No. 36428

SHELL OIL COMPANY v. LOUISIANA AND
ARKANSAS RAILWAY COMPANY

Decided September 29, 1977

Intrastate switching charge found not to apply on switch movements to industry hold track. Published line-haul rate determined to include reasonable compensation for terminal switching service performed by carrier. Reparations ordered.

W. C. Thomas for complainant.

Jon M. Waller and Robert E. Zimmerman for defendant.

REPORT AND ORDER OF THE COMMISSION

DIVISION 2, COMMISSIONERS MURPHY, MACFARLAND, AND CLAPP

BY THE DIVISION:

The modified procedure was followed. The complainant, Shell Oil Company (Shell), filed an appeal from the initial decision of the Administrative Law Judge. The defendant, Louisiana and Arkansas Railway Company (L & A), replied. Our findings differ from those recommended. Issues and requested findings not discussed in this report or reflected in our findings or conclusions have been considered and found not justified or their resolution not necessary for the proper disposition of the proceeding. The relevant evidence. and arguments of the parties shall be presented for the most part without reference to specific pleadings.

The complaint was filed on August 25, 1976. At its Norco, Louisiana refinery, Shell loads cars of asphalt, coke, liquified petroleum gas, and other petroleum products for shipment in interstate commerce. Loaded cars are often moved from the loading spot to a hold track located within the refinery to await the issuance of shipping orders. The complainant alleges that since this practice began many years ago, both parties have considered the switch. movement to the hold track to be a part of the carrier's interstate line-haul service. On or about June 1975, the defendant notified the complainant that it intended to assess a charge for the

switching service. In January 1976, the L & A informed Shell that it believed its intraplant switching charge was applicable to these movements. In March 1976, the defendant submitted balance due bills for charges based on switch movements accomplished between June 1972 and January 1976. The complainant paid defendant approximately $17,000 which represented payment in full for about 1,400 switch movements. The assessed freight charges were published in L & A tariff No. 15 series. The publication current at the time of the complaint was ICC 1845, effective May 1, 1975. The pertinent items are 255 and 295. The per-car charge ranged from $10.90 in June 1972, to $16.34 in January 1976, for the movement of privately owned cars and from $32.21 to $45.06 for the transportation of carrier-owned equipment. These charges were published to apply on intrastate traffic.

Shell claims that the charges are unjust and unreasonable in violation of sections 1 and 6 of the Interstate Commerce Act for the reason that the defendant is obligated to provide switching service under its line-haul rate. It seeks reparations in the amount of approximately $17,000 plus interest and an order requiring the defendant to cease and desist from its unreasonable practice. Shell further alleges that as these charges were published to apply on intrastate traffic, they are not applicable to the switching of cars which are interstate in character.

In its statements Shell contends that for a number of years it has asked the defendant to move loaded cars from the point of loading to the refinery's hold track in advance of the issuance of shipping instructions. The purpose of the move has been to permit the L & A to spot new cars for loading so that loading operations would not have to be suspended until the next time the refinery was switched. The complainant believes that both it and the defendant benefit from this practice, which enables the refinery to maximize the number of cars loaded and shipped. Defendant's exhibit No. 2 shows the intraplant switch movements at the Norco Refinery for the month of March 1976. Complainant points out that of the approximately 52 loaded cars moved to storage and subsequent road-haul movement, 25 cars were moved out by the L & A within 1 day. Thirty-seven or 71 percent of these cars were en route to destination within 2 calendar days, and 88 percent of the cars within 5 calendar days. Only three cars were held longer than 6 calendar days. Shell notes that during this month all of the cars switched to the hold track contained liquified petroleum gas, which is used in the heating of homes, farms, et cetera. The demand for this product is greatly affected by the weather. Loading of cars during periods of

low demand prior to the receipt of shipping orders enables the refinery to maximize the number of cars shipped during periods of heavy demand. Delaying the removal of loaded cars from the loading spots until shipping instructions are received would complicate the switching of the loading area, would idle the loading crews until, at the earliest, the next switch of the refinery, would unnecessarily increase the cost to the refinery of moving its products via rail, and would reduce the capability of the refinery to move cars out over the defendant's line.

Shell contends that all of the cars involved were privately owned and after being placed for loading were subject to demurrage rules and regulations. It further contends that switching of the refinery is at the defendant's convenience and that there is no disability at Norco which could be considered a shipper caused interruption of the carrier's switching activities. Shell acknowledges the existence of carrier-owned hold tracks in close proximity to the loading tracks and adjacent to the L & A's main-line trackage. It admits that it tries to avoid the payment of demurrage and hazardous storage charges whenever possible. Shell claims, however, that there is no advantage to the L & A in placing the cars on carrier-owned hold tracks other than the assessment of these charges. Since the cars involved are all privately owned, and the complainant assumes whatever risk is involved in storing hazardous material, Shell believes that its avoidance of these charges, which should not be regarded as a source of carrier revenue, is justified. Shell asserts that there is no material difference in the distance or complexity of the switching operation necessary for the placement of cars on its own or on the defendant's hold track. The presence of these cars on the carrier's track might in addition complicate the L & A's switching operation.

Complainant admits that an additional switch movement is required by the placement of cars on the hold track, but emphasizes that this move is made during the normal switching of the refinery at the defendant's convenience. It relies upon Carrier Switching at Industrial Plants in the East, 294 I.C.C. 159 (1955) for the principal that the temporary holding of cars on tracks of the carrier or industry for billing or placement instructions from the shipper or receiver where performed by the carrier as necessary incidents to the placement and removal of cars is deemed to be properly included under the line-haul rates. Complainant asserts that this principle, announced by the Commission in Propriety of Operating Practices-Terminal Services, 209 I.C.C. 11, was liberalized for national application in American Smelting & Refinery Co. Terminal

or

Services, 294 I.C.C. 745 (1955). Shell contends that the switch movement to its hold track is a temporary holding and, therefore, may not be considered an industry caused interruption interference in service which would terminate the carrier's transportation obligation under its line-haul rate. In view of the simplicity of the switching operation and the short duration of the holding period in the great majority of cases, complainant believes that the movement does not exceed ordinary terminal service. It cites the defendant's failure to charge for the service prior to August 1975, as indicating that for some years the L & A was of the same belief.

Finally, complainant asserts that the cars involved in the switch movement were forwarded to interstate destinations with very few, if any, exceptions. Since the published rate base applies to private cars in intrastate traffic only, defendant should be precluded from assessing a charge for the switch movement.

In its statements the defendant. contends that it commenced assessing charges for the switch movement after it became aware of the extent and nature of the intraplant switching performed during 1975. The switch movements were made pursuant to instructions transmitted to the L & A by complainant, as indicated by defendant's exhibit No. 2. Defendant's witness notes that carrierowned tracks proximate to the L & A's main line could have been used for the temporary holding of loaded cars. Shell's insistence upon using its own hold track is clearly a means of avoiding demurrage and hazardous materials charges, so that it may load at its convenience without regard to the ultimate date of shipping. By requiring the L & A to switch the car to a particular location within the plant, another switch movement is necessary to place the car in the appropriate consist. The defendant argues that it receives no benefit from the switching of cars to industry-designated tracks for extended periods of time and that complainant has not shown how this maneuver promotes better use of equipment and space.

The defendant notes that the tariff provisions in Ex Parte No. 104 was not adopted in toto in Louisiana and Arkansas Tariff 15-F, I.C.C. 1845. However, even if the principles there enunciated were applicable to the defendant, it argues that the switch movement cannot be considered a temporary holding. Defendant cites Magnolia Petroleum Co. Terminal Allowance, 308 I.C.C. 57 (1959), at 58, which interprets Carrier Switching at Industrial Plants in the East, supra, in the following language:

In the basic report the Commission pointed out when a carrier is prevented at its ordinary operating convenience from reaching points of loading or unloading within a plant because of interruption or interference over which the industry has control, such as *** the manner in which industrial operations are conducted, *** the service beyond the point of interruption or interference is in excess of that performed in simple switching or team-track delivery.

The L & A contends that in formulating the temporary holding exception to this rule, the Commission contemplated only a short delay to await shipping instructions. It urges that the lengthy time factor and the additional service required clearly place the switch movement beyond simple switching or team-track delivery and that it is, therefore, entitled to compensation above that provided by the line-haul rate.

The defendant reproduces certain language of tariff 15-F to refute complainant's allegation that the published rate basis is not applicable. Item 135 states that "(c) Intraplant switching is a switch. movement from one track to another or from one point to another on the same track, within the same plant or industry." Item 255 states that "Where no specific charge is provided herein for intra-plant switching, the charge for such service will be as provided in Rate Basis 29, Item 295 when cars are not furnished by the L & A."

L & A contends that the tariff clearly establishes the applicable. rate by reference to a published rate basis. It further argues that there is no distinction drawn between intraplant switches on the basis of ultimate destination, since the nature of the traffic may be unknown at the time of the switch movement. Finally, the L & A claims that if service has been provided in the absence of tariff authority, the duty to determine what reasonable charges should be assessed rests in the Commission Moore Business Forms, Inc., v. New York Central R. Co., 274 I.C.C. 404.

The Administrative Law Judge found that the defendant has provided intraplant switching beyond "simple switching or teamtrack delivery"; that the move cannot be considered a temporary holding due to the extended periods of time the loaded cars remain on industry-designated tracks; that the published tariff provisions clearly establish the rate of compensation for intraplant switching; and that the defendant is entitled to compensation on the basis of that tariff for the 1,400 intraplant switches and for future switching service.