WPCH -c*AΐʐޛL2hSƓ}sP'nj,Ҡ%S(+M4P..qq9n?o:8"(v܅lQf WF-ڡ$G/O zDkM>~IƓ)ʮI |-^,O5$,DJ]4gmam!>*d]#ZMV@]nz؜&IȫyYk*"B]C:imU.ks{7 L6w2’l8i(?eK'TWӢ6ǤDyjZ̦1qɁ{SB-gM_Zo#j uJVzXləm3%ժ6Knp;ψN5;eޭ|r9œ6wqu2~5t #v, ڡXfDU>< 0U 0'IU0p 07S 0 0" 0  0 01 0!YG 0  0Y 0 0W# 0z 0 0 1uo D+} 0n 0( 0? AQ,9e o} 0#)$&8&+&+ 0C9.]|. 1U0  .1  81  B1U6L11G13G3@6^<4>@  AA_C 0EF 0GU NG %GG 1mGw]H4aHuH mwH\  `$Times NewRoman<:Default ParaXXX<o{:Envelope Ret   E q $MarigoldE #YYXXXQ\  `$Times NewRomanQ #dd q $Marigold8  6Body Text     2$>0Header  .  !>44 <DL!>2>0Footer  !>44 <DL!><jj:Page Number Q\  `$Times NewRomanQXXXQ\  `$Times NewRomanQ<jj:Footnote TexQ\  `$Times NewRomanQXXXQ\  `$Times NewRomanQ<mm:Footnote RefQ\  `$Times NewRomanQXXXQ\  `$Times NewRomanQ,*c17         ,tz*p19 X     8.44j <DL!8 X        >44 <DL!>  ,*c25         ,qq*p27      5+ 4 <DL!5 X        5+ 4 <DL!5  *(c6         ,tz*p51 X     8.44( <DL!8         >44 <DL!>  ,ff*p55    5+  <DL!5 X      5+ 4 <DL!5  ' June 26, 1998 $DAVID L. HALL 0 .     bj)  <XFXX<XXFXX<XF  ݛ! !X!    C  $#?CXXXXF 13103FM1960West Suite204 Houston,Texas770654069 Tel(281)9706700 Fax(281)9706800XFXXX ݌  Ќ! X!!  B.` hp x (#XBC  $$C(2bj$ ;9!  <XFXX<XXFXX<XF  $35=EMU]em1 I. A. 1. a.(1)(a) i) a)  e bj)  <XFXX<XXFXX<XF  ?+ 4 <DL!X?|F62x ( k 0 @ HEkkk| G"G"  G"G"! !X!  J  C  $$CXFXXXFXFXXXF  J݌̌! X!!  ?+ 4 <DL!X?C  $$C'dxd Level 1 Level 2 Level 3 Level 4 Level 5(2bj$ ;9!  <XFXX<XXFXX<XF  ($(2bj$ ;9!  <XFXX<XXFXX<XF  C<< c " bj"  <XFXX<XXFXX<XF  ?+ 4 <DL!X?! !X!    C  $$CXXF    3   ݌  Ќ! X!!     e !bj*  <XFXX<XXFXX<XF  ?+ 4 <DL!X?|"F62x ( k 0 @ HEkkk| G"G"  G"G"! !X!  J  C  $$C!XFXXXFXFXXXF  J݌̌! X!!  ?+ 4 <DL!X?C  $$C(2bj$ ;9!  <XFXX<XXFXX<XF    bj"  <XFXX<XXFXX<XF  ?+ 4 <DL!X?! !X!    C  $$CXXF    3   ݌  Ќ! X!!   $ . )  5+ 4 <DL!5   !    (  $( US Q\  `$Times NewRomanQ      Q\  `$Times NewRomanQ        (  $(Q\  `$Times NewRomanQ        (  $(    5+ 4 <DL!5(  $( &  !*  5+ 4 <DL!5   !  (  $( US Q\  `$Times NewRomanQ      Q\  `$Times NewRomanQ    (  $(  5+ 4 <DL!5(  $(($     S ;!  5+ 4 <DL!5      (  $(  US Q\  `$Times NewRomanQ   ..       ݀AcompletelistoftheCommentsreviewediscontainedintheVerifiedStatementofDavidL.Hall(DLHVS),attachedhereto.$359=AEIMQ2-*+xb3b4b5<6X9`(Courier New / = )  5+ 4 <DL!5   !   US Q\  `$Times NewRomanQ      Q\  `$Times NewRomanQ      5+ 4 <DL!5 1 = !*  5+ 4 <DL!5   !   US Q\  `$Times NewRomanQ      Q\  `$Times NewRomanQ      5+ 4 <DL!5  ;!  5+ 4 <DL!5          US Q\  `$Times NewRomanQ   ..       ݀CommonwealthreceivedcommentsfiledbyAgProcessingInc.,AssociationofAmericanRailroads,ChemicalManufacturersAssociation,ConsumersUnitedforRailEquity,JointCommentsofEdisonElectricInstituteandTheFertilizerInstitute,FMCCorporation,MartinMariettaMaterials,Inc.,NationalGrainandFeedAssociation,TheNationalIndustrialTransportationLeague,JointCommentsofNorthDakotaPublicServiceCommission,NorthDakotaGrainDealersAssociationandNorthDakotaWheatCommission,JointCommentsofNorthernStatesPowerCompany,NorthIndianaPublicServiceCompany,TUCO,Inc.andNewCenturyEnergies,PP&L,Inc.,TheSocietyofPlasticsIndustry,Inc.,JointCommentsofTexasMunicipalPowerAgency,CityUtilitiesofSpringfield,MOandRiverProjectAgriculturalImprovementandPowerDistrict,U.S.ClayProducersTrafficAssociation,Inc.,UnitedStatesDepartmentofAgriculture,UnitedStatesDepartmentofTransportation,UnitedTransportationUnion,andJointCommentsoftheWesternCoalTrafficLeagueandTheNationalMiningAssociation.          ;!  5+ 4 <DL!5        US Q\  `$Times NewRomanQ   ..       ݀UnitedTransportationUnionsComments,Pages4and5  ;!  8.j <DL!8        US Q\  `$Times NewRomanQ   ..       ݀CommentsoftheAssociationofAmericanRailroads,Page9  ;!  8.j <DL!8        US Q\  `$Times NewRomanQ   ..       ݀Ibid,Page10b2  ;!  8.4 <DL!8        US Q\  `$Times NewRomanQ   ..       ݀Thesearereferredtoatpage19ofAARsComments. U ;!  5+ 4 <DL!5        US Q\  `$Times NewRomanQ   ..       ݀SeeJointCommentsofNorthernStatesPowerCompany,NorthIndianaPublicServiceCompany,TUCO,Inc.(NSPC)andNewCenturyEnergies,pages6,1923andCommentsofPP&L,Inc.,pages20,22.((2h=$ ;9!  <XFXX<XXFXX<XF  XXF 4   0  #|x(f9$  <XFXX<XXFXX<XFxhH  Z6Times New Roman Regular<X# e37=CIQYag1.a.i.(1)(a)(i)1)a)p/$esktU ;9!  <XFXX<XXFXX<XF  ݛ      C  $ C݌̌    e  C  $$Ce݌̌    '  C  $$C'R݌̌      C  $$C݌̌      C  $$C݌̌    m  C  $$CJune26,1998&v*%XXFm݌ `  Ќ    o  C  $$Co݌̌    1  C  $$C1\݌̌      C  $$C݌̌      C  $$C݌̌    C  $$CXFX%&v*OfficeoftheSecretary    C  $$CCaseControlUnitC  $$CӢATTN:STBExParteNo.627C  $$CSurfaceTransportationBoardC  $$C1925KStreet,N.W.C  $$CWashington,DC204230001 ` 3< <DL!X3C  $$C ` 9% <DL!<<X9C  $$C 0DL!  X0C  $$CRe:Q #aaddԢSTBExParteNo.627 @   C  $$CMarketDominanceDeterminations"C  $$CProduct&GeographicCompetition #ddaa  p   E+ 4 <DL!DXEC  $$C C  $$CC  $$CDearSecretaryWilliams:C  $$C0DL!X0C  $$CEnclosedforfilingintheabovereferenceddocketareanoriginalandtwelvecopiesofthe   #aaddJointReplyofQFFShellOilCompanyandShellChemicalCompany.Alsoenclosedisa3.5inchdiskette,containing  theJointReplyinaformatwhichmaybeconvertedtoWordPerfect7.0.#ddaa  E+ 4 <DL!DXEC  $$CC  $$CCopiesofthisJointReplyarealsoconcurrentlyservedonallotherpartiesofrecord.C  $$CC  $$CRespectfullysubmitted,C  $$CC  $$CC  $$CC  $$CC  $$CDavidL.Hall  C  $$C  '`"% =FXXdd=#aadd  0DL!X0C  $$CC  $$CQ%BEFORETHEB  C  ԀC  $$CC  $$CQQ Q SURFACETRANSPORTATIONBOARD  H.4 <DL!DXHC  $$CC  $$CWASHINGTON,D.C.C  $$CC  $$CC  $$CC  $$C ___________________ `    0DL!X0C  $$C C  $$CC  $$CQYY"ExParteNo.627C  $$C  C  $$CMarketDominanceDeterminations!C  $$CProductandGeographicCompetitionC  $$CH.4 <DL!DXHC  $$C __________________  C  $$C C  $$CC  $$C0DL!X0C  $$CJOINTREPLYOF  C  $$CQ  "SHELLOILCOMPANYC  $$CQ)ANDC  $$CQSHELLCHEMICALCOMPANYC  $$C C  $$CC  $$CC  $$CC  $$CC  $$CC  $$CC  $$CQ* D   BrianP.FelkerC  $$CQ* D   ManagerofProductsTrafficC  $$CQ* D   ShellChemicalCompanyC  $$CQ* D   OneShellPlazaC  $$CQ* D   PostOfficeBox2463C  $$CDueDate:June29,1998Q* D   Houston,Texas77252 )%)        ќ       C  $$CQ* D     E+ 4 <DL!DXEC  $$C #ddaa     #aa#%  &DL!&(  $((  $(..BEFORETHEB  C  Ԁ(  $((  $(..SURFACETRANSPORTATIONBOARD  8.4 <DL!8(  $((  $(WASHINGTON,D.C.(  $((  $( ___________________  &DL!&(  $( (  $((  $(..EXPARTENO.627  (  $(MARKETDOMINANCEDETERMINATIONS(  $(PRODUCTANDGEOGRAPHICCOMPETITION  (  $(  8.4 <DL!8(  $( ___________________(  $(   (  $(  &DL!&(  $(JOINTREPLYOF(  $(  (  $((  $((  $(..SHELLOILCOMPANY(  $((  $((  $(..AND(  $((  $((  $(..SHELLCHEMICALCOMPANY(  $( (  $((  $(5+ 4 <DL!5(  $( ..ShellOilCompanyand/orShellChemicalCompany foritselfandasagentforShellOilCompany(hereinafterjointlyreferredtoas Shell)herebyfileajointreplyinresponsetothecommentsfiledbycertainpartiesofrecordonMay29,1998,asrequestedbytheSurfaceTransportationBoard(BoardorSTB)initsdecisionservedApril29,1998institutingExParteNo.627,MarketDominanceDetermination"ProductandGeographicCompetition.Bothcompaniesarecorporations,theaddressofwhichisOneShellPlaza,PostOfficeBox2463,Houston,Texas77252.  (  $(#ddRECOMMENDATIONS  X (  $(Inourreviewofthecommentsfiledbypartiestothisproceeding,ShellhasseennothingwhichwouldweakenoursupportfortheBoardsproposaltoeliminateproductandgeographiccompetitionfromconsiderationinthedeterminationofacarriersmarketdominance,andthustheBoardsjurisdiction,wherethereasonablenessofaratehasbeenchallenged.Onthecontrary,virtuallyallofthecommentswehavereviewed  US Q\  `$Times NewRomanQ       (   ,includingthoseoftheAssociationofAmericanRailroads(AAR),providefactualsupportforrelianceondirectmeasureswhichareindicativeoftheeffectivenessofcompetitionsuchasrevenuetovariablecostratios,availabilityofachoiceofrailcarriersatoriginanddestinationandintermodaloptions(whereappropriate),ratherthangeographicandproductcriteriawhichseektomeasureindirectcompetition.  X (  $(Wethereforereiterateourrecommendations;  ( ) $(  2(` ` <DL!2  23  ..ShellrecommendsthattheproposalmadebytheBoardtoeliminateproductcompetitionandgeographiccompetitionasfactorstobeconsideredinthedeterminationofmarketdominancebeenactedexpeditiously.   23  ..ShellrecommendsthatthedecisionenactingthisBoardproposalbemaderetroactivetoratereasonablenesscasescurrentlypendingbeforetheBoardsuchas#aaԀDocketNo.41670,ShellChemicalCo.,etal.v.B.&M.Corp.,etalandDocketNo.42022,FMCWyomingCorp.v.UnionPacificRailroadCo.inwhichtherailroadsinvolvedhaveabusedthediscoveryprocessrelatedtothesecriteriainanattempttodenyshipperaccesstoregulatoryrelief.#dd  , 5+ 4 <DL!5      REPLYTOCOMMENTS     5+ 4 <DL!5 X AdetailedanalysisoftheCommentssubmittedbypartiestothisproceeding,particularlytheAARisfoundintheVerifiedStatementofDavidL.Hallwhichfollows.ThebalanceofmystatementwillrelatemyexperienceasManagerofProductsTraffic,withresponsibilityforallLandTransportationoperationsandexpendituresforbothShellChemicalCompanyandShellOilCompany,asitpertainstothetestimonyprovidedbyrailroadwitnessesintheCommentsoftheAssociationofAmericanRailroads.  , 5+ 4 <DL!5  ..#aaAARstatesatpage1thatthereisa perceivedconcernamongshippersthatitisundulyburdensometolitigateratereasonablenesscasesbeforetheBoard8.Webelievetheshippersconcernsareoverstated.AARknowsfullwellthatshippersconcernsarerealandnotperceived,noroverstated.   ..Shellhasbeenoneofthecaptiveshipperswhichwasdiscouragedfromseekingregulatoryrelief.Whenevertherehasbeenapossibilityofanotherapproach,ratherthanlitigationbeforetheICCorSTB,Shellhastakenittoavoidthetime,expenseanduncertaintyassociatedwitharatereasonablenesscase.   5+ 4 <DL!5..Letmesharea#ddnexampleofthelengthstowhichwehavegonetoavoidthelitigationobstaclestheAARclaimstobeoverstated.OurNorco,Louisianaplanthadanorderformethylethylketone(MEK)tobeshippedtoCanada.TheMEKloadingrackswerecaptive,servedonlybytheIllinoisCentral.WerequestedaratefromtheICforthemovement.Theproposedrateproducedarevenuetovariablecostratioofover500%. X Weattemptedtonegotiatealowerrate,tonoavail.TheICknewthatdeliverybytruckwasapossible,butnotafeasible,alternativeduetothelengthofhaul,volumetobeshippedanddesireofShellscustomerstoreceivetheMEKbyrail.Despitethepossibilityofintermodalcompetitionaswellasgeographiccompetitionfromothersuppliers,theICdidnotbudgefromtheiroriginalprice.  X ӀTherailroaddidnotviewabargealternativeasaseriousthreatbecauseourcustomerwaslandlockedandtheyfiguredthecostofanintermodalbargetruckmovementplusthroughputwouldenduphigherthantheirexorbitantrate.Inessencetheyfeltcertaintheyhadus.  , 5+ 4 <DL!5  ӀOurbusinesscentercouldnotbecompetitiveintheCanadianmarketattheratewehadbeenquotedbyIC.AftermanymanhoursspentsearchingforanalternativewefoundwecouldbargetheMEKtoourDeerParkChemicalPlantandreshipoutviarail.AtDeerPark(whichwasservedbythreerailroadsatthattime)wewouldoffloaditintostoragetanks,reloadintoatankcarandshipoutviarail.   5+ 4 <DL!5 X TherailrateatDeerPark,wherewehadcompetition,was60%lowerthantheratetheICofferedusasacaptiveshipperatNorco.AsaresultwewereabletopaythecostofbargingtheMEKtoDeerPark,plusthethroughputchargeatDeerParkandstillsaveinexcessof$1200/car.Thiswasaveryinefficientmovementandcertainlynotthebestuseofourresources,butbydoingthiswewereabletosecuretheCanadianbusinesswhichwewouldhavelosthadwebecomeinvolvedinthesametypeoflitigationwearepursuingagainstCSX.    X AsecondexampleofthelengthsshipperswillgotoinordertoavoidlitigationbeforetheBoardistheexperienceatourGeismar,Louisianaplant.WearealsocaptivetoICatGeismar.  X TheaveragerevenuetovariablecostratioforratesatGeismarwasinexcessof250%.Whenourcaptorrailroadrefusedtonegotiatewejoinedwithothercaptiveshippersincloseproximitytoourplantto buildinasecondrailroad.Westartedtheprocessin 1993. WehaveyettoturnaspadeofdirtbecausewearestillwaitingforBoardapproval.  X Wechosethisapproachfortworeasons.Thefirstisourbeliefincompetitionoverregulation.Wearecreatingcompetitionatourplantwhichwillresultinbetterserviceatlowerrates.Thesecondreasonisthatweestimatedthetimeframetocompletearatereasonablenesscasewithitsmarketdominancehurdleswouldprobablyequalorexceedthefivetotenyearsthebuildinwilltake.    X ӀICisawareof(andtheyhavefought)ourbuildinatGeismar.However,theydonotseethisasapresentdangerandhaveremarkedduringratenegotiations, Welldiscussthatwhenyougetyourtrackbuiltintotheplant.Bothoftheseexamplesillustratethattheonlycompetitionthatiseffectiveinrestrainingratesisheadtoheadtransportationcompetitionoverthesameroute.  X AARdeniesatpage28ofitsstatementthatthereiswidespreadshipperconcernwithproductandgeographicstandards.ItcitesitsanalysisofninetywrittenstatementsinExParteNo.575,ReviewofRailAccessandCompetitionIssues,whereitsclaims onlythreespecificallytakeissuewiththeBoardsconsiderationofproductandgeographiccompetitioninmarketdominancedeterminations.AARfootnotethirteenintendedtodocumentthisclaim,namesthethreewhichhavetakenissuewiththeBoardoverproductandgeographiccompetitioninmarketdominancedeterminationsasConsumersUnitedforRailEquity,TheFertilizerInstitute,andPotomacElectricPowerCompany.ApparentlytheAARanalysiswaslessthanthorough.Amorerigorousapproachtounderstandingshipperconcernswouldhaveuncoveredthefollowingatpages57inmystatementdatedMarch26,1998inthatproceeding:  X X     2(4 4 <DL!2    X Marketdominance.Theexploitationofratesbyrailcarrierscomesaboutbecauseitisonlyon% * % * socalledmarketdominanttrafficthattherailroadsaresubjecttoanyrestraintsinthepricingoftheirservices;onallothertraffichandledbytherailroadstheCongresshasdeterminedthattherailroadsshouldbefreetoassesstheirratesatwhateverleveltheychose.          X AlthoughtheBoardhasbeenupheldinitsformulationofthestandardsfordeterminingwhetherarailroadencounterseffectivecompetitionforthetrafficunderconsideration,theinclusionofgeographicandproductcompetition,asthosetermshavebeenconstruedbythe% + % + agency,hasrendereditvirtuallyimpossibleforshippers,withthepossibleexceptionofshippersofcoal,tosecureadeterminationfromtheBoardthattheirtrafficiscaptivetotherailroadsservingthem.Inthemorethantwentyyearssincethe4RActwasenacted,nomorethanahandfulofnoncoalshippershavesucceededinpersuadingtheBoardand,before% , % , it,theInterstateCommerceCommission,thattheirtrafficismarketdominant.          X Geographicandproductcompetitionareconceptsborrowedfromtheantitrustlaws,buttheyhavebeendistortedasappliedbytheBoard.Properlyapplied,geographiccompetitiondefinesthemarketinwhichtheanticompetitiveeffectsofatransactionareassessed,andproductcompetitionrecognizesthereadilysubstitutablecommoditiesthatshouldbetakenintoaccountinthemeasuringthetransactionsanticompetitiveimpact.Intherailroadtransportationcontext,theoriginanddestinationpointsoftheconsideredmovementswoulddefinethescopeofgeographiccompetition,andtheintramodal,orrailroad,andeffectiveintermodal,ortruckandbarge,competitionencounteredbytherailroadinhandlingthetrafficwoulddefinethescopeofproductcompetition.That,however,isnotthewaytheBoardappliestheterms.Initsview,thereisgeographiccompetitionwhenevertheshippercanselltheconsideredcommoditytoothercustomersoritscustomerscanprocureitfromothersuppliers,andthereisproductcompetitioniftherearesubstitutesfortheendproductsinthemanufactureofwhichtheconsideredcommodityisconsumed.           X Amending49U.S.C.10707(b)toexcludeBoardconsiderationofgeographicandproductcompetitionwouldcorrectthesituationand,wouldobligetheBoard,inmakingitsmarketdominancedetermination,tofocusonwhethertherailroadtransportingthefreightencountersmeaningfulcompetitioninthetransportationofthecommodityfromrail,motororwatercarriersoperatingbetweentheoriginanddestinationpoints.(footnotesomitted)      X      5+ 4 <DL!5 X TheAARstatesonpage30ofitsCommentsthatit 8doesnotbelievetheburdensassociatedwithlitigatingmarketdominanceissues,includingproductandgeographiccompetition,aresubstantialandwethinkitsisunlikelythatanyshipperhasbeendeterredfromfilingaratecomplaintonthisground.EvidentlyTheAARfailedtoreadthestatementsubmittedtotheBoardinSTBExParteNo.575,ReviewofRailAccessandCompetitionIssues,byFortOrangePaperCompany.InthatstatementFortOrangepointsoutthatthepricingpolicyofConrail(ofwhichFortOrangeiscaptive)istoretainthelongesthaulspossibleratherthantooperatethemostefficientroute.ThispolicyhashadthepracticaleffectofputtingCanadiansuppliersofinboundmaterialsofflimitstotheFortOrangePaperCo.Fortstates, Perhaps(we)couldchallengethispracticeincourtthroughlitigation,butFortisasmallcompanyandthistypeof litigationissimplynoteconomicallyfeasible.  (emphasisadded)TheAARiseithertotallyoutoftouchwiththecustomersofitsrailroadmembersorisintentionallyattemptingtomisleadtheBoardregardingtheseriousnesswithwhichshippersviewthecurrentlackofaccesstoregulatoryrelief.  X TherailroademployeesprovidingstatementsaspartoftheAARCommentsshowlittlemoreawareness.JohnAnderson,CSXTExecutiveVicePresidentofSalesandMarketing,atPage2ofhiscomments, FranklyIamsurprisedtheBoardwouldevenconsidereliminatinggeographicandproductcompetitionfrommarketdominancedeterminations,sinceeachofthemis,orcanbeakeyfactorinmakingmarketbasedpricingdecisionsandinconstrainingrailroadprices.Hegoesontodescribethe rigorousresearchandmodelingCSXdoestoaccountforallformsofcompetition,includingproductandgeographic.ThissameMr.Andersonhasreliedonhisattorneystodelayourratecasewithsuperfluousrequestsforinformationregardingproductandgeographiccompetitionwhichheclaimsinhisstatementtoalreadyhaveobtained,modeledandanalyzed.Ifsuchananalysishasproducedrateswhichyieldrevenuetovariablecostratiosupto500%ofvariablecost,howmuchconstraintarethesefactorsexertingonrates?  X DouglasBabbandGregorySwientonofBNSFmakeaninterestingcommentonpage2oftheirstatementwheretheyindicatethat 8geographiccompetitionhasexertedaconstraininginfluence8andwasresponsiblefora buildinofarailconnectiontoanelectricutilityinAlabamathatwascaptivetoCSXT.ThebuildinpermittedtheAlabamautilitytoobtainPowderRiverBasinCoalwhichgavethemanalternativetotheAppalachiancoaldeliveredbytheCSXT.Introductionofasecondrailroadinjectsintramodalcompetition.Atthatpoint,geographiccompetitionissuperfluous.  X Ifeitherintramodalorintermodalcompetitionprovidesaneffectiveconstraint,theshipperwillenjoyreasonableratesandwillnotseekregulatoryrecourse.NoonegoestotheBoardforthefunofit.Adecisionasseriousasfilingaratecaseindicatesatotallackofconstraintonrailratesandawillingnessonthepartoftherailroadtotakeadvantageifitsmarketpower.  X Inthefinalanalysistheanswertoratereliefforcaptiveshippersistheintroductionofrailtorailcompetition.Untilthatcanbeaccomplished,barrierstoregulatoryratereliefsuchasproductandgeographiccompetitionhurdlesmustbeeliminated.        8.4 <DL!8#aaRespectfullysubmitted,..........SHELLCHEMICALCOMPANY8.4 <DL"8..........ForitselfandasAgentforShellOilCompany8.4 <DL!8..........ByitsManagerofProductsTraffic..........................BrianP.Felker..........OneShellPlazaDated:June26,1998......Houston,Texas77252  5+ 4 <DL!5#dd   XXXK-<6X9`(Courier NewK  8.4 <DL!8XXXQ\  `$Times NewRomanQ#aa  5+ 4 <DL!5#dd      CERTIFICATEOFSERVICE&&&Q\  `$Times NewRomanQ                         XXXQ\  `$Times NewRomanQIherebycertifythatonthis29thdayofJune,1998,copiesoftheJointReplyof#aaShellOilCompanyandShellChemicalCompany#ddԀwereservedbyfirstclassmail,postageprepaid,inaccordancewiththerulesoftheSurfaceTransportationBoardontheU.S.SecretaryofTransportation,andallotherpartiesofrecord.     #DL!#    X &&&Q\  `$Times NewRomanQ          X       &DL!&XXXQ\  `$Times NewRomanQ #aa  ....BrianP.Felker....ManagerofProductsTraffic....ShellChemicalCompany....OneShellPlaza....PostOfficeBox2463....Houston,Texas77252    5+ 4 <DL!5    &&&Q\  `$Times NewRomanQ #dd          XXXQ\  `$Times NewRomanQ    #aa.0  &DL!&BEFORETHE  8.4 <DL!8&DL!&..SURFACETRANSPORTATIONBOARD8.4 <DL!8&DL!&  8.4 <DL!8..򀀀_____________________________  &DL!&..EXPARTENO.627  MARKETDOMINANCEDETERMINATIONSPRODUCTANDGEOGRAPHICCOMPETITION  8.4 <DL!8&DL!&..򀀀  8.4 <DL!8_____________________________  &DL!&..REPLYVERIFIEDSTATEMENT  OF  8.4 <DL!8  5+ 4 <DL!5#ddDAVIDL.HALL8.4 <DL!8#aaIDENTIFICATIONANDQUALIFICATIONSOFAFFIANT  5+ 4 <DL!5..MynameisDavidL.Hall.IamPresidentofCOMMONWEALTHCONSULTINGASSOCIATES,withofficesat13103F.M.1960West,Suite204,Houston,Texas,77065.COMMONWEALTHCONSULTINGASSOCIATESprovidesmanagementconsultingservices,includingpracticeareasinlogisticsandinformationsystems.AdetailedstatementofmyqualificationsmaybefoundinAppendixAofmyinitialVerifiedStatementinthisproceeding,datedMay28,1998.  INTRODUCTION  ..ThisReplyVerifiedStatementissubmittedinsupportofthepositionsofShellOilCompanyand/orShellChemicalCompany foritselfandasagentforShellOilCompany(hereinafterjointlyreferredtoas Shell),assetforthbyBrianP.Felker,inresponsetothecommentsfiledbycertainpartiesofrecord  US Q\  `$Times NewRomanQ     2   ׀onMay29,1998asrequestedbytheSurfaceTransportationBoard(BoardorSTB)initsdecisionservedApril29,1998institutingExParteNo.627,MarketDominanceDetermination"ProductandGeographicCompetition...AsstatedbyMr.Felker,ShellsupportstheBoardproposaltoeliminatefromconsiderationproductandgeographiccompetitioninthedeterminationarailroadsmarketdominanceoverthetraffictowhicharateatissuebeforetheSTBapplies.ThecommentssubmittedbytheotherpartiesarealsopredominantlysupportiveoftheSTBproposal.SixteenofthenineteenstatementsfullyendorsetheBoardproposal. X TheDepartmentofTransportation(DOT)proposedcontinuedpursuitofproceduralreformsuchastheBoardundertookinDocketNo.42022,FMCWyomingCorp.v.UnionPacificRailroadCo.Giventheaccountoftheresultsofthat reformofferedintheFMCCommentsinthisproceeding,DOTmaywanttorethinkitsrecommendation.DOTwill,however,bepleasedtolearnthatBoardalreadyemploysthebifurcatedformatitrecommendedtoallowthemarketdominanceportionofamaximumreasonablerateproceedingtobeheardanddecidedbeforetheratereasonablenessportionbegins.  X OnlytheAssociationofAmericanRailroads(AAR)andarailroadunion,theUnitedTransportationUnion(UTU)completelyopposethisBoardproposaltostreamlinetheregulatoryprocessbyeliminatingconsiderationofsuperfluousfactorsinthedeterminationofrailroadmarketpower.TheauthorsoftheUTUstatementprovidenocoherentrationalefortheiropposition,citinginsteadperiltounrelatedfactorssuchas serviceandsafetyachievementsthathavebeenreached, thesafetyandjobsecurityofUTUsmembersand problemscausedbythecurrentinsufficientcapacity.  US Q\  `$Times NewRomanQ     3    X ThepreponderanceofthisstatementrespondstocommentsoftheAAR.Commentsoftheotherparties,whichconcur,forthemostpart,withthepositionsespousedbyShellinitsopeningcomments,areincorporatedbyreferencewhenapplicable.    8.8 <DL!8REPLYTOCOMMENTS      5+ 4 <DL!5    8.8 <DL!8..Itwouldseemthatallofthepartieswhichsubmittedopeningstatementsinthisproceedingagreethatcompetitionrestrainsratesandobviatestheneedforregulatoryintervention.Theboneoverwhichthereismuchcontentionistherelevanceofindirectcompetition,suchasproductandgeographiccompetition,torailroadratemakingandthereforetheeffectivenesswithwhichratesareconstrainedbyit.  5+ 4 <DL!5        8.8 <DL!8..InitsCommentstheAARanditswitnessescontinueatraditionofpropoundingirrelevanteconomictheorytosupportunsoundpublicpolicyproposals.Inspiteofitsattempttosupportthecontinuationofthemarketdominancestandardcontortionsitinitiatedmorethanadecadeago,fourrelevantfactsemergefromtheCommentsoftheAARandtheactionsofitsmemberrailroads;  5+ 4 <DL!5 R     2(. . <DL!2    8.. . 8 <DL!8  23  ..OnlyEffectiveCompetitionConstrainsRailroadRates    2(. . <DL!2 S     2(/ / <DL!2    8./ / 8 <DL!8  23  ..ThereAreNoDataWhichShowThatEitherProductorGeographicCompetitionEffectivelyConstrainRailroadRates    2(/ / <DL!2 ,     5+ 4 <DL!5    8.8 <DL!8     5+ 4 <DL!5 S     2(/ / <DL!2    8./ / 8 <DL!8  23  ..WhereRailroadRatesAreConstrained,IntramodalorIntermodalCompetitionExist    2(/ / <DL!2 ,     5+ 4 <DL!5    8.8 <DL!8  ..    5+ 4 <DL!5 S     2(/ / <DL!2    8./ / 8 <DL!8  23  ..RailroadEffortstoRemoveRateConstraintsAreConcentratedonIntramodalandIntermodalCompetition    2(/ / <DL!2 ,     5+ 4 <DL!5    8.8 <DL!8  ..    5+ 4 <DL!5        8.8 <DL!8  ..Wewillexamine,inturn,thesupporttheAARunwittinglygiveseachofthesefacts.    5+ 4 <DL!5      5+ 4 <DL!5  8.8 <DL!8 5+ 4 <DL!5      8.8 <DL!85+ 4 <DL!5      8.8 <DL!85+ 4 <DL!5      8.8 <DL!85+ 4 <DL!5      8.8 <DL!8OnlyEffectiveCompetitionConstrainsRailroadRates 5+ 4 <DL!5      8.j <DL!8 X    TheAARiscorrectinobservingthat,whereitiseffective,competitiondisciplinesthepricesthatcustomerspayfortheproductsorservicestheydesire,assuringthatthepricesassessedarenohigherthannecessarytoinducetheirproviderstobringtheproductsorservicestomarket.  US Q\  `$Times NewRomanQ     4   ׀TheeffectivenessofrelevantanddirectcompetitiononrailrateswasvividlyillustratedwiththeentryoftheChicagoandNorthWesternRailroadintotheSouthernPowderRiverBasinofWyoming.Theratesoncoalshipmentsfromthisarea,previouslyservedonlybytheBurlingtonNorthern,droppeddramaticallywhenrailtorailcompetitionwasintroduced.        X   WeagreewiththeAARobservationthatrelianceoncompetitiontodisciplinemarketparticipantsisordinarilyfarmoreefficientthandependenceonregulation.  US Q\  `$Times NewRomanQ     5   ׀Thispointiswellillustratedbytheeventswhichhaveunfoldedinthemotorcarrierindustrysinceitsderegulationnearlytwentyyearsago.Whileliterallyhundredsoftruckersfailedtoadapttotherigorsofthemarketplaceandwereforcedoutofbusinessorintobankruptcy,manyintheindustryhaveprospered,whileshippershavebenefitedfromreducedratesandimprovedservices.        X   Thekey,ofcourse,istheeffectivenessofthecompetitionencounteredbytheproviderofgoodsorservices.AlthoughtheAAR,atpage2ofitsComments,arguesthatproductandgeographiccompetition,asredefinedbytheInterstateCommerceCommissionin1981,areeffectiveconstraintsuponrailroadrates,AARoffersnoevidencetosupportitsassertion.TheveryproceedingscitedbytheAARasallegedlydemonstratingtheeffectivenessofproductandgeographiccompetitionwerebegunbycomp1ainingshippersaggrievedbytherailroads'exorbitantrates.        X   Theonlyformsofcompetitionthattherailroadsactuallyconsidertobeeffectiveareintramodaland,insomecasesintermodalcompetition.Thisdirectcompetitionforamovementofaproductbetweentwospecificpointshasadirect,constrainingeffectontherateonthemovementforwhichthereiscompetition.        X   WhileAARcontendsthatproductandgeographiccompetitionshouldberetainedascriteriafordeterminingmarketdominance,onlytheopinionsofitswitnessessupportthatconclusion.ThefactspresentedbyAARpointinadifferentdirection.    X     8.44j <DL!8 X    ^           5+ 4 <DL!5  ] ,%5+ 4 <DL!5  2(  <DL!2 ThereAreNoDataWhichShowThatEitherProductorGeographicCompetitionEffectivelyConstrainRailroadRates       8.4 <DL!8 X      Therailroadsreallydonotbelieve,asAARritualisticallyrecites,atpage2ofitsComments,thatproductandgeographiccompetitionareeffectiveconstraintsonrailrates.Iftherailroadshadanyconfidencethatsuchwerethecase,theywouldnotberesistingasearnestlyastheyareinthisproceedingtheremovalofproductandgeographiccompetitionasconsiderationsinmarketdominancedeterminationsinrailroadrateproceedings.Therailroadsknowfullwell% 6 % 6 that,if,astheAARmaintains,productandgeographiccompetitionwereeffectiveinkeepingrailroadratesincheck,theirrateswouldnotyieldrevenuesnearlytwicetherailroads'variablecosts.Inotherwords,ifproductandgeographiccompetitionweretheconstraintuponrailroadratesthatAARclaims,therailroads'rateswouldproducerevenuetovariablecostratioswellbelowthe180percentthreshold,andtheshipperswouldbebarredfromprosecutingrateactionsbeforetheBoard.      X   Whererailroadsencountereffectivecompetition,asinthehandlingoftraileronflatcarorcontaineronflatcarshipmentsthatotherwisewouldmovebytruck,theirratesarewellbelowthelevelwhichwouldyieldarevenuetovariablecostratioof180percent.Indeed,therailroads'ratesonthattrafficonlymarginallyexceedtheirvariablecosts;therailroadsarecontentiftheirratesonTOFCorCOFCshipmentscovertheirvariablecostsandmakeamodestcontributiontotheirconstantcostsandprofit.      X   Therailroadratesontrafficostensiblyconstrainedbyproductorgeographiccompetitionareappreciablyhigherthantheyareontruckcompetitivetraffic,yieldingrevenuestwiceandthreetimestherailroads'variablecosts.OnlyadozenorsononcoalrateproceedingshavebeenbroughtbeforetheBoardortheInterstateCommerceCommissioninthepasttwentyyears,and,astheAARshows,onpages1316ofitsComments,mostoftheseneverreachedthemeritsoftheshippers'complaints,becausetherailroadssucceededinpersuadingtheagencythateffectiveproductorgeographiccompetitionconstrainedtherailroads'abilitytoexactexorbitantrates.Thefacts,however,aretothecontrary,asdataincertainofthecitedproceedingsreveal.      X   InConsolidatedPapers,Inc.v.Chicago&NorthWesternTransportationCo.,7I.C.C.2d330(1991),decidedwhentherevenuetovariablecostthresholdwas160percent,"[t]heratesresultedinarevenue/variablecostratioforrepresentativerailmovementsof198percent(laterreducedto185percent)."NekoosaPaper,Inc.v.I.C.C.,739F.2d258,259(7thCir.1984).      X   InNo.38412S,AlliedChemicalCorp.,eta1.v.AnnArborRailroadSystem,etal.,servedJune10,1995,aff'd,GeneralChemicalCorp.v.UnitedStates,817F.2d844(D.C.Cir1987),decidedwhentherevenuetovariablecostthresholdwas160percent,theratesyieldedrevenuesofupto287percentoftherailroads'variablecosts.See,AppendixCtothedecision.      X   InAluminumAss'n.Inc.v.Akron,Canton&YoungstownR.R.,367I.C.C.475,479(1983),aff'd,AluminumCo.ofAmericav.I.C.C.,761F.2d744(D.C.Cir.1985),decidedwhentherevenuetovariablecostthresholdwas170percent,theshippersallegedthattheratesyieldedrevenuesofupto217percentoftherailroads'variablecosts.      X   InNo.37715S,AluminumCompanyofAmericav.BurlingtonNorthern.Inc.,etal.,servedApril11,1993,decidedwhentherevenuetovariablecostthresholdwas160percent,AdministrativeLawJudgeHaroldJ.Sarbacher,atpage13ofhisdecision,foundthattherailroadratesonaluminumcansheetyieldedrevenuesofupto227percentoftherailroads'variablecosts.      X   Inshort,contrarytoAAR'sassertion,productandgeographiccompetitiondonotserveaseffectiveconstraintsupontherailroads'rates.AlltooevidentisthefactthattherailroadsseektohaveproductandgeographiccompetitionretainedasconsiderationsinmarketdominancedeterminationsinrailroadrateproceedingsfortheveryreasonthattheBoard'sconsiderationofthesefactorsservestopreventshippersfrombeingheardontheircomplaintsthattherailroads'ratesontheirshipmentsaretoohighortodiscourageshippersfromevenbringingsuchactionstotheBoardinthefirstplace.     8.4 <DL!8 ^          5+ 4 <DL!5    8.8 <DL!8   WhereRailroadRatesAreConstrained,IntramodalorIntermodalCompetitionExist 5+ 4 <DL!5      8.4 <DL!8..AAR'sownCommentsdemonstratethat,inthoseinstanceswherethereareconstraintsuponrailroadrates,theycomefromeffectiveintramodalandintermodalcompetitionandnotproductandgeographiccompetition.  5+ 4 <DL!5      8.4 <DL!8..Ostensiblytodemonstratetheeffectivenessofproductandgeographiccompetition,AARclaims,atpage2ofitsComments,thatrailroadratesareconstrainedif,forexample,autilityisservedbytworailroads,eachcapableofbringingcoaltoitsplant,albeitfromdifferentmines.AARinconfused;thatsituationisnotillustrativeofgeographiccompetition,asitalleges,but,tothecontrary,thatisademonstrationoftheeffectivenessatintramodalcompetition.Similarly,AARmaintains,id.,thatrailroadratesareconstrainedif,forexample,autility,previouslyservedbyasinglerailroad,constructsabuildouttorailroadlineorbargefacility,eachcarrierbeingcapableofhaulingcoaltotheutility'splant,althoughfromdifferentsources.Again,AARmischaracterizesthatsituationasoneofgeographiccompetition;tothecontrary,whatservestokeeptheinitialrailroadsratesincheckistheeffectivenessoftheintramodal,orrailroad,orintermodal,orbarge,competitionachievedbyconstructionofthebuildout.Indeed,thatistheverypurposeofthebuildout,tosecurethecompetitionofasecondcarrier.  5+ 4 <DL!5      8.4 <DL!8..AAR,atpages1619ofitsComments,claimstofindsupportforitscontentionthatproductandgeographiccompetitioneffectivelyconstraintrailroadratesintheBoardandICCdecisionsexemptingcertaincommoditiesfromrateregulationbytheagency.Amongothers,AARcitestoRailGeneralExemptionAuthorityExemptionofCarbonDioxide,10I.C.C.2d359(1994);RailGeneralExemptionAuthorityExemptionofRockSalt,10I.C.C.2d241(1994);PetitiontoExemptfromRegulationtheRailTransportationofScrapPaper,9I.C.C.2d957(1993);RailGeneralExemptionAuthorityUsedMotorVehicles,9I.C.C.2d884(1993);RailGeneralExemptionAuthorityPetitionofAARtoExemptRailTransportationofSelectedCommodityGroups,9I.C.C.2d969(1993),andRailGeneralExemptionAuthorityTransportationEquipment,9I.C.C.2d263(1992).InnoneofthesedidashipperopposetheARRsexemptionrequestandtherationaleadvancedonbehalfoftherailroadsforitsapprovalbytheBoardandICC.AAR'sreferencetothesedecisionsandtheirdiscussionofproductandgeographiccompetitionamountstolittlemorethanAARquotingitselfand,accordingly,isentitledtonoweight.  5+ 4 <DL!5      8.4 <DL!8..TherailroadmarketingwitnesseswhosestatementswereappendedtotheAAR'sCommentsarenomorehelpfulinestablishingtheallegedefficacyofproductandgeographiccompetitionthanAAR'sdiscussionis.Thewitnessesareasconfusedaboutproductandgeographiccompetition,ontheonehand,and,ontheother,intramodalandintermodalcompetitionastheAARis,asahandfulofexampleswilldemonstrate.  5+ 4 <DL!5      8.4 <DL!8..Messrs.DouglasJ.BabbandGregoryT.SwientonofBNSF,beginningatpage2oftheirjointstatement,ascribetogeographiccompetitionthevigorouscompetitionBNSFencountersfromtheUnionPacificinthetransportationofSouthernPowderRiverBasincoal;however,theirsistheperfectdescriptionofwhatiseffectiveintramodalcompetition...Similarly,Mr.JohnQ.AndersonofCSXTransportationinspeaking,atpage2ofhisstatement,ofthecompetitionencounteredbytherailroadinbringingcrushedstonetoSavannah,GA,acknowledgesthatanotherrailroadservesthemarketaswell.So,too,Messrs.J.W.Fox,Jr.,andDonaldv.SealeofNorfolkSouthern,atpages23oftheirjointstatement,callgeographiccompetitionthecompetitionencounteredbyNorfolkSouthernatcoalfiredgeneratingplantsservedbyotherrailroadsorbybarges,lakevesselsortruck;clearly,theyconfuseeffectiveintramodalandintermodalcompetitionforgeographiccompetition.  5+ 4 <DL!5      8.4 <DL!8..Finally,Mr.RichardB.PetersonoftheUnionPacific,atpage7ofhisstatement,referstothegeographiccompetitionthattheUnionPacificfacesintransportinglumber,plywoodandotherforestproducts;itsrates,Mr.Petersonsays,areconstrainedbyBNSF,otherrailroadsandtrucksonthesameorcompetingproducts.Obviously,Mr.Petersonisnolessconfusedthantheotherrailroadmarketingwitnessesandascribestoproductandgeographiccompetitionwhatinactualityisintramodalandintermodalcompetition.  5+ 4 <DL!5      8.4 <DL!8..Drs.KaltandWilligaddlittle,ifanything,tothediscussionoftheefficacyofproductandgeographiccompetitionasconstraintsuponrailroadrates.Theyprefacetheirjointstatementbyadiscussionoftherelevanceoftheproductandgeographicmarketsindelineatingtherelevantmarketinwhichtoassesstheimpactuponcompetitionofaparticulartransaction.InthatregardtheymerelyparaphrasetheholdingsoftheSupremeCourtintheBrownShoecaseandthedecisionsoftheICCintherailroadmergerproceedings,  US Q\  `$Times NewRomanQ     7   ׀whichweresummarizedinShell'sComments,filedMay29,1998,andarenotinneedofrepetition.  5+ 4 <DL!5      8.4 <DL!8..Whenitcomestorailroadtransportation,however,Drs.KaltandWillighavenodirectknowledge,and,whiletheyhypothesizeabouttheeffectivenessofproductandgeographiccompetitionasconstraintsuponrailroadrates,Drs.KaltandWilligoffernodatacompiledbytheminsupportoftheircontention.Rather,Drs.KaltandWilligaredependentuponthestatementsoftherailroadmarketingwitnessesandthedecisionsoftheBoardandICCcitedbytheAARinitsCommentsasthesecondarysourcesfortheirtestimony.TheirjointstatementisentitledtonogreaterweightthanarethesecondarysourcesuponwhichDrs.KaltandWilligrelied,andthestatementsanddecisionssimplydonotsupportthenotionthatproductandgeographiccompetition,asdistinguishedfromintramodalandintermodalcompetition,areeffectiveconstraintsuponrailroadrates,asDrs.KaltandWilligcontend.  5+ 4 <DL!5      8.4 <DL!8..AARproducesnodatainsupportofitsallegation,atpage2ofitsComments,thatproductandgeographiccompetitionareeffectiveconstraintsonrailrates.Itassertionamountstonothingmorethanaselfservingdeclaration.Indeed,acarefulreadingofitsdiscussionandthatoftherailroadmarketingandtheacademicwitnesseswhosestatementswereappendedtoAAR'sCommentspermitoflittleornodoubtthat,inthoseinstanceswhererailroadratesareconstrained,itinvariablyistheresultofintramodalorintermodalcompetitionandnotofproductorgeographiccompetition.  5+ 4 <DL!5    8.4 <DL!8    8.( <DL!8       ;14( <DL!; RailroadEffortstoRemoveRateConstraintsAreConcentratedonIntramodalandIntermodalCompetition    5+ 4 <DL!5     8.( <DL!8    ;14( <DL!;    5+ 4 <DL!5     8.( <DL!8  ;14( <DL!; ..Farmorerevealingoftherailroads'viewofwhatconstrainstheirratesthanwhattheysayinAAR'sCommentsaretheiractions,andthesepermitofnodoubtthatwhattheyfearmorethanallelseinthecompetitionofothercarriers.  5+ 4 <DL!5     8.( <DL!8  ;14( <DL!;..Therailroadsarenotoriousfortheiroppositiontoincreasesinthesizeandweightoftrucks.Obviously,longerandheaviertruckscantransportfreightmoreefficientlyandeconomically;thatiswhyshippers,aswellasmotorcarriers,largelysupportliftingthelimitationsuponvehiclesizesandweightswhichhaveremainedunchangednowforabouttwentyfiveyears'time.Hardlyanyissuewillbestirtherailroads'governmentrepresentativesmoreeffectively,andbringtheirchiefexecutiveofficerstoWashingtonmorequickly,thanlegislationthatwouldincreasethesizesandweightsoftrucks.  5+ 4 <DL!5     8.( <DL!8  ;14( <DL!;..Nolessforceful,althoughnotashighlypublicized,istherailroads'oppositiontolegislationthatwouldimprovetheinlandwaterwayssystemandthussafeguardthevitalityofbargetransportation.Nearlyhalfofthelocksanddamsontheinlandwaterwayssystemareoverfiftyyearsold,andthebacklogofstructuresrequiringmajorrehabilitation,replacementorexpansionis,largeandgrowing.TherailroadsareadamantintheiroppositiontofundingtheCorpsofEngineerssufficientlytogettheseneededprojectsbuilt.  5+ 4 <DL!5     8.( <DL!8  ;14( <DL!;..Inshort,therailroadsdotheirlevelbesttominimizetheeffectivenessoftruckandbargecompetitiontheyencounter;theyseektothrottleintermodalcompetition.  5+ 4 <DL!5     8.( <DL!8  ;14( <DL!;..Therailroads,however,areevenmorevehementwhenitcomestochokingoffintramodalcompetition;theydoeverythingwithintheirpowertomakecertainthattheshipperstheyserveremaincaptiveandthatasecondrailroadnotservethem.  5+ 4 <DL!5     8.( <DL!8  ;14( <DL!;..OneneedlooknofurtherthantheproceedingsbeforetheBoardandtheICCtoestablishtherailroads'positiononintramodalcompetition.  5+ 4 <DL!5       8.` ` ( <DL!8  ;1` 4` ( <DL!;  23  ..Railroadsopposeashipper'sproposedbuildouttoasecondrailroad.See,FinanceDocketNo.32016,Sioux&WesternR.Co.ConstructionExemptionCharlesCounty,MO,servedMarch25,1992;Louisville&JeffersonCo.&CSXConst.&Oper.Jeff.KY,4I.C.C.2d749(1988).  2(` ` <DL!2     8.` ` ( <DL!8  ;1` 4` ( <DL!;  23  ..Railroadsopposeasecondrailroad'sproposedconstructiontoserveashipper.See,FinanceDocketNo.32433,ChicagoandNorthWesternTransp.Co.ConstructionandOperationExemptionCityofSuperior,DouglasCounty,WI,servedMay11,1994;FinanceDocketNo.30568,SouthernPacificTransp.Co.PetitionforDeclaratoryOrderExtensionofRailLine,servedMarch29,1985.  2(` ` <DL!2     8.` ` ( <DL!8  ;1` 4` ( <DL!;  23  ..Railroadsopposeashipper'sproposedcompetitiveaccessbyasecondrailroad.See,VistaChemicalco.v.Atchison,T.&S.F.Ry.Co.,5I.C.C.2d331(1989);MidtecPaperCorporationv.CNW,etal.,3I.C.C.2d171(1986),aff'd,MidtecPaperCorp.v.U.S.,857F.2d1487(D.C.Cir.1988).  2(` ` <DL!2     8.` ` ( <DL!8  ;1` 4` ( <DL!;  23  ..Railroadsopposeabottleneckrailroad'squotationofratestoasecondrailroad.See,No.41242,CentralPower&LightCo.v.SouthernPacificTransp.Co.,servedApril30.1997,December31,1996.  2(` ` <DL!2       8.4 <DL!8        5+  <DL!5 X      8. <DL!8TheforegoingdecisionsoftheBoardandICCmakeitabundantlyclearthattherailroadsabhorthecompetitionofasecondrai1road;theyaredeathlyafraidofintramodalcompetition.Thereasonfortherailroads'fearisobvious.Intramodalandintermodalcompetitionaretheonlyrealconstraintsuponrailroadrates,therailroadsmaytalkalotaboutproductandgeographiccompetition,but,whenitreallycounts,therailroadsknowfullwellthatitisintramodalandintermodalcompetitionthatkeepstheirratesincheck,andtheyactaccordingly.    5+ 4 <DL!5     X Inshort,theBoardcanwelldoawaywithproductandgeographiccompetitionasconsiderationsinmarketdominancedeterminationsinrailroadrateproceedings;theonlypurposetheyserveistopreventshippersfrombeingheardontheircomplaintsthattherailroadratesassessedontheirfreightareexcessive.    X UseOfStandAloneCostToDetermineMarketDominance    X TwoofthepartiesrepresentingcoalinterestsmentionedthepossibleuseofStandAloneCostsasadeterminantofmarketdominance.  US Q\  `$Times NewRomanQ     8   ׀WeaddressthoseCommentsheretoclarifythescopeforwhichSACisacceptabletotheBoardindeterminingreasonableratelevelsandtostatethatSACisnotanappropriateoracceptablecriterionfortobedevelopedorconsideredinthedeterminationofmarketdominance.  X PP&Lfirstmentionsstandalonecostinthecontextofmarketdominancewithoutaqualifierastothetraffictowhichitwouldpertainonpage20ofitsComments.Thisoversightisrectifiedonpage22wherePP&Lisclearthatthestandardtobeusedinassessingratelevelstojudgetheeffectivenessofcompetitionisthejurisdictionalthresholdrevenuetovariablecostratio(currently180%)forsmallshipmentsaspromulgatedbytheBoardinExParteNo.347(SubNo.2),RateGuidelines!NonCoalProceedings,decisionservedDecember31,1996.  X #ddNSPC,however,failstomakethisdistinctioninitsComments.ItmustbeassumedthatthiswasanoversightonthepartofNSPCswitness,asallofthepartieswhichherepresentsinhisJointCommentsarecoalshippers,andwefurtherassumeshipinunittrainquantities.    #aaWhileratesinexcessofStandAloneCostforunittrainshipmentsmaybeindicativeofmarketdominance,SACshouldnotberequiredtotestformarketdominanceforanysizeshipment.ItwasdeterminedbytheBoardinExParte347(SubNo.2)thatuseofSACisneitheraccuratenorappropriateforsmallshipments.#dd