[Federal Register Volume 86, Number 225 (Friday, November 26, 2021)]
[Proposed Rules]
[Pages 67622-67647]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-25168]



[[Page 67621]]

Vol. 86

Friday,

No. 225

November 26, 2021

Part III





Surface Transportation Board





-----------------------------------------------------------------------





49 CFR Parts 1002, 1111, 1114, et al.





Final Offer Rate Review; Expanding Access to Rate Relief; Proposed Rule

  Federal Register / Vol. 86 , No. 225 / Friday, November 26, 2021 / 
Proposed Rules  

[[Page 67622]]


-----------------------------------------------------------------------

SURFACE TRANSPORTATION BOARD

49 CFR Parts 1002, 1111, 1114 and 1115

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


Final Offer Rate Review; Expanding Access to Rate Relief

AGENCY: Surface Transportation Board.

ACTION: Supplemental notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: In response to comments received on the notice of proposed 
rulemaking (NPRM) published on September 17, 2019, and to ensure 
parallel consideration with the proposal in Joint Petition for 
Rulemaking to Establish a Voluntary Arbitration Program for Small Rate 
Disputes (Arb. NPRM), Docket No. EP 765, published elsewhere in this 
issue of the Federal Register, the Surface Transportation Board (STB or 
Board) invites parties, through this supplemental notice of proposed 
rulemaking (SNPRM), to comment on certain modifications to the rate 
reasonableness procedure, as well as other issues contained in the 
discussion below.

DATES: Comments are due by January 14, 2022. Reply comments are due by 
March 15, 2022.

ADDRESSES: Comments and replies may be filed with the Board via e-
filing on the Board's website at www.stb.gov and will be posted to the 
Board's website.

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, 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).\1\ 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 Rep. 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).
---------------------------------------------------------------------------

    \1\ 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.
---------------------------------------------------------------------------

    In a notice of proposed rulemaking issued on September 12, 2019, 
the Board proposed to build on the RRTF recommendation and establish a 
new rate case procedure for smaller cases, the Final Offer Rate Review 
(FORR) procedure. Final Offer Rate Rev. (NPRM), EP 755 et al. (STB 
served Sept. 12, 2019).\2\
---------------------------------------------------------------------------

    \2\ The proposed rule was published in the Federal Register, 84 
FR 48872 (Sept. 17, 2019).
---------------------------------------------------------------------------

    The Board received numerous comments on the NPRM. By decision 
served on May 15, 2020, to permit informal discussions with 
stakeholders, the Board waived the general prohibition on ex parte 
communications between June 1, 2020, and July 15, 2020. Meetings took 
place during the specified period; parties filed memoranda pursuant to 
49 CFR 1102.2(g)(4); the memoranda were posted on the Board's website; 
and parties were permitted to submit written comments in response to 
the memoranda.\3\
---------------------------------------------------------------------------

    \3\ The following parties submitted comments, participated in 
meetings, or submitted comments in response to memoranda: The 
American Chemistry Council (ACC), The Fertilizer Institute, the 
National Industrial Transportation League, the Chlorine Institute, 
and the Corn Refiners Association (collectively, the Coalition 
Associations); the American Fuel & Petrochemical Manufacturers 
(AFPM); the Association of American Railroads (AAR); BNSF Railway 
Company (BNSF); Canadian National Railway Company (CN); Canadian 
Pacific (CP); CSX Transportation, Inc. (CSXT); Farmers Union of 
Minnesota, Farmers Union of Montana, Farmers Union of North Dakota, 
Farmers Union of South Dakota, and Farmers Union of Wisconsin 
(collectively, Farmers Union); Growth Energy; Indorama Ventures 
(Indorama); Industrial Minerals Association--North America (IMA-NA); 
The Kansas City Southern Railway Company (KCSR); MillerCoors; 
National Grain and Feed Association (NGFA); National Taxpayers Union 
(NTU); Norfolk Southern Railway Company (NSR); Olin Corporation 
(Olin); Private Railcar Food and Beverage Association (PRFBA); 
Samuel J. Nasca; Solvay America, Inc.; Steel Manufacturers 
Association (SMA); Union Pacific Railroad Company (UP); USDA; U.S. 
Wheat Transportation Working Group (USW); and Western Coal Traffic 
League (WCTL). The Board also received a joint comment from several 
members of the Committee for a Study of Freight Rail Transportation 
and Regulation of the Transportation Research Board (referred to 
collectively as the TRB Professors), as well an individual comment 
and reply from one member of that committee, the late Dr. Jerry 
Ellig (Dr. Ellig). That committee issued a report titled Modernizing 
Freight Rail Regulation (TRB Report) in 2015. See Nat'l Acads. of 
Sciences, Eng'g, & Med., Modernizing Freight Rail Regul. (2015), 
http://nap.edu/21759.
---------------------------------------------------------------------------

    In light of the filed comments and information received in meetings 
with stakeholders, the Board is issuing this SNPRM to invite comment on 
certain modifications to the rate reasonableness procedure proposed in 
the NPRM, as well as other issues contained in the discussion below. 
This SNPRM also will ensure parallel consideration of the modified FORR 
proposal with the proposal published elsewhere in this issue of the 
Federal Register, Joint Petition for Rulemaking to Establish a 
Voluntary Arbitration Program for Small Rate Disputes (Arb. NPRM), EP 
765 (STB served Nov. 15, 2021).
    In addition to seeking comments, the Board will again waive the 
general prohibition on ex parte communications regarding matters 
related to this proceeding,\4\ to allow discussions of FORR issues in 
conjunction with ex parte discussions of the arbitration proposal. See 
49 CFR 1102.2(g); Final Offer Rate Rev., 84 FR 48872 (Sept. 17, 2019), 
EP 755 (STB served May 15, 2020). The duration of the ex parte waiver 
will match the ex parte meeting period in Docket No. EP 765, i.e., 
between November 15, 2021, and February 23, 2022.
---------------------------------------------------------------------------

    \4\ The Board previously waived the prohibition on ex parte 
communications in Docket No. EP 665 (Sub-No. 2). See Expanding 
Access to Rate Relief, EP 665 (Sub-No. 2) (STB served Mar. 28, 2018) 
(stating that ``[t]he waiver will remain in effect until further 
order of the Board.'').
---------------------------------------------------------------------------

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.'' (Pub. L. 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.'' \5\ More generally, the rail transportation policy (RTP) at 49 
U.S.C. 10101 states that, in regulating the

[[Page 67623]]

railroad industry, it is the policy of the United States Government to, 
among other things, ``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).
---------------------------------------------------------------------------

    \5\ 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).
---------------------------------------------------------------------------

    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 Proc., 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. 2009), vacated in part on reh'g, 584 F.3d 1076 
(D.C. Cir. 2009). In 2013, the Board increased the relief available 
under the Three-Benchmark methodology and removed the relief limit on 
the Simplified-SAC methodology, among other things. See Rate Regul. 
Reforms, EP 715 (STB served July 18, 2013) (78 FR 44459, July 24, 
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 Proc., 1 S.T.B. at 1057.\6\
---------------------------------------------------------------------------

    \6\ See also Calculation of Variable Costs in Rate Compl. Proc. 
Involving Non-Class I R.Rs., 6 S.T.B. 798, 803 & n.19 (2003) (``[W]e 
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 Proc., 1 S.T.B. at 1008); Mkt. 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.'').
---------------------------------------------------------------------------

    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.\7\ Moreover, because a contract rate 
may not be challenged before the Board, 49 U.S.C. 10709(c)(1), some 
complainants \8\ shift from contract rates to tariff rates before 
bringing a rate case, and tariff rates may be higher than prior 
contract rates.\9\ That factor gives complainants a strong interest in 
having a rate case decided quickly, from start to finish.
---------------------------------------------------------------------------

    \7\ See, e.g., Alliance for Rail Competition Opening Comment 22, 
June 26, 2014, Rail Transp. of Grain, Rate Regul. Rev., 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); 
WCTL Opening Comment 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, then-President of 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).
    \8\ 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 Regul. Rev., EP 665 (Sub-No. 1) et al., 
slip op. at 7-8 (STB served Dec. 29, 2016).
    \9\ 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. Compl. 4-5, Jan. 13, 2015, Consumers Energy 
Co. v. CSX Transp., Inc., NOR 42142; see also Occidental Chem. Corp. 
Comments 2-4, Oct. 23, 2012, Rate Regul. 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 Regul. 
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 filings are cited here simply to illustrate the need 
for expedited rate reasonableness procedures, not to indicate that 
the Board takes any position in this proceeding--one way or 
another--on the appropriateness of rate bundling.
---------------------------------------------------------------------------

    Accordingly, the Board has continued to explore ideas to improve 
the accessibility of rate relief. For example, in Expanding Access to 
Rate Relief, Docket No. EP 665 (Sub-No. 2), the Board sought comment on 
procedures relying on comparison groups that could comprise a new rate 
reasonableness methodology for use in very small disputes. The initial 
comments on that proposal were universally negative. But 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 Comment 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 already 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.\10\ One of the benchmarks compares the 
markup paid by the challenged traffic to the average markup assessed on 
similar traffic. See, e.g., Rate Regul. 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, 72 
FR 51375 (Sept. 7, 2007), EP 646 (Sub-No. 1), slip op. at 18.
---------------------------------------------------------------------------

    \10\ 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).
---------------------------------------------------------------------------

    Although the Board may not require arbitration of rate disputes 
under current law,\11\ and is not doing so here,

[[Page 67624]]

the benefits of final offer procedures used in other settings offer 
support and background for the Board's rule proposed here. 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 Arb., Its Use in Major League Baseball, & Its Potential 
Applicability to Eur. Football Wage & Transfer Disps., 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, Considering Final 
Offer Arb. to Resolve Pub. Sector Impasses in Times of Concession 
Bargaining, 28 Ohio St. J. on Disp. Resol. 1, 3, 16, 23-24 (2012) 
(noting that 14 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'').
---------------------------------------------------------------------------

    \11\ See Arb.--Various Matters, EP 586, slip op. at 3 n.7 (STB 
served Sept. 20, 2001); see also 49 U.S.C. 10704(a)(1); 49 U.S.C. 
11704(c)(2). 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 arbitration of 
any dispute brought before the Board. See Arb. of Certain Disps., 2 
S.T.B. 564 (1997) (adopting voluntary arbitration procedures at 49 
CFR part 1108); Revisions to Arb. Proc., 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 Rep. 14-15.
---------------------------------------------------------------------------

    Similarly, AAR's 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, in the TRB Report released in 2015, the 
Committee for a Study of Freight Rail Transportation and Regulation of 
the TRB (TRB Committee) \12\ described the benefits of adopting ``an 
independent arbitration process similar to the one long used for 
resolving rate disputes in Canada.'' \13\ 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 Rep. 211-12. According to the TRB 
Report, adoption of such a procedure could enhance complainants' access 
to rate reasonableness protections, while expediting dispute resolution 
and encouraging settlements. Id. at 212.
---------------------------------------------------------------------------

    \12\ 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 
TRB Rep. 12-13.
    \13\ 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. Sec. Sec.  
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).
---------------------------------------------------------------------------

    The RRTF agreed that a final offer process--with the decision being 
made by the Board rather than an arbitrator--could be an effective way 
to implement procedural limitations, which would improve access to rate 
relief. RRTF Rep. 16. Taking into account these recommendations, the 
Board's NPRM proposed to adopt a FORR process with the following 
primary features. As proposed, FORR would allow limited discovery, with 
no litigation over discovery disputes; FORR could only be used if the 
complainant elected to use the streamlined market dominance approach 
proposed (and since adopted) in Docket No. EP 756, Market Dominance 
Streamlined Approach; \14\ and the procedural schedule would be brief, 
with a Board decision issued 135 days after the complaint is filed. See 
NPRM, EP 755 et al., slip op. at 8-10, 13-14.
---------------------------------------------------------------------------

    \14\ Mkt. Dominance Streamlined Approach, EP 756 (STB served 
Aug. 3, 2020) (adopting final rule), 84 FR 48882 (Sept. 17, 2019).
---------------------------------------------------------------------------

    Parties would simultaneously submit their market dominance 
presentations, final offers, analyses addressing the reasonableness of 
the challenged rate and support for the rate in the party's offer, and 
explanations of the methodology used and how it complies with the 
decisional criteria set forth in the NPRM. NPRM, EP 755 et al., slip 
op. at 12. Parties would next submit simultaneous replies. Id.
    The complainant would bear the burden of proof to demonstrate that 
(i) the defendant carrier has market dominance over the transportation 
to which the rate applies, and (ii) the challenged rate is 
unreasonable. NPRM, EP 755 et al., slip op. at 12-13; see also 49 
U.S.C. 10701(d)(1), 10704(a)(1), 11704(b); Union Pac. R.R.--Pet. for 
Declaratory Ord., FD 35504, slip op. at 2 (STB served Oct. 10, 2014). 
If the Board were to find 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 specified in the NPRM: The 
RTP, the Long-Cannon factors in 49 U.S.C. 10701(d)(2), and appropriate 
economic principles. See NPRM, EP 755 et al., slip op. at 10-13, 84 FR 
48872 (Sept. 17, 2019).
    The Board proposed a relief cap of $4 million, indexed annually 
using the Producer Price Index, consistent with the potential relief 
afforded under the Three-Benchmark methodology. See NPRM, EP 755 et 
al., slip op. at 16.
    The Board also sought additional comments on Docket No. EP 665 
(Sub-No. 2), including whether to close that docket. NPRM, EP 755 et 
al., slip op. at 17.
    Also, on November 25, 2020, the Board instituted a rulemaking 
proceeding to consider a proposal by

[[Page 67625]]

CN, CSXT, KCSR, NSR, and UP to establish a new, voluntary arbitration 
program for small rate disputes. Joint Pet. for Rulemaking to Establish 
a Voluntary Arb. Program for Small Rate Disps., EP 765 (STB served Nov. 
25, 2020).\15\ In a decision served concurrently with this SNPRM, the 
Board is proposing to adopt a form of such an arbitration program. Arb. 
NPRM, EP 765.
---------------------------------------------------------------------------

    \15\ CP subsequently submitted a letter stating that it 
``supports the effort to find a workable, reasonable, accessible 
arbitration program for small rate cases, and would participate in 
such a pilot program.'' CP Letter, Jan. 25, 2021, Joint Pet. for 
Rulemaking to Establish a Voluntary Arb. Program for Small Rate 
Disps., EP 765.
---------------------------------------------------------------------------

    As discussed in more detail in the Arbitration NPRM, the Board is 
deferring final action on FORR and issuing this SNPRM concurrently with 
the Arbitration NPRM so that both proposals may be considered 
simultaneously, including the pros and cons of adopting--either with or 
without modification--the voluntary arbitration rule, FORR, both 
proposals, or taking other action.

Discussion and Request for Comments

    Based on the filed comments and information received in meetings 
with stakeholders, the Board invites comment on certain modifications 
to the rule proposed in the NPRM and other issues contained in the 
discussion below. In Part I, the Board addresses comments on the 
purpose of the rule. In Part II, the Board addresses comments regarding 
its statutory authority to adopt FORR. In Part III, the Board addresses 
comments regarding the appropriateness of a final offer procedure. In 
Part IV, the Board addresses the review criteria for FORR cases. In 
Part V, the Board addresses discovery and procedural schedule issues, 
including the Board's proposal to remove the use of adverse inferences 
and instead adopt a process for motions to compel discovery. The Board 
also proposes to include mandatory mediation in FORR cases and to 
extend the proposed procedural schedule to accommodate motions to 
compel and mandatory mediation. In Part VI, the Board addresses market 
dominance issues, including the Board's proposal to require only the 
complainant to submit market dominance evidence on opening. The Board 
also proposes to allow complainants to choose between streamlined and 
non-streamlined market dominance approaches and extends the proposed 
procedural schedule in cases where the complainant selects non-
streamlined market dominance. In Part VII, the Board addresses the 
relief cap. Finally, in Part VIII, the Board addresses other 
miscellaneous issues. The text of the proposed rule as modified is 
below.
    Although the modifications to the proposed rule described in this 
decision are not the type that would necessitate additional notice and 
comment under the Administrative Procedure Act,\16\ the Board seeks 
further comment in this instance in order to determine if the outlined 
refinements would improve its proposed rule, and so that the modified 
FORR proposal may be considered in parallel with the proposal in Docket 
No. EP 765 to establish an arbitration program that could include an 
exemption from FORR for carriers that participate in the program. See 
Arb. NPRM, EP 765, slip op. at 14. In seeking additional comment, the 
Board does not limit its authority to adopt modifications that are a 
logical outgrowth of the NPRM or this SNPRM in any final rule without 
further comment.
---------------------------------------------------------------------------

    \16\ 5 U.S.C. 551. See, e.g., Covad Commc'ns Co. v. FCC, 450 
F.3d 528, 548 (D.C. Cir. 2006) (recognizing that ``[a]n agency's 
final rule need only be a `logical outgrowth' of its notice'').
---------------------------------------------------------------------------

Part I--Purpose of the Rule

    The purpose of this proposed rule is to satisfy the statutory 
requirement that, if the Board determines that a rail carrier has 
market dominance over the transportation to which a particular rate 
applies, the rate established by such carrier for such transportation 
must be reasonable. See 49 U.S.C. 10701(d)(1).\17\ A shipper's ability 
to challenge a rate subject to market dominance, and vindicate its 
statutory right to a Board decision on rate reasonableness, is 
frustrated where the litigation costs of the Board's available 
processes exceed the value of potential relief. Non-Coal Proc., 1 
S.T.B. at 1049. Furthermore, in addition to litigation costs, a shipper 
must also take into account the risk associated with the uncertainty of 
receiving relief and the time it may take to obtain a decision. As 
described in the NPRM and as noted above, the Board has sufficient 
grounds to conclude that shippers lack meaningful access to the Board's 
existing rate reasonableness processes with respect to small disputes, 
due to the complexity, cost, and duration of those processes. NPRM, EP 
755 et al., slip op. at 3. The Board expects that FORR's procedural 
limitations should lower the cost of litigating rate disputes, 
providing complainants who otherwise might be deterred from bringing 
smaller rate cases under one of the Board's existing processes a more 
accessible avenue for rate reasonableness review by the Board. Id. at 
7. Reduced litigation costs should also make it more feasible for 
complainants to prove meritorious cases, while a final offer selection 
process would discourage extreme positions and may facilitate 
settlement. Id.
---------------------------------------------------------------------------

    \17\ See also 49 U.S.C. 10701(d)(3) (requiring the Board to 
``maintain 1 or more simplified and expedited methods for 
determining the reasonableness of challenged rates in those cases in 
which a full stand-alone cost presentation is too costly, given the 
value of the case''); 49 U.S.C. 10704(d)(1) (requiring the Board to 
``maintain procedures to ensure the expeditious handling of 
challenges to the reasonableness of railroad rates,'' including 
``appropriate measures for avoiding delay in the discovery and 
evidentiary phases of such proceedings.'').
---------------------------------------------------------------------------

    Some rail interests question the need for a new procedure to 
resolve small rate disputes. (See, e.g., AAR Comment 24; BNSF Comment 
3.) \18\ Shipper interests uniformly indicate that there is a need for 
such a procedure. (AFPM Comment 3; Coalition Ass'ns Comment 4; Farmers 
Union Comment 5-6; Growth Energy Comment 2; IMA-NA Comment 11-12; 
Indorama Comment 11-12; MillerCoors Comment 13-14; NGFA Comment 6; Olin 
Comment 1-9; PRFBA Comment 2; SMA Comment 11-12; WCTL Comment 1-2.) The 
Board will now address those comments.
---------------------------------------------------------------------------

    \18\ Unless otherwise specified, citations to the record are to 
the record in Docket No. EP 755.
---------------------------------------------------------------------------

    AAR claims that the Board's only evidence of the problem to be 
solved--the lack of a meaningful avenue to address rate reasonableness 
in small disputes--is the ``purported scarcity of rate complaints.'' 
(AAR Comment 24.) According to AAR, the absence of complaints could be 
subject to other explanations, for example, that ``many rates are 
governed by contract, and those that are based on tariffs are generally 
reasonable.'' (Id.)
    As indicated in the NPRM, however, that is not the only evidence of 
the problem. As the Board explained, the problem is illustrated by the 
lack of small rate cases combined with repeated shipper statements that 
they need rate relief but find the Board's existing processes too 
complex and expensive. NPRM, EP 755 et al., slip op. at 2-3; see also 
id. at 3 n.5. Comments from shipper interests in this proceeding bear 
out that problem. (See, e.g., Farmers Union Comment 5-9 (explaining the 
challenges faced by customers with small rate disputes, as well as 
citations to evidence of steadily rising rail transportation rates for 
agricultural commodities in recent decades); \19\

[[Page 67626]]

NGFA Comment 5-6; USDA Comment 2-3.)
---------------------------------------------------------------------------

    \19\ Notwithstanding these widespread rate increases, no rate 
case addressing rail transportation of agricultural commodities has 
been filed with the Board or the ICC since McCarty Farms, which 
commenced in 1981. See McCarty Farms, Inc. v. Burlington N., Inc., 2 
S.T.B. 460, 462-63 (1997) (denying rate relief after reopening and 
remand).
---------------------------------------------------------------------------

    AAR's reasoning is circular: It suggests that, in order to justify 
adoption of a new process to determine whether specific rates are 
reasonable, the Board must already have evidence that rates in general 
are unreasonable. Committing to inaction based on such flawed logic 
would risk leaving shippers without a meaningful avenue to challenge 
unreasonable rates, in spite of substantial evidence of the need for 
such relief.
    BNSF contends that the Board should not ``sidestep the innate 
complexity and sophistication of the core task before the agency.'' 
(BNSF Comment 3.) BNSF's implication seems to be that the subject 
matter is so complex that it may not be feasible to simplify it 
sufficiently for use in small disputes (i.e., to address these 
difficult issues expeditiously and inexpensively enough that a case can 
be worth pursuing even with a relatively small amount of money at 
stake). The Board recognizes the concern raised by BNSF--the agency's 
decades-long efforts to create accessible small rate case processes 
attests to the difficulty of reconciling the economic complexity of 
railroad rate review with cost-effective dispute resolution.\20\ But 
the statute's requirement that rates subject to market dominance be 
reasonable applies to large and small cases alike, and BNSF's concern 
cannot preclude further reform given Congress's mandate that simplified 
and expedited methods exist to challenge rate reasonableness in smaller 
cases. See 49 U.S.C. 10701(d)(3), 10704(d)(1).
---------------------------------------------------------------------------

    \20\ To this end, in the NPRM, the Board stated that parties may 
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. NPRM, EP 755 et al., 
slip op. at 17. In response, AFPM states that ``support and 
assistance should be limited to guidance documents and similar 
materials. AFPM believes STB should focus efforts on implementing 
the program effectively before pursuing major efforts to supply 
hands-on assistance.'' (AFPM Comment 10.) The Board remains open to 
ways in which it might provide assistance to participants.
---------------------------------------------------------------------------

    BNSF also argues that the Board should limit any reforms to ``the 
discrete population of small sized shippers moving modest sized 
shipments that are inordinately impacted by the cost and complexity of 
the STB's current methodologies.'' (BNSF Comment 3-4.) BNSF does not 
explain how it would be fair or reasonable to limit a remedy to small 
shippers rather than small disputes (as the Board has done with other 
processes with relief caps), or why a potential complainant with a 
dispute smaller than the cost of using the Board's existing processes 
should be denied access to a new process merely because of the size of 
the entity. BNSF suggests that eligibility to participate in a new 
process should turn on whether the complainant has the ``ability to 
undertake the expense and burden'' present in a more expensive 
proceeding. (Id. at 3.) But even a large shipper with the means to 
proceed under one of the Board's existing rate reasonableness processes 
could not rationally be expected to do so where the time, risk, and 
cost of using that process would exceed the value of the case. Limiting 
FORR to small shippers would leave large shippers without recourse to 
challenge unreasonable rates in smaller cases, and therefore frustrate 
the statute's reasonableness requirement for rates subject to market 
dominance. See 49 U.S.C. 10701(d)(1).
    UP argues that, instead of adopting FORR, the Board could 
accelerate Three-Benchmark cases by eliminating rebuttal, starting 
discovery when the complaint is filed, and committing to issue a 
decision in 60 days. (UP Comment 20-21.) It is far from clear that the 
length of Three-Benchmark cases presents the only deterrent for 
potential complainants. For example, the complexity due to defendants' 
expansive use of ``other relevant factors'' is also likely an issue. 
See RRTF Rep. 51-52. Eliminating the complainant's rebuttal and 
starting discovery upon the filing of the complaint, even in the name 
of faster record development, therefore seems unlikely to increase the 
utility of Three-Benchmark for complainants with small disputes.
    For these reasons, based on the record to date, the Board finds 
that FORR would further the RTP goal of maintaining reasonable rates 
where there is an absence of effective competition, see section 
10101(6), by providing increased access to rate reasonableness 
determinations in small disputes. By facilitating the determination of 
rate reasonableness in situations where it may not, in practice, have 
been feasible previously, FORR would also foster sound economic 
conditions in transportation. See section 10101(5). And FORR's short 
timelines would promote expeditious regulatory decisions and provide 
for the expeditious handling and resolution of proceedings. See section 
10101(2), (15).

Part II--Statutory Authority To Adopt FORR

    Railroad interests argue that the Board lacks statutory authority 
to adopt FORR. The Board disagrees for the reasons stated in the NPRM 
and below.
    AAR asserts that Congress has not authorized the Board ``to 
determine the maximum reasonable rate through a baseball-style final 
offer process.'' (AAR Comment 8.) According to AAR, ``[n]othing in the 
governing statutes, or in the Administrative Procedure Act, authorizes 
the Board to adopt an adjudicatory method that so drastically departs 
from the way agency adjudications and rate-setting proceedings have 
historically been conducted.'' (Id. at 9.) AAR is incorrect. Section 
10701(d)(3) authorizes (and in fact, requires) the Board to maintain 
one 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.'' \21\ This 
provision does not expressly identify the specific methods that the 
Board can use for simplified and expedited rate cases, and courts have 
affirmed the Board's significant discretion to pursue various 
``possible regulatory approaches'' in this area. See Burlington N. R.R. 
v. ICC (McCarty Farms Appeal), 985 F.2d 589, 597 (D.C. Cir. 1993). AAR 
does not identify anything in section 10701(d)(3) to support its 
contention that the Board is limited in rate review proceedings to 
``the way agency adjudications and rate-setting proceedings have 
historically been conducted.'' (AAR Comment 9.) See also 49 U.S.C. 
10704(d)(1) (requiring the Board to ``maintain procedures to ensure the 
expeditious handling of challenges to the reasonableness of railroad 
rates,'' including ``appropriate measures for avoiding delay in the 
discovery and evidentiary phases of such proceedings.'').\22\
---------------------------------------------------------------------------

    \21\ AAR argues that section 11(c) of the STB Reauthorization 
Act does not authorize FORR because it refers to ``procedures that 
are available to parties in litigation before courts.'' (AAR Comment 
10-11.) The plain language of section 11(c), on which the NPRM did 
not rely, does not limit the Board to such procedures, but merely 
requires the Board to ``assess'' those procedures for their 
``potential'' use in rate cases, which the Board did in a different 
proceeding. See Expediting Rate Cases, EP 733 (STB served Nov. 30, 
2017); STB Reauthorization Act section 11(c) (directing the Board to 
``initiate a proceeding to assess procedures that are available to 
parties in litigation before courts to expedite such litigation and 
the potential application of any such procedures to rate cases.'').
    \22\ AAR also argues that ``the Board fails to identify any 
other agency that uses Final Offer Rate Review outside the arbitral 
context.'' (AAR Comment 9.) But under the statute, whether another 
agency might use a final offer process has no bearing on whether the 
Board may adopt such a procedure. And, as noted in the NPRM, the 
final offer structure is already a central part of adjudications 
under the Board's Three-Benchmark test. NPRM, EP 755 et al., slip 
op. at 4.

---------------------------------------------------------------------------

[[Page 67627]]

    Certain railroad interests also emphasize that ``[f]inal-offer 
decisionmaking is an arbitration technique,'' and contend that because 
the Board lacks authority from Congress to impose mandatory 
arbitration, it lacks authority to adopt FORR. (AAR Comment 8-9; see 
also CN Comment 6; CSXT Comment 2.) But the fact that this decision-
making structure is often used in arbitration does not mean that FORR 
is arbitration. See NPRM, EP 755 et al., slip op. at 4-6 (noting that, 
in addition to arbitration, the final offer structure is a key part of 
adjudications by the Board under its existing Three-Benchmark test). 
Indeed, the NPRM made clear that FORR was not an arbitration proposal 
and that ``the Board would make the determination of rate 
reasonableness as it does under the Board's current options for 
challenging the reasonableness of rates.'' See id. at 4 (footnote 
omitted).\23\ And while it is true that Congress did not authorize 
mandatory arbitration, it did authorize the development of new methods 
and procedures for use by the Board in evaluating rate reasonableness. 
49 U.S.C. 10701(d)(3), 10704(d)(1). The absence of statutory authority 
for third-party arbitrators to conduct mandatory arbitration does not 
prohibit the Board from adopting decisional procedures also used by 
arbitrators.\24\ That is particularly true here, where the statutory 
authorization is open-ended regarding the decisional procedures that 
the Board may adopt.
---------------------------------------------------------------------------

    \23\ As courts have recognized, an arbitration is the resolution 
of a dispute by a private arbitrator. See, e.g., Stolt-Nielsen S.A. 
v. AnimalFeeds Int'l Corp., 559 U.S. 662, 682 (2010) (``[A]n 
arbitrator derives his or her powers from the parties' agreement to 
forgo the legal process and submit their disputes to private dispute 
resolution.''); IDS Life Ins. Co. v. SunAmerica, Inc., 103 F.3d 524, 
528 (7th Cir. 1996) (arbitration is ``private ordering'').
    \24\ See, e.g., Bernhardt v. Polygraphic Co. of Am., 350 U.S. 
198, 203 (1956) (``The nature of the tribunal where suits are tried 
is an important part of the parcel of rights behind a cause of 
action. The change from a court of law to an arbitration panel may 
make a radical difference in ultimate result. . . . Arbitrators do 
not have the benefit of judicial instruction on the law; they need 
not give their reasons for their results; the record of their 
proceedings is not as complete as it is in a court trial; and 
judicial review of an award is more limited than judicial review of 
a trial. . . .'').
---------------------------------------------------------------------------

    AAR cites a decision of a federal district court, in which, 
according to AAR, ``[t]he court rejected an agency's attempt to use 
final-offer decisionmaking . . . concluding that the agency lacked 
statutory authorization to adopt the procedure.'' (AAR Comment 13 
(citing Stone v. U.S. Forest Serv., No. Civ. 03-586-JE, 2004 WL 1631321 
(D. Or. July 16, 2004)).) Stone is readily distinguishable. At issue 
there was a statute allowing owners of private property in a national 
scenic area an opportunity to avoid certain land use restrictions by 
selling their land to USDA for fair market value. See Stone, 2004 WL 
1631321 at *1-2. USDA, acting through the Forest Service, established a 
procedure for establishing fair market value whereby it compared its 
own fair market appraisal with the landowner's appraisal and selected 
the one with the strongest support for value. Id. at *3. There was no 
provision for price negotiation, and no additional appraisals would be 
considered after an appraisal was selected. Id.
    In assessing this procedure, the district court noted that ``in all 
probability the Forest Service would simply ignore'' the landowner's 
appraisal and ``rely exclusively upon the report of its own 
appraiser.'' Id. at *3. From there, it questioned whether ``Congress 
ever has or could give a federal agency the power to unilaterally 
determine the ultimate price it must pay to acquire private property 
for public purposes, over the objections of an unwilling seller.'' Id. 
at *5. The court concluded that by ``arbitrarily clos[ing] its eyes to 
additional appraisals submitted by the owner, or categorically 
prohibit[ing] negotiation regarding the purchase price,'' the Forest 
Service's procedure would frustrate, rather than further, the statute's 
goal of affording landowners an opportunity to dispose of burdened 
property. Id. at *7.
    Here, the Board would not be using a final offer process to set the 
price of a transaction to which the government itself is a party, a 
fact that weighed heavily on the outcome in Stone. Accordingly, FORR 
does not raise the same concerns raised in Stone: There is no 
suggestion that the Board would not fairly consider both parties' final 
offers, and their respective replies, or the question of whether the 
shipper has demonstrated both market dominance and that the challenged 
rate is unreasonable under governing statutory principles, both 
prerequisites to rate relief. And by expanding accessibility to rate 
relief, FORR would further implement the statute's directive to create 
methods and procedures to determine what is reasonable. 49 U.S.C. 
10701(d)(3), 10704(d)(1). In this proposed rule, the Board has done so, 
while specifically accounting for the overarching principles that 
Congress provided. See NPRM, EP 755 et al., slip op. at 10-12. 
Accordingly, Stone is inapposite.
    CN argues that because section 10701(d)(3) authorizes development 
of a simplified ``method,'' and FORR does not provide for an economic 
methodology that the Board will use to determine the reasonableness of 
the challenged rate, the statute does not authorize FORR. (See CN 
Comment 6-8.) CN mischaracterizes the statutory language. The 
definition of ``method'' encompasses ``a procedure or process for 
attaining an object.'' \25\ CN acknowledges that FORR is a procedure, 
(see CN Comment 7), and FORR plainly satisfies the express terms of 
section 10701(d)(3).\26\
---------------------------------------------------------------------------

    \25\ See Method, Merriam-Webster, http://merriam-webster.com/dictionary/method (last visited Oct. 13, 2021). Similarly, Black's 
Law Dictionary defines ``method'' as ``a mode of organizing, 
operating, or performing something, esp. to achieve a goal.'' 
Method, Black's Law Dictionary (11th ed. 2019).
    \26\ Even if Congress had used the word ``methodology'' rather 
than ``method,'' the dictionary definition is very similar and would 
also include FORR: ``a body of methods, rules, and postulates 
employed by a discipline: a particular procedure or set of 
procedures.'' See Methodology, Merriam-Webster, http://merriam-webster.com/dictionary/methodology (last visited Oct. 13, 2021).
---------------------------------------------------------------------------

    UP claims, without support, that ``[b]y adopting FORR . . . the 
Board would be unlawfully constraining the exercise of its 
congressionally delegated authority'' by ``mak[ing] itself a prisoner 
of the parties' submissions.'' (UP Comment 3.) The simple fact is that 
the Board's exercise of discretion to offer FORR would not constrain 
its authority to prescribe a maximum rate under section 10704(a)(1). 
FORR would instead facilitate the exercise of that authority, and in 
doing so further Congress's intent that rate review be available at the 
Board, through the enhancement of shippers' opportunities to challenge 
rates subject to market dominance under the relevant criteria by 
providing an additional option available to potential complainants. And 
even if the Board could be said to be using something less than its 
congressionally delegated authority (which it is not), the agency may 
choose to act within a narrower range than Congress authorized. See, 
e.g., Midtec Paper Corp. v. Chi. & N.W. Transp. Co., 3 I.C.C.2d 171, 
181 (1986), aff'd sub nom. Midtec Paper Corp. v. United States, 857 
F.2d 1487, 1500 (D.C. Cir. 1988).
    Accordingly, the Board would act within its statutory authority in 
adopting FORR.

Part III--Appropriateness of a Final Offer Procedure

    Railroad interests advance a variety of arguments assailing the 
appropriateness of a final offer procedure for rate reasonableness 
determinations by the Board. The Board addresses these arguments below.

[[Page 67628]]

A. Use of a Final Offer Procedure in Adjudication

    In addition to its statutory authority arguments discussed above, 
AAR also argues that, in using FORR, the Board would be ``abandon[ing] 
its statutory duty to apply the law in determining, based on its own 
best judgment, the maximum reasonable rate.'' (AAR Comment 10.) Final 
offer decisionmaking, according to AAR, amounts to the adjudicator 
deciding which party's proposal ``comes closest to the correct 
outcome'' rather than determining the correct outcome.
    AAR's argument ignores the fact that adjudicators routinely rely on 
or adopt the parties' submissions or decisional framework. AAR implies 
that, to reach a ``legally correct outcome,'' the Board must perform a 
rate analysis distinct from any party's pleadings within each case; 
otherwise, it somehow violates that provision within Sec.  10704 
authorizing it to establish the ``maximum rate.'' But here the Board 
has established a process and a set of analytical criteria in which to 
exercise its judgment in individual cases. That approach is not novel. 
For example, apart from evidence regarding ``other relevant factors,'' 
which is optional, the Board's Three-Benchmark test comprises a final 
offer process and a formula--an approach in which the Board exercises 
its discretion in deciding between the parties' comparison groups under 
a final offer structure. See Union Pac. R.R. v. STB, 628 F.3d 597, 601 
(D.C. Cir. 2010) (``Since the revenue need adjustment factor is derived 
from static figures published annually by the Board, the Three 
Benchmark framework's reasonableness determination generally turns on 
the Board's selection of a comparison group.'') Likewise, in FORR, the 
Board would exercise its best judgment at multiple stages, including 
its determination of whether the challenged rate has been shown to be 
unreasonable under the governing criteria and, if necessary, its 
selection of an offer. See NPRM, EP 755 et al., slip op. at 10-11.
    AAR similarly asserts that in some cases the maximum reasonable 
rate may be above or below the parties' final offers, whereas in others 
it may fall between the final offers. (AAR Comment 12.) It claims that, 
through FORR, the Board would abdicate its independent judgment to 
determine a maximum reasonable rate, and quotes McCarty Farms Appeal 
for the proposition that ``[o]f course no adjudicator would expect to 
be able to rely entirely on one side's analysis.'' (Id. (citing McCarty 
Farms Appeal, 985 F.2d at 599).)
    This argument incorporates the same mistaken assumptions as the 
argument previously addressed. In particular, AAR assumes that ``what 
in the Board's view is the actual maximum'' depends solely on the 
Board's analysis within an individual case. But the Board also 
``exercise[s] its independent judgment'' in creating a decisionmaking 
process with less discretion within the individual case, as in Three-
Benchmark. The fact that the Board is applying a process or even a 
formula created outside of an individual adjudication does not mean it 
is not an exercise of judgment. AAR's definition of the maximum 
reasonable rate is telling: ``the rate that best achieves the many 
objectives the Board is statutorily required to consider.'' (AAR 
Comment 12 (emphasis added).) This argument--which boils down to an 
appeal that the Board determine the reasonableness of rail rates ``in 
the abstract''--was rejected in CSX Transportation, 568 F.3d at 242. 
There, the court indicated that in order to give shippers a 
``meaningfully effective way to seek some degree of redress for 
unreasonable rail rates,'' section 10701(d)(3) authorized the Board to 
adopt procedures even if they do not yield the level of precision 
seemingly demanded by AAR here. Id. Regardless, and as explained at 
length in the NPRM and in this decision, FORR is a process that 
achieves the Board's various statutory objectives. See, e.g., 49 U.S.C. 
10101(1)-(3), (6), (15), 10701(d)(2), (3), 10704(d)(1).\27\ Indeed, in 
establishing the maximum lawful rate using a FORR process, the Board 
would continue to balance economic considerations together with 
administrative feasibility in defining a process ahead of time. See 
BNSF Ry. v. STB, 453 F.3d 473, 482 (D.C. Cir. 2006) (``The pursuit of 
precision in rate proceedings, as in most things in life, must at some 
point give way to the constraints of time and expense, and it is the 
agency's responsibility to mark that point.'').\28\
---------------------------------------------------------------------------

    \27\ UP argues in the same vein that ``the Board might choose 
the shipper's final offer, even though the rate is below the 
`maximum rate' that would otherwise be objectively reasonable, id. 
section 10704(a)(1), or it might decide the challenged rate is 
better than the alternative, even though it believes the rate 
exceeds an objectively `reasonable' rate, 49 U.S.C. 10701(d)(1).'' 
(UP Comment 5.) According to UP, ``under FORR, the Board would not 
determine whether a challenged rate is reasonable by measuring it 
against the maximum reasonable rate calculated using the statutory 
criteria.'' (UP Comment 9-10.) Like AAR, UP insists that there must 
be an ``objectively reasonable'' rate outside of any process used to 
determine the maximum reasonable rate. UP's theory seems to be that 
the ``statutory criteria'' themselves provide a calculation, and in 
individual cases, the Board measures the challenged rate against the 
``maximum reasonable rate'' resulting from the statute. But in fact, 
the statute supplies no calculations. Instead, the ICC and the Board 
have developed processes that are applied in individual cases to 
produce a maximum reasonable rate--as in FORR. If a party's FORR 
submission fails to adhere to the statutory criteria, it would be 
unlikely to prevail on rate reasonableness, and if necessary, 
selection of an offer.
    \28\ In its comment in response to the ex parte meeting 
memoranda, AAR restates these objections, arguing that the Board 
must engage in a three-step process to rule on rate reasonableness: 
(1) Determine market dominance; (2) determine whether the challenged 
rate is unreasonable; and (3) determine the reasonable rate, taking 
into account the Long-Cannon factors and railroad revenue adequacy. 
(AAR Comment in Response to Mem. 2-3, Aug. 12, 2020.) Contrary to 
AAR's argument, the FORR process accounts for each of these three 
steps. See NPRM, EP 755 et al., slip op. at 10-14. As discussed 
below, the Board confirms in this SNPRM that the determination in 
the third step would be the determination of the maximum reasonable 
rate.
---------------------------------------------------------------------------

    Contrary to AAR's suggestion, nothing in McCarty Farms stands for 
the proposition that the Board may not accept one party's proffered 
rate where it finds it superior to the rate offered by the other party. 
In noting that ``no adjudicator would be expected to rely entirely on 
one side's analysis,'' the court appears to have been merely 
emphasizing that all submissions in litigation tend to be self-serving 
to some extent. See McCarty Farms Appeal, 985 F.2d at 598-99. In any 
event, under FORR, each party would have an opportunity to submit 
analysis with its reply pointing out deficiencies in the other side's 
analysis, which the Board would consider in assessing the 
reasonableness of the challenged rate and the merits of the parties' 
respective offers. See NPRM, EP 755 et al., slip op. at 12. Moreover, a 
final offer process would give parties an incentive to moderate their 
positions, which is demonstrably absent from SAC (where parties may 
expect the Board to seek the middle ground).\29\ In that regard, 
parties are reminded that FORR would not reward extreme positions; 
parties likely would have greater success by presenting more moderate 
proposals.
---------------------------------------------------------------------------

    \29\ According to AAR, ``even if final-offer procedures were an 
acceptable method of retrospective dispute resolution, there is no 
basis for using them with regard to the Board's `legislative 
function' of setting rates prospectively. See Ariz. Grocery Co. v. 
Atchison, Topeka & Santa Fe Ry., 284 U.S. 370 (1932) (unlike 
backward-looking awards of reparations, prescribing a maximum rate 
is legislative and forward-looking).'' (AAR Comment 13.) But AAR 
fails to explain this position, and seems to overlook the fact that 
the provisions authorizing the Board to develop methods for the 
resolution of disputes apply specifically to prospective rate-
setting. See sections 10701(d)(3), 10704(d)(1).
---------------------------------------------------------------------------

    UP makes a similar argument, claiming that, unless the Board 
engages in an issue-by-issue weighing of

[[Page 67629]]

alternatives within each individual case (as opposed to exercising some 
of its discretion in advance), it fails to protect the public interest. 
(See UP Comment 3-4.) UP is incorrect for the same reasons stated 
above. UP cites a Board decision that observes that ``the ICC was not 
the prisoner of the parties' submissions, but rather had the duty to 
`weigh alternatives and make its choice according to its judgment of 
how best to achieve and advance the goals of the [RTP].' '' Pub. Serv. 
Co. of Colo. v. Burlington N. & Santa Fe Ry., NOR 42057, slip op. at 4 
(STB served Jan. 19, 2005) (quoting Balt. & Ohio R.R. v. United States, 
386 U.S. 372, 430 (1967) (Brennan, J., concurring)). Again, that is 
exactly what the Board proposes to do in this rulemaking: Exercise its 
judgment to develop a procedure for smaller rate cases that will best 
``achieve and advance the goals of the [RTP].'' That the Board has 
affirmed its authority in other cases to exercise its judgment 
notwithstanding the parties' submissions does not mean it cannot also 
adopt a final offer procedure where the Board chooses to exercise less 
discretion. Indeed, UP's issue-by-issue weighing approach would 
preclude not only FORR, but also the Three-Benchmark test, which has 
been judicially affirmed. See supra at 3; see also Union Pac. R.R., 628 
F.3d at 601 (explaining that the Three-Benchmark test generally turns 
on the Board's selection of a comparison group--a final offer process 
in which ``the Board's selection is an `either/or' choice between the 
parties' final offers, with no modifications allowed'').
    UP contends that Three-Benchmark is distinguishable from FORR 
because parties can claim ``other relevant factors,'' which acts as a 
``safety valve.'' (UP Comment 6.) However, ``other relevant factors'' 
are optional, and in three of the four proceedings decided under Three-
Benchmark, the Board rejected all proposed ``other relevant factors.'' 
\30\ Moreover, because litigation over proposed ``other relevant 
factors'' has substantially expanded the scope of Three-Benchmark 
cases, it appears that ``other relevant factors'' are a reason--perhaps 
a primary reason--why complainants have not pursued many Three-
Benchmark cases. See RRTF Rep. 51-52.\31\
---------------------------------------------------------------------------

    \30\ See E.I. DuPont de Nemours & Co. v. CSX Transp., Inc., NOR 
42099, slip op. at 14-15, 17-19 (STB served June 30, 2008); E.I. 
DuPont de Nemours & Co. v. CSX Transp., Inc., NOR 42100, slip op. at 
11-13, 15-18 (STB served June 30, 2008); E.I. DuPont de Nemours & 
Co. v. CSX Transp., Inc., NOR 42101, slip op. at 10-12, 14-16 (STB 
served June 30, 2008).
    \31\ With respect to UP's focus on the public interest, as the 
Coalition Associations point out, UP loses sight of the fact that 
the Board is proposing to act here because shippers with small rate 
cases lack reasonable access to the Board's existing rate remedies--
a situation which itself impinges on the public interest. (See 
Coalition Associations Reply Comment 11-12.)
---------------------------------------------------------------------------

    In an analogous argument, UP describes the Federal Communications 
Commission's (FCC) adoption of final offer arbitration for 
interconnection rates, which are required to be just and reasonable. 
(UP Comment 7.) The FCC's procedure requires the arbitrator to ensure 
that the offers comply with the statutory standards, and if they do 
not, the arbitrator can take steps designed to result in an outcome 
that satisfies those standards, including requiring the parties to 
submit new final offers or adopting a result not submitted by any 
party. (See id.) Such an approach, while certainly permissible, would 
eliminate the ``either/or'' nature of a final offer selection that the 
NPRM cited as a benefit. NPRM, EP 755, slip op. at 13; see also 
Simplified Standards, EP 646 (Sub-No. 1), slip op. at 18 & n.25 (``This 
[``either/or'' final offer] approach will work as intended only if the 
parties know that the agency will not attempt to find a compromise 
position somewhere in the middle. . . . [W]e cannot preserve the 
incentives created by a final-offer selection process and retain the 
discretion to formulate our own comparison group. Accordingly, we will 
not adopt [a proposal for the Board to retain the discretion to modify 
the parties' final offers], which would defeat the purpose of a final-
offer selection process.''). Moreover, as explained in the NRPM, the 
Board's criteria for determining rate reasonableness and choosing 
between offers would be based, in part, upon consideration of the RTP 
and the Long-Cannon factors, ensuring that the Board would consider the 
relevant statutory standards. NPRM, EP 755 et al., slip op. at 10-
11.\32\
---------------------------------------------------------------------------

    \32\ According to AAR, a procedure is not actually a final offer 
procedure unless there is a series of offers back and forth, 
narrowing the dispute before final offers are submitted to the 
decision-maker. (See AAR Comment 22.) AAR provides no support for 
this statement. Canadian final offer arbitration, for example, does 
not require the model suggested by AAR. See Canada Transp. Act, S.C. 
1996, c. 10, as amended, sections 161(2), 161.1(1) (Can.). 
Accordingly, this feature is not universal and is not a defining 
feature of a final offer process.
---------------------------------------------------------------------------

    CN argues that, under FORR, the Board would not make a finding that 
the winning offer is the maximum reasonable rate. (CN Comment 9-10.) 
While CN is correct that the NPRM did not state expressly that the 
selected offer would be found to be the maximum reasonable rate, it is 
apparent from other language in the NPRM that it would be. See NPRM, EP 
755 et al., slip op. at 10 (``Each party's final offer should reflect 
what it considers to be the maximum reasonable rate.''). The Board now 
clarifies that if a FORR case reaches the final offer selection stage 
(i.e., the Board has found market dominance and that the challenged 
rate is unreasonable), the offer selected would be found to be the 
maximum reasonable rate.\33\ Also, the Board clarifies that each 
party's final offer must reflect what it considers to be a maximum 
reasonable rate. (See UP Comment 16 n.8 (questioning the NPRM's use of 
``should'' with respect to this issue).\34\)
---------------------------------------------------------------------------

    \33\ CN also implies that, under FORR, the Board would choose 
between final offers without first making a finding that the 
challenged rate is unreasonable. (CN Comment 9-10.) But the NPRM 
states exactly the opposite. NPRM, EP 755 et al., slip op. at 13.
    \34\ UP further argues that requiring a defendant's final offer 
to reflect what it considers to be the maximum reasonable rate 
``would in many cases require railroads to defend higher rates than 
they actually want to charge.'' (UP Comment 16 n.9.) The basis for 
UP's concern is unclear, given that defendant railroads routinely 
submit rate case analyses that produce R/VC ratios higher than the 
challenged rate, sometimes much higher. See, e.g., UP Opening Evid. 
31, 61 & n.62 (citing workpaper with calculations), US Magnesium, 
L.L.C. v. Union Pac. R.R., NOR 42114. Railroads have not hesitated 
to defend those rates.
---------------------------------------------------------------------------

B. ``Full Hearing'' Requirement

    AAR argues that FORR would not satisfy the ``full hearing'' 
requirement of 49 U.S.C. 10704(a)(1), because, according to AAR, the 
Board ``has tied [its] hands by artificially limiting [its] decisional 
range to two possibilities'' and has not ``retained [its] full 
decisionmaking powers.'' (AAR Comment 15-16.) AAR cites Morgan v. 
United States, 304 U.S. 1, 12 (1938), for the proposition that 
``Congress, in requiring a `full hearing,' had regard to judicial 
standards--not in any technical sense but with respect to those 
fundamental requirements of fairness which are of the essence of due 
process in a proceeding of a judicial nature.'' (AAR Comment 15.) AAR 
contends that, just as a judge cannot reject ``fundamental elements of 
a trial,'' the Board cannot ``announce in advance that it will confine 
its decisional outcome to the parties' two proposals.'' (Id. at 15-16; 
see also CN Comment 10; AAR Comment in Response to Mem. 4, Aug. 12, 
2020.)
    In a 1984 decision, the ICC rejected an argument that a ``full 
hearing'' means a formal ``trial-type'' hearing under sections 556 and 
557 of the Administrative Procedure Act (APA),

[[Page 67630]]

noting that the phrase ``full hearing'' is not the same as the ``on the 
record'' language that is a significant factor in deciding whether 
formal hearing procedures are required. State Intrastate Rail Rate 
Auth.--Tex., 1 I.C.C.2d 26, 34-35 (1984). As the ICC observed, where a 
hearing on the record is not required, an agency has ``considerable 
discretion to establish appropriate procedures.'' Id. (citing Vt. 
Yankee Nuclear Power Corp. v. Nat'l Res. Def. Council, 435 U.S. 519, 
524 (1978) (``generally speaking,'' the APA ``established the maximum 
procedural requirements which Congress was willing to have the courts 
impose upon agencies in conducting rulemaking procedures.'')).
    In denying a petition for review of the ICC's decision, the court 
of appeals rejected the appellant's contention that by requiring a 
``full hearing,'' the relevant statutory provision requires a formal 
hearing, affirming that such formality will ``obtain only on the 
requirement of a `hearing on the record.''' R.R. Comm'n of Tex. v. 
United States, 765 F.2d 221, 227 (D.C. Cir. 1985). Notably, the court 
held that where the formal hearing requirements of the APA are not 
triggered, the agency has ``substantial flexibility to structure the 
hearings it must provide.'' Id. at 228 (quoting Sea-Land Serv., Inc. v. 
United States, 683 F.2d 491, 495 (D.C. Cir. 1982)). This required the 
ICC to ``conduct whatever proceedings are necessary to ensure that it 
has sufficient information so that its final decision reflects a 
consideration of the relevant factors.'' Id. (quoting Sea-Land Serv., 
683 F.2d at 496).
    The Supreme Court has confirmed that agencies have such discretion. 
In Pension Benefit Guaranty Corp. v. LTV Corp., 496 U.S. 633 (1990), 
the Court upheld a Pension Benefit Guaranty Corporation (PBGC) decision 
after a lower court had, among other things, found the decision 
arbitrary and capricious because the ``PBGC's decisionmaking process of 
informal adjudication lacked adequate procedural safeguards.'' Id. at 
644. The Supreme Court reversed, explaining that, per Vermont Yankee, 
``courts are not free to impose upon agencies specific procedural 
requirements that have no basis in the APA'' and that the court of 
appeals ``did not point to any provision in [PBGC's governing statute] 
or the APA which gives [respondent] the procedural rights the court 
identified.'' Id. at 654-55. It concluded that PBGC's determination 
``was lawfully made by informal adjudication, the minimal requirements 
for which are set forth in the APA, 5 U.S.C. 555, and do not include 
such [further] elements.'' Id. Here, AAR and other railroad commenters 
do not point to any language in sections 10701(d)(3), 10704(a)(1), or 
otherwise, that restricts the Board's discretion to set a rate by 
selecting the best of two offers after it finds the challenged rate 
unreasonable and considers appropriate statutory principles.
    AAR's reliance on Morgan, a decision that predates enactment of the 
APA, is also misplaced. Contrary to AAR's suggestion, the ``full 
hearing'' requirement, as interpreted in Morgan, speaks not to how an 
agency renders its decision, but rather to the parties' rights in 
agency adjudications to be ``heard.'' FORR provides sufficient 
opportunity for parties to be heard and to critique opposing arguments, 
similar to parties' opportunities under other rate reasonableness 
procedures such as Three-Benchmark.
    Morgan involved an order by the Secretary of Agriculture setting 
maximum rates to be charged at Kansas City stockyards. Morgan, 304 U.S. 
at 13. There, USDA opened an inquiry into the rates charged at the 
stockyards and collected a voluminous amount of evidence. Id. at 15-16. 
The Secretary of Agriculture held an oral argument to consider the 
evidence, but USDA's Bureau of Animal Industry (which was seeking to 
set the rates) submitted no briefing, and other than what it said at 
argument, ``formulated no issues and furnished [the stockyard entities] 
no statement or summary of its contentions and no proposed findings.'' 
Id. at 16. The Secretary denied a request by the stockyard entities for 
a tentative report, ``to be submitted as a basis for exceptions and 
argument,'' and instead adopted findings prepared by the Bureau of 
Animal Industry, leaving the stockyard entities no ``opportunity . . . 
for the examination of'' those findings until after the Secretary had 
served his order. Id. at 17. In reversing a lower court that had 
affirmed the Secretary's order, the Supreme Court held that a ``full 
hearing'' includes ``a reasonable opportunity to know the claims of the 
opposing party and to meet them.'' Id. at 18. It further held that 
``[t]hose who are brought into contest with the Government in a quasi-
judicial proceeding aimed at the control of their activities are 
entitled to be fairly advised of what the Government proposes and to be 
heard upon its proposals before it issues its final command.'' Id. at 
18-19.
    The concerns underlying the Supreme Court's decision in Morgan are 
not present with respect to FORR, under which both parties would have 
ample opportunity to be heard, with two rounds of briefing. Moreover, 
because the Board would confine its choice to one of two proposals 
(only after finding the challenged rate unreasonable), the defendant 
would know the complainant's claim and the rate that it might face 
should the Board select the complainant's offer, and would have an 
opportunity to respond to that offer. Even assuming Morgan survived 
enactment of the APA, which is not clear, FORR clearly satisfies its 
interpretation of a ``full hearing.''

C. Burden of Proof

    AAR suggests that FORR would relieve the complainant of its burden 
of proof, because the Board would simply consider the burden carried if 
it selected the complainant's offer. (See AAR Comment 16.) However, 
this is not what the NPRM proposed. As described in the following 
section, the complainant must still meet its burden by establishing 
that the challenged rate is unreasonable. NPRM, EP 755 et al., slip op. 
at 13. And as made clear above, each party's final offer must reflect 
what it considers to be a maximum reasonable rate. The fact that a 
party's analysis of the reasonableness of the challenged rate would 
almost certainly be the same analysis supporting its offer does not 
mean the Board would simply pass by the rate reasonableness step. On 
the contrary, even if the complainant's offer is superior to the 
defendant's offer, the complainant would not prevail if it failed to 
prove that the challenged rate is unreasonable. See NPRM, EP 755 et 
al., slip op. at 12-13.
    AFPM states that it does not ``share STB's assertion that the 
burden of proof must always be on the complainant (e.g., rail shipper) 
and encourage[s] STB to consider scenarios where the burden of proof is 
on the rail carrier.'' (AFPM Comment 8.) However, the Board has long 
held that complainants bear the burden of proof in rate reasonableness 
proceedings. See, e.g., Union Pac. R.R., FD 35504, slip op. at 2; Duke 
Energy Corp. v. Norfolk S. Ry. (Duke/NS), 7 S.T.B. 89, 100 (2003).
    WCTL states that the parties' presentations ``may be akin to ships 
passing in the night, and the Board might find each method has merit.'' 
(WCTL Comment 10.) To address this issue, WCTL proposes that the Board 
follow the approach used in larger rate cases, in which shippers may 
select one of several ``constraints'' to prove entitlement to rate 
relief. (See id. at 10-11 (citing Coal Rate Guidelines, Nationwide, 1 
I.C.C.2d 520, 534 n.35 (1985).) It asks that the Board in FORR cases 
similarly allow the complainant

[[Page 67631]]

shipper to select the governing methodology, so long as the Board finds 
the methodology, and final offer developed using that methodology, to 
be reasonable. (Id.) WCTL also notes that because complainants bear the 
burden of proof in rate reasonableness cases, ``[i]t is only fair that 
the party with the burden of proof can select the maximum rate standard 
it chooses to utilize to prove its case, and that the Board accept this 
choice if it is reasonable and supported.'' (Id. at 11.)
    WCTL apparently intends its proposal to apply in both the 
evaluation of the reasonableness of the challenged rate, and, if the 
challenged rate is found unreasonable, the selection of offers. But 
applying it in the selection of offers would eliminate the final offer 
element of FORR--rather than selecting between two offers, the Board 
would simply stop at the complainant's offer if it were ``reasonable 
and supported.'' (See id. at 11.) The beneficial incentives and 
dynamics produced by a final offer process, discussed above and in the 
NPRM, would be unavailable. See NPRM, EP 755 et al., slip op. at 4-7. 
Nor would it be appropriate to apply WCTL's proposal to the evaluation 
of the challenged rate. Simply because a shipper may select one of 
several of the Board's established constraints to challenge a rate in a 
larger case, it does not follow that a shipper should be entitled to 
dictate the methodology used in an expedited FORR proceeding 
(potentially including a methodology of the shipper's own creation 
introduced for the first time in a particular case). A fundamental 
aspect of FORR is that the Board would provide more flexibility in 
methodologies and would consider both sides' proposed methodologies for 
evaluating the reasonableness of the challenged rate. WCTL's argument 
to the contrary, it would not be fair to the defendant to establish a 
principle dictating in advance the selection of the complainant's 
methodology in a FORR case even where there is persuasive evidence that 
the defendant's methodology yields a result that better satisfies the 
statutory standards.

D. Specific Scenarios Under FORR

    Some railroad interests posit scenarios intended to show that FORR 
suffers from conceptual flaws that would prevent it from functioning 
properly.
    In a purely hypothetical argument, AAR poses a scenario in which 
the complainant's offer is below the jurisdictional threshold, see 49 
U.S.C. 10707(d)(1)(A), and hence ``impermissibly low,'' and yet the 
complainant otherwise proves that the defendant's offer--be it the 
challenged rate or otherwise--is unreasonable and hence ``impermissibly 
high.'' (See AAR Comment 16-17.) As the NPRM pointed out, however, 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. NPRM, EP 755 et al., slip op. at 10 n.21. Given the either/or 
nature of a final offer process, a complainant would have to submit a 
final offer at or above the jurisdictional threshold to be entitled to 
relief, regardless of whether its methodology supports a lower rate.
    UP claims that, in a FORR case, the Board could never select a 
railroad's final offer. (See UP Comment 11-14.) This claim starts from 
the incorrect premise that, in every case, ``the railroad's final offer 
will be equal to or exceed the challenged rate.'' (See id. at 11-12, 
21-22 (mistakenly assuming that discovery would be unfair to defendants 
because the railroad's final offer and the challenged rate ``will 
inevitably be the same'').) \35\ In the abstract, UP may not want to 
``conced[e] that the challenged rate is unreasonable,'' but in specific 
cases it could be an effective strategic decision for the railroad to 
offer a rate that is lower than the challenged rate but higher than the 
complainant's offer.\36\
---------------------------------------------------------------------------

    \35\ UP also argues that a railroad concerned about its ability 
to defend the challenged rate would settle instead. (Id. at 13.) 
Settlement is possible, of course, but UP provides no support for 
the idea that it would necessarily happen--for example, the parties' 
positions could still diverge too much to allow for a negotiated 
resolution.
    \36\ This strategic decisionmaking is analogous to what happens 
in other types of litigation. In a SAC case, for example, a party 
can deliberately take a less aggressive position on an element of 
the analysis if it is concerned about its likelihood of success--a 
decision that changes what the party ultimately submits as the SAC 
rate.
---------------------------------------------------------------------------

    UP also describes a hypothetical situation in which a complainant 
submits very compelling evidence that the challenged rate is 
unreasonable and no evidence whatsoever in support of its offer. (See 
UP Comment 15-16.) In that situation, UP argues, the Board would have 
to accept that unsupported (and unreasonably low) offer, because it 
cannot prescribe the challenged rate after finding it unreasonable. 
(See id.) UP again assumes, incorrectly, that a railroad's final offer 
must be identical to the challenged rate. Such a scenario is also 
extremely unlikely because it is implausible that a complainant's 
analysis producing an unsupported and unreasonably low rate could 
satisfy FORR's proposed decisional criteria to show that the challenged 
rate is unreasonable.

E. FORR's Encouragement of Settlements

    The NPRM observed that a final offer procedure may help to 
encourage the private settlement of disputes. NPRM, EP 755 et al., slip 
op. at 7. AAR contends that, if FORR does encourage settlements, it 
will not create precedent that will guide parties in future disputes. 
(AAR Comment 20.) While AAR's observation may be true, at least in 
part, it fails to demonstrate a problem with FORR. Increasing the 
frequency of settlements, and therefore avoiding the cost and time of 
litigation, would be a better outcome for parties and the Board. See, 
e.g., U.S. Dep't of Energy v. Balt. & Ohio R.R., NOR 38302S et al., 
slip op. at 5 (STB served June 28, 2017) (``Wherever possible, the 
Board's longstanding policy is to encourage the private resolution of 
disputes through voluntary negotiations among all interested 
parties.''). By contrast, if most disputes are litigated, that would be 
a less favorable development, even though precedent would develop more 
quickly.\37\
---------------------------------------------------------------------------

    \37\ Without citing support, AAR claims that uncertainty would 
deter negotiated outcomes. (See AAR Comment 18; see also CN Comment 
19; BNSF Comment 4-5, 8.) But the NPRM cited multiple sources 
supporting the opposite proposition. NPRM, EP 755 et al., slip op. 
at 5-7.
---------------------------------------------------------------------------

    AAR also argues that it is unreasonable for a railroad to face the 
``coercive pressure'' inherent in a final offer procedure, which is 
what encourages settlements. (See AAR Comment 21-22.) AAR asserts that 
the risks faced by shippers and railroads are not reciprocal, because 
the Board would never prescribe a rate higher than the challenged rate. 
(See id.; see also UP Comment 14-16, 18.)
    This lack of reciprocity is a result of the Board's statutory 
mandate to regulate railroad conduct, rather than shipper conduct. See, 
e.g., 49 U.S.C. 10704(a)(1) (authorizing the Board to prescribe a rate 
or practice for a carrier). It may be true that that statutory 
limitation could produce different incentives than parties have in 
other final offer procedures. But in proposing FORR, the Board has 
weighed the competing considerations and determined that FORR would 
provide sufficient benefits (see, e.g., NPRM, EP 755 et al., slip op. 
at 4-7) even if it were found not to afford the full settlement 
incentives present in certain other contexts.\38\ Additionally, while 
the

[[Page 67632]]

Board would not prescribe a rate higher than the challenged rate in a 
FORR case, as indicated in the NPRM,\39\ there is still considerable 
risk to a complainant that brings an unsuccessful FORR case that the 
carrier may conclude based on the Board's evaluation of the economic 
analyses that it has more latitude to set a higher rate. And should the 
Board find the challenged rate has not been shown to be unreasonable in 
a given case, the Board's findings could have a preclusive effect on 
that complainant in subsequent litigation. See, e.g., Martin v. Garman 
Const. Co., 945 F.2d 1000, 1004 (7th Cir. 1991) (``Agency adjudications 
are afforded collateral estoppel effect, provided appropriate 
safeguards are met.'') (citing United States v. Utah Constr. & Mining 
Co., 384 U.S. 394, 421-22 & n.18 (1966)). Finally, any lack of 
reciprocity is balanced by the defendant carrier's possession of market 
dominance--a prerequisite in any rate case before the Board, including 
FORR. See 49 U.S.C. 10707.\40\ The very existence of a rate case that 
satisfies the market dominance threshold indicates an inherent 
imbalance in bargaining power that favors carriers, while the statutory 
requirements that rates subject to market dominance be reasonable, and 
that the Board maintain simplified procedures for smaller cases, 
reflect Congressional intent to level this playing field. See 49 U.S.C. 
10701(d)(1), (3).
---------------------------------------------------------------------------

    \38\ In a related argument, AAR contends that FORR would have a 
detrimental effect on railroad revenue adequacy, outside the context 
of an individual dispute, because it would ``creat[e] a coercive 
downward force on rates.'' (AAR Comment 25.) AAR provides no support 
for this claim. Although FORR is intended to encourage settlements, 
it would not require them, and any railroad may choose to defend its 
rate as reasonable. If a market dominant railroad does not believe 
its rate is reasonable, as required by 49 U.S.C. 10701(d), then it 
should be incentivized to negotiate a lower rate. In other words, to 
the extent FORR would put downward pressure on high rates, it would 
function as a legitimate mechanism for indirectly enforcing the 
statutory requirement that rates subject to market dominance be 
reasonable.
    \39\ See NPRM, EP 755 et al., slip op. at 14.
    \40\ A complainant challenging a rate that is subject to market 
dominance (i.e., any complainant whose case under FORR reaches the 
rate reasonableness phase) would not have the options that UP 
assumes would be available to complainants. (See UP Comment 14-16 
(assuming, for example, that if a complainant loses, it could simply 
choose not to move traffic under the rate that was at issue in the 
case, or that, ``in many situations,'' the challenged rate is 
constrained by market forces).)
---------------------------------------------------------------------------

    AAR also asserts--similar to its prior claims in opposing other 
efforts at reforming the Board's rate review processes \41\--that rates 
adopted through FORR settlements would become the basis for comparison 
groups in Three-Benchmark cases, ``further driving railroad pricing 
down.'' (See AAR Comment 22-23.) That could be true, but the argument 
would apply whenever any shipper obtained a lower rate, either through 
a Board decision (using any rate reasonableness process) or a 
settlement. Indeed, any decision favorable to a shipper in a Three-
Benchmark case, a process that AAR supports, would set the stage for 
similar decisions in other cases and similar arguments about so-called 
ratcheting. So, in essence, AAR is asserting that any rate 
reasonableness process--whether FORR or some other approach--that 
results in meaningful opportunities for shippers to show that rates are 
unreasonably high must be rejected because it could result in reduced 
revenues for the railroads. The Board will, of course, remain vigilant 
about the adequacy of railroad revenues,\42\ but accepting an argument 
that it should not adopt any process that could provide meaningful rate 
relief would undermine the very law that the Board is bound to 
administer and enforce.
---------------------------------------------------------------------------

    \41\ See AAR Suppl. Comment 10-11, Feb. 26, 2007, Simplified 
Standards for Rail Rate Cases, EP 646 (Sub-No. 1) (predicting 
incorrectly that the Three-Benchmark approach would ``inevitably 
result in an overall ratcheting down of rates towards an average'').
    \42\ The Board is cognizant of the concern raised by the court 
in McCarty Farms Appeal that frequent and regular use of a 
comparison group approach could reduce rates to the lowest revenue 
to variable cost ratio used in the comparison group. See McCarty 
Farms Appeal, 985 F.2d at 597.
---------------------------------------------------------------------------

F. Comparisons to Canadian Final Offer Arbitration

    CN argues that concerns regarding final offer arbitration are 
mitigated in Canada because the process and results are confidential 
and decisions are non-precedential, but that FORR lacks these features. 
(CN Comment 24; see also CSXT Comment 2.) While a certain degree of 
confidentiality and lack of precedent could enhance the benefits of a 
final offer process,\43\ rate reasonableness decisions by the Board are 
precedential and made available to the public (with exceptions for 
certain confidential material). See 5 U.S.C. 552(a)(2) (requiring that 
agencies make ``available for public inspection'' final opinions and 
orders made in the adjudication of cases); Pac. Gas & Elec. Co. v. Fed. 
Power Comm'n, 506 F.2d 33, 38 (D.C. Cir. 1974) (noting that agency 
adjudications ``constitute binding precedents''). In proposing FORR, 
the Board has weighed these considerations and, based on the record to 
date, concludes that FORR would provide sufficient benefit even without 
being confidential and non-precedential.
---------------------------------------------------------------------------

    \43\ (See TRB Professors Comment 5 & n.17.)
---------------------------------------------------------------------------

    CN also states that Canadian final offer arbitration does not 
provide for reparations. (CN Comment 25.) In fact, Canadian final offer 
arbitration does provide monetary relief covering the pendency of the 
litigation, although, unlike reparations awarded by the Board, it 
cannot reach back two years prior to the complaint. See Canada Transp. 
Act, S.C. 1996, c. 10, as amended, section 165(6) (Can.). This 
difference is less significant than it might appear, because 
complainants in rate cases before the Board often wait to switch from a 
contract to a tariff rate until shortly before they file their 
complaints, to minimize the time they pay the tariff rate. See, e.g., 
Consumers Energy Co. v. CSX Transp., Inc., NOR 42142, slip op. at 1, 
284 (STB served Jan. 11, 2018) (complaint filed in 2015; reparations 
calculation started from 2015). The reasonableness of those contract 
rates is not subject to challenge before the Board (see 49 U.S.C. 
10709(c)), meaning that, in practice, the reparations period often 
begins around the time the complaint is filed, rather than two years 
earlier.
    CP states that Canadian final offer arbitration proceedings are 
complex and expensive for both parties, and that, because CP does not 
know what arguments shippers will make, it ``must be overly expansive 
in its briefing, addressing all possible arguments that the complainant 
might raise.'' (CP Comment 5-8 (predicting that briefing in FORR cases 
will be overbroad, with parties submitting ``a vast amount of 
materials'').) Canadian final offer arbitration may be complex, but the 
more relevant issue here is how FORR compares to the Board's existing 
rate reasonableness processes. If it is sufficiently less costly than 
Three-Benchmark, for example, then it could still help to expand access 
to rate relief. Moreover, several shipper interests with member 
companies that have participated in Canadian final offer arbitration 
tout its success. (See, e.g., NGFA Comment 7 (``Some of NGFA's member 
companies have had successful experiences with the Canadian final offer 
arbitration procedures . . . .''); Farmers Union Reply Comment 2 (``In 
your practitioner's experience in working with Canadian researchers, we 
found that [final offer] procedures between shippers and carriers 
rarely went to fruition but were settled many times . . . .'').) And 
none of the shipper interests have expressed concerns similar to those 
raised by CP, despite the fact that it is the shipper interests that 
support FORR based on its expected reduced cost and complexity.

Part IV--Review Criteria

    As noted above, the Board stated that, in reviewing offers, it 
would take into account the RTP, the Long-Cannon factors in 49 U.S.C. 
10701(d)(2), and

[[Page 67633]]

appropriate economic principles. See NPRM, EP 755 et al., slip op. at 
10-13.
    Some shipper interests request additional information regarding the 
review criteria proposed in the NPRM, while railroad interests strongly 
oppose the proposal to rely on criteria as opposed to a defined 
economic methodology. The Board continues to propose a non-
prescriptive, multi-factor test, which would apply in the rate 
reasonableness determination regarding the challenged rate and, if 
necessary, in selecting between the offers. See NPRM, EP 755 et al., 
slip op. at 10-12. But, to aid commenters on this SNPRM, the Board will 
provide some additional information about what it would expect to 
consider.

A. Additional Information Regarding Review Criteria

    USDA asks the Board to be more explicit about the types of actions 
that would not satisfy the criteria. (USDA Comment 4.) Similarly, AFPM 
asks the Board to define ``appropriate economic principles,'' and NGFA 
suggests that the Board provide a ``more detailed discussion of the 
potential criteria and statutory standards.'' (AFPM Comment 7; NGFA 
Comment 10.) And while the Coalition Associations support the Board's 
proposal, they state that the absence of a specific economic 
methodology requires complainants to take a ``leap of faith.'' 
(Coalition Ass'ns Comment 2.)
    To mitigate this uncertainty, the Board will provide additional 
information here. First, parties seeking to satisfy the criteria might 
submit, for example, robust comparison group approaches, cross-subsidy 
analyses, analyses that incorporate market-based factors (see, e.g., 
BNSF Mem. 1-2 (Mtg. with Board Member Begeman); NGFA Reply 12, Aug. 20, 
2020, Joint Pet. for Rulemaking to Establish a Voluntary Arb. Program 
for Small Rate Disps., EP 765), or new analyses relying on constrained 
market pricing (CMP) principles, which are discussed further below. The 
Board declines to propose to determine in advance whether specific 
methodologies (including those identified above) would satisfy the 
review criteria; rather, that determination would take place in 
individual cases, and submitting a methodology in one of these 
categories would not guarantee a party's success.\44\ And this list is 
certainly not exhaustive; parties could also seek to satisfy the review 
criteria with methodologies that are not listed here. But parties who 
are uncertain about how to choose a methodology might consider one of 
these examples as a starting point.
---------------------------------------------------------------------------

    \44\ The Coalition Associations describe a rate benchmarking 
methodology and argue that it would be appropriate to use in a FORR 
case. (See Coalition Ass'ns Comment 19-25.) The Board agrees with 
AAR, however, that this issue is beyond the scope of the proceeding, 
where the Board did not seek comment on particular methodologies. 
(See AAR Reply Comment 5-6.) The appropriateness of methodologies 
would be decided on a case-by-case basis under the proposed 
approach.
---------------------------------------------------------------------------

    Second, the Board clarifies that parties would not be expected to 
address every RTP factor, all of the Long-Cannon factors (see further 
discussion below), or every type of appropriate economic principle. In 
other proceedings, the Board and parties rely on the RTP factors that 
are relevant to the individual case, and the same would be true in FORR 
cases.
    In particular, the Board would rely primarily on the RTP factors 
that have previously been relied on in the rate reasonableness context: 
The policy to allow, to the maximum extent possible, competition and 
the demand for services to establish reasonable rates for 
transportation by rail, 49 U.S.C. 10101(1); to promote a safe and 
efficient rail transportation system by allowing rail carriers to earn 
adequate revenues, as determined by the Board, section 10101(3); and 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, 
section 10101(6). See, e.g., Simplified Standards, EP 646 (Sub-No. 1), 
slip op. at 34 (relying on RTP factors (3) and (6)); W. Coal Traffic 
League--Pet. for Declaratory Ord., FD 35506, slip op. at 16-17 (STB 
served July 25, 2013) (relying on RTP factor (1) in distinguishing the 
Board's rate regulation from public utility regulation). To the extent 
parties seek to rely on RTP factors that have not been relied on in the 
rate reasonableness context, they must take care to demonstrate how 
those factors relate to the economic analysis of the reasonableness of 
the rate.
    AAR argues that the Board does not provide enough detail on how it 
would protect revenue adequacy in a FORR case. (AAR Comment 24-25; see 
also CN Comment 13-14.) In a FORR case, if a party submits an analysis 
that fails to explain how it accounts for revenue adequacy--with regard 
to the reasonableness of the challenged rate as well as support for the 
offer--the party would be less likely to prevail. And if a party's 
analysis does not adequately account for revenue adequacy, the opposing 
party could draw attention to this problem in its reply.
    With respect to the Long-Cannon factors, the NPRM indicated that, 
in deciding between offers, 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, while recognizing 
the policy that rail carriers earn adequate revenues. NPRM, EP 755 et 
al., slip op. at 11. CN points to the Board's statement in a prior 
decision that there is ``no feasible way to incorporate such an 
analysis into a method for resolving small rate disputes without 
raising litigation expenses and rendering the `simplified' method too 
expensive,'' and implies that this discussion applied to the Long-
Cannon factors in general. (See CN Comment 19-20 (citing Simplified 
Standards for Rail Rate Cases (Simplified Standards NPRM), EP 646 (Sub-
No. 1), slip op. at 22 (STB served July 28, 2006)).) But in fact, in 
that decision the Board was referring specifically to the first factor, 
observing that rail capacity had become tight (as opposed to the excess 
capacity that existed when Staggers was enacted) and so ``a railroad is 
not likely to carry any traffic that does not contribute to going 
concern value.'' See Simplified Standards NPRM, EP 646 (Sub-No. 1), 
slip op. at 22. Parties could choose to rely upon this conclusion in 
FORR cases, making the first Long-Cannon factor unlikely to be a 
significant aspect of the analysis, though parties could still address 
how it is accounted for in their proposed methodology.
    Because the Board must give due consideration to the Long-Cannon 
factors when assessing the reasonableness of rates, parties should 
generally address how their methodologies would allow the Board to take 
the issues raised by these factors into account. As discussed above, 
parties may use Board precedent to make arguments about the degree and 
manner in which a particular factor should be considered by the Board 
in relation to a proposed methodology.\45\
---------------------------------------------------------------------------

    \45\ For example, the ICC described the Long-Cannon factors as 
``certain checks on obviously inefficient management.'' Coal Rate 
Guidelines, Nationwide, EP 347 (Sub-No. 1), slip op. at 10, 13-14 
(ICC served Feb. 24, 1983); see also Coal Rate Guidelines, 
Nationwide (Coal Rate Guidelines), 1 I.C.C.2d 520, 540-41 (1985) 
(discussing the Long-Cannon factors in establishing the management 
efficiency constraint). Not every case would be likely to involve 
``obviously inefficient management,'' and parties may seek to 
explain why that is the case.

---------------------------------------------------------------------------

[[Page 67634]]

    Finally, appropriate economic principles would encompass Board and 
ICC precedent (also discussed further below), court precedent reviewing 
Board and ICC decisions, generally accepted economic theory (e.g., 
presented in experts' verified statements or citations to academic 
literature), and analogous economic regulatory materials from other 
tribunals, such as federal courts and agencies. Reliance on these 
sources would hardly be an innovation; parties and the Board already 
can and do cite Board precedent, for example, as well as academic 
literature and analogous materials from other tribunals. See, e.g., 
Total Petrochems. & Ref. USA, Inc. v. CSX Transp., Inc., NOR 42121, 
slip op. at 220 (STB served Sept. 14, 2016) (relying on Board 
precedent); Consumers Energy Co., NOR 42142, slip op. at 19 n.20 
(citing academic literature); AEP Tex. N. Co. v. BNSF Ry., NOR 41191 
(Sub-No. 1), slip op. at 7-8 (STB served May 15, 2009) (citing 
analogous federal court precedent). Expressly referencing these sources 
among the review criteria ensures that parties and the Board can 
continue to cite them in the same ways and with the same frequency that 
they do in other types of proceedings.

B. Vagueness Arguments

    Citing FCC v. Fox Television Stations, Inc., 567 U.S. 239 (2012), 
AAR contends that FORR is unconstitutionally vague because railroads do 
not know in advance what the Board might find unreasonable, inasmuch as 
the methodology is chosen within the case--railroads will not know in 
advance how to conform their conduct to the demands of the law. (See 
AAR Comment 17-19; see also CN Comment 18-19; BNSF Comment 4-5, 7-8.) 
AAR also states that predictable application is necessary to prevent 
the adjudicator from acting in an arbitrary or discriminatory way. (AAR 
Comment 19.)
    Although any agency standard must be sufficiently clear to pass 
constitutional muster,\46\ Fox Television has little resemblance to the 
circumstances here. Unlike the FCC in that case, the Board here is not 
changing course mid-proceeding and purporting to regulate railroad 
conduct without providing notice of what that regulation requires. See 
567 U.S. at 254. To the contrary, the Board is proposing procedural 
rules for the adjudication of railroad rates under the precise criteria 
established by statute. Following the Board's adoption of FORR, 
railroads would continue to be entitled under section 10701 to 
``establish any rate for transportation'' over which they do not have 
market dominance. Where there is market dominance, railroads would also 
continue to be entitled to charge a rate so long as it is reasonable. 
The Board would also consider the reasonableness of rates challenged 
under FORR using the same statutory criteria and economic principles 
applied in past rate cases using other processes. The NPRM made clear 
that a railroad in a FORR proceeding may use ``existing rate review 
methodologies'' to defend the challenged rate or its final offer, as 
well as other methodologies that follow the applicable criteria. NPRM, 
EP 755 et al., slip op. at 12.
---------------------------------------------------------------------------

    \46\ In Freeman United Coal Mining Co. v. Federal Mine Safety & 
Health Review Commission, 108 F.3d 358, 362 (D.C. Cir. 1997), a case 
cited by CN, the court noted that regulations need not achieve 
``mathematical certainty'' or ``meticulous specificity,'' and may 
instead embody ``flexibility and reasonable breadth.'' Id. (quoting 
Grayned v. City of Rockford, 408 U.S. 104, 110 (1972).) Applying 
these principles, the court found that the regulation at issue, 
which broadly required that mine structures ``be maintained in good 
repair to prevent accidents and injuries to employees'' was 
``sufficiently specific to provide notice . . . of the conduct that 
it required or prohibited.'' Id.
---------------------------------------------------------------------------

    AAR's argument overstates the predictability of other types of 
litigation before the Board and understates the predictability of a 
FORR case. In almost every recent SAC case litigated to a merits 
decision, both shippers and railroads have raised novel issues, some of 
which reach the core of the SAC concept. See, e.g., Ariz. Elec. Power 
Coop. v. BNSF Ry., NOR 42113, slip op. at 140-42 (STB served Nov. 22, 
2011) (accepting a new calculation proposed by the defendant railroad 
for use in the discounted cash flow analysis); Consumers Energy Co., 
NOR 42142, slip op. at 25-27 (addressing a new proposed method for 
traffic group selection); E.I. DuPont de Nemours & Co. v. Norfolk S. 
Ry., NOR 42125, slip op. at 282-84 (STB served Mar. 24, 2014) 
(accepting a new adjustment proposed by the complainant shipper to the 
terminal value calculation). Not all of these issues are purely matters 
of economic policy; many also require adjudication as to how a 
hypothetical railroad might operate differently than the defendant, an 
inherently non-quantitative weighing of evidence and argument. See, 
e.g., E.I. DuPont de Nemours & Co., NOR 42125, slip op. at 39-40 
(requiring, for the first time, that a SARR carrying predominantly 
carload traffic account for car classification and blocking). 
Notwithstanding parties' posturing in negotiations before a rate case, 
(see BNSF Comment 8), they cannot predict the resolution of these 
novel, potentially case-dispositive issues in advance--nor can the 
Board, before the development of an administrative record. SAC, 
however, is not unconstitutionally vague and has been upheld on 
judicial review. See, e.g., Consol. Rail Corp v. United States, 812 
F.2d 1444, 1456-57 (3d Cir. 1987); Potomac Elec. Power Co. v. ICC, 744 
F.2d 185, 192-95 (D.C. Cir. 1984).
    Adjudication of claims under 49 U.S.C. 10702 and 11101, addressing 
the reasonableness of practices and the common carrier obligation, 
respectively, bears even greater resemblance to the approach proposed 
here. Each involves a case-specific, multi-factor analysis. See, e.g., 
CF Indus., Inc.--Pet. for Declaratory Ord., FD 35517, slip op. at 4-5 
(STB served Nov. 28, 2012) (describing legal standard in unreasonable 
practice cases); Union Pac. R.R.--Pet. for Declaratory Ord., FD 35219, 
slip op. at 3-4 (STB served June 11, 2009) (describing legal standard 
in common carrier obligation cases).\47\ The ICC and the Board have 
followed this approach for more than a century, with judicial approval, 
despite parties' inability to ``know in advance what the Board might 
deem unreasonable'' with the specificity that AAR would apparently 
require, (AAR Comment 17-18). See, e.g., Lake-and-Rail Butter & Egg 
Rates, 29 I.C.C. 45, 46-47, 49-51 (1914) (enforcing the common carrier 
obligation); Bodine & Clark Livestock Comm'n v. Great N. Ry., 63 F.2d 
472, 477-78 (9th Cir. 1933) (affirming the ICC's determination 
regarding the reasonableness of a practice); Granite State Concrete Co. 
v. STB, 417 F.3d 85, 92-93 (1st Cir. 2005) (specifically

[[Page 67635]]

affirming the STB's application of the legal standard).\48\
---------------------------------------------------------------------------

    \47\ The factors in such cases can be quintessential examples of 
the ``incommensurate interests'' that CN found so problematic in its 
comment: for example, weighing safety considerations against the 
economic interests of a railroad or its customer. See CN Comment 20; 
see also, e.g., N. Am. Freight Car Ass'n v. Union Pac. R.R., NOR 
42119 (STB served Mar. 12, 2015); Bar Ale, Inc. v. Cal. N. R.R., FD 
32821 (STB served July 20, 2001). The ICC and the Board have 
performed these analyses lawfully and with judicial approval, see, 
e.g., Granite State Concrete, 417 F.3d at 95-96, and without an 
advance explanation as to how they would balance potentially 
competing interests. Therefore, contrary to CN's argument regarding 
the Long-Cannon factors, (see CN Comment 20-21), regulating railroad 
practices or rates using a non-prescriptive, multi-factor test is 
not ``void for vagueness'' even if some of the factors are 
incommensurate interests. Cf. Gentile v. State Bar of Nev., 501 U.S. 
1030, 1048-51 (1991). CN also does not support its attempt to 
analogize FORR to the situation in Gentile, a First Amendment 
decision that specifically addresses ``[t]he prohibition against 
vague regulations of speech.'' See id.
    \48\ Even in a cost-of-service rate case before another agency, 
which bears greater resemblance to traditional utility ratemaking--a 
mode of regulation that has been established far longer and with 
greater continuity than any of the Board's rate processes--the 
regulator or a reviewing court may change a significant component of 
the analysis within an individual litigation. See, e.g., United 
Airlines, Inc. v. FERC, 827 F.3d 122, 134-36 (D.C. Cir. 2016) 
(overturning agency's allowance of income taxes in cost of service 
for carriers structured as partnerships).
---------------------------------------------------------------------------

    AAR characterizes FORR as distinct from these other agency 
processes in terms of predictability, implying that the Board has given 
no hint as to how it would reach a decision. (See AAR Comment 17-19; 
AAR Comment in Response to Mem. 5, Aug. 12, 2020.) That is not so; the 
NPRM stated the criteria that would apply in determining rate 
reasonableness,\49\ and if necessary, choosing an offer.\50\ These 
criteria would signal to parties what rates might be found 
unreasonable. For instance, if a defendant railroad is charging vastly 
more for the challenged traffic than it does for comparable traffic, if 
it is aware of costly inefficiencies that a new railroad would not 
adopt, or if its revenue from the challenged rate is out of proportion 
to its properly attributable capital requirements and other costs of 
service, (see BNSF Mem. 2 (Mtg. with Board Member Begeman)), then it 
could reasonably predict a lower likelihood of success in a FORR 
case.\51\ In other words, there is a continuum of predictability with 
respect to litigation--rather than the binary distinction AAR 
proposes--and FORR is closer on the continuum to other types of 
litigation than AAR acknowledges. (See Olin Comment 11 (citing Board of 
Trade v. United States, 314 U.S. 534, 546 (1942) (ratemaking ``is fluid 
and changing--the resultant of factors that must be valued as well as 
weighed'')).) FORR's level of predictability, which is in line with 
unreasonable practice cases and other adjudications requiring the 
tribunal to weigh multiple factors, does not render it 
unconstitutionally vague.
---------------------------------------------------------------------------

    \49\ AAR disagrees with similar reasoning proffered by Olin; AAR 
states that Olin ``misses the point'' because, ``[i]n the rate 
context, the elastic term `reasonable' has specific meaning.'' (AAR 
Comment in Response to Mem. 5, Aug. 12, 2020.) In this attempt to 
distinguish rate reasonableness from unreasonable practice cases and 
rulings on the common carrier obligation, AAR does not cite any 
statutes or case law. See id. AAR relies instead on an article, 
which does not even support the point for which AAR cites it, much 
less provide statutory or precedential support. See id. AAR further 
notes that, with respect to rate reasonableness, Congress has 
required the Board to account for railroad revenue adequacy and the 
Long-Cannon factors. See id. But the FORR process does account for 
these considerations. See NPRM, EP 755 et al., slip op. at 10-12.
    \50\ CSXT asserts that the NPRM ``fails to set forth any 
substantive standard that it would use to choose between the `final 
offers.''' (CSXT Comment 1.) No other commenter makes such a claim, 
for good reason: The NPRM directly stated the non-prescriptive 
criteria that would provide the substantive standard in FORR cases. 
NPRM, EP 755 et al., slip op. at 10-12.
    \51\ AAR does not address whether the discussion it cites from 
Paralyzed Veterans of America v. D.C. Arena, L.P., 117 F.3d 579, 584 
(D.C. Cir. 1997) survives Perez v. Mortgage Bankers Association, 575 
U.S. 92 (2015). (See AAR Comment 19). It does not matter here, 
however, for the reasons stated above. Far from ``promulgat[ing] 
mush,'' see Paralyzed Veterans. 117 F.3d at 584, the Board has 
proposed a test that requires the balancing of multiple factors 
stated in advance, as in other types of adjundicaton.
---------------------------------------------------------------------------

    AAR states that, ``it remains unclear whether the Board will even 
disclose when deciding the case the methodology it used to choose the 
winner.'' (AAR Comment 19.) To clarify, when deciding a case under 
FORR, the Board would explain the basis for its decision, as it does in 
every case. AAR's concern apparently stems from a comment made by the 
TRB Professors, who suggest that the Board can ``fully . . . discharge 
its obligations without going into detail on the reasons it chose one 
offer rather than the other.'' (TRB Professors Comment 5.) However, in 
a FORR case, as in all other cases, the Board would have to provide 
enough detail to supply a reasoned basis for its decision. See, e.g., 
Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 
29, 43 (1983). Consequently, AAR's concern that the Board would issue 
FORR decisions without explaining its reasons for selecting one offer 
rather than the other, or on the reasonableness determination as to the 
challenged rate, is unfounded.\52\
---------------------------------------------------------------------------

    \52\ AAR claims that FORR would not require the parties' offers 
or supporting methodologies to incorporate the stated review 
criteria. (AAR Comment in Response to Mem. 3, Aug. 12, 2020.) 
However, as the NPRM explained, a party that disregards these 
criteria would likely lose, because the criteria will guide the 
Board's determinations. See NPRM, EP 755 et al., slip op. at 11. AAR 
fails to distinguish this situation from any other litigation, where 
a party can choose to submit pleadings that disregard the 
substantive principles governing the proceeding, but in doing so 
scuttle its own case.
---------------------------------------------------------------------------

    AAR argues that, because FORR would rely on general criteria rather 
than a pre-determined methodology, FORR decisions would not provide 
useful guidance in future cases even if the Board did explain its 
reasoning. (AAR Comment 20.) It is a significant overstatement to 
claim, as AAR does, that FORR decisions would provide ``little if any 
guidance'' to future litigants. As parties observe which methodologies 
can be successfully employed within the constraints of FORR, they could 
adopt--and perhaps even improve upon--those methodologies in future 
cases. AAR appears to assume that each FORR case would involve a 
completely different methodology than any prior case. Such a 
development is possible, but parties have strong incentives to be 
guided by precedent, because it is more efficient to build on economic 
and legal work that has already been performed in prior cases. Also, 
parties to other proceedings involving case-specific, multi-factor 
tests can and do cite precedent on a regular basis. See, e.g., Ark. 
Elec. Coop. Opening Evid. & Arg. 4-5, Mar. 16, 2010, Ark. Elec. Coop.--
Pet. for Declaratory Ord., FD 35305 (unreasonable practice case); UP 
Reply 31-38, May 5, 2015, Sherwin Alumina Co. v. Union Pac. R.R., NOR 
42143 (common carrier obligation case).

C. Board Precedent

    AAR asserts that any rate reasonableness process adopted by the 
Board must be ``tethered to'' CMP,\53\ arguing that FORR deviates from 
``historic agency practice.'' (See AAR Comment 14; see also CN Comment 
11-14.) However, AAR overstates the degree to which the Board has 
adhered to CMP in developing previous rate reasonableness processes. In 
adopting the Three-Benchmark test, the Board stated:
---------------------------------------------------------------------------

    \53\ CMP, which the ICC adopted in Coal Rate Guidelines, 
contains three main constraints on the extent to which a railroad 
may charge differentially higher rates on captive traffic. The 
revenue adequacy constraint is intended to ensure that a captive 
shipper will ``not be required to continue to pay differentially 
higher rates than other shippers when some or all of that 
differential is no longer necessary to ensure a financially sound 
carrier capable of meeting its current and future service needs.'' 
Coal Rate Guidelines, 1 I.C.C.2d at 535-36. The management 
efficiency constraint is intended to protect captive shippers from 
paying for avoidable inefficiencies (whether short-run or long-run) 
that are shown to increase a railroad's revenue need to a point 
where the shipper's rate is affected. Id. at 537-42. The SAC 
constraint is intended to protect a captive shipper from bearing 
costs of inefficiencies or from cross-subsidizing other traffic by 
paying more than the revenue needed to replicate rail service to a 
select subset of the carrier's traffic base. Id. at 542-46.

whether using an SAC analysis or CMP's alternative top-down approach 
(both of which are highly data-intensive), a CMP presentation can be 
quite expensive and thus not feasible where the amount of money at 
issue is not great enough to justify the expense. Accordingly, the 
ICC instituted this rulemaking in 1986 to search for simpler, less 
expensive procedures for assessing rate reasonableness in small 
---------------------------------------------------------------------------
cases.

Non-Coal Proc., 1 S.T.B. at 1008 (footnote omitted). The Board also 
explained the development of Three-Benchmark as follows: ``the ICC 
decided that it must find some means other than CMP to meet the dual 
objectives of

[[Page 67636]]

enabling a railroad to differentially price its traffic and protecting 
a complaining captive shipper from bearing an undue share of a 
carrier's revenue requirements.'' Id. at 1012-13. The Board concluded 
that ``other procedures can, and indeed must, be made available for 
those cases in which CMP simply cannot be used--because the traffic is 
so infrequent or widely dispersed that it is not susceptible to a SAC 
presentation or because the case is so small in value that the 
substantial expense of a CMP presentation (whether through the top-down 
approach or SAC's bottom-up approach) cannot be justified.'' Id. at 
1021 (footnote omitted).
    Similarly, when the ICC began the inquiry that led to the Three-
Benchmark test, it explained that its Coal Rate Guidelines decision, 
the source of CMP, might not be a good fit outside the circumstances 
for which it was developed: ``[Coal Rate Guidelines] arose out of a 
request to set rate standards for high-volume shipments from newly-
developed reserves in the Western United States. We acknowledge that 
the specifics of the guidelines finally adopted are particularly well 
suited to high-volume, long-term movements, where the cost and 
complexity of rate regulation are not disproportionate to the public 
and private interest in developing economically efficient rates.'' Rate 
Guidelines--Non-Coal Proc., EP 347 (Sub-No. 2), slip op. at 1-2 (ICC 
served May 21, 1986).\54\
---------------------------------------------------------------------------

    \54\ In the Simplified Standards NPRM, the Board stated that, 
``while this Three-Benchmark approach would not replicate directly 
the results of a SAC analysis, it would import that constraint 
indirectly by comparing the challenged rate against rates for other 
potentially captive movements that are constrained by some form of 
the SAC test.'' Simplified Standards NPRM, EP 646 (Sub-No. 1), slip 
op. at 28. That characterization, however, relied directly on the 
eligibility criteria that the Board had initially proposed (because 
the criteria would ensure that most rates were not eligible for 
Three-Benchmark, meaning that most rates in a comparison group would 
be constrained by SAC, see id.)--and the Board chose not to adopt 
those criteria in the final rule. See Simplified Standards, EP 646 
(Sub-No. 1), slip op. at 89-94.
---------------------------------------------------------------------------

    To be sure, Three-Benchmark's revenue-to-variable cost (R/VC) 
benchmark tests are meant to account for ``all of the relevant 
statutory and economic principles,'' while meeting the Board's ``dual 
objective'' of both permitting differential pricing and protecting 
captive shippers from bearing an undue share of a railroad's revenue 
requirements. Non-Coal Proc., 1 S.T.B. at 1012-13, 1041.\55\ These are 
the same objectives that support CMP. Id. at 1012-13. AAR argues that, 
unlike SAC or Three-Benchmark, FORR does not account for ``market-
driven outcomes and principles.'' (AAR Comment 14; see also BNSF 
Comment 7.) The FORR review criteria, however, expressly account for 
these factors. See NPRM, EP 755 et al., slip op. at 10-11. If a 
complainant's FORR presentation does not adequately account for the 
necessity of demand-based differential pricing, for example, it likely 
would be unable to prove that the challenged rate is unreasonable.
---------------------------------------------------------------------------

    \55\ BNSF argues that approaches relying on R/VC ratios, 
including the 180 R/VC threshold, are inaccurate. (See BNSF Comment 
4.) This resembles a position adopted by the TRB Professors in their 
report, but as the TRB Report acknowledges, reliance on R/VC ratios 
(at least for market dominance) is built into the statute and would 
require the enactment of legislation to remove. See TRB Rep. 134-35. 
Also, even if BNSF were correct, its argument would support the 
Board's adoption of FORR: the Board's existing rate processes all 
rely on R/VC ratios, and although some FORR cases might also use R/
VCs (depending on the methodology selected), it is likely that not 
all FORR cases would do so.
---------------------------------------------------------------------------

    According to AAR, the Board's existing processes have been fine-
tuned through notice and comment and judicial review, and the Board has 
not provided a reasoned explanation for its departure from those 
established methods. (AAR Comment 14-15; see also BNSF Comment 5-6; CN 
Comment 14.) \56\ However, the FORR proposal arose in the context of 
the agency's long and difficult search for a solution for smaller rate 
disputes, and the NPRM explained in detail the reason for its proposal. 
See NPRM, EP 755 et al., slip op. at 3-4, 6-7, 17. Again, the Board and 
the ICC have already recognized the need for non-CMP methods, and FORR 
expressly accounts for ``the basic economic principles that have long 
guided the Board in judging the reasonableness of rates,'' (AAR Comment 
15). BNSF argues in addition that, under FORR, a party could ``select 
only the favorable elements of an existing methodology while discarding 
less favorable elements (including essential procedural protections).'' 
(BNSF Comment 5-6.) However, if a party relies on a modified version of 
an existing methodology that deviates from the principles identified in 
the NPRM as review criteria, the party is less likely to succeed on 
rate reasonableness, and if necessary, selection of an offer. And if a 
party's submission is deficient, as BNSF appears to contemplate, the 
opposing party can explain this deficiency in its reply.
---------------------------------------------------------------------------

    \56\ CN cites McCarty Farms Appeal to argue that ``the 
unexplained jettisoning of CMP cannot pass for reasoned decision-
making.'' (CN Comment 14.) But in McCarty Farms Appeal, the court 
concluded that the ICC had not sufficiently explained its adoption 
of a particular comparison-group methodology only after finding that 
the methodology had ``no evident connection'' to the statutory goals 
undergirding CMP, including railroad revenue adequacy. Id. at 595-
99. By contrast, in resolving a dispute under FORR the Board would 
account for the relevant statutory criteria, including (as explained 
further below) revenue adequacy.
---------------------------------------------------------------------------

    Finally, AFPM argues that ``appropriate economic principles'' 
should not include agency precedent because the industry has changed 
dramatically due to consolidations. (AFPM Comment 7.) The Board 
disagrees. Board and ICC precedent would have value in the FORR small 
dispute context--it constitutes a significant part of the agency's 
implementation of Staggers and ICCTA, establishes important concepts, 
and has been tested on judicial review \57\--and that is true even if 
the specific methodologies developed and implemented in prior cases do 
not turn out to be the ones used in a given FORR case.\58\
---------------------------------------------------------------------------

    \57\ See, e.g., Consol. Rail Corp v. United States, 812 F.2d 
1444 (3d Cir. 1987); BNSF Ry. v. STB, 526 F.3d 770 (D.C. Cir. 2008); 
BNSF Ry. v. STB, 748 F.3d 1295 (D.C. Cir. 2014).
    \58\ Also, contrary to AFPM's suggestion, much of the cited 
precedent was developed after industry consolidation. See, e.g., 
Union Pac. Corp.--Control & Merger--S. Pac. Rail Corp., 1 S.T.B. 233 
(1996) (merger); CSX Corp.--Control & Operating Leases/Agreements--
Conrail Inc., 3 S.T.B. 196 (1998) (acquisition and division of 
assets); Rep. on Rate Case Rev. Metrics, 3d Quarter 2021, available 
at https://www.stb.gov/wp-content/uploads/Report-on-Rate-Case-Review-Metrics-Third-Quarter-October-1-2021.pdf (listing 19 rate 
case dockets that reached merits decisions after 1998); Simplified 
Standards, EP 646 (Sub-No. 1) (one of several rate reasonableness 
rulemakings completed after 1998).
---------------------------------------------------------------------------

Part V--Discovery and Procedural Schedule

    Railroad interests raised concerns with the NPRM's proposed 
approaches to discovery and the FORR procedural schedule. Shipper 
interests proposed several changes to these approaches. Below, the 
Board addresses the comments and changes proposed in this SNPRM in 
response to comments.

A. Discovery

    In the NPRM, the Board proposed to disallow litigation over 
discovery disputes in FORR cases. NPRM, EP 755 et al., slip op. at 8. 
Instead, the Board proposed to take any 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. Id. Railroad interests strongly oppose the proposal to rely 
on adverse inferences rather than motions to compel. (See AAR Comment 
3, 18-19; BNSF Comment 6-7; UP Comment 23.) The Coalition Associations 
also

[[Page 67637]]

oppose this proposal and recommend instead that the Board adopt an 
expedited process for motions to compel. (Coalition Ass'ns Comment 10-
11; see also UP Comment 23 (``if the Board were to move forward with 
FORR, it would have to develop actual procedures for resolving 
discovery disputes.'').) Other shipper interests, while not directly 
opposing the proposal, question how it would apply. (See AFPM Comment 
5-6; NGFA Comment 7-8, 10.)
    The Board acknowledges the concerns raised over the use of adverse 
inferences and recognizes that a motion to compel procedure would 
present a more exacting means of resolving discovery disputes. 
Therefore, although it detracts from the Board's goal of a highly 
expedited procedural schedule, the Board proposes to remove the use of 
adverse inferences and instead adopt a process for motions to compel 
similar to the Coalition Associations' proposal.
    Under the proposed process, each party would be permitted to file a 
single motion to compel that aggregates all of the discovery disputes 
with the other party. (Coalition Ass'ns Comment 10.) A motion to compel 
would need to explain how the requested material is relevant either to 
a methodology that the party may present in its opening submission or 
to market dominance. Each party's motion to compel, if any, would have 
to be filed on the 10th day before the close of discovery (or, if not a 
business day, the last business day immediately before the 10th day). 
The procedural schedule would be tolled while motions to compel are 
pending. (Id.) Each party would be permitted seven days to reply to the 
other party's motion to compel, but in the interest of expediting the 
schedule (and contrary to the Coalition Associations' proposal), 
replies to replies would not be permitted. (See id.) The Board would 
issue a decision in 10 business days. Upon issuance of a decision on 
motions to compel, the procedural clock would resume, and any party 
ordered to respond to discovery would have to do so within the 
remaining 10 days in the discovery period. (See id.) The Board also 
proposes to grant the Coalition Associations' request to extend the 
discovery period from 21 days to 35 days; otherwise, with motions to 
compel now permitted, parties would have to file such motions after 
only 11 days of discovery. (See Coalition Ass'ns Comment 9-10; AAR 
Comment 23 (expressing concern that FORR would provide too little time 
for record development).) Because parties would be able to use motions 
to compel for discovery enforcement, the Board would not adopt the 
NPRM's alternative procedure involving adverse inferences.\59\ Despite 
this addition, parties should seek to resolve discovery disputes among 
themselves rather than filing motions to compel. See 49 CFR 
1114.31(a)(2)(i) (motions to compel in stand-alone cost and simplified 
standards rate cases--which would now include FORR--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).
---------------------------------------------------------------------------

    \59\ Though the Board no longer proposes to adopt the adverse 
inferences discussed in the NPRM, the Board notes that, in the event 
a party does not comply with a Board order on a motion to compel, 
the provisions of 49 CFR 1114.31(b) would apply in a FORR 
proceeding.
---------------------------------------------------------------------------

    Both NGFA and AFPM ask the Board to provide more guidance as to 
what parties should produce in discovery in FORR cases. (See NGFA 
Comment 7-8, 10; AFPM Comment 5-6.) The Board understands NGFA's and 
AFPM's interest in reducing uncertainty with respect to discovery. But 
the material a party seeks in discovery depends to a significant extent 
on the methodology it plans to present. Above, the Board describes 
examples of methodologies that a party might present in a FORR case; 
information in support of one of these methodologies would be a type of 
material that parties could seek in discovery, provided that it is 
appropriately limited in scope and production burden given the brief 
discovery period. See NPRM, EP 755 et al., slip op. at 8 (``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''). The Board confirms, as suggested by NGFA, that a complainant 
may notify the defendant of the data and information it intends to seek 
in discovery at the same time it provides notice of its intent to file 
a complaint. (NGFA Comment 9-10.)
    The Coalition Associations argue that, because rate reasonableness 
methodologies could involve revenue adequacy, the Board should make 
more years of waybill data available--enough to cover a business cycle. 
(See Coalition Ass'ns Comment 11-13.) The Coalition Associations are 
correct that, depending on the methodology a party chooses, more than 
four years of waybill data could be relevant. That would not be the 
case in every FORR proceeding, however, and the Board is mindful of the 
need to disclose no more confidential waybill data than necessary. See 
Proc. on Release of Data from the ICC Waybill Sample, 4 I.C.C.2d 194, 
197-212 (1987). Therefore, four years of waybill data would be the 
default in FORR cases, but a party could request more years if special 
circumstances support such a request in an individual case. Also, as 
requested by the Coalition Associations, the Board confirms that, as in 
Three-Benchmark cases, waybill access (subject to appropriate 
protective orders) would include the full sample, including unmasked 
revenue. (See Coalition Ass'ns Comment 13.)

B. Procedural Schedule

    AAR argues that the burden of FORR's short timelines falls 
disproportionately on the defendant, because the complainant can take 
as much time as it wants to prepare its case before initiating 
litigation. (See AAR Comment 23; see also BNSF Comment 7 (contending 
without explanation or citation of authority that the impact of these 
deadlines is contrary to complainants' burden of proof).) To a certain 
degree, AAR's arguments simply reflect the nature of litigation. A 
plaintiff in a civil action in court controls the timing of case 
initiation and therefore has essentially unlimited time to prepare its 
case (subject to the statute of limitations), because it decides when 
to file a complaint. The defendant in such a case has to prepare its 
response with limited time. And the Board notes that this situation 
exists in the Board's other rate reasonableness processes as well.
    It is true that this imbalance may be more pronounced under FORR 
because the deadlines are shorter and the methodology more flexible. 
But this imbalance would be mitigated by the Board's proposal to extend 
the discovery deadlines and adopt a motion to compel process, as 
discussed above, and to require a mandatory mediation period, as 
discussed below. Moreover, the Coalition Associations point out that, 
unlike defendants, complainants must make their cases largely based on 
information in the possession of the opposing party. (See Coalition 
Ass'ns Comment 9.) In this regard, shorter discovery deadlines favor 
the defendants and further balance out the burden that railroad 
interests describe. In any event, even assuming that the procedural 
schedule in FORR might, in some cases, place a proportionately greater 
burden upon defendants than in other rate review processes, such a 
burden must be weighed against the likelihood that rate relief may be 
functionally unavailable in a small dispute.

[[Page 67638]]

    In addition to proposing to lengthen several deadlines in the 
record development portion of a FORR proceeding, the Coalition 
Associations propose to reduce the Board's decision time from 90 days 
to 60 days. (Coalition Ass'ns Comment 8.) The Coalition Associations 
state as support the fact that Canadian final offer arbitration 
provides for decisions in as little as 30 days and no more than 60 
days. (Id.) The Board declines to adopt this proposal. Canadian final 
offer arbitration decisions are informal, confidential, non-
precedential, and may be formulated by a single individual. See Canada 
Transp. Act, S.C. 1996, c. 10, as amended, section 161(1) (Can.) 
(arbitration is conducted by a single arbitrator unless the parties 
agree to have a panel of three arbitrators). FORR decisions, by 
contrast, would be public precedential decisions that must be supported 
by a majority of the Board, which can have as many as five decision-
makers. Moreover, FORR decisions are subject to the requirements of the 
APA, including the requirement that the agency ``articulate a 
satisfactory explanation for its action including a rational connection 
between the facts found and the choice made.'' See Motor Vehicle Mfrs. 
Ass'n, 463 U.S. at 43 (internal quotation marks omitted).
    In the NPRM, the Board proposed to omit mandatory mediation because 
it would add time and possibly expense but stated that the Board would 
be prepared to facilitate mediation if requested by the parties. NPRM, 
EP 755 et al., slip op. at 14. CN argues that this explanation does not 
account for an interest in mediation ``to promote positive and mutually 
agreeable outcomes for the parties.'' (CN Comment 17-18.) NGFA, by 
contrast, argues that mandatory mediation is unnecessary in FORR cases. 
(NGFA Reply Comment 16.) NGFA asserts that, if a shipper reaches the 
point of filing a complaint, it has already reached an impasse in 
commercial negotiations with the railroad. (Id.) But the Board's 
mediation program has led to post-complaint settlements, to the benefit 
of the parties and the Board. See, e.g., Twin City Metals, Inc. v. KET, 
LLC, NOR 42168 (STB served Sept. 23, 2020). After reviewing the 
comments, the Board agrees with CN that mediation can produce 
substantial benefits, and is persuaded, based on the current record, 
that the possibility of achieving settlement through mediation would 
outweigh a modest lengthening of FORR's procedural timeline. See, e.g., 
Assessment of Mediation & Arb. Proc., EP 699, slip op. at 2, 4 (STB 
served May 13, 2013) (``The Board favors the resolution of disputes 
through the use of mediation and arbitration procedures, in lieu of 
formal Board proceedings, wherever possible . . . . If a dispute is 
amicably resolved, it is likely that the parties would incur 
considerably less time and expense than if they used the Board's formal 
adjudicatory process.'') Therefore, the Board now proposes to include 
mandatory mediation in FORR cases, ensuring that FORR's mediation 
approach remains consistent with other rate reasonableness procedures.
    To accommodate a 20-day mediation period, the Board will extend the 
pre-complaint notification period by 20 days beyond the time period 
proposed in the NPRM, to a total of 25 days. This timing is analogous 
to SAC, where mediation takes place between the pre-complaint 
notification and the filing of the complaint. See 49 CFR 1109.4. Also 
analogous to SAC, the mediation period in FORR cases would begin on the 
date of appointment of the mediator(s).\60\ See section 1109.4(f). Both 
of these features--beginning mediation before the filing of the 
complaint, and having the mediation period run from the date of 
appointment of the mediator(s)--are intended to preserve as much as 
possible the expedited nature of the FORR procedures themselves.
---------------------------------------------------------------------------

    \60\ The Board would appoint a mediator or mediators as soon as 
possible after the filing of the notice of intent to initiate a 
case. Also, as in the Board's other rate case processes, parties 
would be required to meet or otherwise discuss discovery and 
procedural matters. In FORR cases, this discussion would be required 
to take place within three days after the complaint is filed.
---------------------------------------------------------------------------

    The following procedural schedule is the result of the changes 
described:

 
 
 
Day -25.............................  Complainant files and serves
                                       notice of intent to initiate
                                       case; mediation begins on date of
                                       appointment of mediator(s).
Day 0...............................  Complainant files complaint;
                                       discovery begins.
Day 35..............................  Discovery ends.
Day 49..............................  Simultaneous filing of rate
                                       reasonableness analyses, final
                                       offers, and complainant's market
                                       dominance presentation.
Day 59..............................  Simultaneous filing of replies;
                                       defendant's market dominance
                                       reply.
Day 66..............................  Complainant's letter informing the
                                       Board whether it elects an
                                       evidentiary hearing on market
                                       dominance.
Day 73..............................  Optional telephonic evidentiary
                                       hearing before administrative law
                                       judge (market dominance).
Day 149.............................  Board decision.
 

    The filing of a motion to compel by either party would toll this 
schedule as discussed above.
    As stated in the NPRM, this timeline balances 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 overall duration of 
the proceeding. NPRM, EP 755, slip op. at 14.
    To preserve the effects of the procedural limitations described 
above, requests for extensions of time would be strongly disfavored, 
even if both parties consent to the request. Therefore, parties are 
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 additional 
mediation, are 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.
    Additional procedural schedule issues regarding market dominance 
are addressed below.
Part VI--Market Dominance

A. Procedural Issues

    The Board indicated in the NPRM that both complainant and defendant 
would be required to submit market dominance analyses as part of their 
simultaneous opening submissions. See NPRM, EP 755, slip op. at 12 
(``On reply parties would not be able to modify their market dominance 
presentations. . . .''), 14 (``Simultaneous filing of market dominance 
presentations'') (emphasis added). The Board is concerned, however, 
that doing so would require the defendant to anticipate in this opening 
submission what the complainant might present regarding market 
dominance, without even knowing (as discussed below) whether the 
complainant has selected streamlined or non-streamlined market 
dominance. Accordingly, the Board proposes to revise the procedure so 
that only the complainant--as the party with the burden--is required to 
submit market dominance evidence on opening. Only the defendant would 
be required to address market dominance on reply. This approach is 
aligned with the pleadings in Three-Benchmark. See 49 CFR 
1110.10(a)(2)(i)(F), (H).
    The procedural schedule proposed above reflects two differences 
from the market dominance timeline established in Market Dominance 
Streamlined Approach, Docket No. EP 756. See 49

[[Page 67639]]

CFR 1111.12. The complainant's letter informing the Board whether it 
elects an evidentiary hearing would be due seven days after the filing 
of replies, rather than 10 days, in recognition of FORR's expedited 
schedule. Cf. section 1111.12(d)(2). And the hearing itself would be 
held 14 days after replies, unless the parties agree on an earlier 
date, rather than the date when the complainant's rebuttal evidence 
would be due, because FORR does not include written rebuttal evidence. 
Cf. id.

B. Option To Use Non-Streamlined Market Dominance

    In the NPRM, the Board proposed that FORR could only be used if the 
complainant also elected to use the streamlined market dominance 
approach, which at that time was proposed in Market Dominance 
Streamlined Approach, Docket No. EP 756. NPRM, EP 755 et al., slip op. 
at 9. The streamlined market dominance approach has since been adopted. 
The Board stated that the streamlined market dominance approach ``would 
complement and enhance the streamlined rate reasonableness procedure 
proposed here'' and that ``the expedited timelines proposed here may 
make it too difficult for parties to litigate a non-streamlined market 
dominance presentation.'' NPRM, EP 755 et al., slip op. at 9. However, 
the Board also recognized that ``there may be merit to giving 
complainants the option of choosing between streamlined and non-
streamlined market dominance in FORR cases,'' and expressly sought 
comment on whether complainants should have this choice. Id. at 9-10.
    Some shipper interests advocate giving complainants such a choice, 
while others support the restriction of FORR to streamlined market 
dominance.\61\ (See AFPM Comment 6 (supporting restriction); NGFA 
Comment 9 (same); Olin Comment 18 (FORR should not be restricted to 
streamlined market dominance; if non-streamlined market dominance 
proves to be an issue, the Board can address it later, e.g., by 
imposing page limits); Coalition Ass'ns Comment 13-15 (opposing 
restriction and proposing bifurcated pleadings when complainant chooses 
non-streamlined market dominance); NGFA Reply Comment 4 (NGFA does not 
object to the Coalition Associations' proposal); see also TRB 
Professors Comment 4 (``We see no rationale for this restriction. If 
complainants can make a showing of dominance in other ways without 
violating the FORR time limits, they should be permitted to do so.'').)
---------------------------------------------------------------------------

    \61\ Railroad interests did not address this issue.
---------------------------------------------------------------------------

    The Board is persuaded by Olin, the Coalition Associations, and the 
TRB Professors that complainants should have the option of choosing 
between streamlined and non-streamlined market dominance in FORR cases. 
Accordingly, the Board now proposes not to limit FORR complainants to 
streamlined market dominance. Limiting FORR in this way could 
effectively deny access to FORR for many potential complainants--those 
who are unable to satisfy one or more of the streamlined factors--which 
is contrary to FORR's goal of improving access to rate reasonableness 
determinations. Instead, complainants in this situation would be 
permitted to try to carry their market dominance burden using a non-
streamlined presentation if they believe they can do so in the time 
available. See Mkt. Dominance Streamlined Approach, EP 756, slip op. at 
1 (``It is established Board precedent that the burden is on the 
complainant to demonstrate market dominance.''). The fact that 
complainants would have less time to do so in a FORR case does not 
diminish this burden; complainants choosing non-streamlined market 
dominance would still have to demonstrate ``an absence of effective 
competition from other rail carriers or modes of transportation for the 
transportation to which a rate applies,'' 49 U.S.C. 10707(a).
    Providing this choice is intended to ensure that FORR can proceed 
where market dominance can be established with relatively 
straightforward evidence (commensurate with the small disputes that 
FORR addresses with respect to rate reasonableness), even if the 
complainant is unable to use the streamlined approach. Whether market 
dominance is actually straightforward enough to allow a complainant to 
meet its burden in a very short time must be evaluated by the 
complainant; by choosing non-streamlined market dominance in a FORR 
case, the complainant would assume the risks presented by the short 
FORR timeline. Requests for extension of time would be strongly 
disfavored, as discussed above, even if the complainant chooses non-
streamlined market dominance. Therefore, complainants should not choose 
non-streamlined market dominance with the expectation that the Board 
will grant extensions sufficient to allow them to assemble a market 
dominance presentation as voluminous as the ones in other rate 
reasonableness procedures.
    The Board recognizes that defendants are likely to face a more 
difficult analysis in a case using non-streamlined market dominance, 
and unlike complainants, they may not have time to prepare in advance 
of litigation. Therefore, in cases where the complainant chooses non-
streamlined market dominance, the deadline for replies would be 
extended by 20 days. The resulting 30-day interval between opening and 
reply aligns with Three-Benchmark cases, where complainants may also 
elect to use non-streamlined market dominance. See 49 CFR 
1111.10(a)(2)(i)(H).\62\
---------------------------------------------------------------------------

    \62\ The Board rejects the Coalition Associations' proposal to 
add a separate round of pleadings for market dominance. (See 
Coalition Ass'ns Comment 14.) The Coalition Associations make this 
proposal in response to the Board's concern that that ``the 
expedited timelines proposed here may make it too difficult for 
parties to litigate a non-streamlined market dominance 
presentation.'' NPRM, EP 755, slip op. at 9. But for reasons 
explained above, the Board has proposed a different approach to 
address this concern. Moreover, the Coalition Associations' 
proposal, which would add three more rounds of pleadings (market 
dominance opening, market dominance reply, and market dominance 
rebuttal), (see Coalition Ass'ns Comment 14), is disproportionate to 
FORR, which is intended to be simplified and expedited.
---------------------------------------------------------------------------

    Complainants must state their choice of streamlined or non-
streamlined market dominance in their opening market dominance 
submission. See Mkt. Dominance Streamlined Approach, EP 756, slip op. 
at 37 (``the Board agrees with WCTL that shippers may not be able to 
decide whether to pursue a streamlined market dominance approach until 
discovery has been completed.'').\63\
---------------------------------------------------------------------------

    \63\ Because complainants would not state their choice between 
streamlined and non-streamlined market dominance until their opening 
submissions, see Mkt. Dominance Streamlined Approach, EP 756, slip 
op. at 37, it would be impractical to extend the deadline for 
opening submissions in cases using non-streamlined market dominance 
as the Board has done for replies. Such an increase would be 
inappropriate in any event, because expedited timelines are part of 
the core concept of FORR, and because it is the complainant's choice 
to use non-streamlined market dominance.
---------------------------------------------------------------------------

    The following procedural schedule would apply in cases where the 
complainant elects non-streamlined market dominance:

 
 
 
Day -25.............................  Complainant files and serves
                                       notice of intent to initiate
                                       case; mediation begins on date of
                                       appointment of mediator(s).
Day 0...............................  Complainant files complaint;
                                       discovery begins.
Day 35..............................  Discovery ends.
Day 49..............................  Simultaneous filing of rate
                                       reasonableness analyses, final
                                       offers, and complainant's market
                                       dominance presentation.
Day 79..............................  Simultaneous filing of replies;
                                       defendant's market dominance
                                       reply.

[[Page 67640]]

 
Day 169.............................  Board decision.
 

    The filing of a motion to compel by either party would toll this 
schedule as discussed above.

Part VII--Relief Cap

    In the NPRM, the Board proposed to establish a relief cap of $4 
million, indexed annually using the Producer Price Index, which would 
apply to an award of reparations,\64\ a rate prescription or any 
combination of the two. NPRM, EP 755 et al., slip op. at 16. This is 
consistent with the potential relief afforded under the Three-Benchmark 
methodology.\65\ Id. The Board further proposed that any rate 
prescription be limited to no more than two years unless the parties 
agree to a different limit on relief. NPRM, EP 755, slip op. at 14. 
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 also requested comment on 
the advisability of a two-tiered relief procedure in which the top tier 
has a longer procedural schedule and no limit on the size of the 
relief. NPRM, EP 755 et al., slip op. at 16.
---------------------------------------------------------------------------

    \64\ The standard reparations period reaches back two years 
prior to the date of the complaint. 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).
    \65\ As proposed, 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.
---------------------------------------------------------------------------

    Railroad interests object to the proposed relief cap, arguing that 
it is too high. AAR argues that the $4 million relief cap is arbitrary 
because, in this context, it is not based on the cost of litigating the 
next-more-complicated method, on which the Board relied in setting 
relief caps for other rate reasonableness procedures. (AAR Comment 23; 
see also CN Comment 14-16; UP Comment 23-24.) The NPRM, however, 
explained why it would not make sense to rely on the next-more-
complicated method here: ``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.'' NPRM, EP 755 et al., slip op. at 
15. And the NPRM also explained the Board's rationale for applying a $4 
million relief cap: ``[a]pplying 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.'' Id. at 16.
    According to UP, putting FORR and Three-Benchmark into the same 
``small case'' category does not make sense because the Board 
``justifies the adoption of the FORR procedure on the basis that it 
would be more affordable to litigate than the Three Benchmark test.'' 
(UP Comment 24.) Instead, UP argues, the FORR relief cap ``should be 
designed to funnel into the Three Benchmark test,'' which UP suggests 
is the next-more-complicated procedure. (See UP Comment 24; see also CN 
Comment 15-16.) \66\ UP assumes without support that the cost of a 
procedure is a perfect proxy for its accuracy, so that if FORR is less 
costly to litigate than Three-Benchmark, it must be less accurate. (See 
UP Comment 24 (``If the FORR procedure were just as expensive and 
accurate as the Three Benchmark test, there would be no need for the 
Board to adopt the proposed rule. . . . [T]he proposal's significant 
discovery limitations and abbreviated timeline . . . would inevitably 
sacrifice precision.'').) \67\ The Board disagrees. By applying fast 
timelines and a simplified procedure, the Board intends that FORR would 
be less costly to litigate, but that does not inevitably mean the 
analysis is less accurate. Parties' ability to choose their methodology 
would allow the use of analyses that are equally accurate or more 
accurate, if the party presenting it can prepare the analysis quickly 
enough to present it in the time available.\68\ This is to say that 
UP's argument unnecessarily forecloses the possibility that FORR will 
strike a better ``balance'' than Three-Benchmark between providing a 
``reasonably accurate methodology'' while avoiding the expense 
associated with SAC. See BNSF Ry., 453 F.3d at 482.
---------------------------------------------------------------------------

    \66\ CN states that the estimated cost of bringing a Three-
Benchmark case is $250,000. (CN Comment 16 (citing Simplified 
Standards, EP 646, Sub-No. 1, slip op. at 32).) But the most 
recently reported estimate of the cost to litigate a Three-Benchmark 
case is actually $500,000, based on a case completed in 2010. See US 
Magnesium, L.L.C. Comment, V.S. Howard Kaplan 4, Oct. 23, 2012, Rate 
Regul. Reforms, EP 715.
    \67\ As part of an argument that a final offer procedure will 
increase the cost and complexity of rate cases, UP claims that ``the 
90 days the Board now proposes to grant itself to decide each case, 
see NPRM, EP 755 et al., slip op. at 14--the same amount of time as 
for a Three Benchmark case, see Simplified Standards, [EP 646 (Sub-
No. 1),] slip op. at 23--appears to be a recognition that deciding 
cases under the FORR proposal would require the evaluation of 
complex, competing evidentiary submissions.'' (UP Comment 19-20.) 
UP's expectation that FORR cases would present ``complex 
analyses''--analogizing to Three-Benchmark, (id.)--undermines its 
argument in the context of the relief cap that FORR's procedural 
streamlining renders it less accurate than Three-Benchmark, (id. at 
24).
    \68\ UP claims that ``the Board also relies on the fact that 
Canada caps the relief available under its final offer framework,'' 
and yet the Board does not explain why FORR would have a higher 
relief cap than Canadian final offer arbitration. (UP Comment 24.) 
UP mischaracterizes the NPRM. The NPRM clearly referenced the 
Canadian relief cap in seeking comment on the two-tier idea; it did 
not ``rel[y] on the fact that Canada caps relief'' as support for 
the $4 million relief cap. NPRM, EP 755 et al., slip op. at 16. In 
any event, as discussed above, Canadian final offer arbitration is 
an informal, non-precedential process.
---------------------------------------------------------------------------

    CN argues that the $4 million relief cap is actually higher than 
the $4 million cap on Three-Benchmark because a complainant can use 
FORR every two years rather than every five years. (CN Comment 15-16.) 
CN is correct that FORR, as proposed, could be used more frequently 
than Three-Benchmark, but that difference is offset by the fact that a 
FORR complainant could only receive a rate prescription for two years 
rather than five years under Three-Benchmark. A FORR complainant may 
not be able to receive the full $4 million because its rate 
prescription expires at the two-year mark; a Three-Benchmark 
complainant, by contrast, would have three more years to receive the 
benefits of a prescription.
    AAR also contends that the $4 million relief cap would not limit 
FORR to small cases because there is no limit on disaggregation of 
cases. (See AAR Comment 23-24 (``a large chemical company could file 
100 simultaneous FORR complaints for the same rate for the 
transportation of the same commodity for 100 different origin and 
destination pairs and potentially win $4 million for each 
complaint.'').) If disaggregation actually proved to be a problem, the 
Board could address it as it has committed to do in Three-Benchmark 
cases.\69\ But as discussed below, the Board has not held that the mere 
filing of simultaneous Three-Benchmark cases by the same complainant 
automatically constitutes ``abuse'' or ``improper'' disaggregation.

[[Page 67641]]

See E.I. DuPont de Nemours & Co. v. CSX Transp., Inc., NOR 42099 et 
al., slip op. at 3-4 (STB served Jan. 22, 2008).
---------------------------------------------------------------------------

    \69\ See Simplified Standards, EP 646 (Sub-No. 1), slip op. at 
32-33 (``The limits on relief that we establish here do not include 
a mechanical mechanism to police against attempts to divide a large 
dispute into multiple smaller disputes. It is not clear that such a 
mechanism is necessary at this time. The Board has ample discretion 
to protect the integrity of its processes from abuse, and we should 
be able to readily detect and remedy improper attempts by a shipper 
to disaggregate a large claim into a number of smaller claims, as 
the shipper must bring these numerous smaller cases to the 
Board.'').
---------------------------------------------------------------------------

    Shipper interests, by contrast, object to the proposed relief cap 
because they believe it is too low or that there should be no cap at 
all. (See Coalition Ass'ns Comment 15-17; AFPM Comment 9; Farmers Union 
Reply Comment 5; Olin Comment 15-16; USDA Comment 5-7; USW Comment in 
Response to Mem. 5; WCTL Comment 8-9; see also TRB Professors Comment 5 
(arguing against a cap).)
    The Coalition Associations argue that reparations should not apply 
towards the $4 million relief cap, suggesting that the Board could 
adopt a separate cap for reparations, or, if the cap applies to both 
reparations and rate prescriptions, it should be $8 million. (See 
Coalition Ass'ns Comment 15.) The combined cap that the Coalition 
Associations find confusing, (id.), is identical to the one adopted for 
Three-Benchmark in 2007:

    The limit on relief will apply to the difference between the 
challenged rate and the maximum lawful rate, whether in the form of 
reparations, a rate prescription, or a combination of the two. Any 
rate prescription will automatically terminate once the complainant 
has exhausted the relief available. Thus, the actual length of the 
prescription may be less than 5 years if the shipper ships a large 
enough volume of traffic so that the relief is used up in a shorter 
time.

Simplified Standards, EP 646 (Sub-No. 1), slip op. at 28. The Coalition 
Associations ``agree that the FORR relief caps should be no less than 
the caps previously adopted for Three-Benchmark cases,'' although they 
argue that the cap in Three-Benchmark cases should be higher. 
(Coalition Ass'ns Comment 16 (citing the effects of rate bundling).) 
However, both changes to the relief cap for Three-Benchmark and 
determinations regarding rate bundling are outside the scope of this 
rulemaking. See NPRM, EP 755 et al., slip op. at 4 n.7.
    The Coalition Associations assume that FORR cases would be lane-
specific, with the relief cap applying to a single origin-destination 
pair. (Coalition Ass'ns Comment 16.) They argue that it would be 
unreasonable to require complainants to aggregate multiple origin-
destination pairs into a single case under a single relief cap. (Id. at 
16-17.) The Board intends to address this issue in a manner similar to 
its treatment in Three-Benchmark cases. There, the Board established 
that a complainant is not categorically precluded from filing multiple 
complaints at the same time, with the relief cap applying separately to 
each complaint. See E.I. DuPont de Nemours & Co., NOR 42099 et al., 
slip op. at 3 (``If DuPont wished to seek relief of up to $1 million on 
each individual rate for each origin/destination pair, it needed to 
file separate complaints for each.''). However, the Board retained its 
discretion to prevent the use of Three-Benchmark as ``a vehicle for 
adjudicating multiple parts of a larger dispute.'' Id. at 3-4; 
Simplified Standards, EP 646 (Sub-No. 1), slip op. at 32-33. The Board 
would anticipate doing the same with respect to FORR upon adoption.
    The Coalition Associations further propose that, if a party 
presents a sufficiently rigorous rate methodology, it should be able to 
ask the Board to waive any FORR relief cap on a case-by-case basis. 
(Coalition Ass'ns Comment 17; see also USDA Comment 6 (relief should be 
uncapped if the complainant can ``demonstrate very convincingly the 
rate is exceptionally unreasonable.'').) But the Board's purpose in 
proposing FORR is to fill a gap in the availability of rate 
reasonableness determinations for small disputes. As discussed below in 
reference to the two-tier idea, experiences litigating FORR cases may 
provide further insight into whether FORR could also work in the 
resolution of larger disputes. Therefore, although the Board will not 
propose the Coalition Associations' approach here, this concept or 
similar ones may be considered at a later time.
    Several commenters express concern that defendants could ``game'' 
the relief cap by setting high initial rates such that any relief cap 
will be quickly exhausted, which would in turn free the railroad to 
charge the inflated rate for any remainder of the prescription period. 
(See Olin Comment 17; WCTL Comment 8-9; AFPM Comment 9.) The Board 
would anticipate addressing this conduct in individual cases should it 
happen, and the Board would retain the ability to revise its processes 
to counteract any abuses that may arise. WCTL cites Major Issues, in 
which the Board adopted a relief calculation--the Maximum Markup 
Methodology (MMM)--to foreclose the potential for abuse. (WCTL Comment 
9 (citing Major Issues in Rail Rate Cases, EP 657 (Sub-No. 1), slip op. 
at 9-15 (STB served Oct. 30, 2006)).) But WCTL does not propose the 
adoption of MMM here, and its proposed solution--removing the relief 
cap--would disconnect FORR from its purpose as a small dispute 
resolution mechanism before there is case experience to support such a 
change. As WCTL notes, moreover, the Board adopted a case-by-case 
approach to this issue for its current small rate case procedures in 
Simplified Standards, which was decided almost a year after Major 
Issues. See Simplified Standards, EP 646 (Sub-No. 1), slip op. at 33. 
Olin proposes a different solution: Using the expired contract or 
previously used tariff rates as the starting point for applying the cap 
on reparations and rate prescription. (Olin Comment 17.) Olin offers no 
explanation as to how this solution would work in practice. In any 
event, this may be an appropriate remedy in cases where abuses are 
shown to have occurred, but, consistent with Simplified Standards, the 
Board will not adopt Olin's proposal for all cases in advance.
    USDA states that the Board's practice of using relief caps to 
``channel'' disputes to the appropriate procedure, based on the cost of 
the next-more-complicated procedure, fails to account for potential 
complainants' uncertainty as to their likelihood of success in a rate 
case. (USDA Comment 5-6.) According to USDA, ``it is not clear FORR 
logically fits into the same channeling structure as'' the Board's 
existing rate reasonableness procedures. (USDA Comment 6.) USDA's 
second point directly supports the NPRM, which concluded that, 
``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.'' NPRM, EP 755 et al., slip op. at 15. For that reason, the Board 
has not based its proposed approach on its prior ``channeling'' 
practice here, instead relying on the rationale discussed above. Id. at 
16 (rather than setting a cap based on the next-more-complicated 
procedure, the NPRM proposed a cap based on a general analogy to Three-
Benchmark, given that Three-Benchmark and FORR are both intended for 
use in small rate disputes).
    Finally, some commenters expressed support for the idea of a two-
tiered relief procedure in which the top tier has a longer procedural 
schedule and no limit on the size of the relief. (See, e.g., AFPM 
Comment 10-11; Olin Comment 16; SMA Comment 11-12; TRB Professors 
Comment 5.) However, it would be premature to propose expanding FORR 
beyond its initial purpose, which is permitting access to rate 
reasonableness determinations for small disputes. In the future, the 
Board could assess whether FORR may be appropriate for larger disputes. 
Should that be the case, the Board could consider adopting a two-tiered 
process like the one referenced in

[[Page 67642]]

the NPRM--or other ways of expanding FORR's application.\70\
---------------------------------------------------------------------------

    \70\ This approach bears some resemblance to USDA's suggestion 
of a FORR ``pilot phase.'' (See USDA Comment 5.)
---------------------------------------------------------------------------

    Accordingly, the Board continues to propose the relief cap proposed 
in the NPRM.

Part VIII--Miscellaneous Issues

A. InterVISTAS Report

    AAR states that InterVISTAS Consulting Inc. (InterVISTAS), a 
consultant that prepared a report for the Board in 2016,\71\ rejected 
Canadian final offer arbitration as providing no guidance for rate case 
alternatives, due to the confidentiality of that process. (AAR Comment 
19-20.) AAR implies that InterVISTAS's conclusion supports AAR's 
position regarding FORR. (See id.) While the NPRM mentioned the 
Canadian system as an example of final offer procedures, it relied 
primarily on recommendations from USDA and the TRB Report. NPRM, EP 755 
et al., slip op. at 2, 4, 6-7. Both USDA and the TRB Professors 
discussed the benefits of using a short procedural timeline, combined 
with a final offer process, in general terms, and did not limit 
themselves to describing the Canadian system. See USDA Reply Comment 5-
7, Dec. 19, 2016, Expanding Access to Rate Relief, EP 665 (Sub-No. 2); 
TRB Rep. 138, 211-12; Tr. 24-25, Pub. Roundtable, Oct. 25, 2016.\72\ 
The Board found both of these analyses persuasive, NPRM, EP 755 et al., 
slip op. at 4, 6-7, and InterVISTAS's reluctance to draw conclusions 
specifically from the Canadian process, because of its confidentiality, 
does not provide a reason to disregard them.
---------------------------------------------------------------------------

    \71\ An Examination of the STB's Approach to Freight Rail Rate 
Regul. & Options for Simplification (InterVISTAS Report), 
InterVISTAS Consulting Inc., Sept. 14, 2016, available at https://www.stb.gov/wp-content/uploads/STB-Rate-Regulation-Final-Report.pdf.
    \72\ A transcript of this public roundtable is available on the 
Board's website at https://www.stb.gov/wp-content/uploads/TRANSC-Intervistas-Roundtable-Oct.-25-2016.pdf.
---------------------------------------------------------------------------

    BNSF argues that InterVISTAS warned against simplification of 
Three-Benchmark or Simplified-SAC because it ``risks moving the 
approaches further away from the bedrock CMP principles, undermine[s] 
the reliability of the tests, and would not necessarily incentivize 
shippers to use those tests.'' (InterVISTAS Rep. xvii; BNSF Comment 3 
n.1; see also NSR Comment 1-4.) In the body of its comment, however, 
BNSF itself supports ``further simplifications of existing STB 
mechanisms'' notwithstanding this conclusion from InterVISTAS. (BNSF 
Comment 3, 9 (``Among the concepts that BNSF has supported is a 
streamlined comparison group approach built on existing Three Benchmark 
methodology but using prescribed factors to minimize complexity of 
presentation and disputes.'') In any event, the Board is not bound to 
follow the recommendations of particular studies.

B. Application to Class II and III Railroads

    In the NPRM, the Board proposed that FORR would not be available to 
challenge purely local movements of a Class II or Class III rail 
carrier.\73\ NPRM, EP 755 et al., slip op. at 16-17. However, FORR 
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).
---------------------------------------------------------------------------

    \73\ Currently, Class III carriers have annual operating 
revenues of $40.4 million or less in 2019 dollars. Class II rail 
carriers have annual operating revenues of less than $900 million 
but in excess of $40.4 million in 2019 dollars. 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 
July 12, 2021) (the annual deflator factor for 2020 is 1.0000, 
meaning that the 2020 thresholds are the same as the thresholds 
stated in 2019 dollars). The Board recently modified the thresholds 
for classifying rail carriers by raising the Class I revenue 
threshold. See Mont. Rail Link, Inc.--Pet. for Rulemaking--
Classification of Carriers, EP 763 (STB served Apr. 5, 2021).
---------------------------------------------------------------------------

    Some shipper interests argue that, contrary to the Board's 
proposal, FORR should be available to challenge purely local movements 
of a Class II or Class III rail carrier. (See Coalition Ass'ns Comment 
18; NGFA Comment 10; Farmers Union Comment 10.) AFPM states that it 
does not oppose expanding FORR to smaller carriers, but if that would 
delay implementation, the rule should be implemented in phases. (AFPM 
Comment 10.)
    As the Board gains experience with the FORR procedure, the 
arguments made by these commenters could provide a reason to expand 
FORR to purely local movements of a Class II or Class III rail carrier. 
Based on the record to date, however, the Board is reluctant to allow 
the potential for smaller railroads to be the defendants in any initial 
cases under FORR. 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). Accordingly, the Board 
proposes to retain the exclusion from FORR of purely local movements of 
a Class II or Class III rail carrier at this time.

C. Regulatory Impact Analysis

    In his comment, the late Dr. Ellig proposed that the Board conduct 
a ``regulatory impact analysis'' (RIA), which is a form of a cost-
benefit analysis, in these proceedings and in Market Dominance 
Streamlined Approach, Docket No. EP 756. (Ellig Comment 3-4; see also 
AAR Comment 25.) \74\ Other parties did not comment on this proposal. 
While the Board need not conduct a formal RIA,\75\ the Board is, as 
described throughout this decision, carefully weighing the benefits and 
burdens associated with particular aspects of the proposed FORR 
approach. See, e.g., supra at 8-11, 21-25, 34-38, 40, 42-43, 47.
---------------------------------------------------------------------------

    \74\ AAR similarly argues that the Board failed to conduct a 
cost/benefit analysis of this rule, citing Executive Order 12866's 
requirement that executive agencies make a ``reasoned determination 
that the benefits of the intended regulation justify its costs'' and 
the Policies and Procedures for Rulemakings of the U.S. Department 
of Transportation (DOT). (AAR Comment 25.) The cited provision of 
Executive Order 12866 does not apply to ``independent regulatory 
agencies,'' including the Board. See 49 U.S.C. 1301(a); see also Vt. 
Yankee, 435 U.S. at 524-25, 543-48 (``Agencies are free to grant 
additional procedural rights in the exercise of their discretion, 
but reviewing courts are generally not free to impose them if the 
agencies have not chosen to grant them.''). In any event, and as 
noted above, the Board has carefully considered the need for 
regulatory reform, FORR's anticipated benefits and burdens, and 
alternative approaches, including the comparison group approach 
proposed in Docket No. EP 665 (Sub-No. 2).
    \75\ See Vill. of Barrington, Ill. v. STB, 636 F.3d 650, 670-71 
(D.C. Cir. 2011) (stating that ``neither the Board's authorizing 
legislation nor the [APA] requires the Board to conduct formal cost-
benefit analysis'').
---------------------------------------------------------------------------

D. Issues Outside the Scope of These Proceedings

    Commenters raise several issues that are outside the scope of these 
proceedings. (See Coalition Ass'ns Comment 25-27 (asking the Board to 
move forward with reciprocal switching and bottleneck changes); AFPM 
Comment 10 (following the TRB Professors' recommendation, stating that 
the Board could order reciprocal switching as a rate case remedy); Olin 
Comment 13-15 (asking the Board to prohibit rate bundling); USDA 
Comment 4 (requesting a definition of revenue adequacy for purposes of 
rate reasonableness determinations).) Also, Farmers Union states that, 
``[i]n its August 31, 2016 decision in this proceeding [Expanding 
Access to Rate Relief, EP 665 (Sub-No. 2)], the Board

[[Page 67643]]

said (at n.3) that it would address issues like standing and 
agricultural rate transparency in a subsequent decision.'' (Farmers 
Union Comment 9-10.) The Board notes that it has already issued a 
decision addressing standing and publication of rates for agricultural 
products. See Rail Transp. of Grain, Rate Regul. Rev., EP 665 (Sub-No. 
1) et al., slip op. at 7-8 (STB served Dec. 29, 2016), recons. denied 
(STB served June 30, 2017).
Docket No. EP 665 (Sub-No. 2)
    Unlike the universally negative reactions to the Board's comparison 
group proposal in the initial comments in Docket No. EP 665 (Sub-No. 
2),\76\ commenters more recently expressed some interest in that 
approach. (See, e.g., NGFA Comment 11; AAR Reply Comment 2, Jan. 10, 
2020, Expanding Access to Rate Relief, EP 665 (Sub-No. 2).) However, 
the EP 665 (Sub-No. 2) comparison group proposal, FORR, and the 
arbitration program proposed in Docket No. EP 765 all seek to address 
the same issue: Access to rate reasonableness determinations in small 
disputes. As long as the Board is moving forward with the arbitration 
program and/or FORR, it would not be an efficient use of administrative 
resources to pursue the comparison group proposal simultaneously--
particularly in light of the possibility that some or all of its 
objectives might be better accomplished through modifications to the 
Three-Benchmark test rather than creating an additional comparison 
group approach. See ACC Comment 7-9, Nov. 14, 2016, Expanding Access to 
Rate Relief, EP 665 (Sub-No. 2). The Board therefore proposes to close 
Docket No. EP 665 (Sub-No. 2) but may revisit some of the ideas 
presented there depending on future developments and whether additional 
steps in the small rate dispute context appear necessary.
---------------------------------------------------------------------------

    \76\ See, e.g., AAR Comment 2, Nov. 14, 2016, Expanding Access 
to Rate Relief, EP 665 (Sub-No. 2) (``the Board should not proceed 
to propose new rules and should discontinue this proceeding.''); 
NGFA Comment 7, Nov. 14, 2016, Expanding Access to Rate Relief, EP 
665 (Sub-No. 2); ACC Comment 7-9, Nov. 14, 2016, Expanding Access to 
Rate Relief, EP 665 (Sub-No. 2).
---------------------------------------------------------------------------

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, Sec.  603(a), or certify that 
the proposed rule would not have a ``significant impact on a 
substantial number of small entities,'' Sec.  605(b). 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).
    In the NPRM, the Board certified under 5 U.S.C. 605(b) that the 
proposed rule would not have a significant economic impact on a 
substantial number of small entities within the meaning of the RFA.\77\ 
The Board explained that its proposed changes to its regulations would 
not mandate or circumscribe the conduct of small entities. The rule 
requires no additional recordkeeping by small railroads or any 
reporting of additional information. Nor do these rules 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. As the Board noted, small 
railroads have always been subject to rate reasonableness complaints 
and their associated litigation costs, the latter of which the Board 
expects will be reduced through the use of this procedure.
---------------------------------------------------------------------------

    \77\ 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 part 1201, General Instructions section 1-1. 
See Small Entity Size Standards Under the Regul. Flexibility Act, EP 
719 (STB served June 30, 2016) (with Board Member Begeman 
dissenting).
---------------------------------------------------------------------------

    Additionally, the Board concluded (as it has in past proceedings) 
that the majority of railroads involved in these rate proceedings are 
not small entities within the meaning of the Regulatory Flexibility 
Act. NPRM, EP 755 et al., slip op. at 18 (citing 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 estimated that there are approximately 656 
Class III rail carriers. Therefore, the Board certified under 5 U.S.C. 
605(b) that the proposed rule, if promulgated, would not have a 
significant economic impact on a substantial number of small entities 
within the meaning of the RFA.
    This SNPRM revises the rules proposed in the NPRM; however, the 
same basis for the Board's certification in the NPRM applies to the 
SNPRM. Therefore, the Board certifies under 5 U.S.C. 605(b) that the 
SNPRM will not have a significant economic impact on a substantial 
number of small entities within the meaning of the RFA. A copy of 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

    In this proceeding, the Board proposes to modify an existing 
collection of information that was approved by the Office of Management 
and Budget (OMB) under the collection of Complaints (OMB Control No. 
2140-0029). In the NPRM, the Board sought comments pursuant to the 
Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3549, and OMB regulations 
at 5 CFR 1320.8(d)(3) regarding: (1) Whether the collection of 
information, as modified in the proposed rule in the Appendix, 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. One comment 
was received, as discussed below.
    In the only comment relating to the PRA burden analysis, Dr. Ellig 
questioned the factual basis for the Board's estimate that the adoption 
of FORR would result in four additional complaints per year. (Ellig 
Comment 12.) For most collection renewals, the Board uses the actual 
number of filings with the Board over the previous three years and 
averages them to get an estimated annual number of those filings to use 
in its PRA burden analysis. For new rules, however, the Board may not 
have historical data that allows for such averages, so it must estimate 
based on its experience, often considering analogous regulatory changes 
made in the past. Here, while the FORR procedure would be new, the 
Board previously has adopted other rate reasonableness procedures. 
Based on its substantial experience with the complexities of prior rate 
reasonableness litigation, and how such complexities impacted the 
number of

[[Page 67644]]

complaints filed each year, the Board estimated that it would receive 
approximately four additional complaints each year due to the FORR 
procedure. As no party submitted any specific information that would 
lead to a more precise estimate, the Board continues to find that the 
FORR procedure would likely lead to approximately four additional cases 
per year.
    Dr. Ellig also commented that the Board did not provide a source 
for its estimated PRA burden hours or non-burden costs (i.e., printing, 
copying, mailing and messenger costs) for the existing types of 
complaints and the four additional complaints expected to be filed due 
to the FORR procedure. (Id.) These burden hours and non-burden costs 
were derived from the burden hours and non-burden costs the Board 
estimated for existing complaints in its 2017 request to OMB for an 
extension of its collection of complaints--and, with respect to FORR, 
downward adjustments based on FORR's procedural streamlining. See STB, 
Supporting Statement for Modification & OMB Approval Under the 
Paperwork Reduction Act & 5 CFR pt. 1320, OMB Control No. 2140-0029 
(Mar. 2017), https://www.reginfo.gov/public/do/DownloadDocument?objectID=72159101. In its supporting statement for 
that request, which OMB approved, the Board explained that its burden 
estimates were ``based on informal feedback previously provided by a 
small sampling (less than five) of respondents.'' (Id. at 2-3.) The 
Board has been provided no other data upon which it could adjust its 
estimate.
    If FORR is adopted, this modification and extension request of an 
existing, approved collection would be submitted to OMB for review as 
required under the PRA, 44 U.S.C. 3507(d), and 5 CFR 1320.11.

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.

    It is ordered:
    1. The Board requests comments on revisions to its proposed rule as 
set forth in this decision. Notice of this request for comment will be 
published in the Federal Register.
    2. The procedural schedule is established as follows: Comments on 
this decision are due by January 14, 2022; replies are due by March 15, 
2022.
    3. The general prohibition on ex parte communications is waived 
regarding matters related to this proceeding, between November 15, 
2021, and February 23, 2022.
    4. A copy of this decision will be served upon the Chief Counsel 
for Advocacy, Office of Advocacy, U.S. Small Business Administration.
    5. This decision is effective on its service date.

    Decided: November 12, 2021.

    By the Board, Board Members Begeman, Fuchs, Oberman, Primus, and 
Schultz. Board Member Begeman dissented in part with a separate 
expression. Board Members Primus and Schultz concurred with separate 
expressions.
BOARD MEMBER BEGEMAN, Dissenting in part:
    During my tenure, I became convinced that not all shippers have a 
viable rate review process available to them at the Board, which was a 
driving factor in why I established the Rate Reform Task Force in 2018 
while serving as the Acting Chairman. I know many stakeholders share in 
my frustration that, here we are, nearly four years since the Task 
Force went to work, and the Board has still not adopted a rate review 
process to enable shippers with smaller disputes to bring a rate case 
here. To continue, indefinitely, with the status quo is not acceptable. 
That is why I strongly dissent on today's decision to the extent it 
further delays adoption of a final rule to reform the Board's rate 
review regulations.
    As interested parties may have gleaned through the Board's 
quarterly reports on Pending Regulatory Proceedings, the Board has had 
ample opportunity to adopt a final rule to provide a viable rate review 
process for smaller rate disputes, after proposing and receiving public 
comment on the FORR proposal in 2019 and 2020 and then developing a 
final rule for action in October 2020. But it takes the support of a 
Board majority for that much-needed final action. Until then, shippers, 
and particularly smaller shippers, are the ones who may be literally 
paying the price for the Board's inaction on a final rule. I am not 
okay with that.
    Today's decision recognizes that, prior to the Task Force's 
creation, years of work had already been expended in trying to 
determine how the Board could best improve the accessibility of rate 
relief. Yet it was not until the Board proposed FORR that many 
stakeholders coalesced around a new rate review option. And while I 
support exploring the feasibility of a new voluntary arbitration 
program specific to small rate disputes and the effort to provide 
another alternative to litigation, that effort should not come at the 
expense of shippers' ability to pursue formal rate relief while 
consideration of an arbitration proposal plays out.
    But rather than amending the Board's regulations today and finally 
ensuring that all shippers have access to Board rate review, the Board 
is instead issuing a supplemental notice of proposed rulemaking, even 
though a well-reasoned final rule was prepared by staff and ready for 
final Board action over a year ago. The only substantive change in 
today's decision from last year's draft final rule is permitting 
additional ex parte communications. It is my hope those meetings will 
finally convince a Board majority to vote in support of a final rule.
    My time at the Board has almost run out, and I know some shippers 
may be thinking that theirs has too. I thank the Task Force, the great 
team of staff who prepared the FORR notice of proposed rulemaking and 
draft final rule, and the many stakeholders for their contributions to 
helping bring needed reform to the agency's rate review processes. 
Please don't give up.
BOARD MEMBER PRIMUS, concurring:
    As I wrote in the EP 765 decision, the Board should implement FORR 
along with small rate case arbitration and should do so expeditiously. 
While I do not believe FORR to be the magic bullet that will solve all 
the network's rate challenges, it does represent a new and unique 
attempt to address an old and festering issue. For those who will 
nitpick or outright oppose this effort, I respond by saying no 
methodology is perfect and the Board should be given the flexibility 
and latitude to bring forth thoughtful solutions that may ultimately 
enhance the viability of our national rail network.
    I would also like to acknowledge and applaud the work of our fellow 
Board member and past Chairman, Ann Begeman. In 2018, under her 
leadership, the Board established the Rate Reform Task Force, which 
ultimately laid the groundwork that resulted in the creation of FORR 
the following year. Ann's efforts then, and the efforts of the current 
Board under the leadership of Marty Oberman, are a testament to the

[[Page 67645]]

Board's continued desire to work collaboratively to address some of the 
network's most pressing issues. As one of the Board's newest members, I 
am honored to be a part of this vitally important endeavor.
BOARD MEMBER SCHULTZ, concurring:
    The Board is issuing two rulemaking proposals to provide a new 
option to resolve small rate disputes between railroads and shippers. 
Although I have concurred with issuing the supplemental notice of 
proposed rulemaking (NPRM) in this docket and voted for the arbitration 
program proposal in Docket No. EP 765, I am not in favor of the Board 
adopting both rules. I concurred with issuing this supplemental NPRM 
for two reasons. First, this proceeding began in 2019, well before I 
joined the Board in January of this year, and I have not had the 
opportunity to meet with stakeholders about the proposed rule. Issuing 
the supplemental NPRM and waiving the prohibition on ex parte 
communications will allow me to discuss the rule with stakeholders. 
Second, the Board is concurrently seeking public comment on a proposed 
rule in Docket No. EP 765, Joint Petition for Rulemaking to Establish a 
Voluntary Arbitration Program for Small Rate Disputes, and I believe it 
is important for stakeholders to be able to review, and comment on, the 
text of both proposed rules at the same time.
    I am of the firm belief that the arbitration program proposal in 
Docket No. EP 765 represents the better path forward for shippers and 
railroads alike. However, I welcome the opportunity to speak with 
stakeholders about the proposed final offer rate review program in this 
docket.

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

[[Page 67646]]

copies of the answer upon the complainant and any other defendants.
* * * * *
    (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 
where the complainant elects streamlined market dominance:
    (A) Day -25--Complainant files notice of intent to initiate case 
and serves notice on defendant.
    (B) Day 0--Complaint filed; discovery begins.
    (C) Day 35--Discovery closes.
    (D) Day 49--Complainant's opening (rate reasonableness anaylsis, 
final offer, and opening evidence on market dominance). Defendant's 
opening (rate reasonablesness analysis and final offer).
    (E) Day 59--Parties' replies. Defendant's reply evidence on market 
dominance.
    (F) Day 66--Complainant's letter informing the Board whether it 
elects an evidentiary hearing on market dominance.
    (G) Day 73--Telephonic evidentiary hearing before an administrative 
law judge, as described in Sec.  1111.12(d) of this chapter, at the 
discretion of the complainant (market dominance).
    (H) Day 149--Board decision.
    (ii) In cases relying upon the Final Offer Rate Review procedure 
where the complainant elects non-streamlined market dominance:
    (A) Day -25--Complainant files notice of intent to initiate case 
and serves notice on defendant.
    (B) Day 0--Complaint filed; discovery begins.
    (C) Day 35--Discovery closes.
    (D) Day 49--Complainant's opening (rate reasonableness analysis, 
final offer, and opening evidence on market dominance). Defendant's 
opening (rate reasonableness analysis and final offer).
    (E) Day 79--Parties' replies. Defendant's reply evidence on market 
dominance.
    (F) Day 169--Board decision.
    (iii) In addition, the Board will appoint a liaison within five 
business days after the Board receives the pre-filing notification.
    (iv) The mediation period in Final Offer Rate Review cases is 20 
days beginning on the date of appointment of the mediator(s). The Board 
will appoint a mediator or mediators as soon as possible after the 
filing of the notice of intent to initiate a case.
    (v) 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. In 
complaints challenging the reasonableness of a rail rate based on 
stand-alone cost or the simplified standards, the parties shall meet or 
otherwise discuss discovery and procedural matters within 7 days after 
the complaint is filed in stand-alone cost cases, 3 days after the 
complaint is filed in Final Offer Rate Review 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.
0
8. Amend Sec.  1111.12 by revising paragraphs (c) and (d)(1) and (2) to 
read as follows:


Sec.  1111.12   Streamlined market dominance.

* * * * *
    (c) A defendant's reply evidence under the streamlined market 
dominance approach may address the factors in paragraph (a) of this 
section and any other issues relevant to market dominance. A 
complainant may elect to submit rebuttal evidence on market dominance 
issues except in cases under Final Offer Rate Review, which does not 
provide for rebuttal. Reply and rebuttal filings under the streamlined 
market dominance approach are each limited to 50 pages, inclusive of 
exhibits and verified statements.
    (d)(1) Pursuant to the authority under Sec.  1011.6 of this 
chapter, an administrative law judge will hold a telephonic evidentiary 
hearing on the market dominance issues at the discretion of the 
complainant in lieu of the submission of a written rebuttal on market 
dominance issues. In cases under Final Offer Rate Review, which does 
not provide for rebuttal, the telephonic evidentiary hearing is at the 
discretion of the complainant.
    (2) The hearing will be held on or about the date that the 
complainant's rebuttal evidence on rate reasonableness is due, except 
in cases under Final Offer Rate Review, where the hearing will be held 
14 days after replies are due unless the parties agree on an earlier 
date. The complainant shall inform the Board by letter submitted in the 
docket, no later than 10 days after defendant's reply is due, whether 
it elects an evidentiary hearing in lieu of the submission of a written 
rebuttal on market dominance issues. In cases under Final Offer Rate 
Review, the complainant shall inform the Board by letter submitted in 
the docket, no later than 7 days after defendant's reply is due, 
whether it elects an evidentiary hearing on market dominance issues.
* * * * *

PART 1114--EVIDENCE; DISCOVERY

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

    Authority: 5 U.S.C. 559; 49 U.S.C. 1321.
0
10. Amend Sec.  1114.21 by adding paragraph (a)(4) to read as follows:


Sec.  1114.21  Applicability; general provisions.

    (a) * * *
    (4) Except as stated in Sec.  1114.31(a)(2)(iii), 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
11. Amend Sec.  1114.24 by revising paragraph (h) to read as follows:


Sec.  1114.24  Depositions; procedures.

* * * * *
    (h) Return. The officer shall either submit the deposition and all 
exhibits by e-filing (provided the filing complies with Sec.  1104.1(e) 
of this chapter) or securely seal the deposition and all exhibits in an 
envelope endorsed with sufficient information to identify the 
proceeding and marked ``Deposition of (here insert name of witness)'' 
and personally deliver or promptly send it by 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
12. 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

[[Page 67647]]

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. Except as set 
forth in paragraph (a)(2)(iii) of this section, 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.
    (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 and simplified 
standards 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.
    (iii) In a rate case under Final Offer Rate Review, each party may 
file one motion to compel that aggregates all discovery disputes with 
the other party. Each party's motion to compel, if any, shall be filed 
on the 10th day before the close of discovery (or, if not a business 
day, the last business day immediately before the 10th day). The 
procedural schedule will be tolled while motions to compel are pending. 
Replies to motions to compel in Final Offer Rate Review cases must be 
filed with the Board within 7 days of when the motion to compel is 
filed. Upon issuance of a decision on motions to compel, the procedural 
schedule resumes, and any party ordered to respond to discovery must do 
so within the remaining 10 days in the discovery period.
    (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 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
13. 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
14. 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.
* * * * *
[FR Doc. 2021-25168 Filed 11-19-21; 2:00 pm]
BILLING CODE 4915-01-P