[Federal Register Volume 67, Number 217 (Friday, November 8, 2002)]
[Rules and Regulations]
[Pages 68041-68045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28096]


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DEPARTMENT OF TRANSPORTATION

Federal Railroad Administration

49 CFR Part 244

[FRA Docket No. 1999-4985, Notice No. 5]
RIN 2130-AB24


Regulations on Safety Integration Plans Governing Railroad 
Consolidations, Mergers, and Acquisitions of Control

AGENCY: Federal Railroad Administration (FRA), DOT.

ACTION: Final rule; response to petitions for reconsideration.

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SUMMARY: On March 15, 2002, the Federal Railroad Administration 
(``FRA'') and the Surface Transportation Board (``STB'' or ``Board'') 
published joint final rules on regulations on safety integration plans 
(``SIPs'' or ``plans'') governing railroad mergers, consolidations, and 
acquisitions of control, and procedures governing the STB's 
consideration of SIPs in cases involving these type of transactions. 
Two interested parties filed petitions for reconsideration of FRA's 
final rule, addressing certain issues and concerns relating to the 
agency's rule text or regulatory impact statement. (The Board received 
no petitions for reconsideration of its final rule.) In this document, 
FRA responds to the petitions and clarifies and amends discrete 
provisions of the final rule, where appropriate.

DATES: Effective Date: The amendments to the final rule are effective 
November 8, 2002.

FOR FURTHER INFORMATION CONTACT: Jon Kaplan, Trial Attorney, Office of 
Chief Counsel, FRA, 1120 Vermont Avenue, NW, Mail Stop 10, Washington, 
DC 20590 (telephone: (202) 493-6053 and E-mail: 
[email protected]).

SUPPLEMENTARY INFORMATION:

Background

    On March 15, 2002, FRA and the STB published joint final rules in 
the

[[Page 68042]]

Federal Register establishing procedures for developing and 
implementing SIPs by a Class I railroad proposing to engage in certain 
specified merger, consolidation, or acquisition of control transactions 
with another Class I railroad, or a Class II railroad with which it 
proposes to amalgamate operations. 67 FR 11582, 11604, and 11607, March 
15, 2002. The effective date of the final rules was April 15, 2002. Id. 
at 11583. FRA and the STB invited interested persons to file petitions 
for reconsideration of the final rules, id., with FRA requiring that a 
petition summarize the complaint and explain ``why compliance with the 
rule is not possible, is not practicable, is unreasonable, or is not in 
the pubic interest.'' 49 CFR 211.29(a).
    Two parties--the Association of American Railroads (``AAR'') and 
the Canadian National Railway Company (``CN'') filed petitions with 
FRA, seeking amendments to FRA's final rule governing SIPs. (The STB 
received no petitions and accordingly, its final rule remains 
unchanged.) The parties request that FRA revise its regulations 
concerning the approval of SIPs and SIP amendments and personnel 
staffing information required in a SIP. (Collaterally, CN raises 
questions about the agency's Regulatory Impact Analysis (``RIA'') and 
information collection requirements (``ICRs'') under the Paperwork 
Reduction Act of 1995 (``PRA''), 44 U.S.C. 3501 et seq.)
    In response to the petitions, FRA agrees that certain amendments to 
its final rule are warranted. The changes, which are fully discussed in 
the ``Section-by-Section Analysis'' portion of the preamble, are 
practicable and consistent with the public interest. The agency, 
however, denies other aspects of the petitions for the reasons provided 
below.

Discussion of Petitions for Reconsideration

A. Disposition of Proposed SIPs and Amendments Thereto

1. Petitions for Reconsideration
    As summarized earlier, the AAR and CN request that FRA reconsider 
the regulation governing the approval of SIPs and SIP amendments. Under 
Sec.  244.19, FRA reviews and approves a railroad's SIP based on the 
plan's ``reasonable assurance of safety at every step of a 
transaction,'' and the company's execution of the elements in the plan, 
including any amendments thereto. See 49 CFR 244.19(a), (b) at 67 FR 
11607. Both the AAR and CN take issue with the agency's formal review 
process codified in the rule text. They assert that FRA's authority to 
approve a SIP, and amendments to it, seems to duplicate the STB's 
approval of the transaction as a whole. The petitioners also claim that 
the paradigm invites confusion and uncertainty in the application 
process vis-a-vis FRA's and the STB's respective roles.
    Concurrently, the AAR and CN maintain that the process does not 
promote flexibility in responding to new information and experience 
that an informal iteration process facilitates. During an application 
process, the parties assert that integration plans, targets, and 
programs are fluid based on new information received, experience of the 
parties that are participants in the transactions, and unforeseen 
circumstances. CN, for example, cites its mergers with the Illinois 
Central Railroad Company \1\ and the Wisconsin Central Transportation 
Corporation \2\ in support of establishing an informal ``collaborative 
relationship'' with FRA in developing and implementing SIPs rather than 
the formal approval process currently provided in FRA's SIP rules. 
Petition of Canadian National Railway Company for Reconsideration of 
Federal Railroad Administration Rules (``CN Petition'') 5 (filed April 
5, 2002). Informal consultations, the petitioners reiterate, promote 
expeditious changes to a plan or its implementation, whereas the 
approval process invites delay in reviewing a SIP and correspondingly, 
imposes added costs on the applicant. At bottom, the AAR and CN suggest 
that FRA amend its rule to reflect the agency's consultative role on 
SIPs in past mergers.
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    \1\ Canadian National Railway Company, Grand Trunk Corporation, 
and Grand Trunk Western Railroad Incorporated--Control--Illinois 
Central Corporation, Illinois Central Railroad Company, Chicago, 
Central and Pacific Railroad Company, and Cedar River Railroad 
Company, STB Finance Docket No. 33556 (STB Decision Nos. 5 and 6, 
served June 23, 1998, and Aug. 14, 1998) (hereinafter ``CN/IC'').
    \2\ Canadian National Railway Company, et al.--Control--
Wisconsin Central Transportation Corporation. et al., STB Finance 
Docket No. 34000, 66 FR 23757 (May 9, 2001) (hereinafter ``CN/
WCTC'').
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    In the event that FRA maintains the SIP approval requirement, the 
petitioners ask the agency to modify the procedures for handling SIP 
amendments. The parties submit that the current amendment process, 
which requires the agency to approve all amendments to a plan that are 
requested by an applicant before they take effect, should be changed to 
authorize approval of any amendment filed with FRA absent any 
objections by the agency. The AAR and CN propose that the amendment 
would promote flexibility in addressing a change in circumstances, 
reduce regulatory delay in the application process, conserve regulatory 
resources, and facilitate implementation of time-sensitive changes to a 
SIP while enabling the agency to reject an amendment within its 
discretion. This change, the parties contend, would prove beneficial to 
both the regulated community and FRA without any compromise to railroad 
safety.
2. FRA's Response to Request That FRA Adopt a Consultative Role Rather 
Than an Approval Role on SIPs
    The basic arguments advanced by the petitions in support of their 
position that FRA should adopt the informal SIP consultative process 
used in the past were fully considered and rejected by the agency when 
it issued the final rule. The agency's reasoning was discussed in 
detail in the preamble to the final rule and is reaffirmed by this 
response to the petitions for reconsideration. Rather than fully 
restating this discussion, FRA will only lightly touch upon some of the 
points made in the preamble.
    First, the agency restates that a SIP and its implementation 
present critical safety issues during the merger, consolidation, or 
acquisition of a Class I or Class II railroad. FRA's approval process 
provides a mechanism to oversee railroad operations subject to a 
transaction and enables the agency to exercise its expertise in the 
railroad disciplines--operating practices, motive power and equipment, 
signal and train control, track safety, and hazardous materials--that 
are the subject of those operations. See 67 FR 11585. FRA believes that 
its approval process will provide a forum for the agency to coordinate 
informally with an applicant in approving a SIP and monitoring its 
implementation, thereby meeting the flexibility needs of an applicant. 
See id. at 11586, 11599. FRA thus concludes that an approval process 
regulates the safety aspects of a SIP in a coordinated, consistent, and 
efficient manner.
    Second, FRA disagrees with the petitioner's assertion that its 
approval process overlaps with the STB's approval process. As the 
agency explained in its final rule:

    FRA believes that it and the STB have so interpreted their 
respective statutes and jurisdiction as to reconcile them 
seamlessly, thereby serving the public interest by assuring that all 
parts of the affected statutes are given effect and the purposes of 
Congress are fully carried out.

Id. at 11585. FRA recognizes that it has ``primary jurisdiction, 
expertise, and oversight responsibility in rail safety

[[Page 68043]]

matters,'' id. at 11586, whereas the STB ``has sole authority to 
regulate * * * economic transactions.'' Id. at 11585. Within this 
rubric, the agencies have framed their respective roles in the SIP 
process, with FRA reviewing and approving or disapproving plans and the 
implementation thereof, and the STB approving or vetoing a proposed 
transaction. See id. at 11587. FRA's role is to ``provide expert advice 
to the STB on safety issues presented by a proposed transaction,'' id., 
by filing its findings and conclusions on a SIP to the STB, which then 
independently reviews the transaction and plan. See 49 CFR 1106.4(b). 
Therefore, FRA's and the STB's final rules clearly define the roles and 
responsibilities of the respective agencies, obviating any confusion or 
duplication during the application process.
    More important, FRA posits that the approval process is necessary 
to provide a baseline for enforcement. Contrary to the consultative 
process proposed, an approval process enables the agency to take 
enforcement action if a railroad fails either to obtain an approved SIP 
or implement the approved plan. See 67 FR 11586, 11599. Such remedies 
include assessing civil penalties, issuing compliance, 
disqualification, or emergency orders, seeking the issuance of an 
injunction, or referring certain matters to the Department of Justice 
for criminal investigation and prosecution. See id. at 11591-92; 63 FR 
72225, 72229, Dec. 31, 1998. Put another way, the approval process 
ensures that an applicant ``obtain[s] agency approval of a proposed SIP 
before implementing a regulated transaction.'' 67 FR 11592. SIP 
compliance and railroad safety thus mandate that FRA retain the 
approval process. Accordingly, FRA reaffirms its approval process and 
denies the petitioners' request to eliminate the formal SIP approval 
provision from its regulations at Sec.  244.19(b).
3. FRA's Response to Request That FRA Modify Its Procedures for 
Handling SIP Amendments
    FRA agrees with the petitioners that amendments to a SIP should be 
presumed approved unless it rejects the changes because the 
modifications do not, e.g., provide a logical and workable transition 
or are insufficiently detailed to provide ``a reasonable assurance of 
safety.'' See id. at 11586; 49 CFR 244.19(a). The AAR proposed that the 
amendments become effective 20 days after their submission to FRA 
unless rejected by the agency. This is too short of a time period for 
adequate agency review of amendments that may have serious safety 
consequences. Instead, FRA will amend Sec.  244.19(c)(1) to provide for 
a 30-day review period before proposed amendments can become effective 
absent earlier FRA approval or disapproval.

B. Personnel Staffing

1. Petition for Reconsideration
    The AAR requests that FRA modify the personnel staffing rule (49 
CFR 244.13(j)). As currently worded, Sec.  244.13(j) requires an 
applicant to identify in its SIP the number of current and proposed 
employees in each of eight job classification categories when there is 
a projected change of operations that will impact workforce duties or 
responsibilities. The AAR requests that Sec.  244.13(j) be changed to 
require the applicant to provide information on personnel staffing with 
respect to only those job categories that are impacted by a 
transaction. The organization believes that this modification would 
narrow the safety issues of job categories that an applicant would be 
required to address, obviating the need to file extraneous or 
irrelevant personnel staffing information in a plan.
2. FRA's Response
    FRA agrees with the AAR's suggestion that Sec.  244.13(j) should be 
clarified, and has adopted the language proposed by the organization. 
The agency intended to require a railroad to ``only address the 
personnel staffing element when it project[ed] a change of operations 
that [would] impact workforce duties or responsibilities.'' 67 FR 
11597. An applicant ``may omit this section if it expects operations 
will remain constant after the transaction is consummated.'' Id.

C. Regulatory Evaluation Concerns

1. Petition for Reconsideration
    In its petition, CN questions FRA's RIA based on its experience in 
the CN/IC and CN/WCTC mergers. Specifically, CN argues that the agency 
erred in its cost/benefits analysis because the costs identified are 
based on transactions that were consummated before the final rule was 
effective, and the benefits identified do not show any material gain in 
adopting a formal rather than an informal review process. Consequently, 
CN contends that the agency's regulatory impact statement is arbitrary 
and capricious, in violation of the Administrative Procedure Act, 5 
U.S.C. 706(2)(A).\3\
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    \3\ CN also alleges in a footnote that FRA's costs associated 
with the ICRs in its final rule appear to be ``unrealistically 
low.'' See CN Petition at 9 n. 6. The railroad cites no authority 
and provides no basis for the allegation. Absent evidence to the 
contrary, FRA maintains that the ICRs, which the Office of 
Management and Budget reviewed and approved, are accurate and 
satisfy the requirements under the PRA.
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2. FRA's Response
    FRA believes that CN's analysis is misplaced. Consistent with 
Executive Order 12866, the agency issued its RIA that evaluated the 
potential costs and benefits of its final rule, and addressed the 
assumptions, inferences, and conclusions employed in its assessment. 
See 67 FR 11600-01. The cost estimates are premised on the transactions 
cited in the final rules, namely, the Conrail Acquisition,\4\ which was 
the first transaction in which the parties--Norfolk Southern Railway 
Company and CSX Transportation, Incorporated--prepared SIPs. The agency 
analyzed the railroads' individual and collective expenses in 
establishing the cost figures identified in its final rule. Evidence in 
the administrative record supports the cost estimates, which FRA 
incorporated in the preamble to its final rule. See id. at 11600.
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    \4\ CSX Corporation and CSXT Transportation, Inc., Norfolk 
Southern Corporation and Norfolk Southern Railway Company--Control 
and Operating Leases/Agreements--Conrail Inc. and Consolidated Rail 
Corporation, STB Finance Docket No. 33388 (hereinafter ``Conrail 
Acquisition'').
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    Likewise, the benefits measured are founded on, for example, the 
merger of the Union Pacific Railroad Company and the Southern Pacific 
Transportation Company and societal losses associated with the service 
difficulties caused by the disruption of safety and operating practices 
during the merger. See id. The RIA also considered alternatives to the 
rulemaking action, but concluded that the SIP process ensured that 
safety programs were continued and closely monitored. See id. 
Accordingly, FRA's assessment satisfies the regulatory analysis 
requirements under the Executive Order.
    Finally, FRA notes that CN's efforts to draw a distinction between 
voluntary and required information filed in a SIP is irrelevant. The 
model used in the RIA is predicated on a SIP/no SIP analysis because 
SIPs were not prepared as a matter of normal business practice before 
the Conrail Acquisition proceeding. See 63 FR 72228; Conrail 
Acquisition, STB Decision No. 52, served Nov. 3, 1997. This model 
provides the necessary analytical tools in determining the costs and 
benefits associated with the rule given the lack of any such planning 
before the Conrail Acquisition. See Administrative Conference of the 
United States Recommendation 85-02, Agency Procedures for Performing 
Regulatory Analysis of Rules, 50 FR 28364, July 12,

[[Page 68044]]

1985 (agency should discuss selected set of models employed in 
regulatory analysis). FRA submits that this model comports with the 
Executive Order and thus withstands judicial review. See Center for 
Auto Safety v. Peck, 751 F.2d 1336, 1342 (D.C. Cir. 1985) (court will 
not substitute its judgment for that of an agency ``when the agency is 
called upon to weigh the costs and benefits of alternative policies, 
since such cost-benefit analyses epitomize the types of decisions that 
are most appropriately entrusted to the expertise of an agency'') 
(internal quotations and citation omitted); Motor Vehicle Mfrs. Ass'n 
v. State Farm Mut. Ins. Co., 463 U.S. 29, 43 (1983) (``arbitrary and 
capricious'' standard of review requires an agency to ``examine the 
relevant data and articulate a satisfactory explanation for its action, 
[including] a rational connection between the facts found and the 
choice made''); Western Coal Traffic League v. Surface Transportation 
Board, 216 F.3d 1168, 1177 (D.C. Cir. 2000) (agency action is not 
arbitrary and capricious when it provides ``ample opportunity for 
public comment in its proceeding [and] ample justification for its 
decision''); State of Louisiana v. Verity, 853 F.2d 322, 327 (5th Cir. 
1988) (``agency's decision need not be ideal * * * so long as [it] gave 
at least minimal consideration to relevant facts contained in the 
record'').

Section-by-Section Analysis

    FRA is making minor modifications to certain provisions of 49 CFR 
part 244 in response to the petitions for reconsideration. This section 
of the preamble explains the changes made to the final rule in response 
to the petitions. FRA respectfully refers interested parties to the 
agency's Section-by-Section Analysis of the final rule and the Notice 
of Proposed Rulemaking for a full discussion of those aspects of the 
rulemaking action that remain unchanged. See 67 FR 11590-600; 63 FR 
72228-35.

Subpart B--Safety Integration Plans

Section 244.13(j)--Personnel Staffing
    Paragraph (j) of this section is modified in response to the AAR's 
suggestion that the regulatory text be clarified to reflect that an 
applicant need only provide information on personnel staffing with 
respect to those job categories that are impacted by a transaction. The 
amendment requires an applicant to identify the number of employees by 
job category, currently and proposed, to perform the types of functions 
enumerated at Sec.  244.13(j)(1)-(8) when there is a projected change 
of operations that will impact workforce duties or responsibilities for 
employees of that job category.
Section 244.19--Disposition
    FRA is revising paragraph (c)(1) of this section in response to the 
AAR's and CN's petitions for reconsideration. As amended, the 
regulation authorizes an applicant to amend its SIP, provided it 
explain the need for the amendment and inform FRA about the change. An 
amendment to a plan is presumed approved and takes effect no sooner 
than 30 days after it is filed with FRA, unless the agency either 
approves or disapproves the change within that period. Consistent with 
FRA's approval of a plan, the agency must determine that the amendment 
does not provide ``a reasonable assurance of safety'' should it reject 
the modification. See 49 CFR 244.19(a), (b).
    FRA agrees with the petitioners that this revision promotes 
flexibility in enabling a railroad to address a change in circumstances 
should it decide to amend its SIP. This change, which is consistent 
with the agency's Railroad Workplace Safety and Qualification and 
Certification of Locomotive Engineers rules at 49 CFR 214.307(c) and 
240.103(c), respectively, facilitates a railroad's ability to implement 
time-sensitive changes to a plan yet retains agency discretion to 
intervene should circumstances warrant.

Regulatory Impact of FRA's Final Rule

Executive Order 12866 and DOT Regulatory Policies and Procedures

    The response to petitions for reconsideration of the final rule has 
been evaluated in accordance with Executive Order 12866 and DOT 
policies and procedures. Although the final rule met the criteria for 
being considered a significant rule under those policies and 
procedures, the amendments contained in the response to the petitions 
are not considered significant because they either clarify requirements 
currently contained in the final rule or allow for greater flexibility 
in complying with the rule. The economic impact of the amendments and 
clarifications contained in this response will generally reduce the 
cost of compliance with the rule.
    The cost reduction, however, is not easily quantified and does not 
significantly alter FRA's original analysis of the costs and benefits 
associated with the original final rule. Additionally, the agency 
believes that the modifications and clarifications increase the 
benefits associated with the final rule by facilitating amendments to a 
SIP and conserving agency resources in reviewing and approving a plan. 
Accordingly, FRA reaffirms the economic arguments and estimates 
advanced in its RIA for the final rule.

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (``RFA''), 5 U.S.C. 601 et 
seq., requires an assessment of the impact of rules on ``small 
entities.'' FRA certifies that the response to petitions for 
reconsideration does not have a significant impact on a substantial 
number of small entities. Because the amendments contained in this 
document either clarify requirements currently contained in the final 
rule or allow for greater flexibility in complying with the rule, FRA 
has concluded that there is no substantial economic impact on small 
units of government, businesses, or other organizations.

Proper Consideration of Small Entities in Agency Rulemaking

    The response to petitions for reconsideration of the final rule has 
been reviewed in accordance with Executive Order 13272 (67 FR 53461, 
August 16, 2002), which requires agencies to assess and take 
appropriate account of the potential impact on small businesses, small 
governmental jurisdictions, and small organizations, as provided by 
RFA. FRA certifies that this rulemaking action does not have a 
significant economic impact on these entities under the RFA.

Paperwork Reduction Act

    The response to petitions for reconsideration of the final rule 
does not significantly change any of the ICRs contained in the original 
final rule.

Environmental Impact

    FRA has evaluated the response to petitions for reconsideration of 
the final rule in accordance with its ``Procedures for Considering 
Environmental Impacts'' (64 FR 28545, May 26, 1999) as required by the 
National Environmental Policy Act, 42 U.S.C. 4321 et seq., other 
environmental statutes, Executive Orders, and related regulatory 
requirements. FRA has determined that this document is not a major FRA 
action for environmental purposes.

Federalism Implications

    The response to petitions for reconsideration of the final rule has 
been analyzed in accordance with the principles and criteria contained 
in Executive Order 13132, and it has been determined that this action 
does not have sufficient federalism implications

[[Page 68045]]

to warrant the preparation of a Federalism Assessment.

Statement of Energy Effects

    The response to petitions for reconsideration of the final rule has 
been reviewed in accordance with Executive Order 13211 (66 FR 28355, 
May 22, 2001), which requires agencies to prepare a Statement of Energy 
Effects describing the effects of certain regulatory actions on energy 
supply, distribution, or use when such measures are identified as 
``significant energy actions.'' FRA certifies that this rulemaking 
action is not a significant energy action to warrant the preparation of 
such a statement.

List of Subjects in 49 CFR Part 244

    Administrative penalties, practice and procedure, Railroad safety, 
Railroads, Safety Integration Plans.


    In consideration of the foregoing, FRA amends part 244 of chapter 
II of title 49, Code of Federal Regulations, to read as follows:

PART 244--[AMENDED]

    1. The authority citation for Part 244 continues to read as 
follows:

    Authority: 49 U.S.C. 20103, 20107, 21301; 5 U.S.C. 553 and 559; 
Sec. 31001(s)(1), Pub. L. No. 104-134, 110 Stat. 1321-373 (28 U.S.C. 
2461 note); and 49 CFR 1.49.


    2. Section 244.13 is amended by revising paragraph (j) introductory 
text to read as follows:


Sec.  244.13  Subjects to be addressed in a Safety Integration Plan 
involving an amalgamation of operations.

* * * * *
    (j) Personnel staffing. Each applicant shall identify the number of 
employees by job category, currently and proposed, to perform the 
following types of functions when there is a projected change of 
operations that will impact workforce duties or responsibilities for 
employees of that job category:
* * * * *
    3. Section 244.19 is amended by revising paragraph (c)(1) to read 
as follows:


Sec.  244.19  Disposition.

* * * * *
    (c) * * *
    (1) By the applicant. The applicant may amend its Safety 
Integration Plan, from time to time, provided it explains the need for 
the proposed amendment in writing to FRA. Any amendment shall take 
effect no earlier than 30 days after its submission to FRA, unless it 
is either approved or disapproved by FRA within that period. Any 
disapproval of an amendment shall be in accordance with the 
requirements prescribed in paragraph (b) of this section.
* * * * *

    Issued in Washington, DC on October 30, 2002.
Allan Rutter,
Federal Railroad Administrator.
[FR Doc. 02-28096 Filed 11-7-02; 8:45 am]
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