[Federal Register Volume 63, Number 248 (Monday, December 28, 1998)]
[Rules and Regulations]
[Pages 71396-71402]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-34187]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Parts 1146 and 1147

[STB Ex Parte No. 628]


Expedited Relief for Service Inadequacies

AGENCY: Surface Transportation Board.

ACTION: Final rules.

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SUMMARY: The Surface Transportation Board (Board) is issuing final 
rules establishing procedures for obtaining temporary alternative rail 
service when there has been a substantial measurable deterioration or 
other demonstrated inadequacy in rail service provided by the incumbent 
carrier.

DATES: These rules are effective January 27, 1999.

FOR FURTHER INFORMATION CONTACT: Joseph H. Dettmar, (202) 565-1600. 
[TDD for the hearing impaired: (202) 565-1695.]

SUPPLEMENTARY INFORMATION: In April 1998, the Board conducted hearings, 
at the request of Congress, to examine issues of rail access and 
competition in today's railroad industry. A recurring complaint voiced 
by rail shippers at those hearings was the delay and ineffectiveness of 
existing procedures for obtaining relief from localized service 
failures, and the railroads agreed that we should reexamine how such 
service failures can best be addressed.1 Accordingly, in a 
notice of proposed rulemaking in this proceeding served May 12, 1998, 
and published in the Federal Register on May 18, 1998 (63 FR 27253) 
(May Notice), we sought comments on a proposal to establish expedited 
procedures for shippers to obtain localized temporary alternative rail 
service from another carrier when the incumbent carrier cannot properly 
serve them.
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    \1\ See Review of Rail Access and Competition Issues, STB Ex 
Parte No. 575 (STB served Apr. 17, 1998) (Review), slip op. at 6-7.
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    Under the proposed procedures, parties could seek alternative rail 
service, under 49 U.S.C. 10705, 11102, or 11123, when, over an 
identified time period, there has been a substantial measurable 
deterioration in the rail service provided by an incumbent carrier. We 
did not list particular factors to be used in making that assessment, 
or propose a specific test period, but rather sought to retain the 
flexibility needed to address widely varying circumstances. We 
explained, however, that these procedures were not meant to redress 
minor service disruptions, but rather would be directed only at 
substantial service problems that cannot readily be resolved by the 
incumbent railroad. Petitioners would be required to first discuss and 
assess with the incumbent carrier whether adequate service would be 
restored within a reasonable time (and, if not, to explain why not); to 
obtain from another railroad the necessary commitment'should it be 
afforded access--to meet the service needs; and to describe how the new 
service could be provided safely, without degrading service to its 
existing customers and without unreasonably interfering with the 
incumbent's overall ability to provide service. Where relief is granted 
and the incumbent carrier can later demonstrate that it has restored, 
or is prepared to restore, adequate service, it could petition to 
terminate that relief.
    In a supplemental notice of proposed rulemaking served October 15, 
1998, and published in the Federal Register on October 20, 1998 (63 FR 
55996) (October Notice), we sought comments on a request by the 
American Short Line and Regional Railroad Association (ASLRRA) for 
similar expedited procedures for Class II and Class III railroads to 
obtain temporary access to an additional carrier under similar 
circumstances.
    We have received comments in response to both the May Notice 
2 and the October Notice.3 The comments express 
near-universal support for both proposals,4 although the 
commenting parties differ somewhat on what the rules should provide and 
how they should be applied. After considering the comments,5 
we are clarifying and modifying the earlier proposals and are adopting 
the rules set forth below, to be codified at 49 CFR Parts 1146 and 
1147.
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    \2\ Comments were submitted by ACE Cogeneration Company (ACE); 
Alliance for Rail Competition; AmerenUE; ASLRRA; Arkansas, Louisiana 
& Mississippi Railroad Company (AL&M); Association of American 
Railroads (AAR); BHP Copper Inc. (BHP); California Public Utilities 
Commission (CPUC); Cemex USA Management, Inc. (Cemex); Chemical Lime 
Company (CLC); Chemical Manufacturers Association (CMA); Edison 
Electric Institute, Farmland Industries, Inc. and The Fertilizer 
Institute (Edison-Farmland-Fertilizer); Empire Electric District 
Company (Empire); Entergy Services, Inc. and Entergy Arkansas, Inc. 
(Entergy); International Paper Company (IPC); Lower Colorado River 
Authority and the City of Austin, TX (LCRA); National Grain and Feed 
Association (NGFA); National Industrial Traffic League (NITL); 
National Lime and Stone Company; National Mining Association (NMA); 
North Dakota Grain Dealers Association, North Dakota Public Service 
Commission, and North Dakota Wheat Commission (North Dakota); Ohio 
Rail Development Commission, Public Utilities Commission of Ohio, 
and Ohio Attorney General Antitrust Section; PP&L, Inc. (PP&L); 
Shell Oil Company and Shell Chemical Company (Shell); Society of 
Plastics Industry, Inc. (SPI); Swanson-Superior Forest Products, 
Inc.; United States Department of Agriculture; United States 
Department of Transportation (DOT); United Transportation Union 
(UTU); U.S. Clay Producers Traffic Associations, Inc. (US Clay); 
Joseph C. Szabo, for and on behalf of United Transportation Union-
Illinois Legislative Board (UTU-IL); and Western Coal Traffic League 
(WCTL).
    Replies were filed by AL&M AAR; BHP; CPUC; Empire; Entergy; 
IPC; LCRA; NITL, CMA, Edison-Farmland-Fertilizer, NMA, SPI, US Clay, 
AmerenUE, and PP&L (NITL et al.); Shell; and WCTL.
    \3\ Supplemental comments were filed by AL&M CPUC; Cemex; 
Edison-Fertilizer; Empire; Farmrail System, Inc. (Farmrail); NGFA; 
NITL; Reagent Chemical & Research, Inc.; UTU; UTU-IL; WCTL; and 
Western Railroad Company, Inc.
    Supplemental replies were filed by AAR; ASLRRA; Edison-
Fertilizer; Farmrail; and DOT.
    \4\ UTU-IL is the only commenter opposing the proposals. It 
argues that new procedures are unnecessary. Its assertion, however, 
is belied by the overwhelming consensus, expressed in the comments 
of the shipper and railroad communities alike, that such procedures 
would be useful and would assist parties in overcoming temporary 
service problems.
    We also note that the national UTU, while voicing ``serious 
concerns'' about issues that could arise in individual cases 
regarding safety and adverse effects on rail employees, does not 
oppose the proposals.
    \5\ Individual suggestions or arguments not specifically 
referenced here are embraced by our general discussion in this 
decision setting forth the positions of various groups and our 
response thereto.
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Discussion and Conclusions

Overview

    The procedures we are adopting here are designed to enable the 
Board to provide temporary relief from serious, localized railroad 
service problems more quickly and effectively. They do not provide 
permanent remedies; to the contrary, they include specific procedures 
for terminating the relief as soon as the incumbent carrier is ready 
and able to serve the traffic again. Moreover, they are not intended to 
address demands for more competitive service. The ``competitive 
access'' regulations, at 49 CFR 1144, remain available for obtaining 
more permanent relief where the incumbent railroad has acted in a way 
``that is contrary to the competition policies of 49 U.S.C. 10101[] or 
is otherwise anticompetitive,'' 49 CFR 1144.5(a)(1)(i).

Choice of Remedies

    In the May Notice we proposed a single set of procedures under 
which parties could seek temporary alternative rail service under 
either the ``access'' provisions of sections 10705 or 11102 or the 
``emergency service'' provisions of

[[Page 71397]]

section 11123. Under section 10705(a), the Board has broad authority to 
prescribe alternative through routes when we ``consider[] it desirable 
in the public interest.'' Similarly, under section 11102, we have broad 
authority to order the use of another carrier's terminal facilities (in 
subsection (a)) or to order switching arrangements (in subsection (c)) 
when we find such arrangements ``to be practicable and in the public 
interest.'' 6 Finally, we have very broad authority under 
section 11123 to direct the handling of traffic and the use of rail 
facilities for a limited time (not more than 270 days) when there is an 
``emergency situation'' causing ``substantial adverse effects on 
shippers,'' or ``on rail service in a region'' of the country, or when 
a rail carrier ``cannot transport the traffic offered to it in a manner 
that properly serves the public.'' 7 We explained that 
providing a choice of relief would afford flexibility in addressing 
individual circumstances.8
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    \6\ We may also order switching arrangements upon a finding that 
they are ``necessary to provide competitive service.'' 49 U.S.C. 
11102(c). However, as noted above, the rules adopted here are not 
designed to address such needs. A party seeking relief based on a 
desire for more competitive service must proceed under the 
``competitive access'' rules at 49 CFR 1144.5(a). See Intramodal 
Rail Competition, 1 I.C.C. 2d 822 (1985), aff'd sub nom. Baltimore 
Gas & Elec. Co. v. United States, 817 F.2d 108 (D.C. Cir. 1987) 
(adopting the competitive access rules); Midtec Paper Corp. v. 
Chicago & N.W. Transp. Co., 3 I.C.C.2d 171 (1986), aff'd sub nom. 
Midtec Paper Corp. v. United States, 857 F.2d 1487 (D.C. Cir. 1988).
    \7\ As we explained in the May Notice, although section 11123 
typically has been used to respond to regional service emergencies, 
it is not limited to regional emergencies, but by its terms is also 
available to address more localized situations.
    \8\ We noted that the relief available under sections 10705 and 
11102 is limited in nature (for example, trackage rights can only be 
granted to terminal facilities), whereas the emergency relief 
available under section 11123 is limited in duration (restricted to 
a maximum 270-day period) but not in nature.
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    AAR argues that temporary relief for service problems may only be 
afforded under section 11123, and not under sections 10705 or 11102. 
AAR reasons that, because section 11123 addresses emergency situations 
requiring expedited action and embraces the types of service relief 
that would be available under sections 10705 or 11102, we cannot 
circumvent the limitations imposed under section 11123--the 30-day 
reappraisal requirement and the 270-day total time limit 9--
by providing the same relief under sections 10705 or 11102.
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    \9\ 49 U.S.C. 11123(c)(1).
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    We agree with AAR, but only in part. We conclude that it would not 
be appropriate to provide emergency service relief under sections 10705 
or 11102 based on an accelerated or summary process, as section 11123 
is specifically tailored for that purpose. Indeed, section 11123 
permits us to act immediately, without observing normal due process 
procedures, 49 U.S.C. 11123(b)(1), but our actions under those 
circumstances must therefore be short-term (not to exceed 270 days). 
Under the rules that we had proposed, and those that we have decided to 
adopt in Part 1146 for requests brought under section 11123, 
significant process will in fact be provided,10 but under 
very short time frames given the urgency of the situations for which 
they are designed. It is therefore appropriate that the relief granted 
be limited to a specific duration, as it will be based upon the limited 
record that can be developed under such a tight schedule.
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    \10\ The incumbent railroad will be served with a copy of the 
petition for relief and afforded an opportunity to reply. Moreover, 
while the time for filing a reply is short, the incumbent will 
receive additional actual notice, because the petitioner is required 
to discuss the service problems with the incumbent carrier prior to 
filing the petition for relief. In addition, we will issue a written 
decision addressing the record and containing our findings.
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    However, contrary to AAR's position, the statute does not preclude 
us from prescribing alternative service under sections 10705 and 11102 
to alleviate service problems on a fuller, less hastily developed 
record. Inherent in the power to provide permanent relief under those 
sections is the authority to provide the lesser included remedy of 
temporary alternative service. Accordingly, we have decided to adopt 
separate rules, in Part 1147, under which requests for temporary 
alternative service under sections 10705 and 11102 based on service 
problems will be entertained under less pressing time frames, and under 
which the authority granted will be temporary but not limited to a 
specific duration.
    Upon the adoption of these new rules, we will have three different 
sets of rules under which parties may seek alternative rail service. 
Each set of rules will serve a different purpose. The Part 1146 rules 
will apply to requests for expedited, short-term emergency relief under 
section 11123.11 The Part 1147 rules will apply to requests 
for temporary alternative service under sections 10705 or 11102, on a 
more fully developed record, to address serious (but not necessarily 
emergency) service problems. The Part 1144 rules will remain available 
for requests for more permanent alternative service under sections 
10705 or 11102 to address competitive abuses.
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    \11\ Our adoption of the Part 1146 rules for handling requests 
for localized immediate service relief is not intended to preclude 
us from handling broader, regional service emergencies, as we have 
in the past, under ad hoc, case-by-case procedures, as in Joint Pet. 
for Service Order, STB Service Order No. 1518 (Oct. 31, 1997), 
modified and extended (Dec. 4, 1997), further modified and extended 
(Feb. 17 and 25, 1998), terminated with wind-down period (July 31, 
1998) (UP/SP Service Order).
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    These various procedures are not mutually exclusive; parties may 
seek relief under more than one set of rules. For example, parties may 
need temporary access under Part 1147 to address serious ongoing 
service problems while they prepare a case for more permanent 
alternative arrangements under Part 1144 to address a more basic 
underlying competitive problem. Or, in emergency situations, parties 
may need immediate, short-term relief under Part 1146, while they 
pursue longer-term relief through the necessarily slower proceedings 
under Part 1147 and/or Part 1144. In short, to obtain both immediate 
and complete relief, multiple proceedings may be needed, requiring a 
separate record to be developed in each proceeding. This is necessary, 
however, so that the speed of the process, and extent of the showing 
required, can be appropriately tailored to the nature and extent of the 
relief sought. Moreover, we believe that the resulting selection of 
procedures--Part 1146 for expedited, short-term emergency relief; Part 
1147 for temporary, service-based access; and Part 1144 for permanent, 
competition-based access--will be both fair to the interests of the 
affected railroads and responsive to the transportation needs of the 
shippers involved.

Nature and Extent of Service Problems

    The comments reflect differing views on the nature and extent of 
service problems to be addressed by these rules. AAR, supported by UTU, 
argues for a somewhat more restrictive approach than we had envisioned, 
while various shippers advocate a broader approach than we believe is 
appropriate. We emphasize that the temporary service relief to be 
offered under these rules is meant only to address serious service 
problems and only to the extent necessary to meet a demonstrated need 
for rail service; it is to be used for restorative or alleviative 
purposes only, and not as a punitive or preventive measure.
    Thus, we reject AAR's attempt to exclude from the reach of these 
rules those service problems for which the incumbent railroad is not at 
fault.12

[[Page 71398]]

After all, the potentially ruinous impacts on affected shippers and 
connecting carriers of not having adequate rail transportation 
generally do not depend upon the root cause of the carrier's service 
problems. Moreover, because this temporary relief is not a punishment 
against the incumbent railroad--the relief is terminable as soon as 
that carrier is ready and able to provide adequate service itself--we 
need not assign fault for service problems in order to provide relief 
from them.
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    \12\ AAR seeks to carve out service reductions caused by a 
change in demand for rail service or by other shifts in market 
conditions. AAR offers the following examples of what it considers 
to be major market shifts: the Russian grain purchases of the 1970s; 
shifts in traffic due to coal type changes resulting from the Clean 
Air Act; and the primary market for Pacific Northwest lumber 
changing from Asia to the Eastern United States.
    AAR also argues that car supply issues--such as car acquisition, 
allocation, and maintenance--should not addressed in these rules, as 
they can be addressed under 49 U.S.C. 11121 (under which we may, 
after a hearing, require a railroad to furnish safe and adequate car 
service if we make certain findings). We do not believe that section 
11121 precludes us from taking other, temporary measures to enable 
traffic to move by other means while a carrier confronts its own car 
supply problems. Indeed, section 11123 expressly includes a 
``shortage of equipment'' among the urgent situations to be 
addressed under that section.
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    Similarly, these rules are designed only to address serious ongoing 
service disruptions. They are not intended to anticipate problems that 
have not yet occurred (and might not occur), as mentioned by AL&M. Nor 
are they meant for situations where service is adequate, but simply not 
up to the level that a particular shipper or connecting carrier might 
desire. In other words, while transportation needs are crucial, 
individual service desires are not necessarily the proper determinant 
of the adequacy or inadequacy of rail service, as some shippers have 
suggested.
    Many comments addressed the level of service problems that would 
warrant relief under these rules. AAR argues that relief should be 
restricted to instances of ``severe'' service deterioration 
13 occurring over a meaningful time period 14 as 
measured against an appropriate comparison period.15 Various 
other parties advocate a looser standard based upon the particular 
needs and viewpoint of the shippers involved. Still others would have 
us set out in advance more definitive service standards, presumptions 
or benchmarks that would entitle petitioners to relief.
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    \13\ AAR advocates using the adjective ``severe'' so as to limit 
relief to instances of a major service decline and to prevent the 
rules from being used as a subterfuge for universal ``open access.'' 
It further suggests that this is necessary to avoid chilling 
railroads from taking initiatives to improve service, out of fear 
that any improvement in service that cannot be sustained will serve 
as a new benchmark for a later determination that service has since 
deteriorated. We plan to administer these rules in such a manner 
that these fears should not be realized, and our application of 
these rules in individual cases is, of course, subject to judicial 
review.
    \14\ AAR argues that this time period should be 90 days, to 
distinguish a sustained decline in service quality from the ordinary 
variability of rail service. AAR concedes, however, that a shorter 
test period could be appropriate where there have been ``extreme and 
undisputed service breakdowns,'' as in bankruptcies.
    ASLRRA suggests a 30-day time period, arguing that for a small 
railroad such a period is ``extremely damaging and intolerable . . . 
[and] long enough to rule out temporary, minor or fleeting service 
problems.'' Various shippers urge even shorter time periods.
    BHP and IPC argue against a specific test period, and for 
maintaining the flexibility to address varying situations. We agree 
that it is not necessary or appropriate at this time to prescribe a 
minimum period. We note, however, that petitioners have the burden 
of demonstrating the inadequacy of the existing service, and, 
presumably, the longer problems continue, the easier it should be 
for petitioners to document those problems and to demonstrate the 
gravity of the situation.
    \15\ AAR suggests that the base period for comparison should 
consist of several equivalent time intervals over a span of prior 
years, in order to guard against a ratcheted approach where every 
temporary improvement in service that results from seasonality and 
traffic ups and downs could establish a new baseline standard. Such 
concerns, however, can and should be addressed on a case-by-case 
basis. Both petitioners and the incumbent carriers should submit any 
relevant evidence of instructive base periods in making their 
respective presentations.
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    We do not believe that it is possible or appropriate to attempt to 
delineate or define in the abstract what constitutes adequate service 
for all traffic under all circumstances at all times. Rather, we remain 
convinced that such issues are best addressed on a case-by-case basis, 
under flexible general rules, because transportation needs and service 
difficulties can vary substantially. Moreover, we believe that the 
``substantial measurable deterioration'' language we had proposed 
appropriately describes serious, objectively determinable service 
declines for which relief should be available under these rules.
    However, we are persuaded by the comments that there may be an 
equally compelling need for relief in instances where there has been no 
deterioration from prior service levels because service has been 
continuously inadequate or because there are new rail transportation 
needs (by newly located shippers or existing shippers with changed 
transportation needs) for which adequate service is not being provided. 
To address such situations, we are also providing for relief from 
``other demonstrated inadequacy in rail service provided by the 
incumbent carrier.'' 16
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    \16\ This change is consistent not only with sections 10705 and 
11102, but also section 11123(a), which refers to transportation 
``that properly serves the public,'' and with the railroads' 
overarching common carrier obligation, embodied in 49 U.S.C. 
11101(a), to provide service upon reasonable request.
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Available Traffic

    AAR argues that we lack authority to provide any relief for 
transportation that has been exempted from our regulation pursuant to 
49 U.S.C. 10502 or that is the subject of a rail transportation 
contract under 49 U.S.C. 10709.
    AAR is clearly wrong with respect to exempt traffic. We retain full 
jurisdiction to deal with exempted transportation, as we can revoke the 
exemption at any time, in whole or in part, under section 10502(d). G&T 
Terminal Packaging Co. v. Consolidated Rail Corp., 830 F.2d 1230, 1235 
(3rd Cir. 1987), cert. denied, 485 U.S. 988 (1988). We will do so to 
the extent required to provide relief shown to be justified under these 
rules.
    As for transportation that is provided under a rail transportation 
contract, AAR is correct that we cannot enforce, interpret, or disturb 
the contracts themselves, nor can we directly regulate transportation 
that is provided under such a contract. 49 U.S.C. 10709(b), (c). 
However, where no transportation is being provided, we do not believe 
that the mere existence of a contract precludes us from providing for 
temporary emergency service, upon a proper showing, so that traffic can 
move while any contract-related issues are being litigated in the 
courts. Moreover, there may be other instances where it is possible and 
appropriate to exercise our broad regulatory authority to ensure that 
traffic can move, as in the recent UP/SP Service Order. Thus, we are 
not inclined to disavow in advance any possible exercise of 
jurisdiction. Such jurisdictional issues are best left to a case-by-
case examination and, again, our assertion of jurisdiction in any 
specific case will be subject to judicial review.

Discussions With the Incumbent Carrier

    AAR supports the requirement that prospective petitioners discuss 
service problems in advance with the incumbent railroad, and that their 
petitions address the reasons why the incumbent carrier is unlikely to 
restore adequate rail service in a reasonable period of time. AAR 
suggests adding a further requirement that the petitioner act 
responsibly, cooperate reasonably with the incumbent railroad to allow 
provision of adequate service, and not be allowed to reject reasonable 
alternatives proposed by the incumbent carrier to solve the service 
problems.
    Some commentors take a different view. WCTL objects to imposing an 
additional burdens on petitioners. AL&M submits that the advance 
discussions with the incumbent should

[[Page 71399]]

be simply for the purpose of establishing facts about the service 
problem, such as its causes, magnitude, and the forecast for service 
restoration; in an expedited process, they argue, parties should not 
have to engage in deeper discussions. Shell expresses concern that 
requiring projections of when service will be restored may lead the 
incumbent railroad to project dates that it knows it cannot meet in 
order to forestall the introduction of an alternative service provider.
    We see no need to reduce, expand, or otherwise place conditions on 
the requirement that was proposed. Advance discussions between the 
parties are indispensable. They may help solve or ameliorate the 
service problems; narrow the issues in dispute; or, at a minimum, 
enable a more complete and informative record to be developed upon 
which we can assess the situation and the proposal for relief. Thus, it 
is in all parties' interests to engage in full, good faith 
discussions.17 Any allegations that either party is acting 
unreasonably or in bad faith can and will be considered on a case-by-
case basis.
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    \17\ We agree with AAR that, as part of the pre-petition 
communications, the parties should not withhold, but rather should 
make fully available to each other, any documentation of the service 
history.
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Arrangements With an Alternative Carrier

    Several commentors express concern about the requirement that a 
petition include a commitment from another carrier to provide the 
alternative service. CMA suggests that a potential alternative carrier 
may be unwilling to participate because taking on new business for a 
short period of time may be unattractive financially. Or a carrier may 
be hesitant to serve for fear of retaliation by the incumbent carrier, 
particularly if the alternative carrier is a small railroad. CMA and 
CPUC suggest that an unwilling carrier be required to explain its 
objections and, unless they are reasonable, we should order it to 
provide service. Because the cooperation of the alternative carrier is 
essential, we must reject this suggestion. As we explained in the May 
Notice, at 6, even temporary access is a serious remedy, given the 
potentially significant operational, safety, and financial implications 
for the carriers involved. Forcing a second carrier to provide service 
unwillingly could create safety concerns, impair service to its 
customers, or hurt its finances.
    BHP and IPC seek clarification that a shipper can seek alternative 
service from any entity that is ready, willing, and able to provide 
service, including third-party rail switchers or other entities that 
may not be certificated carriers.18 AAR objects, arguing 
that a carrier is not in a position to help if it does not own its own 
infrastructure. We do not foreclose the possibility that third-party 
rail switchers and others can provide genuine service relief in certain 
circumstances, and we will allow any competent carrier to serve, 
provided it can do so safely. However, inasmuch as an entity authorized 
under these provisions will be required to interface directly and fully 
with other rail carriers as common carriers by rail, the entity 
authorized to provide alternative service should be a carrier 
certificated by the Board. That is not to say, as noted, that 
noncarrier entities would be foreclosed from participation, only that 
such entities would be required to use our 7-day notice procedures (at 
49 CFR 1150.31) to obtain the requisite operating authority. In these 
circumstances, and in order to expedite the process and minimize 
burdens on temporary operators, filing fees for such authority will be 
waived.
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    \18\ BHP and IPC assert that third-party rail switchers are 
fully capable of operating on rail lines and moving cars in and out 
of a shipper's plant and, in emergencies, can safely operate over an 
incumbent railroad's track for short distances to interchange 
points.
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    AAR seeks clarification that the alternative carrier must be able 
to provide better service than the incumbent carrier is currently 
providing. We consider that to be implicit in the reason for providing 
relief under these rules, and we will deal with this matter on a case-
by-case basis. We will authorize relief where the combination of the 
alternative carrier and the incumbent carrier will provide better 
service than the incumbent carrier is providing by itself. In this 
regard, we note that providing authority to an alternative carrier does 
not supplant the service furnished by the existing carrier, but rather 
supplements it.
    AAR further suggests that these rules should apply only to 
exclusively-served petitioners, and not to those that already have 
access to an alternative carrier. We agree that as a general rule no 
relief is necessary for petitioners that can already access another 
carrier capable of handling the service needs. If neither of the 
incumbent carriers is providing adequate service, however, relief under 
these rules is not foreclosed.

Safe Implementation

    Petitions for relief under these rules must show how the 
alternative carrier would provide the service safely and without 
degrading service to its existing customers or unreasonably interfering 
with the incumbent's overall ability to provide service. Several of the 
comments specifically addressed this requirement.
    AAR voiced a concern that alternative service remedies could be 
counterproductive, because the incumbent carrier's crews would have to 
train the crews of the alternative carrier, or the incumbent carrier's 
crews might have to be diverted from other service in order to run the 
trains of the alternative carrier. UTU expressed concern that, 
particularly where the incumbent's lines are already congested, the 
inexperience of employees of the alternative carrier on the incumbent's 
trackage could lead to greater delays or accidents. UTU asks that new 
crews be given significant training whenever an alternative carrier 
enters another carrier's lines. BHP and IPC agree that having the crews 
of the incumbent carrier train the new crews or run the alternative 
carrier's trains may may be necessary for safety reasons, but they 
argue that we should not deny a request for alternative service relief 
on that basis. And of course, as NITL notes, there should be little 
effect on an incumbent carrier's operations and safety when only 
reciprocal switching or through route/joint rate remedies are sought.
    NITL argues that, to avoid delay, it should be the responsibility 
of the incumbent carrier, not the petitioner, to identify and address 
likely safety issues, as it would be more difficult for a shipper to 
anticipate and address operational issues. While the incumbent carrier 
will undoubtedly wish to address any such issues, the alternative 
carrier is expected to anticipate and address them as well. Therefore, 
we believe that it is appropriate to have the petition describe the 
alternative carrier's operational plans and discuss how the proposed 
operations can be conducted safely.19 Moreover, the carriers 
involved need to discuss with each other how they can work together to 
make the alternative service work smoothly, and any problems or 
disputes should be raised and dealt with as early in the process as 
possible.
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    \19\ The simple one-page commitment suggested by US Clay 
(consisting merely of a pledge to adequately and safely serve the 
traffic) would not be sufficient. Advance planning will be necessary 
to assure safe integration of the operations of the alternative 
carrier and the incumbent carrier. We believe it is appropriate for 
us to require the respective carriers to demonstrate that they have 
undertaken the requisite planning.
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    Given the importance of safety issues, DOT asks that a copy of 
petitions be served on the Federal Railroad

[[Page 71400]]

Administration (FRA) and that the parties be required to cooperate with 
FRA to ensure that safety is not compromised. We agree and are adding a 
requirement for service on FRA,20 and we expect parties to 
cooperate fully with FRA.
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    \20\ UTU-IL asks that petitioners also be required to serve 
their petitions on employee organizations and to include unspecified 
employee information in the petition. However, UTU-IL--a local 
legislative body located in Illinois--would not be the entity to 
receive such petitions under its proposal, and no entity that would 
has joined in the request. We are reluctant to impose unnecessary 
burdens on the filing of these petitions. Moreover, we are confident 
that safety issues can and will be addressed fully without these 
additional requirements.
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    Finally, AAR argues that we should impose the least intrusive 
remedy that will address the particular service problem 
presented.21 Cemex, on the other hand, asks that we provide 
the best, most expeditious, available relief. We believe it is best to 
maintain the flexibility to weigh issues of intrusiveness, feasibility, 
effectiveness, and speed of relief on a case-by-case basis. However, it 
is worth repeating at this juncture that the remedy provided is 
designed to most effectively address identified service problems, not 
to punish the incumbent carrier.
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    \21\ AAR notes that a new through route can be less disruptive 
or costly than other remedies, and that in most cases reciprocal 
switching is less intrusive than trackage rights.
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Compensation, Rates and Divisions

    NITL argues that the Board, rather than the carriers, should set 
the amount of compensation to be paid to the incumbent carrier for the 
use of its property. However, that would be contrary to the statute, 
which authorizes the Board to set compensation only if the parties 
cannot agree on terms. 49 U.S.C. 11102(a), (c), 11123(b)(2).
    Various parties address the need for the incumbent carrier to be 
fairly compensated if it is required to provide services and/or 
facilities to the alternative carrier. NITL et al. argue that any 
payment to the incumbent carrier should be limited to costs incurred by 
the incumbent, including a return on investment, and not include 
compensation for lost profits. They suggest that fair compensation can 
be developed from our railroad cost accounting system, known as URCS. 
We agree that the incumbent railroad is entitled to fair compensation 
for whatever services and facilities it provides, but not for lost 
profits for service it is not providing. Because the type of access to 
an incumbent carrier's facilities and the services the incumbent will 
be required to provide to an alternative carrier will vary widely, 
depending on the service inadequacy and the relief that is fashioned, 
we will not attempt to prescribe in the abstract a compensation formula 
applicable to all situations. Rather, where appropriate we will be 
guided by established precedent, taking into account the circumstances 
of the particular case.
    BHP and IPC argue that affected shippers should not have to pay 
more for receiving the alternative service than would be paid for the 
incumbent carrier's service, and NITL argues that affected shippers 
should not have to pay more than the URCS variable costs for moving 
their traffic. We do not have the authority, however, to prescribe the 
rates that a carrier will charge to a shipper unless we first find that 
the carrier has market dominance over the traffic involved and that the 
rate selected by the carrier is unlawful. 49 U.S.C. 10701(c), (d), 
10704(a)(1), 10709. Thus, the rates to be charged for the alternative 
service are a matter for discussion between the shipper and alternative 
carrier. We would note, however, that attempting to limit what the 
alternative railroad may charge to what the incumbent would have 
charged, even though the alternative carrier will incur different 
costs, could disserve the shippers' interests by discouraging carriers 
from offering to provide alternative service.
    Finally, ACE asks that we set standards for determining the 
division between the carriers of any joint rates. We have such 
standards in place, at 49 CFR 1137, and see no need to revise them at 
this time. We note, however, that those regulations are meant to serve 
as a last resort only; carriers are encouraged to negotiate divisions 
among themselves.22
---------------------------------------------------------------------------

    \22\ Official-Southwestern Divisions In the Matter of Joint 
Rates Between Official and Southwestern Territories, Docket No. 
29886 (Sub-No. 1) (ICC served Jan. 28, 1987).
---------------------------------------------------------------------------

Case Procedures

    We proposed very short time frames for the development of a record 
under Part 1146--with a reply by the incumbent railroad due in 5 
business days, and any rebuttal by the petitioner due 3 business days 
later--to enable us to provide prompt relief for service emergencies. 
As noted above, we have decided to lengthen the time periods in Part 
1147 applicable to petitions for temporary, service-based access under 
sections 10705 and 11102 of the statute--with a reply by the incumbent 
railroad due in 30 days, and any rebuttal by the petitioner due 15 days 
later.
    With respect to the abbreviated time frames proposed for Part 1146, 
some commenters seek to lengthen the schedule,23 while 
others would have us shorten it even more.24 We do not 
believe that a shorter time frame is feasible, given the nature of the 
relief sought, the need for an adequately developed record regarding 
the factual predicate for such action, and the ability of the parties 
to implement the proposed arrangement safely and without harm to either 
railroad or their other shippers. By the same token, we are not 
persuaded that a longer time frame is necessary or appropriate given 
the emergency nature of the situations for which the Part 1146 rules 
are reserved. (We remind the commenters that parties will actually have 
additional notice of the controversy, because they are required to 
discuss the service problems prior to the filing of the petition.) To 
ensure that the limited time provided can be used effectively, however, 
we adopt the NITL suggestion that service of all pleadings be by hand 
or by overnight delivery.
---------------------------------------------------------------------------

    \23\ AAR suggests that the reply be due in 14 days, and 
petitioner's rebuttal 7 days thereafter. As NITL points out, that 
would serve to triple the originally proposed time frame. North 
Dakota suggests that petitioners have 5 business days for rebuttal.
    \24\ BHP and IPC would have us require the filing and service of 
pleadings (on a designated ``service officer'' for the incumbent 
railroad) by facsimile, with a reply due within 2 calendar days. To 
further speed the process, they suggest that we appoint an ombudsman 
of the Board to receive and quickly act on such petitions, with 
appeals available to the Board.
---------------------------------------------------------------------------

    Finally, several parties ask that we set a time for Board action on 
a petition for temporary alternative service.25 Our goal is 
to issue a decision as soon as possible after the record closes, taking 
into account the degree of urgency involved in the particular request 
before us. We are not persuaded that this goal will be furthered by 
prescribing in advance an arbitrary deadline for Board action in all 
such cases.
---------------------------------------------------------------------------

    \25\ The dates suggested ranged from 5 (Shell and CPUC) to 7 
(CLC) to 15 (US Clay) days after rebuttal.
---------------------------------------------------------------------------

Duration of Relief

    The relief available under Part 1146 is, of course, subject to both 
the 30-day reappraisal requirement and the maximum 270-day time limit 
for actions taken under section 11123. Part 1146 contains a rebuttable 
presumption that an emergency for which relief is granted will extend 
beyond the initial 30-day period, unless otherwise indicated in the 
Board's initial order. AAR argues against such a presumption, on the 
ground that we cannot avoid the requirement in section 11123 for a 
reappraisal of the situation at the end of the first 30 days. Contrary 
to AAR's impression, the presumption was not intended to obviate the 
need for a

[[Page 71401]]

further Board order at the end of the 30-day period. Rather, it is 
designed to simplify and expedite the 30-day reexamination by avoiding 
a rehashing of the original inquiry into whether relief is appropriate 
and limiting the evidentiary presentations and our analysis to the 
issue of whether the emergency is over so that the relief is no longer 
needed. The presumption can be rebutted by the incumbent railroad. 
Moreover, the presumption will not apply in those cases where the Board 
in its original order finds that the emergency is unlikely to continue 
for more than 30 days.
    Of course, under both Parts 1146 and 1147, the incumbent railroad 
will be free to petition to terminate the relief as soon as the 
emergency is over, regardless of when that occurs. The statement in the 
proposed rules that would have discouraged carriers from filing a 
petition to terminate relief less than 90 days after the relief is 
granted, absent special circumstances, would not have barred earlier 
termination petitions. Rather, we intended for it to serve as an 
admonition to carriers not to file such petitions too hastily or 
prematurely. Accordingly, we have changed the language to express that 
purpose more directly and clearly.
    Some shippers seek a minimum period of relief to which the 
petitioner would be entitled.26 While we appreciate their 
concern, we do not believe that establishing a minimum time would be 
appropriate, given the nature and (non-punitive, restorative) purpose 
of actions taken under Parts 1146 or 1147.27 As discussed 
above, parties desiring alternative service that extends beyond 
correction of any serious service problems may proceed under Part 1144.
---------------------------------------------------------------------------

    \26\ NITL argues for a 90-day minimum period, arguing that any 
shorter period will be insufficient to justify the time and expense 
spent by alternative carriers in providing service. Others proposed 
minimum periods ranging from 30 days (AL&M) to 180 days (SPI) to one 
year (PP&L and AmerenUE).
    \27\ For the same reason, we do not believe it is necessary or 
appropriate to place an outside limit on the duration of relief that 
is provided under Part 1147. (Relief granted under Part 1146 is 
statutorily limited to 270 days.) Unitl the incumbent railroad is 
ready to provide adequate service on its own, the basis and need for 
frelief continue.
---------------------------------------------------------------------------

Railroad Petitioners

    We agree with AAR that the rules as originally proposed did not 
preclude railroads (of any size) from seeking relief under the rules, 
and the rules will so specify. As ASLRRA points out, there may well be 
situations where a railroad is seriously affected by the service 
disruptions of a connecting (incumbent) carrier and may need to obtain 
a connection with a second (alternative) carrier and access (by either 
the petitioning or alternative carrier) over track of the incumbent 
carrier for a reasonable distance to reach the alternative carrier. The 
primary issues 28 regarding railroad- (as opposed to 
shipper-) initiated petitions relate to mandatory interchange 
requirements and relief from ``paper barriers'' 29 or other 
contractual impediments to access. 30
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    \28\  ASLRRA's suggestion that we assess qualifying service 
disruptions based upon a preset (30-day) time period, and AAR's 
attempt to remove car supply issues from the service problems for 
which relief may be granted, are rejected for the reasons discussed 
above under ``Nature and Extent of Service Problems.''
    \29\  ``Paper barriers'' refer to contractual restrictions that 
limit the ability of some small carriers to interchange traffic with 
carriers other than their primary connecting carrier. See Review, at 
8.
    \30\  DOT and Farmrail agree that there may be other contractual 
impediments that limit the service that a small railroad can 
provide, such as car supply requirements and exclusive rate making 
authority by the larger, connecting carrier.
---------------------------------------------------------------------------

    ASLRRA asserts that a railroad-petitioner should not need an 
advance commitment from an alternative carrier, in view of the 
mandatory interchange requirements applicable to all railroads in 49 
U.S.C. 10742. AAR argues against compelling an unwilling second 
railroad to participate in an emergency service arrangement. AAR 
asserts that the principal, if not only, reason that a second railroad 
would decline to handle additional traffic via a new connection would 
be operating considerations, which are a significant factor in 
determining whether to grant relief. AAR argues that requiring the 
willingness of the second carrier will filter out those situations 
where there are operational problems. DOT suggests an intermediate 
position short of requiring a binding commitment from a prospective 
connecting railroad--that the prospective railroad be consulted to 
ensure that any relief granted would not unduly affect its operations. 
31 ASLRRA concedes that as a practical matter the 
petitioning railroad will need to work closely with the alternative 
carrier to work out the details of how traffic would be handled 
efficiently and safely in a manner acceptable to each. We agree and 
thus we would expect the carriers normally to have worked out an 
agreement. If for some reason they have not been able to reach 
agreement, we will take that into consideration, on a case-by-case 
basis, in determining whether the relief sought is operationally 
feasible and safe and will not harm service to existing customers.
---------------------------------------------------------------------------

    \31\  WCTL agrees that the petitioning railroad should be 
required to show, as any petitioner would, that the requested relief 
is operationally feasible, but should not be required to ``pre-clear 
its petition with the second carrier's marketing department.'' WCTL 
Supplemental Comments at 6.
---------------------------------------------------------------------------

    AAR agrees that contract terms that would directly prevent the 
exercise of the remedy granted by the Board should be superseded, but 
argues that broader relief is inappropriate. Such issues are likely to 
be fact-dependent, and are thus best left to consideration on any 
individual case basis.
    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources. Moreover, we 
certify that this action will not have a substantial impact upon a 
significant number of small entities.

List of Subjects in 49 CFR Parts 1146 and 1147

    Railroads, Service.

    Decided: December 18, 1998.
    By the Board, Chairman Morgan and Vice Chairman Owen.
Vernon A. Williams,
Secretary.

    For the reasons set forth in the preamble, the Board adds new parts 
1146 and 1147 to title 49, chapter X, of the Code of Federal 
Regulations, to read as follows:

PART 1146--EXPEDITED RELIEF FOR SERVICE EMERGENCIES

    Authority: 49 U.S.C. 721, 11101, and 11123.


Sec. 1146.1.  Prescription of alternative rail service.

    (a) General. Alternative rail service will be prescribed under 49 
U.S.C. 11123(a) if the Board determines that, over an identified period 
of time, there has been a substantial, measurable deterioration or 
other demonstrated inadequacy in rail service provided by the incumbent 
carrier.
    (b)(1) Petition for Relief. Affected shippers or railroads may seek 
the relief described in paragraph (a) of this section by filing an 
appropriate petition containing:
    (i) A full explanation, together with all supporting evidence, to 
demonstrate that the standard for relief contained in paragraph (a) of 
this section is met;
    (ii) A summary of the petitioner's discussions with the incumbent 
carrier of the service problems and the reasons why the incumbent 
carrier is unlikely to restore adequate rail service consistent with 
current transportation needs within a reasonable period of time;
    (iii) A commitment from another available railroad to provide 
alternative service that would meet current transportation needs (or, 
if the

[[Page 71402]]

petitioner is a railroad and does not have an agreement from the 
alternative carrier, an explanation as to why it does not), and an 
explanation of how the alternative service would be provided safely 
without degrading service to the existing customers of the alternative 
carrier and without unreasonably interfering with the incumbent's 
overall ability to provide service; and
    (iv) A certification of service of the petition, by hand or by 
overnight delivery, on the incumbent carrier, the proposed alternative 
carrier, and the Federal Railroad Administration.
    (2) Reply. The incumbent carrier must file a reply to a petition 
under this paragraph within five (5) business days.
    (3) Rebuttal. The party requesting relief may file rebuttal no more 
than three (3) business days later.
    (c) Presumption of continuing need. Unless otherwise indicated in 
the Board's order, a Board order issued under paragraph (a) of this 
section shall establish a rebuttable presumption that the 
transportation emergency will continue for more than 30 days from the 
date of that order.
    (d)(1) Petition to terminate relief. Should the Board prescribe 
alternative rail service under paragraph (a), of this section the 
incumbent carrier may subsequently file a petition to terminate that 
relief. Such a petition shall contain a full explanation, together with 
all supporting evidence, to demonstrate that the carrier is providing, 
or is prepared to provide, adequate service. Carrier are admonished not 
to file such a petition prematurely.
    (2) Reply. Parties must file replies to petitions to terminate 
filed under this subsection within five (5) business days.
    (3) Rebuttal. The incumbent carrier may file any rebuttal no more 
than three (3) business days later.
    (e) Service. All pleadings under this part shall be served by hand 
or overnight delivery on the Board, the other parties, and the Federal 
Railroad Administration.

PART 1147--TEMPORARY RELIEF UNDER 49 U.S.C. 10705 AND 11102 FOR 
SERVICE INADEQUACIES

    Authority: 49 U.S.C. 721, 10705, 11101, and 11102.


Sec. 1147.1.  Prescription of alternative rail service.

    (a) General. Alternative rail service will be prescribed under 49 
U.S.C. 11102(a), 11102(c) or 10705(a) if the Board determines that, 
over an identified period of time, there has been a substantial, 
measurable deterioration or other demonstrated inadequacy in rail 
service provided by the incumbent carrier.
    (b)(1) Petition for Relief. Affected shippers or railroads may seek 
relief described in paragraph (a) of this section by filing an 
appropriate petition containing:
    (i) A full explanation, together with all supporting evidence, to 
demonstrate that the standard for relief contained in paragraph (a) of 
this section is met;
    (ii) A summary of the petitioner's discussions with the incumbent 
carrier of the service problems and the reasons why the incumbent 
carrier is unlikely to restore adequate rail service consistent with 
current transportation needs within a reasonable period of time;
    (iii) A commitment from another available railroad to provide 
alternative service that would meet current transportation needs (or, 
if the petitioner is a railroad and does not have an agreement from the 
alternative carrier, an explanation as to why it does not), and an 
explanation of how the alternative service would be provided safely 
without degrading service to the existing customers of the alternative 
carrier and without unreasonably interfering with the incumbent's 
overall ability to provide service; and
    (iv) A certification of service of the petition, by hand or by 
overnight delivery, on the incumbent carrier, the proposed alternative 
carrier, and the Federal Railroad Administration.
    (2) Reply. The incumbent carrier must file a reply to a petition 
under this paragraph within thirty (30) days.
    (3) Rebuttal. The party requesting relief may file rebuttal no more 
than fifteen (15) days later.
    (c)(1) Petition to terminate relief. Should the Board prescribe 
alternative rail service under paragraph (a) of this section, the 
incumbent carrier may subsequently file a petition to terminate that 
relief. Such a petition shall contain a full explanation, together with 
all supporting evidence, to demonstrate that the carrier is providing, 
or is prepared to provide, adequate service to affected shippers. 
Carriers are admonished not to file such a petition prematurely.
    (2) Reply. Parties must file replies to petitions to terminate 
filed under this subsection within five (5) business days.
    (3) Rebuttal. The incumbent carrier may file any rebuttal no more 
than three (3) business days later.
    (d) Service. All pleadings under this part shall be served by hand 
or by overnight delivery on the Board, other parties, and the Federal 
Railroad Administration.

[FR Doc. 98-34187 Filed 12-24-98; 8:45 am]
BILLING CODE 4915-00-P