[Federal Register Volume 62, Number 187 (Friday, September 26, 1997)]
[Proposed Rules]
[Pages 50550-50553]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-25642]


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DEPARTMENT OF TRANSPORTATION

49 CFR Part 1111

[STB Ex Parte No. 527 (Sub-No. 1)]


Expedited Procedures for Processing Simplified Rail Rate 
Reasonableness Proceedings

AGENCY: Surface Transportation Board; DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: On February 12, 1997, the Surface Transportation Board issued 
an Advance Notice of Proposed Rulemaking soliciting comments on how the 
complaint and investigation procedures at 49 CFR part 1111 should be 
modified to reflect the Board's adoption of Simplified Rate 
Guidelines.1 Based on the comments received, the Board 
proposes to amend part 1111 to facilitate the processing of cases using 
Simplified Rate Guidelines. Comments are invited.

    \1\ Rate Guidelines--Non-Coal Proceedings, Ex Parte No. 347 
(Sub-No. 2) (STB served Dec. 31, 1996), pet. for rehearing and 
reconsideration denied (STB served Sept. 24, 1996), pet. for 
judicial review pending sub nom., Association of Am. Railroad v. 
Surface Transp. Bd., No. 97-1020 (D.C. Cir. filed Jan. 10, 1997).

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DATES: Comments are due November 10, 1997.

ADDRESSES: Send comments referring to STB Ex Parte No. 527 (Sub-No. 1) 
to: Surface Transportation Board, Office of the Secretary, Case Control 
Branch, 1925 K Street, N.W., Washington, DC 20423-0001.

FOR FURTHER INFORMATION CONTACT: Thomas J. Stilling, (202) 565-1567. 
(TDD for the hearing impaired: (202) 565-1695.)

SUPPLEMENTARY INFORMATION: The Board is charged with expediting the 
processing of rate complaint proceedings. Under 49 U.S.C. 10704(c), we 
are required to make a determination as to the reasonableness of a 
challenged rate within 9 months after the record closes if the 
determination is based on stand-alone cost (SAC) evidence, and within 6 
months if it is based upon a simplified methodology adopted pursuant to 
49 U.S.C. 10701(d)(3). On October 1, 1996,2 we adopted rules 
to expedite the handling of complaints challenging the reasonableness 
of railroad rates using SAC,3 including the generally 
applicable procedural schedule of 49 CFR 1111.8 that requires 
completion of the evidentiary phase of a SAC case in 7 months. We 
declined to adopt a procedural schedule to govern the filing of 
evidence in cases using the then unadopted Simplified Rate Guidelines 
procedures. Rather, we decided to consider the adoption of regulations 
covering such cases following completion of the Simplified Rate 
Guidelines rulemaking.
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    \2\ Expedited Procedures for Processing Rail Rate 
Reasonableness, Exemption and Revocation Proceedings, STB Ex Parte 
No. 527, published in the Federal Register on October 8, 1996, (61 
FR 52710), modified by decision served November 15, 1996.
    \3\ SAC is one of four constraints on railroad pricing adopted 
in Coal Rate Guidelines--Nationwide, 1 I.C.C.2d 520 (1985). 
Notwithstanding its title, Coal Rate Guidelines procedures are not 
limited to coal cases. Rather, the guidelines are the preferred 
method of evaluating the reasonableness of any rate.
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    On December 31, 1996, we adopted simplified evidentiary guidelines 
in Simplified Rate Guidelines to determine the reasonableness of rail 
rates on captive traffic where the Coal Rate Guidelines could not be 
practicably applied. Subsequently, by Advance Notice of Proposed 
Rulemaking, served February 12, 1997 (62 FR 6508), we solicited 
comments on whether a general procedural schedule applicable to cases 
processed under the Simplified Rate Guidelines could be promulgated 
(and, if so, what that schedule should be), or whether we should delay 
the adoption of a general procedural schedule and proceed on a case-by-
case basis until all concerned acquire some experience utilizing the 
new guidelines.4
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    \4\ Simplified Rate Guidelines suggested that procedural 
schedules should initially be set on a case-by-case basis. Id. at 38 
n.145.
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    Comments were filed by the Association of American Railroads (AAR), 
the National Industrial Transportation League (NITL), Barbara R. 
Kueppers, and the United Transportation Union-Illinois Legislative 
Board (UTU-ILB).

Positions of the Parties

    AAR acknowledges that the choice of guidelines (Coal Rate 
Guidelines or Simplified Rate Guidelines) must be made at the outset of 
a case. However, AAR sees no need to adopt a set timeframe, such as the 
45-day schedule suggested in Simplified Rate Guidelines (at 38) for 
deciding whether a case should proceed under the Coal Rate Guidelines 
or the simplified procedures. AAR claims that a 45-day schedule would 
be unfair because it would give a shipper unlimited time to prepare its 
initial case while giving the defendant only two weeks to analyze 
complainant's case and prepare opposing evidence.5 AAR also 
notes that

[[Page 50551]]

the 45-day schedule appears to conflict with the requirement for a 
conference of the parties required by 49 CFR 1111.9.6 AAR 
prefers convening a conference of the parties shortly after a complaint 
is filed to allow the parties to develop a schedule, subject to Board 
approval, for determining whether the Simplified Rate Guidelines can be 
used. In addition, because no case has yet been processed using 
Simplified Rate Guidelines, AAR suggests that we set procedural 
schedules for the filing of evidence on a case-by-case basis until 
sufficient experience is gained and the need for a general schedule 
becomes apparent.
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    \5\ Under the 45-day schedule, the defendants would have 15 days 
after the complaint is filed to oppose use of the simplified 
procedures. Complainant would have 10 days to respond to the 
railroad position, and the Board would have 20 days to make its 
determination.
    \6\ Under 49 CFR 1111.9(b), in stand-alone cost complaints, the 
parties are to discuss procedural matters within 7 days after a 
complaint is filed. Under 49 CFR 1111.9(a), in all other complaint 
proceedings, the parties shall discuss procedural issues within 7 
days after an answer is filed.
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    NITL argues that, with minor modifications, complaints seeking to 
invoke Simplified Rate Guidelines can be handled under the procedures 
established at 49 CFR part 1111.7 NITL supports deciding 
within 45 days a request for invocation of the simplified procedures. 
It proposes that the factors that must be included in a complaint 
seeking to invoke the Simplified Rate Guidelines be specifically listed 
in 49 CFR 1111.1(a) so that potential complainants are given 
appropriate notice of both the availability of, and requirements for, 
the use of the simplified procedures.8
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    \7\ NITL suggests that a conference of the parties could be held 
within 7 days of the filing of the answer as specified in 49 CFR 
1111.9(a).
    \8\ Simplified Rate Guidelines (at 37-38) requires that a 
complaint seeking to invoke the simplified procedures should 
contain:
    (1) A general history of the traffic at issue, including how the 
traffic has moved in the past, how it currently moves, and how it 
can and will be moved in the future. This information should address 
not only the physical movement of the traffic, but the type and 
level of rates actually used. It should include all carriers (rail 
and nonrail) that have participated in the transportation of this 
traffic or could do so.
    (2) The specific commodity description(s) for the traffic at 
issue, the shipping characteristics and requirements of the traffic, 
and the type of railroad cars required or used for the traffic.
    (3) All origins, destinations, and O-D [origin-destination] 
pairs involved in the complaint, by commodity type.
    (4) The amount of traffic involved (by commodity type), 
including total annual carloadings, average tons per car, number of 
carloads per shipment, and number of carloads per week or month.
    (5) Total or average revenue per carload paid to the defendant 
railroad(s), by commodity type.
    (6) The feasibility and anticipated cost of preparing a SAC 
presentation in the case.
    (7) An estimate of the other costs to be incurred in pursuing 
the rate complaint, including preparing necessary jurisdictional 
threshold and market dominance evidence.
    (8) The relief sought, including all reparations as well as the 
level and duration of any rate prescription.
    (9) The present value of the relief sought.
    AAR notes that factor 7 includes costs associated with 
``preparing necessary jurisdictional threshold and market dominance 
evidence.'' It asserts that these costs are common to both 
simplified procedure and CMP cases and are therefore not relevant to 
determining which procedure to follow. We note that while the costs 
are common to both types of cases, the purpose of including them is 
to determine and weigh the costs of presenting a rate case under 
either CMP or the simplified procedures.
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    Finally, NITL recommends that the Rules of Practice should include 
a reference to the procedures established in 49 CFR 1244.8 regarding 
access to the Waybill Sample data. It suggests that complainants 
request access to the Waybill Sample simultaneously with the filing of 
the complaint so that complainant can complete discovery and prepare 
its opening statement within 120 days of the filing of the complaint as 
specified at 49 CFR 1111.8.
    Ms. Kueppers argues that the Board should provide for a cost-
efficient means of accessing data through discovery.9 In 
particular, she proposes that discovery be completed in 6 months where 
rate reasonableness is the sole issue in a proceeding. When rate 
reasonableness is combined with other issues, she proposes that the 
procedural schedule be determined on a case-by-case basis, allowing for 
discovery related to other issues. Ms. Kueppers also argues that, 
because individuals in small shipping organizations have a variety of 
duties, it is difficult to determine a universally appropriate schedule 
(such as 120 days in stand-alone cases) for small shippers to prepare 
and present a case. She contends that small shippers should be afforded 
flexibility in scheduling.
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    \9\ She requests that parties enter into a confidentiality 
agreement within 7 days after a complaint is filed. If they are 
unable to concur on an agreement, they can request that the Board 
impose a confidentiality agreement. Within 10 days of a 
confidentiality agreement being in place, the parties are to 
disclose the information required in Rule 26 of the Federal Rules of 
Civil Procedure, and the carrier shall provide to complainant its 
waybill tapes.
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    The UTU-ILB offers no comments on procedural matters but states 
that it continues to support traditional rate comparisons as the best 
test of rate reasonableness for the small shipper, port, or community. 
It adds that it will await the issuance of a notice of proposed 
rulemaking before making any other recommendations.

Discussion

    We appreciate the comments of the parties and have attempted to 
incorporate as many of their suggestions as practical in our proposal. 
We propose to include in our regulations the information that a 
complainant should supply when seeking to test the reasonableness of a 
rate using the Simplified Rate Guidelines. We also propose to establish 
a schedule for determining whether the Simplified Rate Guidelines can 
be used in a particular case. Additional, minor changes are being 
proposed. We are not proposing to adopt at this time a general 
procedural schedule for processing rate complaints under the Simplified 
Rate Guidelines, but rather intend to proceed on a case-by-case basis 
until we gain more experience using the new guidelines.
    Simplified Rate Guidelines (at 37) recognized that a determination 
as to which guidelines should be used in a particular case must be 
decided at the outset of the case.10 If the simplified 
procedures are sought, the complainant ``must present sufficient 
information to show that [use of the Coal Rate Guidelines] is not 
available * * * . [T]his information should be included in the initial 
complaint, so as not to delay the case.'' Id. Simplified Rate 
Guidelines enumerated 9 evidentiary factors (listed in note 8, supra), 
which should be included in a complaint. We propose to modify section 
1111.1(a), as suggested by NITL, to specifically list the 9 evidentiary 
factors that a complaint seeking to use the Simplified Rate Guidelines 
should address.11 This will ensure that anyone contemplating 
filing a complaint is fully aware of the factors that must be addressed 
in its initial pleading. We also propose to make certain technical 
changes to that section.
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    \10\ No special showing is needed to use Coal Rate Guidelines 
because, where available, those guidelines must be used.
    \11\ Currently, 49 CFR 1111.1(a) states in relevant part:
    In a complaint challenging the reasonableness of a rail rate, 
the complainant should indicate whether * * * the reasonableness of 
the rate should be examined using constrained market pricing or 
simplified standards to be adopted pursuant to 49 U.S.C. 
10701(d)(3). The complainant should specify the basis for this 
assertion.
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    As noted, AAR and NITL differ on whether we should prescribe a 45-
day period for deciding whether the simplified procedure should be used 
in deciding rate reasonableness. To comply with the Congressional 
directive to expedite rate cases, the determination of whether to apply 
the simplified procedures must be made quickly at the outset of a case. 
Based on the comments of the parties, however, we propose to modify 
slightly the 45-day schedule suggested in Simplified Rate Guidelines. 
Instead of 15 days, the railroad would have 20 days to file opposition 
to the

[[Page 50552]]

use of the simplified procedures, the same due date for filing an 
answer to a complaint. 49 CFR 1111.4 (a) and (b). This proposal gives a 
railroad more time to respond and necessitates only one filing, rather 
than two, in response to a complaint. The complainant would have 10 
days to respond, and the Board would have 20 days in which to determine 
whether the Simplified Rate Guidelines should be used. See proposed new 
section 1111.9 (providing for a 50-day schedule).12
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    \12\ We propose to renumber current section 1111.9 as section 
1111.10.
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    We believe that such an approach balances the needs of the parties. 
While the time frame is relatively short, we note that we are not 
deciding the case on the merits but simply determining whether to use 
the Simplified Rate Guidelines. This short schedule is necessary if we 
are to proceed with the expeditious handling of the complaint.
    Both the AAR and the NITL see a scheduling conflict between holding 
the procedural conference (49 CFR 1111.9) and determining whether to 
apply the simplified procedures. AAR, while not wanting a schedule for 
determining whether to apply the Simplified Rate Guidelines, wants a 
conference of the parties to be held ``shortly after the complaint is 
filed.'' NITL also favors a conference and supports proceeding under 49 
CFR 1111.9(a), under which the parties are required to meet, or discuss 
by telephone, discovery and procedural matters within 7 days after an 
answer to a complaint is filed.13 To avoid convening a 
conference during the time that parties are preparing pleadings 
addressing the appropriateness of using the Simplified Rate Guidelines, 
we propose to modify 49 CFR 1111.9(a) so that the conference will be 
held 12 (instead of 7) days after the answer is filed (day 32) and the 
report to the Board will be due 19 (instead of 14) days after the 
answer is filed.14
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    \13\  Within 14 days after an answer to a complaint is filed, 
the parties, either jointly or separately, shall file a report with 
the Board setting forth a proposed procedural schedule to govern 
future activities and deadlines in the case.
    \14\  Because we propose to redesignate Sec. 1111.9 as 
Sec. 1111.10, these modifications are in proposed section 
1111.10(a).
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    The parties disagree about whether we should prescribe a general 
procedural schedule to govern the submission of evidence for cases 
processed under the Simplified Rate Guidelines. AAR and, to some 
extent, Ms. Kueppers favor a case-by-case approach. NITL supports the 
use of the procedural schedule applicable to stand-alone cost cases 
with certain modifications.15
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    \15\  See 49 CFR 1111.8.
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    We agree with AAR and Ms. Kueppers that it seems best to proceed 
initially on a case-by-case basis. Without any experience processing 
cases using the Simplified Rate Guidelines, it is difficult to develop 
a generally applicable procedural schedule. Nevertheless, the goal of 
section 10704 is to expedite the processing of rate cases. As a general 
matter, we believe that the evidentiary phase of a non-coal case should 
take less than the 7-month time frame for large coal cases. Therefore, 
we will generally require that discovery be expedited.
    Finally, NITL requests that the Rules of Practice cross reference 
the regulation at 49 CFR 1244.8 concerning access to the Waybill 
Sample.16 We believe, however, that such redundance is 
unnecessary.17
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    \16\  Ms. Kueppers requests that the carrier provide its waybill 
tapes to the complainant. Our rules at section 1244.8, however, 
provide for a party to request from the Board the Waybill Sample, 
which is a statistically valid sample. We believe that this process 
is a more efficient method of obtaining information. We also 
believe, at least for the present, that Ms. Kueppers' request for 
discovery and confidentiality rules is unnecessary and can be 
handled on a case-by-case basis.
    \17\  In Simplified Rate Guidelines (at 41) we denied access to 
the Waybill Sample prior to the filing of the complaint. However, 
parties can request access to such data simultaneously with the 
filing of a complaint. The Board will act promptly on these 
requests.
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    The Board certifies that the rules, if adopted, would not have a 
significant economic effect on a substantial number of small entities. 
The proposed rules should result in the quicker processing of rail 
complaints using the simplified procedures. The Board, however, seeks 
comments on whether there would be effects on small entities that 
should be considered.
    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.

List of Subjects in 49 CFR Part 1111

    Administrative practice and procedure, Investigations.

    Decided: September 18, 1997.

    By the Board, Chairman Morgan and Vice Chairman Owen.
Vernon A. Williams,
Secretary.

    For the reasons set forth in the preamble, title 49 chapter X, part 
1111 of the Code of Federal Regulations is proposed to be amended as 
follows:

PART 1111--COMPLAINT AND INVESTIGATION PROCEDURES

    1. The authority citation for part 1111 is revised to read as 
follows:

    Authority: 5 U.S.C. 559; 49 U.S.C. 721, 10704, and 11701.

    2. Section 1111.1 is proposed to be amended by revising the last 
two sentences of paragraph (a) and adding paragraphs (a)(1) through 
(a)(9) to read as follows:


Sec. 1111.1  Content of formal complaints; joinder.

    (a) * * * In a complaint challenging the reasonableness of a rail 
rate, the complainant should indicate whether, in its view, the 
reasonableness of the rate be examined using constrained market pricing 
or simplified standards adopted pursuant to 49 U.S.C. 10701(d)(3). If 
the complainant seeks to use the simplified standards, it should 
support this request by submitting, at a minimum, the following 
information:
    (1) A general history of the traffic at issue, including how the 
traffic has moved in the past, how it currently moves, and how it can 
and will be moved in the future. This information should address not 
only the physical movement of the traffic, but the type and level of 
rates actually used. It should include all carriers (rail and nonrail) 
that have participated in the transportation of this traffic or could 
do so.
    (2) The specific commodity description(s) for the traffic at issue, 
the shipping characteristics and requirements of the traffic, and the 
type of railroad cars required or used for the traffic.
    (3) All origins, destinations, and origin-destination (O-D) pairs 
involved in the complaint, by commodity type.
    (4) The amount of traffic involved (by commodity type), including 
total annual carloadings, average tons per car, number of carloads per 
shipment, and number of carloads per week or month.
    (5) Total or average revenue per carload paid to the defendant 
railroad(s), by commodity type.
    (6) The feasibility and anticipated cost of preparing a SAC 
presentation in the case.
    (7) An estimate of the other costs to be incurred in pursuing the 
rate complaint, including preparing necessary jurisdictional threshold 
and market dominance evidence.
    (8) The relief sought, including all reparations as well as the 
level and duration of any rate prescription.
    (9) The present value of the relief sought.
* * * * *

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Sec. 1111.8  [Amended]

    3. In Sec. 1111.8 remove the phrase ``section 1111.9(b)'' and add 
``Sec. 1111.10(b)'' in its place.
    4. Redesignate Sec. 1111.9 as Sec. 1111.10 and add new Sec. 1111.9 
to read as follows:


Sec. 1111.9  Procedural schedule to determine whether to use simplified 
procedures.

    Absent a specific order by the Board, the following procedural 
schedule will apply in determining whether to grant a request under 
Sec. 1111.1(a) to use the simplified procedures (the remainder of the 
procedural schedule will be determined on a case-by-case basis):
    Day 0  Complaint filed, discovery period begins.
    Day 20  Defendant's answer to complaint and opposition to use of 
simplified procedures due.
    Day 30  Complainant's response to use of simplified procedures due.
    Day 50  Board's determination of whether simplified procedures 
should be used.
    5. In newly designated Sec. 1111.10 paragraph (a) is revised to 
read as follows:


Sec. 1111.10  Meetings to discuss procedural matters.

    (a) Generally. In all complaint proceedings, other than those 
challenging the reasonableness of a rail rate based on stand-alone 
cost, the parties shall meet, or discuss by telephone, discovery and 
procedural matters within 12 days after an answer to a complaint is 
filed. Within 19 days after an answer to a complaint is filed, the 
parties, either jointly or separately, shall file a report with the 
Board setting forth a proposed procedural schedule to govern future 
activities and deadlines in the case.
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[FR Doc. 97-25642 Filed 9-25-97; 8:45 am]
BILLING CODE 4915-00-P