about tfae complexity of
movement-specific adjustments are particularly relevant in tfais case, wfaere numerous special
studies were used in tfae 2003 Decision to create tfae movement-specific adjustments and wfaere
several complex adjustments were applied. To revise tfaose special studies and revisit all of tfae
complex adjustments now, and on an on-going basis over tfae next ten years, would directiy
conflict witfa Congress' intent to establisfa an "easy-to-determine regulatory safefaarborfor the
railroads."
As explained by Messrs. Baranowski and Fisher, the Board's 2003 Decision applied 26
different movement-specific adjustments covering a broad range of variable cost categories.
19
JA086
Table 2 to tfae Baranowski/Fisfaer verified statement lists tfae vast amount of data tfaat would need
to be collected to try to replicate tfaose movement-specific adjustments today. Moreover, tfae
data previously used to make the movement-specific adjustments came from data systems that
have not remained static over the past decade, and it is uncertain that tfae data previously
available to carry out tfae special studies and adjustments is available today. It is likely tfaat any
effort to recreate tfae adjustments from 2003 using new data from new or different data systems
would lead to substantial disputes. In addition, tfae 2003 movement-specific calculations relied
on several complex special studies, including a special study of fuel conspumption on specific
TMPA trains. Tfae metfaodologies used in tfaose complex studies migfat not even be possible to
replicate today.
Given tfae complexity and unreliability of variable costs determined using movement-
specific adjustments, tfae Board specifically found in Major Issues tfaat use of system-average
costs in lieu of movement-specific adjustments sfaould apply not only to future cases but also to
cases pending at tfae time of tfae decision in Major Issues. Two rate reasonableness cases
involving AEP Texas and WFA/Basin were pending wfaen tfae Board issued its decision in Major
Issues. In botfa cases, tfae partiesfaadalready filed variable cost evidence tfaat included numerous
movement-specific adjustments. Even tfaougfa tfae partiesfaadalready incurred tfae costs to
develop complex movement-specific adjustments, tfae Board found tfaat tfae concems thatfaadled
it to eliminate movement-specific adjustments in fiiture cases applied also to tfae pending cases.
Tfae Board noted tfaat
wfaile tfae partiesfaavealready incurred the costs for making movement-

specific adjustments for historical movements, tfaeyfaavenot yet done so
for future movements. And because we will use a 20-year SAC analysis
period in tfae AEP Texas and Westem Fuels cases, rate prescriptions could
in tfaeory extend for almost two decades. Thus, deciding to make
20
JA087
movement-specific adjustments in tfae pending cases would perpetuate a

flawed approacfa long into tfae future.
Major Issues, at 76.
It would be contrary to current law and to sound regulatory policy for tfae Board to
perpetuate tfae flawed movement-specific approacfa into tfae future if it were to reopen tfais case
and extend tfae prior rate prescription. As tfae Board concluded in Major Issues, applying tfae
movement-specific adjustments from tfae 2003 Decision now and in the future to calculate tfae
jurisdictional tfaresfaold on TMPA's movements would impose enormous litigation burdens and
would produce results tfaat are not reliable. BNSFfaaspresented evidence demonstrating tfaat tfae
rate being cfaarged to TMPA falls below tfae jurisdictional tfaresfaold calculated using system-
average URCS as tfae Board's mles require. Tfaere is no basis for pursuing an altemative
approacfa.
IV. CONCLUSION
Tfae Board should deny TMPA's Petition on grounds tfaat TMPA seeks to enforce a rate
prescription wfaere none exists. If tfae Board were to treat TMPA's Petition as a request to
reopen tfae prior decisions in tfais case, tfae Board sfaould find tfaat a reopening is not warranted
because tfaere was no material error in tfae prior decisions and tfaere is no factual basis for
extending tfae rate prescription for 10 more years. Finally, even if tfae Board were to reopen tfae
prior decisions and extend tfae rate prescription, tfae Board's jurisdiction over BNSF's rates
would have to be assessed using system-average URCS and BNSFfaassfaown tfaat its current
TMPA rate is below tfae Board's jurisdictional tfaresfaold.
21
JA088
Respectfully submitted.
Ricfaard E. Weicfaer Samuel M. Sipe, Ji

Jill K. Mulligan Antfaony J. LaRocca
BNSF RAILWAY COMPANY STEPTOE & JOHNSON LLP
2500 Lou Menk Drive 1330 Connecticut Ave., N.W.
Fort Wortfa, TX 76131 Wasfaington, D.C. 20036
(817)352-2353 (202)429-3000
Attomeys for BNSF Railway Company
January 6,2011
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JA089
CERTIFICATE OF SERVICE
Ifaerebycertify tfaat tfais 6tfa day of January, 2011,1 served a copy of BNSF's Reply to
TMPA's Petition for Enforcement of Decision on tfae following by U.S. mail.
Sandra L. Brown
David E. Benz
Tfaompson Hine, LLP
1920 N Street, NW, Suite 800
Washington, DC 20036
(202)263-4101
JA090
SURFACE TANSPORTATION BOARD

STB Docket No. NOR 42056

v.
BNSF RAILWAY COMPANY
Verified Statement of
Robert A. Brautovicfa
My name is Robert A. Brautovicfa. I am the Assistant Vice President, Coal Marketing
West, for BNSF Railway Company ("BNSF"). I have been employed in the Coal Marketing
Group of BNSF and its predecessor, Burlington Northem Railroad Company, since 1992 in tfae
positions of Manager, Coal Marketing, Director of Coal Marketing, and Assistant Vice President,
Coal Marketing West. In my Coal Marketing Group positions, Ifaavebeen responsible for
managing specific coal customer accounts and, more recently, for managing tfae accounts of
customers witfain a geograpfaic territory tfaat includes Texas Municipal Power Agency's
('TMPA") Gibbons Creek Steam Electric Station located near lola, Texas.
I was responsible for managing the TMPA account in 2001, when TMPAfileda
complaint with tfae STB cfaallenging tfae reasonableness of BNSF's conunon carrier rate for
transportation of coal to tfae Gibbons Creek plant. Before TMPAfiledits complaint, I faad
engaged in several discussions and negotiating sessions witfa TMPA executives in an attempt to
reacfa agreement on tfae terms ofa transportation contract. Wfaen tfaose negotiations failed to
produce an agreement, BNSF establisfaed a common carrier rate and TMPA challenged the rate
before the STB. After two years of litigation, the STB found tfaat tfae cfaallenged rate exceeded a
JA091
reasonable maximum rate and ordered BNSF to pay reparations to TMPA. Tfae STB also
prescribed the maximum rates that BNSF could cfaarge tfarougfa 2010.
In tfae Fall of 2010, as tfae end of tfae rate prescription period approacfaed, I contacted
Gary Parsons, tfae General Manager of TMPA, to initiate discussions about commercial options
available to BNSF and TMPA wfaen the rate prescription ended. We exchanged correspondence
and had a meeting in November 2010. We discussed the possibility of entering into a
transportation contract and BNSF offered TMPA specific contract terms. BNSF never received a
replyfix)mTMPA to the contract offer.
While BNSF was waiting for a replyfromTMPA to its confract offer, BNSF established
a common carrier rate tfaat would go into effect on January 1,2011, wfaen tfae rate prescription
ended. In setting tfae level of tfae common carrier rate, my objective was to set a rate tfaat was fair
to TMPA and tfaat would avoid continued rate reasonableness litigation in tfae event tfaat TMPA
declined to agree to BNSF's confract proposal. I understand tfaat Congressfaasestablisfaed a safe
faarbor for railroad rates tfaat precludes legal cfaallenge to rates tfaat are less tfaan 180 percent of
URCS variable costs. BNSF determined tfaat a rate of $30.85 per ton plus BNSF's standard fuel
surcfaarge would generate revenues tfaat were less tfaan 180 percent of URCS variable costs.
Tfaerefore, BNSF establisfaed tfaat rate to take effect on January 1,2011. Tfae new rate was set
out in BNSF Pricing Autiiority 90068, Revision 75, wfaicfa BNSF issued on December 13,2010.
Wfaen BNSF establisfaed tfae new common carrier rate, tfae most recent available URCS
was fortiieyear 2008. On December 17,2010,tiieBoard issued a new URCS fortiieyear 2009.
BNSF determined tfaat based on tfae newly issued 2009 URCS, tfae TMPA rate previously
establisfaed in Pricing Autfaority 90068 needed to be reduced in order to ensure that it generated
revenues tfaat were less tfaan 180 percent of URCS variable costs. Tfaerefore, in order to remain
JA092
below tfae jurisdictional tfaresfaold, BNSF revised tfae rate based on tfae 2009 URCS and
eliminated tfae fuel surcfaarge. BNSF establisfaed tfae new reduced rate of $29.70 per ton on
December 24,2010 to be effective on January 1,2011. Tfae new rate is set out in BNSF Pricing
Autfaority 90115, wfaicfa is attacfaed to tfais statement.
JA093
I declare under penalty of perjury that tfae foregoing is true and correct. Furtfaer, I certify
tfaat I am qualified and authorized to file this Verified Statement.
Robert
January 5,2011
JA094
BNSF Railway Company
Common Carrier Pricing Authority BNSF 90115
Effective Date: January 1,2011
Expiration Date: December 31, 2011
Commodity: Raw sub-bituminous, STCC 11-21-Series (excluding artificially dried or

processed coal) and STCC 11-22-Series
Origins: Wyoming coal mine origins cited herein.
Destination: Gibbons Creek Steam Generating Station located near lola, TX.
Route: BNSF direct.
Rates: All rates are expressed in U.S. Dollars per net lading ton (2000 pounds
avoirdupois) in BNSF provided rail cars.
Shipper: Shipper shall be the party tendering Coal for shipment pursuant to this
Pricing Authority.
Rate / ton in
Origin Origin Mines BNSF
Group Railcars
Antelope, Belle Ayr, Black Thunder, Buckskin, Caballo,

WYPRB Clovis Point, Cordero, Caballo Rojo, Coal Creek, Dry $29.70
Fork, Eagle Butte, Fort Union, East Thunder, North
Antelope, Rawhide, and West Thunder.
Raiicar Supply and Tender Requirements: Railcars shall be provided by BNSF. The
Minimum Tender for a train is one hundred twenty (120) such Railcars. Claims for damage to or
destruction of such Railcars shall be handled in accordance with the procedures set forth in the
Field Manual and Office Manual of the Association of American Railroads Interchange Rules, as
amended from time to time.
Raiicar and Trainload Weights: Weighing of Coal shipments tendered for transportation
hereunder shall be subject to the provisions BNSF Price List 6041-series Items 130 and 210 in
effect on the date such weighing is undertaken. The Minimum Weight per Trainload for freight
billing purposes shall be determined by multiplying the number of furnished Railcars per
Trainload by 120 net tons. Freight Charges will be assessed on the basis of the applicable
Minimum Weight per Trainload or the actual weight of Coal per Trainload whichever is greater.
Minimum Annual Volume Commitment ("MAVC"): The Freight Rates enumerated herein are
subject to a minimum annual volume commitment of 1,800,000 net tons per calendar year.
Within 30 days following completion of a calendar year, shipper shall certify compliance with the
MAVC provision. In the event shipper fails to meet the MAVC, the resulting volume shortfall will
be subject to payment of liquidated damages, equal to 30% of the rate in effect on the last day
of the calendar year times the amount of such volume shortfall.
Page 1 of 2
JA095
BNSF Railway Company
Common Carrier Pricing Authority BNSF 90115
Loading and Unloading: Loading and Unloading of shipments tendered for transportation
hereunder shall be subject to the provisions of BNSF Price List 6041-series Items 110 and 120
in effect on the date that such loading and unloading commences.
Other Accessorial Services: Coal unit train accessorial services in addition to those described
herein shall be subject to the provisions of BNSF Price List 6041-series or successors thereto in
effect on the date such services are provided.
Billing and Payment: BNSF will bill each shipment under the terms of the Unifomn Straight Bill
of Lading. All railcars for each shipment are to be billed on one (1) Bill of Lading. This Common
Carrier Authority BNSF 90115, connect address and patron code must be shown on the Bill of
Lading to insure accurate billing. Shipper shall establish credit with BNSF prior to requesting
service hereunder. If credit is extended to Shipper for the payment of transportation charges,
such payment shall be subject to the provisions of BNSF Rules Book 6100-series Item 3400
and successors thereto. In the event that shipper does not make timely payment, or if adverse
credit conditions occur, which in BNSF's judgment could affect Shipper's ability to meet
payment terms, BNSF may require Shipper to pay cash in advance of service for all amounts for
which Shipper is liable under this Common Carrier Authority.
Other Provisions: Shipments made under the provisions of this Common Carrier Authority are
subject to the Uniform Freight Classification 6000-series or its successor, BNSF Rules Book
6100-series, applicable tariffs, statutes, federal regulatory rules and regulations, AAR rules, and
other accepted practices within the railroad industry as may be amended from time to time.
Page 2 of 2
JA096
JOINT VERIFIED STATEMENT
of
MICHAEL R. BARANOWSKI
and
BENTON V. FISHER
I. Introduction
We are Micfaael R. Baranowski and Benton V. Fisher. We are Senior Managing
Directors in FTI Consulting's Network Industries Strategies practice with offices at 1101 K
Street, NW, Washington, DC 20005. Statements of our qualifications are set forth in Exhibits 1
and 2, respectively. We have been asked by BNSF Railway Company toreviewthe Board's
March 21,2003 and September 24,2004 decisions and supporting work papers in this
proceeding and (1) to examine how a number ofthe key inputs and forecast assumptions used by
the Board in the discounted cash fiow model to calculate stand-alone costs compare to actual
values, with a specific focus on the impact of unexpected fiiel cost increases; (2) to explain the
complexity and uncertainty that would be involved in any effort to calculate variable costs for
the issue traffic movement using the movement-specific adjustments to URCS that were adopted
in the Board's original decisions in this case; and (3) to present therevenue-to-variablecost
("R/VC") ratios for the TMPA traffic using the Board's current methodology of system average
URCS costs to develop variable costs.
JA097
II. Comparison of Forecast to Actual Index Values for Key SAC Assumptions
The principal index and forecast values used in the Board's DCF analysis in this case
included the Rail Cost Adjustment Factor- unadjusted for productivity (RCAF-U), which was
used to inflate operating expenses, and the Association of American Railroads (AAR) Quarterly
Railroad Cost Indexes that were used to inflate road property asset costs. The RCAF-U forecast
used by the Board in its original DCF analysis is based on a July 2001 DRI-WEFA RCAF-U
forecast. For the forecast ofthe AAR indexes, the Board's then prevailing practice was to use
the average rate of change in the index component values for the prior five years as the forecast
for theremainderofthe DCF period. In the case ofthe TMPA DCF, die average rate of change
in the AAR index values for the 1996 to 2000 time period form the basis for the 2001 through
2020 forecast.
The DCF analysis underlying the Board's TMPAratereasonablenessdetermination was
generated on March 24,2003. The DCF model wasrerunon Februaiy 27,2004 in support of the
subsequent Board decision onreconsideration,but the key forecast components of that latter
decision were unchanged from those used for the 2003 decision. As such, the forecast inputs
underlying the Board's TMPAratereasonablenessdecision at best refiect expectations as ofthe
first quarter of 2003.
The Board has previously acknowledged that forecasts stretching many years into the
fiiture are inherently unreliable. In its discussion ofthe appropriate pattem of capital recoveiy in
this case, the Board explained that the capital recovery advocated by TMPA, whicfa would have
weighted the annual capital recovery based on therelativetonnage volumes forecast for each
year, placed undue weight on the accuracy of traffic forecasts extending out 20 years. The Board
therefore used a time-based pattem of capital recoveiy. Similar concems about thereliabilityof
JA098
fiiture forecasts were expressed by the Board in its October 30,2006 decision in Ex Parte No.
657 - Major Issues in Rail Rate Cases ("Major Issues"), where it acknowledged that forecasts
beyond 10 years do not reliablyreflectinevitable and unanticipated changes. Specifically, in
discussing its decision to switchfit}ma 20-year to a 10-year DCF period, the Board explained:
The Board proposed to require the use ofa 10-year analysis period in SAC cases
for severalreasons.First, as a practical matter the benefits ofa 20-year analysis
and potential rate prescription are illusory. Rate prescriptions have tended to
endure no longer than 10 years because of inevitable and substantial changes in
circumstances. The logistics industiy is dynamic, with changes in market
conditions rendering obsolete the underlying assumptions in older SAC analyses
well before the 20-year analysis period has ended. Major Issues at 62.
The Board's concemsregardinglong term forecasts are confirmed in this case, where the
costs actually experienced by therailroadindustiy over the 2003-2010 period have consistentiy
turned out to be higher than the costs forecast by the Board in the original DCF analysis. The
most prominent example is the price of fiiel, which has been consistentiy and in some years
dramatically higher than the forecast price implicit in the Board's TMPA DCF results. In the
remainder of this section, we compare the forecasts ofthe key cost indexes used by the Board to
the actual historical index values over the 2001 to 2010 time frame.
a. Comparison of Actual Versus Forecast RCAF-U
The RCAF-U is used in the DCF model to inflate the SARR operating expenses. Figure
1 below compares the RCAF-U forecast for 2001 through 2010 used in the Board's DCF model
to the actual RCAF-U values over the same period.
JA099
Figure 1
Comparison of TMPA DCF Forecast RCAF-U to Actual RCAF-U Through 2010
150.0
90.0
80.0
1 2 3 4 5 6 7 8 9 10 1112 1 3 1 4 1 5 1 6 1718 19 20 2122 2 ) 2 4 25 26 27 28 29 30 3132 33 34 35 36 37)8 39
DCF Ouartpr
• Actual Through 2010 —*— DCF Forecast
As Figure 1 demonstrates, since approximately Quarter 16 of the DCF model mn (the second
quarter of 2004), the actual RCAF-U has been consistentiy higher than forecasted, demonstrating
that tfae forecast SARR operating expenses in the TMPA analysis are understated.
b. Comparison of Actual Versus Forecast AAR Index Values
The AAR indexes are used in the DCF model to inflate road property investment costs. The
DCF model uses three separate input indexes. The Materials and Supplies index is used to
inflate road property asset accounts that consist primarily of materials. These are Account 8 -
Ties, Account 9 - Rail and OTM, and Account 11 - Ballast. Tfae Wages and Supplements index
is used to inflate road property asset accounts that are comprised primarily of labor. These are
Account 1 - Engineering and Account 12 - Track Laying and Surfacing. The remaining road
property accounts except for land are indexed by the AAR Materials, Supplies, Wages and
JA100
Supplements combined (excluding fuel) index.' The AAR and land index values are applied to
the assigned account groupings in tfae "Asset Inflation" tab ofthe DCF model, wfaere a
composite index is calculated. As with the RCAF-U, the actual AAR index values have also
tumed out to be consistently higher than those initially forecast in the Board's DCF model.
Figure 2 compares the composite forecast AAR index values used in the DCF to the composite
index recalculated to reflect the actual AAR index values through 2010.
Figure 2
Comparison of TMPA DCF Forecast AAR Index to Actual AAR Index Through 2010
0.900
0.800
9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39
DCF Quarter
•DCF Forecast —•—Actual Through 2010
c. Changing the Board's DCF Analysis Only to Capture the Actual Change in Fuel
Prices Flips the DCF Results to a Cumulative Under-Recovery Over the 20-Year
DCF Period
Figure 1 demonstrates that the actual RCAF-U since 2004 has been consistently higher
than was forecast. Mucfa ofthe difference is driven by the dramatic - and unforeseen as of 2003
- increases in the price of fiiel. The SARR locomotive operating cost of $103 million for base
year 2001 is the single largest operating cost in the Board's DCF analysis, with fuel cost
' The land inflation index in the DCF is not derived from the AAR index values and is typically the result
ofa special study.
JA101
representing 97.5% of those expenses, or $100.4 million. Because fiiel represents such a large
portion of SARR operating expenses, any understatement in forecasted fuel cost would have a
dramatic effect on the overall stand-alone cost determination. Figure 3 compares tfae implicit
fuel price per gallon used in the Board's DCF model calculated using the fuel component ofthe
DRI-WEFA RCAF-U forecast with the fiiel price indexed based on the actual historical change
in the highway diesel fuel price index between 2001 and 2009.
Figure 3
Comparison of DCF Forecast Implicit Fuel Price with Actual Cfaange in HDF Price Index
$2.50
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
^ ^ - Implicit DCF Fuel Price —•— Estimated Actual Fuel Price
Figure 3 demonstrates tfaat actual fuel prices increased at a much higher rate than forecast.
Changing the Board's DCF results to incorporate only the incremental cost of fuel based on
actual fiiel prices and conservatively holding 2011-2020 fuel prices at 2010 levels would change
the outcome ofthe DCF analysis from an over-recoveiy over the 20-year DCF period of $108
million (present value) to an under-recoveiy of $301 million. Details of these calculations are set
forth in our work papers.
JA102
III. Issues and Obstacles with the Development of Movement-Specific Adjustments to

URCS Costs as Adopted by the STB in the 2003 and 2004 Decisions
In 2006, the Board decided in Major Issues to calculate variable costs for purposes of
determining the Board's jurisdictional threshold using only system-average URCS. One ofthe
Board's principal concems that led it torejectcontinued use of movement-specific adjustments
to URCS was the cost and complexity of making movement-specific adjustments. That concem
would be particularly applicable ifthe parties were now required to calculate the jurisdictional
tfaresfaold based on the movement-specific adjustments used in the Board's original March 2003
decision in this case.
There would be tremendous effort, complexity, and imcertainty associated with
detennining the jurisdictional threshold level rate based on the various metfaodologies used in the
2003 decision. In diat decision, the STB determined the variable costs for the TMPA issue-
traffic movement by evaluating more than two dozen detailed analyses, special studies, and otfaer
adjustments to URCS that were proposed by the Complainant and Defendant. In many cases the
Board modified calculations made by the parties and incorporated other corrections and
adjustments. The STB's discussion of variable costs was set out in a technical Appendix to the
2003 decision that required nearly 30 pages. The Board specifically observed that "We have
noticed that the spreadsheets used to develop movement-specific adjustments have become more
complex and detailed." (2003 Decision at 41)
Numerous complex movement-specific adjustments to URCS costs were made in the
2003 decision. Set out below is a list ofthe special studies and analyses on which the STB's
2003 variable-cost findings were based.
^ For example, the STB observed that the variable costs that it adopted differedfromboth parties'
estimates for most ofthe 20 different cost components. (2003 Decision at 46-47, Table A-4)
JA103
Table 1: Adjustments to System-Average URCS Costs

Adopted by STB in 2003 TMPA Decision
Category 1. Adjustments to URCS Input File

1. Exclude Account 76 Interest During Construction
2. Include Account 90 Construction Work in Progress
Category 2. Adjustments to URCS Unit Cost FUe
1. Separate URCS switching costs between road and yard
2. Separate URCS costs between system-owned tracks and private
Ooop) tracks
Category 3. Adjustments to URCS Service Unit Inputs
1. Tare weights
2. Empty miles
3. Number of locomotive units
4. Cycle-time hours for locomotives
5. Cycle-time hours for freight cars
6. Yard switching minutes
7. Road switching minutes on non-yard tracks
8. Road switching minutes on yard tracks
9. Number of bad-order cars switched
Category 4. Adjustments to URCS Unit Costs
1. Carload Handling
2. Joint Facilities
3. Retum on Investment in Road Property
4. Depreciation of Road Property
5. Fuel Consumption
6. Crew Wage
7. Helper Service
8. Locomotive Acquisition
9. Freight Car Acquisition
10. End-of-Train-Device Acquisition
11. Third-Party Loading
12. Loss and Damage
13. Indexing
Any effort to recalculate variable costs today, nearly eight years later, in a manner
consistent with the 2003 decision would be complex and likely contentious.
First, the sheer amount of data needed to carry out the specified movement-specific
adjustments would make such an exercise complex and burdensome. As shown in Table 1, the
JA104
movement-specific adjustments adopted by the STB in the 2003 decision covered a broad range
of cost categories and required tfae collection of costing inputs that involve datafi'omvarious
accounting and operating sources. The Board spoke directiy to the efforts needed to compile this
infonnation in its Major Issues decision:
The analysis of proposals for movement-specific adjustments is complex,

expensive, and time consuming. Massive discovery is required. Detailed
adjustments to the URCS program are needed and exhaustive analysis ofthe
reliability ofthe evidence is performed. Major Issues at SO.
The same data collection efforts would be required to develop movement-specific adjustments
today.
The amount of data needed to carry out the movement-specific adjustments used in the
2003 decision is very broad and would be burdensome to collect. Table 2 below identifies the
more than 30 sources of data and other information tfaat wouldfaaveto be queried to determine
whether adjustments to system-average URCS could be calculated today consistent with the
adjustments used in tfae 2003 decision.
Table 2: Source Data Required to Perform Movement-Specific Adjustments

to System-Average URCS Costs Adopted by STB in 2003 TMPA Decision
Required Data or Information

STB URCS input file
R-l data
AAR index information
Waybill records
Train Movement records
Locomotive Event data
Unloading reports
Time Tables
Track Charts
Density data by segment
Locomotive information
Purchases
JA105
Maintenance contracts
Service life, depreciation rate, salvage value
Freight Car information
Purchases
Leases
Transportation contracts
End of Train Devices
Purchases
Joint Facilities
Agreements
Invoices
Road Property
Investment by segment
Accumulated depreciation by segment
Annual depreciation by segment
Unassigned investments
Unassigned accumulated depreciation
Unassigned annual depreciation
Fuel Consumption
Event recorder data
Manufacturer consumption rates
Translation software
Crew Wage
Train crew records for TMPA trains
All W-2 payroll data for TMPA train crews
Payroll data for mine loading and helper service crews
Third-Party Loading
Agreements
Invoices
Loss and Damage information
Second, there is no assurance that the same types of data used to produce movement-
specific adjustments in the 2003 decision continue to be available today. It is likely that many of
the data originally relied upon by the parties include data that BNSF has not collected in many
years, since BNSF has not had to use the infonnation subsequent to the STB's adoption of
system-average URCS in Major Issues. Moreover, many ofthe data used in the original
10
JA106
calculations were pulledfix»mdatabases that were not designed to collect or produce data in the
format needed to develop the movement-specific adjustments. Substantial efforts were needed to
make the data usable. And as BNSF's data systems have notremainedstatic over the years, it is
uncertain whether data that were previously available continue to be available, or whether the
data that are currently available canreliablybe used in the movement-specific adjustments that
were developed several years ago.
Third, some ofthe inputs that the STB adopted in making the movement-specific
adjustments were derived from sources other than BNSF. For example, inresolvingthe dispute
between the partiesregardingthe amount of switching required tofaandletfae TMPA traffic, the
STB adopted a study that TMPA performed of its own Unloading Reportsfix)m2001. The STB
used theserecordsto detennine the duration and thefi:equencyof switching associated with
reconfiguring Distributed Power ("DP") locomotives. (2003 Decision at 46) As the figures
adopted by the STB were based on DP operations of 10 years ago, proper updating would require
that TMPA perform a new study and make theresultsavailable to BNSF.
Fourth, even though the Boardresolvedthe disputes between tfae parties as to the proper
calculation ofthe movement-specific adjustments in 2003, it isrealisticto expect that new
disputes would arise as the parties attempt to implement movement-specific calculations today.
Since new data would be needed, possiblyfijomnew databases, there would likely be disputes
over tfae implementation ofthe movement-specific adjustments using the new data. Indeed, in
the 2003 decision there were a number of areas where the parties ultimately agreed on the values
to be used in the movement-specific adjustments, but that agreement was only reached afier three
rounds of evidence, wfaere both parties filed opening, reply andrebuttalevidence.
11
JA107
Finally, the movement-specific adjustments used in the 2003 decision included a number
of complex, time-consuming and potentially contentious special studies. In some cases, it is
uncertain that the studies originally carried out could even be replicated today. New study
protocols might need to be developed, with the inevitable disputes over the proposed protocols.
Some examples ofthe special studies that would need to be reproduced are discussed below.
Fuel costs are a considerable element ofthe overall expense of providingrailroadservice,
and in particular are one ofthe largest cost components for long-haul, unit-coal trains like
TMPA's. As noted in the 2003 decision, the parties agreed to conduct a special study of fiiel
usage using an eventrecorderfor locomotive units on TMPA trains. Tfaat study required
significant effort and coordination, involving multiple BNSF operating personnel. In addition to
designing and implementing a special test-car run that measured fiiel flow, BNSF also extracted
eventrecorderinfonnationfi-omthe locomotives that powered the TMPA trains over multiple
months. BNSF^ used specific software to translate the eventrecorderresultsto fuel consumption
estimates by segment, taking into account a variety of operational aspects including DP
configuration and idling time, and then matched these consumption amounts to other data for the
TMPA trains to confinn the validity ofthe event recorder readings. The amount of fuel
consumed on TMPA trains was determined and used to adjust the specific fuel components of
URCS variable costs. In order to detennine the specific amount of fiiel consumed by
locomotives on tfae TMPA movement today, a separate series ofanaiyses would have to be
performed that identified the specific locomotives used to power the TMPA trains, the amoimt of
fuel they consumed, and tfae proper matching and verifications to produce the movement-specific
adjustment. Also, as discussed in morerecentevidentiary submissions in stand-alone rate cases.
^ The BNSF witness was a retired mechanical department employee who was familiar with locomotive
operations and interpreting event recorder information.
12
JA108
die manner in which BNSF captures locomotive event data has changed in the last eight years,
raising fiirther imcertainty regarding whether the prior approach could be followed, or what type
of study could be performed to develop variable costs for the TMPA movement in a maimer
consistent with the 2003 decision.
Road property ownership costs represent another major expense item that, like fiiel, are
particularly significant for long-haul, unit-coal trains. In the 2003 decision, the STB adopted
movement-specific adjustments for retum on investment and depreciation expenses that had been
the subject of disagreement between the parties over three rounds of simultaneous evidentiary
filings. ^ In addition to the extensive accounting and density infonnation that wasrequiredto
develop these adjustments, there were disagreements between the parties regarding tfae need to
reconcile the amounts in the BNSF asset databases to the reported investment totals, and to
account for the significant amount of BNSF investments that were not assigned to individual
segments. While the STBresolvedthe treatment of these issues as they were analyzed a decade
ago, the passage of time and considerable investments inroadproperty that BNSF has made
since then wouldrequireare-examinationofthe assignment of investments in the more recent
period and a detennination as to whetfaer the prior methodology could be applied. A new study
ofroad property investment costs would likely result in disputes over how the amounts should be
treated and how a movement-specific adjustment should be calculated.
Regarding yard switching costs, the STBrejectedBNSF's efforts to rely upon a 1989
study as the basis for a movement-specific adjustment to capture the expense of handling bad-
ordered cars. However, tfae STBrecognizedthat BNSF incurred such costs in providing service
to TMPA. Moreover, the STB accepted TMPA's special study of switching costs at the
* The Board subsequently recognized in Major Issues that no valid movement-specific adjustment in road
property costs could be made without also addressing the proper variability factor.
13
JA109
destination, as noted previously. Tfaerefore, in evaluating the switching costs that BNSF incurs
today, it would be necessary to consider whether yard switching costs couldreliablybe
calculated using a more recent study or altemative data sources.
If movement-specific adjustments were used to calculate variable costs, it would also be
necessaiy to address the numerous issues discussed above and engage in the burdensome data
collection and evaluation for every year in which the jurisdictional threshold must be detemiined.
Such an on-going effort would require a substantial and long-term commitment of resources.
Tfae Board properly decided that such a massive use ofresourceswas not warranted and
concluded that movement-specific adjustments should no longer be used to determine the
jurisdictional threshold.
IV. Calculation of RA^C Ratios for TMPA Traffic
BNSF also asked us to calculate the RA^Cratioson the current common carrier rate that
BNSF is charging for the issue traffic movement using the Board's current methodology for
detennining variable costs. In order to perform those calculations, we determined the nine
standard movement inputs for developing URCS variable costs, as set forth by the Major Issues
decision, calculated the variable costs based on the 2009 BNSF URCS that was recently released
by tfae Board, and indexed theresultsto the fourth quarter 2010. As the current common carrier
rate is tfae same for all PRB origins, tfae resulting WVCratiosvary by mine and range fix)m
166% to 174%, as shown in Table 3 below.
14
JA110
Table 3: R/VC Ratios for TMPA Traffic
URCS Variable
Mine Origin IQ 2010 Rate Cost (indexed RA^C Ratio
to 40 2010)
Antelope $29.70 $17.05 174%
Belle Ayr $29.70 $17.63 168%
Black Thunder $29.70 $17.33 171%
Buckskin $29.70 $17.94 166%
Caballo $29.70 $17.63 168%
Caballo Rojo $29.70 $17.60 169%
Clovis Point $29.70 $17.81 167%
Coal Creek $29.70 $17.52 170%
Cordero $29.70 $17.54 169%
Dry Fork $29.70 $17.85 166%
Eagle Butte $29.70 $17.91 166%
East Thunder $29.70 $17.36 171%
Fort Union $29.70 $17.83 167%
N. Antelope $29.70 $17.11 174%
Rawhide $29.70 $17.88 166%
West Thunder $29.70 $17.38 171%
15
JA111
VERIFICATION
I, Michael R. Baranowski, declare under penalty of perjury that the foregoing is true and
correct. Further, I certify that I am authorized to file this verified statement.
Michael R. Baranowski
Executed on Januarv 6.2011
JA112
VERIFICATION
I, Benton V. Fisher, declare under penalty of perjuiy that the foregoing is true and
correct. Further, I certify that I am authorized to file this verified statement.
R m t n n V.
Benton V TTichm-
Fisher V-/
Executed on Januarv 6.2011
JA113
Exhibit 1
Paget of9
Senior Managing Director - Economic Consulting
niike.baranowski(a)fticonsullinq.corr
1101 K Street. NW Mike Baranowski provides financial and economic consulting services to the telecommunications
Suite B100 and transportation Industries. He has special expertise In analyzing and developing complex
Washington, DC 20005 computer costing models, operations analysis, and transportation engineering. Much of his work
Tel: (202) 312-9100 involves providing oral and written expert testimony before courts and regulatory bodies.
Fax:(202)312-9101
Some of Mr. Baranowski's representative accomplishments Include:
• Overseeing the development of computer cost modeling tools designed to simulate the
Education
cost of competive entry into local telecommunications markets and directing the efforts of
B.S. in Accounting,
Fairfield University
a nationwide team of testifying experts presenting the cost model results in multiple
proceedings across the country.
Supplemental Finance
Studies, Kean College • Directing the analysis, critique and restatement of a variety of complex cost models
developed by major telecommunications companies designed to simulate the fonvard-
looking cost of competitive entry Into local telecommunications markets.
• Designing multiple PC-based spreadsheet models for use in calculating the stand-alone
cost of competitive entry into the railroad and pipeline markets. These models have been
used to assist clients In all three networi< Industries In making Intemal pricing decisions
that are In compliance with goveming regulatory standards.
• Conducting detailed analyses of railroad operations and developing the associated
capital requirements and operating expenses attributable to specific movements and the
incremental capital and operating expense requirements attributable to major changes in
anticipated traffic levels.
• Calculating marginal and Incremental costs for a major petroleum products pipeline
company, an approach that Is now used regulariy by the company in making Intemal day-
to-day pricing decisions.
Mr. Baranowski holds a B.S. in Accounting from Fairfield University In Fairfield, Connecticut and
has pursued supplemental finance studies at Kean College In Union, New Jersey.
TELECOIMMUNICATIONS TESTIMONY
Federal Communications Commission
Febmary 1998 Flle No. E-g8-05. AT&T Corp. v. Bell Atlantic Corp. Affidavit of Michael R.
Baranowski.
March 13,1998 File No. E-98-05. AT&T Corp. v. Bell Atlantic Corp. Supplemental Affidavit
of Michael R. Baranowski.
June 10,1999 CC Docket No. 96-98. Implementation of the Local Competition Provisions
of the Telecommunications Act of 1996. Reply Affidavit of Michael R.
Baranowski, John C. Klick and Brian F. Pitkin.
F T I www.fticonsulting.com^
JA114
Exhibit 1
Page 2 of 9
July 25,2001 CC Docket No. 00-251,00-218. In the Matter of Petition of AT&T

Communications of Virginia, Inc. and WoridCom, Inc., Pursuant to Section
252(e)(5) of the Communications Act, for Preemption of the Jurisdiction of
the Virginia State Corporation Commission Regarding Interconnection
Disputes with Verizon-Virginia, Inc. Panel
June 13, 2005 WC Docket No. 05-25;RM-10593. In the Matter of Special Access Rates for
Price Cap Local Exchange Carriers; AT&T Corp. Petition for Rulemaking to
Reform Regulation of Incumbent Local Exchange Carrier Rates fbr Interstate
Special Access Services, Joint Declaration on Behalf of SBC
Communications, Inc.
July 29, 2005 WC Docket No. 05-25;RM-10593. In the Matter of Special Access Rates for
Price Cap Local Exchange Carriers; AT&T Corp. Petition for Rulemaking to
Reform Regulation of Incumbent Local Exchange Canier Rates for Interstate
Special Access Services, Joint Reply Declaration on Behalf of SBC
Communications, Inc.
Public Service (bmmission of Delaware

February 4,1997 PSC Docket No. 96-324. In the Matter of Bell Atlantic - Delaware Statement
of Terms and Conditions Under Section 252(F) of the Telecommunications
Act of 1996. Testimony of Michael R. Baranowski.
Public Sen/ice Commission of ttie DisUitA of Columbia

March 24,1997 Formal Case No. 962. In the Matter of the Implementation of the District of
Columbia Telecommunications Competition Act of 1996. Testimony of
Michael R. Baranowski.
May 2,1997 Formal Case No. 962. in the Matter of the Implementation of the District of
Columbia Telecommunications Competition Act of 1996. Rebuttal Testimony
of Michael R. Baranowski.
Public Senrice Commission of ttie State of Maryland
March 7,1997 Docket No. 8731, Phase 11. In the Matter of the Petitions for Approval of
Agreements and Arbitration of Unresolved Issues Arising Under Section 252
of the Telecommunications Act of 1996. Direct Testimony of Michael R.
Baranowski.
April 4,1997 Docket No. 8731, Phase II. In the Matter of the Petitions fbr Approval of
Agreements and Arbitration of Unresolved Issues Arising Under Section 252
of the Telecommunications Act of 1996. Rebuttal Testimony of Michael R.
Baranowski.
May 25,2001 Case No. 8879. In the Matter of the Investigation Into Rates for Unbundled
Networit Elements Pursuant to the Telecommunications Act of 1996. Panel
Testimony on Recurring Cost Issues
F T I www.ftic9nsuiting.com
JA115
Exhibit 1
Page 3 of 9
Michael R. baranowsKi
Public Senrice Commission ofthe State of Michigan
January 20, 2004 Case No. U-13531. In the Matter, on the Commission's Own Motion to
Review the Costs of Telecommunication Service Provided By SBC Michigan.
Initial Testimony of Michael R. Baranowski and Julie A. Murphy.
May 10, 2004 Case No. U-13531. In the Matter, on the Commission's Own Motion to
Review the Costs of Telecommunication Service Provided By SBC Michigan.
Final Reply Testimony of Michael R. Baranowski and Julie A. Murphy.
New Jersey Board of Public Utilities

December 20,1996 Docket No. TX 95120631. Notice of Investigation Local Exchange
Competition fbr Telecommunications Services. Rebuttal Testimony of John
C. Klick and Michael R. Baranowski.
Noilh Carolina Utilities Commission

March 9,1998 Docket No. P-100, Sub 133d. In ttie Matter of Establishment of Universal
Support Mechanisms Pursuant to Section 254 ofthe Telecommunications
Act of 1996. Rebuttal Testimony of Michael R. Baranowski.
Pennsylvania Public Utility Commission

January 13,1997 Docket Nos. A-310203F0002 et al. MFS-III. Application of MFS Intelenet of
Pennsylvania, Inc. et. Al. (Phase III). Rebuttal Testimony of Michael R.
Baranowski.
February 21,1997 Docket Nos. A-310203F0002 et al. MFS-III. Application of MFS Intelenet of
Pennsylvania, Inc. et. Al. (Phase III). Surrebuttal Testimony of Michael R.
Baranowski.
April 22,1999 Docket Nos. P-00991648, P-00991649. Petition of Senators and CLECs fbr
Adoption of Partial Settiement and Joint Petition for Global Resolution of
Telecommunications Proceedings. Direct Testimony of Michael R.
Baranowski.
January 11, 2002 Docket No. R-00016683. Generic Investigation of Verizon Pennsylvania,
Inc's Unbundled Network Element Rates. Panel Testimony on Recurring
Cost Issues
State Corfjoration Commission Commonwealth of Virginia
April 7,1997 Case No. PUC970005. Ex Parte to Determine Prices Bell Atiantic - Virginia,
Inc. Is Authorized To Charge Competing Local Exchange Carriers In
Accordance With The Telecommunications Act of 1996 And Applicable State
Law. Affidavit of Michael R. Baranowski.
April 23,1997 Case No. PUC970005. Ex Parte to Determine Prices Bell Atiantic - Virginia,
Inc. Is Autiiorized To Charge Competing Local Exchange Carriers In
Law. Direct Testimony of Michael R. Baranowski.
F T I www.fticonsulting.com
JA116
Exhibit 1
Page 4 of 9
June 10,1997 Case No. PUC970005. Ex Parte to Determine Prices Bell Atiantic - Virginia,
Inc. Is Authorized To Charge Competing Local Exchange Caniers In
Law. Rebuttal Testimony of Michael R. Baranowski.
Washington State Utilities and Transportation Commission
December 22,2003 Docket No. UT-033044. In the Matter of flie Petition of Qwest Corporation
To Initiate a Mass-Market Switching and Dedicated Transport Case Pursuant
to the Triennial Review Order. Direct Testimony of Michael R. Baranowski.
Febmary 2, 2004 Docket No. UT-033044. In the Matter of the Petition of Qwest Corporation
To Initiate a Mass-Maritet Switching and Dedicated Transport Case Pursuant
to tiie Triennial Review Order. Response Testimony of Michael R.
Baranowski.
Public Service Commission of West Virginia
February 13,1997 Case Nos. 96-1516-T-PC. 96-1561-T-PC, 96-1009-T-PC, 96-1533-T-T.
Petition to establish a proceeding to review the Statement of Generally
Available Tenns and Conditions offered by Bell Atiantic In accordance with
Sections 251,252, and 271 of the Telecommunications Act of 1996.
Testimony of Michael R. Baranowski.
February 27,1997 Case Nos. 96-1516-T-PC, 96-1561-T-PC, 96-1009-T-PC, 96-1533-T-T.
Petition to establish a proceeding to review the Statement of Generally
Available Terms and Conditions offered by Bell Atlantic in accordance with
Sections 251,252, and 271 of the Telecommunications Act of 1996.
Rebuttal Testimony of Michael R. Baranowski.
June 3, 2002 Case No. 01-1696-T-PC, Verizon West Virginia, Inc. Petition For Declaratory
Ruling That Pricing of Certain Additional Unbundled Network Elements
(UNEs) Complies Witti Total Element Long-Run Incremental Cost (TELRIC)
Principles. Direct Testimony of Michael R. Baranowski
July 1,2002 Case No. 01-1696-T-PC, Verizon West Virginia, Inc. Petition For Declaratory
Ruling That Pricing of Certain Additional Unbundled Networi^ Elements
(UNEs) Complies With Total Element Long-Run Incremental Cost (TELRIC)
Principles. Supplemental Direct Testimony of Michael R. Baranowski
RAILROAD TESTIMONY
Interstate Commerce Commission
March 9.1995 Finance Docket No. 32467. Nationai Railroad Passenger Corporation and
Consolidated Rail Corporation - Application Under Section 402(a) of the Rail
Passenger Sen/ice Act for an Order Fixing Just Compensation.
October 30,1995 Docket No. 41185. Arizona Public Sen/ice Company and Pacificorp v. The
Atchison, Topeka and Santa Fe Railway Company.
JA117
Exhibit 1
Page 5 of 9
Surkice Transportation Board
July 11,1997 Docket No. 41989. Potomac Elecbic Power Company v. CSX
Transportation, Inc. Reply Statement and Evidence of Defendant CSX
Transportation, Inc.
August 14,2000 Docket No. 42051. Wisconsin Power and Light Company v. Union Pacific
Railroad Company, Reply Verified Statement of Christopher D. Kent and
Michael R. Baranowski.
September 20,2002 STB Docket No. 42070. Duke Energy Corporation v. CSX Transportation,
Inc., Reply Evidence and Argument of CSX Transportation, Inc.
September 30,2002 STB Docket No. 42069. Duke Energy Corporation v. Norfolk Southem
Railway Company, Reply Evidence and Argument of Norfolk Southern
Railway Company.
October 11, 2002 STB Docket No. 42072. Carolina Power & Light v. Norfolk Soutiiem Railway
Company, Reply Evidence and Argument of Norfolk Southem Railway
Company.
November 12, 2002 Docket No. 42070 Duke Energy Corporation v. CSX Transportation, Rebuttal
Evidence and Argument of CSX Transportation
November 19, 2002 Docket No. 42069 Duke Energy Corporation v. Norfolk Southern Railway
Company, Rebuttal Evidence and Argument of Norfolk Southern Railway
Company
November 27, 2002 Docket No. 42072 Carolina Power & Light Company v. Norfolk Southern
Railway Company, Rebuttal Evidence and Argument of Norfbik Southem
Railway Company
January 10,2003 STB Docket No. 41185. Arizona Public Service Co. And Pacificorp v. The
Atchison, Topeka and Santa Fe Railway Company, Petition of ttie Buriington
Northern and Santa Fe Railway Company to Reopen and Vacate Rate
Prescription.
February 19,2003 STB Docket No. 42077, Arizona Public Service Co. And Pacificorp v. The
Buriington Northern and Santa Fe Railway Company, and STB Docket No.
41185, Arizona Public Service Co. And Pacificorp v. The Buriington Northem
and Santa Fe Railway Company, Reply of the Buriington Northem Santa Fe
Railway Company in Opposition to Petition fbr Consolidation.
April 4, 2003 Docket No. 42057 Public Service Company of Colorado D/B/A Xcel Energy
V. The Buriington Nortiiem and Santa Fe Railway Company, Reply Evidence
and Argument of The Buriington Northem and Santa Fe Railway Company
October 8, 2003 Docket No. 42071 Otter Tail Power Company v. The Buriington Northem and
Santa Fe Railway Company, Reply Evidence of The Buriington Northem and
Santa Fe Railway Company
October 24, 2003 Docket No. 42069 Duke Energy Corporation v. Norfolk Southem Railway
Company, Supplemental Evidence of Norfolk Southem Railway Company
JA118
Exhibit 1
Page 6 of 9
October 31, 2003 Docket No. 42069 Duke Energy Corporation v. Norfolk Soutiiem Railway
Company, Reply of Norfolk Souttiern Railway Company to Duke Energy
Company's Supplemental Evidence
November 24, 2003 Docket No. 42072 Carolina Power & Light Company v. Norfolk Southem
Railway Company, Supplemental Evidence of Norfolk Southern Railway
Company
December 2,2003 Docket No. 42072 Carolina Power & Light Company v. Norfolk Southem
Railway Company, Reply of Norfolk Southem IRailway Company to Carolina
Power & Light Company's Supplemental Evidence
December 12,2003 Docket No. 42069 Reply of Norfolk Southern Railway Company to Duke
Energy Corporation's Petition to Correct Technical Error and Affidavit of
January 5,2004 Docket No. 42070 Duke Energy Corporation v. CSX Transportation, Inc.,
Supplemental Evidence of CSX Transportation, Inc.
January 26, 2004 Docket No. 42058 Arizona Elech'ic Power Cooperative, Inc. v. The Buriington
Norttiem and Santa Fe Railway Company and Union Pacific Railroad
Company, Joint Supplemental Reply Evidence and Argument of The
Buriington Northem and Santa Fe Railway Company and Union Pacific
Railroad Company
March 22, 2004 Docket No. 42071 Otter Tail Power Company v. The Buriington Norttiem and
Santa Fe Railway Company, Supplemental Reply Evidence of The Buriington
Northem and Santa Fe Railway Company
April 9.2004 Docket No. 41185 Arizona Public Service Company and Pacificorp v. The
Buriington Norttiem and Santa Fe Railway Company, The Buriington
Northern and Santa Fe Railway Company's Reply Evidence on Reopening
May 24,2004 Docket No. 41191 (Sub-No. 1) AEP Texas Nortti Company v. The Buriington
Northern and Santa Fe Railway Company, Reply Evidence of The Buriington
Norttiem and Santa Fe Railway Company
June 23, 2004 Docket No. 42057 Public Service Company of Colorado d/b/a Xcel Energy v.
The Buriington Northem and Santa Fe Railway Company, Petition to Con-ect
Technical and Computational Errors
March 1,2005 Docket No. 42071 Otter Tail Power Company v BNSF Railway Company,
Supplemental Evidence of BNSF Railway Company
April 4,2005 Docket No. 42071 Otter Tail Power Company v BNSF Railway Company,
Reply of BNSF Railway Company to Supplemental Evidence
July 20,2005 Docket No. 42088 Westem Fuels Association, Inc. and Basin Electric Power
Cooperative, Inc. v. BNSF Railway Company, Reply Evidence of BNSF
Railway Company
May 1,2006 Docket No. Ex Parte 657 (Sub-No. 1) Major Issues in Rail Rate Cases,
Verified Statement Supporting Comments of BNSF Railway Company
JA119
Exhibit 1
Page 7 of 9
May 31,2006 Ex Parte 657 (Sub-No. 1) Major Issues in Rail Rate Cases; Verified
Statement Supporting Reply Comments of BNSF Railway Company
June 15,2006 Docket No. 42088 Westem Fuels Association, Inc. and Basin Electric Power
Cooperative, Inc. v. BNSF Railway Company, Reply Supplemental Evidence
of BNSF Railway Company
June 15, 2006 Docket No. 41191 (Sub 1) AEP Texas North Company v. BNSF Railway
Company, Reply Supplemental Evidence of BNSF Railway Company
June 30, 2006 Docket No. Ex Parte 657 (Sub-No. 1) Major Issues in Rail Rate Cases;
Verified Statement Supporting Rebuttal Comments of BNSF Railway
Company
Febmary 4,2008 Docket No. 42099 E.I. DuPont De Nemours and Company v. CSX
Transportation, Inc., Opening Evidence of CSX Transportation, Inc.
Febmary 4,2008 Docket No. 42100 E.l. DuPont De Nemours and Company v. CSX
May 1,2008 Docket No. Ex Parte 679 Petition of the AAR to Institute a Rulemaking
Proceeding to Adopt a Replacement Cost Methodology to Determine
Railroad Revenue Adequacy, Verified Statement of Michael R. Baranowski
July 14,2008 Docket No. 42088 Westem Fuels Association, Inc. and Basin Elecbic Power
Cooperative, Inc. v. BNSF Railway Company, Third Supplemental Reply
Evidence of BNSF Railway Company
July 14, 2008 Docket No. AB-515 (Sub-No. 2) Central Oregon & Pacific Railroad, Inc. -
Abandonment and Discontinuance of Service - in Coos, Douglas, and Lane
Counties, Oregon (Coos Bay Rail Line)
August 8, 2008 Docket No. 41191 (Sub-No. 1) AEP Texas North Company v. BNSF Railway
Company, Fourth Supplemental Evidence of BNSF Railway Company
August 11,2008 Docket No. 42014 Entergy Arkansas, Inc. and Entergy Services, Inc. v Union
Pacific Railroad Company and Missouri & Northem Arkansas Railroad
Company, Inc.; Finance Docket No. 32187 Missouri & Nortiiem Arkansas
Railroad Company, Inc. - Lease, Acquisition and Operations Exemption -
Missouri Pacific Railroad Company and Buriington Norttiem Railroad
Company, Reply Evidence and Argument of Union Pacific
September 5,2008 Docket No. 41191 (Sub-No. 1) AEP Texas North Company v. BNSF Railway
Company, Fourth Supplemental Reply Evidence of BNSF Railway Company
September 12,2008 Docket No. AB-515 (Sub-No. 2) Cenbal Oregon & Pacific Railroad, Inc. -
Abandonment and Discontinuance of Service - in Coos, Douglas, and Lane
Counties, Oregon (Coos Bay Rail Line); Rebuttal to Protests
August 24,2009 Docket No. 42114 US Magnesium, L.L.C. v. Union Pacific Railroad
Company, Opening Evidence of Union Pacific Railroad Company
October 22, 2009 Docket No. 42114 US Magnesium, L.L.C. v. Union Pacific Railroad
Company, Rebuttal Evidence of Union Pacific Railroad Company
JA120
Exhibit 1
Page 8 of 9
January 19, 2010 Docket No. 42110 Seminole Electric Cooperative, Inc. v. CSX
Transportation, Inc., Reply Evidence of CSX Transportation, Inc.
May 7,2010 Docket No. 42113 Arizona Elecbic Power Cooperative, Inc. v. BNSF Railway
Company and Union Pacific Railroad Company, Joint Reply Evidence of
BNSF Railway Company and Union Pacific Railroad Company
US District Court for Northem District of Oklahoma
January 2,2007 Case No. 06-CV-33 TCK-SAJ, Grand River Dam Authority v. BNSF Railway
Company; Report of Michael R. Baranowski
February 2,2007 Case No. 06-CV-33 TCK-SAJ, Grand River Dam Authority v. BNSF Railway
Company; Reply Report of Michael R. Baranowski
Circuit Court ofPulasId County, Arkansas

August 17,2007 Case No. CV 2006-2711, Union Pacific Railroad v. Entergy Ari<ansas, Inc.
and Entergy Services, Inc., Expert Witness Report of Michael R. Baranowski
December 14,2007 Case No. CV 2006-2711, Union Pacific Railroad v. Entergy Aricansas, Inc.
and Entergy Services, Inc., Reply Expert Witness Report of Michael R.
Baranowski
U.S. District Court fbr the Eastem District of Wsconsin
Febmary 15, 2008 Case No. 06-C-0515, Wisconsin Electric Power Company v. Union Pacific
Railroad Company, Expert Reply Report of Michael R. Baranowski
Arbitrations and Mediations
March 7,2005 Arbitration Case #181 Y 00490 04 BNSF Railway Company and J.B. Hunt
Transport, Inc., Expert Report on behalf of BNSF Railway Company
March 28, 2005 Arbitration Case #181 Y 00490 04 BNSF Railway Company and J.B. Hunt
Transport, Inc., Rebuttal Expert Report on behalfof BNSF Railway Company
April 12,2005 Arbitration Case #181 Y 00490 04 BNSF Railway Company and J.B. Hunt
Transport, Inc., Supplemental Expert Report on behalfof BNSF Railway
Company
April 19,2005 Arbitration Case #181 Y 00490 04 BNSF Railway Company and J.B. Hunt
Transport, Inc., Supplemental Rebuttal Expert Report on behalf of BNSF
Railway Company
April/May 2005 Arisitration Case #181 Y 00490 04 BNSF Railway Company and J.B. Hunt
Transport, Inc., Hearings before Arbitration Panel
February 20,2007 In the Matter ofthe Arbitration between tiie Debroit Edison Company, et al,
and BNSF Railway Company, Expert Report of Michael R. Baranowski
March 19,2007 In the Matter of the Arbitration between the Detroit Edison Company, et al,
and BNSF Railway Company, Supplemental Expert Report of Michael R.
Baranowski
JA121
Exhibit 1
Page 9 of 9
Febmary 12,2009 In the Matter ofthe Arbitration between Wisconsin Public Service
Corporation and Union Pacific Railroad Company, Rebuttal Expert Report of
October 16,2009 In the Matter of Ariiitration Between Norfolk Southern Railway Company and
Dmmmond Coal Sales, Inc., Expert Report of Michael R. Baranowski
F T I www.rticonsulting.com
JA122
Exhibit 2
Page 1 of 7
Benton V. Fisher
ing Director -
benton. Iisherfaiiticons
1101 K Street, NW
Benton V. Fisher is a Senior Managing Director of FTI's Economic Consulting group, located in
Suite 8100
Washington, D.C. Mr. Fisher has neariy 20 years of experience in providingfinancial,economic
Washington, 0 0 20005
and analytical consulting services to corporate clients dealing with transportation,
Tel: (202) 312-9100
telecommunications, and postal subjects.
Fax- (202) 312-9101
North America's largest railroads have retained FTI both to assist them in making stirategic and
Education tactical decisions and to provide expert testimony In litigation. FTI's ability to present a thorough
B.S. in Engineering and understanding of myriad competitive and regulatory factors has given its clients the necessary
Management Systems,
tools to implement and advance their business. Mr. Fisher has worked extensively to develop
Princeton University
these clients' applications for mergers and acquisitions and expert testimony justifying the
reasonableness of their rates before the Surface Transportation Board. In addition to analyzing
extensivefinancialand operating data, Mr. Fisher has worked closely with people within many
departinents at the railroad as well as outside counsel to ensure ttiat the railroads' presentations
are accurate and defensible. Additionally, Mr. Fisher reviews the expert testimony of ttie railroads'
opponents In these proceedings, and advises counsel on the necessary course of action to
respond.
AT&T and MCI retained FTI to advance its efforts to implement the Telecommunications Act of
1996 in local exchange markets. Mr. Fisher was primarily responsible for reviewing the incumbent
local exchange carriers' (ILEC) cost studies, which significantiy Impacted the ability of FTI's clients
to access local markets. Mr. Fisher analyzed the sensitivity of multiple economic components and
incorporated this information into various models being relied upon by the parties and regulators to
detennine the pricing of services. Mr. Fisher was also responsible for preparing testimony that
critiqued altemative presentations.
Mr. Fisher assisted in reviewing the U.S. Postal Service's evidence and preparing expert testimony
on behalf of interveners in Postal Rate and Fee Changes cases. He has also been retained by a
large international consultingfimnto provide statistical and econometric support in their preparation
ofa long-range Implementation plan for improving telecommunications infrastructure In a European
country.
Mr. Fisher has sponsored expert testimony in rate reasonableness proceedings before the Surface
Transportation Board and in contract disputes in Federal Court and arbitration proceedings.
Mr. Fisher holds a B.S. in Engineering and Management Systemsfi'omPrinceton University.
JA123
Exhibit 2
Page 2 of 7
TESTIMONY
Surface Transportation Board
January 15,1999 Docket No. 42022 FMC Corporation and FMC Wyoming Corporation v.
Union Pacific Railroad Company, Opening Verified Statement of Christopher
D. Kent and Benton V. Fisher
March 31,1999 Docket No. 42022 FMC Corporation and FMC Wyoming Corporation v.
Union Pacific Railroad Company, Reply Verified Statement of Christopher D.
Kent and Benton V. Fisher.
April 30,1999 Docket No. 42022 FMC Corporation and FMC Wyoming Corporation v.
Union Pacific Railroad Company, Rebuttal Verified Statement of Christopher
D. Kent and Benton V. Fisher
July 15,1999 Docket No. 42038 Minnesota Power, Inc. v. Duluth, Missabe and Iron Range
Railway Company, Opening Verified Statement of Christopher D. Kent and
Benton V. Fisher
August 30,1999 Docket No. 42038 Minnesota Power, Inc. v. Duluth, Missabe-and Iron Range
Railway Company, Reply Verified Statement of Christopher D. Kent and
Benton V. Fisher
September 28,1999 Docket No. 42038 Minnesota Power, Inc. v. Duluth, Missabe^and Iron Range
Railway Company, Rebuttal Verified Statement of Christopher D. Kent and
Benton V. Fisher
June 15, 2000 Docket No. 42051 Wisconsin Power and Light Company v. Union Pacific
Railroad Company, Opening Verified Statement of Christopher D. Kent and
Benton V. Fisher
August 14,2000 Docket No. 42051 Wisconsin Power and Light Company v. Union Pacific
Railroad Company, Reply Verified Statement of Christopher D. Kent and
Benton V. Fisher
September 28,2000 Docket No. 42051 Wisconsin Power and Light Company v. Union Pacific
Railroad Company, Rebuttal Verified Statement of Christopher D. Kent and
Benton V. Fisher
December 14,2000 Docket No. 42054 PPL Montana, LLC v. The Buriington Northem Santa Fe
Railway Company, Opening Verified Statement of Christopher D. Kent and
Benton V. Fisher
March 13, 2001 Docket No. 42054 PPL Montana, LLC v. The Buriington Norttiem Santa Fe
Railway Company, Reply Verified Statement of Christopher D. Kent and
Benton V. Fisher
May 7,2001 Docket No. 42054 PPL Montana, LLC v. The Buriington Northern Santa Fe
Railway Company, Rebuttal Verified Statement of Christopher D. Kent and
Benton V. Fisher
F T I 'www.fticonsulting.com
JA124
Exhibit 2
Page 3 o f 7
October 15, 2001 Docket No. 42056 Texas Municipal Power Agency v. The Buriington
Northem Santa Fe Railway Company, Opening Verified Statement of
Benton V. Fisher
January 15, 2002 Docket No. 42056 Texas Municipal Power Agency v. The Buriington
Northem Santa Fe Railway Company, Reply Verified Statement of Benton
V. Fisher
Febmary 25,2002 Docket No. 42056 Texas Municipal Power Agency v. The Buriington
Northem Santa Fe Railway Company, Rebuttal Verified Statement of
Benton V. Fisher
May 24,2002 Docket No. 42069 Duke Energy Corporation v. Norfolk Southem Railway
Company, Opening Evidence and Argument of Norfolk Souttiern Railway
Company
June 10,2002 Docket No. 42072 Carolina Power & Light Company v. Norfolk Southern
Railway Company, Opening Evidence and Argument of Norfolk Soutiiem
Railway Company
July 19,2002 Northem States Power Company Minnesota v. Union Pacific;Railroad

Company, Union Pacific's Opening Evidence
September 30, 2002 Docket No. 42069 Duke Energy Corporation v. Norfolk Soutiiem Railway
Company, Reply Evidence and Argument of Norfolk Southem Railway
Company
October 4,2002 Northem States Power Company Minnesota v. Union Pacific Railroad
Company, Union Pacific's Reply Evidence
October 11, 2002 Docket No. 42072 Carolina Power & Light Company v. Norfolk Southem
Railway Company, Reply Evidence and Argument of Norfolk Southem
Railway Company
November 1,2002 Northern States Power Company Minnesota v. Union Pacific Railroad
Company, Union Pacific's Rebuttal Evidence
November 19,2002 Docket No. 42069 Duke Energy Corporation v. Norfolk Southem Railway
Company, Rebuttal Evidence and Argument of Norfolk Southem Railway
Company
November 27,2002 Docket No. 42072 Carolina Power & Light Company v. Norfolk Souttiern
Railway Company, Rebuttal Evidence and Argument of Norfolk Southem
Railway Company
January 10,2003 Docket No. 42057 Public Service Company of Colorado D/B/A Xcel Energy
V. The Buriington Northern and Santa Fe Railway Company, Opening
Evidence and Argument of The Buriington Northem and Santa Fe Railway
Company
February 7,2003 Docket No. 42058 Arizona Elecbic Power Cooperative, Inc. v. The
Buriington Northern and Santa Fe Railway Company and Union Pacific
Railroad, Opening Evidence of The Buriington Northern and Santa Fe
Railway Company and Union Pacific Railroad
JA125
Exhibit 2
Page 4 of 7
Benton V. Fisher
April 4, 2003 Docket No. 42057 Public Service Company of Colorado D/B/A Xcel Energy -
V. The Buriington Nortiiem and Santa Fe Railway Company, Reply Evidence
and Argument of The Buriington Northern and Santa Fe Railway Company
May 19, 2003 Docket No. 42057 Public Service Company of Colorado D/B/A Xcel Energy
V. The Buriington Nortiiem and Santa Fe Railway Company, Rebuttal
Evidence and Argument of The Buriington Northem and Santa Fe Railway
Company
May 27,2003 Docket No. 42058 Arizona Elecfric Power Cooperative, Inc. v. The
Railroad, Joint Variable Cost Reply Evidence of The Buriington Northern
and Santa Fe Railway Company and Union Pacific Railroad
May 27, 2003 Docket No. 42058 Arizona Elecb-ic Power Cooperative, Inc. v. The
Railroad, Reply Evidence of The Buriington Northem and Santa Fe Railway
Company
June 13, 2003 Docket No. 42071 Otter Tail Power Company v. The Buriington Northern
and Santa Fe Railway Company, Opening Evidence of The Buriington
Northem and Santa Fe Railway Company
July 3, 2003 Docket No. 42058 Arizona Electric Power Cooperative, Inc. v. The
Railroad, Joint Variable Cost Rebuttal Evidence of The Buriington Northern
and Santa Fe Railway Company and Union Pacific Railroad
October 8,2003 Docket No. 42071 Otter Tail Power Company v. The Buriington Nortiiem
and Santa Fe Railway Company, Reply Evidence of The Buriington
Northern and Santa Fe Railway Company
October 24, 2003 Docket No. 42069 Duke Energy Corporation v. Norfolk Southem Railway
Company Supplemental Evidence of Nori'olk Southem Railway Company
October 31, 2003 STB Docket No. 42069 Duke Energy Corporation v. Norfbik Soutiiem
Railway Company, Reply of Norfolk Southem Railway Company to Duke
Energy Company's Supplemental Evidence
November 24,2003 STB Docket No. 42072 Carolina Power & Light Company v. Norfolk
Southern Railway Company, Supplemental Evidence of Norfolk Southem
Railway Company
December 2,2003 STB Docket No. 42072 Carolina Power & Light Company v. Norfolk
Souttiern Railway Company, Reply of Norfolk Souttiern Railway Company to
Carolina Power & Light Company's Supplemental Evidence
January 26,2004 STB Docket No. 42058 Arizona Electric Power Cooperative, Inc. v. The
Buriington Northern and Santa Fe Railway Company and Union Pacific
Railroad Company, Joint Supplemental Reply Evidence and Argument of
The Buriington Northem and Santa Fe Railway Company and Union Pacific
Railroad Company
F T I www.ftlconsulting.com
JA126
Exhibit 2
Page 5 of 7
March 1,2004 STB Docket No. 41191 (Sub-No. 1) AEP Texas Nortti Company v. The
Buriington Northern and Santa Fe Railway Company, Opening Evidence
and Argument of The Buriington Northem and Santa Fe Railway Company
March 22,2004 STB Docket No. 42071 Otter Tail Power Company v. The Buriington
Norttiem and Santa Fe Railway Company, Supplemental Reply Evidence of
The Buriington Northern and Santa Fe Railway Company
April 29, 2004 STB Docket No. 42071 Otter Tail Power Company v. The Buriington
Norttiem and Santa Fe Railway Company, Rebuttal Evidence of The
Buriington Northern and Santa Fe Railway Company
May 24,2004 STB Docket No. 41191 (Sub-No. 1) AEP Texas North Company v. The
Buriington Northern and Santa Fe Railway Company, Reply Evidence of
The Buriington Northern and Santa Fe Railway Company
March 1,2005 Docket No. 42071 Otter Tail Power Company v. BNSF Railway Company,
Supplemental Evidence of BNSF Railway Company
April 4, 2005 Docket No. 42071 Otter Tall Power Company v BNSF Railway Company,
Reply of BNSF Railway Company to Supplemental Evidence'.
April 19,2005 Docket No. 42088 Westem Fuels Association, Inc. and Basin Electric Power
Cooperative, Inc. v. BNSF Railway Company, Opening Evidence of BNSF
Railway Company
July 20,2005 Docket No. 42088 Westem Fuels Association, Inc. and Basin Electric Power
Cooperative, Inc. v. BNSF Railway Company, Reply Evidence of BNSF
Railway Company
July 27,2004 STB Docket No. 41191 (Sub-No. 1) AEP Texas Norfli Company v. The
Buriington Northem and Santa Fe Railway Company, Rebuttal Evidence of
The Buriington Northem and Santa Fe Railway Company
September 30,2005 Docket No. 42088 Western Fuels Association, Inc. and Basin Elecb-ic Power
Cooperative, Inc. v. BNSF Railway Company, Rebuttal Evidence of BNSF
Railway Company
October 20, 2005 Docket No. 42088 Westem Fuels Association, Inc. and Basin Elecb'ic Power
Cooperative, Inc. v. BNSF Railway Company, Sunrebuttal Evidence of BNSF
Railway Company
June 15,2006 Docket No. 42088 Westem Fuels Association, Inc. and Basin Electric Power
Cooperative, Inc. v. BNSF Railway Company, Reply Supplemental Evidence
of BNSF Railway Company
June 15,2006 Docket No. 41191 (Sub-No. 1) AEP Texas North Company v. BNSF Railway
Company, Reply Supplemental Evidence of BNSF Railway Company
March 19,2007 Docket No. 41191 (Sub-No. 1) AEP Texas North Company v. BNSF Railway
Company, Reply Third Supplemental Evidence of BNSF Railway Company
F T I www.ftlconsulting.com
JA127
Exhibit 2
Page 6 of 7
March 26, 2007 Docket No. 42088 Westem Fuels Assodation, Inc. and Basin Electric Power
Cooperative, Inc. v. BNSF Railway Company, Reply Second Supplemental
July 30,2007 Docket No. 42095 Kansas City Power & Light v. Union Pacific Railroad
Company, Union Pacific's Opening Evidence
August 20,2007 Docket No. 42095 Kansas City Power & Light v. Union Pacific Railroad
Company, Union Pacific's Reply Evidence
Transportation, Inc., Opening Evidence of CSXT
Febmary 4, 2008 Docket No. 42100 E.l. DuPont De Nemours and Company v. CSX
February 4,2008 Docket No. 42101 E.l. DuPont De Nemours and Company v. CSX
March 5, 2008 Docket No. 42099 E.l. DuPont De Nemours and Company v. CSX
Transportation, Inc., Reply Evidence of CSXT
March 5,2008 Docket No. 42100 E.l. DuPont De Nemours and Company v..CSX
March 5, 2008 Docket No. 42101 E.l. DuPont De Nemours and Company v. CSX
April 4.2008 Docket No. 42099 E.l. DuPont De Nemours and Company v. CSX
Transportation, Inc., Rebuttal Evidence of CSXT
April 4, 2008 Docket No. 42100 E.l. DuPont De Nemours and Company v. CSX
April 4, 2008 Docket No. 42101 E.l. DuPont De Nemours and Company v. CSX
July 14, 2008 Docket No. 42088 Westem Fuels Association, Inc. and Basin Elecb'ic Power
Cooperative, Inc. v. BNSF Railway Company, Third Supplemental Reply
August 8,2008 Docket No. 41191 (Sub-No. 1) AEP Texas North Company v. BNSF Railway
Company, Fourtii Supplemental Evidence of BNSF Railway Company
September 5, 2008 Docket No. 41191 (Sub-No. 1) AEP Texas Nortti Company v. BNSF Railway
Company, Fourth Supplemental Reply Evidence of BNSF Railway Company
October 17,2008 Docket No. 42110 Seminole Elecbic Cooperative, Inc. v. CSX
Transportation, Inc., CSX Transportation, Inc's Reply to Petition for
Injunctive Relief, Verified Statement of Benton V. Fisher
August 24,2009 Docket No. 42114 US Magnesium, L.L.C. v. Union Pacific Railroad
Company, Opening Evidence of Union Pacific Railroad Company
JA128
Exhibit 2
Page 7 of 7
September 22,2009 Docket No. 42114 US Magnesium, L.L.C. v. Union Pacific Railroad
Company, Reply Evidence of Union Pacific Railroad Company
October 22, 2009 Docket No. 42114 US Magnesium, L.L.C. v. Union Pacific Railroad
Company, Rebuttal Evidence of Union Pacific Railroad Company
January 19, 2010 Docket No. 42110 Seminole Electric Cooperative, Inc. v. CSX
Transportation, Inc., Reply Evidence of CSX Transportation, Inc.
May 7,2010 Docket No. 42113 Arizona Electric Power Cooperative, Inc. v. BNSF Railway
Company and Union Pacific Railroad Company, Joint Reply Evidence of
BNSF Railway Company and Union Pacific Railroad Company
October 1,2010 Docket No. 42121 Total Petrochemicals USA, Inc. v. CSX Transportation,
Inc., Motion for Expedited Determination of Jurisdiction Over Challenged
Rates, Verified Statement of Benton V. Fisher
U.S. District Court for the Eastem District ofNorth Carolina •
March 17, 2006 Civil Action No. 4:05-CV-55-D, PCS Phosphate Company v. Norfoiit
Southern Corporation and Norfolk Southern Railway Company, Report by
Benton V. Fisher
U.S. District Court for the Eastem District of Califomia
January 18, 2010 E.D. Cal. Case No. 08-CV-1086-AWI, BNSF Railway Company v. San
Joaquin Valley Railroad Co., et al.
Arbitrations and Mediations
July 10, 2009 JAMS Ref. # 1220039135; In ttie Matter of the Arbitration Between Pacer
International, Inc., d/b/a/ Pacer Stacktrain (f/k/a/ APL Land Transport
Sen/ices, Inc.), American President Lines, Ltd. And APL Co. R e . Ltd. And
Union Pacific Railroad Company; Rebuttal Expert Report of Benton V. Fisher
JA129
JJrlUJVll Ovl.N ATIANTA CLEVELAND QAVTON WASHINGTON. D
CINCINNATI ' COLUMBUS NEWYORK
Januaiy 18,2011 ci^TEi=t^lL-«r,,QS

Offico o.^'0'
Cyntiiia Brown y^.^ \ Z ZOl^
Chief, Section of Administration .
Ofifice ofProccedings puVj^cliQ^^^
Surface Transportation Board
39SESti«et,SW
Washington, D.C. 20423
RE: Docket No. NOR 420S6, Texas Municipal Power Agency v. The BNSF
Railway Company
Dear Ms. Brown:
In a Reply filed January 6,2011 in the above-captioned docket, the BNSF Railway Company
("BNSF") made a number of misleading statements regarding therequestof Texas Municipal
Power Agency ('TMPA") diat the Board enforce the maximum reasonable rate in diis case.
TMPArespectfiillyrequestsdiat die Board accept dus letter, despite 49 CFR § 1104.13(c),
because it "provide[s] a more complete record, clarif[ies] the arguments, will not prejudice any
party, and do[es] not unduly prolong die proceeding." BNSF Railwav Comnanv -
Discontinuance of Trackage Riehts Exemption - In Peoria and Tazewell Counties. 111.. STB
DocketNo. AB-6 (Sub-No. 470X), slip op. at 1 (served June 4,2010).
As an initial matter, TMPA wants toreiteratethat it seeks an expeditious mlingfix)mthe Board.

In its Reply, BNSF includes numerous statistics and a variety of statements about the case
possibly being reopened. However, this case is not reopened and neither TMPA nor BNSF have
sought reopening. Instead, TMPA is seeking enforcement ofthe existing decision. Nine trains
have been loaded and seven BNSF tiains have already arrived at TMPA's Gibbons Creek stiition
in 2011, and an expeditious decision is warranted.
An expeditious decision is also warranted because BNSF is also attempting to impose additional
costs to TMPA's service beyond the new higher tariff rate. These additional costs are above and
beyond those itemized in the STB's rate case decisions for TMPA and include:
1. A minimum car loading that has increased from 118 to 120 tons per car. This makes
loading BNSF cars exb«mely difificult when their maximum net capacity.is 121 tons
or less. The weight target range is too small and TMPA must pay overloading
charges if more than 121 tons is placed into the car or minimum loading chaiges if
less than 120 tons is loaded. A weight tolerance range ofless than 1% ofa car's
capacity is nonsense.
THOMPSON HINE LIP 1920 N Street. N.W. www.ThoinpsonHiiie.coiii

ATTORNEYSATLAW Vfashington, D.C. 20036-1600 Plione 202.331.8800
Fax 202.331.8330
JA130
THOMPSON
—ffpfe—
January 18,2011
Page 2
2. A minimum annual volume has been added at 1.8 million tons with a 30% liquidated
damages penalty for any shortage.
3. Demurrage charges of $600 per hour for train unloacUng times in excess of 6 hours.'
4. This tariff is subject to BNSF's coal dust tariff and the costs associated with dust
suppression treatments of bnins.
Strewn throughout dieflotsamofdie Reply, BNSFrepeatedlyclaims diat circumstances have

changed since the Board's 2003 and 2004 decisions in this case. See, e.g.. BNSF Reply at 2
(claiming "substantial changes in economic conditions"). The major change in economic
conditions, according to BNSF, is an increase in fiiel costs since the original SAC analysis.
BNSF Reply at 15. BNSF convenientiy ignores other changes that would show die original SAC
analysis overestimated thereasonablerate level; for example, railroad rates have risen
dramatically since 2003, especially for coal transportation. See. e.g.. Study of Railroad Rates:
1985-2007, Surface Transpoitation Board, Office of Economics, Environmental Analysis &
Administiation (January 16,2009); A Study of Competition in die U.S. Freight Railroad Industtv
and Analvsis of Proposals that Mipht Enhance Competition. Christensen Associates, Inc.,
Volume I, page 2-11 (November 2009); An Update to die Study of Competition in die U.S.
Freight Railroad Industi-y. Christensen Associates, Inc., page 2-5 to 2-6 (January 2010) (graph
shows significant increase in two coal transportation rate indices, and notes that "[bjoth rate
indexes show that coal transportation rates increased more rapidly than overall industiy rates").
In any event, BNSF's assertions are irrelevant because this proceeding is not reopened. BNSF
has not actuallyrequestedreopening,or made any effort to meet the reopening standard carefiilly
described in Maior Issues in Rail Rate Cases. STB Ex Parte No. 657 (Sub-No. 1), slip op. at 67-
75 (served Oct. 30,2006). Because BNSF has not met die standard of 49 USC § 722(c), die
Board should disregard BNSF's unsupported assertions and simply enforce the existing decision.
BNSF now claims that the current maxunum reasonable rate of $25.33 per ton is less than 180%
of BNSF's variable costs. If BNSF wants to assert die 180% RA^C level, it must follow die
movement-specific adjustments as duected in the Board's original decision. "The parties should
calculate this rate floor, in a manner consistent with the procedures and findings contained in
' In die March 24,2003 Decision, die STB accepted BNSFs evidence for utility unloading time
wherein BNSF asserted that the average time its trains spend at the destinations (including
Gibbons Creek) ranges from 10 to 19 hours. Decision, slip op at 76. In addition, the STB found
that TMPA failed to show that tiains could be expected to be unloaded within the free time
provided in die BNSF tariffs.
JA131
IhOMFSON
January 18,2011
Page 3
Appenduc A, as the necessaiy information for each time period becomes available." TMPA v.
BNSF. 6 STB 573,608 (2003). BNSF now appears to claim diat it has not kept back ofdie
"necessaiy infoimation" reganiing its variable costs as that infonnation has become available
during diis case. BNSF Reply at 19-21. BNSF's failure to maintain its variable cost data as
directed by the Board should not be used to BNSF's benefit, as an excuse to switch to system
average variable costs.
BNSF also suggests that the switch to unadjusted variable costs in Maior Issues means diat the
Board-determined movement-specific adjustments in the TMPA v. BNSF pioceeding must be
ignored. BNSF Reply at 17-18. This is incorrect. In Maior Issues, die Board only stated diat die
new mles would apply to "fixture cases." Ex Parte No. 657 (Sub-No. 1), slip op. at 76-77. The
Board cannot apply the Major Issues mle changes to the pre-existing decision in Docket 42056
because retinactive mlemaking is unlawfiil under die Adminisb-ative Procedure Act. Bowen v.
Georgetown University Hospital. 488 U.S. 204,223-224 (1988); Sierra Club v. Whitman. 285
F.3d 63,68 (D.C. Cir. 2002) (intemal citation omitted) ("We have held diat die APA prohibits
retroactivei mlemaking.").
BNSF tries to make an issue ofdie feet diat T W A did not seekreconsiderationofdie Board's
initial decision in this case on the issue ofwhen therate-settingfi%edomwould be retumed to
BNSF. BNSF Reply at 5. This is true, but only because TMPA believed then, and continues to
believe now, that the decision clearly used a 20-year analysis period and mandates maximum
reasonable rates for all 20 years. It may also be worth noting that BNSF did not seek
reconsideration on this issue either.
BNSF also claims that, despite die 20-year netting process used by the Board in this case, no
maximum rate is appropriate for years 11-20 because rate relief is entirely "discretionary."
BNSF Reply at 13. See also BNSF Reply at 8 (BNSF claimstiiatTMPA's argument is based
upon the "supposed logic" ofdie SAC analysis). BNSF seems to be saying that, after a multi-
year and multi-million dollar SAC proceeding that shows TMPA is entitled torelief,die Board
should simply decide to refiain from enforcing a maximum reasonable rate.
This assertion is based on the "may prescribe" language fixim 49 USC § 10704(a)(1) and a recent
decision in the AEP Texas case, but BNSF omits several key points in citing these two sources.
First, BNSF ignores the Board's reliance on die peculiar "circumstances" in the AEP Texas case.
In that case (which did not use the percentreductionmethod), a maximumreasonableratewas
only warranted in the 21st year of an 83-quarter DCF period for a few origin mines. The Board
decided not to prescribe that maximumreasonablerate because it was so far in the future and due
to the unique "combination of circumstances" that existed in the case. AEP Texas North
Companv v. BNSF Railway Company. STB Docket No. 41191 (Sub-No. 1), slip op. at 19
(served May 15,2009). The Board also noted that its determination of what areasonablerate
JA132
IkOMPSON
—Ipfe
Januaiy 18,2011
Page 4
would be in die 21st year should be used by the parties as a "tiansparent guide." Id. In contiast,
the TMPA rate dispute concems the rate to be charged right now, not at a point years in the
future; moreover, the "circumstances" and equities favor enforcing die Board's decision because
the netting process (in conjunction with the percent reduction method) used by the Board
reduced TMPA's recoveiy in years 1-10 to offset die existence ofa maximum reasonable rate
through year 20.
One of BNSFs most distiirbing assertions is diat TMPA's only relief now is diat it can challenge
die new tariff in a new rate case, despite die fact diat die original 20-year DCF period continues
duough die first quarter of 2021. BNSF Reply al 11. BNSF's viewpoint is a recipe for chaos
and would create a second, overlapping SAC analysis period for the same shipper and same
origin to destination pairs. The irrationality ofthis situation highlights the fallacy of BNSF's
position.
Under BNSF's interpretation ofdie Boaid's netting process, a defendant raiiroad is able to
manipulate the result to its own favor. Use of netting in conjunction with the percent reduction
mediod means diat SARR under-recoveries in later years ofdie SAC analysis work to ofi&et
SARR over-recoveries in early years. Thus, as in TMPA's case, a maximumreasonablerateis
"pulled" upward in the early (over-recovery) years in order to "push" down the maximum rate to
the tariff level in later (under-recoveiy) years. In BNSF's view, die defendant has complete rate-
setting freedom in the later years that were part ofthe analysis period.
BNSF asserts diat die Board does not have authority to set maximum reasonable rates for 2011 -
2021. BNSF Reply at 13. This assertion is contradicted by Boaid precedent. Contiaiy to
BNSF's unsupported assertion, the Board does and has set a maximum reasonable rate equal to
die challenged tariff level. APS. 2 STB at 390-393. See maximum rate on page 452, where die
"Arizona ultimate reduced rate" is equal to die putative tariff rate "Greater of revised reduced
rate or RA^C floor" in years 2003-2004 and 2008-2013. 2 STB at 452. As later stated by die
Board in the same proceeding, "the SAC analysis assumes diat the defendant railroad would
adhere to die rate diat it has selected." APS, slip op. at 7 (served Dec. 13,2004).
BNSF claims diat TMPA's position represents "the same argument" made by Westem Fuels in
STB Docket No. 42088 (Sub-No. 1). BNSF Reply at 9. There is a worid of difference between
the position advocated by Westem Fuels and that explained by TMPA in the Petition for
Enforcement. Westem Fuels was arguing about how to calculate variable costs for the
determination ofthe maximum reasonable rate (which was set at an R/VC ratio). Westem Fuels
asserted diat the original variable costs should be used, and simply indexed for the next 20 years.
The Board disagreed, finding diat the variable costs should be calculated each year based on
. BNSF's reported results. Westem Fuels Association. Inc. and Basui Electiic Power Cooperative
JA133
THOMPSON
January 18,2011
Page 5
y. BNSF Railway Company. STB Docket No. 42088 (Sub-No. 1), slip op. at 6-9 (served July 27,
2009).
The Westem Fuels dispute about how to calculate variable costs has norelationshipto TMPA's
position regarding the netting process used by the Board in calculating the maximum reasonable
rate using the percent reduction method in a 20-year DCF. The Board did not even use the
percent reduction method in Westem Fuels. In short, TMPA is not making "the same argument"
as Westem Fuels.
Finally, BNSF makes the unusual assertion that a "legal flaw" must be shown to justify
reopening a case based on material error. Reply at 12-13. Despite repeatedly claiming a "legal
flaw" is necessaiy for material error to exist, BNSF does not cite to any Board or ICC precedent.
Indeed, the "legal flaw" concept is nowhere found in the goveming statute, 49 USC § 722(c), or
the Board's reopening rules, 49 CFR § 1115.4. The Board has previouslyreopeneda case based
on material error with.no mention ofa "legal flaw" or statute violation. See Plailroad Ventures.
Inc. - Abandonment Exemption - Between Youngstown. OH and Darlington. PA. In Mahoning
and Columbiana Counties. OH and Beaver Countv. PA. STB Docket No. AB-556 (Sub-No. 2X),
slip op. at 6-8 (served Feb. 15,2007). While neither TMPA nor BNSF have argued for
reopening here, the Board should reject BNSF's attempt to create a new standard for reopening
based on material error.
Please do not hesitate to contact me ifyou have any questions.
Veiy tmly yours.
V^My/(^<
Sandra Brown
cc: Samuel M. Sipe, Jr., Counsel for BNSF Railway Company

Parties ofRecord
JA134
41714 SERVICE DATE – JULY 27, 2011

EB
DECISION
Docket No. NOR 42056

v.
Digest:1 The Board will not “enforce” an expired rate prescription against the
defendant railroad as requested by the complaining shipper. The Board’s prior
decisions in this proceeding provide that the maximum rate prescription ended in
2010.
Decided: July 22, 2011
Ten years ago in this proceeding, Texas Municipal Power Agency (TMPA) challenged
the reasonableness of the rate charged by The Burlington Northern and Santa Fe Railway
Company (BNSF) for transportation of coal in unit trains from certain mine origins in the
Powder River Basin (PRB) of Wyoming to TMPA’s Gibbons Creek Steam Electric Station at
Iola, Tex. In a decision served March 24, 2003 (TMPA 2003),2 the Board found that BNSF had
market dominance over that transportation and that the challenged rate was unreasonably high.
Based on a stand-alone cost (SAC) analysis, the Board awarded reparations to TMPA and
prescribed maximum reasonable rates through the year 2011. In a decision served September 27,
2004 (TMPA 2004),3 the Board reconsidered various aspects of TMPA 2003 and corrected
several technical errors.4 As a result of its reconsideration, the Board revised its rate
prescription, prescribing maximum reasonable rates through the year 2010. Neither party
appealed the Board’s decisions, nor has either party sought reopening.
1
The digest constitutes no part of the decision of the Board but has been prepared for the
convenience of the reader. It may not be cited to or relied upon as precedent. Policy Statement
on Plain Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010).
2
Tex. Mun. Power Agency v. Burlington N. & Santa Fe Ry., 6 S.T.B. 573 (2003).
3
4
The Board subsequently served a decision correcting TMPA 2004’s Table 2 – Revised
Rate Prescription. Texas Mun. Power Agency v. Burlington N. & Santa Fe Ry., NOR 42056
(STB served Oct. 29, 2004) (TMPA Correction). The remainder of TMPA 2004 was unchanged.
JA135
On December 17, 2010, TMPA filed what it called a “Petition for Enforcement of
Decision,” seeking a Board order directing that BNSF charge TMPA no higher than what it
called the “SAC rate” or “Tariff rate”5 through March 31, 2021 (the last quarter of the 20-year
Discounted Cash Flow (DCF) analysis period in this case).6 TMPA argues that TMPA 2003 and
TMPA 2004 established maximum reasonable rates through the 1st quarter of 2021. It asserts
that, on an overall net present value basis over the entire 20-year DCF period, the Board found
that the revenues of the stand-alone railroad (SARR) exceeded its costs, requiring rate relief.
TMPA claims that the Board lowered TMPA’s rate relief in the first 10 years of the DCF period
so that annual overpayments and underpayments would offset each other by the end of the
20-year DCF “prescription” period, using a “netting” procedure.7 TMPA argues that under this
netting procedure—although rates were not ordered to be reduced during the years 2011 through
the 1st quarter of 2021—the maximum reasonable rate for this time period is the “Tariff rate” or
“SAC rate” shown in TMPA 2004.8 TMPA argues that it only received half of the appropriate
rate reductions and that allowing BNSF to charge anything other than the tariff rate or SAC rate
through the 1st quarter of 2021 would “subvert the offset,”9 thereby permitting BNSF to
“over-recover” during the SAC analysis period and undermining 49 U.S.C. § 10701, the rate
reasonableness process, and the DCF analysis in this case. TMPA claims that, by charging more
than the tariff rate or SAC rate, BNSF is improperly attempting to alter the rate prescription
(which TMPA asserts is legislative in nature) without having sought reopening of the Board’s
decisions.
TMPA also contests certain new charges that BNSF has added to its base rates including
a fuel surcharge, a reduced car-loading weight tolerance range with minimum loading charges
and penalties for overweight loadings, a minimum annual volume commitment with penalty for
shortages, new demurrage charges, and coal dust mitigation costs.10 TMPA claims that the new
5
TMPA (Pet. at 5, 16) refers to Table 2 of TMPA 2004, 7 S.T.B. at 832, corrected,
TMPA Correction, slip op. at 2.
6
In 2006, the Board reduced the standard DCF period to 10 years for future large rate
cases. Major Issues in Rail Rate Cases, EP 657 (Sub-No. 1), slip op. at 61-66 (STB served
Oct. 30, 2006) (Major Issues). The Board noted that most rate prescriptions in large rail rate
cases ended after 10 years. Id. at 65-66.
7
Pet. at 8-10.
8
See TMPA 2004, 7 S.T.B. at 832 (Table 2), corrected, TMPA Correction, slip op. at 2.
9
Pet. at 10.
10
Pet. at 14; Letter from TMPA counsel to Board, at 1-2 (Jan. 18, 2011). TMPA also
requested expedited consideration for its Petition in light of “BNSF’s stated plan to deviate from
the maximum reasonable rate starting January 1, 2011,” and to “prevent BNSF from charging a
significantly higher rate than the maximum reasonable rate determined under the Board’s
20-year analysis.” Pet. at 1. In letters filed on December 21, 2010, and January 19, 2011, BNSF
opposed TMPA’s request for expedited treatment and asked the Board not to accept TMPA’s
January 18 Letter into the record. In the interest of compiling a complete record, we will accept
(continued . . . )
2
JA136
fuel, demurrage, and coal dust mitigation charges are similarly proscribed by the rate
prescription because they were already accounted for by the SARR and in the DCF analysis.
BNSF opposes TMPA’s requests in its Reply filed January 6, 2011, arguing that the
Board restored its pricing discretion upon the end of the rate prescription in 2010. BNSF points
out that TMPA cites no language in TMPA 2003 and TMPA 2004 that supports its position, but
instead TMPA claims that the logic of the SAC analysis requires a constraint on rates even
though the Board did not specify a maximum rate after 2010. BNSF contends that the Board’s
rate prescription was unambiguous and was required only through 2010. Further, BNSF claims
that the scope of a rate prescription is governed by the language of the Board’s decision, rather
than the SAC assumptions underlying the rate prescription. BNSF argues that prescribed rates
are an exercise of the Board’s discretion under 49 U.S.C. § 10704(a)(1) and that the Board only
had the discretion to prescribe rates through 2010, because after 2010, the SAC analysis showed
that the SARR would not generate sufficient revenues to cover its costs. Thus, BNSF argues, the
Board did not have a legal basis on which to prescribe rates for 2011-2021.11
In addition, BNSF argues that TMPA has not shown grounds for either reopening TMPA
2003/TMPA 2004 or extending the rate prescription. To extend the rate prescription, BNSF
argues that the Board would need to consider fuel cost evidence and an array of other changed
circumstances since the 2001 base year forecasts.12 Finally, BNSF claims that the revenue it
receives from its current rate is less than 180% of the variable cost of the movements, and
therefore the Board may not prescribe rates below the current level.13
Both parties oppose reopening our prior decisions, but BNSF submits evidence of
changed circumstances in its Reply, should the Board reopen.14
( . . . continued)
the parties’ letter filings. See, e.g., Reporting Requirements for Positive Train Control Expenses
& Investments, EP 706, slip op. at 1 n.2 (STB served Feb. 10, 2011).
11
Reply at 7-11.
12
For example, the parties and the Board used 2001 fuel costs in the SAC analysis,
TMPA 2003, 6 S.T.B. at 635-36, but BNSF points out there has been a dramatic increase in fuel
costs over the past decade. Thus, BNSF concludes that had the original DCF analysis accurately
projected fuel cost increases since 2001, no rate prescription would have been ordered, even for
the period before 2010. Reply at 16.
13
Reply at 16-21.
14
Reply at 15-16 & Joint V.S. of Michael R. Baranowski and Benton V. Fisher, at 3,
5-6.
3
JA137
DISCUSSION AND CONCLUSIONS
The Board will deny TMPA’s petition. The Board will not clarify, or “enforce,” its
TMPA 2003 and TMPA 2004 decisions in the manner TMPA seeks, because those decisions
clearly provide that TMPA is entitled to a rate prescription only through 2010.
The plain language of the Board’s decisions in this case is contrary to TMPA’s position.
In TMPA 2003, the Board stated that “[i]n our SAC analysis, we find that the SAC rate would be
lower than the challenged rate until the year 2012. Accordingly, we find the challenged rate to
be unreasonable and we prescribe a maximum reasonable rate through the year 2011.”15 In
TMPA 2004, the Board stated that “[b]ased upon a stand-alone cost (SAC) analysis, the Board
prescribed maximum reasonable rates through the year 2011.”16 The Board then modified this
year to 2010.17 Table 2 – Revised Rate Prescription shows that the “STB Prescribed Rate” – the
Higher of the SAC rate or a 180% R/VC rate – ends after 2010.18 Finally, the Board served a
correction to TMPA 2004 in which it stated that “[a] decision by the Board, in [this] proceeding .
. . did not properly calculate the rate prescription for 2002 through 2010.”19 Although TMPA
argues that the 20-year SAC and DCF analyses support its position that BNSF’s rate must be
capped through the 1st quarter of 2021, the Board’s language makes clear that the agency
ordered rate relief only through 2010.
In 2004, the Board reviewed the SAC evidence and the results of the DCF analysis
showing that the SARR’s revenues would exceed its costs during the first 10 years of the SAC
analysis period, but that its costs would exceed revenues during the second 10 years.20 Further,
the DCF analysis showed that “[t]he sum of the present values of over-recoveries exceeds the
under-recoveries, thus demonstrating that the existing rate level is too high.”21 That is, the
agency concluded (in 2004) that TMPA was eligible for relief from BNSF’s unreasonable rates
from 2001 to 2010, but not from 2011 to 2021, because BNSF’s forecasted rates were not shown
to be unreasonable in the latter years.
15
TMPA 2003, 6 S.T.B. at 608. See also Table E-1, GCRR Cash Flow, which shows
zeroes in columns 9 through 11 for the years 2012 through 2021. Column 9 shows “Required
Revenue Reduction (present val[ue])”; Column 10 shows “Required Revenue Reduction
(current)”; and Column 11 shows “Percent Rate Reduction.” TMPA 2003, 6 S.T.B. at 749.
16
TMPA 2004, 7 S.T.B. at 803.
17
TMPA 2004, 7 S.T.B. at 830-33.
18
TMPA 2004, 7 S.T.B. at 832, corrected, TMPA Correction, slip op. at 2. The Board’s
first ordering paragraph states that “[t]he rate prescription . . . for movements of the issue traffic
[is] revised as discussed above [in the decision] and set forth in Table[] 2 . . . of this decision.”
TMPA 2004, 7 S.T.B. at 833.
19
TMPA Correction, slip op. at 1.
20
TMPA 2004, 7 S.T.B. at 830-31.
21
Id. at 831.
4
JA138
TMPA has raised additional issues stemming from TMPA 2003 and TMPA 2004, such as
its concern about “netting,” but it did not timely raise questions about those long-final decisions.
TMPA also complains about BNSF’s alleged alteration of the rate prescription, while BNSF has
raised issues regarding changed circumstances since we decided TMPA 2003 and TMPA 2004,
such as rising fuel costs. But we cannot properly analyze and make findings on those issues
without reopening this proceeding, which both TMPA and BNSF expressly oppose.22
Although we could reopen our decisions on our own initiative, we will not do so here for
three reasons. First, the parties have affirmatively asked us not to reopen. Second, if we were to
reopen on our own initiative, we would look at changed circumstances such as rising fuel costs
and other economic conditions that were unforeseen when the original 20-year projections were
made. We would also look at revisions to our SAC policies in the past 8 years, such as our
shortening our analysis period to 10 years,23 changing the method by which we calculate
maximum lawful rates for a complainant shipper,24 and using our unadjusted Uniform Rail
Costing System to determine if rail rate levels are below the jurisdictional floor.25 Finally, more
than 8 years have passed since the Board first stated, in TMPA 2003, that the rate prescription
would apply only to approximately the first half of the DCF period, and 7 years since we
indicated, in TMPA 2004, that it would end in 2010. For these reasons and in the interest of
administrative repose,26 we decline to reopen on our own initiative.
This decision will not significantly affect the quality of the human environment or the
conservation of energy resources.
It is ordered:
1. TMPA’s Petition for Enforcement is denied.
2. This decision is effective on its service date.
By the Board, Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey.
22
Reply at 16, 21; TMPA Jan. 18 Letter at 1, 2, 5; BNSF Jan. 19 Letter at 1.
23
Major Issues, slip op. at 64, aff’d sub nom. BNSF Ry. v. STB, 526 F.3d 770 (D.C. Cir.
2008).
24
Id. at 14.
25
Id. at 59-60.
26
See, e.g., Union Pac. R.R.—Aban. Exemption—In Rio Grande & Mineral Cntys.,
Colo., AB-33 (Sub-No. 132X), slip op. at 6 (STB served May 3, 2005) (need for repose weighed
against granting petition to reopen more than 5 years after line sale).
5
JA139
BEFORE THE
SURFACE TRANSPORTATION BOARD xv_

SI"
Complainant,
V. Docket No. NOR 4205'6
THE BNSF RAILWAY COMPANY
Defendant.
PETITION FOR RECONSIDERATION
Pursuant to 49 CFR § 1115.3, Texas Municipal Power Agency ("TMPA") respectfully
submits this Petition for Reconsideration ofthe Surface Transportation Board's ("Board" or
"STB") July 27,2011 decision in this proceeding ("Decision"). In the Decision, the Board
denied TMPA's Petition for Enforcement ("Petition") and effectively erased the last 10 years of
relief from the 20-year period used to calculate the maximum reasonable rate in this proceeding.
TMPA respectfully requests that the Board reconsider its Decision.
SUMMARY OF ARGUMENT
The challenged BNSF tariff rate, over a 20-year period, was determined to be unlawfully
high by the Board in a decision served in 2003. Texas Municipal Power Agency v. The
Burlington Northem and Santa Fe Railwav Companv. 6 STB 573 (2003) ("TMPA 2003"). The
Board ordered reparations and prescribed maximum reasonable rates for TMPA's Powder River
Basin coal transportation. Id. The Board modified its decision slightly in a reconsideration
decision served September 27, 2004,7 STB 803, ("TMPA 2004") and a technical corrections
decision served October 29, 2004, collectively "TMPA Rate Decisions." TMPAfiledits Petition
JA140
immediately upon leaming that BNSF was asserting that the TMPA Rate Decisions limited
TMPA's relief to 10 years. The Decision denied TMPA's Petition for Enforcement on the
asserted basis that the TMPA Rate Decisions were clear that TMPA's relief was limited to 10
years. With its Decision on July 27,2011, the Board has nullified the entire foundation ofthe
TMPA Rate Decisions. Thus, the Decision contains material error, as described below.
First, the Decision errs in as much as the Board ruled that the language ofthe TMPA Rate
Decisions clearly limited TMPA's relief to 10 years ofthe 20-year analysis period. The 20-year
•analysis and 20-year relief period was the established precedent at that time. The evidence
•submitted by the parties and the logic ofthe TMPA Rate Decisions were all predicated on 20
years. The TMPA Rate Decisions did not acknowledge or explain this alleged deviation from
the past precedent. Thus, the Board's Decision claiming now that TMPA should have assumed
the Board had deviated from the evidence, precedent and logic, is material error.
Second, the Decision errs in as much as the Board ruled that TMPA's netting evidence
was untimely. TMPA raised the netting issue in its Petition as evidence ofthe 20-year rate relief
period. TMPA has not objected to the netting process, which was also an established precedent
at that time. Most importantly, the netting only made sense under the established 20-year
analysis and 20-year rate relief period precedent. TMPA reasonably relied on the netting process
as the underlying logic to support the established 20-year analysis and 20-year rate relief period
for TMPA Rate Decisions.
Finally, the Board erred to the extent it retroactively applied the 10-year Discounted Cash
Flow ("DCF") rule. Any implication that the Decision is justified today because the rule for rate
cases is now 10 years is material error as an unlawful retroactive application ofthe new rule on
the TMPA Rate Decisions.
JA141
required to litigate a rate case under the Coal Rate Guidelines. 1 ICC2d 520 (1985), the Board
should ensure that TMPA obtains thefiillbenefit ofthe 20-year analysis period.
Moreover, the Board's Decision constitutes material error because the Board does not
even address the issue raised by TMPA that BNSF should be held to its commitment because the
Board precedent supports that BNSF be held to a key underpinning in any proceeding. See APS.
slip op. at 7 (served Dec. 13,2004) ("the SAC analysis assumes that the defendant railroad
would adhere to the rate that it has selected"). See also. Union Pacific Corporation et al. -
Control and Merger - Southern Pacific Rail Con?oration .et al.. 4 STB 879, 881-885 (2000)
(Board requires Union Pacific to abide by terms of UP-BNSF Agreement, which underpinned
Board approval ofthe UP-Southem Pacific merger). It caimot be untimely to raise an issue that
was an established part ofthe SAC analysis. In other words, TMPA had no way to predict that
the Board would later deviate from both its precedent and the underlying logic ofthe TMPA
Rate Decisions.
The Board's unsupported conclusion that the raising ofthe netting issues was untimely is
material error. The Board fails to take into account that TMPA raised the issue as evidence of
the 20-year relief period and not as an objection to the netting process. Furthermore, the Board
failed to even discuss how the netting and other language in the TMPA Rate Decisions, along
with past precedent, would have resulted in justifiable reliance on the Board's 20-year period.
III. THE BOARD'S DECISION WAS IN ERROR BECAUSE IT RETROACTIVELY

APPLIES THE 10-YEAR DCF RULE
While the Board's discussion of reopening appears to be dicta, the Board provided three
reasons for why it was not reopening its decisions on its own initiative. Of course, there would
be nothing to reopen if, as the Board declares, the prior decisions were clear that TMPA's relief
ended after 10 years notwithstanding the fact that the rate during those 10 years was established
17
JA142
based on the 20-year DCF analysis period. Yet, the main thrust ofthe discussion on reopening
appears aimed at justifying the Board's Decision by pre-judging that any alleged changed
circumstances would all be in favor ofthe railroad and that TMPA would not be entitled to any
relief anyway under a 10-year DCF analysis period.^ As discussed above, the 10-year DCF
period did not become the rule until five years after TMPAfiledits rate case and nearly two
years after the last decision in 2004.
Any implication by the Board that its Decision is justified today because the rule now for
rate cases is that a 10-year DCF analysis period and 10-year prescription is used, is material
error. The precedent against the retroactive application of rules is unambiguous. Bowen v.
Georgetown University Hosp.. 488 U.S. 204 (1988)(finding that HHS without authority to
promulgate retroactive cost-limit rules); Landgraf v. USI Film Products. 511 U.S. 244 (1994)
(affirming a refusal to grant retroactive operation ofthe Civil Rights Act of 1991); Westem Fuels
Assoc. Inc. V. BNSF Railwav Co.. STB Docket No. 42088, p. 22 (served Feb. 17,2009) (citing
the standard in Williams Natural Gas Co. v. FERC. 3 F.3d 1544,1553-54 (DC Cir. 1993). At the
time ofthe TMPA Rate Decisions there was a clear policy for the 20-year period. Thus,
retroactive application ofthe 10-year mle to TMPA's rate case is material error. Moreover, the'
^ The Board's Decision also appears inappropriately swayed by the fact that BNSF asserts that
changed circumstances such as fuel costs would have, according to BNSF, resulted in no rate
prescription even before 2010. The Board does not even mention TMPA's response on January
18,2011 that supported that the SAC analysis may have overestimated the reasonable rate level.
TMPA does not dispute that BNSF always had the right to assert that the maximum reasonable
rate cannot be below 180% revenue-variable costs percentage (R/VC) but BNSF had not asserted
that until this issue arose and BNSF did not previously attempt to show or charge a different rate
than the SAC rate. If in fact BNSF felt its costs had dramatically increased, it would have been
an imprudent business decision to not enforce its right to get its increased costs covered under
the jurisdictional threshold. So for the Board to be swayed by BNSF's unfounded assertion is
material error.
18
JA143
BEFOR*: THE
)
TEXAS MUNICIPAL POWER AGENCY j
Complainant, ^
) Docket No. 42056
)
BNSF RAI LWAY COMPANY j OC.icn 'J. i':. c'-'?K;ing3
Defendant. > !?CPG6 20i1

)
Partof
Pl'' lir '-'liccrd
REPLY OF BNSF RAILWAY COMPANY TO A'l^'Wl

PETITION FOR RECONSIDERATION
BNSl' hereby responds in opposition to the Petition for Reconsideration filed by Texas
Municipal Power Agency ("TMPA") on August 16, 2011 in the abovc-caplioncd matter.
SUMMARY OF ARGUMENT
fMPA seeks reconsideration ofthe Board's July 27. 2011 decision denying TMPA's
December 17, 2010 request that the Board "enforce" an expired rale prescription against B.N'SF
by extending the prescription beyond ils original term through 2010 through the first quarter
2021. The Board correctly denied TMPA'.s request, which .sought to have the Board interpret its
prior rate prescription in this case in a way that contradicted the clear language ofthe Buard'.s
prior decisions imposing the prescription. TMPA has provided no valid reason to reconsider the
Board's July 27, 2011 decision.
In its petition for reconsideration. TMP.A first argues that the Board could nol have
established a 10-year rate prescription in this case since .such a rate prescription would have been
inconsistent with precedent. But precedent is irrelevant in determining the scope ofthe rate
proscription here because the Board unambiguou.sly defined the scope ofthe rate prescription in
JA144
its decisions. T.MPA conspicuously ignores the clear language ofthe Board's decisions limiting
the rale prescription to the period 2001-2010. Moreover, even if TMPA were correct that a 10-
year rate prescription was a departure from precedent - an assertion that is not correct, as
explained below - TMPA should have raised the i.ssuc on appeal but it failed lo do so.
Second, TMP.'\ argues that the Board erred in finding that TMP.'V failed to raise its
concerns about "netting" in a limely fashion. TMPA's argument about netting is simply a
N'ariation on its argument about precedent and it fails for the same reason. TMPA argues that Ihe
Board could nol have meant to establish a 10-year rate prescription because such a prescription
would be inconsistent with the logic underlying the Board's netting practice. But regardless of
the validitv of TMPA's claims about the supposed logic of netting - and again, TMPA's
substantive arguments about the logic of netting arc incorrect - the Board clearly defined the
scope ofthe rate prescription in its decisions in this case and specified thai the rale prescription
would last only through 2010. If TMPA thought that the Board's clearly defined rale
prescription was inconsistent with the logic of netting, then TMPA should have brought a timely
appeal ofthe Board's prior decision, which TMPA failed to do.
Finally, TMPA argues that it was material error for the Board in its July 27, 2011
decision to apply retroactively ils current rule that rates are prescribed in stand-alone cost
("S.'\C") cases for no more than 10 years. The short answer lo this assertion of error is that Ihe
Board did not apply ils current rule on the scope of rate prescriptions relroactivcly. The Board's
July 27, 2011 Decision simply acknowledged what the Board had said in its prior TMPA
decision in unambiguous language, namely that the Board, in 2004, prescribed rates in this case
onh through 2010.
JA145
In the TMPA proceeding, the Board reasonably concluded in 2004 thai the rate
prescriplion should be limited lo the years 2001-2010. As the Board explained in the July 27,
201 1 Decision, "the agency concluded (in 2004) that TMPA was eligible for relief from BKSF's
unreasonable rates from 2001 to 2010, but not from 2011 to 2021, because BNSF's forecasted
rates were not shown lo be unreasonable in the latter years.'' July 27, 2011 Decision al 4.
Indeed, the statute gives the Board discretion lo prescribe rates only where the Board has found
that the challenged rate "does or wilT' violate the statute, which is not the case here for the period
2011-2021. 49 U.S.C. § 10704(a)(1). But even if the Board had legal authority to prescribe rates
for 2011 -2021, il chose not lo do so and made that decision abundantly clear in defining the
scope of the rate prescription. TMPA failed to challenge that decision on appeal, and il is loo
late to challenge that decision here.
II. The Board Correctly Found That T.MPA's Concerns About Netting Were Not
Timely Raised.
T.MP.\ al.so takes issue with the Board's conclusion in the July 27, 2011 Decision that
TMPA did not timely raise questions about the way the Board carried out its "netting''
procedures in the 2003 and 2004 Decisions. TMP.A Pel. For Recon. al 13, TMPA's discussion
ofthe netting issue in its Petition is particularly confused. The argument on netting appears to
be a variant on 'TVIPA's argument, addressed above, that the Board should interpret the 2003 and
2004 Decisions based on inferences from precedent ralher than on the plain language ofthe
decisions.
Specifically. TMPA argues that the Board, in the July 27, 2011 Decision, should have
inteqireted the scope of the 2003 and 2004 rate prescriptions in light ofthe supposed logic
underlying the netting process. According to TMPA, netting is a process that "accounl[s] for a
full 20-ycar period," so the rate relief should cover the same 20-year period. TMPA Pel. for
JA146
Recon. at 13. While it is true that the netting process looks al cash flows over the entire 20-year
period. TMP.A ignores the objective of netting. The purpose and effect of netting in this case
was to ensure that the revenues ofthe stand-alone railroad would be reduced only by an amount
necessary to eliminate BNSF's total over-recovery as calculated in the 20-year S.AC analysis.
See BNSF's Reply to TMPA's Pelition for Enforcement of Decision at 13 (filed .lanuary 6,
2011). 'The Board properly used netting in this ca.sc to ensure that the total over-recovery was
eliminated through rate reductions in each year that BNSF was projected to have an overcharge,
/. 1^.2001-2010.
However, it is not necessary for the Board to address TMPA's claims about the objective
of netting and its implications for any rate prescriplion because the scope ofa rate prescription is
not defined through inferences drawn from the supposed logic underlying the SAC analysis. As
discussed above, a rate prescription is defined by the specific language ofthe Board decision
cslablishing that prescriplion. Whether TMPA would have had a valid basis for challenging the
Board's decision lo prescribe a rate only for the years 2001-2010 based on TMPA's theory of
netting is beside the point. 'The Board unambiguously defined the scope ofthe rale prescription
as limited to the period 2001-2010 and TMPA failed to challenge that decision in a timely
appeal.
III. The Board Did Not Retroactively Apply The Current Rule Limiting Rate
Prescriptions To 10 Years.
Finally, 'TMPA argues that the "retroactive application of ihc lO-ycar rule lo TMPA's
rate case is material error." TMPA Pet. For Recon. at 18. TMPA seems to realize that it
mischaraclerizes the Board's July 27, 2011 Decision, as it slates that "the Board's discussion of
reopening |in which the reference lo the 10 year rule arose] appears to be dicta." Indeed the
Board did not find that the rule adopting a 10 year SAC analysis period applies here. In.stead, the
JA147
41918 SERVICE DATE – JANUARY 20, 2012

EB
DECISION

v.
Digest:1 The Board upholds its decision denying “enforcement” of an expired

rate prescription against the defendant railroad as requested by the complaining
shipper.
Decided: January 18, 2012
In 2001, Texas Municipal Power Agency (TMPA) challenged the reasonableness of the
rate charged by The Burlington Northern and Santa Fe Railway Company (BNSF) for
transportation of coal in unit trains from certain mine origins in the Powder River Basin (PRB) of
Wyoming to TMPA’s Gibbons Creek Steam Electric Station at Iola, Tex. In a decision served
March 24, 2003 (TMPA 2003),2 the Board found that BNSF had market dominance over that
transportation and that the challenged rate was unreasonably high. Based on a stand-alone cost
(SAC) analysis, the Board awarded reparations to TMPA and prescribed maximum reasonable
rates through the year 2011. In a decision served September 27, 2004 (TMPA 2004),3 the Board
reconsidered various aspects of TMPA 2003 and corrected several technical errors.4 In TMPA
2004, the Board revised its rate prescription, prescribing maximum reasonable rates through the
year 2010. Neither party sought reconsideration of TMPA 2004 or judicial review of either
TMPA 2003 or TMPA 2004, nor has either party sought reopening of those decisions.
On December 17, 2010, TMPA filed what it called a “Petition for Enforcement of
Decision,” seeking a Board order directing that BNSF charge TMPA no higher than what it
1
The digest constitutes no part of the decision of the Board but has been prepared for the
convenience of the reader. It may not be cited to or relied upon as precedent. Policy Statement
on Plain Language Digests in Decisions, EP 696 (STB served Sept. 2, 2010).
2
3
4
The Board subsequently served a decision correcting TMPA 2004’s Table 2 – Revised
Rate Prescription. Tex. Mun. Power Agency v. Burlington N. & Santa Fe Ry., NOR 42056
(STB served Oct. 29, 2004) (TMPA Correction). The remainder of TMPA 2004 was unchanged.
JA148
called the “SAC rate” or “Tariff rate”5 through March 31, 2021 (the last quarter of the 20-year
Discounted Cash Flow (DCF) analysis period in this case). BNSF opposed TMPA’s request in
its Reply filed January 6, 2011, arguing that the Board restored BNSF’s pricing discretion upon
the end of the rate prescription in 2010. Both parties opposed reopening our prior decisions.
By a decision served July 27, 2011 (TMPA 2011), the Board denied the relief TMPA
requested, finding that the decisions in 2003 and 2004 clearly provided that TMPA was entitled
to a rate prescription only through 2010. TMPA filed a petition for reconsideration of TMPA
2011 on August 16, 2011, and BNSF filed an opposition on September 6, 2011.
On reconsideration, TMPA claims the Board committed material error in denying the
petition for enforcement. TMPA challenges TMPA 2003, TMPA 2004 and TMPA 2011 on the
merits, making 2 arguments we could only address if we were to reopen our earlier decisions.
TMPA argues the Board erred in ruling that: (1) TMPA 2003 and TMPA 2004 limit TMPA’s
relief to 10 years of the 20-year DCF analysis period; and (2) TMPA’s concern about the Board’s
“netting” process was untimely. Although TMPA sought timely reconsideration of TMPA 2003
back in 2003, it did not present these 2 arguments at that time. Now, some 8 years later, TMPA
has expressly said it does not want the Board to reopen TMPA 2003 and TMPA 2004, and it
does not oppose our decision not to reopen on our own initiative.
TMPA’s first argument—that the Board materially erred in TMPA 2011 in denying
“enforcement” of a rate prescription for the full 20-year DCF period—is contrary to the plain
language of TMPA 2003 and TMPA 2004: “Accordingly, we find the challenged rate to be
unreasonable and we prescribe a maximum reasonable rate through the year 2011,” TMPA
2003, 6 S.T.B. at 608 (emphasis added). In TMPA 2003, the Board “prescribed maximum
reasonable rates through the year 2011 and awarded reparations to TMPA.” TMPA 2004, 7
S.T.B. at 803 (emphasis added).6 We cannot “enforce” a rate prescription for later years that we
did not order, and thus our refusal to do so in TMPA 2011 is not material error.
Second, to the extent TMPA believes that those plain statements about the extent of its
rate relief are inconsistent with the “netting” procedure discussed in those same decisions, any
alleged inconsistencies should have been just as evident to TMPA when TMPA 2003 and TMPA
2004 were issued as they are today. TMPA could have raised that argument years ago on
reconsideration or judicial review of TMPA 2003 and TMPA 2004, but it did not. Thus, our
observation in TMPA 2011 (at 5) that TMPA “did not timely raise questions about those long-
final decisions” with regard to netting is not material error.
Finally, in addition to the 2 arguments already discussed, TMPA adds 1 additional point:
it argues that the Board materially erred in TMPA 2011 because that decision “retroactively
5
TMPA (TMPA Pet. for Recon. at 5, 16) refers to Table 2 of TMPA 2004, 7 S.T.B. at
832, corrected, TMPA Correction, slip op. at 2.
6
In TMPA 2004, the Board adjusted the rate prescriptive period to run through the end
of 2010, rather than 2011. Compare TMPA 2003, 6 S.T.B. at 609-610 (Tables 3 and 4) with
TMPA 2004, 7 S.T.B. at 832, corrected, TMPA Correction, slip op. at 2 (Table 2).
JA149
applies the 10-year DCF rule.” The decision, however, does not retroactively apply the 10-year
DCF rule; it merely notes, in dicta, that if we were to reopen TMPA 2003 and TMPA 2004—
which we did not do on our own initiative and which TMPA itself expressly asked us not to do—
we would consider a range of circumstances that have changed since then, including the
reduction of the standard DCF analysis period from 20 years to 10. Nowhere does TMPA 2011
state or imply that the Board is declining to enforce a 20-year rate prescription because the DCF
analysis period is now only 10 years. To the contrary, we are declining to enforce a 20-year rate
prescription because our decisions in 2003 and 2004 did not provide for one.
For these reasons, TMPA’s petition for reconsideration is denied.
This decision will not significantly affect the quality of the human environment or the
conservation of energy resources.
It is ordered:
1. TMPA’s Petition for Reconsideration is denied.
2. This decision is effective on its service date.
By the Board, Chairman Elliott, Vice Chairman Mulvey, and Commissioner Begeman.
JA150
. "TV
1^ ' ^ \ ^
<• • • •
BEFORE THE h /^J.\

SURFACE TRANSPORTATION BOARD \ . {\i
V
Complainant,
V. Docket No. NOR 42056
THE BURLINGTON NORTHERN AND

SANTA FE RAILWAY COMPANY
Defendant.
PETITION TO REOPEN AND MODIFY RATE PRESCRIPTION
Complainant, Texas Municipal Power Agency ("TMPA"), pursuant to
49 U.S.C. § 722(c) and 49 C.F.R. Part 1115.4, hereby petitions to reopen the decisions
and orders in Texas Mun. Power Agency v. Burlington N. & Santa Fe Ry., 6 S.T.B. 573
(2003) {"TMPA 2003 ") and Texas Mun. Power Agency v. Burlington N. & Santa Fe Ry.,
7 S.T.B. 803 (2004) ("TMPA 2004"), as subsequently corrected in part by Texas Mun.
Power Agency v. Burlington N. & Santa Fe Ry., STB Docket No. 42056 (STB served
Oct. 29,2004), and modify the maximum rail rate prescriptions ordered therein on
grounds of changed circumstances. Specifically, upon receipt of appropriate, limited
additional evidence concerning stand-alone costs ("SAC") and updated variable costs for
the traffic at issue, the Board should revise its schedule of the maximum rates that
Defendant, BNSF
JA151
Railway Company ("BNSF")' can charge for the transportation of coal to TMPA's
Gibbons Creek Generating Station established in TMPA 2004, and extend the rate
prescription from 2011 through 2021. This relief is mandated by changes in
circumstances that prove that assumptions in the original prescription regarding future
rate levels for the issue traffic, and forecasts of future inflation, transportation revenues,
and certain other specific components of the SAC analysis, were seriously inaccurate.
Consistent with precedent, including the Board's previous handling of
similar petitions advanced by rail carriers subject to rate prescriptions on utility coal
traffic, the scope of reopening should be limited to consideration of the impact of the
revised, post-2010 projection of GCRR stand-alone revenues from the issue traffic on
the DCF analysis, and updates of indices and forecasts included in TMPA 2003 and
TMPA 2004 that have proven to be inaccurate (e.g., inflation forecasts, equity capital
costs, coal traffic and revenue forecasts, etc.). In all other respects, the Board's
evaluation of SAC on reopening should be based on the record and findings in TMPA
2003 and TMPA 2004. When re-evaluated in light of those changed circumstances, the
portions of the final rate prescription schedule in TMPA 2004 applicable to the years
2011 through 2021 addressing the issue rates and SAC should be revised as shown in
Table 1, below.
BNSF is successor in interest to the named Defendant in this proceeding.

^ TMPA 2003 and TMPA 2004 evaluated the reasonableness of the challenged
BNSF tariff rates under the SAC constraint of the Board's Coal Rate Guidelines, based
on the costs and revenues associated with a hypothetical substitute rail carrier designated
as the Gibbons Creek Railroad or "GCRR."
2
JA152
Table 2
Restatement of SAC-Based Maximum Rates
Year Tariff Rates Percent Reduction Max. SAC Rate
2011 $29.70 18.61% $24.17
2012 $31.21 11.64% $27.58
2013 $31.84 9.90% $28.69
2014 $32.36 6.43% $30.28
2015 $32.97 4.66% $31.43
2016 $33.48 7.29% $31.04
2017 $33.73 10.59% $30.16
2018 $34.01 13.36% $29.47
2019 $34.23 15.64% $28.88
2020 $34.38 15.71% $28.98
2021 (IQ) $34.38 14.19% $29.50
See V.S. Crowley/Fapp at Exhibit No. 4.
In its Enforcement Decision (at 5), the Board suggested that were it to
reopen this proceeding for any reason, it might "look at revisions to our SAC policies in
the past 8 years," including the methodological policy changes adopted in 2006 in Major
Issues, such as the shift from a 20-year DCF to a 10-year model. TMPA respectfully
submits that such an approach would be legally improper and unfairly prejudicial.
25
JA153
Fapp show, however, if it is assumed that the 10-year DCF period was applied to the
original TMPA record, TMPA would have been entitled to a greater measure of rate
relief over the 2001-2010 time period than was awarded in TMPA 2004. Indeed, based
on records of the coal volumes shipped by TMPA over the time period, the additional
aggregate relief to which it would have been entitled would be valued at over $13
million.^' Because the TMPA 2004 award was in the form of a rate prescription,
however, the recognized prohibition against retroactive changes precludes TMPA from
seeking or the Board granting a revision of the TMPA 2004 award to reflect a 10-year
DCF approach. See Arizona Grocery Co. v. Atchison, Topeka & S.F. Ry., 284 U.S. 370,
389 (1932). See also Assoc Gas Distributers v. FERC, 898 F.2d 809, 810 (D.C. Cir.
1990) (Williams, J. concurring). The asymmetry associated with applying even this
single element of Major Issues to a reopening of this proceeding under the APS model
demonstrates the manifest inequity of considering any changes other than the limited set
described supra.
^' See V.S. Crowley/Fapp at Exhibit No. 5.

27
JA154
BEFORE THE
Texas Municipal Power Agency
STB Docket No. NOR 42056

V.
The Burlington Northern And

Santa Fe Raihvay Company
Verified Statement
Of
Thomas D. Crowley
President
and
Daniel L. Fapp
Vice President
L.E. Peabody & Associates, Inc.

On Behalf Of
Texas Municipal Power Agency
April 20,2012
JA155
USCA Case #12-1087 Document #1405205 Filed: 11/15/2012 Page 159 ofNo.
Exhibit 1733
Page 1 of 1
Comparison of TMPA Projected Rates Per Ton
TMPA Rates
TMPA Rates With Actual
Quarter/ Per Ton In 2011 and 2012
Year STBDecisionl/ Rates To TMPA 2/
(1) (2) (3)
1. 2011 $25.33 $29.70

2. 2012 26.09 31.21
3. 2013 26.88 31.84
4. 2014 27.68 32.36
5. 2015 28.51 32.97
6. 2016 29.37 33.48
7. 2017 30.25 33.73
8. 2018 31.16 34.01
9. 2019 32.09 34.23
10. 2020 33.05 34.38
11. 2021 1 Qtr 3/ 33.05 34.38
1/ Source: TMPA 2004 STB workpapers.

2/ Years 2011 and 2012 equal actual rates i)aidbyTMPA. Years
2013 through 2020 are based on Year 2012 rate adjusted by
the forecasted change in the BNSF URCS Index.
3/ The STB's TMPA 2004 DCF model used 2020 rates per ton
for IQ 2021.
JA156
USCA Case #12-1087 Document #1405205 Filed: 11/15/2012
232295
Page 160 of 173
BEFORE THE ENTERED

Office of Proceedings
) May 10, 2012
)
) Part of
Complainant, )
)
Public Record
v. ) Docket No. 42056
)
BNSF RAILWAY COMPANY )
)
Defendant. )
)
REPLY OF BNSF RAILWAY COMPANY IN OPPOSITION TO

TMPA’S PETITION TO REOPEN AND MODIFY RATE PRESCRIPTION
BNSF Railway Company (“BNSF”) hereby replies in opposition to the Petition to
Reopen and Modify Rate Prescription (“TMPA Petition to Reopen”) filed by Texas Municipal
Power Agency (“TMPA”) on April 20, 2012.
INTRODUCTION AND SUMMARY OF ARGUMENT
The rate prescription in this docket established by the Board in its 2003 and 2004
decisions expired at the end of 2010. When the rate prescription expired, BNSF exercised its
statutory right to establish a new common carrier rate. Any challenge to the lawful rates that
BNSF established after the rate prescription expired must be carried out through a new complaint
that meets the requirements of the governing statute. TMPA cannot circumvent the statutory
provisions governing rate reasonableness challenges by asking the Board to reopen and extend a
rate prescription that ended over a year ago.
Moreover, any challenge to the rates that BNSF established after the rate prescription
expired – whether through a supposed reopening or through a proper rate reasonableness
complaint – would fail because those rates are significantly below the Board’s jurisdictional
-1-
JA157
threshold. TMPA is wrong that the Board is required to assess its jurisdiction today using the
complex and discredited movement-specific variable cost methodology that was used in the
Board’s 2003 decision in this case. The Board decided in 2006 that the use of movement-
specific adjustments to Uniform Rail Costing System (“URCS”) variable costs produced
unreliable variable cost calculations and determined that it would assess its jurisdiction in the
future using only system-average URCS variable costs. Under the Board’s current variable cost
methodology, BNSF’s rates are not subject to the Board’s jurisdiction.
TMPA previously sought to extend the rate prescription beyond 2010 through an
implausible and erroneous reading of the Board’s prior decisions. In response to TMPA’s
request, the Board on its own initiative considered whether it would be appropriate to reopen its
prior decisions in this docket and consider making changes to the rate prescription. The Board
concluded that a reopening was not justified and TMPA has provided no basis for reversing that
decision.
TMPA’s Petition to Reopen is an abuse of the Board’s process. TMPA seeks reopening
even though TMPA has already acknowledged that a reopening of the 2003/2004 Decisions
would not be possible if, as the Board has definitively ruled, the rate prescription expired at the
end of 2010. TMPA and its counsel and consultants also know full well that the rates BNSF has
charged since the rate prescription expired are below the Board’s jurisdictional threshold and
therefore are beyond the Board’s jurisdiction. TMPA’s Petition to Reopen is nothing more than
an effort to prolong litigation over the Board’s 2003/2004 Decisions as an excuse to continue
underpaying BNSF’s common carrier rates, which TMPA has been doing since BNSF
-2-
JA158
established a new common carrier rate on January 1, 2011. The Board should not countenance
such a misuse of Board process, and it should promptly deny TMPA’s Petition to Reopen.1
BACKGROUND
In 2001, TMPA challenged the reasonableness of BNSF’s common carrier rate for
providing transportation from the Wyoming Powder River Basin to TMPA’s Gibbons Creek
Station in Iola, TX. In 2003, the STB determined that the challenged rates were unreasonable
and prescribed maximum reasonable rates for the transportation service through 2011.2 In 2004,
the STB modified the rate prescription to extend only through the end of 2010.3 When the rate
prescription expired at the end of 2010, BNSF established a new common carrier rate effective
January 1, 2011, as it is entitled to do by statute. 49 U.S.C. § 10701(c).
In late 2010, TMPA filed a Petition for Enforcement at the Board seeking a declaration
that BNSF could not charge any rates for transportation to the Gibbons Creek Station in the years
2011 through first quarter 2021 that are higher than those identified as “SAC Rates” in the 2004
Decision. TMPA argued that the Board prescribed those “SAC Rates” for the Gibbons Creek
movement through the entire 20-year DCF period used in the Board’s SAC analysis – 2001
through 2021.4
1
TMPA’s Petition to Reopen also violates the Board’s rules limiting petitions to reopen
to 20 pages. 49 C.F.R. §§1115.3(d), 1115.4. To address all of the arguments in TMPA’s 80-plus
page Petition, BNSF is filing along with this Reply a request for leave to exceed the page limit in
49 CFR §§1115.3(d), 1115.4.
2
Texas Municipal Power Agency v. The Burlington Northern & Santa Fe Ry. Co., 6
S.T.B. 573 (2003) (“2003 Decision”).
3
Texas Municipal Power Agency v. The Burlington Northern & Santa Fe Ry. Co., 7
S.T.B. 803 (2004) (“2004 Decision”).
4
TMPA Petition for Enforcement (filed Dec. 17, 2010) at 7-10.
-3-
JA159
PRINCIPLES ;/
E
FINAL REPORT !
September 1, 1987
Volume 2-Detailed Report
RAILROAD ACCOUNTING PRINCIPLES BOARD

JA160
CHAPTER
Causality Principle
STATEMENT OF PRINCIPLE
Costs shall only be attributed to cost objectives when a causal relationship exists
(the cost would not have been incurred but for the requirements of the cost
objective). A cost objective is the result of the use of resources. It can take many
forms, depending on the purpose for which the cost information is needed.
Existence of a causal relationship may be established through direct observation,

engineering analysis, and/or statistical techniques.
For each regulatory application, the costs must represent the time orientation
relevant to the particular application. These time orientations may represent past
or future, and short-run, intermediate-run, or long-run.
EXPLANATION The Principle is based on the concept of avoidabil-

ity as a test or determinant for causality. If the cost
Causality is the primary criterion for cost assign- would not have been incurred but for the perfor-
ment. Cost is the amount (usually expressed in mance of the specified activity, then the cost is
monetary terms) of input resources used to achieve causally related to the activity.
a specified quantity of activity or service. Causality
links cost with an activity or service. The avoidability test is applied on an incremental
basis. That is, the change in the level of an activity
The Causality Principle precludes, to the extent may result in a change in the level of costs incurred.
practical, the use of arbitrary cost assignment in Without the change in the level of the activity, the
determining economically accurate cost. It limits change in the level of costs would not have occurred.
the use of costs to only those resulting from the However, elimination of the activity may not result
activity which is the subject of the regulatory deci- in total cost avoidance ifjoint and/or common costs
sion. are present.
9
JA161
report, they will not be specifically addressed by the hypothetical competitor to provide service to
the RAPB. the shipper or group of shippers.
Other applications of maximum rate cost evidence, This Principle permits a causal relationship to be
such as those presented in past ICC cases, sug- established through direct observation, engineering
gested to the RAPB by commenting parties or pro- analysis, and/or statistical techniques.
posed by the ICC in Ex Part@No. 347 (Sub-No. 2),
involve the computation of variable costs or a sur- As applied to SAC, each of the three approaches
rogate for stand-alone costs. These applications differs in its underlying assumptions. Direct obser-
typically are based on GPCS, such as RFA or the vation typically focuses on a specific portion of an
IJRCS, with adjustments to incorporate movement- existing railroad’s facilities and operations as a sur-
specific cost information and operating character- rogate for the facilities and operations of a hypo-
istics consistent with the RAPB’s Principles. Simi- thetical competitor. Engineering analysis is based
larly, when SAC are used, the ICC may have to on general physical relationships between the quan-
allocate the excess of revenues over total SAC in tity and mix of input resources required to produce
determining rate reductions for individual members a specific quantity of output rather than relying on
of the stand-alone shipper group, but these alloca- surrogate cost information from a particular exist-
tions are a rate-setting task, not a costing problem. ing railroad, Statistical techniques typically are
applied in GPCS to produce railroad-wide average
Railroad Accounting Principles apply whenever costs unit costs as a surrogate for the unit costs of a
are used in maximum rate cases. However, their hypothetical competitor.
application may vary among specific maximum rate
cases, depending upon the type of costs which the The RAPB has not established a hierarchical pref-
ICC requires to make its rate reasonableness deci- erence among the approaches for establishing cau-
sions. For example, for practicality reasons, the sality. However, where historical railroad costs are
Asset Valuation Principle is applied differently for used in direct observation or in statistical tech-
SAC than for variable costs from GPCS. The Prin- niques, caution should be exercised to ensure that
ciple requires current market asset valuation for the physical and operating characteristics of the
SAC, but it permits other measuresof cost for GPCS. surrogate railroad comport with those of the hypo-
thetical competitor.
This chapter’s explanation of how the Principles
apply in maximum rate cases pertains specifically The Causality Principle discourages apportionment
to SAC, since the ICC’s CMP guidelines for coal or allocation of joint costs among activities where
include a SAC test. The explanation is based on the the relationship between the incurrence of cost and
ICC’s current CMP guidelines; it may require mod- the joint performance of activities is inseparable
ifications for subsequent ICC departures from these among the activities. In determining costs for the
guidelines. stand-alone competitor, such allocations may be
avoided by determining costs for the entire stand-
APPLICATION OF PRINCIPLES alone entity. If the revenues for the traffic to be
TO MAXIMUM RATE CASES handled by the stand-alone competitor exceed the
total SAC, then maximum reasonable rates must be
In computing SAC for use in maximum rate cases,
set by the ICC.
all of the Principles may apply. This section addresses
the application of those Principles which are likely
The Causality Principle recognizes that costs may
to be most useful in preparing SAC evidence.2l
apply in the short-run, intermediate-run, or long-
Causality run, depending on the specific regulatory applica-
tion. In SAC applications, relevant costs are typi-
The Causality Principle, as applied to SAC, allows cally long-run costs since the relevant time period
the inclusion of costs which would be incurred by for a hypothetical competitor considering entering
Z’One commenting party stated that SAC should never be the end point in maximum rate regulation. Rather, SAC should be considered,
in conjunction with actual direct cost of service, as a means of allocating common costs among users of rail facilities. The weight
afforded SAC or its particular application in setting maximum rates are matters of ICC regulatory policy rather than of economically
accurate cost determination.
64 RAPB-Volume 2
JA162
a market is the expected life of the stand-alone Entity

entity’s operation. The expected life depends upon The entity for SAC is the transportation network
the assumptions made regarding the period over required by the new hypothetical competitor.
which the stand-alone railroad’s traffic is expected
to move. Cost of Capital
Homogeneity Capital costs, typically an important component of
SAC, consist of three major components: cost-of-
Average costs should be computed for interchange- capital rate, asset valuation, and capital recovery.
able resources according to the Homogeneity Prm- These three components are determined by the Cost
ciple. Many costs for a hypothetical competitor of Capital Principle and the Asset Valuation and
exhibit interchangeability since no expenses have Related Expense Principle.
actually been incurred and no assets have actually
been acquired. Average costs for interchangeable The cost-of-capital rate is determined by the Cost
resources may be used both in direct observation of Capital Principle. For SAC, a nominal cost-of-
of existing operations, as a surrogate for hypothet-
capital rate, comprised of the weighted average of
ical operations, and in engineering methods.
the current cost of debt and equity capital, is the
appropriate discount rate when DCF analysis is
Stand-alonelocomotive repair cost projections, based used.‘* If the most practical method to perform this
on historical coal pool locomotive repair experi- analysis-an after-tax cost-of-capital rate-is used,
ence, provide an example of homogeneity. While neither the cost-of-capital rate nor the asset base
repair information for the specific units actually require adjustment for deferred taxes. Cash-flow
used to handle a complainant’s coal movements
effects of taxes are recognized directly in the cash-
may be specifically identified, the averagepool repair flow computations. The cost-of-capital rate should
costs should be used if all coal pool locomotives reflect the financial risk of the hypothetical com-
have an equal chance for use in the complainant’s petitor. However, if the computation of such a rate
movements.
is impractical, the ICC-determined national rate may
be used.
Practicality
The Practicality Principle offers guidance on com- As noted by one commenting party, if an approach
puting SAC relevant to the size of the rate case. It other than DCF is used, care must be taken to avoid
recognizes that detailed engineering analysis for a double counting inflation in capital costs.
complex stand-alone railroad network conceivably
could exceed the potential transportation cost sav- Asset Valuation and Related Expense
ings for a shipper. For the preparation of SAC to be
In applying the Asset Wuation and Related Expense
feasible in such cases, the Practicality Principle
Principle to SAC, current market valuation at the
allows reasonable estimates when necessary.
time of entry, excluding special entry and exit bar
rier costs, should be used.= Current market valua-
Data Integrity
tion does not require that the new competitor acquire
Because costs for a hypothetical competitor are all new assets.Theoretically, a new competitor could
necessarily estimates which reflect a degree ofjudg- acquire assets of mixed vintages similar to those of
ment, under the Data Integrity Principle they must the existing railroad. However, the current market
be supported either by underlying source records valuation of assets with similar productive capacity
or an explanation of the rationale and key assump- and remaining lives, rather than their historical cost,
tions regarding such judgments. Discovery and is the relevant valuation for SAC.
rebuttal procedures used in adversarial proceed-
ings are appropriate mechanisms to ensure data For example, if a complainant chooses to include
integrity. the costs of used rail in its stand-alone railroad,
%See Ch. 6, “Cost of Capital,” for a discussion of why the WE adopted a nominal rate and rejected a real rate,
““Special entry barrier costs are costs that would be incurred by a new entrant competitor but would not be incurred by the existing
railroad due solely to the order of market entry. Exit barrier costs are sunk costs that the entrant competitor would incur even if it
exited the markel, For example, statutorily imposed employee compensation guarantees may represent an exit barrier.
Chapter IO-Maximum Rates 65

JA163
such costs must be at current market prices for rail l Deduct deferred taxes from the hypothetical
of the designated age, and its expected remaining competitor’s asset base.
useful life should be recognized accordingly. The
l Directly recognize the tax consequencesin a DCF
resulting rail costs would comprise those costs which
analysis.
must be recovered to induce entry by a hypothetical
competitor. l Recognizetax expenseusing comprehensive inter-
period tax allocation method (see p. 43).
In most cases, capital recovery (the annual return
of and return on assets) should be determined by The third alternative was preferred by the RAPB
estimating the annual cash flows that, when dis- since a potential investor would include only the
counted using the after-tax nominal cost-of-capital cash-flow effects of taxes in an investment analysis
rate, recover the original asset value. This capital ignoring noncash deferred taxes. The other alter-
recovery methodology, known as the DCF approach, natives which recognize deferred taxes imply that
requires the exclusion of noncash expenses, such deferred taxes comprise a predetermined fixed por-
as depreciation and deferred taxes, from the annual tion of the investor’s asset base. These assumptions
cash-flow computations. may not be appropriate for a new entrant. The alter-
native of using comprehensive inter-period tax allo-
While the DCF method is the preferred approach, cation would overstate the revenues required to
other appropriate methods may be used. For any induce a potential investor to enter a market.
method, the time value of money must be recog-
nized. Asset Valuation and Related Expense
Commenters were divided regarding whether his-
ANALYSIS SUPPORTING/ torical or current market valuations should be used
REJECTING CHANGES TO THE in SAC. Several commenters supported the exclu-
APPLICATION sive use of current market valuations. Other com-
menters suggested that the use of either valuation
The Cost of Capital and Asset Valuation and Related approach was acceptable as long as inflation was
Expense Principles required a selection from among not recovered twice. One commenter suggestedthat
alternatives with specific application to SAC. historical costs of the existing railroad should be
used as a ceiling for sunk investments to prevent
Cost of Capital including entry barrier costs in SACF4
The cost-of-capital rate is an integral component of
capital costs in SAC computations. The RAPB’s The use of current asset valuations in SAC is theo-
rationale in selecting the current nominal cost-of- retically appropriate. Because SAC represents the
capital rate for all cost applications is discussed in costs incurred by a hypothetical new competitor,
Chapter 6, “Cost of Capital” (see p. 33). asset valuations are prospective in nature. Asset
costs borne by the defendant railroad in the past
The treatment of deferred taxes in SAC computa- are irrelevant except to the extent that they may be
tions was mentioned by several commenting parties used to estimate or verify the asset costs used in
who suggested that the benefits of deferred taxes SAC determinations or to the extent that they pose
should be reflected by reducing the revenue require- special entry or exit barrier costs.
ments of the stand-alone competitor.
In addition, practical problems associatedwith using
Alternative treatments of deferred taxes in SAC current market valuations in general company-wide
considered by the RAPB and discussed in Chapter 7 applications are likely to be diminished in SAC anal-
were: ysis. Because the scope of the stand-aIone compet-
itor’s network is likely to be less than the defen-
l Incorporate deferred taxes as a zero-cost com- dant’s entire railroad system, the assets valued are
ponent in the cost-of-capital rate. hypothetical rather than actual. Consequently, spe-
% this context, sunk costs are those costs which, once expended, cannot be reversed by the cessation of the activity they make
possible. See Verified Statement in Ex Parte No. 347 (SubNo. 1) of William J. Baumol and Robert D. Willig on behalf of five railroads
(July 28, 1983), p. 23.
66 RAPEVolume 2
JA164
ciflc railroad assets do not need to be identified and unique circumstances of each case. Consequently,
valued. in the RAPB’s view, choosing among suggested
methodologies for determining entry and exit bar-
The potential problem of double counting for infla- rier costs is an implementation matter appropri-
tion in capital costs can be avoided by applying a ately addressed in each case by the ICC.
DCF capital recovery methodology. That method-
ology determines starting revenue so that cash flows, According to one commenting party, a compen-
when discounted by the nominal cost-of-capital rate, sated transition must be implemented if the ICC
exactly recover the investments. (An example of changes asset valuation approaches for maximum
applying the DCF methodology is presented on rate regulation.z5The party argued that, historically,
p. 69.) the ICC has used original cost asset valuation for
maximum rate regulation. By adopting current mar-
Several commenting parties addressed problems ket asset valuation (e.g., trended net original cost)
associated with entry and exit barriers, the sunk in SAC, the ICC has changed valuation approaches.
nature of many railroad capital costs, and the rele-
vant lives for capital recovery in a SAC analysis. Compensated transitional mechanisms are not
One party stated that the difference between costs included in the Railroad Accounting Principles since
which were sunk in the past by an existing railroad the RAPB’s focus is limited to establishing princi-
and costs which must be sunk by hypothetical ples to guide SAC computations. The transition issue
entrants may pose special entry barriers. Another does not pertain to the computation of economi-
party stated that capital recovery of long-lived assets cally accurate SAC. Rather, it is an implementation
over a relatively short time period, coinciding with mechanism directed toward alleviating perceived
the lie of the traftic at issue, may result in the inequity resulting from moving from one regulatory
overstatement of investment costs. policy to another. If the RAPB’s Principles are likely
to result in economic dislocation or inequitable
The RAPB believes that the problems tend to be treatment of certain railroads or shippers, transi-
interrelated. An investment cost is not sunk if its tional mechanisms may be instituted by the ICC to
remaining economic value can be recovered upon alleviate these problems. However, transitional
exit from the market. In such a case, the life of the mechanisms are independent from the computation
stand-alone railroad is irrelevant. Conversely, an of economically accurate costs.
investment cost is sunk if it cannot be recovered
upon exit from the market. Nevertheless, sunk Capital Recovery
investment costs incurred by both the existing rail-
road and the hypothetical entrant must be recov- Two capital recovery methods-the utility method
erable to induce entry. Recovery of sunk investment and the DCF method-were considered by the RAPB.
costs by the existing railroad over one time period
and by the hypothetical entrant over a different time Under the utility method, capital costs are deter-
period imposes different capital costs on incum- mined each year by multiplying the net depreciated
bents and entrants. asset base times a cost-of-capital rate and adding
to this figure an annual depreciation expense (usu-
From the R4PB’s perspective, the treatment of entry ally based on straight-line depreciation).
and exit barrier costs in SAC analysis must be sep-
arated between issues that are a matter of principle Under the DCF method, also called the capital bud-
and issues that address detailed implementation of geting approach, a profitable investment or venture
the Principles. As a matter of principle, the exclu- must produce cash flows which, when discounted
sion of entry and exit barrier costs is necessary for at the cost-of-capital rate, equal or exceed the initial
SAC to conform with the contestable markets the- cash outlayF6 When used for maximum rate pur-
ory upon which the use of SAC as a maximum rate poses, the cumulative present value of cash flows
tool is based. However, acceptable approaches to must equal the hypothetical competitor’s initial cash
identifying and quantifying such barriers may be outlay since returns in excess of the cost of capital
numerous. The best approach depends upon the are not permitted.
25Comments addressing this issue used the term “compensated switch.” The RAPB has substituted the term “transition” for “switch”
to avoid confusion with railroad operating terminology.
Chapter lo-Maximum Rates 67

JA165
Annual cash-flow components under the DCF market value asset base over the competitor’s rel-
approach are not necessarily level. For example, evant life. Since exit barriers do not exist in SAC, a
annual cash flows may be established to recognize pattern of capital recovery which will not allow the
the tax effects of accelerated depreciation. They hypothetical new entrant to earn a competitive return
also may recognize expected Mation, changes in on the assets employed, valued at their opportunity
the productivity of assets, and changes in demand. cost, will result in liquidation of the investment and
exit from the market.
Assuming that rates are based on costs, the time
pattern of capital recovery will differ between alter- The absence of exit barriers suggests that the cap-
native approaches. The time pattern under the util- ital recovery patterns may not conform to those
ity approach is one of high capital costs in an asset’s generated under the utility method or any other
early years and relatively low capital costs in its predefined method of capital recovery. The possible
later years. The time pattern under the DCF approach inability of the hypothetical competitor to recover
depends on the productivity of an asset over time. relatively high capital costs In the early years under
If the productivity of an asset is constant over its the utility method may preclude use of the utility
life, the DCF approach produces a level annuity; if capital recovery pattern. Conversely, the possibility
the productivity declines evenly over time, the DCF of traffic volume declining in the stand-alone com-
approach may conform more closely with the utility petitor’s later years might not permit capital recov-
approach. ery patterns which reflect relatively high capital
costs in later years.
The difference between the two approaches is illus-
trated by considering two railroads, one with entirely An example of a DCF approach, incorporating the
new assets and one with the same type of assets application of the Cost of Capital and Asset Valua-
comprised of mixed vintages and valued at current tion Principles, is shown in Figure 1 on the follow-
market cost. Under the utility approach, the railroad ing page. In this example, starting revenue is set in
with entirely new assets will exhibit higher capital such a way that, when indexed at an expected infla-
costs in the first year than the railroad with mixed tion rate, the present value of the resulting cash
assets. Under the DCF approach, if the productivity flows over the life of the assets equal the original
of the assets for both railroads is constant over asset base investment.27
their entire lives, other things being equal (such as
tax depreciation), both railroads would have the According to several commenting parties, the RAPB
same capital costs. In the DCF case, relative vin- should neither endorse nor prescribe a specific SAC
tages of the railroads’ assets are immaterial. methodology. Rather, the RAPB should allow flex-
ibility in computing SAC because (1) each maxi-
If the productivity of assetsfor both railroads declines mum rate case may involve particular circum-
evenly over time, the DCF approach will produce stances which are unique and (2) application is
annual capital charges similar to those previously relatively new and, as a result, is still evolving.
described under the utility approach.
The R.APB does not intend to prescribe a detailed
The RAPB prefers the DCF approach in SAC anal- DCF computational methodology nor does it intend
ysis since it permits a flexible time pattern of capital to preclude the use of alternative capital recovery
recovery according to the configuration of the hypo- methodologies which are consistent with the Rail-
thetical competitor. This flexibility may be neces- road Accounting Principles. To accommodate par-
sary so that the hypothetical competitor may earn ticular circumstances and assumptions in each case,
a current market rate of return on the opportunity the RAPE recognizes that the specific computa-
cost value of its investment. tional methodology, consistent with its Principle,
must be flexible. The following example represents
The relevant pattern of capital recovery must be only one of many possible capital recovery appli-
that which yields market returns on the current cations to SAC.
26DCF analysis also includes the negative cash flows from operating expenses. However, the discussion here focuses solely on capital
recovery since annual operating expenses could be recovered separately under any SAC methodology.
% the example in Figure 1, starting asset base, operating cost, inflation rate, nominal cost of capital, and the number of years for the
cash flow are assumed. Derivation of the other numbers in the example are contained in the figure and its footnotes.
68 RAF’B-Volume 2
JA166
Figure 1
EXAMPLE OF DISCOUNTED CASH FLOW APPLICATION

TO STAND-ALONE COST
Original Asset Base $5,000,000 Inflation Rate ELOO’X

Starting Revenue/SAC $1,547,362 Nominal Cost of Capital” 10.00%
StarLingOperating Cost $1,000,000 (used as discount rate)
Current Present
Revenue/ Oper.z” Tax”” Tax Cash Value
SAC Expense Depr. Expense Flow C.F. P.V.
(2) 0) (4) (5) (6) (7) (8)
(inflated) (inflated) (a%> (z3-4)'tr (2-3-5)
I $ 1,585,576 $ 1,024,695 $ 750,000 $ (86,995) $ 647,875 $ 617,725 $ 617,725

2 1,664,853 1,075,930 1,100,000 (235,095) 824,019 714,246 1,331,971
3 1,748,096 1,129,7X6 1,050,000 (198,550) 816,920 643,721 1,975,692
4 1,835,601 1,186,213 1,050,000 (184,327) 833,616 597,161 2,572,853
5 1,927,276 1,245,523 1,050,000 (169,394) 851,146 554,290 3,127,143
6 2,023,640 1,307,799 329,286 386,554 228,850 3,355,992
7 2,124,822 1,373,189 345751 405,881 218,447 3,574,440
8 2,231,063 1,441,849 3631038 426,175 208,518 3,782,958
9 2,342,616 1,513,941 381,190 447,484 199,040 3,951,997
10 2,459,747 1,589.638 400,250 469,858 189,993 4,171,990
11 2,582,734 1,669,120 420,262 493,351 181,357 4,353,346
I2 %,711,871 1,752$76 441,275 518,019 173,113 4,526,459
13 2,847,464 1,840,205 463,339 543,920 165,244 4,691,704
14 2,989,837 1,932;2 15 486,506 571,116 157,733 4,849,437
15 3,139,329 2,028,826 510,831 599.672 150.563 5,000,000
I
$34,214,422 $22,111,448 $5,000,000 $3,267,368 $8,835,606 $5,000,000
Starting revenue was determined by tist developing the following formula which equates the initial invest-
ment (original asset base) to the discounted value of future cash flows:
(1)
” 0.5
Irk - e, - tk)
a= c
k=O,i (1 +V
a, asset base rk = r(l + inf)”

i, cost of capital e ~ e (1 + infJk
b, tax rate t,” 1 (r, - ek ~ dk) tr
n, life of the stand-alone railroad r, starting revenue
rk? required revenue for period k e, initial cash operating expense
ekr escalated operating expense for period k inf, expected annual inflation
t k7 tax payment for period k d kl tax depreciation for period k
The above equation was solved for “r,” starting revenue, yielding the following formula:
L8Weighted average cost-of-capital rate reflecting after-tax debt and equity rates.
YExcludes noncash expenses such as “book” depreciation. Return of capital is implicit in DCF analysis. AU expenses are before
fbwlcing.
.Variable means are defined on the following page.
I
JA167 69
Chapter IO-Maximum Rates
a + e(l ~ tr)
r=
(1 - tr) c (ygk
k OR
gk, Tax depreciation rate for period k
Thus, by substituting the value of the original asset EFFECTS OF IMPLEMENTATION

base, the operating cost, the rate of inflation, the
statutory tax rate, the accelerated tax depreciation The Ex Parte No. 347 (Sub-No, 1) guidelines neither
factors, and the cost-of-capital rate into Equation 2, prescribe precise costing methodology nor endorse
the starting revenue amount and subsequentin&ted or reject any general approach to determining SAC.=
revenue amouuts which produce a net present value Where the guidelines address costing issues, they
of the cash flows equal to zero may be determined.3’ are consistent with the application of the RAPB’s
Principles to SAC.
The DCF approach has the advantages of directly
recognizing the tax consequences arising from the While only two proceedingshave been decided under
hypothetical competitor’s assets and of eliminating the ICC’s maximum rate guidelines, the RUB’s
the need to separately index various components Principles are generally consistent with the intent
of SAC to avoid double counting capital-cost infla- of the ICC standards.33
tion.
“‘The example assumes that the investor has no other income against which to apply the tax losses and must carry forward tax losses.
If this assumption is not the case, the starting revenue would be $1,547,362 rather than $1,578,252 as shown in the Example.
%ee Ex Parte No. 347 (Sub-No. l), supra., at 542.
=ICC Docket No. 38783, Omaha Public Power District v. Bwliwgtcm Northern Railroad Company, served Nov. 20, 1986, and ICC
Docket No. 36719 (and embraced cases), Arkansas Power & Light Company, et aL. v. Burlingtm Northern Railmad Company, et &.,
served May 13, 1987.
70 FLAPB-Vbhune 2
JA168
CERTIFICATE OF SERVICE
I hereby certify that I electronically filed the foregoing Joint Appendix
with the Clerk of the Court for the United States Court of Appeals for the District
of Columbia Circuit by using the appellate CM/ECF system on November 15,
2012. The following participants in the case who are registered CM/ECF users
will be served by the appellate CM/ECF system:
Raymond Allen Atkins Robert B. Nicholson

James Brian Boles U.S. Department of Justice
Surface Transportation Board (DOJ) Antitrust Division, Appellate
(STB) Office of General Counsel Section
395 E Street, SW Room 3228
Washington, DC 20423-0001 950 Pennsylvania Avenue, NW
atkinsr@stb.dot.gov Washington, DC 20530-0001
james.boles@stb.dot.gov robert.nicholson@usdoj.gov
Anthony J. LaRocca Finnuala K. Tessier

Samuel Sipe U.S. Department of Justice
Linda Stein (DOJ) Antitrust Division, 3311
Steptoe & Johnson LLP 950 Pennsylvania Avenue, NW
1330 Connecticut Avenue, NW Washington, DC 20530-0000
Washington, DC 20036-1795 finnuala.tessier@usdoj.gov
alarocca@steptoe.com
ssipe@steptoe.com
lstein@steptoe.com
I further certify that I have mailed copies of the foregoing document by First-Class
Mail, postage prepaid to the following non-CM/EFC participants:

Craig Mitchell Keats Richard E. Weicher

Surface Transportation Board Burlington Northern and Santa
(STB) Office of General Counsel Fe Railway Company
395 E Street, SW AOB 3rd Floor
Washington, DC 20423-0001 2500 Lou Menk Drive
PO Box 961039
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Texas Municipal Power Agency v. STB, Et Al

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Texas Municipal Power Agency v. STB, Et Al

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USCA Case #12-1087 Document #1405205 Filed: 11/15/2012 Page 1 of 173

ORAL ARGUMENT NOT YET SCHEDULED

IN THE UNITED STATES COURT OF APPEALS

TEXAS MUNICIPAL POWER AGENCY, Petitioner

SURFACE TRANSPORTATION BOARD and

and BNSF RAILWAY COMPANY, Intervenor.

ON PETITION FOR REVIEW OF AN ORDER OF

Filed: November 15, 2012 Attorneys for Petitioner Texas

INDEX TO JOINT APPENDIX

Document Description Page

Texas Municipal Power Agency v. Burlington Northern and Santa

Texas Municipal Power Agency v. Burlington Northern and Santa

Texas Municipal Power Agency v. Burlington Northern and Santa

TMPA’s Petition for Enforcement of Decision, Texas Municipal

BNSF Reply to TMPA’s Petition for Enforcement of Decision,

TMPA Letter, Texas Municipal Power Agency v. Burlington

Texas Municipal Power Agency v. Burlington Northern and

TMPA Petition for Reconsideration, Texas Municipal Power

Reply of BNSF Railway Company to Petition for Reconsideration,

Texas Municipal Power Agency v. Burlington Northern and

TMPA’s Petition to Reopen and Modify Rate Prescription, Texas

Reply of BNSF Railway Company in Opposition to TMPA’s Petition

Railroad Accounting Principles Board, Railroad Accounting

TEXAS MUNICIPAL POWER V. THE BNSF RY. CO. 573

STB DOCKET NO. 42056

TEXAS MUNICIPAL POWER AGENCY

Decided March 21, 2003

ACRONYMS USED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 579

I. PRELIMINARY MATTER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 581

II. MARKET DOMINANCE INQUIRY . . . . . . . . . . . . . . . . . . . . . . . . . 582

III. RATE REASONABLENESS STANDARDS . . . . . . . . . . . . . . . . . . . 585

IV. STAND-ALONE COST ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . 587

TEXAS MUNICIPAL POWER V. THE BNSF RY. CO. 607

608 SURFACE TRANSPORTATION BOARD REPORTS

TEXAS MUNICIPAL POWER V. THE BNSF RY. CO. 609

2002 19.55 5.52% 18.47

2012 26.09 0.00% 26.09

610 SURFACE TRANSPORTATION BOARD REPORTS

2002 19.55 5.52% 18.47

2012 26.09 0.00% 26.09

Finally, we award reparations to TMPA for the unreasonable portion of the

748 SURFACE TRANSPORTATION BOARD REPORTS

APPENDIX E — DISCOUNTED CASH FLOW COMPUTATION

TEXAS MUNICIPAL POWER V. THE BNSF RY. CO. 749

TEXAS MUNICIPAL POWER V. THE BNSF RY. CO. 803

STB DOCKET NO. 42056

Decided September 24, 2004

Upon reconsideration, the Board modifies the rate prescription and

< the variable costs associated with maintenance-of-way, return on

< those portions of the SAC analysis addressing rerouting of traffic,

< the asserted technical errors (Section IV); and

804 SURFACE TRANSPORTATION BOARD REPORTS

< the scope of the rate prescription (Section V).

DISCUSSION AND CONCLUSIONS

A party may seek to have the Board reconsider a decision by submitting a

828 SURFACE TRANSPORTATION BOARD REPORTS

IV. Technical Errors

TEXAS MUNICIPAL POWER V. THE BNSF RY. CO. 829