## Facts

- Electric utilities shipped coal from the Powder River Basin to power plants over routes containing a terminal “bottleneck” segment served by only one railroad.
- MidAmerican sought a separate rate for the final 90-mile segment to its Iowa plant, which was served only by Union Pacific; Union Pacific offered only an end-to-end through rate.
- Central Power & Light sought a separate rate for the Fort Worth–Coleto Creek segment in Texas, served only by Southern Pacific; Southern Pacific refused and offered a joint through rate for the entire movement.
- The utilities aimed to obtain competitive pricing on non-bottleneck portions while subjecting the monopoly bottleneck segment to regulatory rate review.
- The utilities filed complaints asking the Surface Transportation Board (STB) to prescribe “reasonable” bottleneck rates under the Interstate Commerce Act (ICA).
- The STB dismissed the complaints, concluding a bottleneck carrier satisfies its common-carrier duty by offering a single origin-to-destination rate that includes the bottleneck segment.
- The utilities and shipper groups petitioned for judicial review; the Eighth Circuit consolidated the petitions and reviewed under APA standards.

## Issues

1. Whether the ICA requires a bottleneck carrier to quote a separate rate for the bottleneck segment when a shipper seeks to use other carriers on the remaining portions of the route.
2. Whether, absent a separately published bottleneck rate, the STB must still allow rate-reasonableness review focused only on the bottleneck portion.
3. Whether the STB’s bottleneck-rate policy was arbitrary, capricious, or contrary to the ICA’s competition and rate-regulation goals.

## Decision

- The Eighth Circuit upheld the STB’s core bottleneck-rate rulings and denied the petitions for review.
- The court held the ICA does not compel a bottleneck carrier to “unbundle” service by publishing a separate bottleneck-segment rate upon shipper request.
- The court agreed that offering a through origin-to-destination rate covering the entire route can satisfy the carrier’s common-carrier obligation.
- The court accepted the STB’s approach tying rate-reasonableness review to the rate actually offered and published (the through rate), rather than requiring segment-specific review of the bottleneck portion.
- The court deferred to the STB’s interpretation of ambiguous statutory provisions and found the policy rationale adequately explained and not arbitrary or unlawful.

## Legal Principles

- When the ICA does not clearly mandate a particular rate structure, courts defer to the STB’s reasonable construction and policy choices under APA review.
- A rail carrier’s common-carrier obligation may be satisfied by offering a single origin-to-destination rate, even if part of the route is a monopoly “bottleneck” segment.
- The ICA does not require carriers to provide shipper-requested “unbundled” component rates for physical subsegments of a movement.
- The STB may structure its rate-reasonableness jurisdiction around rates that carriers actually publish and offer, rather than treating requested subsegment rates as independently reviewable by default.

## Conclusion

The Eighth Circuit sustained the STB’s policy permitting bottleneck carriers to decline separate bottleneck-segment quotes so long as they offer a through rate, and it approved the STB’s decision to administer rate-reasonableness review primarily with reference to the published through rate rather than a compelled segment rate.


MidAmerican Energy Co. v. Surface Transp. Bd., 169 F.3d 1099 (8th Cir. 1999)