[Federal Register Volume 61, Number 57 (Friday, March 22, 1996)]
[Proposed Rules]
[Pages 11799-11802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-6986]



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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Parts 1000 through 1149

[STB Ex Parte No. 527]


Expedited Procedures for Processing Rail Rate Reasonableness, 
Exemption and Revocation Proceedings

AGENCY: Surface Transportation Board, DOT.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: Under new 49 U.S.C. 10704(d), enacted as part of section 
102(a) of the ICC Termination Act of 1995 (ICCTA), the Surface 
Transportation Board (Board) is required to establish procedures to 
expedite the handling of challenges to the reasonableness of railroad 
rates and of proceedings involving the granting or revocation of 
railroad exemptions. Such procedures are to be promulgated by October 
1, 1996. The Board solicits comments on how the existing regulations at 
49 CFR Parts 1000 through 1149 can be modified to expedite the handling 
of rate reasonableness and exemption/revocation proceedings.

DATES: Comments are due on May 6, 1996.

ADDRESSES: Send comments (an original and 10 copies) referring to STB 
Ex Parte No. 527 to: Surface Transportation Board, Office of the 
Secretary, Case Control Branch, 1201 Constitution Ave., N.W., 
Washington, DC 20423-0001. Parties are encouraged to submit all 
pleadings and attachments on a 3.5-inch diskette in WordPerfect 5.1 
format.

FOR FURTHER INFORMATION CONTACT: Thomas J. Stilling, (202) 927-7312. 
[TDD for the hearing impaired: (202) 927-5721.]

SUPPLEMENTARY INFORMATION: New 49 U.S.C. 10704(d), which was enacted as 
part of section 102(a) of the ICC Termination Act of 1995 (ICCTA), Pub. 
L. No. 104-88, 109 Stat. 803, provides that:

    Within 9 months after the effective date of the ICC Termination 
Act of 1995, the Board shall establish procedures to ensure 
expeditious handling of challenges to the reasonableness of railroad 
rates. The procedures shall include appropriate measures for 
avoiding delay in the discovery and evidentiary phases of such 
proceedings and exemption and revocation proceedings, including 
appropriate sanctions for such delay, and for ensuring prompt 
disposition of motions and interlocutory administrative appeals.


[[Page 11800]]

    New section 10704(d) is one of several specific provisions designed 
to implement the new rail transportation policy (RTP) ``to provide for 
the expeditious handling and resolution of all [rail related] 
proceedings.'' New 49 U.S.C. 10101(15). Other such provisions adopted 
by the ICCTA include new 49 U.S.C. 10704(c), which requires the Board 
to decide the reasonableness of a challenged rate within 9 months after 
the close of the record if the determination is based upon a stand-
alone cost presentation,1 and within 6 months if it is based upon 
a simplified methodology.2 In addition, any proceeding to grant or 
revoke an exemption ``shall be completed within 9 months after it is 
begun.'' New 49 U.S.C. 10502 (b) and (d).

    \1\ See Coal Rate Guidelines, Nationwide, 1 I.C.C.2d 520 (1985), 
aff'd sub nom. Consolidated Rail Corp. v. United States, 812 F.2d 
1444 (3d Cir. 1987) (adopting constrained market pricing, including 
stand-alone cost, as a test for maximum reasonableness of coal 
rates).
    \2\ New 49 U.S.C. 10701(d)(3) requires the Board ``to establish 
[within 1 year] a simplified and expedited method for determining 
the reasonableness of challenged rail rates in those cases in which 
a full stand-alone cost presentation is too costly.'' In Rate 
Guidelines--Non-Coal Proceedings, Ex Parte No. 347 (Sub-No. 2) (ICC 
Dec. 1, 1995), 60 FR 62256 (1995), simplified guidelines have been 
proposed for public comment.
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    These various provisions were included in the ICCTA, in part, in 
response to concerns raised by parties that litigate before the Board. 
We hope, and expect, that the parties that raised these concerns will 
now participate in a constructive way to assist us in establishing 
appropriate procedures to expedite cases. Accordingly, we institute 
this proceeding to examine ways in which we can comply with the new RTP 
and, in particular, the specific requirements of new section 
10704(d).3

    \3\ In New Procedures in Rail Exemption Revocation Proceedings, 
Ex Parte No. 400 (Sub-No. 4) (ICC Apr. 28, 1995), the Interstate 
Commerce Commission (ICC) solicited comments on a proposal by the 
Railway Labor Executives' Association to establish formal procedural 
rules to govern petitions to revoke exemptions. In a separate 
decision served today, that proceeding is being discontinued because 
the concerns that were to be addressed there can and should be 
subsumed into this broader proceeding. The comments filed in that 
proceeding will be incorporated into the record in this proceeding 
and need not be refiled.
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    New section 10704(d) addresses the need to expedite two distinct 
types of proceedings--rate reasonableness and exemption/revocation 
cases. We note that, whereas the decisional time limits in rate 
reasonableness cases run from the date on which the administrative 
record is closed, in exemption/revocation cases they run from the date 
on which the proceeding is instituted. Therefore, any delay in the 
record-building stage of an exemption/revocation proceeding caused by a 
protracted discovery or evidentiary process can hinder a party's 
ability to effectively present its case within the allotted time. For 
that reason, special discovery and evidentiary procedures might be 
needed for exemption/revocation proceedings.
    The existing regulations that govern the filing and processing of 
rate reasonableness and exemption/revocation cases are contained in the 
Rules of Practice at 49 CFR 1000 through 1129 (Rules of General 
Applicability), and at 49 CFR 1130 through 1149 (Rate Procedures). 
These regulations provide a starting point in the search for new ways 
of expediting cases. We recognize that some provisions of the existing 
regulations have been rendered obsolete by the ICCTA and are now in the 
process of being eliminated. Moreover, certain provisions will require 
minor conforming changes, such as updating references to statutory 
provisions or replacing the reference to the ICC with the Surface 
Transportation Board. Those changes, which do not materially affect the 
way in which a case is argued or a decision reached, can be handled 
ministerially without comment from the public. In this proceeding, by 
contrast, we are focusing on those procedures (both codified and 
uncodified) that have a direct and significant impact on the time 
devoted to developing the administrative record and the adequacy of 
that record.

Discovery

    In any proceeding in which discovery is needed to develop an 
adequate evidentiary record, the discovery process can have a 
substantial impact on how quickly the case proceeds. We recognize that 
the evidentiary process in the larger rate reasonableness cases where 
stand-alone cost is used--such as challenges to the rate charged for 
large volume movements of coal--can involve extensive discovery. In 
these cases, discovery disputes often arise as each party attempts to 
acquire the data needed to present its case fully. The number of such 
disputes and how they are handled by the parties (and by the decisional 
body) can be a major factor in protracting these proceedings.
    In exemption/revocation proceedings, the development of an adequate 
factual record can also be a substantial undertaking. With the new 
statutory deadlines, it is imperative that the discovery process be 
structured so as to enable discovery to be conducted fully and 
completed quickly.4 It is equally important that discovery 
procedures not be abused so as to limit an opposing party's ability to 
effectively participate in a proceeding within the time allotted.

    \4\ In some cases, exemptions have been granted based on the 
evidence filed with the petition and without receiving comment from 
other interested parties. In such cases, it may be appropriate to 
develop procedures that would permit a party wishing to petition to 
revoke the exemption to conduct discovery prior to the filing of a 
petition for revocation.
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    We solicit comments, particularly from parties that have been 
involved in litigating cases, as to how we can speed up the discovery 
process, how discovery disputes can be avoided, and how we can more 
effectively resolve the discovery disputes that require resolution by 
the Board. In particular, parties should suggest changes to the 
discovery regulations (49 CFR 1114.21-1114.31) that they believe would 
expedite the processing of cases.
    Some particular areas on which commenters may wish to focus include 
the need for Board approval prior to discovery; the use and role of 
administrative law judges (ALJs) in handling discovery matters in major 
rate cases; and the best way to handle interlocutory appeals of 
discovery orders.
    The existing discovery rules, for example, require prior Board 
approval for all discovery other than interrogatories and requests for 
admissions. See 49 CFR 1114.21(b)(2). The discovery rules also provide 
for the filing of certain discovery documents with the Board, even 
though the documents are not ``evidence,'' and will not be evidence 
unless and until they are filed in an evidentiary submission. See 49 
CFR 1114.24(h). Every unnecessary filing that is required to be made 
with the Board, or processed by the Board, slows down the process for 
the parties and impedes the Board in its ability to complete its cases 
quickly.5 Therefore, we ask commenters to consider ways in which 
discovery can proceed without the need for any Board action or 
involvement, at least until a conflict arises.

    \5\  Similar internal paperwork burdens result from the practice 
of permitting emergency filings by facsimile (FAX) [See 54 FR 52587 
(Dec. 22, 1989)]. Although the concept of FAX filings was well 
conceived, in practice it burdens the Secretary's Office, by 
requiring it to process each FAX, and then to process, for a second 
time, the same document when it is submitted in hard copy. As the 
existing regulations already contemplate the use of overnight 
delivery services (see 49 CFR 1004.6), we are considering 
restricting the use of FAXes in the future. Commenters may wish to 
address this issue.
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    A difficult issue in major rate cases involves disputes over 
discovery. On the one hand, we must assure that

[[Page 11801]]
parties obtain the information they need to make their case; on the 
other hand, we are concerned that discovery not become overreaching and 
unduly burdensome. Also, we are directed by statute to assure that the 
process can be completed in a timely fashion. Thus, we seek a process 
that will quickly produce proper discovery rulings in the first 
instance, and that will then provide only narrow grounds for 
interlocutory appeals.
    In the past, we have used ALJs initially to resolve discovery 
disputes in significant cases. Given the highly technical issues raised 
in major rate cases, and the need to curtail the appellate process, our 
preliminary view is that the Board's staff--which is thoroughly 
familiar with the practical application of the agency's maximum rate 
procedures--should be involved in the resolution of discovery disputes 
from the outset. Commenters should address how we can best utilize the 
talents of an ALJ and/or our own staff to produce initial discovery 
rulings that will balance the burdens of production with the needs for 
information.6

    \6\  For example, it may be that discovery in major rate cases 
should be handled directly by the Board; that the ALJ handling 
discovery should be directed to include Board staff in all discovery 
conferences; or that the ALJ should only prepare a recommended 
decision on discovery.
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    New section 10704(d) directs the Board to dispose of motions and 
interlocutory administrative appeals promptly. Many of these motions 
and interlocutory appeals concern discovery. The ICC was not always 
consistent in its handling of, for example, interlocutory appeals. 
Sometimes, it treated interlocutory appeals under the rules governing 
appellate procedures found at 49 CFR 1115. Sometimes, it treated them 
under its regulations governing interlocutory appeals from hearing 
officers found at 49 CFR 1113.5. Assuming that we can devise procedures 
that will advance prompt and proper rulings in the first instance, we 
would be inclined to adopt interlocutory appeals procedures along the 
lines of those found at 49 CFR 1113.5, which permit interlocutory 
appeals only in extremely narrow circumstances. We would also be 
inclined to provide that such matters will be handled by the entire 
Board, rather than the Chairman, in order to limit the number of 
appellate levels available. Commenters should address this issue as 
well.7

    \7\  We also, of course, seek comment on how we should handle 
motions and interlocutory appeals related to matters other than 
discovery.
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Evidentiary Phase

    The number and timing of evidentiary filings can also greatly 
affect the length of a rate reasonableness proceeding. For example, in 
a rate case we can proceed with the market dominance and rate 
reasonableness phases sequentially or simultaneously. In some cases in 
the past, the ICC conducted the two phases of the case sequentially; 
only if it found market dominance did the ICC schedule the filing of 
rate reasonableness evidence.8 More recently, the ICC provided for 
the market dominance and rate reasonableness evidence to be filed 
simultaneously.

    \8\  In the new law, as in the law prior to the ICCTA, a 
prerequisite to our exercise of jurisdiction over the reasonableness 
of a rail rate is the requirement that a rail carrier have market 
dominance over the transportation at issue. New 49 U.S.C. 10707.
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    The sequential procedure can extend the time needed to close the 
record, but has the advantage of sparing the parties the expense 
associated with presenting evidence on the reasonableness of a rate in 
cases where the carrier is found not to possess market dominance. The 
simultaneous procedure allows faster completion of the record, but 
always requires the parties to incur the expense of filing evidence on 
the reasonableness of a rate. We ask for comments on whether to adopt a 
general policy that would govern all cases, or whether we should 
continue to decide on a case-by-case basis whether to bifurcate the two 
phases of a rate proceeding.9

    \9\  One option would be not to bifurcate cases unless all 
parties to the proceeding favored bifurcation.
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    Different evidentiary considerations apply to exemption and 
revocation proceedings. Exemption or revocation requests may be very 
particularized (i.e., for an individual transaction) or quite broad 
(for an entire class of traffic or transactions). Generally, the 
broader the request, the more extensive and complicated the evidentiary 
record that needs to be developed. However, even a narrowly drawn 
individual exemption petition can require a lengthy evidentiary 
process. Exemption petitions involving construction or abandonment 
activity, for example, often require extensive environmental analyses 
(either an environmental assessment or environmental impact statement). 
In such cases, it can be difficult to complete the environmental review 
within 9 months. Comments are solicited on how proceedings requiring 
extensive environmental analysis can best be accommodated in an 
exemption context. One approach may be to issue an exemption that is 
conditional pending completion of the environmental analysis.
    More generally, to speed the exemption/revocation process in all 
cases, it would seem that any party seeking either an exemption or a 
revocation of an exemption should be required to provide all of its 
supporting information at the time it submits its exemption or 
revocation request. We welcome suggestions on fashioning appropriate 
procedural schedules, including how much time should be allowed for the 
filing of reply and rebuttal evidence. For those cases in which the 
public should have an opportunity to comment on a request for exemption 
or revocation, we also welcome suggestions on how to structure our 
procedures to obtain the participation of potentially interested 
persons in a prompt and effective manner.
    Another issue that affects how much time is needed to complete the 
administrative record is the timing of the briefing schedule in those 
cases where briefing is needed. A simultaneous briefing schedule 
proceeds more quickly than sequential submissions of opening, reply and 
rebuttal briefs. Sequential briefing, however, better focuses the 
issues and allows parties to directly address and respond to those 
issues that are considered important by the opposing party. We request 
comments as to whether we should adopt a general policy on simultaneous 
or sequential briefing in rate reasonableness and exemption/revocation 
proceedings, or whether we should make that decision on a case-by-case 
basis. We also request comments on whether page limits generally should 
be imposed and, if so, what the page limit should be.

Sanctions

    New section 10704(d) specifically calls for ``sanctions to be 
imposed for dilatory tactics in rate cases and revocation 
proceedings.'' 10 H.R. Conf. Rep. No. 422, 104th Cong., 1st Sess. 
172 (1995), reprinted in 1996 U.S. Code Cong. & Admin. News 856. The 
current sanctions for failure to respond to discovery are found at 49 
CFR 1114.31, and the current sanctions for failure to comply with the 
procedural schedule are found at 49 CFR 1112.3. Parties should review 
these provisions and comment on whether there are other sanctions, such 
as monetary sanctions or other sanctions used by the courts,

[[Page 11802]]
that would be more appropriate and effective.

    \10\  The Board has general powers to carry out the provisions 
of the statute, including the imposition of sanctions. New 49 U.S.C. 
721.
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Other Issues

    Finally, we welcome any other suggestions on ways to improve the 
processing of rate reasonableness and exemption/revocation 
cases.11 In general, we expect to expedite the record-building 
stage of cases by looking with disfavor on requests to extend the 
procedural schedule. We intend to deny all requests for extensions of 
time that fail to demonstrate a compelling need for additional time.

    \11\  In several recent cases, we have required that pleadings 
be filed in paper form and on computer disk in WordPerfect format. 
We have also required that spreadsheets be filed in Lotus 1-2-3. 
Having evidence on electronic media in a format that is familiar to 
the staff has been quite beneficial as we analyze the record. We 
intend to require that evidence be filed on computer disks in the 
future.
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    We tentatively conclude that the proposed action will not have a 
substantial adverse impact on a significant number of small entities. 
In any event, the impact on small entities should be beneficial because 
it should allow parties to more quickly avail themselves of their 
statutory right to institute proceedings before the Board and to have 
the Board expedite the processing of those proceedings.
    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.

    Decided: March 8, 1996.

    By the Board, Chairman Morgan, Vice Chairman Simmons, and 
Commissioner Owen.
Vernon A. Williams,
Secretary.
[FR Doc. 96-6986 Filed 3-21-96; 8:45 am]
BILLING CODE 4915-00-P