[Federal Register Volume 84, Number 180 (Tuesday, September 17, 2019)]
[Proposed Rules]
[Pages 48872-48882]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20093]


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SURFACE TRANSPORTATION BOARD

49 CFR Parts 1002, 1111, 1114, and 1115

[Docket Nos. EP 755; EP 665 (Sub-No. 2)]


Final Offer Rate Review; Expanding Access to Rate Relief

AGENCY: Surface Transportation Board.

ACTION: Notice of proposed rulemaking; request for comments.

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SUMMARY: The Surface Transportation Board (STB or Board) proposes a new 
procedure for challenging the reasonableness of railroad rates in 
smaller cases. In this procedure, the Board would decide a case by 
selecting either the complainant's or the defendant's final offer, 
subject to an expedited procedural schedule that adheres to firm 
deadlines.

DATES: Comments on the proposed rule are due by November 12, 2019. 
Reply comments are due by January 10, 2020.

ADDRESSES: Comments and replies in either or both dockets may be filed 
with the Board either via e-filing or in writing addressed to: Surface 
Transportation Board, Attn: Docket No. EP 755 and/or Docket No. EP 665 
(Sub-No. 2), 395 E Street SW, Washington, DC 20423-0001. Comments and 
replies will be posted to the Board's website at www.stb.gov.

FOR FURTHER INFORMATION CONTACT: Amy Ziehm at (202) 245-0391. 
Assistance for the hearing impaired is available through the Federal 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: In January 2018,\1\ the Board established 
its Rate Reform Task Force (RRTF), with the objectives of developing 
recommendations to reform and streamline the Board's rate review 
processes for large cases, and determining how to best provide a rate 
review process for smaller cases. After holding informal meetings 
throughout 2018, the RRTF issued a report on April 25, 2019 (RRTF 
Report).\2\ Among other recommendations, the RRTF included a proposal 
for a final offer procedure, which it described as ``an administrative 
approach that would take advantage of procedural limitations, rather 
than substantive limitations, to constrain the cost and complexity of a 
rate reasonableness case.'' RRTF Report 12. Versions of a final offer 
process for rate review have also been recommended by the U.S. 
Department of Agriculture (USDA) and a committee of the Transportation 
Research Board (TRB). The Board now proposes to build on the RRTF 
recommendation and establish a new rate case procedure for smaller 
cases, the Final Offer Rate Review (FORR) procedure.
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    \1\ These proceedings are not consolidated. A single decision is 
being issued for administrative convenience.
    \2\ The RRTF Report was posted on the Board's website on April 
29, 2019, and can be accessed at https://www.stb.gov/stb/rail/Rate_Reform_Task_Force_Report.pdf.
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Background

    In the ICC Termination Act of 1995 (ICCTA), Congress directed the 
Board to ``establish a simplified and expedited method for determining 
the reasonableness of challenged rail rates in those cases in which a 
full stand-alone cost [(SAC)] presentation is too costly, given the 
value of the case.'' Public Law 104-88, 109 Stat. 803, 810. In the 
Surface Transportation Board Reauthorization Act of 2015 (STB 
Reauthorization Act), Public Law 114-110, 129 Stat. 2228, Congress 
revised the text of this requirement so that it currently reads: 
``[t]he Board shall maintain 1 or more simplified and expedited methods 
for determining the reasonableness of challenged rates in those cases 
in which a full [SAC] presentation is too costly, given the value of 
the case.'' 49 U.S.C. 10701(d)(3) (emphasis added). In addition, 
section 11 of the STB Reauthorization Act modified 49 U.S.C. 10704(d) 
to require that the Board ``maintain procedures to ensure the 
expeditious handling of challenges to the reasonableness of railroad 
rates.'' \3\ More generally, the rail transportation policy states 
that, in regulating the railroad industry, it is the policy of the 
United States Government ``to provide for the expeditious handling and 
resolution of all proceedings required or permitted to be brought under 
this part.'' 49 U.S.C. 10101(15).
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    \3\ Prior to the enactment of the STB Reauthorization Act, 
section 10704(d) began with a sentence stating that, ``[w]ithin 9 
months after January 1, 1996, the Board shall establish procedures 
to ensure expeditious handling of challenges to the reasonableness 
of railroad rates.'' See, e.g., 49 U.S.C. 10704(d) (2014).
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    In 1996, the Board adopted a simplified methodology, known as 
Three-Benchmark, which determines the reasonableness of a challenged 
rate using three benchmark figures. Rate Guidelines--Non-Coal 
Proceedings, 1 S.T.B. 1004 (1996), pet. to reopen denied, 2 S.T.B. 619 
(1997), appeal dismissed sub nom. Ass'n of Am. R.Rs. v. STB, 146 F.3d 
942 (D.C. Cir. 1998). A decade passed without any complainant bringing 
a case under that methodology. In 2007, the Board modified the Three-
Benchmark methodology and also created another simplified methodology, 
known as Simplified-SAC, which determines whether a captive shipper is 
being forced to cross-subsidize other parts of the railroad's network. 
See Simplified Standards for Rail Rate Cases, EP 646 (Sub-No. 1) (STB 
served Sept. 5, 2007), aff'd sub nom. CSX Transp., Inc. v. STB, 568 
F.3d 236 (D.C. Cir.), vacated in part on reh'g, 584 F.3d 1076 (D.C. 
Cir. 2009). In 2013, the Board increased the relief available under the

[[Page 48873]]

Three-Benchmark methodology and removed the relief limit on the 
Simplified-SAC methodology, among other things. See Rate Regulation 
Reforms, EP 715 (STB served July 18, 2013), remanded in part sub nom. 
CSX Transp., Inc. v. STB, 754 F.3d 1056 (D.C. Cir. 2014). 
Notwithstanding the Board's efforts to improve its rate review 
methodologies and make them more accessible, only a few Three-Benchmark 
cases have ever been brought to the Board, and no complaint has been 
litigated to completion under the Simplified-SAC methodology.
    The Board has recognized that, for smaller disputes, the litigation 
costs required to bring a case under the Board's existing rate 
reasonableness methodologies can quickly exceed the value of the case. 
Expanding Access to Rate Relief, EP 665 (Sub-No. 2), slip op. at 10 
(STB served Aug. 31, 2016). As the Board stated in Simplified 
Standards, ``[f]or some shippers who have smaller disputes with a 
carrier, even [Simplified-SAC] would be too expensive, given the 
smaller value of their cases. These shippers must also have an avenue 
to pursue relief.'' Simplified Standards, EP 646 (Sub-No. 1), slip op. 
at 16. Along similar lines, as the Board has previously stated, 
simplified procedures ``enable the affected shippers to avail 
themselves of their statutory right to challenge rates charged on 
captive rail traffic regardless of the size of the complaint.'' Non-
Coal Proceedings, 1 S.T.B. at 1057.\4\
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    \4\ See also, e.g., Calculation of Variable Costs in Rate 
Complaint Proceedings Involving Non-Class I R.Rs., 6 S.T.B. 798, 803 
& n.19 (2003) (``We have had to sacrifice some accuracy for 
simplicity where necessary to ensure that our rate complaint 
processes are accessible to shippers. . . . Towards that end, we 
have adopted simplified evidentiary procedures for adjudicating rate 
reasonableness in those cases where more sophisticated procedures 
are too costly or burdensome, `to ensure that no shipper is 
foreclosed from exercising its statutory right to challenge the 
reasonableness of rates charged on its captive traffic.' '') 
(quoting Non-Coal Proceedings, 1 S.T.B. at 1008); Market Dominance 
Determinations--Prod. & Geographic Competition, 3 S.T.B. 937, 949 
(1998) (excluding product and geographic competition from 
consideration in market dominance determinations so as to ``remove a 
substantial obstacle to the shippers' ability to exercise their 
statutory rights.'').
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    In public comments, shippers and other interested parties have 
repeatedly stated that the Board's current options for challenging the 
reasonableness of rates do not meet their need for expeditious 
resolution at a reasonable cost.\5\ Moreover, because a contract rate 
may not be challenged before the Board, 49 U.S.C. 10709(c)(1), some 
complainants \6\ shift from contract rates to tariff rates before 
bringing a rate case, and tariff rates may be higher than prior 
contract rates.\7\ That factor gives complainants a strong interest in 
having a rate case decided quickly, from start to finish.
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    \5\ See, e.g., Alliance for Rail Competition Opening Comments 
22, June 26, 2014, Rail Transp. of Grain, Rate Regulation Review, EP 
665 (Sub-No. 1) (stating that the Three-Benchmark methodology is too 
costly and complex for grain shippers and producers in its current 
form); W. Coal Traffic League Opening Comments 74-76, Oct. 23, 2012, 
Rate Regulation Reforms, EP 715 (the cost and complexity of the 
Simplified-SAC methodology discourage its use); Oversight of the STB 
Reauthorization Act of 2015 Before the Subcomm. on R.Rs., Pipelines, 
& Hazardous Materials of the H. Comm. on Transp. & Infrastructure, 
115th Cong. (2018) (letter from Chris Jahn, President, The 
Fertilizer Institute, submitted for the record) (due to the time and 
expense needed to pursue a rate case, it ``does not work'' for most 
complainants).
    \6\ Paying a transportation rate is not the only way to 
establish standing to bring a rate case, and the Board has 
previously provided guidance in a policy statement for 
``complainants that allege indirect harm in rate complaints.'' See 
Rail Transp. of Grain, Rate Regulation Review, EP 665 (Sub-No. 1) et 
al., slip op. at 7-8 (STB served Dec. 29, 2016).
    \7\ As an example, the most recent rate proceeding involved a 
complainant that had been served pursuant to contracts for many 
years and then filed its complaint as soon as its contract expired. 
See Consumers Energy Co. Complaint 4-5, Jan. 13, 2015, Consumers 
Energy Co. v. CSX Transp., Inc., NOR 42142; see also, e.g., 
Occidental Chem. Corp. Comments 2-4, Oct. 23, 2012, Rate Regulation 
Reforms, EP 715 (paying the tariff rate for extended periods of time 
while a rate case is litigated--which can add millions of dollars in 
costs beyond the direct costs of litigation--undermines the utility 
of a rate challenge, especially if the carrier requires that all 
rates bundled with the challenged rate also shift to tariff during 
the pendency of the case); PPG Indus., Inc. Comments 3-4, Oct. 23, 
2012, Rate Regulation Reforms, EP 715 (noting the effect of bundling 
and stating that tariff premium could reach $20 million per year of 
rate litigation). The latter two cites are simply to illustrate the 
need for expedited rate reasonableness procedures, and not to take a 
position--one way or another--on the appropriateness of rate 
bundling.
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    Accordingly, the Board has continued to explore ideas to improve 
the accessibility of rate relief. See, e.g., Expanding Access to Rate 
Relief, EP 665 (Sub-No. 2), slip op. at 11-23. Among the comments 
submitted in Docket No. EP 665 (Sub-No. 2), the Board received a 
suggestion from USDA that the Board consider procedural limitations to 
streamline and expedite its rate reasonableness review as an 
alternative to substantive limitations. See USDA Reply Comments 5-6, 
Dec. 19, 2016, Expanding Access to Rate Relief, EP 665 (Sub-No. 2). 
USDA specifically recommended a short procedural timeline as a means to 
make rate reasonableness review accessible for smaller disputes. See 
id. To implement this recommendation, USDA suggested that the Board 
adopt a final offer procedure whereby parties would submit market 
dominance and rate reasonableness evidence in a single package offer. 
See id. at 6-7.
    The Board uses a final offer procedure as part of the Three-
Benchmark methodology, although it is only one part of the rate 
reasonableness approach as opposed to providing the overall framework, 
as the Board is proposing here.\8\ One of the benchmarks compares the 
markup paid by the challenged traffic to the average markup assessed on 
similar traffic. See, e.g., Rate Regulation Reforms, EP 715, slip op. 
at 11. To improve the efficiency of this part of the Three-Benchmark 
methodology and ``enable a prompt, expedited resolution of the 
comparison group selection,'' the Board requires each party to submit 
its final offer comparison group simultaneously, and the Board chooses 
one of those groups without modification. See Simplified Standards, EP 
646 (Sub-No. 1), slip op. at 18.
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    \8\ The Three-Benchmark methodology also includes more 
procedural steps and a longer timeline than the FORR procedure 
proposed here. See 49 CFR 1111.10(a)(2).
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    The Board has held that it may not require arbitration of rate 
disputes under current law,\9\ and it is not proposing to do so here; 
instead, the Board would make the determination of rate reasonableness 
as it does under the Board's current options for challenging the 
reasonableness of rates. However, the benefits of final offer 
procedures used in other settings offer support and background for the 
Board's proposal. For example, final offer procedures are used in 
commercial settings, including the resolution of wage disputes in Major 
League Baseball, and final offer arbitration is therefore sometimes 
referred to as ``baseball arbitration.'' See, e.g., Josh Chetwynd, Play 
Ball? An Analysis of Final-Offer Arbitration, Its Use in Major League 
Baseball, & Its Potential Applicability to European Football Wage & 
Transfer Disputes, 20 Marq. Sports L. Rev. 109 (2009) (noting the final 
offer procedure ``can lead to a win-win situation as it spurs 
negotiated settlement at a very high rate''); see also Michael Carrell 
& Richard Bales,

[[Page 48874]]

Considering Final Offer Arbitration to Resolve Public Sector Impasses 
in Times of Concession Bargaining, 28 Ohio St. J. on Disp. Resol. 1, 3, 
16, 23-24 (2012) (noting that fourteen states had codified some form of 
final offer arbitration for certain labor disputes involving public 
sector employees and noting that the procedure ``encourages the parties 
to negotiate toward middle ground rather than staking out polar 
positions'' and ``encourages the parties to settle before 
arbitration'').
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    \9\ See Arbitration--Various Matters, EP 586, slip op. at 3 n.7 
(STB served Sept. 20, 2001); see also 49 U.S.C. 10704(a)(1) (rate 
prescriptions require an order from the Board); 49 U.S.C. 
11704(c)(2) (reparations require an order from the Board). The Board 
has had a voluntary arbitration process in place for more than 20 
years, and section 13 of the STB Reauthorization Act required 
adjustments to this process (including the addition of rate disputes 
to the types of matters eligible for arbitration), but to date 
parties have not agreed to arbitrate a dispute brought before the 
Board. See Arbitration of Certain Disputes, 2 S.T.B. 564 (1997) 
(adopting voluntary arbitration program); Revisions to Arbitration 
Procedures, EP 730 (STB served Sept. 30, 2016) (making adjustments 
required by STB Reauthorization Act). In addition to its 
recommendation for a final offer procedure that would culminate in a 
decision by the Board, the RRTF recommended legislation that would 
permit mandatory arbitration of smaller rate cases. See RRTF Report 
14-15.
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    Similarly, the Association of American Railroads' Circular No. OT-
10, ``Code of Car Service Rules/Code of Car Hire Rules,'' sets forth a 
final offer procedure for car hire arbitration, which is included in 
Rule 25 (the Arbitration Rule). See Circular No. OT-10, Rule 25, 
https://www.railinc.com/rportal/documents/18/260773/OT-10.pdf. The 
Board has described the Arbitration Rule as an ``integral part'' of its 
deregulation of car hire rates. See Joint Pet. for Rulemaking on R.R. 
Car Hire Comp., EP 334 (Sub-No. 8) et al., slip op. at 1 (STB served 
Apr. 22, 1997). And as noted by the Board's predecessor agency, the 
Interstate Commerce Commission (ICC), the Arbitration Rule ``provides 
for negotiation and, when that is not successful, `baseball style' 
arbitration, by which the arbitrator will select between the best final 
offers of the parties.'' Joint Pet. for Rulemaking on R.R. Car Hire 
Comp., 9 I.C.C.2d 80, 88 (1992).
    Finally in this regard, the Committee for a Study of Freight Rail 
Transportation and Regulation of the TRB (TRB Committee) \10\ released 
a report in 2015 that described the benefits of adopting ``an 
independent arbitration process similar to the one long used for 
resolving rate disputes in Canada.'' \11\ In particular, the TRB 
Committee recommended ``a final-offer rule,'' set on a ``strict time 
limit,'' whereby ``each side offers its evidence, arguments, and 
possibly a changed rate or other remedy in a complete and unmodifiable 
form after a brief hearing.'' TRB Committee Report 211-12. According to 
the TRB Committee Report, adoption of such a procedure could enhance 
complainants' access to rate reasonableness protections, while 
expediting dispute resolution and encouraging settlements. Id. at 212.
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    \10\ In 2005, legislation was enacted directing the Secretary of 
Transportation to enter into an agreement with TRB ``to conduct a 
comprehensive study of the Nation's railroad transportation 
system.'' See Safe, Accountable, Flexible, Efficient Transportation 
Equity Act: A Legacy for Users, Public Law 109-59, section 9007, 119 
Stat. 1144, 1925 (2005). The study was funded in 2011, H.R. Rep. No. 
112-284, at 287 (2011), and the TRB Committee was formed, see Nat'l 
Acads. of Sciences, Eng'g, & Med., Modernizing Freight Rail 
Regulation (TRB Committee Report) at 12-13 (2015), http://nap.edu/21759.
    \11\ In a well-known process used by Canadian regulators, final 
offer procedures are administered by an outside arbitrator or panel 
of arbitrators. In Canada, a complainant may submit its rate dispute 
to the Canadian Transportation Agency, which refers the matter to an 
arbitrator or a panel of arbitrators. Canada Transp. Act, S.C. 1996, 
c. 10, as amended, sections 161(1), 162(1) (Can.). The Canadian 
statute establishes a two-tiered structure: If the matter involves 
freight charges of more than $2 million CAD (subject to an inflation 
adjustment), a 60-day procedure applies, and if the matter involves 
freight charges of $2 million CAD or less (subject to an inflation 
adjustment), a 30-day procedure applies. Id. sections 164.1, 
165(2)(b). Among other things, the 60-day procedure allows the 
parties to direct interrogatories to one another, and the arbitrator 
may request written filings beyond the final offers and information 
initially submitted in support of final offers. See id. sections 
163(4), 164(1). In the 30-day procedure, there is no discovery, and 
the arbitrator may request oral presentations from the parties but 
may not request written submissions beyond the final offers and 
replies. See id. section 164.1. The arbitrator's decision is issued 
within 60 days after the matter was submitted for arbitration, or 30 
days if the further expedited procedure applies. Id. section 
165(2)(b). Any resulting rate prescription is limited to two years, 
unless the parties agree to a different period. See id. section 
165(2)(c).
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    Proposed Rule. The RRTF stated that there is substantial merit to 
USDA's general recommendation to improve access using procedural 
limitations, RRTF Report 16, and the Board agrees. USDA points out 
that, in addition to reducing the length and cost of litigation, ``[a] 
limited amount of time to collect and present evidence forces parties 
to focus their time on only the clearest and most important evidence,'' 
and ``the decision of what evidence to use or leave out is 
contextualized within each case.'' USDA Reply Comments 6, Dec. 19, 
2016, Expanding Access to Rate Relief, EP 665 (Sub-No. 2).
    The Board also agrees with the RRTF and USDA that a final offer 
approach could be an effective way to implement procedural limitations. 
As USDA notes, Dr. Richard L. Schmalensee, chair of the TRB Committee, 
recommended that the Board seek process improvements based on the final 
offer arbitration procedure used in Canada. See Tr. 24-25, Public 
Roundtable, Oct. 25, 2016 (emphasizing the importance of time limits 
and raising the idea that, among other things, the Board retain final 
authority over the outcome of a proceeding).\12\ The TRB Committee 
Report also outlined several advantages of a final offer approach--for 
example, ``[t]he imposition of time limits is intended to bring economy 
to the process and to ensure that shippers are not precluded from 
access to rate relief as a consequence of slow processing and high 
litigation costs,'' and ``the time limit in conjunction with the final-
offer rule injects uncertainty into the process, which limits the 
likelihood that any one party will take an extreme position and 
encourages the settlement of disputes.'' TRB Committee Report 138. And 
the Board stated in Simplified Standards that ``[a] final offer 
procedure for determining the comparison group is in the public 
interest because it will encourage both parties to submit a reasonable 
comparison group. Any final tender that is skewed too far in one 
direction might well result in the selection of a more reasonable final 
tender presented by the opposing party.'' Simplified Standards, EP 646 
(Sub-No. 1), slip op. at 18; see also U.S. Magnesium, L.L.C. v. Union 
Pac. R.R., NOR 42114, slip op. at 9-12 (STB served Jan. 28, 2010) 
(selecting one party's comparison group as ``more reasonable'' while 
also recognizing that both parties' submissions were imperfect).
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    \12\ A transcript of this public roundtable is available on the 
Board's website at https://www.stb.gov/stb/docs/eLibrary/InterVISTAS%20Economic%20Roundtable%20Transcript.pdf.
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    By lowering the costs of litigating smaller rate cases, the Board 
expects that complainants with smaller rate cases, who otherwise might 
have been deterred from challenging a rate due to the cost of bringing 
a case under the Board's existing rate reasonableness methodologies, 
would have a more accessible avenue for rate reasonableness review by 
the Board. The Board also expects that reduced litigation costs would 
make it possible for such complainants to prove meritorious cases. And, 
a final offer procedure may help to encourage private settlements of 
disputes, an outcome that was similarly suggested in the TRB Committee 
Report.
    Accordingly, the Board proposes to establish a procedure similar to 
the one described by the RRTF: A final offer procedure to determine 
rate reasonableness for smaller cases, thereby providing faster, less 
costly review of claims of unreasonable railroad rates.

I. Initiating a Proceeding and Discovery

    Before the process formally begins, the complainant would be 
required to file with the Board and serve the defendant with a notice 
of intent to initiate a case, at least five days in advance of filing 
its complaint.\13\ The

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proceeding would formally begin with the filing of a complaint. At the 
time it files its complaint, the complainant would also be required to 
submit the information listed in 49 CFR 1111.2(a)(1)-(11) \14\ and 
provide to the defendant the materials described in Sec.  
1111.2(b).\15\ The Board would not require the defendant to file an 
answer to the complaint \16\ in cases under FORR, in light of the 
expedited timeline included in this procedure.
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    \13\ The Board would appoint a Board employee to serve as a case 
liaison within five business days after the pre-filing notification. 
See Expediting Rate Cases, EP 733, slip op. at 15 (STB served Nov. 
30, 2017) (explaining the role of a Board-appointed liaison in rate 
cases). The liaison would be appointed sooner than in cases under 
Three-Benchmark, Simplified-SAC, or SAC, consistent with the 
expedited nature of the proposed FORR procedure.
    \14\ If the defendant disagrees with the calculation of variable 
costs based on the complainant's inputs to the Uniform Railroad 
Costing System (URCS) Phase III program (see 49 CFR 1111.2(a)(1)-
(9)), it could address this issue in its market dominance 
presentation. As is the case with market dominance determinations 
generally, movement-specific adjustments to URCS would not be 
permitted. See, e.g., Major Issues in Rail Rate Cases, EP 657 (Sub-
No. 1), slip op. at 50-52 (STB served Oct. 30, 2006), aff'd sub nom. 
BNSF Ry. v. STB, 526 F.3d 770 (D.C. Cir. 2008).
    \15\ Section 1111.2(b) requires the complainant to ``provide to 
the defendant all documents relied upon in formulating its 
assessment of a feasible transportation alternative and all 
documents relied upon to determine the inputs to the URCS Phase III 
program.''
    \16\ The defendant would have an opportunity to file a reply to 
the complainant's market dominance presentation and final offer, as 
addressed below.
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    The filing of the complaint would also mark the beginning of 
discovery. No litigation over discovery disputes would be permitted. 
Instead, if a party unreasonably withholds information that the Board 
subsequently deems to be relevant, the Board would take that 
withholding into account in making its final decision.\17\ If a party 
believes that relevant information was unreasonably withheld during 
discovery, it could so argue in the explanation accompanying its final 
offer, as described further below.
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    \17\ A similar approach is used in the Canadian final offer 
procedure, discussed above. See Canada Transp. Act, S.C. 1996, c. 
10, as amended, section 163(5) (Can.).
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    Parties should not expect to receive (or produce) the volume or 
even necessarily the types of discovery that parties have received in 
SAC cases, because the proposed time limits do not provide for it. 
Parties would instead submit narrowly tailored, targeted discovery 
requests based on the information that the other side could reasonably 
be expected to provide in a short period of time, focusing on the key 
information needed to prove or defend a rate case. Parties would be 
expected to interpret such discovery requests liberally to require the 
production of readily available information (relative to the discovery 
deadline) that they should reasonably know to be material and 
responsive to the request. If a party limits its requests as described 
above, and the other side still does not comply, as noted above, the 
requesting party could argue in the explanation accompanying its final 
offer that relevant information was unreasonably withheld. The Board 
would take that unreasonable withholding of relevant information into 
account in choosing between the offers--for example, by giving less 
weight to an argument that could be undercut by the information that 
was withheld or by making other adverse inferences. Over time, the 
Board anticipates that its decisions in FORR cases would establish 
categories of easily producible, core information that each side could 
be expected to request and produce within the truncated discovery 
period.
    Although this procedure would not necessarily require the use of 
data from the Board's Waybill Sample, parties would be able to seek 
access to waybill data pursuant to the Board's regulations at 49 CFR 
1244.9.\18\ Up to four years of Waybill Sample data would be 
available--specifically, the most recent four years that can be 
provided as of the date of the complaint. See Waybill Data Released in 
Three-Benchmark Rail Rate Proceedings, EP 646 (Sub-No. 3), slip op. at 
4-9 (STB served Mar. 12, 2012). A complainant would be required to 
submit its waybill data request pursuant to 49 CFR 1244.9(b)(4), if it 
chooses to make such a request, on the same day it files its notice of 
intent to initiate a case. See Simplified Standards, EP 646 (Sub-No. 
1), slip op. at 78-80 (describing procedures for the release of Waybill 
Sample data to rate case litigants). A defendant would be required to 
submit its waybill data request pursuant to 49 CFR 1244.9(b)(4), if it 
chooses to make such a request, no later than one day after it is 
served with the complaint. The defendant would have the option of 
submitting its request at any time after complainant's filing of the 
notice of intent to initiate a case, until the deadline stated above--
an option which, in effect, provides at least six days for a defendant 
to make a request. Based on these deadlines, the Board would process 
requests and provide the data no later than five business days after it 
receives the request for waybill data.
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    \18\ The Board also intends to propose certain changes to its 
regulations relating to the Waybill Sample. See RRTF Report 47-49.
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II. Market Dominance Inquiry

    In order to adjudicate the reasonableness of a rate, the Board must 
first find that the defendant rail carrier has market dominance over 
the transportation to which the rate applies. 49 U.S.C. 10707(c). 
Market dominance includes both a quantitative threshold and a 
qualitative analysis. Total Petrochems. & Ref. USA, Inc. v. CSX 
Transp., Inc., NOR 42121, slip op. at 3 (STB served May 31, 2013). 
Under the proposed FORR procedure, market dominance would be evaluated 
separately from the parties' offers, as is the case with other rate 
reasonableness procedures. The Board proposes that the FORR procedure 
may only be used if the complainant also elects to use the streamlined 
market dominance approach proposed in Docket No. EP 756, Market 
Dominance Streamlined Approach, served concurrently with this decision. 
In that decision, the Board is proposing a streamlined market dominance 
approach for those cases in which a complainant can establish a prima 
facie case of market dominance by demonstrating six specified factors. 
See Market Dominance Streamlined Approach, EP 756, slip op. at 6-7 (STB 
served Sept. 12, 2019). Although the RRTF suggested that a streamlined 
market dominance approach may not be necessary for a final offer 
procedure given the time constraints that would accompany such a 
procedure, RRTF Report 17, the Board finds that the streamlined market 
dominance approach proposed in Docket No. EP 756 would complement and 
enhance the streamlined rate reasonableness procedure proposed here. 
Moreover, the expedited timelines proposed here may make it too 
difficult for parties to litigate a non-streamlined market dominance 
presentation.\19\ Nevertheless, because there may be merit to giving 
complainants the option of choosing between streamlined and non-
streamlined market dominance in FORR cases, parties may address this 
issue in their comments.
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    \19\ As discussed in Market Dominance Streamlined Approach, the 
market dominance inquiry is often a costly and time-consuming 
undertaking, resulting in a significant burden on rate case 
litigants. For example, given the hypothetical nature of some 
competitive options proposed by defendant railroads in past cases, 
complainants essentially have to predict what a defendant railroad 
might argue regarding potential, but unused, competitive options--
all without knowing precisely what constitutes a prima facie showing 
of an absence of effective competition. Parties' market dominance 
presentations in recent cases (throughout their filings) have been 
hundreds of pages long. See, e.g., Consumers Energy Co. v. CSX 
Transp., Inc., Docket No. NOR 42142 (parties' market dominance 
presentations alone (throughout their filings) exceeded 200 pages of 
narrative discussion and included multiple expert reports).
---------------------------------------------------------------------------

    In a FORR case, the complainant would submit its showing as to the 
relevant factors identified in the Board's proposal in Docket No. EP 
756 in its

[[Page 48876]]

market dominance presentation. The defendant carrier, in its reply, 
could try to refute any of the prima facie factors or otherwise 
demonstrate that effective competition exists for the traffic at issue. 
At the complainant's option, further discussion of market dominance 
could take place during a telephonic hearing before an administrative 
law judge (ALJ), as described below. In the event that the complainant 
opts for such a hearing, both sides would be permitted to present their 
market dominance positions at the hearing.

III. Review Criteria for Final Offers

    Following discovery, parties would simultaneously submit their 
market dominance presentations and final offers, and each party would 
also submit an analysis addressing the reasonableness of the challenged 
rate and support for the rate in the party's offer.\20\ Each party's 
final offer should reflect what it considers to be the maximum 
reasonable rate. See 49 U.S.C. 10704(a)(1). The party submitting the 
offer could choose how to present and support its offer, including the 
methodology it uses. The Board's criteria for determining rate 
reasonableness of and choosing between the offers \21\ would be based 
on its consideration of the rail transportation policy in 49 U.S.C. 
10101, the Long-Cannon factors in 49 U.S.C. 10701(d)(2), and 
appropriate economic principles.
---------------------------------------------------------------------------

    \20\ Given the expedited timelines provided, the Board is not 
proposing to impose page limits at this time, beyond the 50-page 
limit proposed for replies in a streamlined market dominance 
presentation. See Market Dominance Streamlined Approach, EP 756, 
slip op. at 12. Consistent with the findings of the TRB Committee 
Report, the Board believes the expedited timelines would serve to 
control unnecessary submissions. Should the Board adopt this 
proposal, and if expedited timelines prove insufficient to control 
the scope of the issues presented, the Board may consider page 
limits either by rule or in individual proceedings at a later time.
    \21\ The Board ``may not set the maximum reasonable rate below 
the level at which the carrier would recover 180% of its variable 
costs of providing the service.'' Major Issues in Rail Rate Cases, 
EP 657 (Sub-No. 1), slip op. at 6.
---------------------------------------------------------------------------

    Among other aspects of the rail transportation policy, the Board 
would take into account the policy ``to allow, to the maximum extent 
possible, competition and the demand for services to establish 
reasonable rates for transportation by rail,'' the policy ``to maintain 
reasonable rates where there is an absence of effective competition and 
where rail rates provide revenues which exceed the amount necessary to 
maintain the rail system and to attract capital,'' and the policy ``to 
promote a safe and efficient rail transportation system by allowing 
rail carriers to earn adequate revenues, as determined by the Board.'' 
49 U.S.C. 10101(1), (3), (6).
    Furthermore, pursuant to the Long-Cannon factors, the Board would 
give due consideration to (i) the carrier's efforts to minimize traffic 
transported at revenues that do not contribute to going concern value, 
(ii) the carrier's efforts to maximize revenues from traffic that 
contributes only marginally to fixed costs, and (iii) whether one 
commodity is paying an unreasonable share of the carrier's overall 
revenues, all the while recognizing the policy that rail carriers earn 
adequate revenues. 49 U.S.C. 10701(d)(2).\22\
---------------------------------------------------------------------------

    \22\ See also, e.g., Simplified Standards for Rail Rate Cases, 
EP 646 (Sub-No. 1), slip op. at 22 (STB served July 28, 2006) 
(discussing the first Long-Cannon factor); Major Issues in Rail Rate 
Cases, EP 657 (Sub-No. 1), slip op. at 18 (STB served Oct. 30, 2006) 
(discussing the second Long-Cannon factor); Non-Coal Proceedings, 1 
S.T.B. at 1038 (discussing the third Long-Cannon factor).
---------------------------------------------------------------------------

    Finally, the Board would consider appropriate economic principles, 
and this general criterion would allow the Board to apply, among other 
things, the agency's expertise and general principles developed in its 
rate case precedent over decades. See, e.g., R.R. Revitalization & 
Regulatory Reform Act of 1976, Public Law 94-210, 90 Stat. 31 
(directing the ICC to ``give due consideration to appropriate economic 
principles'' in adopting new accounting system requirements relevant to 
its authorities); see also Non-Coal Proceedings, 1 S.T.B. at 1007 
(``Our challenge is to reflect these economic and equitable principles, 
as best we can, in a practical, readily administrable test.''). As with 
the Board's other rate reasonableness procedures, the agency would 
consider the defendant railroad's need for differential pricing to 
permit it to collect adequate revenues. See Simplified Standards, EP 
646 (Sub-No. 1), slip op. at 73.
    If a party adopts a position that is contrary to these guiding 
criteria, it risks the likelihood that the Board would choose the other 
party's offer. In addition to the previously noted benefits of a final 
offer procedure with expedited time limits, most notably its bringing 
economy to rate cases and encouraging the parties to take reasonable 
positions, the Board expects that the criteria here--the rail 
transportation policy, the Long-Cannon factors, and appropriate 
economic principles--allow for the parties to submit final offers using 
their preferred methodologies, including revised versions of the 
Board's existing rate review methodologies or new methodologies 
altogether. These principle-based, non-prescriptive criteria are 
intended to allow for innovation with respect to rate review 
methodologies, and the use and creation of precedent through an 
adversarial process simultaneously creates incentives for 
methodological improvements over time (while overall complexity is 
constrained by procedural limitations and reasonableness is encouraged 
by a final offer selection structure).\23\
---------------------------------------------------------------------------

    \23\ The Board also recognizes the expedited timelines of the 
proposed FORR procedure and accounts for that characteristic by 
setting a cap on relief, as described in Section VII of this 
decision.
---------------------------------------------------------------------------

IV. Final Offers, Market Dominance Presentations, Replies, and ALJ 
Hearing

    With its final offer, each party would be required to submit an 
analysis addressing the reasonableness of the challenged rate and 
support for the rate in the party's offer,\24\ including an explanation 
of the methodology it used and how it complies with the criteria 
discussed above, as well as any necessary supporting workpapers.\25\ 
Ten days after submitting market dominance presentations, rate 
reasonableness analyses, and final offers, the parties would 
simultaneously submit replies to each other's presentations. On reply, 
parties would not be permitted to alter their market dominance 
presentations, rate reasonableness analyses, or final offers but would 
have an opportunity to argue against the other side's submission.
---------------------------------------------------------------------------

    \24\ Since the parties' final offers should reflect what they 
each consider to be the maximum reasonable rate, a party's analysis 
regarding the reasonableness of the challenged rate would likely 
overlap with its support for its final offer.
    \25\ If spreadsheets are submitted, links between spreadsheets 
should be used to the maximum extent possible. If links are not 
practicable, hard-coded numbers may be used, but parties should 
include references to the relevant source document or method of 
calculation. See, e.g., Gen. Procedures for Presenting Evidence in 
Stand-Alone Cost Rate Cases, EP 347 (Sub-No. 3) (STB served Mar. 12, 
2001); see also Consumers Energy Co. v. CSX Transp, Inc., NOR 42142 
(STB served July 15, 2015) (adopting requirements for submission of 
evidence in that case). Under the proposed rule, if a party fails to 
submit documentation in a form the Board can use (for example, due 
to unlinked spreadsheets), that failure could contribute to 
rejection of that party's offer.
---------------------------------------------------------------------------

    One week after the submission of replies, at the complainant's 
option, the parties would participate in a telephone hearing before an 
ALJ. The purpose of this hearing would be to complete the record 
regarding market dominance, and the transcript of this hearing would be 
part of the administrative record submitted to the Board for decision. 
The complainant, if it chooses, may limit its written market dominance 
presentations to the six factors required for the prima facie showing--
in that instance, at the

[[Page 48877]]

ALJ hearing, the complainant could address any additional market 
dominance arguments made by the defendant. As noted above, if the 
complainant opts for a hearing, both sides would be permitted to 
present their market dominance positions at the hearing. Within four 
days of the evidentiary hearing, a transcript of the hearing would be 
entered into the docket.

V. Selection of an Offer

    Pursuant to the Administrative Procedure Act, ``the proponent of a 
rule or order has the burden of proof.'' 5 U.S.C. 556(d). In a rate 
complaint proceeding, the complainant is the proponent of an order and 
therefore bears the burden. Accordingly, the complainant must 
demonstrate that (i) the defendant carrier has market dominance over 
the transportation to which the rate applies; and (ii) the challenged 
rate is unreasonable. See 49 U.S.C. 10701(d)(1), 10704(a)(1), 11704(b).
    If the Board finds that the complainant's market dominance 
presentation and rate reasonableness analysis demonstrate that the 
defendant carrier has market dominance over the transportation to which 
the rate applies and that the challenged rate is unreasonable, the 
Board would then choose between the parties' final offers. In making 
the rate reasonableness finding and choosing between the offers, the 
Board would take into account the criteria described above.\26\ As in 
the final offer procedure used as part of the Three-Benchmark 
methodology, this would be an ``either/or'' selection, with no 
modifications by the Board. See Simplified Standards, EP 646 (Sub-No. 
1), slip op. at 18.\27\ This approach would work as intended only if 
the parties know that the agency would not attempt to find a compromise 
position. Id. The incentives created by a final offer selection 
procedure could not be preserved if the Board retained the discretion 
to formulate its own ``offer.'' Id.\28\
---------------------------------------------------------------------------

    \26\ The standard applying to market dominance determinations 
would be as described in Market Dominance Streamlined Approach, 
Docket No. EP 756, cited above.
    \27\ Although the RRTF envisioned the possibility of a scenario 
where the offers have equal merit, RRTF Report 19, in fact, it is a 
defining characteristic of a final offer procedure that the 
decision-maker must choose between the offers. See Simplified 
Standards, EP 646 (Sub-No. 1), slip op. at 18; see also, e.g., 
Carrell & Bales, supra SUPPLEMENTARY INFORMATION (``the arbitrator 
must choose the more reasonable of the parties' final proposals'') 
(emphasis added).
    \28\ See also Chetwynd, supra SUPPLEMENTARY INFORMATION 
(decision-makers' tendency to ``split the difference'' creates 
incentives for parties to take extreme positions).
---------------------------------------------------------------------------

    The Board would issue a decision no later than 90 days after the 
deadline for the parties' replies. Petitions for reconsideration would 
be due five days after service of the Board's decision; replies to 
petitions for reconsideration would be due 10 days after service of the 
Board's decision; and the Board would issue its decision on 
reconsideration expeditiously after replies are filed.

VI. Proposed Timeline

    The following is the proposed timeline for this procedure.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Day 5....................................  Complainant files and serves
                                            notice of intent to initiate
                                            case.
Day 0....................................  Complainant files complaint.
Day 0....................................  Discovery begins.
Day 21...................................  Discovery ends.
Day 35...................................  Simultaneous filing of market
                                            dominance presentations,
                                            rate reasonableness
                                            analyses, and final offers.
Day 45...................................  Simultaneous filing of
                                            replies.
Day 52...................................  Optional telephone hearing
                                            before administrative law
                                            judge (market dominance).
Day 135..................................  Board decision.
------------------------------------------------------------------------

    This proposed timeline attempts to balance the need for due 
process--for example, allowing parties to reply to each other's 
submissions--and the Board's underlying goal of constraining the cost 
and complexity of rate litigation by limiting the time available. The 
Board specifically seeks comment on whether the proposed timeline 
strikes the appropriate balance.
    To preserve the effects of the procedural limitations described 
above, requests for extensions of time would be strongly disfavored, 
even if both parties consented to the request. Therefore, parties would 
be encouraged not to spend the scarce time available under this 
procedure on preparing extension requests. Joint requests to allow time 
to negotiate a settlement, including joint requests for mediation, 
would be an exception and would be considered by the Board. A party 
would be permitted to accept the other party's final offer at any time.
    Mediation is mandatory as part of the Board's existing rate 
reasonableness procedures. See 49 CFR 1109.4(a), 1111.10(a)(1), 
1111.10(a)(2). The Board does not propose to require mediation as part 
of FORR because it would add time and possibly expense, but the Board 
would be prepared to facilitate mediation if requested by the parties. 
See 49 CFR 1109.2 (parties may request Board-sponsored mediation).

VII. Relief

    If the Board finds that the defendant carrier has market dominance, 
finds the challenged rate unreasonable, and chooses the complainant's 
offer (or the defendant's offer, if it is below the challenged rate), 
it could award relief based on the difference between the challenged 
rate and the rate in that offer. The proposed procedure would be 
subject to a two-year limit on rate prescriptions unless the parties 
agree to a different limit on relief. Such a limit would be one-fifth 
of the 10-year limit applied in SAC cases and less than half of the 
five-year limit applied in Simplified-SAC and Three-Benchmark cases 
(see Expanding Access to Rate Relief, EP 665 (Sub-No. 2), slip op. at 
6), thereby accounting for the expedited deadlines of the FORR 
procedure. The Board could also award relief in the form of 
reparations. See 49 U.S.C. 11704(b).\29\
---------------------------------------------------------------------------

    \29\ The standard reparations period reaches back to two years 
prior to the date of the complaint. RRTF Report 30; see also 49 
U.S.C. 11705(c) (requiring that complaint to recover damages under 
49 U.S.C. 11704(b) be filed with the Board within two years after 
the claim accrues).
---------------------------------------------------------------------------

    For certain of its other options for challenging the reasonableness 
of rates, the Board has also previously imposed monetary caps on 
relief. See Simplified Standards, EP 646 (Sub-No. 1), slip op. at 27-
28. Such caps apply to an award of reparations, a rate prescription, or 
a combination of the two. Thus, any rate prescription automatically 
terminates once the complainant has exhausted the relief available, and 
the actual length of the prescription may be less than the period set 
by the Board if the relief is used up in a shorter time. Under such 
circumstances, the complainant would be barred from bringing another 
complaint against the same rate for the remainder of the prescription 
period set by the Board. Id.; see also Rate Regulation Reforms, EP 715, 
slip op. at 11-12 (STB served July 18, 2013).\30\
---------------------------------------------------------------------------

    \30\ After the relief is exhausted, the carrier may raise the 
rate, and that new rate may be challenged. However, after the relief 
is exhausted, if the carrier keeps the rate at the challenged 
level--with appropriate adjustments for inflation using the rail 
cost adjustment factor, adjusted for inflation and productivity 
(RCAF-A)--the rate may not be challenged under any of the Board's 
rate reasonableness options until the two-year maximum prescription 
period has expired. See Simplified Standards, EP 646 (Sub-No. 1), 
slip op. at 28.
---------------------------------------------------------------------------

    The Board established its prior caps based on the cost of 
litigating a case using the next more complicated and precise 
procedure: A cap on the Simplified-SAC methodology (later removed) was 
based on the cost to bring a SAC case, and a lower cap for the Three-
Benchmark methodology was

[[Page 48878]]

based on the cost to bring a Simplified-SAC case. See Simplified 
Standards, EP 646 (Sub-No. 1), slip op. at 28. In setting these limits, 
the Board attempted to strike a balance between providing simplified 
methods that permit complainants to seek protection from unreasonable 
rates, while encouraging use of the most precise approach feasible for 
the amount in dispute. Id. at 35; see also id. at 52 (explaining that 
this approach represents ``sound regulatory policy'' by balancing the 
impracticability of using a more complicated procedure given its cost 
against the impropriety of judging large disputes under what might be 
considered a less accurate methodology). In addition, adoption of the 
caps gave effect to Congress's directive that the Board weigh the 
litigation cost of a SAC presentation against the value of the case 
when establishing a simplified and expedited method for rate 
reasonableness challenges. Id. at 34; see also id. at 52 (explaining 
that the best ``method'' is the ``creation of separate processes for 
rail rate disputes of varying size'').
    In keeping with 49 U.S.C. 10701(d)(3), as well as the Board's 
previously stated interest in channeling higher-value cases into 
appropriate procedures, there is merit in setting a cap for FORR by 
considering it within the framework of pre-existing rate reasonableness 
methodologies. Nevertheless, as described above, because FORR does not 
prescribe a particular methodology--nor a methodology necessarily less 
precise than any pre-existing procedure--the Board's prior rationale 
for capping relief based on the cost of the next more complicated 
procedure does not necessarily or neatly apply here.
    Accordingly, the Board proposes to establish a relief cap of $4 
million, as indexed annually using the Producer Price Index, which is 
consistent with the potential relief afforded under the Three-Benchmark 
methodology.\31\ Applying a relief cap based on the estimated cost to 
bring a Simplified-SAC case would further the Board's intention that 
Three-Benchmark and FORR be used in the smallest cases, and applying 
the same $4 million relief cap, as indexed, would provide consistency 
in terms of defining that category of case.
---------------------------------------------------------------------------

    \31\ The relief cap would incorporate indexing that has 
previously been applied to the Three-Benchmark cap, so that the cap 
for FORR is the same as the cap for Three-Benchmark.
---------------------------------------------------------------------------

    Although the proposed FORR procedure is designed to apply to 
smaller cases (i.e., proceedings for which the value of the case is 
subject to a certain relief cap), parties may wish to generally address 
whether the Board should establish different levels of relief and 
provide supporting rationale for such alternatives. As discussed above, 
final offer arbitration in Canada provides for two different procedural 
tracks. If the matter involves freight charges of $2 million CAD or 
less (subject to an inflation adjustment), an expedited ``summary'' 
procedure applies, and if the matter involves freight charges of 
greater than that amount, a longer procedure applies. See Canada 
Transp. Act, S.C. 1996, c. 10, as amended, section 164.1 (Can.). The 
Board might consider an approach that, for example, would permit a 
complainant submitting a FORR complaint to use the procedure described 
above if it seeks relief equal to or less than the $4 million cap 
proposed by the Board here. But, if the complainant were to seek relief 
above this amount (which, under the procedure described here, would be 
subject only to the two-year limit on rate prescriptions), a somewhat 
longer procedural schedule could apply. The Board invites comment on 
the advisability of such a two-tiered relief procedure in which the top 
tier contains no limit on the size of the relief, in total, including 
both reparations and the two-year prescription period.
    Another alternative that parties may wish to address in comments is 
a relief cap based on record development time and value of the case. 
For example, this alternative could consider the potential relief 
available in a SAC case, reduced proportionally by the difference in 
record development time between a case brought under the proposed FORR 
procedure and one brought under SAC. The resultant proportionally 
reduced amount could be the relief cap applicable to cases under the 
FORR procedure.

VIII. Other FORR Issues

    The Board proposes that the FORR procedure would not be available 
to challenge purely local movements of a Class II or Class III rail 
carrier.\32\ Rate cases filed to date indicate that complainants' rate 
concerns relate primarily to Class I carriers. As such, the Board sees 
no reason to apply these new rules to purely local movements of smaller 
carriers. See, e.g., Am. Short Line & Reg'l R.R. Ass'n Comment 4-5, 
Feb. 26, 2007, Simplified Standards for Rail Rate Cases, EP 646 (Sub-
No. 1) (describing the impacts new rate reasonableness procedures would 
have on small railroads in particular). However, the FORR procedure 
would be available in challenges where the movement involves the 
participation of a Class I railroad as well as a Class II or Class III 
railroad. See Simplified Standards, EP 646 (Sub-No. 1), slip op. at 
101-02 (stating that excluding combined movements would shut out a 
significant portion of domestic rail traffic and could create perverse 
routing incentives). Parties may further address in their comments the 
applicability of this proposed rule to purely local movements of a 
Class II or Class III rail carrier.
---------------------------------------------------------------------------

    \32\ Class III carriers have annual operating revenues of $20 
million or less in 1991 dollars, or $39,194,876 or less when 
adjusted for inflation using 2018 data. Class II rail carriers have 
annual operating revenues of less than $250 million but in excess of 
$20 million in 1991 dollars, or $489,935,956 and $39,194,876 
respectively, when adjusted for inflation using 2018 data. The Board 
calculates the revenue deflator factor annually and publishes the 
railroad revenue thresholds in decisions and on its website. 49 CFR 
1201.1-1; Indexing the Annual Operating Revenues of R.Rs., EP 748 
(STB served June 14, 2019).
---------------------------------------------------------------------------

    Parties may also file comments as to whether and how the Board 
might provide assistance to parties--particularly smaller entities--
regarding how best to utilize the proposed FORR procedure.
    The Board acknowledges that the FORR procedure, by requiring that 
the Board select one of the parties' final offers without modification, 
constrains its flexibility in setting a maximum lawful rate. See 
generally 49 U.S.C. 10704(a) (authorizing the Board to ``prescribe'' a 
maximum rate should it find the rate charged by the carrier to be 
unreasonable). Also, by prohibiting litigation over discovery disputes, 
the FORR procedure would constrain the Board's ability to separately 
resolve one type of ancillary issue--although, as noted above, these 
issues may be raised in the explanations accompanying parties' final 
offers. The Board, however, concludes that these constraints would be 
justified by the cost and time savings it expects would be achieved 
through the use of the proposed procedure to challenge rate 
reasonableness for smaller cases, which in turn would assist the Board 
in maintaining reasonable rates. The existing options to challenge the 
reasonableness of rates (especially SAC), which allow the Board to 
craft individual responses to numerous issues (hundreds of issues, in 
some instances), are time-consuming and costly.
    Finally, the Board seeks additional comments on Docket No. EP 665 
(Sub-No. 2), including whether to close that docket. There, the Board 
provided notice that it was considering a new

[[Page 48879]]

methodology that would utilize a comparison group approach to determine 
the reasonableness of the challenged traffic's rate, like the approach 
utilized by the Three-Benchmark methodology but more streamlined. 
Expanding Access to Rate Relief, EP 665 (Sub-No. 2), slip op. at 12, 
15, 23. As the RRTF explained, however, the Board received a number of 
negative comments regarding Docket No. EP 665 (Sub-No. 2), including 
arguments that the methodology discussed in that docket could increase 
the time and cost of litigation compared to bringing a Three-Benchmark 
case. See, e.g., Am. Chemistry Council Opening Comments 7-9, Nov. 14, 
2016, Expanding Access to Rate Relief, EP 665 (Sub-No. 2).
    Within the due dates for comments set forth below, parties may also 
update their comments or submit new comments on Docket No. EP 665 (Sub-
No. 2). If parties choose to submit comments that pertain both to 
Docket No. EP 665 (Sub-No. 2) and to the proposal made in Docket No. EP 
755, they should submit those comments in both dockets. Moreover, the 
Board is aware that stakeholders have worked to create additional rate 
reasonableness methodologies. See, e.g., Nat'l Grain & Feed Ass'n 
Opening Comments 27-35, June 26, 2014, Rail Transp. of Grain, Rate 
Regulation Review, EP 665 (Sub-No. 1); Notice of Director's Decision, 
WB 17-44 (STB served Apr. 17, 2018) (granting access to Waybill Sample 
data for the ``development, evaluation, and proposal'' of new rate 
reasonableness alternatives).

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, 
generally requires a description and analysis of new rules that would 
have a significant economic impact on a substantial number of small 
entities. In drafting a rule, an agency is required to: (1) Assess the 
effect that its regulation will have on small entities, (2) analyze 
effective alternatives that may minimize a regulation's impact, and (3) 
make the analysis available for public comment. Sections 601-604. In 
its notice of proposed rulemaking, the agency must either include an 
initial regulatory flexibility analysis, section 603(a), or certify 
that the proposed rule would not have a ``significant impact on a 
substantial number of small entities,'' section 605(b). Because the 
goal of the RFA is to reduce the cost to small entities of complying 
with federal regulations, the RFA requires an agency to perform a 
regulatory flexibility analysis of small entity impacts only when a 
rule directly regulates those entities. In other words, the impact must 
be a direct impact on small entities ``whose conduct is circumscribed 
or mandated'' by the proposed rule. White Eagle Coop. v. Conner, 553 
F.3d 467, 480 (7th Cir. 2009).
    This proposal would not have a significant economic impact on a 
substantial number of small entities within the meaning of the RFA.\33\ 
The proposal imposes no additional record-keeping by small railroads or 
any reporting of additional information. Nor does this proposed rule 
circumscribe or mandate any conduct by small railroads that is not 
already required by statute: The establishment of reasonable 
transportation rates when a carrier is found to be market dominant. 
Although the Board predicts that the establishment of the FORR 
procedure would result in the filing of several additional complaints 
per year, small railroads have always been subject to rate 
reasonableness complaints and their associated litigation costs, the 
latter of which the Board expects would be reduced through the use of 
this proposed procedure. The new procedure proposed here would exclude 
purely local movements of Class III carriers, affecting only movements 
that also involve the participation of a Class I railroad. Finally, as 
the Board has previously concluded, the majority of railroads involved 
in these rate proceedings are not small entities within the meaning of 
the Regulatory Flexibility Act. Simplified Standards, EP 646 (Sub-No. 
1), slip op. at 33-34. Since the inception of the Board in 1996, only 
three of the 51 cases filed challenging the reasonableness of freight 
rail rates have involved a Class III rail carrier as a defendant. Those 
three cases involved a total of 13 Class III rail carriers. The Board 
estimates that there are approximately 656 Class III rail carriers. 
Therefore, the Board certifies under 5 U.S.C. 605(b) that this proposed 
rule, if promulgated, would not have a significant economic impact on a 
substantial number of small entities as defined by the RFA.
---------------------------------------------------------------------------

    \33\ For the purpose of RFA analysis for rail carriers subject 
to Board jurisdiction, the Board defines a ``small business'' as 
only including those rail carriers classified as Class III rail 
carriers under 49 CFR 1201.1-1. See Small Entity Size Standards 
Under the Regulatory Flexibility Act, EP 719 (STB served June 30, 
2016) (with Board Member Begeman dissenting).
---------------------------------------------------------------------------

    This decision will be served upon the Chief Counsel for Advocacy, 
Office of Advocacy, U.S. Small Business Administration, Washington, DC 
20416.

Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3521, 
Office of Management and Budget (OMB) regulations at 5 CFR 
1320.8(d)(3), and in the Appendix, the Board seeks comments about the 
revisions in the proposed rule to the currently approved collection of 
Complaints (OMB Control No. 2140-0029) regarding: (1) Whether the 
collection of information, as modified in the proposed rule and further 
described below, is necessary for the proper performance of the 
functions of the Board, including whether the collection has practical 
utility; (2) the accuracy of the Board's burden estimates; (3) ways to 
enhance the quality, utility, and clarity of the information collected; 
and (4) ways to minimize the burden of the collection of information on 
the respondents, including the use of automated collection techniques 
or other forms of information technology, when appropriate.
    The Board believes that the proposed procedure would provide a less 
burdensome alternative to other rate review options and estimates that 
it would, on balance, result in four additional complaints filed each 
year. Filing a complaint, generally, has been estimated to require an 
annual hour burden of 469 hours and an annual ``non-hour burden'' cost 
of $1,462. See Supporting Statement for Modification & OMB Approval 
Under the Paperwork Reduction Act & 5 CFR 1320, OMB Control No. 2140-
0029 (Jan. 2018), available at https://www.reginfo.gov/public/do/DownloadDocument?objectID=78860402. For the reasons discussed above, 
filing a FORR complaint is likely to require less time and expenditure 
than other complaints. Accordingly, the Board estimates that this 
proposed procedure would entail an annual hour burden of 250 hours per 
complaint and an annual ``non-hour burden'' cost of $780 per complaint. 
Accounting for the projected four additional complaints per year, this 
proposal would result in an additional total annual hour burden of 
1,000 hours and $3,120 of total annual ``non-hour burden'' cost under 
the PRA. The Board welcomes comment on the estimates of actual time and 
costs of the proposed alternative complaint, as detailed below in the 
Appendix. Other information pertinent to the proposed alternative 
complaint is also included in the Appendix. The proposed rule will be 
submitted to OMB for review as required under 44 U.S.C. 3507(d) and 5 
CFR 1320.11. Comments received by the Board regarding the information

[[Page 48880]]

collection will also be forwarded to OMB for its review when the final 
rule is published.
    It is ordered:
    1. The Board proposes to amend its rules as set forth in this 
decision. Notice of the proposed rule will be published in the Federal 
Register.
    2. Comments are due by November 12, 2019. Reply comments are due by 
January 10, 2020.
    3. A copy of this decision will be served upon the Chief Counsel 
for Advocacy, Office of Advocacy, U.S. Small Business Administration.
    4. This decision is effective on its service date.

List of Subjects

49 CFR Part 1002

    Administrative practice and procedure, Common Carriers, Freedom of 
information.

49 CFR Part 1111

    Administrative practice and procedure, Investigations.

49 CFR Part 1114

    Administrative practice and procedure.

49 CFR Part 1115

    Administrative practice and procedure.

    Decided: September 11, 2019.

    By the Board, Board Members Begeman, Fuchs, and Oberman.
Jeffrey Herzig,
Clearance Clerk.

    For the reasons set forth in the preamble, the Surface 
Transportation Board proposes to amend parts 1002, 1111, 1114, and 1115 
of title 49, chapter X, of the Code of Federal Regulations as follows:

PART 1002--FEES

0
1. The authority citation for part 1002 continues to read as follows:

    Authority: 5 U.S.C. 552(a)(4)(A), (a)(6)(B), and 553; 31 U.S.C. 
9701; and 49 U.S.C. 1321. Section 1002.1(f)(11) is also issued under 
5 U.S.C. 5514 and 31 U.S.C. 3717.

0
2. Amend Sec.  1002.2 by revising paragraph (f)(56) to read as follows:


Sec.  1002.2  Filing fees.

* * * * *
    (f) * * *

------------------------------------------------------------------------
                   Type of proceeding                           Fee
------------------------------------------------------------------------
 
                              * * * * * * *
PART V: Formal Proceedings:
    (56) A formal complaint alleging unlawful rates or
     practices of carriers:
        (i) A formal complaint filed under the coal rate           $350.
         guidelines (Stand-Alone Cost Methodology)
         alleging unlawful rates and/or practices of
         rail carriers under 49 U.S.C. 10704(c)(1)......
        (ii) A formal complaint involving rail maximum             $350.
         rates filed under the Simplified-SAC
         methodology....................................
        (iii) A formal complaint involving rail maximum            $150.
         rates filed under the Three Benchmark
         methodology....................................
        (iv) A formal complaint involving rail maximum             $150.
         rates filed under the Final Offer Rate Review
         procedure......................................
        (v) All other formal complaints (except                    $350.
         competitive access complaints).................
        (vi) Competitive access complaints..............           $150.
        (vii) A request for an order compelling a rail             $350.
         carrier to establish a common carrier rate.....
 
                              * * * * * * *
------------------------------------------------------------------------

* * * * *

PART 1111--COMPLAINT AND INVESTIGATION PROCEDURES

0
3. The authority citation for part 1111 is revised to read as follows:

    Authority:  49 U.S.C. 10701, 10704, 11701, and 1321.

0
4. Amend Sec.  1111.3 by revising paragraph (c) to read as follows:


Sec.  1111.3  Amended and supplemental complaints.

* * * * *
    (c) Simplified Standards. A complaint filed under Simplified-SAC or 
Three-Benchmark may be amended once before the filing of opening 
evidence to opt for a different rate reasonableness methodology, among 
Three-Benchmark, Simplified-SAC, or stand-alone cost. If so amended, 
the procedural schedule begins again under the new methodology as set 
forth at Sec. Sec.  1111.9 and 1111.10. However, only one mediation 
period per complaint shall be required. A complaint filed under Final 
Offer Rate Review may not be amended to opt for Three-Benchmark, 
Simplified-SAC, or stand-alone cost, and a complaint filed under Three-
Benchmark, Simplified-SAC, or stand-alone cost may not be amended to 
opt for Final Offer Rate Review.
0
5. Amend Sec.  1111.5 by revising paragraphs (a), (b), (c), and (e) to 
read as follows:


Sec.  1111.5  Answers and cross complaints.

    (a) Generally. Other than in cases under Final Offer Rate Review, 
which does not require the filing of an answer, an answer shall be 
filed within the time provided in paragraph (c) of this section. An 
answer should be responsive to the complaint and should fully advise 
the Board and the parties of the nature of the defense. In answering a 
complaint challenging the reasonableness of a rail rate, the defendant 
should indicate whether it will contend that the Board is deprived of 
jurisdiction to hear the complaint because the revenue-variable cost 
percentage generated by the traffic is less than 180 percent, or the 
traffic is subject to effective product or geographic competition. In 
response to a complaint filed under Simplified-SAC or Three-Benchmark, 
the answer must include the defendant's preliminary estimate of the 
variable cost of each challenged movement calculated using the 
unadjusted figures produced by the URCS Phase III program.
    (b) Disclosure with Simplified-SAC or Three-Benchmark answer. The 
defendant must provide to the complainant all documents that it relied 
upon to determine the inputs used in the URCS Phase III program.
    (c) Time for filing; copies; service. Other than in cases under 
Final Offer Rate Review, which does not require the filing of an 
answer, an answer must be filed with the Board within 20 days after the 
service of the complaint or within such additional time as the Board 
may provide. The defendant must serve copies of the answer upon the 
complainant and any other defendants.
* * * * *

[[Page 48881]]

    (e) Failure to answer complaint. Other than in cases under Final 
Offer Rate Review, which does not require the filing of an answer, 
averments in a complaint are admitted when not denied in an answer to 
the complaint.
* * * * *
0
 6. Amend Sec.  1111.10 by adding paragraph (a)(3) to read as follows:


Sec.  1111.10  Procedural schedule in cases using simplified standards.

    (a) * * *
    (3)(i) In cases relying upon the Final Offer Rate Review procedure:
    (A) Day 5--Complainant files notice of intent to initiate case and 
serves notice on defendant.
    (B) Day 0--Complaint filed; discovery begins.
    (C) Day 21--Discovery closes.
    (D) Day 35--Market dominance filings, rate reasonableness analyses, 
and final offers.
    (E) Day 45--Replies.
    (F) Day 52--Telephonic evidentiary hearing before an administrative 
law judge, as described in Sec.  1111.12(e), at the discretion of the 
complainant (market dominance).
    (G) Day 135--Board decision.
    (ii) In addition, the Board will appoint a liaison within five 
business days after the Board receives the pre-filing notification.
    (iii) With its final offer, each party must submit an explanation 
of the methodology it used.
* * * * *
0
7. Amend Sec.  1111.11 by revising paragraph (b) to read as follows:


Sec.  1111.11  Meeting to discuss procedural matters.

* * * * *
    (b) Stand-alone cost or simplified standards complaints.
    (1) In complaints challenging the reasonableness of a rail rate 
based on stand-alone cost, Simplified-SAC, or Three-Benchmark, the 
parties shall meet, or discuss by telephone or through email, discovery 
and procedural matters within 7 days after the complaint is filed in 
stand-alone cost cases, and 7 days after the mediation period ends in 
Simplified-SAC or Three-Benchmark cases. The parties should inform the 
Board as soon as possible thereafter whether there are unresolved 
disputes that require Board intervention and, if so, the nature of such 
disputes.
    (2) In complaints challenging the reasonableness of a rail rate 
under Final Offer Rate Review, the parties may not seek Board 
intervention in discovery disputes, but the parties should discuss 
discovery matters with one another to the extent necessary.

PART 1114--EVIDENCE; DISCOVERY

0
8. The authority citation for part 1114 continues to read as follows:

    Authority: 5 U.S.C. 559; 49 U.S.C. 1321.

0
9. Amend Sec.  1114.21 by adding paragraph (a)(4) to read as follows:


Sec.  1114.21  Applicability; general provisions.

    (a) * * *
    (4) Time periods specified in this subpart do not apply in cases 
under Final Offer Rate Review. Instead, parties in cases under Final 
Offer Rate Review should serve requests, answers to requests, 
objections, and other discovery-related communications within a 
reasonable time given the length of the discovery period.
* * * * *
0
10. Amend Sec.  1114.24 by revising paragraph (h) to read as follows:


Sec.  1114.24  Depositions; procedures.

* * * * *
    (h) Return. The officer shall securely seal the deposition in an 
envelope endorsed with sufficient information to identify the 
proceeding and marked ``Deposition of (here insert name of witness)'' 
and shall either personally deliver or promptly send the original and 
one copy of all exhibits by e-filing (provided the filing complies with 
49 CFR 1104.1(e)) or registered mail to the Office of Proceedings. A 
deposition to be offered in evidence must reach the Board not later 
than 5 days before the date it is to be so offered.
* * * * *
0
11. Amend Sec.  1114.31 by revising paragraphs (a) and (d) to read as 
follows:


Sec.  1114.31   Failure to respond to discovery.

    (a) Failure to answer. If a deponent fails to answer or gives an 
evasive answer or incomplete answer to a question propounded under 
Sec.  1114.24(a), or a party fails to answer or gives evasive or 
incomplete answers to written interrogatories served pursuant to Sec.  
1114.26(a), the party seeking discovery may apply for an order 
compelling an answer by motion filed with the Board and served on all 
parties and deponents. Such motion to compel an answer must be filed 
with the Board and served on all parties and deponents. Such motion to 
compel an answer must be filed with the Board within 10 days after the 
failure to obtain a responsive answer upon deposition, or within 10 
days after expiration of the period allowed for submission of answers 
to interrogatories. On matters relating to a deposition on oral 
examination, the proponent of the question may complete or adjourn the 
examination before he applies for an order. Motions to compel may not 
be filed in cases under Final Offer Rate Review.
    (1) Reply to motion to compel generally. Except in rate cases to be 
considered under the stand-alone cost methodology or simplified 
standards, the time for filing a reply to a motion to compel is 
governed by 49 CFR 1104.13.
    (2) Motions to compel in stand-alone cost and simplified standards 
rate cases.
    (i) Motions to compel in stand-alone cost, Simplified-SAC, and 
Three-Benchmark rate cases must include a certification that the movant 
has in good faith conferred or attempted to confer with the person or 
party failing to answer discovery to obtain it without Board 
intervention.
    (ii) In a rate case to be considered under the stand-alone cost, 
Simplified-SAC, or Three-Benchmark methodologies, a reply to a motion 
to compel must be filed with the Board within 10 days of when the 
motion to compel is filed.
    (3) Conference with parties on motion to compel. Within 5 business 
days after the filing of a reply to a motion to compel in a rate case 
to be considered under the stand-alone cost methodology, Simplified-
SAC, or Three-Benchmark, Board staff may convene a conference with the 
parties to discuss the dispute, attempt to narrow the issues, and 
gather any further information needed to render a ruling.
    (4) Ruling on motion to compel in stand-alone cost, Simplified-SAC, 
and Three-Benchmark rate cases. Within 5 business days after a 
conference with the parties convened pursuant to paragraph (a)(3) of 
this section, the Director of the Office of Proceedings will issue a 
summary ruling on the motion to compel discovery. If no conference is 
convened, the Director of the Office of Proceedings will issue this 
summary ruling within 10 days after the filing of the reply to the 
motion to compel. Appeals of a Director's ruling will proceed under 49 
CFR 1115.9, and the Board will attempt to rule on such appeals within 
20 days after the filing of the reply to the appeal.
* * * * *
    (d) Failure of party to attend or serve answers. If a party or a 
person or an officer, director, managing agent, or employee of a party 
or person willfully fails to appear before the officer who is to take 
his deposition, after being served with a proper notice, or fails to 
serve answers to interrogatories submitted under Sec.  1114.26, after 
proper service of

[[Page 48882]]

such interrogatories, the Board on motion and notice may strike out all 
or any part of any pleading of that party or person, or dismiss the 
proceeding or any part thereof. Such a motion may not be filed in a 
case under Final Offer Rate Review. In lieu of any such order or in 
addition thereto, the Board shall require the party failing to act or 
the attorney advising that party or both to pay the reasonable 
expenses, including attorney's fees, caused by the failure, unless the 
Board finds that the failure was substantially justified or that other 
circumstances make an award of expenses unjust.
* * * * *

PART 1115--APPELLATE PROCEDURES

0
12. The authority citation for part 1115 continues to read as follows:

    Authority: 5 U.S.C. 559; 49 U.S.C. 1321; 49 U.S.C. 11708.

0
13. Amend Sec.  1115.3 by revising paragraph (e) to read as follows:


Sec.  1115.3   Board actions other than initial decisions.

* * * * *
    (e) Petitions must be filed within 20 days after the service of the 
action or within any further period (not to exceed 20 days) as the 
Board may authorize. However, in cases under Final Offer Rate Review, 
petitions must be filed within 5 days after the service of the action, 
and replies to petitions must be filed within 10 days after the service 
of the action.
* * * * *

    Note: The following appendix will not appear in the Code of 
Federal Regulations.

Appendix

Information Collection Under the Paperwork Reduction Act

    Title: Complaints under 49 CFR 1111.
    OMB Control Number: 2140-0029.
    STB Form Number: None.
    Type of Review: Revision of a currently approved collection.
    Summary: As part of its continuing effort to reduce paperwork 
burdens, and as required by the Paperwork Reduction Act of 1995, 44 
U.S.C. 3501-3521 (PRA), the Surface Transportation Board (Board) 
gives notice that it is requesting from the Office of Management and 
Budget (OMB) approval for the revision of the currently approved 
information collection, Complaints under 49 CFR part 1111, OMB 
Control No. 2140-0029, as further described below. The requested 
revision to the currently approved collection is necessitated by 
this Notice of Proposed Rulemaking (NPRM), which proposes to add an 
alternative (Final Offer Rate Review) complaint to the types of 
complaints collected by the Board in this information collection. 
All other information collected by the Board in the currently 
approved collection is without change from its approval.
    Respondents: Affected shippers, railroads, and communities that 
seek redress for alleged violations related to unreasonable rates, 
unreasonable practices, service issues, and other statutory claims.
    Number of Respondents: Eight.
    Frequency: On occasion. In recent years, respondents have filed 
approximately four complaints per year with the Board. It is 
anticipated that four additional complaints would be filed annually 
under the proposed procedure. In Market Dominance Streamlined 
Approach, EP 756 (STB served September 12, 2019), the Board 
simultaneously issued a separate NPRM that also would impact the 
Board's existing collection of complaints. But that decision, which 
expects to add an additional five complaints a year (including the 
four complaints estimated to filed under Final Offer Rate Review), 
is being treated as separate and subsequent--for the purposes of 
estimation--to this NPRM's modification of the existing collection 
of complaints. The decision in EP 756 will include the modification 
here.
    Total Burden Hours (annually including all respondents): 2,876 
(sum of (i) estimated hours per complaint (469) x total number of 
estimated, existing complaints (4) and (ii) estimated hours per 
proposed alternative complaint (250) x total number of those 
complaints (4)).
    Total ``Non-Hour Burden'' Cost (such as start-up costs and 
mailing costs): $8,968 (sum of (i) estimated non-hour burden cost 
per complaint ($1,462) x total number of estimated, existing 
complaints (4) and (ii) estimated non-hour burden cost per proposed 
alternative complaint ($780) x total number of those complaints 
(4)).
    Needs and Uses: Under the Board's regulations, persons may file 
complaints before the Board pursuant to 49 CFR part 1111 seeking 
redress for alleged violations of provisions of the Interstate 
Commerce Act, Public Law 104-88, 109 Stat. 803 (1995). In the last 
few years, the most significant complaints filed at the Board allege 
that railroads are charging unreasonable rates or that they are 
engaging in unreasonable practices. See, e.g., 49 U.S.C. 10701, 
10704, and 11701. As described in more detail above in the NPRM, the 
Board is proposing to add a new procedure to provide stakeholders 
with a more streamlined option to challenge rate reasonableness for 
smaller cases. The collection by the Board of these complaints, and 
the agency's action in conducting proceedings and ruling on the 
complaints, enables the Board to meet its statutory duties.

[FR Doc. 2019-20093 Filed 9-16-19; 8:45 am]
 BILLING CODE 4915-01-P