[Federal Register Volume 89, Number 89 (Tuesday, May 7, 2024)]
[Rules and Regulations]
[Pages 38646-38710]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09483]



[[Page 38645]]

Vol. 89

Tuesday,

No. 89

May 7, 2024

Part VI





Surface Transportation Board





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49 CFR Part 1145





Reciprocal Switching for Inadequate Service; Final Rule

  Federal Register / Vol. 89, No. 89 / Tuesday, May 7, 2024 / Rules and 
Regulations  

[[Page 38646]]


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SURFACE TRANSPORTATION BOARD

49 CFR Part 1145

[Docket No. EP 711 (Sub-No. 2)]


Reciprocal Switching for Inadequate Service

AGENCY: Surface Transportation Board (the Board or STB).

ACTION: Final rule.

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SUMMARY: The Board adopts new regulations that provide for the 
prescription of reciprocal switching agreements as a means to promote 
adequate rail service through access to an additional line haul 
carrier. Under the new regulations, eligibility for prescription of a 
reciprocal switching agreement will be determined in part using 
objective performance standards that address reliability in time of 
arrival, consistency in transit time, and reliability in providing 
first-mile and last-mile service. The Board will also consider, in 
determining whether to prescribe a reciprocal switching agreement, 
certain affirmative defenses and the practicability of a reciprocal 
switching agreement. To help implement the new regulations, the Board 
will require all Class I railroads to submit certain service data on an 
ongoing and standardized basis, which will be generalized and publicly 
accessible. Railroads will also be required to provide individualized, 
machine-readable service data to a customer upon a written request from 
that customer.

DATES: The rule will be effective on September 4, 2024.

FOR FURTHER INFORMATION CONTACT: Valerie Quinn at (202) 740-5567. If 
you require accommodation under the Americans with Disabilities Act, 
please call (202) 245-0245.

SUPPLEMENTARY INFORMATION:

Table of Contents

Introduction
Legal framework
Analytical Justification
Performance Standards
Data Production to the Board and Implementation
Data Production to an Eligible Customer
Terminal Areas
Practicability
Service Obligation
Procedures
Affirmative Defenses
Compensation
Duration and Termination
Contract Traffic
Exempt Traffic
Class II Carriers, Class III Carriers, and Affiliates
Labor
Environmental Matters
Environmental Review
Regulatory Flexibility Analysis
Paperwork Reduction Act
Congressional Review Act
Table of Commenters
Final Rule

Introduction

    In a decision served on September 7, 2023, the Board issued a new 
notice of proposed rulemaking that would provide for the prescription 
of reciprocal switching agreements with emphasis on how to address 
inadequate rail service. Reciprocal Switching for Inadequate Serv. 
(NPRM), 88 FR 63897 (proposed Sept. 18, 2023).\1\ The Board explained 
that, given the major service problems that occurred subsequent to the 
2016 proposal in Docket No. EP 711 (Sub-No. 1) and the history of 
recurring service problems that continue to plague the industry, it is 
appropriate, at this time, to focus reciprocal switching reform on 
service-related issues. NPRM, 88 FR at 63899.
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    \1\ The Board also closed a sub-docket involving an earlier 
notice of proposed rulemaking from 2016. Reciprocal Switching, 88 FR 
63917 (published Sept. 18, 2023) (closure of Docket No. EP 711 (Sub-
No. 1)).
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    As discussed in the NPRM, reciprocal switching agreements provide 
for the transfer of a rail shipment between Class I rail carriers or 
their affiliated companies within the terminal area in which the 
shipment begins or ends its journey on the rail system. Id. at 63898. 
In a typical case, the incumbent rail carrier either (1) moves the 
shipment from the point of origin in the terminal area to a local yard, 
where an alternate carrier picks up the shipment to provide the line 
haul; or (2) picks up the shipment at a local yard where an alternate 
carrier placed the shipment after providing the line haul, for movement 
to the final destination in the terminal area. Id. The alternate 
carrier might pay the incumbent carrier a fee for providing that 
service. Id. The fee is often incorporated in some manner into the 
alternate carrier's total rate to the shipper. Id. A reciprocal 
switching agreement thus enables an alternate carrier to offer its own 
single-line rate or joint-line through rate for line-haul service, even 
if the alternate carrier's lines do not physically reach the shipper/
receiver's facility. Id.
    The regulations as proposed in the NPRM would provide for the 
prescription of a reciprocal switching agreement when service to a 
terminal-area shipper or receiver failed to meet one or more objective 
performance standards and when other conditions to a prescription were 
met. Id. The proposed standards addressed: (1) a rail carrier's 
failures to meet its original estimated time of arrival (OETA), i.e., 
to provide sufficiently reliable line-haul service; (2) a deterioration 
in the time it takes a rail carrier to deliver a shipment (transit 
time); and (3) a rail carrier's failures to provide local pick-ups or 
deliveries of cars (also known as first-mile/last-mile service (FMLM)), 
as measured by the carrier's success in meeting an ``industry spot and 
pull'' (ISP) standard. Id. at 63901. The proposed regulations also 
addressed regulatory procedures, affirmative defenses, and 
practicability. Id. at 63908-10. In addition to proposing to provide 
for the prescription of a reciprocal switching agreement when the 
foregoing conditions were met, the Board sought comment on what 
methodology the Board should use in setting the fee for switching under 
a prescribed agreement, in the event that the affected carriers did not 
reach agreement on compensation within a reasonable time. Id. at 63909-
10.
    The proposed regulations would impose certain data requirements to 
aid in implementation of those regulations. In part, the proposed 
regulations would require a Class I carrier to provide to a customer, 
upon written request, that customer's own individualized service data. 
In addition, to ensure that the Board would have an informed view of 
service issues across the network, the proposed regulations would (1) 
make permanent the filing of certain data that is similar to the data 
the Board had collected on a temporary basis in Urgent Issues in 
Freight Rail Service--Railroad Reporting, Docket No. EP 770 (Sub-No. 
1); and (2) require consistency in reporting that data. NPRM, 88 FR at 
63910-11.
    The Board solicited comments on the NPRM by October 23, 2023, and 
replies by November 21, 2023. NPRM, 88 FR at 63897. In response to 
requests for extensions, these dates were extended to November 7, 2023, 
and December 20, 2023, respectively. Reciprocal Switching for 
Inadequate Serv., EP 711 (Sub-No. 2)(STB served Sept. 29, 2023, and 
Nov. 20, 2023).
    The Board received many comments and replies from interested 
parties, including public officials, railroads, shippers, trade 
organizations, and others.\2\ As discussed below, overall, shippers and 
their supporting trade organizations strongly favor the Board's 
proposal, although many seek minor modifications or, in some instances,

[[Page 38647]]

significant expansions to the scope of the proposed rule. The railroads 
and their trade organizations generally object to the Board's legal 
foundation for the proposed regulations and otherwise suggest 
significant changes to those regulations.
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    \2\ A Table of Commenters with abbreviations the Board uses in 
the text and citations is provided below.
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    After reviewing the record, the Board is adopting a version of part 
1145 that reflects certain modifications to the proposal in the NPRM. 
With respect to the performance standards in part 1145, some of the key 
modifications are as follows. First, based on numerous shipper comments 
and the data the Board had been collecting since 2022 in Docket No. EP 
770 (Sub-No. 1), the Board is increasing the OETA standard for 
delivering within 24 hours of the OETA from 60% to 70% and the standard 
for performing ISP from 80% to 85%. Second, the Board is adopting a 
proposal whereby railcars that are delivered more than 24 hours before 
the OETA will count in assessing the rail carrier's performance. Third, 
the Board is establishing an absolute floor for the service consistency 
standard and will modify that standard to provide that certain 
deteriorations in transit time over a three-year period would also 
count as a failure. Fourth, the Board is withdrawing its proposal to 
combine lanes; the service reliability standard and the service 
consistency standard will be applied only to each individual lane of 
traffic to/from the petitioner's facility. Finally, in response to 
public comments, the Board makes other modifications to each 
performance standard. As discussed in the NPRM, the performance 
standards apply only to petitions under part 1145; the standards do not 
by themselves establish whether a carrier's operations are otherwise 
appropriate. The Board does not view it as appropriate to apply or draw 
from the standards when regulating or enforcing the common carrier 
obligation. See NPRM, 88 FR at 63902. Likewise, the performance 
standards do not define what constitutes adequate rail service. This 
also means that whether a carrier meets or fails to meet the standards 
in part 1145 is not determinative of whether a service-related 
prescription might be justified under part 1144 or part 1147 of the 
Board's regulations.
    The Board is also clarifying issues concerning Class II and Class 
III rail carriers. Part 1145 pertains to shippers and receivers that 
have practical physical access to only one Class I rail carrier or its 
affiliated company. The affiliated company might be a Class II or Class 
III railroad. Part 1145 otherwise does not apply to Class II and Class 
III railroads.
    As discussed in the NPRM, the Board will initiate an ongoing 
collection of data similar to a subset of the data that it had 
collected on a temporary basis in Docket No. EP 770 (Sub-No. 1). That 
data must now be submitted using a standardized template to be 
developed by the agency. The Board will continue to require Class I 
railroads to provide data to a customer within seven days of receiving 
a request, but the Board is providing more clarity and specificity in 
regard to that requirement, as the original proposal could have impeded 
carriers' ability to provide timely responses. Based on comments, the 
Board also clarifies and modifies in certain respects the proposed 
provisions on affirmative defenses. The Board is also increasing the 
minimum duration of a prescribed reciprocal switching agreement from 
two years to three years and the maximum duration of a prescribed 
reciprocal switching agreement from four years to five years.
    With respect to traffic that is or was moved under a transportation 
contract under 49 U.S.C. 10709, the Board explains that it will not 
prescribe a reciprocal switching agreement under part 1145 based on 
performance that occurs during the term of the contract. Concerning 
exempt commodities, the Board will not consider pre-revocation 
performance as the basis for a prescription under part 1145 but intends 
to prioritize petitions for partial revocation filed in furtherance of 
part 1145 cases in order to resolve expeditiously those petitions for 
partial revocation. The Board also intends to explore at a later date 
whether it should partially revoke exemptions on its own initiative to 
allow for reciprocal switching petitions, as is currently the case for 
the boxcar exemption. See 49 CFR 1039.14(b)(3) (expressly allowing for 
regulation of reciprocal switching for rail transportation of 
commodities in boxcars).
    These issues, as well as numerous others, are discussed below. 
After considering the record, the Board hereby adopts the proposed 
regulations, with modifications as indicated below, as part 1145 of its 
regulations.
    Various entities have asked that the Board take additional steps in 
this proceeding such as adopting a fourth performance standard that 
would measure whether the incumbent carrier reasonably met the 
customer's local operational and service requirements, (PCA Comments 
12; see also PRFBA Comments 9 n.4; EMA Comments 8-9 n.4; NSSGA Comments 
9 n.3; Olin Comments 6), or adopting a performance standard that would 
apply specifically to grain shippers, (USDA Comments 5-6). USDA and 
others ask the Board to grant terminal trackage rights based on a 
carrier's failure to meet the ISP standard, (USDA Comments 8; NGFA 
Comments 7; NSSGA Comments 9; ACD Comments 5; NMA Comments 6), or to 
open a new docket concerning terminal trackage rights, (Coal. Ass'ns 
Comments 8).
    Others seek more sweeping reform, including: expanding part 1145 to 
all bottleneck segments (Coal. Ass'ns Comments 8); overturning the 
``anti-competitive conduct'' test in Midtec Paper Corp. v. Chicago & 
North Western Transportation Co. (Midtec), 3 I.C.C.2d 171 (1986) (Coal. 
Ass'ns Comments 8; DOT/FRA Comments 3; ILWA Comments 1; FRCA/NCTA 
Comments 2; Celanese Comments 2; PCA Comments 4-7; Olin Comments 6-8; 
NMA Comments 4); adopting rules in Petition for Rulemaking to Adopt 
Rules Governing Private Railcar Use by Railroads, Docket No. EP 768, 
(NGFA Comments 9); and further delineating the scope of the common 
carrier obligation, (TTD Comments 3). The Coalition Associations, with 
support from ACD, also assert that, if the Board concludes it cannot 
consider the performance of contract traffic, the agency should reopen 
Reciprocal Switching, Docket No. EP 711 (Sub-No. 1), to adopt that 
proposal with several proposed modifications. (Coal. Ass'ns Reply 47-
52; ACD Reply 3.)
    The Board appreciates the Coalition Associations' efforts as well 
as the numerous additional suggestions from others about possible Board 
actions outside of this docket. However, the Board would like to gauge 
the effectiveness of this new rule before considering other ways to 
pursue the objectives of section 11102(c). As noted in the NPRM, in 
choosing to focus reciprocal switching reform on service issues at this 
time, the Board does not intend to suggest that consideration of 
additional reforms geared toward increasing competitive options is 
foreclosed. Id. at 63900. And, even with the adoption of part 1145, 
shippers may still pursue access to an alternate rail carrier under 
parts 1144 and 1147, and advocate for continued development, including, 
as appropriate, development by the Board of adjudicatory policies and 
the appropriate application of those rules in individual cases. Id.
    The Board expects part 1145 to be a significant step in 
incentivizing Class I railroads through competition to achieve and 
maintain higher service levels on an ongoing basis. The objective and 
transparent standards, defenses, and definitions in this rule should 
also provide greater certainty

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than the status quo. The Board also expects the new data collection to 
help ensure that it has an informed view of service issues across the 
network.

Legal Framework

Design of Part 1145

    As discussed in the NPRM, part 1145 implements the Board's 
authority under 49 U.S.C. 11102(c) to prescribe reciprocal switching 
agreements when ``practicable and in the public interest.'' NPRM, 88 FR 
at 63899. There is a clear public interest in adequate rail service--a 
matter of fundamental concern under the Interstate Commerce Act. See 
United States v. Lowden, 308 U.S. 225, 230 (1939); 49 U.S.C. 10101 (in 
various policies referencing an ``efficient'' and ``sound'' rail system 
that can ``meet the needs of the public''); see also House Report No. 
96-1430: Staggers Rail Act of 1980, Report of the Committee on 
Conference on S. 1946 at 80 (Sept. 29, 1980). Inadequate rail service 
can substantially impair rail customers' ability to operate their 
businesses, resulting in substantial harm to the United States economy 
as a whole. NPRM, 88 FR at 63899-900 (citing 49 U.S.C. 10101). The 
Board's decision to adopt part 1145 grows out of the Board's 
recognition that inadequate rail service can critically and adversely 
affect the national economy, yet the Board's existing regulations do 
not necessarily provide a sufficient response. NPRM, 88 FR at 63900 & 
n.7. Part 1145 addresses these concerns by providing a reasonably 
predictable and efficient path toward a prescription under section 
11102(c) while, at the same time, providing for regulatory intervention 
only when there are sufficient, service-related signs of a public 
interest in intervention and when there would be no undue impairment to 
rail carriers' operations or ability to service other customers.
    Part 1145 is designed specifically to promote the provision of 
adequate rail service to terminal-area customers that have practical 
physical access to only one Class I rail carrier or affiliate. NPRM, 88 
FR at 63899. Under part 1145, upon petition by a shipper or receiver, 
the Board will prescribe a time-limited reciprocal switching agreement 
when (1) the prescription is in a terminal area and the petitioner has 
practical physical access to only one Class I rail carrier or 
affiliate, see 49 CFR 1145.1 (definition of ``reciprocal switching 
agreement''), 1145.6(a)(1); (2) the incumbent rail carrier failed to 
meet one or more performance standards, see 49 CFR 1145.2, 
1145.6(a)(2); (3) that failure was not excused by an affirmative 
defense, see 49 CFR 1145.3, 1145.6(a)(3); (4) transfers under the 
reciprocal switching agreement would be operationally feasible and 
would not unduly impair service to other customers, see 49 CFR 
1145.6(b); and (5) resulting line-haul arrangements would be 
operationally feasible and would not unduly impair a participating rail 
carrier's ability to serve its other customers, see id.
    The performance standards in part 1145, which can be easily 
understood by shippers and carriers, address three fundamental aspects 
of adequate rail service: reliable timing in the arrival of line-haul 
shipments, consistent shipment times, and on-time local pick-ups and 
deliveries. The standards are set at levels such that performance below 
the standards would not meet many shippers' (and carriers') service 
expectations. See Performance Standards. Upon a petitioner's 
demonstration of such a failure and in the absence of an incumbent or 
alternate carrier's demonstration of an affirmative defense, 
infeasibility, or undue impairment as provided for in part 1145, see 49 
CFR 1145.3, 1145.6(b), the Board would prescribe a reciprocal switching 
agreement, which would give the petitioner the opportunity to obtain 
line-haul service from an alternate carrier that may be able to provide 
better service. The prescription of a reciprocal switching agreement 
does not necessarily mean that the incumbent carrier would lose line-
haul service because the incumbent carrier would continue to have the 
opportunity to compete to serve the petitioner. NPRM, 88 FR at 63901. 
The initial term of any prescribed agreement is for a limited duration 
of three to five years. 49 CFR 1145.6(c).
    Part 1145 will promote the provision of adequate rail service, not 
only to a successful petitioner, but on a broader network basis. By 
providing a clearer set of conditions and procedures for the Board to 
prescribe reciprocal switching agreements, part 1145 will create an 
incentive for rail carriers to provide adequate service to terminal-
area customers that lack another rail option. Part 1145 will also 
reduce regulatory risk and burdens under section 11102(c) by (1) 
enhancing the predictability of regulatory outcomes, (2) enabling 
potential petitioners to evaluate the costs and potential benefits of 
seeking a prescription, and (3) helping to contain the time and cost of 
petitioning for a prescription. NPRM, 88 FR at 63901. At the same 
time--because part 1145 provides for an appropriately defined and 
scoped switching agreement prescription only after careful 
consideration of affirmative defenses, infeasibility, and undue 
impairment--part 1145 will not result in the prescription of a 
reciprocal switching agreement when there is an insufficient basis or 
when the prescription would be unwise as a matter of policy. See Midtec 
Paper Corp. v. United States, 857 F.2d 1487, 1499 (D.C. Cir. 1988).

Comments

    Class I rail carriers claim that adoption of part 1145 would exceed 
the scope of the Board's legal authority. These carriers assert that, 
as a condition to prescribing a reciprocal switching agreement, the 
Board must undertake a case-by-case analysis that would be far more 
elaborate than what is called for under part 1145. According to 
carriers, the Board must find that: (1) the incumbent carrier 
consistently provides inadequate service to the petitioner; (2) the 
incumbent carrier failed to cure the inadequacy after being given 
notice and a reasonable opportunity to cure; (3) the inadequacy 
continues to exist at the time of the Board's prescription; (4) service 
to the petitioner is worse than service to other customers; (5) the 
petitioner has a compelling need for alternate rail service, as 
indicated by demonstrated harm to the petitioner's planning and 
business needs; (6) alternate service would not impose greater harm on 
other stakeholders; (7) the alternate service would be safe and 
practicable; and (8) the alternate service would actually remedy the 
inadequate service. (See AAR Comments 2, 5, 8, 13, 17-18, 20-22, 62; 
see also CN Comments 16, 21; CN Reply 3-4; NSR Comments 8-10; CSXT 
Comments 10-12; CSXT Reply 4-5.)
    In attempting to find a legal foundation for their approach, rail 
carriers look past the text of section 11102(c) to three cases in which 
the Board's predecessor, the Interstate Commerce Commission (ICC or 
Commission), applied the public interest standard: Jamestown Chamber of 
Commerce v. Jamestown, Westfield, & Northwestern Railroad, 195 I.C.C. 
289 (1933); Central States Enterprises, Inc. v. Seaboard Coast Line 
Railroad, NOR 38891 (ICC served May 15, 1984), aff'd sub nom., Central 
States Enterprises v. ICC, 780 F.2d 664 (7th Cir. 1985); and Delaware & 
Hudson Railway v. Consolidated Rail Corp., 367 I.C.C. 718 (1983). 
According to carriers, these cases indicate that, to find that a 
reciprocal switching agreement would be in the public interest, the 
Board must find that the petitioner has a ``compelling need'' for the 
agreement. (See, e.g., AAR Comments 12-14.) AAR also relies on a 
statement in the legislative history suggesting that the

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``practicable and in the public interest'' standard in section 11102(c) 
is ``the same standard the Commission has applied for many years in 
considering whether to order the joint use of terminal facilities.'' 
(See AAR Comments 14 (citing H.R. Rep. No. 1430 at 116 (1980)).)
    Shippers respond that carriers' ``compelling need'' test misstates 
the law. According to NSSGA, the outcome in Jamestown (in which the ICC 
denied a request to prescribe terminal trackage rights) rested in part 
on the fact that the incumbent carrier there provided exceptionally 
good service. (NSSGA Reply 1-2.) Similarly, WCTL argues that Jamestown 
was premised in part on the fact that the proposed service arrangement 
was sought to aid a financially weak rail carrier. (WCTL Reply 10.) PCA 
asserts that any ``compelling need'' test would improperly impose an 
extra-statutory limitation on the Board's authority to prescribe 
reciprocal switching agreements. (PCA Reply 2, 5 (describing Jamestown 
as inapposite and stating that an ``actual necessity/compelling 
reason'' standard is found nowhere in the governing statute).) The 
Coalition Associations assert that the carriers' proposed ``compelling 
need'' test is overly narrow. They argue that the in-depth inquiry that 
carriers propose under the ``compelling need'' test would, as a 
practical matter, limit the availability of prescribed reciprocal 
switching agreements. According to the Coalition Associations, there is 
sufficient need for part 1145 given the public interest in creating an 
incentive to provide adequate rail service. (Coal. Ass'ns Reply 15-18.) 
The Coalition Associations add that the Board's authority to enact part 
1145 flows not only from the ``practicable and in the public interest'' 
standard but also from the ``competitive rail service'' standard in 
section 11102(c). (Id. at 15-16.)
    Class I carriers assert, not only that the Board must undertake a 
detailed case-by-case investigation as described above, but that, as a 
condition to prescribing a reciprocal switching agreement, the Board 
must find that the petitioner lacks an adequate intermodal 
transportation option (i.e., a transportation option via a mode other 
than rail). Carriers reason that, when there is an intermodal option, 
there is unlikely to be a compelling need for an alternate rail option. 
(See AAR Comments 78-79; see also BNSF Comments 14-15.) The Coalition 
Associations respond that intermodal options are not a realistic 
incentive to provide adequate rail service, reasoning that a customer 
might have structured its facilities and business model around rail 
transportation. (See Coal. Ass'ns Reply 22-23; see also AF&PA/ISRI 
Reply 7-8.)
    On a separate tack, AAR asserts that part 1145 would 
inappropriately amount to direct regulation of the quality of rail 
service. AAR bases its assertion on the rule's use of defined 
performance standards. According to AAR, direct regulation of quality 
of service would contradict congressional policy to minimize the need 
for federal regulatory control over the rail transportation system. 
(AAR Comments 14-15.)
    Finally, CPKC argues that the Board is precluded by the doctrine of 
legislative ratification from undertaking the approach taken in part 
1145. Citing a statement in Midtec Paper Corp. v. United States, 857 
F.2d at 1507, that Congress did not intend the agency to undertake a 
radical restructuring of the rail sector through its switching 
authority, CPKC asserts that Congress ratified what CPKC calls the 
``limited scope of the statute'' by not passing any of eighteen bills 
that, according to CPKC, would have relaxed the approach in Midtec. 
CPKC concludes on that basis that the Board may prescribe a reciprocal 
switching agreement only as a direct remedy to an inadequacy that is 
demonstrated on a case-by-case basis considering all relevant factors. 
(CPKC Reply 5 n.2.)

The Board's Assessment

    Part 1145 reasonably implements the Board's authority to prescribe 
reciprocal switching agreements when practicable and in the public 
interest. Class I rail carriers' arguments to the contrary rest on a 
misinterpretation of the public interest standard in section 11102(c)--
a misinterpretation that would effectively replace the statutory 
standard with a ``compelling need'' standard that, as interpreted by 
the carriers, would leave the Board little room to fashion its 
implementation of the public interest standard and the underlying 
congressional objectives according to the circumstances at hand. The 
carriers' generalized concerns about the prescription of reciprocal 
switching agreements are also misguided. Finally, because part 1145 is 
amply justified under the ``practicable and in the public interest'' 
standard, it is unnecessary to consider here whether part 1145 is also 
justified under the ``competitive rail service'' standard in section 
11102(c), as some commenters have argued.
Governing Principles
    The public interest standard in section 11102(c) gives the Board 
broad discretion to determine when to prescribe reciprocal switching 
agreements. In other contexts in which Congress has used the public 
interest standard, the United States Supreme Court has described the 
standard as ``expansive.'' Nat'l Broad. Co. v. United States, 319 U.S. 
190, 219 (1943). The public interest standard serves as a ``supple 
instrument'' for the exercise of discretion by the expert body that 
Congress charged with carrying out legislative policy. FCC v. 
Pottsville Broad. Co., 309 U.S. 134, 137-38 (1940); see also McManus v. 
Civil Aeronautics Bd., 286 F.2d 414, 419-20 (1960) (citing Sunshine 
Anthracite Coal Co. v. Adkins, 310 U.S. 381, 396 (1940)). The public 
interest standard allows the agency to respond to changes in the 
industry and to the interplay of complex factors, consistent with 
policy objectives that Congress established by statute. Gen. Tel. Co. 
of Cal. v. FCC, 413 F.2d 390, 398 (D.C. Cir. 1969); Huawei Techs. USA, 
Inc. v. FCC, 2 F.4th 421, 439 (5th Cir. 2021). In addition, both before 
and after the Staggers Act, there has been a recognition that the 
public interest in adequate transportation could be served through the 
introduction of another rail carrier. See, e.g., Pa. Co. v. United 
States, 236 U.S. 351 (1915) (pre-Staggers); 49 U.S.C. 11102(c); Del. & 
Hudson, 367 I.C.C. at 723 (post-Staggers).
    In implementing the public interest standard in section 11102(c), 
the Board's discretion is to be guided by the policy objectives that 
Congress established through section 10101 (previously section 10101a) 
of the Act (the Rail Transportation Policy or RTP)). Midtec Paper Corp. 
v. United States, 857 F.2d at 1499-500; see also N.Y. Cent. Sec. Corp., 
287 U.S. 24-25 (1932) (establishing that an agency's implementation of 
broad statutory authority is to be guided by policies set forth by 
Congress). Depending on the facts at hand, relevant considerations may 
include the potential to secure lower rates and/or better service, the 
expansion of shipping options, and possible detriments to affected 
carriers. See, e.g., Del. & Hudson, 367 I.C.C. at 723-24, 726. As 
needed, in considering whether a proposed action would advance the 
statutory objectives in section 10101, the Board weighs and balances 
the various elements of the RTP to ``arrive at a reasonable 
accommodation of the conflicting policies'' in the Act. Ass'n of Am. 
R.Rs. v. STB, 306 F.3d 1108, 1111 (D.C. Cir. 2002); Midtec Paper Corp. 
v. United States, 857 F.2d at 1497, 1500; see also Vill. of Palestine 
v. ICC, 936 F.2d 1335

[[Page 38650]]

(D.C. Cir. 1991) (agency looks to relevant and pertinent rail 
transportation policies).
Implementation of the Public Interest Standard Through Part 1145
    Part 1145 advances the statutory goal of developing and continuing 
a sound rail transportation system. 49 U.S.C. 10101(4). Part 1145 does 
so by striking an appropriate balance between, on one hand, the 
shipping public's interest in securing better rail service and, on the 
other hand, the interest of rail carriers. See 49 U.S.C. 10101(1), (3), 
(4) and (5); NPRM, 88 FR at 63901. Part 1145 strikes this balance by 
providing for the introduction of an alternate rail carrier via an 
appropriately defined and scoped switching agreement prescription only 
when there are sufficient indications, based on the incumbent carrier's 
performance, that the introduction of a competing carrier would create 
the possibility of an improved service environment and when the 
affected carriers have not demonstrated that the proposed prescription 
would unduly impair their operations or ability to serve their other 
customers. As the ICC indicated in Delaware & Hudson, the introduction 
of an alternate rail carrier provides the potential to achieve better 
service. Del. & Hudson, 367 I.C.C. at 723; see also NPRM, 88 FR at 
63901 (noting that part 1145 would ``advance the policies in Sec.  
10101 of having a rail system that meets the public need, of ensuring 
effective competition among rail carriers, of minimizing the need for 
regulatory control, and of reaching regulatory decisions on a fair and 
expeditious basis'').
    The design of part 1145 takes into account carriers' need to earn 
adequate revenues. See 49 U.S.C. 10101(3). Its built-in limitations 
ensure that a prescription will not be issued if carriers demonstrate 
that a particular proposed prescription would unduly impair the 
carrier's ability to serve its existing customers. Other relevant 
considerations include that the rule does not apply to traffic moving 
under contract and that the initial duration of a prescription under 
part 1145 is limited to three to five years. While it is possible that 
a particular prescription could result in some reduction in an 
incumbent carrier's revenues (because a shipper chooses to use the 
alternate carrier after considering the service offerings of both the 
incumbent and the alternative carrier) such a potential concern is 
outweighed by the public interest in securing reliable and consistent 
rail service through an expeditious regulatory process for prescribing 
a reciprocal switching agreement when, as provided for in part 1145, no 
undue impairment would result. Part 1145 also balances consideration of 
the impact on non-petitioning shippers, as the Board will consider 
carrier arguments, if raised, about the impact on other shippers in 
determining whether a petition should be granted. Even with the 
potential concerns that any particular prescribed switch might raise, 
Congress expressly provided that the Board should have the authority to 
determine when such switches are ``practicable and in the public 
interest'' and part 1145 reasonably includes analysis of those 
statutory factors.
    Part 1145 also gives reasonable effect to the statutory objectives 
of minimizing the need for federal regulation and of providing for 
efficient and fair regulatory proceedings. See 49 U.S.C. 10101(2), 
(15). First, part 1145 allows rail carriers to retain sufficient 
operational flexibility. While part 1145 could lead to some alterations 
in a carrier's operations, those alterations would be based largely on 
how the carrier chooses to respond to the potential of an alternate 
carrier, as part 1145 does not establish a service level for purposes 
of assessing common carrier or other statutory violations and remedies. 
See NPRM, 88 FR at 63902. Second, with respect to efficient and fair 
proceedings, part 1145 advances that interest through a targeted, 
service-based approach to regulatory intervention based on readily 
obtainable and understood information. The performance standards 
themselves are largely based on data that carriers and shippers use in 
the ordinary course of business and the assessment of performance is 
straightforward to calculate. Part 1145 provides specific affirmative 
defenses, which help to narrow the scope of a proceeding, and also 
allows for case-by-case consideration of other relevant issues when 
warranted. This ease of administration is an important policy goal, 
particularly where there have been concerns expressed about the 
efficiency of the Board's existing processes. See, e.g., NPRM, 88 FR at 
63900 n.7.
    In addition, as a condition to regulatory intervention under part 
1145, there must be sufficient indications, in the form of the 
incumbent carrier's failure to meet a service-based performance 
standard and the absence of an affirmative defense or demonstration of 
undue impairment, that the introduction of an alternate rail carrier 
via an appropriately defined and scoped switching agreement 
prescription could be valuable in bringing about better rail service. 
See 49 CFR 1145.6. Part 1145 will lead to regulatory intervention only 
when, on balance, such intervention is specifically warranted and 
therefore does not implicate the D.C. Circuit's opinion in Midtec Paper 
Corp. v. United States about a radical restructuring of the rail 
sector. See Midtec Paper Corp. v. United States, 857 F.2d at 1507. And 
even when that regulatory intervention occurs, given part 1145's 
express recognition of the incumbent rail carrier's ability to continue 
to compete for a successful petitioner's traffic even when a switch is 
prescribed, the rule furthers section 10101(4)'s goal of relying 
appropriately on competition among rail carriers. A shipper that 
obtains a prescribed switch after careful Board analysis will have the 
ability to elect the service provider that best addresses its needs. 
See NPRM, 88 FR at 63901; see also Del. & Hudson, 167 I.C.C. at 723 
(``Additional rail competition is a clear public benefit . . . , one 
which is endorsed by rail transportation policy announced in the 
Staggers Act.'').
The Carriers' Proposed Approach Is Not Required by Law
    The elaborate, case-by-case approach that rail carriers advocate is 
not required by law and, at the same time, would undermine the policy 
goals that the Board seeks to advance here. In the carriers' view, as a 
condition to prescribing a reciprocal switching agreement, the Board 
would need (1) to compare the quality of service to the petitioner 
versus the quality of service to other customers, (2) to assess whether 
any differences in the quality of service were reasonable, (3) to 
identify the petitioner's business needs, (4) to identify the level of 
transportation service that would reasonably meet those needs, and (5) 
to determine which rail carrier could provide better service. (See, 
e.g., AAR Comments 19-23.) If this approach were required by law, as 
alleged by carriers, then the Board would lose the discretion that is 
inherent in section 11102(c)--the discretion to respond to different 
types of needs and to changing needs by prioritizing different 
objectives in section 10101 as appropriate to meet those needs. See 
Midtec Paper Corp. v. United States, 857 F.2d at 1497, 1500 (stating 
that the question is whether the agency arrived at a reasonable 
accommodation of the conflicting policies in its governing statute).
    The most glaring deficiency in carriers' argument is that nothing 
in the text of section 11102(c) suggests that the Board's discretion is 
limited to where the Board undertakes carriers' elaborate

[[Page 38651]]

approach. Likewise, none of the cases that the carriers cite suggest 
that the carriers' approach is required by law. In Jamestown, the 
petitioners sought the prescription of terminal trackage rights under 
what is now section 11102(a). The requested prescription would have 
required the incumbent rail carrier to construct terminal-area 
facilities to enable the petitioners to directly reach another rail 
carrier (as it stood, the petitioners drayed their shipments to the 
other carrier). Jamestown, 195 I.C.C. at 289-91. In denying the 
prescription, the ICC noted that the prescription would have caused 
distortions by requiring the incumbent carrier to invest in facilities 
for the benefit of its weaker competitor. Id. at 291. The ICC concluded 
therefore that, while the prescription would have provided a 
convenience to the petitioners, more was needed to meet the public 
interest standard. To outweigh the harm that the prescription would 
cause, the petitioners would had to have shown more than a mere 
convenience:

    Where something substantial is to be taken away from a carrier 
for the sole benefit of [the petitioners], and with no corresponding 
benefit to the carrier, as in this case, we are inclined to the view 
that some actual necessity or compelling reason must be shown before 
we can find such action in the public interest.

Id.

    The circumstances that led the ICC to look for a compelling need in 
Jamestown have no meaningful parallel to circumstances that could arise 
under part 1145. A prescription under part 1145 would not require the 
incumbent carrier to make investments for the benefit of a competitor, 
involves a limited form of intervention, and would be granted only if 
the carriers did not adequately demonstrate infeasibility or undue 
impairment to their operations or ability to serve other customers, 
among other limitations and protections under this rule. Of critical 
note, the NPRM made clear that a carrier's loss of a customer's 
business as a result of a prescription based on a failed performance 
standard is not a loss that needs to be redressed, (see NPRM, 88 FR at 
63909), and part 1145 includes protections to avoid any associated 
undue impairment to the carrier's ability to service other customers, 
thus minimizing any potential concerns. Indeed, an incumbent carrier's 
financial losses in such a case would largely reflect its own service 
failure--it failed to meet one of three performance standards, and the 
carrier cannot offer an affirmative defense to excuse the service 
failure--and the shipper's election of the alternate carrier once given 
the option to choose rail providers. For these reasons, in the present 
context, there is no need for the Board to find, as a condition to a 
prescription, a heightened need that would outweigh harm to the 
incumbent carrier. As indicated by the ICC in Delaware & Hudson, the 
interest of the shipping public in securing better service is not a 
mere convenience. Del. & Hudson, 367 I.C.C. at 723 (stating that there 
is a light burden under the statute for a petitioner that seeks the 
potential to secure better rail service through the introduction of an 
additional rail carrier).
    Like carriers' reliance on Jamestown, carriers' reliance on Central 
States is misplaced. There, the petitioner sought the prescription of 
either trackage rights or a reciprocal switching agreement so that the 
petitioner could have a shipment moved from the terminus of one 
carrier's tracks to a destination on another carrier's tracks 1.4 miles 
away. The ICC found that the proposed arrangement was intended to 
achieve business purposes unrelated to the adequacy of rail service 
and, moreover, would have threatened the affected carrier's already 
weak financial standing. The ICC denied the petition, reasoning that, 
in light of that harm, the public interest required more than a showing 
that the prescription would provide a convenience to the petitioner. 
Cent. States, 780 F.2d at 670-71, 679.
    As with Jamestown, the circumstances that led the ICC to look for a 
compelling need in Central States have no meaningful parallel under 
part 1145. The harm that would have arisen in Central States--
substantial harm to the affected carrier's already weak financial 
standing--is unlikely to arise under part 1145 because today each of 
the Class I carriers' financial standing is significantly stronger, see 
R.R. Revenue Adequacy--2022 Determination, Docket No. EP 552 (Sub-No. 
27) (STB served Sept. 5, 2023); because a prescription under part 1145 
would, at most, result in the incumbent carrier's loss of the 
petitioner's business for the limited duration of the prescription; and 
because of the numerous other protections and limitations in this rule. 
See, e.g., 49 CFR 1145.6. For example, if the incumbent carrier were to 
demonstrate that a prescription under part 1145 would unduly impair 
operations or its ability to serve other customers, then the Board 
would not grant the prescription as provided for in 49 CFR 1145.6(b). 
Accordingly, the introduction of an alternate carrier through a 
prescription under part 1145 would only occur when there are potential 
public benefits and, given the Board's consideration of relevant 
issues, the risk of cognizable negative impacts is greatly minimized.
    The ICC's decision in Delaware & Hudson, while cited by carriers, 
directly contradicts carriers' narrow approach to implementing the 
public interest standard in section 11102(c). There the ICC cited 
Jamestown for the proposition that the agency must find ``some actual 
necessity or compelling reason'' to prescribe a reciprocal switching 
agreement. At the same time, the ICC indicated the potential benefits 
of competition are not merely something convenient or desirable to a 
petitioner, as those benefits are normally presumed to be in the public 
interest. Del. & Hudson, 367 I.C.C. at 723. The ICC prescribed a 
reciprocal switching agreement in Delaware & Hudson based on these 
benefits plus the expansion of shipping options to customers in the 
terminal area and the lack of substantial harm to the complaining 
carrier. Id. at 723-24, 726.
    In contrast, the ICC did not make the findings that AAR asserts are 
necessary pre-conditions to prescription of a reciprocal switching 
agreement. The ICC did not examine whether customers had a compelling 
need for the prescription as evidenced by regulatory determinations 
that customers had experienced consistently inadequate service or that 
the inadequacy persisted. The ICC did not examine whether customers' 
businesses had been harmed by existing service and whether any such 
harm was proportionally greater than harm to other customers. Finally, 
the ICC did not examine whether an inadequacy in service would be cured 
by alternate rail service. If anything, part 1145 is more conservative 
than the ICC's approach in Delaware & Hudson given that, under part 
1145, prescription of a reciprocal switching agreement is available 
only if the incumbent carrier failed a performance standard and the 
other conditions to a prescription under part 1145 were met.\3\
---------------------------------------------------------------------------

    \3\ The approach and goals in part 1147 of the Board's 
regulations differ from those in part 1145 as well as from those in 
part 1144 of the Board's regulations. Part 1147 (``Temporary Relief 
Under 49 U.S.C. 10705 and 11102 for Service Inadequacies'') was 
issued in conjunction with the Board's issuance of regulations on 
emergency service orders in 1998. Part 1147 was designed to create a 
regulatory option to address a service-based issue that was longer-
term than an emergency service order (and distinct from the 
permanent prescription of access to an alternate carrier as provided 
for in part 1144). Part 1147 was designed specifically to replace an 
incumbent carrier for the duration of a service inadequacy. See 
Expedited Relief for Serv. Inadequacies, 3 S.T.B. 968 (1998), 63 FR 
71396, 71396-97 (published Dec. 28, 1998). Therefore, part 1147 
calls for the Board to (1) examine whether there has been a 
substantial, measurable deterioration or other demonstrated 
inadequacy in the incumbent carrier's service, and (2) consider 
whether another rail carrier is committed to providing alternate 
service. See 49 CFR 1147.1(a), (b)(iii).
    While part 1147 is thus similar in some respects to the approach 
that AAR advocates here, part 1147 does not require several findings 
that AAR claims are required by statute. As examples, part 1147 does 
not require a finding of disproportionate harm to the petitioner or 
a finding that service to the petitioner is worse than service to 
other customers. But more importantly, as discussed above, none of 
part 1147, part 1144, and part 1145 seeks to define the absolute 
limits of the Board's discretion in implementing section 11102(c). 
The approach under each regulation is designed to address a specific 
concern; each approach reflects a particular prioritization or 
balancing of legislative objectives as reasonably appropriate to 
addressing the specific concern at hand. See Midtec Paper Corp. v. 
United States, 857 F.2d at 1497, 1500. The range of approaches 
across the Board's regulations and the case law underscores AAR's 
error in asserting that, by law, the Board's discretion to advance 
the public interest through section 11102(c) is limited to the 
overly restrictive approach that AAR advocates.

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

[[Page 38652]]

    All that remains of carriers' legal argument is an unremarkable 
statement in the legislative history that the ``practicable and in the 
public interest'' standard in section 11102(c) is ``the same standard 
the Commission has applied for many years in considering whether to 
order the joint use of terminal facilities.'' See H.R. Rep. No. 1430 at 
116; see also 125 Cong. Rec. 15309, 15319 (1979). Without support, 
carriers contend that this general statement implies a host of 
restrictions on the Board's statutory authority. Properly understood, 
however, the statement merely points out a parallel between section 
11102(a) on terminal trackage rights and section 11102(c) on reciprocal 
switching: both provisions use the ``practicable and in the public 
interest'' standard. Nothing in Congress's mere observation of that 
parallel suggests that henceforth, in implementing the public interest 
standard, the agency was to be bound by policy decisions or approaches 
that the agency had adopted in the past.
    Rail carriers' interpretation of the ``same standard'' language 
fails on another level. Carriers imply that Congress meant to equate 
the public interest standard with the ``compelling need'' that the ICC 
looked for in Jamestown, even though neither the statutory text nor the 
legislative history includes any reference to a compelling need or to 
Jamestown. In fact, the ICC's inquiry in Jamestown grew out of the 
peculiar facts of that case; in other pre-Staggers cases in which the 
ICC applied the public interest standard, the ICC said nothing about a 
compelling need. See, e.g., Seaboard Air Line R.R.--Terminal Facilities 
of Fla. E. Coast Ry., 327 I.C.C. 1, 7-8 (1965) (finding that the 
proposed service arrangement was in the public interest based on 
anticipated operating efficiencies, without reference to whether there 
was a compelling need for the arrangement).
    Finally, even if a compelling need were required under the public 
interest standard in section 11102(c), a prescription under part 1145 
would meet that standard. Part 1145 promotes adequate rail service both 
by introducing an alternate rail carrier via an appropriately defined 
and scoped reciprocal switching agreement when there have been 
sufficient indications of service issues (without the establishment of 
an affirmative defense or undue impairment) and by more broadly 
creating an incentive for rail carriers to provide adequate service. 
This approach--both for individual cases and at a broader systemic 
level--will help to mitigate the substantial harm that inadequate rail 
service imposes on the national economy. NPRM, 88 FR at 63900. At the 
same time and as noted throughout this decision, the Final Rule 
contains numerous protections against undue impairment, infeasibility, 
and operational impairment, including about carriers' investments and 
the ability to raise capital to the extent that results in undue 
impairment or an inability to serve other shippers. See Analytical 
Justification. Part 1145 further promotes adequate rail service by 
providing a clearer path to a prescription under section 11102(c), 
whereas carriers' approach would impose undue barriers.
Intermodal Competition
    Carriers erroneously assert that, as a condition to prescribing a 
reciprocal switching agreement, the Board must find that the petitioner 
lacks an adequate option via another mode of transportation. (See, 
e.g., AAR Comments 78-79; BNSF Comments 14-15.) Neither the text of 
section 11102(c) nor the legislative history suggests that the Board's 
discretion to prescribe a reciprocal switching agreement is limited to 
where there is an absence of intermodal competition.\4\ See Del. & 
Hudson Ry. v. Consol. Rail Corp., 366 I.C.C. 845, 854 (1982), affirmed, 
367 I.C.C. at 727 (finding that the agency's authority to prescribe a 
reciprocal switching agreement is not limited to where there is an 
absence of intermodal competition). The presence or absence of 
intermodal competition might be relevant for purposes of part 1144, 
given that part 1144 seeks to remedy or prevent an act that is contrary 
to the competition policies of section 10101 or is otherwise 
anticompetitive. In that context, a finding of intermodal competition 
might inform whether the incumbent carrier could have abused market 
power for purposes of part 1144. See Midtec Paper Corp. v. United 
States, 857 F.2d at 1513. As is well established, though, part 1144 
does not reflect the full breadth of the Board's discretion under 
section 11102(c). The statute itself does not require a finding of 
conduct that is anticompetitive or contrary to the competition policies 
of section 10101, much less a finding that the incumbent carrier holds 
or abused market power. See also 49 CFR part 1147 (providing for a 
prescription without regard to whether the incumbent carrier holds or 
abused market power).
---------------------------------------------------------------------------

    \4\ The absence of a requirement in section 11102(c) to consider 
intermodal competition stands in contrast to other sections where 
Congress has expressly required the Board to consider intermodal 
competition. See, e.g., 49 U.S.C. 10707 (requiring the Board to 
consider competition from other rail carriers and other modes of 
transportation when making market dominance determinations).
---------------------------------------------------------------------------

    Here, there is no need either to find that the petitioner lacks an 
intermodal option or that the incumbent carrier holds or abused market 
power in serving the petitioner. To require those findings would be 
inconsistent with the specific concerns that the Board seeks to address 
through part 1145. The types of service-related problems that part 1145 
seeks to address--insufficient reliability and excessive transit 
times--might reflect an abuse of market power vis-[agrave]-vis the 
petitioner but might also reflect broader management or operating 
decisions that are not well directed toward the development of a sound 
rail system. Part 1145 creates an incentive to avoid service issues, to 
the benefit of the rail system at large, by providing for the 
introduction of an alternate carrier in individual cases as would 
enable the shipper to choose a more efficient and responsive rail 
carrier.\5\
---------------------------------------------------------------------------

    \5\ It is beyond the scope of this proceeding to address 
whether, for the duration of a reciprocal switching agreement under 
part 1145, a carrier that served the petitioner necessarily would 
lack market dominance within the meaning of section 10707 and 
therefore would not be subject to rate review with respect to that 
carrier's line-haul rate to the petitioner. (See, e.g., BNSF Reply 
16; Coal. Ass'ns Comments 60; Coal. Ass'ns Reply 22-23.) The 
question of market dominance could be presented for consideration on 
a case-by-case basis, under the standards in section 10707, in the 
context of any challenge to the relevant line-haul rate.
---------------------------------------------------------------------------

The Ratification Doctrine Does Not Preclude Adoption of Part 1145
    CPKC's ratification argument--that, by not acting on legislative 
proposals after Midtec Paper Corp. v. United States, Congress mandated 
a narrow

[[Page 38653]]

interpretation of section 11102, (see CPKC Reply 5 n.2)--is unfounded. 
First, CPKC mischaracterizes the D.C. Circuit's decision in Midtec 
Paper Corp. v. United States. When the court suggested that Congress 
did not envision a radical restructuring of the rail sector, see 857 
F.2d at 1507, the court did not suggest that the agency's discretion 
under the statute was limited to application of the standards in part 
1144. To the contrary, the court noted that, through part 1144, the 
agency had narrowed its discretion. Id. at 1500; see also Balt. Gas & 
Elec., 817 F.2d at 115 (leaving open the question whether a broader 
approach to implementing the agency's reciprocal switching authority 
would meet the objectives of the Staggers Act). CPKC's vague assertion 
that Midtec Paper Corp. v. United States confirmed ``the limited scope 
of the statute'' ignores the court's actual language.
    Second, as relevant to part 1145, no reasonable inference can be 
drawn from legislative inaction on bills that were introduced after 
Midtec Paper Corp. v. United States. To find that Congress ratified or 
acquiesced to the interpretation of a statute, there must be 
overwhelming evidence that Congress considered and rejected the precise 
issue at hand. See Rapanos v. United States, 547 U.S. 715, 750 (2016). 
CPKC has failed to meet that burden, offering nothing to suggest that 
Congress has ever considered much less rejected an approach similar to 
the approach in part 1145. The inability to draw any relevant inference 
from legislative inaction after Midtec Paper Corp. v. United States is 
underscored by the lack of connection between part 1145 and the concern 
that the D.C. Circuit identified in Midtec Paper Corp. v. United 
States. Under part 1145, a prescription is not warranted merely by the 
fact that the petitioner has direct physical access to only one Class I 
carrier. A time-limited prescription would not be issued under part 
1145 unless the shipper is only served by one Class I carrier, only in 
a terminal area, and only after the carrier failed to meet one of three 
performance standards, no affirmative defenses were established, and 
infeasibility or undue impairment were not demonstrated. The fact that 
part 1145 does not implicate the D.C. Circuit's concern about a radical 
restructuring further undermines CPKC's dubious theory that, by not 
acting after Midtec Paper Corp. v. United States, Congress precluded 
the approach in part 1145.
    Finally, it would be unreasonable to conclude that--through 
inaction, with no indication of legislative intent--Congress reversed 
its affirmative decision to grant the agency broad authority to 
prescribe reciprocal switching agreements. If anything, Congress' 
reenactment of the public interest standard in section 11102(c) 
confirms the agency's broad authority in this context. See Reciprocal 
Switching (2016 NPRM), Docket No. EP 711 (Sub-No. 1) slip op. at 11-13 
(STB served July 27, 2016), 81 FR 51149 (published Aug. 3, 2016).

Analytical Justification

    Class I rail carriers suggest that the Board has failed to 
adequately support promulgation of part 1145. First, the carriers 
suggest that the Board must go farther than it does in analyzing the 
effects that the rule might bring about. Second, the carriers suggest 
that the levels of the performance standards in part 1145 are not 
adequately supported by record evidence. The following discussion 
addresses each argument in turn, explaining why each lacks merit.

Scope of Analysis

Comments
    AAR asserts that, under principles of reasoned decision making, the 
Board must assess the cumulative advantages and disadvantages of 
promulgating part 1145 and must find that the advantages outweigh the 
disadvantages, even if the Board would later consider advantages and 
disadvantages in applying the rule on a case-by-case basis. (See AAR 
Comments 113-15 (citing Michigan v. EPA, 576 U.S. 743, 753 (2015)).)
    AAR then directs a broad challenge at any rule that provides for 
the prescription of reciprocal switching agreements, without regard to 
the specific provisions of that rule. (See AAR Comments 113-15.) 
According to AAR, the promulgation of any such rule would create 
numerous disadvantages. First, in AAR's view, any expansion of ``forced 
switching'' would directly impair investment by increasing operational 
burdens, reducing resiliency, increasing costs, and reducing profits. 
(Id. at 115-21.) Second, in AAR's view, so-called ``sweeping'' 
switching requirements would distort the market for transportation 
service, in contradiction of congressional policy to achieve sound 
economics in transportation. AAR states that, where switching is 
economically efficient, it is likely to occur voluntarily. (Id. at 116-
19, 123; id., V.S. Orszag & Eilat at 14 (market distortions could 
result from regulatory intervention where there has been no 
demonstration of a deviation from efficient market outcomes); see also 
AAR Comments 9, 24-25 (asserting that, under part 1145, shippers could 
seek prescription of a reciprocal switching agreement, not because they 
needed alternate service, but as a means to extract rate concessions at 
others' expense).)
    Third, in AAR's view, sweeping switching requirements would 
undermine the use of differential pricing, which AAR characterizes as 
critical to the health of the rail network. (Id. at 122 (citing Pet. 
For Rulemaking to Adopt Revised Competitive Switching Rules (2012 
Rulemaking), EP 711, slip op. at 7 (STB served July 25, 2012)).) 
Additional disadvantages alleged by AAR include inefficient routing, 
increased congestion, environmental costs that are associated with 
increased use of fuel and emissions, train delays, higher risk of 
service failure due to increased ``touches,'' depressed incentives for 
future investment with resulting reductions in the quality of service, 
operational inefficiencies, safety risks, and threats to carriers' 
ability to recover the costs of their entire networks and to maintain 
financial viability. (AAR Comments 113.)
    While naming a litany of alleged disadvantages, AAR asserts that 
provision for the prescription of reciprocal switching agreements would 
provide no public benefit. AAR suggests that the only benefit would be 
any benefit that accrued to the successful petitioner and that this 
benefit would impose burdens on others--for example, by causing 
disruptions or inefficiencies in rail service on a system-wide basis. 
(Id. at 119.)
    AAR suggests that the alleged disadvantages of promulgating part 
1145 can to some extent be quantified. (Id. at 114.) According to AAR, 
the Board has recognized the need for data-driven rulemaking. (Id. 
(citing 2012 Rulemaking, EP 711).)
The Board's Assessment
    The Board has engaged in reasoned decision-making, and AAR's 
arguments to the contrary lack merit. First, AAR mischaracterizes the 
standard for reasoned decision-making that applies in the present 
context. Second, the disadvantages that AAR alleges in connection with 
promulgation of part 1145 do not reflect the actual regulation.
AAR Mischaracterizes the Applicable Standard
    An agency engages in reasoned decision making under the 
Administrative Procedure Act, 5 U.S.C. 551-559, when the agency reaches 
a logical conclusion based on relevant factors. Motor Vehicle Mfrs. 
Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 42-43 (1983). The 
factors that the

[[Page 38654]]

agency must consider are defined by the governing statute. See Michigan 
v. EPA, 576 U.S. 743. As discussed above, the relevant factors in 
implementing section 11102(c) are the RTP factors, which the Board has 
weighed as discussed in Legal Framework.
    AAR errs in suggesting that, under Michigan v. EPA, the Board must 
go farther than it does in addressing the impact of part 1145. In 
Michigan v. EPA, the EPA decided to subject power plants to certain 
minimum, regulatory standards under the Clean Air Act. The Court found 
that, under the ``appropriate and necessary'' standard in the Clean Air 
Act, the EPA should have considered what it would cost power plants to 
comply with the regulatory standards in question. The Court reasoned 
that, within the statutory framework, the ``appropriate and necessary'' 
standard was properly interpreted as calling for consideration of the 
cost of compliance. The Court relied in this respect on the fact that 
related provisions of the Act expressly directed the EPA to consider 
the cost of compliance. Michigan v. EPA, 576 U.S. at 749-54. The 
Court's assessment of the factors that the EPA needed to consider 
rested specifically on the relevant provisions of the Clean Air Act. 
Id.
    Michigan v. EPA therefore does not suggest that other agencies, in 
implementing other statutory provisions, must consider the same 
factors. See Env't Comm. of Fla. v. EPA, 94 F.4th 77, 97-98 (D.C. Cir. 
2024). Of equal significance, Michigan v. EPA left in place the 
principle that agencies have broad discretion in how to consider 
relevant factors.\6\ Even in Michigan v. EPA, where the Court held that 
the agency must consider quantifiable costs, the Court declined to hold 
that the EPA must conduct a particular type of cost-based analysis: 
``It will be up to the Agency to decide (as always, within the limits 
of reasonable interpretation) how to account for costs.'' Michigan v. 
EPA, 576 U.S. at 759. Here, neither section 11102(c) nor any related 
statutory provision indicates that the Board must undertake a 
particular form of analysis when implementing section 11102(c).
---------------------------------------------------------------------------

    \6\ See Stilwell v. Off. of Thrift Supervision, 569 F.3d 516, 
519 (D.C. Cir. 2009) (``The [Administrative Procedure Act] imposes 
no general obligation on agencies to produce empirical evidence.''); 
Sacora v. Thomas, 628 F.3d 1059, 1067 (9th Cir. 2010) (an agency is 
entitled to rely on its own expertise in promulgating a regulation); 
see also Northport Health Servs. of Ark. v. U.S. Dep't of Health & 
Hum. Servs., 14 F.4th 856, 874 (8th Cir. 2021) (an agency is 
entitled to rely on anecdotal evidence in promulgating a 
regulation).
---------------------------------------------------------------------------

    Michigan v. EPA likewise does not suggest that the Board must 
speculate on the cumulative impacts of part 1145. As noted above, part 
1145 establishes a framework for case-by-case consideration of the 
``practicable and in the public interest'' standard in section 11102(c) 
in the context of a petition for prescription of a reciprocal switching 
agreement. While the Board expects that the number of petitions under 
part 1145 will not be significant, the actual number will depend on 
factors that the Board cannot now predict--factors that, among other 
things, will include rail carriers' management and operating decisions. 
Whether the Board grants a given petition will also depend on factors 
that the Board cannot now predict, such as whether the incumbent 
carrier had an affirmative defense and whether the carriers could 
demonstrate undue impairment as provided for under part 1145. Unlike 
part 1145, the regulatory scheme in Michigan v. EPA did not involve 
case-by-case consideration. The future action that the EPA contemplated 
would have imposed more stringent standards on power plants, beyond the 
minimum standards that resulted from the EPA's original decision to 
regulate. Michigan v. EPA, 576 U.S. at 756-57. Michigan v. EPA 
therefore does not suggest that--when a rule establishes requirements 
that will be implemented only on a case-by-case basis, and when the 
outcomes in individual cases will turn on variable facts that the 
agency cannot reasonably predict--the agency must nevertheless 
speculate on outcomes as a condition to promulgating the rule. In any 
event, as discussed in Legal Framework, the Board has considered the 
many positive impacts this regulation will have on the incentive for 
carriers to provide adequate service and the concerns that may arise 
from particular switching orders. The Board has found that the 
qualitative advantages of part 1145 under the RTP outweigh those 
concerns and, in reaching this conclusion, has appropriately considered 
the relevant factors.
    AAR's reliance on the 2012 Rulemaking--for the proposition that the 
Board should conduct a more data-driven analysis here--is similarly 
unpersuasive. Pending before the Board at that time was a proposal by 
the National Industrial Transportation League (NITL). NITL's proposal 
was to provide, by rule, for the prescription of a reciprocal switching 
agreement when four conditions were met: (1) the shipper was served by 
a single Class I rail carrier; (2) there was no effective intermodal or 
intramodal competition for the relevant line-haul movement; (3) there 
was or could be ``a working interchange'' within a ``reasonable 
distance'' of the shipper's facility; and (4) switching would be safe 
and feasible, with no adverse effect on existing service. The proposal 
would have established conclusive presumptions for when the second and 
third elements of the four-part test were met. For example, the Board 
would conclusively presume that there was no effective intermodal or 
intramodal competition for a movement if the incumbent carrier's 
associated revenues exceeded its variable costs by a given ratio or if 
the incumbent carrier had handled a given amount of the relevant 
traffic. See 2012 Rulemaking, EP 711, slip. op. at 4.
    The Board found that these conclusive presumptions would tend to 
make only certain types of shippers eligible for a prescription and, 
indeed, would result more or less automatically in prescriptions on 
behalf of those shippers. Id. The Board expressed concern that--if 
those shippers obtained lower rates on a widespread basis, due to the 
widespread prescription of reciprocal switching agreements on their 
behalf--then other shippers (those that remained captive) might bear an 
excessive portion of system costs. Id. at 7. The Board therefore sought 
empirical evidence on three impacts of NITL's proposal: (1) the impact 
on rates and service for qualifying shippers; (2) the impact on rates 
and service for captive shippers that would not qualify; and (3) the 
impacts on the financial condition of the rail industry and on the 
efficiency of the industry's operations. Id. at 2.
    In 2016, the Board rejected NITL's proposal, concluding that the 
proposal would unduly favor certain shippers. The Board decided, as 
part of the same decision, to propose a different approach to 
reciprocal switching--an approach that, rather than relying on 
conclusive presumptions, left the prescription of reciprocal switching 
agreements almost entirely to case-by-case basis evaluation. See 2016 
NPRM, EP 711 et al., slip. op. at 13-15, 16, 20. Given the difference 
in the approach in the 2016 proposal, the Board did not call for 
empirical evidence on the impact of that proposal.
    The Board called for a particular type of analysis in considering 
NITL's proposal because, due to the nature of the proposal, it seemed 
likely that the proposal would have a discernible and predictable 
impact on rates and service. The Board did not call for a comparable 
analysis in considering the 2016 proposal, which left implementation 
almost entirely to the Board's discretion on a case-by-case basis. It 
would have been impractical, in that context, to attempt to predict the 
impact of the proposal on rates or service. Part 1145

[[Page 38655]]

is like the 2016 proposal in this sense. Under part 1145, the Board 
will prescribe a reciprocal switching agreement only on a case-by-case 
basis and only upon making specific determinations under the 
``practicable and in the public interest'' standard.
AAR Mischaracterizes the Impact of Part 1145
    The Board finds unpersuasive AAR's claim that promulgation of part 
1145 would impose significant disadvantages. AAR's list of alleged 
disadvantages is notably directed at any regulation that the Board 
might promulgate on reciprocal switching, no matter what standards the 
Board established through that regulation. (See AAR Comments 113.) On 
that level alone, AAR's list of alleged disadvantages is flawed as a 
basis for challenging promulgation of part 1145; AAR has failed to 
establish a sufficient nexus between its list of alleged disadvantages 
and promulgation of part 1145.
    Of particular note, a prescription under part 1145 would not 
``force'' the incumbent carrier to relinquish the petitioner's shipment 
to another rail carrier. A prescription under part 1145 would merely 
establish the legal foundation for the petitioner's shipment to be 
transferred to the other rail carrier should the shipper elect to take 
service from that carrier. Whether a transfer actually occurred would 
be determined by the petitioner, who could choose between competitive 
options--the services of the incumbent railroad and those of the 
alternate carrier. Within this regulatory scheme, particularly in light 
of the numerous protections in the rule, a carrier that desires more 
certainty, for example with respect to its capital investment 
decisions, can ensure that it provides high level service, can 
negotiate suitable contracts when appropriate, and can otherwise work 
with its customers to avoid regulatory intervention under part 1145.
    Nor will part 1145 result in ``sweeping switching requirements,'' 
given numerous limitations that are built into part 1145. First, under 
part 1145, the Board will prescribe a reciprocal switching agreement 
only on behalf of a shipper or receiver that is served by a single 
Class I rail carrier (or affiliate), only in a terminal area, and only 
after the incumbent carrier failed to meet one of three performance 
standards. Second, a prescription would not be available under part 
1145 for movements that occur under valid transportation contracts or 
for movements of exempt commodities. As explained below, a shipper of 
an exempt commodity would need to obtain revocation of the exemption 
before obtaining prescription of a reciprocal switching agreement under 
part 1145. See Contract Traffic and Exempt Traffic. As a result of 
these limitations, only a relatively small portion of all Class I 
movements are even potentially eligible for a prescription under part 
1145. See ``Freight Rail Pricing,'' Report to Congressional Committees 
by the U.S. Government Accountability Office, GAO-17-166 at 5 (December 
2016). Third, under part 1145, the Board will not prescribe a 
reciprocal switching agreement when there is demonstrated infeasibility 
or undue impairment to a carrier's operation or ability to serve other 
customers as provided for in part 1145. Fourth, a reciprocal switching 
agreement that is prescribed under part 1145 would remain in place 
after its initial duration only to the extent that the carrier failed 
to meet standards for termination or chose not to seek termination. 
Fifth, the rule allows incumbent carriers to offer affirmative defenses 
regarding a failure to meet a performance standard. It not only 
specifically enumerates multiple affirmative defenses but also allows a 
carrier to offer additional affirmative defenses on a case-by-case 
basis. In all, due to the reasonably tailored approach in part 1145, 
there is no basis to assume that part 1145 will lead to significant 
adverse overall impacts.
    Besides lacking a sufficient nexus to part 1145, AAR's list is 
flawed on another fundamental level. Underlying the list is a 
mischaracterization of the nature of reciprocal switching. Under the 
proper characterization, reciprocal switching is merely an incidental 
movement to the line-haul movement. When a customer chooses to rely on 
a reciprocal switching agreement, the incumbent carrier simply moves 
the customer's shipment to/from the alternate carrier's switching yard 
for the customer's terminal area rather than to/from the incumbent's 
yard for that terminal area. These types of movements are routine in 
the rail industry and are governed by applicable safety and related 
regulations. In addition, as described throughout this decision, part 
1145 includes protections against infeasibility and undue operational 
impairment. Any change in fuel use or emissions would be minimal; 
shippers have incentives to select the route that is overall most 
efficient, which may often be the route that is most fuel efficient. 
(See AAR Comments, 113-21; id., V.S. Orszag & Eilat at 15-17.) By 
extension, given that an individual prescription is unlikely to impose 
adverse impacts in these respects, it is unlikely that promulgation of 
part 1145 will impose meaningful cumulative, adverse impacts in these 
respects.
    The protections that are built into part 1145 also will allow 
carriers to raise concerns about investments and the ability to attract 
capital (see id., V.S. Orszag & Eilat at 6), in that the Board would 
consider arguments in individual cases that a proposed prescription 
would impair investments to the point of unduly impairing operations or 
the ability to serve other customers. Limited eligibility under part 
1145 (for example, the fact that a prescription would be available 
under part 1145 only for points of origin or final destination in a 
terminal area) also protects against substantial, cumulative adverse 
impacts on carriers' revenues, ability to attract capital, and ability 
to engage in differential pricing.
    Finally, the Board disagrees that the introduction of an alternate 
rail carrier under this framework, especially when there are sufficient 
indications that sub-optimal service was provided, could substantially 
distort the market. (See, e.g., AAR Comments, V.S. Orszag & Eilat at 10 
(suggesting that the Board's intervention when service dips below a 
certain threshold level could result in market distortions); id. at 14 
(``Cases in which switching has not happened by voluntary agreement 
require an explanation for why that is the case if switching is indeed 
the operationally and economically efficient outcome.''); AAR Comments 
123.) A voluntary agreement between carriers to transfer a shipment 
from one carrier to another might enable the carriers to maximize their 
profits, but that outcome does not necessarily determine whether the 
carriers have made efficient investment and operating decisions from 
the perspective of the rail network as a whole.

Levels of the Performance Standards

    Part 1145 relies on conservative performance standards--standards 
that are set below common service expectations and goals--as indicators 
of where it might be beneficial, consistent with the purposes of part 
1145, to introduce an alternate rail carrier via an appropriately 
defined and scoped reciprocal switching agreement. As described in the 
NPRM, 88 FR at 63900, the Board has used two points of reference in 
setting the levels of the performance standards in part 1145. The first 
point of reference is customers' service expectations. Through public 
hearings in early 2022 and through numerous ``ex parte'' meetings since 
then, the Board has collected extensive

[[Page 38656]]

information about customers' service expectations. See, e.g., Hr'g Tr. 
64:5 to 64:9, Apr. 26, 2022, Urgent Issues in Freight Rail Serv., EP 
770; Ex Parte Mtg. Summary, Mar. 31, 2022, Reciprocal Switching, EP 711 
(Sub-No. 1). The record shows that, when customers expressed heightened 
concern about carriers' performance, carriers' performance was falling 
dramatically.\7\ There is also significant consistency among customers 
in their service expectations.\8\ These factors provide sufficient 
confidence in the context of part 1145, given its specific design and 
purposes, that the service expectations that customers have identified 
in these proceedings generally reflect a level of rail service that is 
needed for customers to conduct their businesses on a reasonably 
efficient basis. While the performance standards in part 1145 are set 
with reference to customers' service expectations, the standards are 
set at or below the level of service that many customers have said is 
needed to avoid serious disruptions in their operations. A carrier's 
failure to meet one or more of the performance standards therefore is 
strongly indicative that the introduction of another carrier (which 
would allow market forces to address those concerns, subject to 
appropriate protections) could be beneficial.
---------------------------------------------------------------------------

    \7\ See e.g., Hr'g Tr. 544:21 to 545:4, Apr. 27, 2022, Urgent 
Issues in Freight Rail Serv., EP 770. The evidence underscores the 
critical need for improved rail service reliability. When the Board 
held its hearing in EP 770, CSXT and UP had 69% and 63% OETA for 
manifest traffic, respectively. See CSXT Performance Data at Row 
163, May 18, 2022, and UP Performance Data at Row 182, May 18, 2022, 
available at www.stb.gov/reports-data/railservice-data/. In 
addition, according to 10-K filings made with the U.S. Securities 
and Exchange Commission (SEC), CSXT had carload trip plan compliance 
of 64% in the 2022 fiscal year, and UP had manifest/automotive car 
trip plan compliance of 59% in the 2022 fiscal year, but 71% in 
fiscal year 2020. These SEC filings are available at www.sec.gov 
(open tab ``Filings'', select ``Search for Company Filings'', and 
then select ``EDGAR full text search'').
    \8\ (See Coal. Ass'ns Comments 22; LyondellBasell Comments 2; 
DCPC Comments 6-8; NGFA Comments 12; PRFBA Comments 7; GISCC 
Comments 5; AFPM Comments 8-9; API Comments 3-4; NSSGA Comments 6-7; 
EMA Comments 6 PRFBA Comments 6-7 (each seeking a reliability 
standard as defined in the NPRM of at least 70%); see also Coal. 
Ass'ns Comments 32; ACD Comments 5; NGFA Comments 12-13; Olin 
Comments 6 (each seeking a service consistency standard where a 
failure would result from an increase of 15% or less in transit 
time); see, e.g., Coal. Ass'ns Comments 5; NSSGA Comments 9; AFPM 
Comments 12; EMA Comments 8; PRFBA Comments 9; DCPC Comments 10; API 
Comments 5; NGFA Comments 13; FRCA/NCTA Comments 2 (each seeking an 
ISP standard of 90%).)
---------------------------------------------------------------------------

    The Board's second point of reference in setting the levels of the 
performance standards is the evidence that the Board collected in 2022 
and 2023 in reviewing the performance of Class I rail carriers. That 
evidence corroborates the service expectation levels that are suggested 
by customers. The Board began its recent service oversight during the 
early 2020s, when it was widely recognized that delays and other 
deficiencies in the transportation of freight were substantially 
impairing the national economy.\9\ Due to the pervasiveness of poor 
rail service, testimony during a public hearing in March 2022--a 
hearing in Docket No. EP 711 (Sub-No. 1) that was meant to explore 
competitive access on a more general level--often turned to customers' 
need for better service. See, e.g., Hr'g Tr. 105:4 to 105:17, Mar. 15, 
2022, Reciprocal Switching, EP 711 (Sub-No. 1) et al. At roughly the 
same time as that hearing, the Board received several reports--
including from the Secretary of Agriculture, U.S. Senator Shelley Moore 
Capito, and stakeholders--about the serious impact that poor service 
was having on rail customers. See Urgent Issues in Freight Rail Serv., 
EP 770, slip op. at 2 n.1 (STB served Apr. 7, 2022) (citing Honorable 
Thomas J. Vilsack, USDA Letter, Mar. 30, 2022, Reciprocal Switching, EP 
711 (Sub-No. 1); Letter from Honorable Shelley Moore Capito, to Board 
Members Martin J. Oberman, Michelle A. Schultz, Patrick J. Fuchs, 
Robert E. Primus, & Karen J. Hedlund (Mar. 29, 2022), available at 
www.stb.gov (open tab ``News & Communications'' & select ``Non-Docketed 
Public Correspondence''); Letter from NGFA to Board Members Martin J. 
Oberman, Michelle A. Schultz, Patrick J. Fuchs, Robert E. Primus, & 
Karen J. Hedlund (Mar. 24, 2022), available at www.stb.gov (open tab 
``News & Communications'' & select ``Non-Docketed Public 
Correspondence''); Letter from SMART-TD to Chairman Martin J. Oberman 
(Apr. 1, 2022), available at www.stb.gov (open tab ``News & 
Communications'' & select ``Non-Docketed Public Correspondence'')).
---------------------------------------------------------------------------

    \9\ See, e.g., Fed. Reserve Bank of Cleveland, Matthew V. Gordon 
and Todd E. Clark, ``The Impacts of Supply Chain Disruptions on 
Inflation,'' Number 2023-08 (May 10, 2023), www.clevelandfed.org/publications/economic-commentary/2023/ec-202308-impacts-supply-chain-disruptions-on-inflation.
---------------------------------------------------------------------------

    These concerns led the Board to establish a new docket, Urgent 
Issues in Freight Rail Service, Docket No. EP 770, and to hold a 
hearing in that docket in April 2022. Through that hearing and 
subsequent meetings, the Board sought to understand customers' need for 
service and to examine decisions by rail carriers that had contributed 
to carriers' failure to meet that need. See Urgent Issues in Freight 
Rail Serv., EP 770 (STB served Apr. 7, 2022). Shortly after the April 
2022 hearing, the Board began to collect data on Class I carriers' 
performances both in completing line hauls and in providing local 
service on a timely basis. See Urgent Issues in Freight Rail Serv.--
R.R. Reporting, EP 770 (Sub-No. 1) (STB served May 6, 2022); see also 
NPRM, 88 FR at 63904.
    The evidence that the Board collected reveals that Class I 
carriers' system-average performances varied significantly from time 
period to time period and from carrier to carrier during the early 
2020s. NPRM, 88 FR at 63903-04, 63906. The evidence does more, though, 
than reveal carriers' faltering and erratic service during those years. 
It identifies the level of service that Class I carriers themselves set 
as their short-term performance goals to bring them out of the crisis 
period.\10\ For example, the 70% reliability standard in part 1145 is 
set above the average level of Class I carriers' system-wide 
performances during the early 2020s yet generally below the carriers' 
own performance targets. This evidence reinforces the conclusion that 
the reliability standard is set at a modest level that balances the 
public interest in adequate rail service with a measured approach to 
regulatory intervention. Application of the reliability standard would 
provide a reasonable basis to conclude that intervention here--the 
prescription of an appropriately defined and scoped reciprocal 
switching agreement--could be beneficial (provided that the affected 
carriers did not demonstrate an affirmative defense, infeasibility, or 
undue impairment to their ability to serve other customers).
---------------------------------------------------------------------------

    \10\ See, e.g., BNSF Status Report, Interim Update 7, Dec. 2, 
2022, Urgent Issues in Freight Rail Serv.--R.R. Reporting, EP 770 
(Sub-No. 1) (Merchandise OTP = 65% and ISP (referred to as ``Local 
Service Performance'') = 91%); CSXT Status Report Interim Update 3, 
Dec. 2, 2022, Urgent Issues in Freight Rail Serv.--R.R. Reporting, 
EP 770 (Sub-No. 1) (Manifest TPC w/in 24 Hours = 82% and ISP/FMLM = 
87%); NSR Status Report, Interim Update 5, Dec. 2, 2022, Urgent 
Issues in Freight Rail Serv.--R.R. Reporting, EP 770 (Sub-No. 1) 
(Merchandise TPC = 82% and ISP (referred to as Local Operating Plan 
Adherence) = 78%); and UP Status Report, Interim Update 4, Dec. 2, 
2022, Urgent Issues in Freight Rail Serv.--R.R. Reporting, EP 770 
(Sub-No. 1) (TPC Manifest = 70% and ISP (referred to as FMLM) = 
91%). See also NPRM, 88 FR at 63901 (the carriers recognized that 
their performance during the early 2020s fell below reasonable 
service expectations).
---------------------------------------------------------------------------

    The same is true of the service consistency standard in part 1145. 
It is clear from the carriers' reports that a 20% increase in transit 
time can indicate the presence of significant service issues. In Docket 
No. EP 770 (Sub-No. 1), the Board required BNSF, CSXT, NSR, and UP to 
report a target system velocity for the period coming

[[Page 38657]]

out of the crisis of the early 2020s.\11\ The data that the Board has 
collected on train speed informs the reasonableness of the service 
consistency standard, even though that standard measures increases in 
transit time rather than decreases in train speed.\12\ For each 
carrier, a 20% drop from the carrier's target velocity \13\ would 
correspond to service as bad as or worse than the carrier's service 
during what clearly were highly problematic periods on the network, as 
indicated by average train speeds that the carriers reported for those 
periods. See United States Rail Service Issues--Performance Data 
Reporting, EP 724 (Sub-No. 5) and data submitted to the Board pursuant 
to 49 CFR part 1250.\14\ Even where velocity was reduced by less than 
20% from the carrier's target velocity, the carriers recognized that 
the reduction in velocity imposed significant burdens on shippers.\15\
---------------------------------------------------------------------------

    \11\ The target system velocities that the carriers reported are 
as follows: BNSF--Overall Velocity = 26 mph (BNSF Status Report, 
Interim Update 7, Dec. 2, 2022, Urgent Issues in Freight Rail 
Serv.--R.R. Reporting); CSXT--(STB LOR Velocity = 24.2 mph (CSXT 
Status Report Interim Update 3, Dec. 2, 2022, Urgent Issues in 
Freight Rail Serv.--R.R. Reporting); NSR--System Velocity = 22 mph 
(NSR Status Report, Interim Update 5, Dec. 2, 2022, Urgent Issues in 
Freight Rail Serv.--R.R. Reporting); and UP--Car Velocity = 207 
(Status Report, Interim Update 4, Dec. 2, 2022, Urgent Issues in 
Freight Rail Serv.--R.R. Reporting (note that UP reports its 
velocity as measuring the average daily miles a car moves on UP's 
network)).
    \12\ Train speed is based on the time that it took a train to 
cover the distance between two terminals. See 49 CFR 1250.2(a)(1). A 
reduction in train speed means that the train sat idle for a longer 
time between terminals, without saying anything about how long the 
train sat idle at a terminal. In contrast, an increase in transit 
time could arise out of increased delays at a terminal and/or 
increased delays between terminals. It is reasonable to conclude 
therefore that, during periods when a carrier's average train speeds 
were reduced by a significant percentage, transit times over the 
carrier's system likely increased by the same percentage or a higher 
percentage.
    \13\ The Board recognizes these velocity figures are system 
averages, and it explains below how its service consistency standard 
accounts for variability across lanes.
    \14\ For example, a 20% drop for BNSF from its target would be 
20.8 mph. The lowest average train speed BNSF has experienced since 
reporting began under 49 CFR part 1250 occurred in the March 29, 
2019 reporting week with a system velocity of 22.3 mph. This was due 
to extreme flooding in the Midwest at that time. See ``Railroads' 
flood-ravaged Midwestern tracks trigger emergency declaration,'' 
Progressive Railroading (Mar. 21, 2019), 
www.progressiverailroading.com/class_is/news/Railroads-flood-
ravaged-Midwestern-tracks-trigger-FRA-emergency-declaration--57161. 
Even during the service problems of the early 2020s, BNSF's lowest 
average train speed was 24 mph--a drop of only 7.69% from BNSF's 
target velocity. For CSXT, a 20% drop from its target would be 19.36 
mph. The lowest average train speed CSXT has experienced since 
reporting began under 49 CFR part 1250 occurred in the August 16, 
2017 reporting week with a system velocity of 18.4 mph. The Board 
held a hearing on CSXT's service issues at this time. See Public 
Listening Session Regarding CSXT's Rail Serv. Issues, EP 742 (STB 
served Aug. 24, 2017). A 20% drop for NSR from its target would be 
17.6 mph. NSR had an average train speed of 17.6 mph in the November 
5, 2021 reporting week and 17.0 mph in the November 24, 2021 
reporting week. The 17.0 mph is the lowest recorded average train 
speed for NSR since reporting began. For UP, its average train speed 
was 24 mph for the reporting week of May 5, 2023. A 20% drop from UP 
from this level would be 19.2 mph. The lowest average train speed 
that UP has experienced since reporting began in under 49 CFR part 
1250 occurred in the March 29, 2019 reporting week with a system 
velocity of 21.3 mph. As with BNSF, this low velocity was due to 
extreme flooding in the Midwest at that time. Even during the 
service problems of the early 2020s, UP's lowest average train speed 
was 22.8 mph--a drop of only about 5% from UP's target velocity. To 
access data filed pursuant to 49 CFR part 1250 visit www.stb.gov/reports-data/rail-service-data/ (in table under ``Individual Carrier 
Performance Data'' select the individual railroad; then click the 
most current hyperlink; then filter by date, average train speed, 
and carrier).
    \15\ For example, during the week of April 15, 2022, UP had an 
average train speed of 22.8 mph--only 5% below UP's target of 24 
mph. See id. During the Board's hearing in April 2022, UP 
acknowledged that even that reduction in velocity represented a 
failure to meet reasonable public demand. See testimony of Eric 
Gehringer VP of Operations at UP at the Apr. 27, 2022 Urgent Issues 
hearing and Testimony of Steve Bobb Chief Marketing Officer at BNSF 
Hr'g Tr. 805:8-813:19, and 813:11-17, Apr. 27, 2022, Urgent Issues 
in Freight Rail Serv., EP 770 (``We know we are not currently 
meeting our customer's expectations. I want to reinforce our 
commitment to restoring network velocity so that we can deliver the 
quality of service our customers have come to expect, and position 
ourselves to grow with our customers, long-term.'') See also UP's 
10-K filing with the SEC, which is available at www.sec.gov (open 
tab ``Filings'', select ``Search for Company Filings'', and then 
select ``EDGAR full text search'').
---------------------------------------------------------------------------

    This evidence is corroborated by testimony of shippers in Docket 
No. EP 770, which shows that shippers were complaining about drops in 
velocity of less than 20% during the early 2020s.\16\ When a shipper 
uses railcars that the shipper supplies itself, any significant 
reduction in the velocity of those cars through the system means that 
the cars are substantially less productive, resulting in adverse 
impacts on the shipper's costs, revenues, or both. See, e.g., Hr'g Tr. 
551:6 to 551:14, 568:12 to 569:9, Apr. 27, 2022, Urgent Issues in 
Freight Rail Serv., EP 770. Shippers that rely on carrier-supplied cars 
may not have the same concern about fleet productivity but, as with 
other shippers, would still be impacted by the inventory cost of 
undelivered freight. A significant reduction in velocity might also be 
associated with reduced availability of carrier-supplied cars, to a 
shipper's detriment.
---------------------------------------------------------------------------

    \16\ At the April 2022 hearing in Docket No. EP 770, several 
shippers testified about the burdens associated with increased 
transit times. See, e.g., Hr'g Tr. 73:7-13, Apr. 26, 2022, Urgent 
Issues in Freight Rail Serv., EP 770 (Cargill testifying that rail 
service deterioration since the fourth quarter of 2021 resulted in a 
15% increase in transit time for its private fleet); Hr'g Tr. 364:18 
to 367:15, Apr. 26, 2022, Urgent Issues in Freight Rail Serv., EP 
770 (increased transit days resulting from rail service issues ``has 
had a huge financial impact'' on Molson Coors); Hr'g Tr. 551:6-8, 
Apr. 27, 2022, Urgent Issues in Freight Rail Serv., EP 770 (NITL 
testifying that ``transit times in the first quarter this year have 
increased by 15% over pre-pandemic levels due to crew and power 
shortages''); Hr'g Tr. 558:12-18, Apr. 27, 2022, Urgent Issues in 
Freight Rail Serv., EP 770 (ASLRRA testifying that, since the fourth 
quarter of 2020, one member company ``experienced significant 
deterioration in rail service'' including transit times that 
increased by six days and variability of transit that made it 
``impossible for shippers to plan their business'').
---------------------------------------------------------------------------

    In all, record evidence indicates the conservative nature of the 
service consistency standard in part 1145, which reserves federal 
intervention for an increase in transit time of more than 20%. In the 
absence of a proven affirmative defense, such an increase in transit 
time provides sufficient indicia of service problems that are 
inconsistent with meeting customer and carrier expectations. In effect, 
such an increase points sufficiently to the potential value of 
introducing an additional line haul carrier.
    To the extent that some commenters argue that the performance 
standards in part 1145 might be overinclusive, i.e., counting as a 
``failure'' service that would not prove to be inadequate in the 
market, the public interest is protected both by the provisions in part 
1145 for consideration of factors that could work against a 
prescription and by the specific and limited nature of regulatory 
intervention under part 1145. Regulatory intervention--again, the 
prescription of an appropriately defined and scoped reciprocal 
switching agreement--would give the petitioner a service option when 
there is a factual predicate for concluding that intervention is 
warranted. Petitioners have the incentive to select, over the duration 
of the prescribed agreement, the more efficient and responsive carrier. 
To the extent that the performance standards might be underinclusive, 
counting as a ``pass'' service that would have proven to be inadequate 
in the market, the public interest is protected by the opportunity for 
the affected shipper or receiver to seek a prescription under the 
Board's other regulations. In all cases, the public interest is 
protected not only by the performance standards themselves, but also by 
the opportunity that carriers would have, on a case-by-case basis, to 
demonstrate an affirmative defense, infeasibility, or undue impairment 
to their ability to serve other customers. By ensuring that application 
of the performance standards is not the end of the inquiry, part 1145 
precludes a prescription when sufficient countervailing public interest 
has been

[[Page 38658]]

demonstrated. In addition, as discussed in Legal Framework, the Board's 
paramount interest in establishing an expeditious process for 
addressing service-based reciprocal switching petitions and fostering a 
sound rail transportation system is best supported by a process that 
does not require protracted litigation.
Carriers' Objections
    According to Class I rail carriers, the levels of the performance 
standards in part 1145 are not adequately supported by record evidence. 
The carriers allege several errors in this respect. First, according to 
AAR, the levels of the standards were inappropriately derived from data 
in Docket No. EP 770 (Sub-No. 1) that shows system-average performance. 
According to AAR, system-average performance does not necessarily 
indicate the level of performance that constitutes adequate service 
over a given lane or at a given time. (AAR Comments 46-50; see also 
CPKC Reply at 2, 8; R.V.S. Workman & Nelson at 19-23.) In addition, 
according to AAR, system-average performance does not distinguish 
between common carriage service and contract service. AAR suggests that 
this distinction is relevant because, according to AAR, contract 
customers might have agreed to different levels of service. (AAR 
Comments 9, 49-50; V.S. Orszag/Eilat 7, 21-24; see also CN Comments 5-
6; CSXT Comments 14-15.)
    Second, according to UP, it is inappropriate to rely on the data in 
Docket No. EP 770 (Sub-No. 1) because UP used one-week periods to 
measure its performance (i.e., UP reported for each week the percentage 
of shipments that it delivered on time during that week). UP asserts 
that a carrier's level of performance over one-week periods cannot 
reasonably be used to extrapolate a reasonable level of performance 
over 12-week periods as provided for in part 1145. (UP Comments 4-5.)
    Third, according to UP, it is problematic to base the levels of the 
performance standards on the data in Docket No. EP 770 (Sub-No. 1) 
because the carriers did not necessarily report their performance in 
the same way that compliance with the performance standards in part 
1145 will be measured. For example, UP considered itself to have 
succeeded in completing a line haul on time if UP met its original trip 
plan as adjusted to account for delays encountered en route. In 
contrast, under part 1145, a rail carrier will be considered to have 
succeeded only if it came within 24 hours of the original estimated 
time of arrival, without adjustment for delays encountered en route. UP 
implies that, due to how carriers reported their performance in Docket 
No. EP 770 (Sub-No. 1), the data there overstates actual performance as 
compared to how performance will be measured under part 1145. (UP 
Comments 6.)
    Finally, in its attempt to show that the performance standards in 
part 1145 are not adequately supported, AAR conducted a study of 
transit times. AAR submitted the study in its reply comments, as a 
result of which other parties did not have the opportunity to comment 
on the study. The study was based on transit times for all movements 
over Class I rail carriers from 2020 to 2023, with some exclusions. 
(AAR Reply, R.V.S. Baranowski & Zebrowski at 5-6.) The study purported 
to show that a year-over-year decrease in velocity of 20% would capture 
about 53.9% of the movements in 2020, about 76.6% of the movements in 
2021, about 82.5% of the movements during 2022, and about 65.5% of the 
movements during 2023. (Id. at 7.) AAR concludes, based on its study, 
that it is typical for shipments to experience increases (and 
decreases) in transit time from one year to the next and that therefore 
the transit time standard does not capture only inadequate service. 
(Id. at 4-5.) AAR adds that its analysis showed no difference between 
consistency in serving captive customers and consistency in serving 
other customers. AAR concludes on that basis that the prescription of a 
reciprocal switching agreement would not necessarily cure an increase 
in transit time. (Id. at 5-6.)
The Board's Assessment
    The Board rejects each of the foregoing arguments. First, contrary 
to carriers' suggestion, it is reasonable for system-average 
performance to inform the levels of the performance standards in part 
1145. In the Board's experience, system-average performance is a strong 
indicator of the capability of the rail system to meet the public need 
for transportation service. While there is heterogeneity in lanes and 
traffic, and while variations can impact different geographies and 
businesses differently, the specific performance measurements under 
part 1145 largely factor in these differences. For example, the 
reliability standard in part 1145 is based on the estimated time of 
arrival that the carrier originally predicted. In setting the OETA, the 
carrier can account for the characteristics of the given lane (and, by 
extension, the characteristics of the shipper's traffic \17\) and 
likely delays. As a result, this type of measurement essentially 
controls for lane and traffic characteristics, so service over one lane 
is no more likely than service over another lane to fail the 
reliability standard. The consistency standard in part 1145 is based on 
how long it took the carrier to deliver the shipment over the same lane 
and over the same 12-week period during the previous year. This 
approach essentially controls for differences between service over a 
lane that has a longer-than-average transit time and service over other 
lanes.
---------------------------------------------------------------------------

    \17\ Under the definition of the term ``lane,'' the Board states 
that ``shipments of the same commodity that have the same point of 
origin and the same designated destination are deemed to travel over 
the same lane, regardless of which route(s) the rail carrier uses to 
move the shipments from origin to destination.'' 49 CFR 1145.1. 
Through this definition, the Board is eliminating potentially flawed 
comparisons between traffic of different characteristics (e.g., 
differences by commodity) and between traffic with different origin-
destination pairs.
---------------------------------------------------------------------------

    A similar analysis applies to seasonal variations in rail service. 
For example, because a railroad can account for likely delays in 
setting OETA, service in one season is no more likely than service in 
another season to fail the reliability standard. In the case of an 
extreme weather-related event, that event could provide an affirmative 
defense to the extent that the event could not reasonably be predicted 
or mitigated. As for the fact that the system-wide data in Docket No. 
EP 770 (Sub-No. 1) included service to contract customers, the Board 
finds that detail to be irrelevant. In the Board's experience, most 
contracts do not establish standards for quality of service and, in any 
event, the EP 770 data does not establish whether carriers were 
providing service consistent with any contractual commitments that 
might have applied.
    Second, contrary to UP's suggestion, it is reasonable to use 
system-average performance as reported for one-week periods as the 
basis for assessing performance over a 12-week period. The Board has 
accounted for any volatility that might have resulted from week-to-week 
reporting by using records of system-average performance over the 
course of several years and by relying heavily on customers' reasonable 
service expectations and carriers' performance targets.
    Third, the ``apples to oranges'' problem that UP describes is both 
substantially overstated and ultimately irrelevant. As would be 
expected, in Docket No. EP 770 (Sub-No. 1), railroads that adjusted 
their original trip plans for delays that they encountered en route 
appeared to perform better than carriers that did not make those 
adjustments. The incremental difference between the two groups of rail 
carriers

[[Page 38659]]

tended to be fairly constant.\18\ As a result, the Board can reasonably 
discern what system-average performance would have been across the 
industry if all carriers had reported their performance on the same 
basis.
---------------------------------------------------------------------------

    \18\ For example, the Board observes a reasonably strong linear 
association between UP's reliability data and BNSF's reliability 
data as reported in Docket No. EP 770. UP and BNSF operate in 
similar geographical environments, with approximately the same route 
miles and employment levels. In reporting reliability, UP adjusted 
its estimated time of arrival to reflect delays that UP encountered 
en route when those delays were not caused by UP. (See UP Comments 
at 6.) BNSF did not do so. During 85 weeks of the reporting period 
(May 13, 2022 to December 22, 2023), there was a correlation of 0.55 
between reliability data for UP and reliability data for BNSF. The 
magnitude of the difference between the two carriers was fairly 
constant after adjusting for natural shocks (such as weather-related 
incidents) that each carrier may individually have experienced; for 
55 of the 85 weeks of the difference in the two carriers' 
reliability data fell within a 2.9% to 12.1% range. Overall, UP had 
77 weeks of better performance than BNSF. The consistency of the 
difference indicates that the difference was due to the difference 
in how the two carriers reported their reliability data.
---------------------------------------------------------------------------

    Of equal importance are the details of the reliability standard in 
part 1145. A carrier would fail to meet the reliability standard only 
if, over a 12-week period, the carrier fell below 70% in meeting its 
OETA plus or minus 24 hours. The general range of the reliability 
standard recognizes that, in the ordinary course of rail service, a 
shipment might encounter a certain number of unanticipated delays en 
route. The specific percentage (70%) provides an additional cushion 
between ordinary service and the possibility of regulatory 
intervention, as suggested by the data that the Board collected in 
Docket No. EP 770 (Sub-No. 1)--data that was largely collected during 
the major service problems of the early 2020s. The Board reasonably 
expects that rail service in the ordinary course will be better than 
rail service during that period. The 24-hour grace period provides even 
more cushion. In effect, the reliability standard in part 1145 provides 
for regulatory intervention on a conservative basis. The 70% standard 
is not as conservative as the 60% standard that the Board inquired 
about in the NPRM but--in the Board's judgment, based on comments and 
further analysis--provides appropriate ground for considering whether 
to prescribe a reciprocal switching agreement. See Performance 
Standards.
    Finally, AAR's study of transit times does not persuade the Board 
that the performance standards in part 1145 would capture typical rail 
service. One of the glaring deficiencies in AAR's study is that it 
compared transit times from year to year during the early 2020s, when 
rail service was faltering and erratic. It would be unreasonable to 
conclude that increases in transit times during that period reflected 
variations in transit times that might be expected in the ordinary 
course of rail operations; if the Board were to accept AAR's study, the 
Board would implicitly and unreasonably conclude that the years that 
AAR used in its study provide the proper baseline for assessing changes 
in transit time.

Performance Standards

Service Reliability: Original Estimated Time of Arrival

    As discussed in the NPRM, the proposed service reliability standard 
would measure a Class I rail carrier's success in delivering a shipment 
near its OETA, i.e., the estimated time of arrival that the rail 
carrier provided when the shipper tendered the bill of lading for 
shipment. NPRM, 88 FR at 63903. The OETA would be compared to when the 
car was delivered to the designated destination. Id. Application of the 
service reliability standard would be based on all shipments that the 
shipper tendered to the carrier over a given lane over 12 consecutive 
weeks. Id.\19\
---------------------------------------------------------------------------

    \19\ Under part 1145, once a carrier has communicated an OETA to 
a customer, that time will not be changed to reflect any subsequent 
change to the original trip plan of the car, no matter the cause of 
that change. As a result, a carrier will be deemed to miss the OETA 
for cars that are delayed due to a cancelled or annulled train if 
cars are not delivered within 24 hours of the original estimated 
time of arrival.
---------------------------------------------------------------------------

    Using data that Class I carriers provided in Docket No. EP 770 
(Sub-No. 1) as a reasonable starting point, the agency proposed a 
reliability standard of 60%, where a carrier would meet the standard 
if, over a period of 12 consecutive weeks, the carrier delivered at 
least 60% of the relevant shipments within 24 hours of the OETA. Id. at 
63903-04. The Board also suggested that the reliability standard could 
be set by rule to escalate one year after the rule took effect. Id. at 
63904. The Board sought comment on the percentage at which the 
reliability standard should be set, what the applicable grace period 
should be, and other matters relevant to the reliability standard. Id. 
at 63903-04.
Reasonableness of Using OETA
    CPKC questions whether OETA is a meaningful reference point. 
According to CPKC, nearly half of its shipments arrive a day or more 
after the OETA. CPKC claims that it is infeasible to try to provide a 
more accurate OETA because, according to CPKC, there are too many 
routine factors that contribute to variations from the company's 
original trip plan. (See CPKC Reply, R.V.S. Workman & Nelson 15-16.)
    Contrary to CPKC's suggestion, it is reasonable to use OETA data 
over a 12-week period to provide indicia of the overall reliability of 
a carrier's service for purposes of part 1145. Rail carriers bring 
their considerable expertise to the task of developing OETAs. Carriers 
typically study the factors that affect transit time over a lane, 
account for those factors through seasonal or other appropriate 
tolerances, and apply those tolerances in setting OETAs. CPKC, which is 
the only carrier to question use of OETA, has failed to convince the 
Board that the company cannot adopt a similar approach.
OETA Percentage
    Many shipper organizations ask the Board to set the reliability 
standard (when based on a 24-hour grace period) at more than 60%. For 
example, the Coalition Associations ask the Board to set the percentage 
at 70%. (Coal. Ass'ns Comments 22.) They claim that the 70% threshold 
is attainable, is more consistent with Class I carriers' own 
expectations of the quality of service that they should provide, and 
better reflects the threshold at which poor service reliability has 
significant operational consequences for rail customers. (Id. at 24.)
    LyondellBasell urges the Board to adopt the 70% standard proposed 
by the Coalition Associations. (LyondellBasell Comments 2.) It asserts 
that the higher standard is more in line with the level of service 
customers require to conduct their business. (Id.) LyondellBasell notes 
that, when railroads fail to deliver shipments close to the OETA, it 
incurs: (1) increased costs from diverting traffic to other sub-optimal 
modes of transportation; (2) lack of products at distribution 
facilities, which in turn has required LyondellBasell to use 
inefficient distribution sites and means of transportation; and (3) 
reduced production rates, shutdowns, or both for its own and its 
customers' facilities. (Id.) Even at reliability levels at or above 
70%, according to LyondellBasell, the company incurs a substantial 
burden on its operations. (Id.) For example, because most polymer 
plants produce materials coming off the production line directly into 
railcars as the storage receptacle, LyondellBasell will likely have 
already reduced its production rates at such polymer sites. (Id. at 2-
3.)
    Other shipper groups ask the Board either to set the reliability 
standard at more than 70% at the outset or eventually to escalate the 
standard to above 70%. (DCPC Comments 6-8 (80% in year 1 and 90% in 
year 2); NGFA

[[Page 38660]]

Comments 12 (supports ``closer to 100%''); PRFBA Comments 7 (80%); 
GISCC Comments 5 (80%); AFPM Comments 8-9 (65% in year 1, 70% in year 
2, 75% in year 3, and 80% in year 4).) API argues that the second-year 
standard should be set at 80% to 85% and that, even at higher levels of 
performance by rail carriers, there are adverse impacts on the public 
interest. (API Comments 3-4.) API adds that service levels affect labor 
decisions made by the shipper, and that late shipments result in lost 
production time; overtime labor; increased transportation costs, 
demurrage, administrative burden, storage costs, and private railcar 
fleets; and loss of business opportunities. (Id. at 4.) NSSGA and EMA, 
which seek a reliability standard of 80% or higher, claim that at 60% 
their members would need to curtail operations or ship by truck. (NSSGA 
Comments 6-7; EMA Comments 6.) EMA adds that, for some of its members, 
trucking is not an option at all. (EMA Comments 6.)
    Railroads oppose the 60% reliability standard as well as any other 
reliability standard, arguing that there is insufficient record 
evidence to support such a standard. Railroads otherwise do not comment 
on the level at which the reliability standard should be set. As 
explained in the Analytical Justification section above, however, the 
Board has sufficient justification for setting its standards based on 
credible evidence of reasonable service expectations and evidence that 
the Board has collected since 2022 in investigating the performance of 
Class I rail carriers. AAR adds that what a customer perceives as 
service that best meets its individual ``needs and requirements'' may 
run counter to the interests of other shippers and the health of the 
overall network that serves many shippers. (AAR Reply 39.) According to 
AAR, a standard that bypasses consideration of other shippers or the 
network as a whole--or the question whether a switch would remedy the 
shipper's service concerns--would not be consistent with the approach 
Congress directed. (Id.)
    The Board will set the reliability standard at 70%.\20\ Although 
several shippers support a higher OETA standard based on the argument 
that it would be ``attainable'' by the railroads, that is not the basis 
for the Board's decision here. The reliability standard, like the other 
metrics, grows out of shippers' reasonable service expectations, 
carriers' performance records, and carriers' performance goals without 
specifically rendering judgment on the level of reliability that rail 
carriers might in theory attain. As discussed above, many shippers have 
commented that a reliability standard of 60% is too low, as service 
even above that level exposes shippers to significant problems, 
including increased costs and production delays. A number of shipper 
organizations indicate that their members are impacted by poor service 
even when the carrier provides service above 60% reliability (measured 
as OETA + 24 hours). For example, PRFBA explains:
---------------------------------------------------------------------------

    \20\ As discussed later in this decision, the 70% reliability 
standard will apply not only to cars that arrive more than 24 hours 
after the OETA but also those that arrive more than 24 hours earlier 
than the OETA.

    [T]hat 60%, and indeed even 70%, represent far too low a bar for 
service reliability. Under the proposed rule, even those carriers 
who meet the standard with 60% nearly on-time performance would 
force some PRFBA members to shut down their plants and still others 
frantically to seek out alternative transport by truck. There are 
not enough trucks or truck drivers to keep up with that demand, to 
say nothing of the greater expense passed onto the consumer and 
drastically greater polluting emissions caused by trucking goods as 
compared with rail shipping. Moreover, for some PRFBA members, 
trucking goods simply is not an option altogether. Also, all PRFBA 
members suffer from the underutilization of their railcars whenever 
---------------------------------------------------------------------------
service is poor.

(PRFBA Comments 6-7.)

    The Board specifically requested that shippers identify the point 
at which there are negative business impacts from poor reliability in 
rail service, see NPRM, 88 FR at 63904, and the information provided by 
shippers supports a finding at this point that a 70% level of 
reliability is reasonable as a reflection of service expectations.
    The 60% standard in the NPRM was also a conservative proposal. As 
the Board explained, much of the underlying Docket No. EP 770 (Sub-No. 
1) data in the NPRM reflected a challenging service period. Indeed, 
overall on-time performance for BNSF, CSXT, NSR, and UP had fallen from 
a pre-pandemic average of 85% in May 2019 to just 67% in the last week 
of May 2022, as crew shortages plagued rail service. See Stephens, 
Bill, Data Reported to Federal Regulators Reveal Extent of 
Deterioration in Rail Service--Trains (June 9, 2022). The Board found 
that 60% was a reasonable potential starting point for determining the 
reliability standard because it reflected a level that even the 
carriers acknowledged was far below expectations, but the Board also 
proposed an alternate standard that would escalate to 70% one year 
after the effective date of the rule, reflecting the view that service 
during that challenging time might not be the appropriate long-term 
measure for service performance for purposes of part 1145. Not only is 
that view supported by shippers' comments detailing the negative impact 
of service even above the 60% reliability standard, Docket No. EP 770 
(Sub-No. 1) data from last December does in fact show that carriers are 
performing better. Indeed, data for the week ending December 22, 2023, 
indicates overall on-time performance of the four carriers averaging 
80.1%. See Urgent Issues in Freight Rail Serv.--R.R. Reporting, EP 770 
(Sub-No. 1), slip op. at 4 (STB served Jan. 31, 2024). Considering this 
data, the comments from shippers about negative impacts to their 
businesses, and the overall framework in which failure to meet a 
service standard acts as a mechanism--with appropriate protections--for 
switching (as opposed to a different, more intrusive, or more severe 
form of regulatory intervention), a 70% standard is therefore 
reasonable.
    A 70% standard is also consistent with railroads' stated, near-term 
performance goals as reported in Docket No. EP 770. As noted in the 
NPRM, BNSF, CSXT, NSR, and UP each identified a target for its 
systemwide weekly percentage of manifest railcars placed within 24 
hours of OETA (as reported in Docket No. EP 770 (Sub-No. 1)) that the 
carrier would meet beginning May 2023, and these targets average 
approximately 74%. NPRM, 88 FR at 63903. The 70% reliability standard 
in the final rule remains below that average [as well as the average in 
more recent Docket No. EP 770 (Sub-No. 1) reports]. See Analytical 
Justification.
    While the current record supports a finding that a reliability 
standard of 70% is reasonable, the Board declines at this time to set 
the reliability standard at a higher level or to provide by rule for 
escalation of that standard as requested by some shipper interests. The 
Board concludes that the better course of action is to gain experience 
under the 70% standard and gauge the effectiveness of part 1145 before 
considering whether to raise the standard above 70%.
Observation Period
    Several shipper groups ask that a petitioner be allowed to rely on 
less than 12 weeks of data. (EMA Comments 6 (six weeks); PRFBA Comments 
7 (six weeks); GPI Comments 3 (eight weeks); GISCC Comments 5 (four to 
six weeks).) According to NSSGA, which requests a six-week period, 12 
weeks of bad service would have a ``devastating

[[Page 38661]]

impact'' on NSSGA members' operations. (NSSGA Comments 7.) Similarly, 
AFPM asserts that allowing poor service to continue for even six weeks 
would severely hurt refiners and petrochemical manufacturers, causing 
curtailments in output and even shutdowns. (AFPM Comments 9.) AAR 
responds that the record before the Board provides no basis to conclude 
that any of those changes would help the Board accurately and 
effectively identify situations where a service inadequacy exists and 
warrants regulatory intervention. (AAR Reply 41.) According to AAR, 
such changes would significantly complicate the proposed rule's 
operation and risk generating a large number of false positives. (Id.)
    The Board will use an observation period of 12 weeks as proposed in 
the NPRM. Using a 12-week observation period means that the OETA 
standard will not be triggered by a service problem of relatively short 
duration, unless the problem is of such severity that it nevertheless 
results in failure to meet the 70% standard over the 12-week period. 
This approach will tend to reserve regulatory intervention under part 
1145 for cases in which there had been a more chronic problem in 
serving the petitioner. A chronic but not necessarily acute problem is 
the type of problem that, compared to other types of service problems, 
is more likely to benefit from the introduction of rail-to-rail 
competition as provided for in part 1145. For acute service problems, 
shippers may seek relief under parts 1146 and 1147, without waiting for 
a 12-week observation period to end.
    NSR recommends measuring performance under the reliability standard 
over quarters of the calendar year, rather than over a rolling 12-week 
period. According to NSR, using a rolling 12-week period would allow 
shippers to petition for a prescription based on performance that did 
not reflect the carrier's typical performance or indicate an ongoing 
service problem. (NSR Comments, V.S. Israel 3, 14; see also UP Comments 
19 (encouraging an approach based on the last calendar quarter to 
mitigate the burden of data production).) The Board declines to adopt 
NSR's recommendation. To use quarters of the calendar year as the 
observation period would make the standard less likely to identify 
service for which the public interest would be served by introducing an 
alternate rail carrier (e.g., a carrier could miss the OETA for 22 
weeks and would not fail the standard if half of those weeks were in 
one quarter and the other half were in the next quarter).
The Definition of OETA
    AAR notes that the definition of OETA in the NPRM differs from the 
definition of OETA in the demurrage setting and asserts that the 
definition in part 1145 should conform to the definition that is used 
for purposes of demurrage. (AAR Comments 51-52.) Under proposed Sec.  
1145.1, OETA is provided upon tender of a bill of lading. NPRM, 88 FR 
at 63912-13. For purposes of demurrage billing, OETA is provided after 
the shipment is physically released to the carrier or received by the 
carrier in interchange and is based on the first movement of the origin 
carrier. See 49 CFR 1333.4(d)(1). AAR claims that having two different 
definitions creates risk of confusion and would lead to duplicative 
efforts. (AAR Comments 51-52.) Individual railroads also call for OETA 
to be measured at time of release. (CN Comments 45; UP Comments 6.)
    The Board will not change the definition of OETA under part 1145. 
The demurrage OETA definition, while appropriate for part 1333's 
``minimum'' informational purposes, does not meet the goals of this 
rulemaking. As noted by the Coalition Associations, to use the OETA 
that is based on the carrier's first movement of the shipment rather 
than tender of the bill of lading would not capture a carrier's delay 
in picking up a car that had been tendered for shipment. (Coal. Ass'ns 
Reply 29.) And, if the carrier failed the reliability standard due to 
the shipper's delay in releasing the car, that could be raised as an 
affirmative defense. See Affirmative Defenses.
Delivery at Interchange
    In the NPRM, the Board proposed that, in the case of interline 
service where the shipment is transferred between line-haul carriers at 
an interchange en route, the shipment is deemed to be delivered when 
the receiving carrier acknowledges receipt of that shipment. NPRM, 88 
FR at 63904, 63912. Several commenters raised concerns with this 
approach.
    CN asserts that this approach fails to account for cases in which 
the shipment arrived at the interchange but the receiving carrier is 
unable to accept the shipment. (CN Comments 48-49.) UP similarly 
asserts that a car should be deemed to be delivered upon ``delivery in 
interchange.'' According to UP, ``delivery in interchange'' occurs when 
a railroad moves the car past a designated automatic equipment 
identification reader or places the car on a designated interchange 
track, depending on the specific interchange that is involved. (UP 
Comments 7.) UP claims that a car can potentially sit on an interchange 
track for several days after delivery and before the subsequent carrier 
acknowledges receipt, when the matter is out of the delivering 
carrier's control. (Id.; see also API Comments 4 (suggesting that the 
gap between delivery and receipt can last for several hours).) The 
Coalition Associations respond that no carrier offers a practical 
solution to address concerns about a gap, but that AAR's own rules for 
assigning responsibility for car hire provide a clear and appropriate 
framework for determining when interchange occurs, including in 
situations where the receiving carrier causes an interchange delay. 
(Coal. Ass'ns Reply 43.)
    The Board will define ``delivery'' at the interchange using UP's 
proposal. Although the Board suggested that in case of a dispute about 
a gap at the interchange it would be guided by interchange rules, NPRM, 
88 FR at 63903, UP's approach is superior. While the car hire data is 
more accurate, it is more difficult to retrieve and can only be used 
after any disputes are resolved. In contrast, Delivery in Interchange 
data is routinely reported to the shipper on a real time basis. As 
such, based on UP's approach, a car will be deemed delivered at an 
interchange when it is moved past a designated automatic equipment 
identification reader or placed on a designated interchange track, 
depending on the specific interchange location involved. However, if 
there are disputes about the accuracy of a delivery time by either the 
customer or the receiving railroad, the Board can use car hire 
accounting records to decide the issue.
Delivery at Customer's Facility
    For deliveries to a customer's facility, the Board proposed to 
define ``delivery'' as when a shipment either is actually placed at the 
designated destination or, in given circumstances, is constructively 
placed at a local yard that is convenient to the designated 
destination. NPRM, 88 FR at 63912.
    UP notes that for traffic it delivers to customer facilities, UP's 
Trip Plan Compliance (TPC) measure for manifest traffic measures 
compliance based on when the car is delivered to the customer facility, 
regardless of whether it spends time in constructive placement. (UP 
Comments 8.) For ``order in'' customers--customers who by prior 
agreement have UP hold cars in serving yards pending the recipient's 
request for delivery--UP ``stops the clock'' during the time a car 
spends in constructive placement for purposes of measuring TPC. (Id.) 
If ``spot on arrival''

[[Page 38662]]

customers--customers with facilities where railcars may be placed 
without placement instructions--cannot accept delivery when their cars 
arrive, UP puts the cars into a hold status then adjusts the time of 
arrival under UP's trip plan when the car is released from that status. 
UP asserts that its calculation method reflects the customer's role in 
the delivery schedule and the full journey of the railcar. (Id.) UP 
asks that the Board conform to the railroad's practice. (Id.)
    The Board will retain its approach from the NPRM and not adopt UP's 
proposal to define delivery as being at a customer's facility. The 
proposed definition of delivery takes into account both situations 
described by UP. For ``order in'' customers, the car would be 
``delivered'' for purposes of OETA when the car is constructively 
placed at a local yard that is convenient to the designated 
destination, which is the time it arrives in the local serving yard and 
is ready for local service in accordance with the rail carrier's 
established protocol. See NPRM, 88 FR at 63903 n.17. The same would be 
true for ``spot on arrival'' customers that are not able to accept 
delivery at the designated destination. If the customer is not able to 
accept delivery, the car is ``delivered'' at the time it arrives in the 
local serving yard and is ready for local service in accordance with 
the rail carrier's established protocol. The Board recognizes that each 
carrier may currently define its trip plan compliance-like metric 
differently, but one of the objectives of this rule is to standardize 
the metrics that will be used for part 1145 so that they may be easily 
understood by shippers, carriers, the Board, and the public. The 
approach from the NPRM accomplishes this. See also Data Production to 
an Eligible Customer.
Unit Trains and Intercity Passenger Trains
    The Board proposed to apply the reliability standard only to 
shipments that are moving in manifest service, not to unit trains. 
NPRM, 88 FR at 63904. The Board explained that, in its experience, 
deliveries of unit trains do not give rise to the same type of concerns 
with respect to meeting OETA. Id.
    A number of shipper groups ask the Board to include unit trains. 
(API Comments 3; AFPM Comments 9 n.15; NSSGA Comments 7; see also FRCA/
NCTA Comments 3.) NGFA disagrees that unit trains do not have the same 
need as manifest trains to be delivered on time. It adds that the 
failure of Class I carriers to deliver unit trains on time can result 
in significant harm to the shipper/receiver and the shipper's/
receiver's customers. (NGFA Comments 12.)
    The Coalition Associations recommend including unit trains and 
using a higher reliability standard (of 90%) for those trains. (Coal. 
Ass'ns Comments 31.) According to the Coalition Associations, a 90% 
standard would better reflect the nature of unit trains, which tend to 
go through few if any interchanges. (Id.) In addition, according to the 
Coalition Associations, a 90% reliability standard for unit trains 
would better reflect the fact that the early or late arrival of a unit 
train (which might consist of 80 or more cars) can have a 
proportionally greater adverse effect on the customer. (Id.)
    The Board will not apply a reliability standard to unit trains for 
purposes of part 1145. Based on Board experience, while manifest 
traffic runs on scheduled trains, unit trains generally do not have 
schedules. They run at various, usually irregular times. And, although 
some railroads have trip plans based on the unique schedule for each 
unit train that are applied to each car on the train, CN, CSXT, and NSR 
do not currently produce trip plans for unit trains. (See CN Comments 
44); Urgent Issues in Freight R.R. Serv.--R.R. Reporting, EP 770 (Sub-
No. 1), slip op. 5 n.16, 6 n.19 (STB served Jan. 31, 2024). It would be 
unduly burdensome to require those carriers to produce trip plans 
(including an OETA) for unit trains for purposes of the reliability 
standard under part 1145, factoring in that problems with the delivery 
of unit trains can also be captured by the service consistency standard 
in part 1145.
    One commenter asks the Board to apply the reliability standard to 
intercity passenger trains. (Ravnitzky Comments 1.) The performance of 
intercity passenger trains is beyond the scope of this proceeding. As 
proposed in the NPRM, part 1145 applies only to Class I freight 
carriers and their affiliates and provides only for the prescription of 
a reciprocal switching agreement, a regulatory action that would not be 
meaningful for intercity passenger trains. Regardless, other statutory 
provisions address on-time performance issues of intercity passenger 
trains. See 49 U.S.C. 24308(f); Compl. & Pet. of Nat'l R.R. Passenger 
Corp. Under 49 U.S.C. Sec.  24308(f)--for Substandard Performance of 
Amtrak Sunset Ltd. Trains 1 & 2, NOR 42175, slip op. at 1 (STB served 
July 11, 2023).
Severity of Delay
    The Coalition Associations suggest significant additions to the 
OETA + 24 hours model. They ask the Board to establish graduated 
reliability standards, where the standard would increase as the 
differential between the OETA and the time of delivery increased. Under 
the Coalition Associations' approach, the reliability standard would be 
set at 70% at OETA + 24 hours, 80% at OETA + 48 hours, and 90% at OETA 
+ 72 hours. (Coal. Ass'ns Comments 4; see also ACD Comments 4.) The 
Coalition Associations also ask the Board to base the standards for the 
24-, 48-, and 72-hour time bands on the average systemwide performance 
of all Class I carriers for those respective bands. (Coal. Ass'ns 
Comments 4.) According to the Coalition Associations, these standards 
would provide a strong incentive to railroads to achieve a reasonable 
level of service reliability that is consistent with changing industry 
conditions. (Id.)
    Others raise concerns that the reliability standard, when based on 
OETA + 24 hours, does not measure the severity of deficiencies in the 
carrier's performance. For example, CSXT suggests that, under the 
reliability standard, a delivery 25 hours after OETA would be treated 
the same as a delivery 25 days after OETA. (CSXT Comments 17-18.) NSR 
recommends replacing OETA + 24 hours with a standard that measures both 
whether a delay has occurred and the severity of delay. (NSR Comments, 
V.S. Israel 13.) NSR specifically recommends use of a service 
reliability ratio, which would measure by what percent of the actual 
duration of the shipment the carrier missed OETA + 24 hours. (Id.)
    The Board will not at this time change the reliability standard to 
account for the severity of a delay. The Board appreciates that its 
approach does not distinguish between failed deliveries that are just 
past the 24-hour mark and cars that are many days past that mark, but 
the Board would like to gauge the effectiveness of its basic concept of 
OETA + 24 hours before considering changes or refinements to account 
for degrees of severity. And, if extremely late deliveries are 
frequent, that could result in the service consistency standard not 
being met. Part 1145 is also not the only course of action a shipper 
will be able to pursue. In the case of more egregious delays, the 
shipper could petition under part 1147 without waiting the 12 week-
observation period provided by part 1145. Where appropriate, the 
shipper could also pursue a separate action based on the common carrier 
obligation.

[[Page 38663]]

Early Cars
    The Coalition Associations ask the Board to clarify that shipments 
that arrive more than 24 hours early do not count as being delivered on 
time. The Coalition Associations suggest that this approach will remove 
any incentive for rail carriers to ``game'' the reliability standard by 
artificially inflating OETAs and note that early cars can cause 
congestion at a shipper's facility. (Coal. Ass'ns Comments 4, 29; see 
also Olin Comments 5.) AAR opposes application of the reliability 
standard to early arrivals and asserts that early deliveries were not 
addressed in the NPRM. (AAR Reply 46-47.) AAR argues that shippers and 
railroads should be able to work together to manage flow into a 
customer facility, including by using constructive placement. (Id.) AAR 
adds that applying the reliability standard to early deliveries could 
encourage carriers to slow down the movement of traffic through their 
systems. (Id.)
    The Board will adopt the proposal and clarify that cars arriving 
more than 24 hours before the OETA will count against the carrier for 
purposes of the service reliability standard. While delivering cars 
excessively early could potentially disrupt a carrier's system, it 
remains a possibility that a carrier could seek to avoid failing the 
standard through such practices. The Board is also persuaded by the 
Coalition Associations' assertion that unexpected early deliveries can 
have significant economic and operational consequences for rail 
customers. (Coal. Ass'ns Comments 29.) When railcars arrive 
unexpectedly early at a rail customer's facility, they can cause 
congestion at the facility that can impair operations. (Id.; see also 
Dow Reply 2 (noting that when raw materials customers order from Dow by 
rail are delayed or arrive excessively early, the customers can 
experience production slowdowns or downtime or may not have appropriate 
staffing to handle the delivery).) Even if a customer has a yard or 
even some extra capacity, it may simply not be ready to accept that car 
for various reasons. And, if the customer does not have the 
infrastructure to accept an early delivery, the customer usually must 
incur demurrage or storage charges. (Coal. Ass'ns Comments 30.)
    AAR claims that constructive placement prevents the problems that 
early arrivals can cause for customers, (AAR Reply 46-47), but the 
Coalition Associations' complaint suggests that constructive placement 
is not solving the problems the shipper groups identify. In the Board's 
experience, railroads usually only begin constructive placement of cars 
to a spot-on-arrival customer once that shipper's facility is full of 
cars and no more cars can be actually placed. See Capitol Materials 
Inc.--Pet. for Declaratory Ord.--Certain Rates & Pracs. of Norfolk S. 
Ry., NOR 42068, slip op. at 10 (STB served Apr. 12, 2004); (see also 
Coal. Ass'ns Comments 29). Constructive placement is therefore often 
not a solution for a customer who is faced with an early arrival.
    While the Board did not specifically propose to cover early 
deliveries in the NPRM, it made clear that it was open to approaches to 
assessing reliability other than the approaches that were specifically 
discussed in the NPRM. See NPRM, 88 FR at 63904. The NPRM stated that 
OETA ``would . . . promote the completion of line hauls near the 
original estimated time of arrival. The on-time completion of line 
hauls allows the shipper to conduct its operations on a timely basis 
while permitting effective coordination between rail service and other 
modes of transportation.'' NPRM, 88 FR at 63903. It was therefore 
foreseeable that the Board might consider early arrivals as a 
circumstance that could negatively affect shippers' operations and 
coordination, as reflected in the Coalition Associations' comments. 
Other parties had full opportunity to respond to the Coalition 
Associations' proposal. See Logansport Broad. Corp. v. United States, 
210 F.2d 24, 28 (D.C. Cir. 1954); Int'l Harvester Co. v. Ruckelshaus, 
478 F.2d 615, 632 n.51 (D.C. Cir. 1973).
Cross-Border Traffic
    CN raises concerns about the application of part 1145 to movements 
that cross into or out of the United States; CN suggests that part 1145 
should apply only to movements that take place entirely within the 
United States. (CN Comments 49-50.) CN also argues that system-wide 
reporting should exclude cross-border traffic and notes that it only 
reported on domestic U.S. trains as part of its reporting for Docket 
No. EP 770 (Sub-No. 1). (Id.)
    The Board will not exclude this traffic from either the service 
reliability standard or the service consistency standard. The Board's 
jurisdiction includes rail transportation ``in the United States 
between a place in . . . the United States and another place in the 
United States through a foreign country; or . . . the United States and 
a place in a foreign country.'' 49 U.S.C. 10501(a)(2)(E)-(F). As to 
cross-border traffic, the Board has jurisdiction to determine the 
reasonableness of a joint through rate covering international 
transportation in the United States and in a foreign country. E.g., 
Can. Packers, Ltd. v. Atchison, Topeka & Santa Fe R.R., 385 U.S. 182, 
184 (1966). However, the Board does not have jurisdiction over 
operations outside of the United States. See 49 U.S.C. 10501(a)(2) (the 
Board's jurisdiction ``applies only to transportation in the United 
States''). Given the Board's jurisdiction, retaining part 1145's 
coverage of such traffic furthers the rule's underlying goal of 
incentivizing carriers to provide a level of service that best meets 
the need of the public.
    However, the Board will limit action under part 1145 to situations 
where there is a distinguishable movement in the United States, 
specifically when the carrier records receipt or delivery at or near 
the U.S. border (including where the shipment is transferred between 
affiliated rail carriers at that point).\21\ At this time, CPKC does 
not record an event for the U.S.-only portions of moves into or out of 
Canada. (CPKC Comments 13.) And it does not appear that requiring CPKC 
to do so would advance the purposes of the rule because, for moves into 
or out of Canada, the record before the Board does not indicate that 
the border has operational significance to customers in terms of 
service reliability. However, if a customer is concerned about service 
for cross-border movements within the Board's jurisdiction but without 
a separately measured U.S. component, the customer could seek relief 
under other statutes or regulations (e.g., part 1147).
---------------------------------------------------------------------------

    \21\ Kansas City Southern historically has used such an approach 
for movements with an origin or destination in Mexico. (CPKC 
Comments 13.)
---------------------------------------------------------------------------

Multiple Lanes
    In the NPRM, the Board explained that the service reliability 
standard generally would apply individually to each lane of traffic to/
from the petitioner's facility. NPRM, 88 FR at 63904. Nonetheless, in 
certain circumstances, the Board proposed that it would prescribe a 
reciprocal switching agreement that governs multiple lanes of traffic 
to/from the petitioner's facility, each of which has practical physical 
access to only one Class I carrier, when (1) the average of the 
incumbent rail carrier's success rates for the relevant lanes fell 
below the applicable performance standard, (2) the Board determines 
that a prescription would be practical and efficient only when the 
prescription governs all of those lanes; and (3) the petition meets all 
other conditions to a prescription. Id. The petitioner could choose 
which lanes to/from its facility to include in

[[Page 38664]]

determining the incumbent rail carrier's average success rate. Id.
    AAR raises various concerns about this approach, including that it 
(1) would not satisfy the ``actual necessity or compelling reason'' 
standard, (2) would undermine the Board's goal of predictability, (3) 
would present serious complexities to the Board, (4) would undermine 
carriers' abilities to plan and invest, and (5) would allow the 
petitioner to use reciprocal switching only for some of the lanes even 
though the Board had found that the reciprocal switching agreement 
would be ``practical and efficient'' only if it governed all of the 
lanes. (AAR Comments 66-69 (quoting NPRM, 88 FR at 63904, 63914).) AAR 
therefore asks the Board to apply the performance standards in part 
1145 only to individual lanes. (AAR Comments 69.) AAR adds that a 
shipper could aggregate lanes in its petition, as a means to increase 
efficiency in proceedings before the Board, provided again that the 
performance standards applied only to each lane individually. (Id.; see 
also CN Comments 20-21.)
    The proposal to allow prescriptions that cover multiple lanes has 
raised a number of questions, (see AAR Comments 68-69), and drew no 
explicit support from shippers. Therefore, in order to keep the 
procedures under part 1145 simple and predictable, the Board will 
withdraw this proposal. Thus, the service reliability standard and 
service consistency standard will only apply individually to each lane 
of traffic to/from the petitioner's facility. This, however, does not 
foreclose the possibility that a petitioner could make a case for 
switching irrespective of particular lanes under another part of the 
Board's regulations, e.g., part 1147.
Additional Proposals
    NSR asserts that the Board should modify the reliability standard 
to incorporate data on rail performance from competitive markets, which 
NSR asserts could include movements of exempt commodities and movements 
of boxcars. NSR suggests that, by incorporating that data, the Board 
would have a more useful benchmark to evaluate the quality of service 
to a petitioner. (NSR Comments, V.S. Israel 15-18.) Under NSR's 
proposal, the reliability standard would be replaced with a standard 
that measured deviations from system-wide average performance in 
competitive markets. (Id., V.S. Israel 17.)
    The Board will not adopt NSR's proposal, which would undermine 
predictability and ease of administration by potentially requiring 
multiple OETA standards, the identification of the particular 
competitive movement(s) that would provide a benchmark for the 
petitioner's movement, and periodic revisions to the OETA standard(s). 
NSR's proposal is also flawed insofar as it suggests that the Board 
should not prescribe a reciprocal switching agreement when service 
falls below reasonable expectations and performance goals unless the 
carrier has singled out one or more captive shippers in failing to meet 
those expectations and goals. In effect, NSR's proposal is based on the 
incorrect premise that the Board's discretion to introduce an alternate 
carrier is limited to situations in which the carrier is engaged in a 
demonstrated abuse of market power.
    UP argues that the reliability standard should allow adjustments 
for delays that are not service related, such as a customer's request 
while a car is en route to have the car delivered to a different 
destination. (UP Comments 6.) It is not necessary to incorporate such a 
``time-out'' into the reliability standard. The Board has provided, in 
part 1145, for affirmative defenses, which can include that a shipment 
was diverted en route based on a customer's request. The Board can 
judge the merits of such a defense in the context of a specific case 
and it seems unlikely that a petitioner would bring a petition if its 
service were routinely affected by that issue in any given 12-week 
period.
    CSXT raises concerns that part 1145 does not require evidence that 
the customer relied on the OETA to its detriment or even that the 
customer was aware of OETA. CSXT also suggests that railroads should 
get credit for providing updated OETAs. (CSXT Comments 17-18.) CSXT's 
concerns fail to grapple with the purpose of the reliability standard, 
which is to promote on-time deliveries vis-[agrave]-vis the schedule 
that the carrier originally provides unless an affirmative defense 
applies. As noted by the Coalition Associations, accurate OETAs help 
avoid supply disruptions. (Coal. Ass'ns Reply 33.) They submit that, 
without an accurate OETA, a rail customer cannot effectively plan its 
shipments, operations, and fleet needs to avoid a supply disruption at 
the destination. (Id.) As a result, rail customers must maintain 
additional storage and railcar fleet capacity to prevent transportation 
delays from causing supply disruptions. Moreover, ETA updates do not 
make up for inaccurate OETAs. (Id.) The Coalition Associations explain 
that, while an updated ETA may be helpful to allow a rail customer to 
mitigate the impacts of transit variability to OETA, mitigating delays 
while a shipment is in transit is challenging, and mitigation options 
typically dwindle as the shipment progresses to the destination. (Id.) 
Thus, ETA updates do not resolve the root problem or provide the 
additional inventory and railcars necessary to address delays. (Id.)
    The Board appreciates that updated ETAs remain important to 
customers so that the actual status of the car and probable date of 
arrival are known. With that said, shippers have pointed to numerous 
valid reasons why failure to meet OETA is problematic for customers and 
harmful to business operations. Given the goal of part 1145, it is 
reasonable to hold a railroad accountable for its original trip plan. 
To not hold the railroad accountable would undermine one of the Board's 
goals of incentivizing carriers to provide service that meets their own 
and shippers' expectations and needs. The Board will therefore not 
modify the rule as suggested by CSXT.
Summary
    In conclusion, the Board will adopt the service reliability 
standard in the NPRM with the following changes: (1) the reliability 
standard will increase to 70%; (2) the definition of ``delivery'' will 
be clarified for purposes of interchange; (3) the reliability standard 
will measure early arrivals as well as late arrivals, in each case with 
a 24-hour grace period; (4) the reliability standard will be clarified 
for cross-border traffic; and (5) the reliability standard will only 
apply individually to each lane of traffic to/from the petitioner's 
facility.

Service Consistency: Transit Time 22
---------------------------------------------------------------------------

    \22\ As noted in the Delivery at Interchange section above, the 
Board is changing the definition of ``delivery'' for purposes of a 
movement that involves an interchange between carriers en route. 
This change also applies to the service consistency standard. 
Moreover, as discussed above in Cross-Border Traffic, the Board is 
clarifying how its service reliability and service consistency 
standard will apply to cross-border traffic.
---------------------------------------------------------------------------

    As discussed in the NPRM, the service consistency standard would 
measure a rail carrier's success in maintaining, over time, the 
carrier's efficiency in moving a shipment through the rail system. 
NPRM, 88 FR at 63905. Based on the Board's understanding of the rail 
network and available data, the Board proposed that, for loaded 
manifest cars and loaded unit trains, a rail carrier would fail the 
service consistency standard if the carrier's average transit time for 
a shipment over a 12-week period increased by either 20% or 25% (to be 
determined in the final rule) as compared to the carrier's average 
transit time for that shipment over the same 12-

[[Page 38665]]

week period during the previous year. Id. Deliveries of empty system 
cars and empty private cars could also result in a failure to meet the 
service consistency standard. Id. The Board sought comment on what 
level of increase in transit time should be used in the service 
consistency standard and whether the Board should adopt a different 
standard--in lieu of the proposed service consistency standard--that 
captures prolonged transit time problems, to the extent those problems 
would not be captured by the reliability standard or ISP standard. Id.
Whether To Adopt the Service Consistency Standard
    Some carriers question the usefulness of the service consistency 
standard. For example, CSXT asserts that fluctuations in transit time 
for individual lanes are normal on a dynamic network and not meaningful 
indicia of a service problem. (CSXT Comments 18.) CSXT adds that a 
year-over-year comparison does not consider other events affecting 
velocity such as track work, capacity improvements, volume surges in 
other traffic, slowdowns on another railroad network, and service 
design changes. (Id. at 19-20.) Similarly, CPKC warns that, unless the 
service consistency standard is carefully aligned with real world facts 
and data pertaining to the normal functioning of manifest carload 
networks, the standard would misidentify normal variations in service 
outcomes as service failures rather than spotlighting only those 
situations that represent real service inadequacies. (CPKC Reply 10.) 
In CSXT's view, this would lead to wasteful expenditures on proceedings 
that are triggered by misaligned thresholds and, moreover, would cause 
operational inefficiencies. CSXT also claims that the service 
consistency standard could lead railroads ``to shun traffic that does 
not fit into repeatable network operations.'' (Id.)
    Using a rolling 12-week observation period at a 20% service 
consistency standard, AAR's consultants project a high likelihood--
65.5%--that any given carload would not meet the service consistency 
standards. (AAR Reply, R.V.S. Baranowski & Zebrowski 7, tbl. 2.) AAR 
argues that this study confirms that there are substantial natural 
variations in transit time, such that nearly any lane, observed enough 
times, could trigger the service consistency standard. (AAR Reply 50.)
    Based on data that AAR submitted in its reply comments, NSR asserts 
that the service consistency standard is seriously flawed as a measure 
of inadequate service. Rather than identifying potential service 
problems, the standard (according to NSR) captures the majority of rail 
traffic, where normal variations in transit time do not indicate 
inadequate service. (NSR Reply 9-15.) NSR argues that, if the Board 
wishes to use a service consistency standard, the Board should suspend 
this proceeding to more carefully study transit time data, so that any 
service consistency standard is empirically supported. (Id. at 2.) NSR 
also suggests, as an alternative, that the Board request supplemental 
evidence in support of the service consistency standard. (Id.) CN makes 
a similar recommendation. (CN Reply 8.)
    The Board will retain the service consistency standard. Taken at 
face value, Baranowski and Zebrowski's results seem to indicate normal 
variability in transit times. But that appearance is misleading. A 
majority of the analysis period primarily covers the pandemic and 
supply chain crises years (2020, 2021, 2022).\23\ If those years 
included one ``fast'' year because shipments were down and then one 
``slow'' year because the carriers had decreased their staff numbers, 
it would follow that a significant amount of traffic would have been 
captured under this standard. In any case, what Baranowski and 
Zebrowski show is that the service consistency standard may indeed 
capture a crisis on a carrier's system. The Board does not find that 
outcome to be problematic. Such a carrier crisis is among the problems 
that the Board wishes to address through this rulemaking. See also 
Analytical Justification.
---------------------------------------------------------------------------

    \23\ At the March 2022 hearing in Reciprocal Switching, EP 711 
(Sub-No. 1), the Board heard testimony from shippers about the 
following types of problems encountered during this period:

    The railroads have pushed our sites to take on more expense and 
change operations to match the new process and operating strategies. We 
have had to increase our railcar fleet by over 10 percent in the past 
couple of years solely due to inconsistency in the rail service and 
increased transit time. And we're about to increase our fleet again in 
the next six months by approximately seven to eight percent. This is 
---------------------------------------------------------------------------
again due to the inconsistency in the service and transit time.

Hr'g Tr. 792:19 to 793:6, Mar. 16, 2022, Reciprocal Switching, EP 711 
(Sub-No. 1). Another shipper commented: ``Our plant in the Northeast 
lost production of over 57 million pounds during the first two months 
of 2022 mostly due to increased transit time and railroad delays 
resulting from crew shortages.'' Id., Hr'g Tr. 795:7 to 795:10, Mar. 
16, 2022.
    Furthermore, as explained in the NPRM, the service consistency 
standard promotes the public interest in various ways. For example, it 
helps to prevent the possibility that a rail carrier would increase the 
OETA for a shipment for the sole purpose of meeting the OETA 
performance standard--a practice that could obscure inadequate service. 
NPRM, 88 FR at 63901. The standard also provides an incentive for 
carriers to maintain velocity through the rail system. Id. Declines in 
velocity can require shippers to procure more railcars. (LyondellBasell 
Comments 3.) Increased fleets are a burden on railroads, shippers, and 
the system as a whole. As UP explained at the Board's hearing 
concerning reciprocal switching in Docket No. EP 711 (Sub-No. 1), ``if 
we assume the cycle times for manifest traffic increase by 24 hours, 
then customers would need to increase their fleets by 3,200 railcars. A 
chemical customer shared that a one-day increase in transit time would 
translate to an additional railcar lease cost of $100,000 annually, and 
$350,000 in annual inventory carrying costs.'' Hr'g Tr. 287:9 to 
287:16, Mar. 15, 2022, Reciprocal Switching, EP 711 (Sub-No. 1).

    NSR itself notes that transit time data is a useful tool:
    [T]ransit time data is important to its customers, and it is 
important to NS--NS monitors transit time and uses it as a tool to 
diagnose and problem-solve network issues as part of its commitment 
to providing safe, reliable service to its customers. As such, NS 
believes transit time data can be valuable for monitoring service.
(NSR Reply 9.)
    The Board appreciates the carriers' concerns that normal variants 
could be captured by the metric under certain challenging operating 
periods like those that occurred during the pandemic. But just because 
a situation is ``normal'' or has occurred before does not mean it is 
excusable or acceptable. That said, part 1145 has also left the door 
open to other affirmative defenses such as, for example, a velocity 
problem that was due to scheduled maintenance and capital improvement 
projects.\24\ And,

[[Page 38666]]

any time that is customer-controlled time is not counted in computation 
of the velocity and not counted against a railroad.
---------------------------------------------------------------------------

    \24\ As discussed in the Affirmative Defenses section, the Board 
will consider ``scheduled maintenance and capital improvement 
projects'' on a case-by-case basis. The Board does not intend the 
rule to disincentivize capital investment and in fact expects that 
this rule will help promote investments necessary for adequate 
service. However, the nature of ``scheduled'' maintenance and 
capital improvement projects suggests that carriers have a degree of 
control over their execution, and the Board intends to ensure that 
carriers exercise that control with reasonable consideration of 
shippers' service levels.
---------------------------------------------------------------------------

Percentage
    A number of shipper groups ask the Board to set the service 
consistency standard at a level that would capture smaller reductions 
in velocity from one year to the next. For example, based on member 
feedback, the Coalition Associations urge the Board to reduce the 
standard to 15%. (Coal. Ass'ns Comments 32.) They assert that a 
sustained 15% increase in transit times would mean that shippers must 
purchase or lease additional railcars and would incur additional 
railcar maintenance costs. (Coal. Ass'ns Comments 32.) And, as shippers 
rely on more and more railcars to address longer transit times, these 
additional railcars can create network congestion that increases 
transit times even more, thereby requiring the shipper to acquire even 
more railcars. (Id.) Also, as shippers' railcar fleets swell to address 
transit-time increases above 15%, corresponding rail infrastructure 
requirements increase. (Id. at 33.) Rail customers would need 
additional railcar storage capacity to ensure they have enough spare 
railcars available, because increased transit times increase demand for 
railcars in transit as well as spares. (Id.)
    Other shipper groups also support a more rigorous service 
consistency standard. ACD agrees that the standard should be set at 
15%, (ACD Comments 5), while NGFA believes the Board should intervene 
except where transit time is nearly equal to transit time during the 
preceding year, (NGFA Comments 12-13). Olin adds that a service 
consistency standard in the 10% to 15% range is appropriate because 
service has been especially bad in the last few years and hence the 
``base'' transit times have already been skewed downwards. (Olin 
Comments 6.)
    AAR responds that none of the proposed service consistency 
standards are supported by data and that therefore none of the proposed 
standards identify where prescription of a reciprocal switching 
agreement could relieve inadequate service. (AAR Reply 49; see also 
CPKC Reply 6-7 (asserting that the proposed service consistency 
standards are not based on data concerning fluctuations in transit time 
from year to year).)
    The Board proposed in the NPRM to set the percentage at either 20% 
or 25%. NPRM, 88 FR at 63905. Based on the comments received, the Board 
will set the standard at 20%. The Board must guard against making the 
standard too lenient, as at 25%, and thus not intervening before 
problems with poor velocity become severe and clog a carrier's system 
with cars. As acknowledged by railroads themselves, poor velocity can 
trigger a vicious cycle that is harmful to shippers, the incumbent 
railroad, and the network as a whole. See Hr'g Tr. 287:9 to 287:16, 
Mar. 15, 2022, Reciprocal Switching, EP 711 (Sub-No. 1); Hr'g Tr. 787:1 
to 787:13, Apr. 27, 2022, Urgent Issues in Rail Freight Serv., EP 770. 
On the other hand, the standard should not be too strict, as that could 
capture situations not warranting regulatory intervention under part 
1145. Weighing these considerations, the Board finds that 20% is 
currently appropriate here.\25\ The Board appreciates that a 20% 
standard is conservative given that some of the testimony considered in 
making this proposal referred to 15% drops in velocity, and given 
commenters' subsequent calls for a standard that is not met when a 
decrease is above 15%. However, the Board finds as a policy matter 
that, at this point, it would be preferable to use a standard that 
reserves part 1145 for somewhat more significant concerns about 
patterns of decreased velocity over time. This approach is reinforced 
by the Board's decision to capture, in the final rule, gradual 
increases in transit time as discussed below. The Board reiterates that 
stakeholders will continue to have access to other relief for service 
inadequacies, including under parts 1144, 1146, and 1147. And, while 
the railroads assert that the Board's general support for the part 1145 
standards percentage is insufficient and not supported by data, as 
discussed in the Analytical Justification section, those arguments fail 
to adequately consider the purpose and built-in limitations of the rule 
and the reasonableness of the indicators that the Board has chosen 
based on record evidence. Here, not only has the Board considered data 
submitted by the carriers, the Board has testimony from shippers as 
well as comments from numerous shippers upon which to inform its 
decision.
---------------------------------------------------------------------------

    \25\ The Board rejects CPKC's argument that normal fluctuations 
in transit time are so significant as to ``swamp'' a 20% change in 
transit time. (See CPKC Reply, R.V.S. Workman & Nelson at 19-23.) 
CPKC's argument fails to account for how the service consistency 
standard works. The standard assesses changes from year to year in 
the average transit time over a lane over the same 12-week period. 
This approach inherently accounts for normal fluctuations in transit 
time over the lane in question, identifying a failure to meet the 
service consistency standard only when the average transit time over 
that lane increased from one year to the next by more than 20%.
---------------------------------------------------------------------------

Observation Period
    As with the reliability standard, a number of shipper groups ask 
the Board to decrease the observation period for the service 
consistency standard. NSSGA submits that 12 weeks is too long a period 
of bad service, claiming that it could potentially ruin its members' 
businesses. (NSSGA Comments 8.) NSSGA instead proposes a six-week 
period. (Id.; see also PRFBA Comments 10 (six weeks); AFPM Comments 10-
11 (six weeks).) EMA also suggests that the Board adopt a six-week 
period rather than 12 weeks so that carriers ``have less time to 
obscure what level of service they truly are providing.'' (EMA Comments 
7-8, 9.)
    The Board will retain the 12-week observation period. As noted 
early in the service reliability section, a shorter observation period 
would not as clearly signal the public interest in introducing an 
alternate rail carrier via switching as the means to allow the 
petitioner to choose the carrier that better met its needs. And, as 
noted earlier, stakeholders will continue to have access to other Board 
relief, including parts 1144, 1146, and 1147--without needing to wait 
for a 12-week observation period to end.
Empty Railcars
    Various carriers claim that the service consistency standard should 
not be triggered by decreases in velocity for movements of empty 
railcars. According to CN, application of the service consistency 
standard to movements of empty railcars could give a shipper access to 
an alternate line-haul carrier for loaded cars when the incumbent 
carrier is performing well in delivering those cars. In that case, 
according to CN, the shipper's petition would not meet the ``actual 
necessity or compelling reason'' standard that carriers contend should 
apply. (CN Comments 47; see also AAR Comments 56-57.) \26\ CN further 
asserts that there are differences in how empty cars are managed and 
moved and that these differences affect transit times for those 
movements. (CN Comments 46-47.) CN notes that variables such as car 
supply, customer behavior, diversions, and other effects unrelated to 
service performance can result in high variability in transit time for 
empty private cars. (Id. at 47.) CSXT makes similar arguments, noting 
that

[[Page 38667]]

empty cars do not cycle between the same origin and destination and are 
often diverted. (CSXT Comments 36-37.)
---------------------------------------------------------------------------

    \26\ As discussed in Legal Framework, the carriers' claims 
concerning the appropriate standard lack merit.
---------------------------------------------------------------------------

    The Coalition Associations urge the Board to reject railroad 
arguments that oppose considering empty-car movements under the service 
consistency standard. They assert that railroad concerns about the 
differences in how loaded and empty cars move are overstated. (Coal. 
Ass'ns Reply 35.) Even though empty railcars might not cycle between 
the same origins and destinations, the Coalition Associations note that 
railroads can still measure transit times on empty cars that do move 
between the same empty origin and empty destination, which the 
Coalition Associations claim is a substantial number of private cars. 
(Id. at 36.) The Coalition Associations add that transit time increases 
involving empty-car movements can have a significant impact on rail 
customers, and allowing transit time increases on empty railcar 
movements to justify reciprocal switching prescriptions for both the 
empty movement and the associated loaded movement is a practical 
solution to discourage inadequate service involving empty movements. 
(Id. at 36-37.)
    The Board will continue to include movements of empty cars in 
applying the service consistency standard. Consistent transit time in 
returning private/leased empties to the original place of loading is 
critical to having cars available for loading at that location. Indeed, 
if a year ago a shipper's fleet cycled at the rate of two roundtrips 
per month and that deteriorated to, for example, 1.4 roundtrips per 
month while demand remained constant, the customer would be faced with 
either obtaining more equipment or reducing its delivery of product. As 
AFPM explains, increased transit times for empty railcars can interrupt 
a rail customer's supply of cars needed to support operations, deprive 
a rail customer of empty cars that it may need for the goods it 
produces, and ultimately prevent a rail customer from fulfilling its 
own customers' orders. (AFPM Comments 11.) In the direst situations, a 
disruption in empty-car supply may cause severe facility backups, 
requiring a reduction of or even stalling operations. (Id.) The Board 
will therefore provide for a prescription based on the velocity of 
empty cars. However, customer behavior and customer-ordered diversions 
could constitute an affirmative defense to a service consistency 
failure arising from empty-car movements. Finally, similar to loaded 
cars (as discussed below), the Board will apply the three-year, 25% 
standard and 36-hour floor to empty cars.
Lanes vs. Routes
    UP asserts that the Board should apply the service consistency 
standard to routes as opposed to lanes. (UP Comments 9-10.) \27\ UP 
claims that comparing transit times for a given route from year to 
year, as opposed to comparing transit times for a given lane from year 
to year, is necessary to avoid distorted results. UP appears to reason 
that, by comparing transit times for a given route, the Board could 
better account for unanticipated events that occurred over a given 
segment of the rail system. (Id.)
---------------------------------------------------------------------------

    \27\ Movement over a lane (transportation from a given point of 
origin to a given destination) often can be accomplished over a 
variety of routes.
---------------------------------------------------------------------------

    The Board will continue to apply the service consistency standard 
to lanes, not routes. It is true that different routes can have 
different run times and lead to different delivery dates. But those 
changes nonetheless can affect a shipper's or receiver's business. If a 
railroad has decided to downgrade a route and condense volume on a core 
route and that decision adds miles and days to the transit time, then 
there might be grounds to prescribe access to another line haul 
carrier, subject to other requirements in part 1145. As noted by the 
Coalition Associations, UP's proposal would not capture increases in 
transit time that resulted from the incumbent carrier's routing 
decisions. (Coal. Ass'ns Comments 39.) If a routing decision is a 
function of, for example, a bridge washing out, the Board has provided 
an affirmative defense for extraordinary circumstances, and the carrier 
has other affirmatives defenses available in other circumstances.
    DCPC recommends making a customer's facility open to reciprocal 
switching for all lanes, presumably as long as the incumbent carrier 
failed to meet a performance standard for at least one of those lanes 
and as long as the other conditions to a prescription were met. (DCPC 
Comments 4.) The company reasons that otherwise the customer and the 
carriers would need to closely monitor which cars from the facility 
were eligible for reciprocal switching and which cars from the facility 
were not. (Id. at 3-4.)
    The Board declines at this time to adopt DCPC's approach, which 
would represent a major change to the framework the Board proposed in 
the NPRM. Its approach could make reciprocal switching available for 
movements that were not necessarily implicated by the carrier's failure 
to meet a performance standard. As a result, this approach would go 
beyond the current design and purpose of part 1145. DCPC also asks what 
would happen if a carrier created a new lane and whether a petitioner 
would need to refile with the Board to seek to add that lane to any 
prescription. (DCPC Comments 3-4.) As noted in Multiple Lanes, however, 
the Board has decided not to allow petitioners to combine lanes.
Shorter Lanes
    Several carriers raise the concern that the service consistency 
standard will disproportionately affect traffic that has relatively 
short running times. CN reasons that, for trips of twelve hours, the 
addition of only a few hours in transit time from year to year could 
mean failing to meet the service consistency standard. (CN Comments 
46.) CPKC raises a similar concern, noting that a 24-hour or greater 
delay-occasioned for example by a single missed connection-over a 
shipment that is scheduled to arrive in four days would exceed the 20% 
service consistency standard. (CPKP Reply 26.) CPKC argues that 
establishing a minimum absolute value for downward movement in average 
transit times of ``perhaps 36 hours'' would help to address this flaw. 
(CPKC Reply 26, 41.)
    The Coalition Associations respond that the service consistency 
standard should be based on a percentage of transit time. They reason 
(1) that increases in cycle time require proportional increases in the 
size of the fleet that the shipper needs to maintain the same delivery 
rate to the destination, and (2) that this increase in the required 
size of the fleet imposes significant economic consequences on 
shippers. Having said that, the Coalition Associations suggest that the 
Board could adopt a 24-hour floor for the service consistency standard 
because its shippers typically plan fleet needs based on days in 
transit rather than hours in transit. (See Coal. Ass'ns Reply at 38-
39.)
    The Board will adopt an absolute floor of 36 hours, meaning that an 
increase in transit time over a 12-week period will fail the service 
consistency standard only if the increase is more than 36 hours. This 
approach is grounded in practical considerations and the specific goals 
of part 1145. A reciprocal switching movement itself might add roughly 
24 hours to a trip. It is therefore unlikely that it would serve the 
public interest to prescribe a reciprocal switching agreement under

[[Page 38668]]

part 1145, as a means to introduce an additional line-haul carrier, 
based on an increase in transit time of 36 hours or less.\28\ The 36-
hour floor applies only under part 1145. A shipper would be free to 
seek to demonstrate under part 1144 or part 1147 that an increase in 
transit time of 36 hours or less justified prescription of a reciprocal 
switching agreement.
---------------------------------------------------------------------------

    \28\ For the same reason the 36-hour floor also will be applied 
to the three-year standard.
---------------------------------------------------------------------------

Calls To Measure the Entire Move
    Some shipper groups raise concerns that the service consistency 
standard applies only to the incumbent carrier's portion of an 
interline movement and therefore does not account for increases in 
transit time over the entire interline movement. (PRFBA Comments 10; 
EMA Comments 9.) NSSGA suggests that applying the standard only to the 
incumbent carrier's portion is, in effect, to apply the standard to an 
``arbitrary subset'' of the entire movement. (NSSGA Comments 8.) The 
Board disagrees that it is arbitrary to apply the service consistency 
standard only to the incumbent carrier's portion of the interline 
movement, given that the incumbent carrier has the most direct control 
over its portion of the movement. If the incumbent carrier provided 
sufficiently consistent transit times over its portion, yet there was 
an excessive decline in transit times over the entire movement, then 
this would very likely be due to factors beyond the incumbent carrier's 
reasonable control. Given this high likelihood, the Board sees no value 
in requiring the incumbent carrier to demonstrate, as an affirmative 
defense, that a decline in transit time over the entire movement was 
beyond the incumbent carrier's reasonable control.
Volume
    AAR notes that the service consistency standard requires comparing 
transit time performance in a particular lane between two windows of 
time. (AAR Comments 56.) To make this an ``apples-to-apples'' 
comparison, it asks the Board to clarify that the selected windows must 
have seen reasonably equivalent volumes shipped, with shipments moving 
under non-exempt common carrier service in both windows. (Id.) AAR 
asserts that volume can significantly affect transit time for a variety 
of operational and economic reasons and that large blocks of cars will 
often move through the network faster than single carloads. (Id.) The 
Board will not adopt AAR's clarification. Requiring a shipper to 
compare volumes as well as observation periods would be more difficult 
to apply, and affirmative defenses provide an adequate and appropriate 
path for an incumbent carrier to address transit-time increases that 
primarily result from volume changes, including where the likelihood of 
this occurring is not clear or predictable. (Coal. Ass'ns Comments 37.)
Gradual Increases in Transit Time
    A number of parties claim that comparing transit time from one year 
to the next might not capture a significant increase in transit time 
that develops over a period of several years. For example, AFPM notes 
that, using the standard's proposed 20% or 25% year-over-year increase 
for a shipment that takes 14 days today could result in an increase to 
17.5 days in the first year and nearly 22 days in the second year, 
continuing to grow exponentially in perpetuity, nearly doubling its 14-
day transit time to more than 27 days after just three years. (AFPM 
Comments 11; see also FRCA/NCTA Comments 3.) To avoid the compounding 
effect of increases in transit time, the Coalition Associations ask the 
Board to adopt an additional threshold that would make reciprocal 
switching available if transit time increases by more than 25% during 
the prior three years. (Coal. Ass'ns Comments 4, 31-32; V.S. Crowley/
Fapp, Ex. 2 at 5; see also Dow Reply 3.) Although AAR also made this 
point in its comments, (AAR Comments, V.S. Orszag/Eilat 18), it later 
argues that a multi-year approach would not be useful because, 
according to AAR, it would still capture normal variations in transit 
time. (AAR Reply, R.V.S. Baranowski & Zebrowski 9.)
    To capture a slow increase in transit time that becomes substantial 
over time, the Board will modify the transit time measure to include an 
additional metric, which a carrier would not meet if a petitioner's 
transit time over the lane increased by more than 25% over the prior 
three years. See 49 CFR 1145.2(b)(2). For example, if the base year 
average transit time over a twelve-week period in the summer was 20 
days, the incumbent carrier would fail to meet the standard if in years 
one through three, the average transit time for the corresponding 12-
week period in any of those three years increased by five days or more, 
i.e., to 25 days or more. A rail customer would qualify for a 
reciprocal switching agreement if it demonstrated that the incumbent 
carrier did not meet either the one-year or three-year threshold. As 
the Board explained in the NPRM, part 1145 ``would provide for the 
prescription of a reciprocal switching agreement to address 
deteriorating efficiency in Class I carriers' movements, specifically 
when the incumbent rail carrier failed to meet an objective standard 
for consistency, over time, in the transit time for a line haul.'' 
NPRM, 88 FR at 63901. The Board's modification of the transit time 
measure is consistent with that approach.
Summary
    The Board will adopt the service consistency standard that was 
proposed in the NPRM using a 20% standard. The Board will also: (1) 
change the definition of delivery to an interchange and customer 
facility; (2) clarify how it measures transit time performance on 
international lanes; (3) modify the transit time measure to add a 
measure for a 25% increase in transit time over the prior three years; 
(4) create an absolute floor for both the one-year and three-year 
measure of 36 hours; and (5) provide that the service reliability 
standard only applies individually to each lane of traffic to/from the 
petitioner's facility.

Inadequate Local Service: Industry Spot and Pull

    The third performance standard--ISP--would measure a rail carrier's 
success in performing local deliveries (``spots'') and pick-ups 
(``pulls'') of loaded railcars and unloaded private or shipper-leased 
railcars during the planned service window. NPRM, 88 FR at 63905. Under 
the proposed rule, a rail carrier would fail the ISP standard if the 
carrier had a success rate of less than 80% over a period of 12 
consecutive weeks in performing local deliveries and pick-ups during 
the planned service window. Id. The success rate would compare (A) the 
number of planned service windows during which the carrier successfully 
completed the requested placements or pick-ups to (B) the number of 
planned service windows for which the shipper or receiver, by the 
applicable cut-off time, requested a placement or pick-up. Id. The 
carrier would be deemed to have missed the planned service window if 
the carrier did not pick up or place all the cars requested by the 
shipper or receiver by the applicable cut-off time. Id. Subject to 
affirmative defenses, this would include situations in which the 
carrier has ``embargoed'' the shipper or receiver as a result of 
congestion or other fluidity issues on the carrier's network, which 
results in reduced service to the shipper or receiver. Id. Below are 
responses on these matters as well as other issues that drew 
significant comment.

[[Page 38669]]

    The Board proposed the 80% standard based on data submitted in 
Docket No. EP 770 (Sub-No. 1). Id. at 63906. As with the service 
reliability standard, the Board requested that stakeholders and 
shippers/receivers provide evidence and comment on the appropriateness 
of this percentage and whether it should be higher or lower. Id. The 
Board also sought comment on a number of other points, including two 
possible service windows. Id. at 63906-07.
Whether To Adopt the ISP Standard
    A number of carriers challenge the appropriateness of the ISP 
standard. For example, CN asserts that the Board should eliminate the 
ISP standard from Sec.  1145.2 on the ground that the prescription of a 
reciprocal switching agreement is not an effective remedy for 
inadequate local service. CN reasons that, even where the petitioner 
chose the alternate carrier for line-haul service, the incumbent 
carrier would continue to provide local service to the petitioner. (CN 
Comments 36.) AAR agrees, adding that the petitioner's choice to rely 
on the alternate carrier for line-haul service might exacerbate the 
inadequate local service. (AAR Comments 57-58.) AAR suggests that a 
more appropriate response to poor local service might be the 
prescription of terminal trackage rights. AAR adds, however, that 
providing for the prescription of terminal trackage rights in this 
proceeding would exceed the scope of the NPRM. (Id. at 58.)
    AAR asserts that, if the Board retains the ISP standard, the Board 
should establish a technical working group to study and consider the 
matter. AAR reasons that there is significant technical complexity 
related to how carriers provide local service. (Id. at 109.) CPKC goes 
further and argues that local services are too complex and require too 
much on-the-ground operating discretion and flexibility to warrant the 
Board's application of a universal performance standard for local 
service. CPKC suggests that, if the Board might wish to adopt standards 
for local service, then the agency should first examine in appropriate 
detail all of the complexities and potential adverse impacts associated 
with any such standard. (CPKC Reply 28.)
    The Board will retain the ISP standard. The record in this 
proceeding demonstrates a significant public interest in promoting 
adequate local service. As discussed below, a number of shipper groups 
advocate for higher standards for service. (See, e.g., ACD Comments 5 
(noting that the group is supportive of this performance standard as 
first-mile/last-mile service has been a significant issue for shippers 
for decades); see also NSSGA Comments 9; AFPM Comments 12; EMA Comments 
8; PRFBA Comments 9; DCPC Comments 10; API Comments 5; NGFA Comments 
13; FRCA/NCTA Comments 2.) The Class I carriers agree that local 
service is critical to meeting customers' needs and that nevertheless, 
due to a variety of operating decisions by those carriers, the quality 
of local service is not at times where it should be. The public 
interest in adequate local service is effectively advanced by providing 
for the introduction of an alternate rail carrier for purposes of line-
haul service when, through the subpar quality of the local service that 
it provides, the incumbent carrier failed to meet reasonable service 
expectations. The incumbent carrier's potential loss of the line haul 
creates an appropriate incentive to meet local service expectations 
given that provision of the line haul is the carrier's main source of 
revenue. Indeed, due to the economics of providing local service, the 
incumbent carrier might be indifferent to losing that service if it 
retained the line haul. Potential loss of the line haul also reflects 
the fact that overall operation of the network is more fluid when local 
service and line-haul service are well-coordinated, for example, when a 
local drop-off occurs within a reasonable time of when the line haul is 
completed. While the Board supports the carriers' goal of retaining 
flexibility in how they provide local service, as a means to maximize 
efficiency, it is vital that their less successful experimentation not 
threaten the fluidity of the network. An incumbent carrier that had to 
coordinate with an alternate line haul carrier would be more pressed to 
provide adequate local service.
    The Board declines to convene a working group to consider 
complexities and variations in the provision of local service. From the 
customer's perspective, what matters is whether the carrier delivers 
and picks up cars when it says it will. The Board expects that each 
carrier will take into account the complexities of its operations when 
making those communications to the customer.
Calls To Measure by Railcar and for a No-Show Standard
    Under the ISP standard proposed in the NPRM, a rail carrier would 
be deemed to have missed the planned service window for purposes of the 
ISP standard if the carrier did not pick up or place all the cars 
requested by the shipper or receiver by the applicable cut-off time. 
NPRM, 88 FR at 63906-07. Several commenters recommend modifying that 
approach.
    The Coalition Associations propose two standards for local service. 
One standard would measure how many cars, out of the cars that were 
scheduled to be delivered or picked up during a planned service window, 
were not delivered or picked up. (Coal. Ass'ns Comments 4-5.) The other 
standard would measure how many planned service windows during the 
observation period were ``no shows,'' where the carrier failed to 
provide any local service during the planned service window. (Id.) The 
Coalition Associations assert that these different types of failure 
have different impacts on customers. (Id.) Under the Coalition 
Associations' proposed measure, the threshold would be tripped if the 
carrier failed to perform at least 80% of scheduled spots (deliveries) 
and pulls (pick-ups) during the planned service window and did not 
perform the remaining spots and pulls within the service window that 
immediately followed the planned service window. (Id. at 5, 36.) The 
Coalition Associations' proposed ``no-show'' standard would require a 
carrier to provide local service during at least 90% of the planned 
service windows over the 12-week observation period and not to miss two 
consecutive service windows. (Id. at 5, 37-38.)
    AAR asserts that any standard for local service should be based on 
the number of cars that were spotted or pulled as scheduled within the 
planned service window. (AAR Comments 59.) AAR claims that the approach 
in the NPRM (which would credit the carrier with a ``hit'' only if the 
carrier spotted and pulled all scheduled cars during the planned 
service window) would overstate the impact of a carrier's failure to 
perform a small portion of the scheduled spots and pulls during the 
planned service window. (Id. at 23, 57-59, 109; id., V.S. Orszag/Eilat 
13.) CN agrees. (CN Comments 40.) CN states that it tracks local 
performance on a per-car basis. According to CN, this approach provides 
better insight into its performance and into the reasons for any 
misses. (Id. at 40-41; see also CSXT Comments 23; UP Comments 11.)
    The Board will retain the approach to local service that was 
proposed in the NPRM. This approach is straightforward, avoids the 
complexity of the Coalition Associations' proposal, and provides an 
appropriate incentive to provide adequate local service. Not showing up 
at all counts as a ``miss'' under the Board's simpler approach and, in 
some circumstances, could be

[[Page 38670]]

captured by the service consistency and service reliability standards 
the Board is also adopting in part 1145. With respect to AAR's approach 
based on the number of cars spotted and pulled within any service 
window, the Board finds that the Board's approach is not only simpler 
to measure and consistent with the expeditious and efficient handling 
of proceedings but also properly reflects the relative impacts that 
local service failures have on customers. For these reasons, while the 
Board recognizes AAR's observation that service windows might include 
varying numbers of cars, the Board finds that AAR's concerns regarding 
overstatement are not persuasive. Under this rule, a carrier has 
flexibility to establish protocols governing their local service, 
including when to constructively place cars, when and how to establish 
cut-off times, and other actions important to formulating a work order 
that they should execute.
Percentage
    Several shipper groups ask the Board to increase the threshold 
percentage used in the ISP standard. NSSGA argues that 80% is too low--
that local service at that level causes a backup of products at the 
facilities of NSSGA members. (NSSGA Comments 9.) NSSGA asserts that 90% 
would be a more appropriate standard, which, if achieved, could protect 
against such backups. (Id.) AFPM also supports a 90% standard based on 
the adverse impacts that late or missed local service, as well as the 
spot or pull of incorrect cars, have on plant production and revenues. 
(AFPM Comments 12.) Others support setting the local service standard 
either at 90%, (EMA Comments 8; PRFBA Comments 9; DCPC Comments 10), or 
at 80% and providing by rule for an increase up to 85% or 90% after two 
years, (API Comments 5 (initial standard of 80% but 85% or 90% after 
two years)). NGFA recommends setting the standard at the ``high end of 
the interim performance targets'' from Docket No. EP 770 (Sub-No. 1). 
(NGFA Comments 13.) FRCA/NCTA recommend setting the standard at 85%. 
(FRCA/NCTA Comments 2.) AAR opposes these calls to increase the 
standard, asserting that the data does not support an increase. (AAR 
Reply 51.)
    The Board will increase the local service standard. The 80% 
standard that was proposed in the NPRM would not have been triggered 
for many shippers until, on average over a 12-week period, the carrier 
had failed to fulfill a local work order for that shipper more than 
once per week. (EMA Comments 8.) The 80% figure, however, was too low 
to provide a useful indication of when it might be in the public 
interest to introduce an additional line-haul carrier through a 
prescription under part 1145. This point is clear both from shippers' 
comments and from data that the Board collected in Docket No. EP 770 
(Sub-No. 1). The Rail Service Data page on the Board's website shows 
that, from May 13, 2022, to December 22, 2023, three of the four 
carriers that reported data for that period had average weekly ISP 
performance of between 89% and 91%, with highs between 93% and 97%. See 
www.stb.gov/reports-data/rail-service-data/#Urgent%20Issues%20Rail%20Service%20Data. While ISP performance was 
measured somewhat differently in Docket No. EP 770 (Sub-No. 1) as 
compared to how it will be measured under part 1145, the performance 
data from Docket No. EP 770 (Sub-No. 1) shows the high level of 
reliability that carriers seek to provide, and that customers expect, 
even during periods of major problems on the network. With this in 
mind, an 80% ISP standard would provide insufficient incentive for 
carriers to provide adequate local service. An 85% standard better 
reflects a level of service that is below what customers have 
consistently reported as their service expectations and what carriers 
appear to aim for in their service. See id. Although some shippers ask 
the Board to set a higher threshold, the agency would like to implement 
part 1145 before considering whether to increase the percentage.
Observation Period
    AFPM argues that the 12-week observation period for the local 
service standard is too long for refiners and petrochemical 
manufacturers, adding that poor local service over such a sustained 
period will ``dramatically hurt'' their operations. (AFPM Comments 12.) 
For the reasons discussed above in the Observation Period sections 
concerning the service reliability standard and the service consistency 
standard, the Board will retain the 12-week observation for the local 
service standard.
Rebuttable Presumption
    CSXT is concerned that the local service standard does not account 
for missed spots or pulls that were caused by the customer or resulted 
from the customer's request for service that exceeded the capacity of 
the customer's facility. (CSXT Comments 22.) CSXT asserts that the 
carrier should not be required to prove to the Board, after the event, 
that the miss was caused by the customer, arguing that the local crew's 
recorded determination at the time of the miss should be treated as 
presumptive evidence on that point. (Id. at 22-23.)
    As stated in the NPRM, a miss caused by the customer would not be 
counted against the incumbent rail carrier. NPRM, 88 FR at 36907. The 
Coalition Associations asks the Board to include the phrase ``except 
due to a variation in its traffic,'' (Coal. Ass'ns Reply 44), but that 
suggestion will not be adopted. It is not clear without context why a 
miss caused by a variation in a customer's traffic should count against 
a carrier, but the Board can consider the relevance of the variation if 
presented as an affirmative defense.
    The Board will not adopt CSXT's proposal to treat the local crew's 
determination of the cause of a miss as presumptive evidence of the 
cause. The burden should be on the railroad to provide persuasive 
evidence of the cause of the miss, given that the railroad would have 
the most direct knowledge of the cause. Persuasive evidence might 
include the local crew's determination at the time and can be provided 
by the railroad. The Board will consider this evidence but might find, 
based on the facts at hand, that the local crew's determination was 
insufficient.
Adjustment to the Local Service Standard Based on Reductions in Service
    The Board proposed in the NPRM that, if a carrier unilaterally 
chooses to reduce the frequency of the local work that it makes 
available to a customer, based on considerations other than a 
commensurate drop in local customer demand, then the local service 
standard would become 90% for a period of one year. NPRM, 88 FR at 
63907.
    The Board will adopt this proposal in the final rule. AAR claims 
that an increase based on a reduction in the frequency of local service 
would limit carriers' flexibility and would make railroads more 
cautious to experiment with increased local service levels. (AAR 
Comments 59.) While the Board supports efforts to optimize rail 
service, it is important to disincentivize carrier efforts that, 
without collaboration with the shipper, reduce the quality of service 
to a shipper or receiver without corresponding increases in efficiency. 
A reduction in the frequency of local service can have substantial 
adverse effects on a shipper or receiver, especially if it does not 
reflect coordination with the shipper. For example, a shipper might 
need to build additional plant trackage to accommodate reduced pulls by 
the carrier. However, the Board may consider the impact of all customer

[[Page 38671]]

demand in the local serving area, not just that of petitioner, in 
considering whether a petitioner qualifies for this provision. The 
carrier will bear the burden to demonstrate that the drop in customer 
demand necessitated the reduction in local service.
    The Board will extend to two years the period during which the 
increased local standard would apply. As the Coalition Associations 
explain, the burden of mitigating the risk of missed spots and pulls is 
significant and its members indicate that the infrastructure and fleet 
design changes necessary to implement these mitigation measures can 
take two years to fully implement. (Coal. Ass'ns Comments 41.) Although 
AFPM suggests a 95% standard, claiming that it recognizes some 
disruptions may occur while protecting shippers from service reductions 
that would result in poor ISP performance, (AFPM Comments 13), the 
Board will not adopt such a high standard. A 90% standard achieves the 
Board's goals, recognizing the high degree of accuracy that is 
appropriate in the context of local service while reserving the Board's 
introduction of an additional line-haul carrier for relatively 
significant local service issues.
    The NPRM made clear, however, that the agency might find that the 
90% ISP standard should not apply in a case. NPRM, 88 FR at 63907. The 
Board may consider, among other things, whether the carrier is offering 
more service during periods of seasonal or unusual demand to 
accommodate the demands of a shipper and whether such circumstances 
invalidate use of the 90% ISP standard. Id. Arguments such as these 
could be considered as affirmative defenses in response to a petition.
Service Window
    The Board sought comment on two alternatives for what service 
window to use in applying the local service standard. NPRM, 88 FR at 
63906. Under one alternative, the Board would use a standardized 
service window of 12 hours (the maximum duration that a crew is allowed 
to work), starting from the relevant serving crew's scheduled on-duty 
time. Id. Under the second alternative, the Board would use the service 
window that the rail carrier specified according to the carrier's 
established protocol, provided that the window did not exceed 12 hours. 
Id. at 63906-07.
    The Coalition Associations recommend using service windows that 
comply with the carrier's established protocol rather than a 
standardized 12-hour window. (Coal. Ass'ns Comments 42.) They assert 
that using service windows that comply with the carriers' established 
protocol will encourage rail carriers to provide local service that 
meets the expectations that flow from the protocol, thus reducing 
disruptions to shippers. (Id.) The Coalition Associations note that 
when local service is unreliable, many customers stage cars for service 
the day before the service window and wait long after their service 
window for the carrier to pull staged cars. (Id. at 43.) At many 
facilities, this extended staging impairs or prohibits facility 
operations because it uses track space that the facility needs to 
operate and can lead to extra labor costs. (Id.)
    The Board finds that, on balance, it is best to use a standardized 
12-hour window for purposes of applying the local service standard. In 
response to the Coalition Associations' concern, the Board emphasizes 
that the 12-hour window that is used for purposes of the local service 
standard is not meant to override the rail carrier's protocols or to 
excuse carriers from complying with those protocols. The benefit of 
using a standardized 12-hour window for purposes of the local service 
standard is that it will result in uniform understanding of the point 
at which the Board would consider regulatory intervention. To use a 
carrier's shorter window would impose costs that the carrier might not 
have accounted for in setting that shorter window; the carrier might 
therefore be encouraged to lengthen the window beyond the window that 
is otherwise most efficient for that carrier. That outcome is 
inconsistent with the Board's intent, as it would undermine the public 
interest in efficient operation as well as the interests of the 
individual shipper or receiver. Likewise, for the sake of uniformity 
across railroads, the Board will decline AFPM's proposal to use a 
window that extends from two hours before to two hours after the 
estimated service time that was specified in the local crew's job plan. 
(AFPM Comments 13.)
Advance Notice
    The Board sought comment from stakeholders on whether a rail 
carrier should be required to provide notice to the customer before the 
carrier changes the on-duty time for the local crew that serves the 
customer--at least for the purposes of regulatory measurement--and, if 
so, how much advance notice should be required. NPRM, 88 FR at 63906.
    The Coalition Associations ask the Board to require carriers to 
provide 60 days' notice of a change to the service window. (Coal. 
Ass'ns Comments 43-44.) AFPM goes further and argues that railroads 
should not be allowed to unilaterally change a service window without 
(1) agreement from a customer, or (2) going through a formal mediation 
process. (AFPM Comments 13.)
    The Board will not adopt these measures, which seem unnecessarily 
rigid and do not directly relate to the purpose and design of part 
1145. The Board notes, though, that regular or unreasonably abrupt 
changes to a customer's service window might be relevant considerations 
under parts 1144 or 1147 of the Board's regulations.
Clarification for Spot on Arrival Cars
    Per the Coalition Associations' request, the Board clarifies that 
the spot and pull standard includes ``spot on arrival'' railcars. 
(Coal. Ass'ns Comments 42.) However, failure to spot ``spot on 
arrival'' railcars for a planned service window results in a missed 
service window only if the railcars arrived at the local yard that 
services the customer and are ready for local service before the cut-
off time applicable to the customer and in accordance with the 
carrier's established protocol.
Clarification of Applicable Traffic
    CN asks the Board to clarify that the local service standard does 
not apply to unit trains or intermodal traffic. (CN Comments 43.) CN 
states that unit trains are not handled through the same process as 
manifest traffic--that unit trains are often staged in yards upstream 
from the destination while CN coordinates with the customer to 
determine the appropriate time for service. (Id. at 43-44.) Further, 
according to CN, the needs of unit train customers differ from those of 
manifest customers, as CN generally works to ensure that a certain 
number of unit trains are delivered based on monthly demand, as opposed 
to ensuring that unit trains are delivered according to planned service 
windows. (Id. at 44.) CN claims that intermodal traffic is not 
compatible with the local service standard because intermodal traffic 
presents unique factors and challenges associated with the transloading 
process. (Id.) With intermodal traffic, according to CN, containers are 
typically unloaded at an intermodal facility and then stacked at the 
facility until trucks arrive ingate to pick up the containers. (Id.)
    The Board did not propose to apply the local service standard to 
unit trains or intermodal traffic and will not do so in the final rule. 
Unit trains are not switched or spotted and pulled in the same manner 
as other carload shipments. Similarly, when traffic is

[[Page 38672]]

transferred between a rail carrier and another mode of transportation, 
those transfers do not involve local service in the same manner as 
local traffic. The Board will clarify the exclusion of unit trains and 
intermodal traffic in the text of the adopted regulation, Sec.  
1145.2(e).
Summary
    The Board will adopt the local service standard that was proposed 
in the NPRM using a 12-hour work window. The Board will also: (1) 
increase the local service standard to 85%; (2) extend the period 
during which a 90% standard would apply when a rail carrier 
unilaterally reduces service; (3) clarify how success in spotting 
``spot on arrival'' railcars will be measured; and (4) clarify that the 
local service standard does not apply to unit trains or intermodal 
traffic. The Board also makes technical modifications, including 
reordering paragraphs and using more consistent terminology to describe 
service windows.

Data Production to the Board and Implementation

    The Board proposed in the NPRM to continue to collect certain data 
that is relevant to service reliability and local service and similar 
to the data being collected on a temporary basis in Docket No. EP 770 
(Sub-No. 1). NPRM, 88 FR at 36911. See Urgent Issues in Freight Rail 
Serv.--R.R. Reporting, EP 770 (Sub-No. 1), slip op. at 6 (STB served 
May 6, 2022) (items 5 and 7). The Board's ongoing collection of this 
data under part 1145 would be adapted to the design of part 1145.
    It is true that the Board did not extend the temporary data 
reporting as defined in Docket No. EP 770 (Sub-No. 1) because overall 
performance data, especially with regard to service, showed improvement 
and because BNSF, CSXT, NSR, and UP were meeting the majority of their 
one-year service targets. See Urgent Issues in Freight Rail Serv.--R.R. 
Reporting, EP 770 (Sub-No. 1), slip op. at 2-3 (STB served Mar. 14, 
2024). However, as noted in the NPRM, the collection of the data as 
defined in part 1145 will assist with general oversight and facilitate 
implementation of part 1145. NPRM, 88 FR at 63911. As a general matter, 
this material would also allow a reciprocal switching petitioner to 
compare its service to that of the industry or the incumbent carrier's 
service on a system and regional level to see whether service problems 
are systemic and/or worsening. Id. at 63902. FRA and DOT support an 
ongoing collection, noting that it provides them with ``invaluable 
insight into factors that affect the safety, reliability, and 
efficiency of railroad operations.'' (DOT/FRA Comments 3.) 
Additionally, they assert that the Board's proposed data requirements 
would promote transparency among rail customers and the broader public. 
(Id.) Other groups also support ongoing reporting. (See, e.g., PRFBA 
Comments 4.)
    The Board will therefore adopt the data collection it proposed in 
the NPRM. As discussed below, all six Class I rail carriers must begin 
reporting based on the new, standardized definitions of OETA and ISP by 
September 4, 2024. The Board's Office of Public Assistance, 
Governmental Affairs, and Compliance (OPAGAC) will provide the Class I 
rail carriers with a standardized template for these new reporting 
requirements.

Technical Working Group

    AAR agrees with the Board that reporting service data by individual 
rail carriers is ``helpful to understanding conditions on the rail 
network.'' (AAR Comments 106.) However, it asserts that there are some 
details and considerations that need to be worked through before the 
Board requires permanent reporting. (Id. at 107.) It notes that the 
reporting for part 1145 will be standardized, unlike the temporary 
reporting for Docket No. EP 770 (Sub-No. 1). AAR also raises a number 
of issues purportedly requiring a technical conference, including OETA 
matters the Board already discussed in the Performance Standards 
section, the technical complexities of ISP, as well as questions about 
empty cars, routing instructions, and bad order cars. (Id. at 107-09.) 
According to AAR, those and other such considerations would benefit 
from consideration by a working group. (Id. at 109.) AAR claims that 
doing so will allow Board staff and interested parties to better 
understand the issues, work out necessary details, and build a more 
complete record of the technical issues for the Board to consider as it 
finalizes a rule. (Id.)
    Similarly, CPKC seeks a technical conference or other process for 
undertaking a more systematic evaluation of real-world lane-specific 
service data before implementing a rule that could have sweeping 
consequences for the railroad operations and the incentives railroads 
confront in designing services that meet shipper needs. (CPKC Reply 1, 
3, 24, 40-41.)
    The Board will not establish a technical working group or hold a 
conference before implementing the final rule. The Class I carriers 
have had experience reporting data in Docket No. EP 770 (Sub-No. 1) and 
in Demurrage Billing Requirements, Docket No. EP 759. Although the 
Board is standardizing the definition of OETA and ISP, these measures 
are not significantly different from the type of reporting required of 
the railroads in Docket No. EP 770 (Sub-No. 1). If specific issues 
arise, the Board can address those issues as needed. AAR's other 
concerns also do not warrant a technical conference. The Board 
addresses AAR's OETA and ISP points in the Performance Standards 
section. And, AAR's questions about bad orders or problems with routing 
instructions can be examined in the context of a particular case. 
Finally, the Board is rejecting in the Analytical Justification and 
Legal Framework sections the notion that the agency must develop per-
lane performance standards.

Calls for More Data

    A number of entities ask the Board to require the rail carriers to 
provide additional data. For example, FRA and DOT suggest that the 
Board consider maintaining intermodal traffic data as a reporting 
requirement, stating that, while intermodal is not rate-regulated 
traffic, it is a valuable metric to monitor supply chain efficiency. 
(DOT/FRA Comments 3.) The Board will not require the Class I rail 
carriers to report this data because the railroads measure this traffic 
differently from other traffic, and standardizing intermodal service 
measurement is not one of the purposes of this regulation. Intermodal 
traffic is also typically a one-train event from origin to destination 
with no terminal switching events at origin, intermediate points, or 
destination.
    API encourages the agency to collect regional-level data. It claims 
that this data will better inform the Board as to what and where FMLM 
issues exist. (API Comments 8.) Similarly, USDA argues that the Board 
should also collect regional data for transit time. (USDA Comments 3.) 
It notes that data is critical to well-functioning markets. (Id. at 8.) 
Although the Board appreciates these comments, it will collect ISP data 
on an operating division basis, which will provide similar granularity 
to regional data. The Board will therefore not expand the collection of 
data to the regional level but may seek more data at a later point, if 
necessary.

Implementation

    AAR claims that because the proposed rule's service metrics are 
new, railroads need time to modify their systems to conform to the new 
standards and to build new systems to support their obligations. (AAR 
Comments 111.) CSXT raises a similar point and adds that it would need 
to

[[Page 38673]]

build a process to respond to customer requests, which could take one 
year. (CSXT Reply 15-16; see id., R.V.S. Maio.) CSXT discusses this 
issue because ``the Board should be aware of the likely realistic 
timeline for creating a new regulatory regime in which bespoke lane-by-
lane performance metrics would need to be produced on demand for any of 
CSXT's more than 5,000 customers and 60,000 lanes in a matter of 
days.'' (CSXT Reply 16; see also CPKC Comments 10.) And, UP argues that 
time is necessary (1) to create a new systems for Board reporting, 
which UP claims would take one to two years, and (2) to design, 
program, test, and implement new methods for developing arrival-time 
estimates that would be consistent with the methods used to determine 
compliance with OETA standard. (UP Comments 18.) UP estimates that 
between one and two years would be required to complete the design, 
programming, and testing of such systems before they could be 
implemented, and ``not the 10-person/days estimated in the NPRM.'' 
(Id.)
    CPKC adds that unique to it is the challenge of preparing to comply 
with the proposed rule at a time when the separate rail carriers that 
are part of the CPKC network continue to maintain separate systems that 
have yet to be fully integrated. (CPKC Comments 11.) In CPKC's 
judgment, the systems of its predecessors will require modification to 
be able to provide petitioners the data on a lane-specific basis from 
different 12-week periods in the way the proposed rule contemplates. 
(Id.) It notes that the Board has taken similar considerations into 
account when imposing new disclosure requirements on carriers. See, 
e.g., Released Rates of Motor Common Carriers of Household Goods, RR 
999 (Amendment No. 5), slip op. at 2-3 (STB served Mar. 9, 2012) 
(extending by six weeks the original three-month period from issuance 
of decision to effectiveness, ``in order to provide additional time for 
affected parties to come into compliance, and in order to allow 
consumers to benefit from the changes as soon as possible.'').
    The Board disagrees with UP's stated concern that an entirely new 
system will be needed to meet the reporting requirements of this rule 
and similarly disagrees with CSXT's assertion that it will take a year 
to update its existing software. While the Board recognizes that 
implementation of this new rule may require some software programming 
changes, the railroads fail to support their burden arguments. 
Specifically, the railroads do not adequately explain how the variances 
in measuring OETA using their current definitions would require such a 
significant reprogramming based on the definition of OETA the Board is 
adopting for part 1145. They also do not make such a showing as to 
modifying the definition of ISP and the underlying metrics in their 
systems.
    Additionally, while CSXT raises a concern about building a 
reporting platform, the Board finds this claim to be overstated. CSXT's 
current platform already has a module, ``Trip Plan Performance,'' which 
``provides customers with information on how well CSXT is complying 
with the trip schedules it generates for each container, trailer, and 
carload shipped by CSXT at the system, location, and lane level.'' CSXT 
Comments 6, Dec. 17, 2021, First Mile/Last Mile Serv., EP 767. 
Similarly, CPKC's concerns also appear unfounded as CP appears to have 
had a sophisticated system for its customers. See Canadian Pac. 
Comments 2, Nov. 6, 2019, Demurrage Billing Requirements, EP 759 (``CP, 
as well as other railroads, already provide or make readily available a 
plethora of data that meet these [demurrage] objectives. Detailed data 
is accessible to the customer on a real time basis and in downloadable 
form.''). The Board will therefore not unduly delay implementation of 
part 1145. To promote a smooth transition though, railroads will have 
until September 4, 2024, the effective date of the final rule, to 
modify their software.
    Additionally, AAR argues that, in light of policy and fairness 
concerns, the Board should not order a switching prescription based on 
a carrier's performance before the date on which any final rule is 
promulgated. (AAR Comments 111.) The Board finds this reasonable. Cases 
can therefore only be brought under part 1145 based on service 
occurring after the rule becomes effective.

Interline Traffic

    AAR argues that the Board should gain experience applying 
performance standards to single-line traffic before applying 
performance standards to interline traffic, given the greater 
complexities with interline traffic. (AAR Comments 11.) The Board 
disagrees. There is no need to apply the rule first to single-line 
movements and then to interline movements as the standards measure an 
individual carrier's success in performing its own movement. However, 
as discussed in the Performance Standards section, the Board 
appreciates that there can be problems at an interchange and has 
adjusted its definition of when a shipment is delivered there.
    CPKC also argues that the Board should defer application of part 
1145 to interline movements based on similar concerns. (CPKC Comments 
8; CPKC Reply 39-40.) When the Board does apply the rule to interline 
movements, CPKC seeks two modifications based on its fear that a 
petitioner could be incentivized to seek an alternate carrier to 
convert an interline movement into a single-line movement when an 
incumbent carrier only handles traffic for a minority of the origin to 
destination routing. (CPKC Comments 8.) One proposed modification 
involves limiting the eligibility of certain alternate carriers, and 
the second involves limiting the duration of the prescription. (Id. at 
9.) \29\ CPKC claims that both could be implemented in a manner that 
would preserve the central feature and purpose of the Board's rule as a 
service remedy while minimizing the potential for overreach. (Id.)
---------------------------------------------------------------------------

    \29\ The first approach would disqualify a proposed alternate 
carrier from switching access if (a) the incumbent serves only a 
minority of full origin-to-destination routes, (b) the alternate 
carrier's network would serve the entire origin-to-destination route 
after being granted switching access, and (c) the alternate carrier 
is not the only other Class I rail carrier serving the pertinent 
terminal. (CPKC Comments 9.)
    The second approach could be applied in cases where the only 
available alternate carrier would serve the entire route after being 
granted switching rights. In those situations, according to CPKC, 
the Board should avoid an overreaching restructuring of the 
shipper's rail service options by limiting the duration of the order 
to that necessary to enable the incumbent to demonstrate that it can 
provide adequate service. According to CPKC, an appropriate limit 
might be that the order is effective initially for three months, 
during which time the incumbent would be entitled to demonstrate 
that its service had risen to an adequate level thereby terminating 
the alternate carrier's access. (Id.)
---------------------------------------------------------------------------

    The Board will not adopt these adjustments concerning interline 
traffic. A prescription would be available under part 1145 with respect 
to the incumbent carrier's portion of an interline movement only if the 
requirements of part 1145 were met with respect to that movement. The 
prescription in that case would be consistent with the Board's goals in 
enacting part 1145. There is no cause, within this framework, to 
consider the petitioner's motivation in seeking access to an alternate 
carrier for the incumbent carrier's portion of the interline movement. 
To the extent that the incumbent carrier believed that the proposed 
prescription would cause undue impairment as provided for in part 1145, 
the Board would consider the carrier's objection in deciding whether to 
grant the prescription.

[[Page 38674]]

Data Production to an Eligible Customer

    In the NPRM, the Board proposed to require Class I carriers to 
provide, within seven days of receiving a related written request from 
a shipper or receiver, all individualized performance records necessary 
for that shipper or receiver to file a petition under part 1145. 88 FR 
at 63902, 63910-11. The incumbent carrier would be required to record 
that data and, upon request from a shipper or receiver, would be 
required provide it to that customer. Id. at 63911.\30\ The Board 
stated that the data disclosure requirement would facilitate 
implementation of part 1145 and provide customers with records 
``necessary to ascertain whether a carrier did not meet the OETA, 
transit time, and/or ISP standards'' in order to bring a case at the 
Board. Id. at 63898, 63902. The Board also stated that railroads would 
be required to provide the shipper or receiver with machine-readable 
data, as defined in Demurrage Billing Requirements, EP 759, slip op. at 
3 (STB served Apr. 6, 2021). NPRM, 88 FR at 63911 (inviting 
stakeholders to comment on what format and fields would be useful). The 
Board also sought comment on (1) whether carriers could be required to 
disclose data about past service to a shipper or receiver when a 
different entity paid for the service, and (2) whether the entity that 
paid for such service should be given an opportunity to seek 
confidential treatment of that service data. Id. at 63911 n.40.
---------------------------------------------------------------------------

    \30\ As explained in the NPRM, the data in question would 
include all of the customer's data on traffic that was assigned 
OETAs and local service windows, along with corresponding time 
stamps indicating performance. NPRM, 88 FR at 63911.
---------------------------------------------------------------------------

    CN and CSXT oppose the data disclosure proposal, arguing that it 
amounts to pre-petition discovery and that it improperly departs from 
both traditional litigation and standard Board practice. (CN Comments 
32-22; CSXT Comments 38-39.) The carriers also argue that the NPRM did 
not identify a source of statutory authority that would allow the Board 
to require data disclosure outside the context of a Board proceeding 
and that neither section 11102 nor section 1321 support the data 
disclosure proposal. (CN Comments 33-34; CSXT Comments 39-40.) UP 
argues that shippers should not need data from the incumbent rail 
carrier to decide whether they are receiving inadequate service that 
justifies filing a petition under part 1145. (UP Reply 1-3 (stating 
that UP customers have online access to data allowing the customer to 
track and quantify UP's performance); see also CSXT Comments 40-41 
(stating that CSXT already provides certain data to shippers).)
    CN, CSXT, and UP also argue that the proposed data disclosure 
regulation at Sec.  1145.8(a) is vague and overly broad. (CN Comments 
31-32; CSXT Comments 39; UP Reply 2; see also AAR Comments 106-07 
(urging the Board to provide details about the reporting 
requirements).) CN and CSXT state that the proposed regulation would 
not limit who can request data. They also raise concerns about the 
extent and potential frequency of data requests. (CN Comments 31; CSXT 
Comments 38-39 (arguing that requiring railroads to disclose 
information to parties not eligible for relief under part 1145 ``would 
serve no clear regulatory purpose'').) UP asserts that it is unclear 
whether a railroad will be ``expected to scour its records to identify 
any 12-week period in which standards were not met in a given lane'' 
and whether a carrier would satisfy the data disclosure requirement by 
producing no records if it determines that a standard was not violated. 
(UP Reply 2; see CN Comments 31-32.) These rail carriers suggest that 
the Board should instead require railroads to disclose certain 
performance records to customers only after that customer has filed a 
petition under part 1145. (CN Comments 35 (noting that the petitioner 
should also file a protective order); CSXT Comments 39 (stating that 
metrics could be provided through either the discovery process or an 
initial disclosure process); UP Reply 3 (suggesting an ``expedited 
discovery process'' following the filing of a petition).)
    The Coalition Associations oppose requiring shippers to file a 
petition under part 1145 before a rail carrier is required to disclose 
individualized performance data. The Coalition Associations argue that 
such a procedure would require shippers to file a petition before 
knowing whether data demonstrates a service inadequacy that supports a 
petition under part 1145. (Coal. Ass'ns Reply 25.) As an alternative to 
the proposal to require a petition to be filed before a railroad would 
be required to disclose data, the Coalition Associations propose that 
shippers submit a 30-day pre-filing notice, after which the incumbent 
rail carrier would have five business days to provide the requisite 
service data for the six-month period preceding the pre-filing notice. 
(Id. at 25-26.) In contrast, NGFA argues that shippers and receivers 
should be able to request and receive data as often as they believe it 
would be beneficial and that shippers should be able to challenge the 
data that the carrier provides. (NGFA Comments 4.)
    The Board declines to adopt proposals that would require railroads 
to disclose performance data to a shipper or receiver only after the 
shipper or receiver has filed a petition under part 1145. Section 
1321(a) gives the Board broad authority to fashion means to carry out 
its duties under Chapter 13 and Subtitle IV of the Interstate Commerce 
Act, including the Board's duty to exercise its discretion under 
section 11102(c) in furtherance of the public interest. Indeed, as 
expressly provided in section 1321(a), the enumeration of particular 
powers in Chapter 13 and Subtitle IV does not exclude other powers that 
the Board may have in carrying out those provisions. More generally as 
well, the Board has broad discretion to fashion means to carry out its 
duties, even when those means are not expressly enumerated in the Act. 
See ICC v. Am. Trucking Ass'ns, 467 U.S. 354, 364-65 (1984) (citing 
Trans Alaska Pipeline Rate Cases, 436 U.S. 631 (1978)) (stating that 
the ICC may exercise powers that are not expressly enumerated when 
those powers are legitimate, reasonable, and directly adjunct to the 
agency's express statutory powers); Zola v. ICC, 889 F.2d 508, 516 (3d 
Cir. 1989). Therefore, the Board is not persuaded that, absent express 
authorization in section 1321 or section 11102 to require railroads to 
disclose information to third parties, the Board lacks such authority. 
(CN Comments 34.) Such a narrow reading of the Board's authority would 
unduly hinder implementation of section 11102(c) by blocking the 
availability of information that the Board has determined is relevant 
to the public interest thereunder.
    Here, the data disclosure requirement is a reasonable exercise of 
the Board's discretion and is narrowly tailored to implement a 
particular procedure under section 11102(c) effectively. As stated in 
the NPRM, the data disclosure requirement is intended to provide 
customers with records that are necessary to ascertain whether a 
carrier has met the OETA, transit time, and/or ISP standards. NPRM, 88 
FR at 63902. In the context of part 1145, the requirement that rail 
carriers provide this information to shippers/receivers about their own 
traffic ensures that these customers have basic eligibility information 
that is otherwise in the hands of the carriers. In this way, the data 
disclosure requirement differs from traditional discovery. Without the 
data, a shipper or receiver may have difficulty in determining whether, 
if the shipper or receiver submitted a petition, the

[[Page 38675]]

shipper or receiver could establish a failure to meet a performance 
standard. Ensuring that a shipper or receiver has access to evaluate 
basic eligibility before filing a petition will help to facilitate the 
Board's implementation of part 1145 and is consistent with the Board's 
authority under section 11102(c)(1), as it will reduce unnecessary 
litigation and facilitate the expeditious handling and resolutions of 
petitions for prescription of a reciprocal switching agreement. By 
promoting efficient regulatory proceedings and sound regulatory 
decisions, the data disclosure requirement is reasonably adjunct to the 
Board's statutory responsibilities while advancing the purposes of 
section 1321(b) and the RTP. See 49 U.S.C. 10101(2), (15).
    Moreover, although some rail carriers argue that shippers already 
have access to carriers' online platforms containing data necessary to 
file a petition, rail users have complained that railroads often 
provide data in a way that is ``incomprehensible to even seasoned 
industry veterans.'' \31\ Given the variability of individual carrier 
online platforms and current metric-related methodologies, the data 
disclosure requirement will ensure that shippers and receivers have 
access to standardized data clearly correlating to the standards in 
part 1145. Carriers remain free, however, to maintain their existing 
platforms and customer interfaces as long as they are also able to 
provide the standardized part 1145 data to shippers upon request.
---------------------------------------------------------------------------

    \31\ (NSSGA Comments 4; see also AFPM Comments 6 (stating that 
rail carriers have a ``history of technically providing data that 
were extremely difficult to understand''); CSXT Comments 15-16 
(noting that the Board's definition of OETA is ``similar'' to CSXT's 
TPP, which CSXT reports on ShipCSXT); UP Comments 6 (noting that in 
assessing a car's compliance with its trip plan, UP's TPC measure 
for manifest traffic adjusts for the impact of various events that 
delay or change a car's arrival time but are not caused by UP 
service issues).)
---------------------------------------------------------------------------

    Contrary to CN's argument, it would not be inconsistent with the 
Board's practices to require data disclosure before a regulatory 
proceeding. For example, the Board requires carriers to include 
specific information on demurrage bills to allow customers to more 
readily gauge whether to challenge their demurrage assessments. See 49 
CFR 1333.4; see Demurrage Billing Requirements, EP 759, slip op. at 1, 
9.
    The Board also rejects the Coalition Associations' proposal to 
require a potential petitioner to submit a prefiling notice, with that 
notice serving as the basis for the potential petitioner to obtain data 
from its incumbent carrier. The purpose of the data disclosure 
requirement is to enable a potential petitioner to assess before 
initiating regulatory proceedings whether to initiate those 
proceedings. That objective would be undermined by requiring a 
potential petitioner to submit a pre-filing notice as a condition to 
obtaining relevant information. A pre-filing notice would be an 
additional step, one that could even discourage some shippers or 
receivers from moving forward under part 1145. At the same time, a pre-
filing notice is not required as a matter of law. As discussed above, 
the Board has ample authority to require data disclosure without regard 
to whether related regulatory proceedings are pending.
    However, the Board is persuaded that greater specificity in Sec.  
1145.8(a) would facilitate timely responses by carriers to requests for 
individualized performance records. The proposed regulatory text will 
be modified to require a response by the carrier when a shipper or 
receiver has practical physical access to only one Class I rail carrier 
with respect to the lane(s) in question and when the request identifies 
the relevant lane(s), the range of dates for which records are 
requested, and the performance standard(s) in question. The Board will 
also define ``individualized performance records'' as OETA, transit 
times, and/or ISP data related to the shipper or receiver's traffic, 
along with the corresponding time stamps.
    The Board will not, as some rail carriers suggest, place 
limitations on the frequency of requests for individualized performance 
records or the time period during which data can be requested. (See 
CSXT Comments 38-39.) The record indicates that most, if not all, 
shippers already have access to similar data from carrier online 
platforms that provide performance information, though not on a 
standardized basis. (See id. at 40-41; UP Reply 2.) Therefore, the 
Board is not persuaded that the carriers' concerns about receiving 
voluminous requests for data are likely to come to bear, as shippers 
may choose not to formally request this information from railroads 
unless they are close to initiating a proceeding. (See CSXT Comments 
38-39.) For the same reason, the Board finds that seven days is 
adequate for the incumbent rail carrier to provide individualized 
performance records upon written request from a shipper or receiver, 
given that the carriers already track this information in the ordinary 
course of business.\32\ However, the data production is intended to 
implement part 1145, and the Board expects shippers and receivers to 
request individualized performance records based on a good faith belief 
that the Class I rail carrier has provided service that does not meet 
at least one performance standard in part 1145. In response to such a 
request, a carrier shall provide records for the identified 
standard(s). In a petition for prescription of a reciprocal switching 
agreement, a shipper or receiver may also challenge the veracity of the 
data provided.
---------------------------------------------------------------------------

    \32\ CN argues that the data disclosure requirement raises 
confidentiality concerns. CN appears to suggest that, when the 
shipper or receiver that requests data is not the payor, the payor 
may wish to seek confidential treatment of the data. (CN Comments 
34-35.) CN also asks the Board to consider 49 U.S.C. 11904, which 
prohibits rail carriers from disclosing certain information to 
persons other than the shipper or consignee without consent. (CN 
Comments 34.) CN suggests that the Board instead require data 
disclosure only in the context of a formal regulatory proceeding, 
after a petition has been filed and the Board has issued a 
protective order. (Id.) The Board rejects CN's suggestion. If the 
payor is concerned that the shipper or receiver will disclose the 
requested data to an unauthorized third party, the payor may address 
that concern through its agreement with the shipper or receiver. 
There is no need for the Board to initiate a regulatory proceeding 
to protect the payor's interest. As for the prohibition on carriers' 
disclosure of certain service-related data to parties other than the 
shipper or consignee under section 11904, that prohibition is not 
implicated by the data disclosure requirement. As clarified in the 
final rule, a carrier need only provide to a shipper or receiver 
data that pertains to the carrier's service to that shipper or 
receiver, which is already permissible under section 11904.
---------------------------------------------------------------------------

    Additionally, and as proposed in the NPRM, the Board will adopt a 
requirement that the data be machine-readable, ``meaning `data in an 
open format that can be easily processed by computer without human 
intervention while ensuring no semantic meaning is lost.''' NPRM, 88 FR 
at 63911 (citing Demurrage Billing Requirements, EP 759, slip op. at 3 
n.9). As noted above, some rail users state that data provided by 
railroads is often incomprehensible. (NSSGA Comments 4; AFPM Comments 
6.) A machine-readable data requirement will ensure that rail users 
have access to data that allows them to ascertain whether their 
individualized performance records meet the standards for a petition 
under part 1145. The Board will give Class I carriers the discretion to 
determine how to provide rail users with access to machine-readable 
data, including through a customized link, electronic file, or other 
similar option. In addition, to provide greater clarity as requested by 
carriers and more generally to facilitate the implementation of the 
rule, the Board will require Class I carriers to retain all data 
necessary to respond to requests for individualized performance records 
for a minimum of four years. (See AAR Comments 107; CPKC Comments 11.)

[[Page 38676]]

This approach will ensure that the Board, shippers, and receivers have 
available data that is relevant to implementation of part 1145, 
including the multi-year transit time standard in Sec.  1145.2(b)(2).

Terminal Areas

    In this proceeding, the Board proposed a rule that would permit 
shippers and receivers to seek prescription of a reciprocal switching 
agreement for a movement that begins or ends within a terminal area. 
The reciprocal switching agreement would provide for the shipment to be 
transferred within the terminal area in which the shipment begins or 
ends its journey on the rail system. NPRM, 88 FR at 63902; \33\ id. at 
63898 (``The newly proposed regulations would provide for the 
prescription of a reciprocal switching agreement when service to a 
terminal-area shipper or receiver fails to meet certain objective 
performance standards.''). As discussed below, some commenters urge the 
Board to go further and institute broader competitive-access 
initiatives, while others request clarification or express views on how 
various terms should be understood. Some assert that the rule should 
not include a definition of ``terminal area'' but, rather, should 
simply rely on existing case precedent. However, no commenter questions 
the permissibility or practicality of a terminal-based approach. In 
AAR's view, a terminal-area limitation ``is good policy'' because it is 
likely to eliminate from consideration a number of potential switching 
arrangements that would be ``highly impractical and inefficient.'' (AAR 
Comments 27.)
---------------------------------------------------------------------------

    \33\ The NPRM proposed defining a ``terminal area,'' as a 
commercially cohesive area in which two or more railroads collect, 
classify, and distribute rail shipments for purposes of line-haul 
service. A terminal area is characterized by multiple points of 
loading/unloading and yards for local collection, classification, 
and distribution. A terminal area (as opposed to main-line track) 
must contain and cannot extend significantly beyond recognized 
terminal facilities such as freight or classification yards. The 
proposed definition further clarified that a point of origin or 
final destination on the rail system that is not integrated into or, 
using existing facilities, reasonably cannot be integrated into the 
incumbent carrier's terminal-area operations would not be suitable 
for a prescribed switching arrangement. 88 FR 63913.
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    The Coalition Associations--joined by Celanese and AF&PA/ISRI--
state that they support the Board's proposed definition of ``terminal 
area'' (the area in which a shipper or receiver must be located to be 
eligible for prescription of a reciprocal switching agreement under 
part 1145) because ``[t]he function-based definition is consistent with 
precedent'' and constrains carriers' ability to undermine the proposal 
by seeking to establish ``narrow geographic boundaries.'' (Coal. Ass'ns 
Comments 5, 45; accord Celanese Comments 2; AF&PA/ISRI Comments 2.) 
USDA suggests that the Board consider providing a non-exhaustive list 
of ``terminal areas'' to which the rule would apply. (USDA Comments 7.)
    Several commenters approve of the overall switching proposal in the 
NPRM but state that it should not be limited to terminal areas. For 
example, NGFA (joined by three other organizations) \34\ supports the 
policy underlying the NPRM--to provide incentives for railroads to 
provide adequate service--but states that the proposed rule ``could 
prove to be too narrow in scope to be of use to many agricultural 
shippers by applying only to `service to a terminal area shipper or 
receiver.''' (NGFA Comments 2, 8-9 (noting that its members are often 
captive to Class I rail carriers at locations that are outside of 
``terminal areas'' as the Board would define that term in proposed 
Sec.  1145.1).) EMA echoes this view, asserting that a rule limited to 
``terminal areas'' would leave many rural EMA members who are captive 
shippers without a remedy for poor service. (EMA Comments 9-10; accord 
NMA Comments 6 (calling for access remedies for rail customers not 
located within terminal areas).) Olin and PCA assert that limiting 
reciprocal switching to ``terminal areas'' as defined in the NPRM is 
unduly restrictive because the statute does not require such a 
limitation. (Olin Comments 4-5; PCA Comments 3, 13-14.) WCTL and the 
Coalition Associations express a similar view. (WCTL Comments 9-10; 
Coal. Ass'ns Reply 19-20.) WCTL also states that the scope of 
reciprocal switching relief should be assessed on a case-by-case basis 
that allows for consideration of the facts and circumstances of the 
particular case, rather than ``strict, geographic limits.'' (WCTL 
Comments 10.) These commenters and others urge the Board to return to 
the proposal in Docket No. EP 711 (Sub-No. 1),\35\ or take other action 
to broaden the impact of reciprocal switching prescriptions.\36\
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    \34\ NGFA's comments are supported by the North American 
Millers' Association, Agricultural Retailers Association, and the 
National Council of Farmer Cooperatives. (NGFA Comments 2.)
    \35\ (E.g., Olin Comments 4-5; PCA Comments 3, 13-14.)
    \36\ (E.g., NGFA Comments 3, 9-11 (calling for the Board to 
resume or take final action under multiple dockets); EMA Comments 9-
10 (broaden definition or develop new rule to protect EMA members 
who are remote rural captive shippers); Coal. Ass'ns Comments 46-47 
(initiate proceeding to expand the rule to shippers outside terminal 
areas pursuant to 49 U.S.C. 10705(a)(2)(c)); Coal. Ass'ns Reply 19-
20 (include common stations where the two carriers currently 
interchange traffic); Ravnitzky Comments 2 (establish a default 
interchange point based on the nearest feasible location where both 
railroads can access each other's tracks).) GPI encourages the Board 
to be attentive to any concerns expressed from rural captive 
shippers after the rule goes into effect to help ensure that these 
shippers are not disadvantaged as Class I rail carriers ``focus 
their priorities in more competitive areas of the country.'' (GPI 
Comments 3.)
    With respect to NGFA's comment concerning action in other 
dockets, the Board notes that a final rule was issued earlier this 
year in Docket No. EP 762 amending the emergency service regulations 
at part 1146; among other things, the new rule establishes a more 
streamlined and accelerated process for entertaining emergency 
service petitions under 49 U.S.C. 11123 and clarifies the Board's 
use of its regulations when acting on its own initiative to direct 
emergency service. See Expedited Relief for Serv. Emergencies, EP 
762.
---------------------------------------------------------------------------

    Conversely, AAR asserts that any prescription of reciprocal 
switching must be limited to traffic within a terminal area because 
``the terminal-area limitation is required by statute.'' (AAR Comments 
25-26; accord, e.g., CN Comments 8.) AAR further suggests that ``[t]he 
Proposed Rule will most effectively embody the Board's intent to limit 
switching arrangements to terminal areas'' if it relies on case 
precedent to define a terminal area and ``makes clear in the regulatory 
text that the Board will prescribe switching only in such areas.'' (AAR 
Comments 29.)
    As stated in the NPRM, the Board proposed a rule that ``would 
provide for the prescription of a reciprocal switching agreement when 
service to a terminal-area shipper or receiver fails to meet certain 
objective performance standards.'' NPRM, 88 FR at 63898. The proposed 
rule's focus on terminal-area shippers and receivers is consistent with 
prior cases on reciprocal switching. As a policy matter, the Board 
concludes that the same approach is appropriate to this rule. In the 
case of terminal-area shippers and receivers, access to another rail 
carrier tends to be limited by the difficulty of constructing even the 
minimal amount of new track that would allow the other carrier to reach 
the shipper or receiver directly. The new regulations in part 1145 are 
intended to address this relatively discrete need by focusing on 
terminal-area shippers and receivers. They are not intended to address 
circumstances in which, due to the shipper or receiver's location 
outside of a terminal area, a regulatory introduction of an alternate 
rail carrier to address service issues might have different policy 
implications.\37\ Accordingly, the Board

[[Page 38677]]

will not adopt commenter proposals to reopen Docket No. EP 711 (Sub-No. 
1) or expand the scope of part 1145 to shippers and receivers outside 
of terminal areas as defined in part 1145. This decision does not leave 
such customers without recourse for poor service; parts 1144 and 1147 
both cover trackage rights and through routes as well as reciprocal 
switching agreements, and both parts can provide a remedy for poor 
service when the conditions therein are met.\38\ Given that the Board 
has chosen as a policy matter to limit part 1145 to terminal-area 
shippers and receivers, it is unnecessary to resolve here whether 49 
U.S.C. 11102(c) would accommodate a more expansive approach. Below, the 
Board addresses commenters' claims and contentions about the 
significance of various facts in determining what constitutes a 
``terminal area,'' and other remarks or requests pertaining to this 
subject.
---------------------------------------------------------------------------

    \37\ See Laurits R. Christensen Assoc., Inc., A Study of 
Competition in the U.S. Freight Railroad Industry and Analysis of 
Proposals That Might Enhance Competition, 22-13 (rev. 2009) 
(discussing economic implications of different forms of regulatory 
intervention); Midtec Paper Corp. v. United States, 857 F.2d 1487, 
1502 (D.C. Cir. 1988) (describing the use of terminal trackage 
rights as a more intrusive remedy than switching).
    \38\ As stated in the NPRM, shippers may still pursue access to 
an alternate rail carrier that goes beyond reciprocal switching 
under 49 CFR parts 1144 and 1147, which also allow for continued 
development, including, as appropriate, the Board's reassessment of 
adjudicatory policies and the appropriate application of those rules 
in individual cases. NPRM, 88 FR at 63900. Moreover, the Board's 
action in this docket is not intended to suggest that consideration 
of additional reforms directed towards increasing competitive 
options will be foreclosed in other proceedings. Id.
---------------------------------------------------------------------------

    The Board underscores at the outset that, consistent with case 
precedent, the Board has taken a functional approach to defining 
``terminal area'' for purposes of this rule. The agency has long 
understood ``terminal area'' in such functional terms: as a 
commercially cohesive area in which two or more railroads engage in the 
local collection, classification, and distribution of rail shipments 
for purposes of line-haul service, characterized by multiple points of 
loading/unloading and yards for such local collection, classification, 
and distribution. NPRM, 88 FR at 63902 (citing cases). A terminal area 
(as opposed to main-line track) must contain, and cannot extend 
significantly beyond, recognized terminal facilities, such as freight 
or classification yards. Id. at n.11. In other words, a ``terminal 
area'' is defined by the scope and nature of its functions, rather 
than, for example, distance limits, and the assessment of related 
issues may be fact-specific.\39\ For this reason, the Board agrees with 
AAR that it would not be practical or productive to publish a list of 
``terminal areas'' (as USDA suggests).\40\
---------------------------------------------------------------------------

    \39\ See Midtec, 3 I.C.C.2d at 179 (``The questions of what is a 
terminal area and what is switching are factual ones requiring 
consideration of all the circumstances surrounding a particular 
case.''). Commenters recognize the merit of a flexible, functional 
approach. (See, e.g., Coal. Ass'ns Comments 5, 45 (stating that the 
function-based definition is consistent with precedent and 
forecloses carriers from evading accountability by establishing 
artificial geographic boundaries for terminal areas); AAR Comments 
27 (acknowledging that distance is a poor indicator of whether a 
switch will be operationally feasible or can be integrated into 
existing operations); CN Comments 8-9 (noting agency's ``long 
history'' of assessing terminal area issues on a case-by-case basis 
in light of the many types of factors that are considered).)
    \40\ (See USDA Comments 7 (suggesting that the Board publish a 
non-exhaustive list of ``terminal areas'' to which the proposed rule 
would apply); AAR Reply 32-33 (explaining why USDA's proposal would 
be time-consuming and difficult to implement).) VPA's request for a 
broad ``declar[ation] that ports are terminal areas,'' (VPA Comments 
1, 12), will not be granted for similar reasons. (See, e.g., AAR 
Reply 33 n.11.)
---------------------------------------------------------------------------

    While the regulatory text does not incorporate a list, the Board 
notes that, as a general matter, a normal revenue interchange point on 
the Open and Pre-Pay Stations List is often located within a ``terminal 
area.'' AAR asserts that inclusion on that list ``does not suggest 
there is'' a terminal area as described in the NPRM. (AAR Comments 29-
30.) As the Board indicated in the NPRM, inclusion on the list as a 
normal revenue interchange point would be relevant (albeit not 
dispositive) evidence in identifying a terminal area. The list is a 
useful tool that could assist shippers and receivers in assessing 
whether their facilities are within a terminal area. Carriers would 
remain free to present--and the Board would also consider--evidence and 
argument that the area does not possess the attributes needed to 
qualify as a terminal area.
    The Board also notes that the types of equipment and crew used to 
accomplish a movement that is incidental to a line-haul move do not 
dictate whether a particular origin or destination point is within a 
``terminal area.'' AAR's suggestion to the contrary is misplaced.\41\ 
See, e.g., Midtec, 3 I.C.C.2d at 179 (rejecting incumbent carrier's 
contention that the service it provided to the shipper was line-haul 
service--not switching--because it used road trains and crews rather 
than the switch engines and yard crews generally used in switching or 
terminal operations). The case law allows the Board to consider whether 
movements from the customer's facility are integrated into the 
incumbent carrier's local terminal area operations, whether service is 
performed within a cohesive commercial area, and other relevant 
characteristics. See, e.g., Rio Grande Indus., FD 31505, slip op. at 
10-11 (collecting cases).\42\ As has long been the case, these 
questions will be assessed on a case-by-case basis in the event of a 
dispute. See, e.g., Midtec, 3 I.C.C.2d at 179 (``The questions of what 
is a terminal area and what is switching are factual ones requiring 
consideration of all the circumstances surrounding a particular 
case.'').
---------------------------------------------------------------------------

    \41\ (AAR Comments 28 (stating that industries ``served by road 
switchers from the terminal complex'' should not be covered by the 
proposed rule).) Conversely, whether a shipper or receiver can be 
``reached by a local train dispatched from a freight yard'' does not 
determine the scope of a terminal area, and the agency has properly 
rejected suggestions to this effect. See Rio Grande Indus.--Purchase 
& Related Trackage Rts.--Soo Line R.R., FD 31505, slip op. at 11 
(ICC served Nov. 15, 1989). As discussed above, and consistent with 
long-standing practice, the Board would consider the totality of 
pertinent facts in determining whether a particular origin or 
destination point is located within a terminal area. The Board 
anticipates that, in most instances, determining whether that point 
is located in a terminal area should not be time consuming or 
controversial.
    \42\ The definition of ``terminal area'' proposed and adopted in 
this rule is not intended to exclude from consideration all areas 
across the network that have some portion of main-line track, if 
that track is used for local movements that are incidental to a 
line-haul move and other requirements for a terminal area are met. 
See, e.g., Midtec, 3 I.C.C.2d at 179-80.
---------------------------------------------------------------------------

    For similar reasons, AAR's suggestion that a terminal area does not 
exist if one carrier serves all the industries in an area and ``must 
carry traffic on a line haul'' to reach the other carrier for purposes 
of the switch, (AAR Comments 26 n.3), is misguided. The Board would 
consider, on a case-by-case basis, taking into account all the 
pertinent facts, whether a particular switching interchange could be 
considered to be within a terminal area for purposes of this rule. 
FRCA/NCTA point out that ``[t]here are areas where a single railroad 
provides the terminal service for itself as well as its 
competitor(s),'' and assert that ``the requirement that two carriers 
perform terminal services in a given area appears overly restrictive.'' 
(FRCA/NCTA Comments 2.) The Board will maintain the two-carrier 
requirement in the final rule, without dictating what it would mean, in 
an individual case, for two carriers to perform terminal-area services. 
Consistent with the principles discussed above, in the event of a 
dispute, the resolution of whether a particular carrier or activity 
satisfies the rule's definition would be made based on case-by-case 
analysis.
    Finally, it is unnecessary to amend the regulatory text of proposed 
Sec. Sec.  1145.2(c) and 1145.6(a) to state, as suggested by AAR, that 
reciprocal switching will be prescribed only within a terminal area. 
(AAR Comments 27-28.) The existing definition of ``reciprocal switching 
agreement'' is clear--as are the NPRM and this final

[[Page 38678]]

rule--that prescriptions will be limited to terminal areas.\43\
---------------------------------------------------------------------------

    \43\ A reciprocal switching agreement is an agreement for the 
transfer of rail shipments between one Class I rail carrier or its 
affiliated company and another Class I rail carrier or its 
affiliated company within the terminal area in which the rail 
shipment begins or ends its rail journey. Service under a reciprocal 
switching agreement may involve one or more intermediate transfers 
to and from yards within the terminal area. NPRM, 88 FR at 63913 
(emphasis added); see also, e.g., id. at 63915 (proposed Sec.  
1145.6(b), describing switching service under the agreement as ``the 
process of transferring the shipment between carriers within the 
terminal area''); id. at 63909 (stating that switching service under 
a reciprocal switching agreement under part 1145 would occur within 
a terminal area).
---------------------------------------------------------------------------

    Some commenters state that the final rule should omit a definition 
of ``terminal area.'' AAR asserts that the rule does not need to define 
this term because agency precedent already describes how to identify a 
terminal area; AAR maintains that adding a definition by rule could 
create confusion. (AAR Comments 28-29.) CN reiterates this view. (CN 
Comments 30.) Some shippers also favor omitting the definition. (See, 
e.g., Olin Comments 4 (stating that the statute does not define 
``terminal area'' and that such matters ``are determined on a case-by-
case basis''); PCA Comments 13-14 (same; also stating that proposed 
definition is unnecessary and unduly restrictive).) The Board finds 
that it is useful and appropriate to provide stakeholders with a 
concise, readily accessible definition of ``terminal area'' in the 
regulation itself. Accordingly, the Board will reject suggestions to 
omit the definition. The Board notes that this definition relies on 
case precedent that reflects the functional, multi-factored approach 
the agency has long taken in considering issues involving terminal 
areas, and that these determinations turn on their particular facts. 
See, e.g., Midtec, 3 I.C.C.2d at 179 (agency must consider ``all the 
circumstances surrounding a particular case''). The Board thus finds 
unpersuasive AAR's claim about the risk of ``unnecessarily (and 
potentially erroneously) unsettling that existing body of law.'' (AAR 
Comments 29.) At the same time, including a concise, accessible 
definition in the rule does not mean the Board will depart from its 
long-standing practice of conducting a case-specific analysis of the 
pertinent facts in each proceeding, as CN, Olin, and PCA suggest the 
Board should--and the Board will--continue to do. (See CN Comments 8-9 
(referencing agency's ``long history'' of considering terminal area 
issues on a case-by-case basis); Olin Comments 4; PCA Comments 13.)
    CN additionally expresses confusion about the meaning of the last 
sentence of the proposed definition of ``terminal area'' in Sec.  
1145.1. (CN Comments 29.) As proposed, that sentence states: ``A point 
of origin or final destination on the rail system is not suitable for a 
prescribed switching arrangement if the point is not integrated into 
or, using existing facilities, reasonably cannot be integrated into the 
incumbent rail carrier's terminal-area operation.'' See NPRM, 88 FR at 
63913 (emphasis added). According to CN, the italicized clause might be 
read to suggest that a point outside of a terminal area could, in some 
circumstances, be suitable for a prescribed reciprocal switching 
agreement. As discussed above, prescriptions under part 1145 will be 
limited to points of origin or final destination that are located 
within terminal areas. The Board will revise the regulatory text to 
make this point clear.
    The NPRM invited comments as to whether the reciprocal switching 
tariff of an alternate carrier applicable to shippers in the same area 
should be considered as evidence that the area is a terminal area. 
NPRM, 88 FR at 63902 n.12. AAR asserts that ``[t]here are many reasons 
that the existence of a tariff describing switching is not evidence of 
the geography of a terminal area.'' (AAR Comments 30.) Specifically, 
AAR says, the existence of a tariff that is not used (in AAR's terms, a 
``legacy'' tariff) ``would not speak to the operational realities that 
define a terminal area'' because, according to AAR, it would not be 
indicative of ``actual switching practice that the capabilities of 
infrastructure within a commercially cohesive area support.'' (Id.) AAR 
also remarks that tariffs may be labeled ``reciprocal switching'' that 
``do not reflect `reciprocal switching' in the statutory sense (i.e., 
in a terminal area).'' (Id.) Finally, AAR argues that even reciprocal 
switching tariffs that ``otherwise align with the statutory definition 
of reciprocal switching'' may not support the conclusion that a 
particular location is within a terminal area. (Id. at 30-31 
(commenting that these tariffs ``may exist more as a matter of 
historical happenstance than current economic and operational 
reality,'' or ``may have limited scope as to shippers, destinations, 
commodities, or number of railcars to which they apply'').) AAR 
maintains that construing such tariffs as evidence of a terminal area 
``risks sweeping in areas that cannot meet the Board's established 
definition of that term.'' (Id. at 31.)
    To the extent that AAR is arguing that the Board should not 
consider the existence of such a tariff as relevant evidence at all, 
the Board disagrees.\44\ As the Coalition Associations point out, an 
alternate carrier's tariff plainly is relevant. (Coal. Ass'ns Comments 
46.) The publication of a reciprocal switching tariff may indicate that 
the carriers have the ability to engage in transfers that are 
incidental to a line-haul move--which could constitute useful evidence 
pertinent to determining whether there is a terminal area for purposes 
of this rule. Furthermore, carriers would always have the opportunity 
to demonstrate that a particular location should not be considered part 
of a ``terminal area,'' that a particular prescription would not be 
practicable (which appears to be at the core of AAR's concern), or that 
regulatory requirements under the rule were not otherwise met. For 
these reasons, the Board concludes that it is appropriate to consider 
the existence of a reciprocal switching tariff, applicable to shippers 
or receivers in the same area, in determining what constitutes a 
terminal area. Similarly, the Board would consider evidence, apart from 
the publication of a tariff, that carriers in that area were engaged in 
reciprocal switching arrangements.
---------------------------------------------------------------------------

    \44\ Contrary to AAR's implication, (AAR Comments 31-32), the 
Board is not suggesting that the publication of a tariff would be 
dispositive in defining the existence or scope of a terminal area. 
It is one piece of evidence, among others, that the Board would 
consider. Indeed, AAR appears to acknowledge that tariffs are useful 
in defining the scope of reciprocal switching services, (id. at 31), 
which is one factor, among others, that would bear upon the Board's 
assessment of the existence and scope of a terminal area.
---------------------------------------------------------------------------

    The Board also invited comments on how to reconcile inconsistencies 
in tariffs. NPRM, 88 FR at 63902 n.12. AAR states that it is not aware 
of any systematic issue relating to inconsistencies that would be 
amenable to treatment in a general rule; it suggests that any such 
issues would need to be addressed on a case-by-case basis. (AAR 
Comments 31.) The Coalition Associations maintain that inconsistencies 
between incumbent and alternate carrier tariffs are only a concern when 
no reciprocal switching is occurring between any facilities in the 
terminal area--in which case, they state the Board should examine the 
history of interchanges between the carriers within that terminal. 
(Coal. Ass'ns Comments 46.) The Coalition Associations suggest that 
inconsistencies should otherwise be resolved in favor of a presumption 
that any point within the terminal area could qualify for a 
prescription. (Id.) Based on the comments received, the Board concurs 
with AAR that any issues that may arise concerning tariff

[[Page 38679]]

inconsistencies should be resolved on a case-by-case basis.

Practicability

    The Board stated in the NPRM that, because switching service under 
a prescribed reciprocal switching agreement would occur within a 
terminal area,\45\ there is reason to conclude that those agreements 
would be practicable under section 11102(c). NPRM, 88 FR at 63909. The 
Board added, however, that, should a legitimate practicability concern 
arise, it would consider whether the switching service could be 
provided without unduly impairing the rail carriers' operations. Id. 
The Board also stated that it would consider an objection by the 
alternate rail carrier or incumbent rail carrier that the alternate 
rail carrier's provision of line-haul service to the petitioner would 
be infeasible or would unduly hamper the objecting rail carrier's 
ability to serve its existing customers.\46\ As explained in the NPRM, 
the objecting rail carrier would have the burden of proof of 
establishing infeasibility or undue impairment. NPRM, 88 FR at 
63909.\47\ The Board further proposed that, if the carriers had an 
existing reciprocal switching arrangement in the petitioner's terminal 
area, the incumbent carrier would bear a heavy burden in demonstrating 
why the proposed reciprocal switching agreement would be operationally 
infeasible. See id. at 63902, 63915.\48\
---------------------------------------------------------------------------

    \45\ As discussed above, see Terminal Areas, the last sentence 
of the definition of ``terminal area'' in Sec.  1145.1 will be 
modified to promote clarity. However, because that modification does 
not expand the definition of terminal area beyond the NPRM or 
precedent, it does not impact the discussion below.
    \46\ Id.; see id. at 63915 (proposed Sec.  1145.6(b), stating 
that notwithstanding paragraph (a), the Board will not prescribe a 
reciprocal switching agreement if the objecting carrier demonstrates 
that switching service under the agreement ``could not be provided 
without unduly impairing either carrier's operations; or the 
alternate carrier's provision of line-haul service to the petitioner 
would be infeasible or would unduly hamper the incumbent carrier or 
the alternate carrier's ability to serve its existing customers''). 
For purposes of consistency, Sec.  1145.6(b) will be modified to 
replace ``unduly hamper'' with ``unduly impair'' (emphasis added). 
This modification does not substantively change the regulatory text; 
the terms as used in the final rule are essentially the same. 
``Hamper'' is defined to mean ``to interfere with the operation of'' 
or ``to restrict the movement of'' and ``impair'' is defined to mean 
to ``diminish in function, ability, or quality.'' See Hamper, 
Merriam-Webster Dictionary, available at www.merriam-webster.com/dictionary/hamper; see also Impair, Merriam-Webster Dictionary, 
available at www.merriam-webster.com/dictionary/impair.
    \47\ Section 1145.5(d) will be modified to make clear that the 
burden of proof of establishing infeasibility and undue impairment 
will be on the objecting carrier. Evidence relating to the types of 
infeasibility and undue impairment referenced in the rule would be 
relevant in determining whether an objection to the practicability 
of a prescription was meritorious.
    \48\ Minor clarifying changes have been made in the regulatory 
text of Sec.  1145.6(b) to more closely correspond to the 
descriptions of these concepts provided in the preamble of the NPRM 
and the final rule.
---------------------------------------------------------------------------

    AAR and CSXT argue that a petitioner under part 1145 should be 
required to address practicability in its petition. According to AAR, 
the Board has recognized that shippers must affirmatively address 
feasibility concerns in other access proceedings.\49\ AAR argues that 
the Board should take a similar approach here and require the petition 
to address practicability. (AAR Comments 63-64.) AAR also states that 
the Board would be prevented from making ``an affirmative finding'' 
with respect to practicability if this issue is not addressed in the 
petition. (Id. at 63.) CSXT asserts that ``the burden is on the 
petitioner to prove practicability, as the advocate of agency action.'' 
(CSXT Comments 44.) \50\ CSXT itself recognizes, however, that rail 
carriers are often in the best position to opine on safety and 
feasibility. (Id.) \51\ CSXT suggests therefore that the Board require 
rail carriers to inform the petitioner during the pre-petition 
negotiation period whether the carriers will contest practicability 
and, if they intend to do so, permit the petitioner to conduct limited 
discovery on that issue. (CSXT Comments 44.)
---------------------------------------------------------------------------

    \49\ (AAR Comments 63 (citing 49 CFR 1147.1(b)(1)(iii), which 
requires, inter alia, that a petition filed under part 1147 contain 
``an explanation of how the alternative service would be provided 
safely without degrading service to the existing customers of the 
alternative carrier and without unreasonably interfering with the 
incumbent's overall ability to provide service'').)
    \50\ CSXT cites Golden Cat Division of Ralston Purina Co. v. St. 
Louis Southwestern Railway (Golden Cat), NOR 41550 (STB served Apr. 
25, 1996), as support for this proposition. However, Golden Cat 
involved a complaint proceeding brought directly under former 49 
U.S.C. 11103(a)--not the establishment of a new regulatory framework 
to efficiently and effectively address requests for reciprocal 
switching prescriptions under a defined service-based framework. 
Moreover, in that case, issues relating to which party bore the 
burden of proof on a particular issue (such as practicability) were 
not raised or contested, and thus were not before the agency for 
decision.
    \51\ AAR similarly recognizes that the issue of practicability 
``would likely . . . be addressed in the carrier's reply'' to a 
petition. (AAR Comments 63.)
---------------------------------------------------------------------------

    The Board rejects the suggestion that practicability must be 
addressed in a petition filed under part 1145. Under the rule, the 
prescription would only occur in a terminal area, thereby lowering the 
likelihood of infeasibility and undue operational impact (as compared 
to a more expansive form of potential regulatory intervention). If an 
objection to practicability were raised, it would be, therefore, 
reasonable to require the objecting rail carrier to bear the burden of 
proof of showing that transfers under the proposed agreement would be 
infeasible. Placing this obligation on the rail carrier would also 
promote the RTP by allowing efficient and expeditious handling of a 
petition under part 1145. See 49 U.S.C. 10101(2), (15). The same is 
true with respect to carriers' obligation to demonstrate that resulting 
line-haul arrangements would be infeasible or would unduly impair the 
ability to serve other customers. For both the switching services and 
line-haul arrangements, the carriers--not the petitioner--would have 
direct knowledge of the relevant information. Notwithstanding the 
aforementioned, however, a petitioner may seek discovery on 
practicability issues after the filing of a petition--in anticipation 
of an objection to practicability from either the incumbent or 
alternate rail carrier--and the Board itself can require additional 
information from carriers in particular cases. There is therefore no 
need to provide for pre-petition discovery on practicability issues, 
which would create an unnecessary hurdle and delay for potential 
petitioners. Moreover, although AAR suggests that the Board would be 
prevented from making ``an affirmative finding'' with respect to 
practicability if this issue is not addressed in the petition, (see AAR 
Comments 63), this assertion is mistaken. Any final decision, including 
findings on practicability, if raised, would be issued at the 
conclusion of the proceeding, based on the full record before the 
Board. Further, due to the characteristics of a switching arrangement, 
as explained above and as defined and scoped by this rule, in a case 
where no party raised practicability as an issue, the Board would be 
justified in ``find[ing] [the] agreement[ ] to be practicable'' as 
required by the statute. 49 U.S.C. 11102(c).
    Nor is it necessary for part 1145 to follow the approach in part 
1147, which does require that an initial petition discuss 
practicability. A petition filed under part 1147 requires an advance 
commitment from another available railroad to provide the alternative 
service, see 49 CFR 1147.1(b)(1)(iii)--meaning the petitioner there 
would have direct access to information bearing on practicability 
considerations before the petition is filed. The advance commitment 
requirement is not a feature of part 1145, making it less likely that 
the petitioner will have access to such information at the beginning of 
a case.

[[Page 38680]]

    AAR asserts that, in assessing practicability under part 1145, the 
Board should apply the standards that were articulated in Delaware & 
Hudson.\52\ (AAR Comments 64.) AAR's underlying assumption is that the 
prescription of a reciprocal switching agreement under part 1145 could 
have significant operational impact. AAR argues that added transfers 
increase operational complexity and introduce a higher risk of 
failure--effects that, according to AAR, could adversely affect the 
rail network. (Id.) CN argues that under the established test for 
practicability, relevant factors include existing track and yard usage, 
capacity, congestion, traffic density, operational interference, 
safety, the potential for unduly impairing the ability of either 
carrier to serve its shippers, and the impacts to other carriers, 
shippers, and the public. (CN Comments 18-19.)
---------------------------------------------------------------------------

    \52\ In Delaware & Hudson, the ICC stated that reciprocal 
switching is ``practicable and in the public interest'' when it 
generally meets the following criteria: ``(1) interchange and 
switching must be feasible; (2) the terminal facilities must be able 
to accommodate the traffic of both competing carriers; (3) the 
presence of reciprocal switching must not unduly hamper the ability 
of either carrier to serve its shippers; and (4) the benefits to 
shippers from improved service or reduced rates must outweigh the 
detriments, if any, to either carrier.'' See Del. & Hudson, 367 
I.C.C. 718, 720-22.
---------------------------------------------------------------------------

    There is, in fact, no significant difference between the standards 
that the ICC applied in Delaware & Hudson and the provisions of part 
1145 on practicability. What differs, with respect to practicability, 
is the level of inquiry that was warranted in Delaware & Hudson versus 
the level of inquiry that will be warranted under part 1145. The 
reciprocal switching agreement in Delaware & Hudson covered all 
customers in the terminal area, on the tracks of the affected carriers, 
throughout the city of Philadelphia. It made sense in Delaware & Hudson 
for the ICC to explore, on a broad scale, the possible impacts of the 
proposed agreement given the wide scope of the agreement. In contrast, 
a reciprocal switching agreement under part 1145 would be limited in 
scope because it would apply only to the successful petitioner's 
facility.
    Carriers also oppose the presumption that was proposed in the NPRM. 
Under that presumption, which the incumbent railroad would bear a 
``heavy burden'' to overcome, operation under a reciprocal switching 
agreement would be presumed to be operationally feasible if the 
incumbent railroad and the alternate railroad had an existing 
reciprocal switching arrangement in the petitioner's terminal area. 
NPRM, 88 FR at 63915 (proposed Sec.  1145.6(b)). CN suggests that 
existing voluntary reciprocal switching operations would be only one 
factor in determining whether a proposed agreement would be 
practicable. (CN Comments 18-19 (citing Delaware & Hudson, 367 I.C.C. 
at 720).) CSXT asserts that all relevant evidence should be reviewed 
when determining whether an agreement would be practicable; CSXT 
contends that the Board therefore should eliminate the use of any 
presumption.\53\ (CSXT Comments 42-44.)
---------------------------------------------------------------------------

    \53\ Specifically, CSXT states that ``the Board should eliminate 
its presumption that forced switching in a terminal area would be 
practicable.'' (CSXT Comments 42.) CSXT misdescribes the 
presumption, which applies only to operational feasibility, and 
arises only when the incumbent and alternate carriers have an 
existing reciprocal switching arrangement in the petitioner's 
terminal area.
---------------------------------------------------------------------------

    Conversely, the Coalition Associations support the presumption of 
operational feasibility when a reciprocal switching arrangement already 
exists in a petitioner's terminal area. (Coal. Ass'ns Comments 5-6, 
45.) The Coalition Associations argue, however, that the Board should 
adopt a similar requirement for any location where the incumbent and 
alternate carrier interchange traffic. The Coalition Associations 
reason that the transfer of railcars at an interchange en route on a 
line haul is operationally the same as the transfer of railcars within 
a terminal area for a reciprocal switch. (Id. at 5-6.) AAR responds 
that the Coalition Associations' argument is untenable. (AAR Reply 57.) 
According to AAR, the existence of an interchange that is not 
associated with reciprocal switching cannot establish that it is 
feasible to add other switching at that interchange. (Id.)
    The Board will retain the presumption of operational feasibility 
based on an existing reciprocal switching arrangement in the 
petitioner's terminal area. That presumption pertains only to 
operational feasibility of the reciprocal switch, not to other 
potential elements of impracticability (such as undue impairment of the 
incumbent carrier's operations, the infeasibility of the alternate 
carrier's line-haul service, or undue impairment of the incumbent rail 
carrier's or the alternate rail carrier's ability to serve its existing 
customers). An existing reciprocal switching arrangement would 
demonstrate that railcars could be transferred between carriers within 
the terminal area. The presumption is rebuttable and the carriers will 
have the opportunity to demonstrate that the petitioner's traffic could 
not reasonably be added to switching operations. Further, the Board 
will retain flexibility to assess all relevant information bearing on 
the issue of practicability. See 49 CFR 1145.6(b).
    With respect to the Coalition Associations' proposal to presume 
operational feasibility at any location where the incumbent and 
alternate carrier interchange traffic, the Board finds that such a 
proposal is outside the scope of this proceeding. This rulemaking is 
limited to establishing criteria for the prescription of reciprocal 
switching agreements within terminal areas as defined in part 1145.
    Some commenters argue that the Board should consider safety as part 
of its assessment of practicability. (See, e.g., CN Comments 18-19.) 
The federal government's primary safety agency for freight rail 
transportation, FRA, and its parent department, DOT, state that the 
Board should consider safety in assessing a petition under part 1145 
but note that, in general, they do not foresee safety concerns with 
reciprocal switching. (DOT/FRA Comments 3 n.3 (explaining that 
railroads are required to operate safely and in compliance with all 
applicable FRA safety regulations at all times, which would include 
while conducting reciprocal switching moves).) AAR agrees that 
compliance with relevant safety regulations and practices ``will do 
much to mitigate safety concerns,'' but argues that unforeseen safety 
issues may arise in a specific proceeding. (AAR Reply 56.) AAR suggests 
the Board clarify in the regulatory text that ``the Board will not find 
a switching arrangement to be practicable and in the public interest if 
it is unsafe.'' \54\
---------------------------------------------------------------------------

    \54\ (Id. (quoting with modifications 2016 NPRM, EP 711 et al., 
slip op. at 18; see also CN Comments 22 (asserting that a finding of 
practicability requires consideration of safety issues associated 
with the handling of traffic or the alternate route); CSXT Comments 
43-44 (noting risk of accidents and employee injuries from increased 
handlings and safety/security concerns with hazardous materials and 
TIH shipments).)
    BLET also raises concerns that switching ``would impair the safe 
operations of crews on both the host and guest railroads.'' (BLET 
Comments 2.) This concern, however, seems to address a trackage 
rights scenario as opposed to reciprocal switching, as BLET later 
refers to a guest railroad traversing the tracks of a host railroad. 
(Id.) The Board declines to address the issue raised by BLET here as 
it appears to go beyond the scope of this proceeding.
---------------------------------------------------------------------------

    Part 1145 does not preclude the Board from considering safety in 
its assessment of a petition filed under part 1145. The proposed rule 
requires any petition for prescription of a reciprocal switching 
agreement to be served on FRA. NPRM, 88 FR at 36908 (proposed Sec.  
1145.5(c)). Therefore, FRA would receive notice and have an opportunity 
to comment on any petition if it deemed

[[Page 38681]]

necessary. The Board would take FRA's comments into account in 
determining whether the proposed reciprocal switching was practicable 
and in the public interest. In light of the foregoing, it is not 
necessary to amend part 1145 to require a specific determination as to 
safety.
    CRC and Metrolink express concern that a reciprocal switching 
agreement under part 1145 could adversely impact existing agreements 
between freight rail carriers and passenger rail carriers, including 
agreements regarding shared use of facilities, on-time performance 
goals, safety, and dispatching priorities. CRC and Metrolink assert 
that, given the potential impact reciprocal switching agreements may 
have on a shared rail corridor, the Board must consider the interests 
of passenger rail carriers in a proceeding under part 1145. (CRC 
Comments 4-6; Metrolink Comments 1-2.) To that end, CRC suggests that 
the Board modify proposed Sec.  1145.6(b) to permit a ``potentially 
affected rail carrier'' to bring practicability concerns before the 
Board. (CRC Comments 7-8.)
    The Board declines to modify proposed Sec.  1145.6(b) as suggested 
by CRC. As CRC notes, freight rail carriers and passenger rail carriers 
already have existing shared use and/or operational agreements. There 
is no reason to suppose that those agreements would be nullified by the 
Board's prescription of a reciprocal switching agreement. To the 
contrary, the Board may assume that the alternate carrier under the 
prescribed agreement would provide line-haul service to the petitioner 
in accordance with the alternate carrier's operating agreements with 
other carriers. In all events, freight rail carriers are in a position 
to make the Board aware of any practicability issues involving 
passenger carriers.
    Finally, BNSF urges the Board to consider car supply issues when 
weighing the practicability of a proposed reciprocal switching 
agreement, including the alternate carrier's ability to supply cars and 
how added car supply responsibilities will impact the alternate 
carrier's other customers. (BNSF Comments 8.) BNSF notes that its 
existing, market-based car-supply programs have substantial built-in 
lead times and argues that the Board should ensure that these programs 
are not adversely affected by a prescribed reciprocal switching 
agreement. (Id. at 9-10.)
    Although BNSF urges the Board to consider car supply issues when 
considering the practicability of a reciprocal switch, the Board notes 
that it is possible that the petitioner and the alternate carrier will 
have addressed car supply issues in advance of the filing of a 
petition. Nevertheless, the Board reiterates that, under Sec.  
1145.6(b), the Board will not prescribe an agreement if the alternate 
carrier demonstrates that the provision of line-haul service to the 
petitioner would be infeasible or that it would unduly impair the 
alternate rail carrier's ability to serve its existing customers--and 
will consider evidence, for example, of whether the alternate carrier 
would be unable to accommodate the car supply needs of the petitioner 
in the event a reciprocal switching agreement were ordered.

Service Obligation

    The Board sought comment on whether a prescription should include a 
minimum level of switching service, and if so, whether the Board should 
establish a separate and specific penalty structure to be imposed on 
carriers that do not meet that level of service. NPRM, 88 FR at 63903 
n.15.
    The Coalition Associations and PCA support establishing such a 
requirement, along with a specific penalty structure to be imposed on 
carriers that do not meet the customer's level of service requirements. 
(Coal. Ass'ns Comments 58; PCA Comments 7-8.) AAR asserts that no such 
requirement or ``penalty structure'' is appropriate, as the prescribed 
service will be subject to the common carrier obligation under 49 
U.S.C. 11101, and the usual remedies for a failure to provide adequate 
service upon reasonable request will be available. (AAR Comments 94.)
    While the Board expects movements under a prescribed reciprocal 
switching agreement to occur on a timely and efficient basis, the Board 
will not attempt through this rule to anticipate or set standards for 
resolving related disputes. The Board will leave enforcement of 
carriers' obligations under a prescribed reciprocal switching 
agreements to other proceedings, should a dispute arise.\55\
---------------------------------------------------------------------------

    \55\ More broadly, as described in the NPRM and throughout this 
rule, the Board has recognized that the form of intervention, the 
characteristics of the appropriately defined and scoped switching 
prescription here, the numerous protections in this rule, and other 
aforementioned factors enable the Board to balance the aspects of 
the RTP and set these performance standards in this specific 
context. As the Board stated in the NPRM, it does not view it as 
appropriate to apply or draw from these standards to regulate or 
enforce the common carrier obligation. See, e.g., State of Montana 
v. BNSF Ry., NOR 42124, slip op. at 7 (STB served Apr. 26, 2013) 
(stating what constitutes a reasonable request depends on all 
relevant facts and circumstances); Granite State Concrete Co. v. 
STB, 417 F.3d 85, 92 (1st Cir. 2005); Union Pac. R.R--Pet. for 
Declaratory Ord., FD 35219, slip op. at 3-4 (STB served June 11, 
2009).
---------------------------------------------------------------------------

Procedures

Negotiations

    The NPRM proposed that, at least five days prior to filing a 
petition under part 1145, the petitioner must seek to engage in good 
faith negotiations to resolve its dispute with the incumbent rail 
carrier. NPRM, 88 FR at 63914. Several rail carriers argue that five 
days is insufficient for an incumbent carrier to cure a service issue. 
They urge the Board to extend the negotiation period or require 
additional pre-filing communication between carriers and petitioners. 
(See, e.g., AAR Comments 86; CPKC Reply 25; CSXT Comments 35; NSR 
Comments 11.)
    NSR suggests that customers should be required to communicate with 
the incumbent carrier during the period of the alleged service issue 
upon which a petition is based. (NSR Comments 11 (stating that it is 
consistent with the RTP of 49 U.S.C. 10101(2) to promote the private 
resolution of disputes); see AAR Reply 67 (encouraging the Board to 
adopt NSR's recommendation); CPKC Reply 25 (endorsing NSR's 
suggestion).) Similarly, AAR suggests that shippers be required to 
notify an incumbent carrier of the concerns in question as soon as 
practicable after the 12-week period during which the carrier allegedly 
failed to meet a performance standard, and that shippers also be 
required to engage with the incumbent carrier for a reasonable period--
such as four weeks--during which the incumbent carrier would be 
encouraged to remedy the problem.\56\ (AAR Comments 88; see CSXT 
Comments 35 (endorsing AAR's recommendation).) According to AAR, 
allowing an incumbent carrier to cure a service issue is the most 
efficient approach to achieving ``the Board's ultimate objective.'' 
(AAR Comments 86-87.)
---------------------------------------------------------------------------

    \56\ CSXT also argues that the Board should only permit 
petitions for alleged service inadequacies that are ``reasonably 
contemporaneous with the petition and exist at the time of the 
petition'' because there is no compelling need for a switching 
prescription where a service inadequacy no longer exists. (CSXT 
Comments 35.) As suggested above, though, carriers have misstated 
the law in suggesting that the Board must find a compelling need as 
a condition to a prescription under section 11102(c). See Legal 
Authority. Even putting aside the applicable standard, part 1145 
properly does not require demonstration of an ongoing service issue 
as a condition to a prescription. Given the fluid nature of rail 
operations, what had been an ongoing problem could be temporarily 
fixed or could recur. It therefore would undermine the purposes of 
part 1145 to require demonstration of an ongoing service issue. That 
approach would undermine predictability for shippers and receivers 
that were considering whether to file a petition under part 1145 
and, by undermining predictability, would negate the incentives that 
part 1145 is designed to introduce.

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

[[Page 38682]]

    Rail carriers also argue that an incumbent rail carrier would be 
better situated to cure a service issue if the Board extended the five-
day negotiation period. According to UP, a 30-day negotiation period 
would allow the customer and carrier ``to resolve issues and make 
longer-term, permanent changes to address the concerns.'' (UP Comments 
14.) BNSF also suggests a 30-day negotiation period and states that, 
during the 30-day period, Board staff from the OPAGAC or the Rail 
Customer and Public Assistance Program (RCPA) could assist in resolving 
disputes. (BNSF Comments 4-5; BNSF Reply 2-3; see also AAR Reply 67 
(stating that the Board should encourage shippers and carriers to 
utilize OPAGAC).)
    NSSGA responds that carriers' request for additional time to cure a 
service deficiency shows that carriers can improve service if 
threatened with the possibility of a reciprocal switching proceeding 
and are only interested in improving service when a shipper intends to 
pursue a switching prescription. (NSSGA Reply 4.) NSSGA argues that 
carriers can improve service at any time, that providing carriers with 
additional time to cure would delay service improvement, and that 
carriers may make only temporary improvements to avert a switching 
prescription. (Id.) AFPM also supports the proposed five-day 
negotiation period. (AFPM Comments 14.)
    The Board rejects proposals to extend the five-day negotiation 
period or to require additional pre-filing communication between rail 
carriers and shippers or receivers, including during the period of 
alleged service inadequacy. As a practical matter, the Board expects 
that--given both the regulatory requirement that a petitioner must seek 
to engage in good faith negotiations to resolve its dispute and the 
practical dynamics of the business relationship between carriers and 
their customers--a shipper or receiver would have communicated with the 
incumbent carrier during the period of alleged service inadequacy, and 
parties are encouraged to seek assistance from RCPA to informally 
resolve disputes.\57\ But requiring such communication or resolution 
would only impose an unnecessary hurdle on petitioners and could result 
in delaying service improvement. Moreover, AAR errs in asserting that 
the Board's ``ultimate goal'' in enacting part 1145 is merely to 
provide for resolution of an immediate service problem. The Board's 
broader goal is to create appropriate regulatory incentives for Class I 
railroads to achieve and to maintain higher service levels on an 
ongoing basis. NPRM, 88 FR at 63899. Requiring petitioners to seek 
private resolution of an ongoing service issue--which is a remedy 
already available to them--would not accomplish these goals.
---------------------------------------------------------------------------

    \57\ RCPA can be reached at (202) 245-0238 and [email protected].
---------------------------------------------------------------------------

Replies and Rebuttals

    AAR argues that the Board did not explain why it proposed a 20-day 
period to reply to a petition, rather than a 30-day period as permitted 
under 49 CFR 1147.1(b)(2). (AAR Comments 89); see NPRM, 88 FR at 63914. 
AAR states that a 30-day reply period would allow an incumbent railroad 
to provide a well-informed pleading. (AAR Comments 89.) Similarly, 
Ravnitzky suggests a 30-day period for both replies and rebuttals. 
(Ravnitzky Comments 2); see NPRM, 88 FR at 63915 (proposing a 20-day 
period to file a rebuttal to a reply).
    The proposed 20-day reply period is consistent with the Board's 
general regulations, which permit a party to file a reply to any 
pleading within 20 days after the pleading is filed, unless otherwise 
provided. See 49 CFR 1104.13. As to the rebuttal period, Ravnitzky does 
not explain why a period longer than 20 days is necessary. Consistent 
with the RTP, see 49 U.S.C. 10101(2), (15), the Board also finds that 
the 20-day deadlines will promote more efficient proceedings, reflect 
the guidance in the rule itself regarding the scope of available 
arguments, and will allow the Board to meet its target for issuing an 
order addressing a petition within 90 days of it being filed. See NPRM, 
88 FR at 63908 (proposed Sec.  1145.5(f)). Nevertheless, the Board 
maintains discretion to extend any deadline upon request and for good 
cause. See 49 CFR 1104.7(b).

Alternate Carriers

    Rail carriers urge the Board to clarify the alternate carrier's 
role in a proceeding for a switching prescription under part 1145. 
(See, e.g., AAR Comments 89; BNSF Comments 6-7; UP Comments 14-15.) 
BNSF argues that the Board should require petitioners to engage in pre-
petition consultations with the alternate carrier to establish, before 
a petition is filed, whether switching would be practicable. (BNSF 
Comments 5-6 (proposing a 30-day pre-filing negotiation period).) BNSF 
also states that the Board should clarify that an alternate carrier has 
a right to participate in a formal Board proceeding brought under part 
1145. (Id. at 7.) According to BNSF, such participation by the 
alternate carrier would ensure that a new switching prescription 
improves the petitioner's service without harming service to the 
alternate's existing customers. (Id.)
    Other rail carriers argue that the proposed rule should require 
petitioners to obtain a commitment from the alternate carrier before 
filing a petition. (See, e.g., AAR Comments 10, 90 (stating that the 
commitment should include a design plan, which is central to the 
Board's consideration of issues such as practicability, safety, and 
impact on other shippers).) CN, CSXT, and UP note that part 1147 
requires petitioners to obtain a commitment from an alternate carrier 
and that, in adopting part 1147, the Board stated that an alternate 
carrier's participation was ``essential.'' (CN Comments 22; CSXT 
Comments 37-38; UP Comments 16-17); see Expedited Relief for Serv. 
Inadequacies, 3 S.T.B. at 977, 979 n.19; 49 CFR 1147.1(b)(1)(iii). CSXT 
states that, if cooperation by the alternate is essential under part 
1147, it is essential for nonemergency cases filed under part 1145. 
(CSXT Comments 38.) Similarly, CN argues that the Board's reasoning in 
Expedited Relief for Service Inadequacies that ```[f]orcing a second 
carrier to provide service unwillingly could create safety concerns, 
impair service to its customers, or hurt its finances' . . . . is 
equally valid in the context of the current NPRM.'' (CN Comments 22 
(quoting Expedited Relief for Serv. Inadequacies, 3 S.T.B. at 977).) UP 
also argues that a commitment requirement would incentivize shippers to 
provide alternate rail carriers with sufficient time to evaluate 
impacts of the proposed service and would allow the shipper and 
alternate carrier to negotiate about service and volume. (UP Comments 
17.) Alternatively, UP suggests that the Board clarify that it would 
not require an alternate carrier to provide service if the carrier 
would need to change service plans, hire crews, or assume capital 
investments. (Id.)
    ACD responds that a commitment requirement is unnecessary, as the 
NPRM already requires a switch to be practicable and in the public 
interest, and that a commitment requirement would delay petitions and 
make them more difficult to complete. (ACD Reply 5.) WCTL argues that a 
commitment requirement would essentially require a shipper to contract 
with what may be the only alternate rail carrier available, providing 
the alternate with ``significant leverage over the shipper and . . . 
little incentive to afford substantial value to the aggrieved 
shipper.'' (WCTL Reply 19.) Other rail users suggest that a potential 
alternate carrier may be unwilling to enter into an alternate

[[Page 38683]]

service commitment. (See NGFA Comments 6 (asserting that a lack of 
interest by the potential alternate carrier is a primary reason that 
few cases invoking the emergency service rules under part 1147 have not 
resulted in alternate carrier service); DCPC Reply 7 (stating that, 
absent an opportunity to compete for all or most of a shipper's 
business, an alternate may be unwilling to invest in and commit to 
alternate service).)
    The Board will not adopt the suggestion that petitioners should 
obtain a commitment from an alternate rail carrier before filing a 
petition. However, for the Board to best meet its information needs and 
carry out the regulations, the Board will require that an alternate 
carrier participate in a proceeding under part 1145 by filing a reply 
to a petition. See NPRM, 88 FR at 63914 (proposed Sec.  1145.5(c), 
requiring a petitioner to serve the petition on the alternate carrier); 
\58\ see also Revisions to Reguls. for Expedited Relief for Serv. 
Emergencies, EP 762, slip op. at 11 (STB served Jan. 24, 2024). In such 
a reply, an alternate carrier may raise concerns pertaining to 
practicability. As stated in the NPRM, in determining whether to issue 
an order granting a reciprocal switching prescription, the Board would 
consider any alternate rail carrier's objections that the provision of 
line-haul service to the petitioner would be infeasible or unduly 
hamper the alternate carrier's ability to serve its existing 
customers.\59\ NPRM, 88 FR at 63909. And if an alternate carrier needed 
to make certain investments to accept a petitioner's traffic, the Board 
would consider whether a longer minimum term for the prescription was 
necessary for the prescription to be practical. Id. at 63910. To ensure 
carriers have necessary information for their replies, the Board will 
amend its proposal to require the petitioner to identify the requested 
duration of the prescription of a reciprocal switching agreement and 
provide supporting evidence for any request for a prescription longer 
than the minimum term specified in Sec.  1145.6(c).
---------------------------------------------------------------------------

    \58\ Consistent with its approach in Docket No. EP 762, 
Revisions to Regulations for Expedited Relief for Service 
Emergencies, the Board will require a petition to identify at least 
one possible rail carrier to provide alternative service. Given that 
a petitioner may have two or more options if it were to receive a 
reciprocal switching agreement prescription, the Board will amend 
the proposal to clarify that a petitioner can identify, and must 
serve the petition on, one or more alternate carriers, and each 
identified alternate carrier will be required to reply to the 
petition.
    \59\ As stated in the NPRM, the objecting carrier would have the 
burden of proof of establishing infeasibility or undue impairment. 
NPRM, 88 FR at 63909. The final regulatory text has been modified to 
clarify that the objecting rail carrier bears the burden of proving 
infeasibility or undue impairment. See 49 CFR 1145.5(d).
---------------------------------------------------------------------------

    The procedures in this rule allow an alternate carrier to 
meaningfully participate in a Board proceeding while reducing barriers 
to petitioners. Additionally, requiring an alternate carrier to file a 
reply to a petition will allow the Board to better assess any concerns 
relating to practicability and to weigh those concerns against the 
public interest. In short, the Board rejects rail carriers' assertions 
that, in the absence of a commitment requirement, an alternate carrier 
would be forced to offer line-haul service where there are legitimate 
practicability concerns that would unduly impair the alternate 
carrier's operations. Finally, requiring a commitment from the 
alternate carrier would contradict the design of part 1145, which seeks 
to allow the successful petitioner to choose between available rail 
carriers as the petitioner sees fit.

Shippers and Receivers

    VPA, while noting that the Board ``has appropriately focused its 
proposed rulemaking on shippers and receivers of freight,'' 
nevertheless argues that the Board should ``modestly expand the scope'' 
of the entities eligible to seek a reciprocal switching prescription 
``to include ports and port facilities.'' (VPA Comments 5.) VPA asserts 
that a port, in effect, is the originator or terminator of traffic 
because every rail movement involving a port either starts or ends at 
the port, and that ports have a need for reliable, predictable, and 
efficient rail service similar to that of shippers and receivers. (Id. 
at 6.) VPA also argues that poor rail service creates operational 
issues at ports, as was shown by the problems experienced recently at 
West Coast ports. (Id. at 6-7.) VPA asserts that any portion of a port 
facility that is served by only one Class I rail carrier should be 
eligible for relief; this, VPA argues, would be consistent with the 
Board's definition of ``practical physical access'' and the proposed 
rule's coverage of a shipper's traffic in a single eligible lane even 
if the shipper enjoys practical physical access to multiple carriers 
with respect to other lanes. (Id. at 7-8.)
    AAR opposes VPA's request to expand eligibility to ports, arguing 
that shippers and receivers ``are the entities with the essential 
economic and operational relationships with the carrier,'' and that 
expanding eligibility ``would raise numerous questions about how the 
entities with those economic and operational relationships would 
properly be heard'' and would ``pose complicated issues related to data 
confidentiality.'' (AAR Reply 66 n.21.)
    While it may be, as VPA suggests, that port facilities can bear 
certain similarities to shippers and receivers from an operational 
perspective, it is also true that they serve a distinct function as 
links in the national and international supply chain. (See VPA Comments 
5 (noting that The Port of Virginia ``works hard to be an important 
part of the national intermodal system for the benefit of the shippers, 
the economy of Virginia, and the nation.'').) And the Board is 
sensitive to the concerns AAR raises regarding the economic and 
operational relationships between railroads and the shippers and 
receivers who are their ultimate customers and users of the supply 
chain of which ports are a part. Moreover, VPA has not identified any 
particular reason why it would not be equally effective for the 
shipper/receiver to petition, or how a port would implement a switch, 
as it is not a purchaser of common carrier rail service. Therefore, 
based on the comments received, the current record does not support 
modifying the rule to expand eligibility to ports or portions thereof. 
Because the Board is not modifying the rule to include ports as 
eligible petitioners, the other changes VPA requests need not be 
addressed, as they would directly flow from those modifications. (See 
id. at 8-12.)
    DCPC raises whether a group of shippers in the same terminal area 
could file for a prescription of a reciprocal switching agreement, 
giving as an example a group of shippers located in an industrial park. 
(DCPC Comments 13.) DCPC asserts that groups of shippers served by the 
same incumbent railroad in the same terminal area that demonstrate 
inadequate service according to the established standards should be 
allowed to seek a prescription. (Id.) While the Board does not 
foreclose the possibility that a group of similarly situated shippers 
could jointly seek a prescription, it need not attempt to define in the 
abstract a specific set of circumstances, if one exists, wherein 
individual shippers each would qualify for the same relief in such a 
similar way that a joint petition would be appropriate. The Board 
therefore will consider the suitability of a joint petition on a case-
by-case basis in the event such a petition is filed.
    AAR urges the Board to clarify that ``if the party with the 
economic relationship to the carriers [e.g., payor of freight] is not 
the same as the party with the operational relationship to the 
switching, they both need to be before the Board as both interests will 
be

[[Page 38684]]

affected.'' (AAR Comments 91.) The Board disagrees. The real parties in 
interest for these regulations are the shippers and receivers that have 
directly experienced the service issue. Moreover, considering the 
business relationship between payors of freight and the shipper or 
receiver (to the extent those entities are different), and the costs to 
a shipper or receiver of bringing a case, the Board notes that 
petitioners would have an incentive to communicate and coordinate as 
necessary with the payor of freight and to avoid filing cases in which 
the petitioner could not pursue a switching arrangement from an 
economic perspective. Based on the record here, the Board sees little 
value in requiring another entity beyond those parties to also join in 
a proceeding.

Short Lines, Passenger Rail, and Commuter Rail

    Under proposed Sec.  1145.5(c), a petitioner would be required to 
serve the petition for prescription of a reciprocal switching agreement 
on the incumbent rail carrier, the alternate rail carrier, and FRA. 
Several commenters encourage the Board to recognize that other entities 
may be affected by a prescription and to require that the petition 
should be served on them also.
    AAR argues that shippers should serve notice on short lines and 
passenger railroads to prevent complications, and that those parties 
should be permitted to submit comments on a petition if needed. (AAR 
Reply 65-66.) Similarly, ASLRRA argues that short lines should be 
notified of switches impacting their traffic--so a short line railroad 
scheduled to receive a shipment subject to a reciprocal switch 
prescription earlier in its journey should be notified of the petition 
as well. (ASLRRA Comments 1, 7.) CSXT supports ASLRRA's proposal to 
notify short lines of petitions that could affect ``joint line traffic 
handled by that short line.'' (CSXT Reply 14.) CSXT also argues that 
pre-Staggers standards for joint use of terminal facilities, which 
Congress ``imported'' when adopting section 11102(c), made clear that a 
determination as to whether a prescribed reciprocal switching is in the 
public interest requires consideration of the relief's impact on other 
parties. (Id. at 13.)
    CRC asks the Board to add a definition of ``Potentially Affected 
Rail Carrier'' that would include any rail carrier--freight or 
passenger--that operates on track shared with one of the rail carrier 
parties to a prescribed reciprocal switching agreement, and to amend 
Sec.  1145.5 to require that the petition be served on potentially 
affected rail carriers. (CRC Comments 7-8.) CSXT supports CRC's 
suggestion about notifying affected passenger railroads. (CSXT Reply 
14.) Metrolink asks that commuter rail and intercity passenger rail 
entities be given notice of a proceeding and the ability to comment. 
(Metrolink Comments 1.) Within a case, Metrolink also asks that the 
Board consider impacts on passenger rail and those entities' shared-use 
agreements with Class I carriers. (Id. at 1-2.)
    With respect to commenter requests for post-prescription 
notifications, the Board notes that voluntary reciprocal switching 
arrangements involving a Class I rail carrier are reflected on that 
carrier's public website,\60\ and other rail carriers could observe 
that a voluntary reciprocal switching agreement is in place. Like a 
voluntary reciprocal switching arrangement, a prescribed reciprocal 
switching agreement also would be reflected on the carrier's website 
and observable; moreover, the fact that it was prescribed would be 
available on the Board's website. See also Sec.  1145.6(d), as amended 
below. From an operations perspective, given the definitions and 
protections in this rule, there are substantial similarities between a 
voluntary reciprocal switching arrangement and one that is prescribed 
and their resulting impacts. As such, the record does not support 
requiring special notice to other rail carriers of either prescribed 
reciprocal switching agreements or the filing of a petition. 
Furthermore, a shipper or receiver may not be aware of all the rail 
carriers that use a shared track; it could be burdensome or nearly 
impossible for the petitioner to ascertain all possible rail carriers 
using that track because they do not have access to the applicable 
agreements. The Board also notes that carriers are free to notify any 
affected entity and consult them in formulating their replies, 
including in considering or addressing practicability. For those 
reasons, the Board declines to expand Sec.  1145.5(c) to require notice 
to entities other than the incumbent carrier, the alternate carrier, 
and FRA. Should there be concerns with how a prescription could affect 
other rail carriers, the parties should raise and address them in their 
pleadings.
---------------------------------------------------------------------------

    \60\ See, e.g., https://c02.my.uprr.com/scs/index.html#/external/search (for UP's website) and www.bnsf.com/bnsf.was/SCRSWeb/SCRSCentralController (for BNSF's website).
---------------------------------------------------------------------------

Disclosure Under 49 CFR Part 1300

    Proposed Sec.  1145.6(d) provides, in part, that upon the Board's 
prescription of a reciprocal switching agreement, the affected rail 
carriers must ``include, in the appropriate disclosure under 49 CFR 
part 1300, the location of the petitioner's facility, indicating that 
the location is open to reciprocal switching, and the applicable terms 
and price.'' NPRM, 88 FR at 63915. AAR comments that this phrasing is 
ambiguous and could result in confusion about the proper disclosure, as 
``information about a switching agreement is not itself subject to 
disclosure under 49 CFR part 1300.'' (AAR Comments 95 (asserting that 
no provision in part 1300 describes such carrier-to-carrier agreements 
and that terms of switching agreements are generally not disclosed to 
the public).) AAR also asserts that agreements may include information 
about a shipper's specific lanes, which could raise confidentiality 
concerns for the shipper. (Id.) AAR argues that, in this context, the 
only relevant disclosure under part 1300 would be the alternate 
carrier's line-haul rate and terms for a movement that utilizes the 
switching services of the incumbent carrier. AAR suggests that ``[t]he 
Board may wish to refine 1145.6(d) to avoid confusion.'' (Id.)
    This provision was intended to ensure a measure of public notice in 
the ordinary course of business (apart from the Board's prescription 
proceeding itself) that a particular location has become open to 
reciprocal switching. The Board acknowledges AAR's concern, however, 
that the NPRM's reference to ``the appropriate disclosure under Part 
1300'' is ambiguous and possibly confusing. For that reason, the Board 
is clarifying this provision to instead require that, in the event of a 
prescription, the incumbent carrier promptly amend its switching 
publication(s) \61\ as appropriate to reflect the availability of 
reciprocal switching under the prescription.
---------------------------------------------------------------------------

    \61\ Here, the term ``switching publication'' refers to the 
instrument used by a railroad to document for its customers and 
other railroads which customers are covered by a reciprocal 
switching agreement and the applicable terms.
---------------------------------------------------------------------------

Prioritization

    USDA suggests that the Board develop a ``ranking component'' to 
prioritize proceedings under part 1145 based on the severity of the 
performance lapses and ``help expedite extraordinary cases.'' (USDA 
Comments 7.) The Board appreciates suggestions for potential ways to 
enhance the efficiency of Board proceedings. However, the type of 
system described by USDA would itself be time-consuming (and, in all 
likelihood, complicated and contentious) to develop. Moreover, the 
Board is not anticipating a high volume

[[Page 38685]]

of cases under part 1145 each year. See Paperwork Reduction Act 
section. The Board will defer development of any prioritization 
approach and will devote its resources at this time to expeditiously 
resolving part 1145 proceedings as they are filed.

Affirmative Defenses

    The Board explained in the NPRM that an incumbent rail carrier 
shall be deemed not to fail a performance standard if the carrier 
demonstrates that its apparent failure to meet a performance standard 
was caused by conditions that would qualify as an affirmative defense. 
88 FR at 63908. If the incumbent carrier makes such a showing, the 
Board would not prescribe a reciprocal switching agreement.\62\ 88 FR 
at 63908. The Board set forth four affirmative defenses in proposed 
Sec.  1145.3: (1) extraordinary circumstances beyond a carrier's 
control; (2) surprise surge in petitioner's traffic; (3) highly unusual 
shipment patterns; and (4) delays caused by dispatching choices of a 
third party. Id. at 63908-09. The Board further noted that defenses 
that do not fit within those categories would be evaluated on a case-
by-case basis. Id. at 63908. The Board also sought comment on what 
other affirmative defenses, if any, should be specified in the final 
rule. Id.
---------------------------------------------------------------------------

    \62\ If the incumbent carrier establishes that its failure to 
meet a performance standard was excused by an affirmative defense, 
the Board could in its discretion, see 49 CFR 1104.11, allow the 
petitioner to amend its petition to address a 12-week period of 
service that was unaffected by the affirmative defense.
---------------------------------------------------------------------------

    Several railroads and AAR urge the Board to consider all relevant 
evidence that may bear on the reasons for the failure to satisfy the 
relevant performance standard. The carriers also assert that the 
incumbent railroad must have the opportunity to put the metric-based 
showing into case-specific context, whereby the incumbent railroad 
would try to establish that there was no service inadequacy. (AAR 
Comments 75; CSXT Comments 32; NSR Comments 7; CN Comments 25; CPKC 
Reply 27; NSR Reply 19-21 (proposing language that would allow for 
``any defense relevant to whether there is a service inadequacy for 
which there is actual necessity or compelling reason for a prescribed 
switching agreement''); CN Reply 12 (same).) Some carriers and AAR also 
assert that the proposed affirmative defenses are highly restrictive, 
reasoning that service quality may be influenced by a variety of 
factors that are varied and difficult to predict. (AAR Comments 73-74; 
see also CSXT Comments 3 n.3, 9.) They urge the Board to broadly 
interpret the specified defenses to account for circumstances that were 
beyond the rail carrier's control or for which the rail carrier could 
not reasonably prepare. (AAR Comments 80-85; see, e.g., AAR Comments 
82-84 (urging an interpretation of ``surprise surge'' to include spikes 
in demand of shippers other than the petitioner); see also CSXT 
Comments 25 n.21.)
    Some railroads and AAR propose additional affirmative defenses that 
would address situations they contend are likely to recur: the 
incumbent carrier's curing of the potential service inadequacy during 
the course of the proceeding, (AAR Comments 75; UP Comments 14); 
scheduled maintenance and capital improvement projects undertaken by 
the incumbent, (AAR Comments 75-76; CN Comments 24); conduct of third 
parties, including action or inaction by the shipper that led to 
failure to meet a performance standard, (AAR Comments 76-77; BNSF 
Comments 10-11); \63\ valid embargoes, (AAR Comments 77-78); effective 
intermodal competition, (AAR Comments 78-79); and alternate carrier 
objections, (AAR Comments 79-80). In reply, the Coalition Associations 
state that they do not oppose the affirmative defenses proposed by AAR 
pertaining to third-party conduct or scheduled maintenance and capital 
improvements, but they oppose the defenses regarding cured service 
inadequacies, valid embargoes, and intermodal competition. (Coal. 
Ass'ns Reply 22-23.) PCA opposes AAR's proposed defenses, asserting 
that they are without legal support and impose barriers in obtaining 
relief. (PCA Reply 7.)
---------------------------------------------------------------------------

    \63\ In response to the Board's request for comment as to 
whether the definition of ``affiliated companies'' should include 
third-party agents of Class I carriers, see NPRM, 88 FR at 63902 
n.9, AAR asserts that the definition should not include third 
parties, as it might include a Class II or Class III rail carrier 
serving as a handling carrier at the customer location, thus 
potentially assigning responsibility to a Class I carrier for 
failures to meet a metric that were caused by a third party. (AAR 
Comments 76-77.)
---------------------------------------------------------------------------

    AFPM generally supports delineating a limited number of affirmative 
defenses but notes that these should be clearly defined and understood, 
as ambiguous affirmative defenses could weaken the usefulness of this 
proposal. (AFPM Comment 15.) AFPM further suggests that the ``surprise 
surge'' and ``highly unusual shipment patterns'' affirmative defenses 
are redundant and could potentially be combined. (Id.)
    The Board will adopt one of the additional affirmative defenses 
proposed by commenters as part of the final rule. As noted above, the 
Board already proposed to include a defense for delays caused by 
dispatching choices of a third party. The suggestion to include, as an 
affirmative defense, other conduct by third parties is consistent with 
the reasoning for including the dispatching-related defense, to the 
extent that conduct is outside the control of the incumbent carrier. 
See NPRM, 88 FR at 63908-09; (see also AAR Comments 76-77.) As such, 
the Board will adopt a separate affirmative defense for third-party 
conduct that is outside the reasonable control of the incumbent 
carrier. The Board notes that several shipper groups do not oppose 
including this defense. (Coal. Ass'ns Reply 22-23.)
    To be clear, the affirmative defense for third-party conduct will 
be narrowly construed to prevent this or any defense from being used as 
a frivolous tactic to unduly prolong or delay, or unnecessarily 
increase the cost of the proceeding so as to deter the current or 
future petitioners from bringing proceedings under this rule. This 
third-party conduct affirmative defense will include only conduct that 
had a direct, cognizable impact on the incumbent carrier's meeting the 
applicable performance standard, and that was outside the reasonable 
control of the incumbent carrier. To the extent that the impact of the 
conduct could not have been reasonably prevented, the defense will not 
apply if the incumbent carrier failed to take reasonable steps to 
mitigate the impact of the third-party conduct. To the extent the 
conduct could have been reasonably prevented, the defense will not 
apply if the incumbent carrier failed to take reasonable steps to 
prevent and mitigate the impact of the third-party conduct. As with the 
other affirmative defenses, the burden will be on the incumbent carrier 
to prove each of these elements.
    The Board declines to adopt the other additional affirmative 
defenses proposed by commenters. The Board is adopting a number of 
specific affirmative defenses, designed to cover scenarios that should 
be considered when evaluating whether a reciprocal switching agreement 
should be prescribed and the Board will also, under proposed Sec.  
1145.3, consider on a case-by-case basis affirmative defenses that are 
not specified in the rule. Though the Board recognizes the variability 
of rail customers, many of the other suggested defenses undermine the 
underlying purposes of the rule.
    As a general matter, the Board's specified affirmative defenses are 
focused on reasons that a carrier's service might be below a metric 
during the relevant 12-week period. The Board

[[Page 38686]]

sees less value in potential affirmative defenses that instead focus on 
whether there is a service inadequacy with certain largely undefined 
effects based on allegations of a petitioner's particularized service 
needs or whether the carrier cured the cause of its failure to meet a 
performance standard. These types of considerations would not inform 
why the carrier could not meet the relevant performance standard nor 
would they appear to further the underlying purposes of the rule. 
Consideration of the presence or absence of intermodal transportation 
options and/or market dominance is likely to raise similar issues. See 
Legal Framework. As discussed above, part 1145 is designed to provide a 
shipper with an alternative rail option if the incumbent railroad's 
performance falls below a defined standard. The rule is not punitive; 
rather, it mainly serves to introduce an additional rail carrier as a 
means to provide the appropriate level of service while more broadly 
incentivizing rail carriers to avoid the drops in network performance 
that the carriers themselves have recognized as unacceptable. See Legal 
Framework; see also NPRM, 88 FR at 63900-01. Finally, the Board 
declines to treat as an affirmative defense information from the 
alternate carrier about the possible impact of the proposed reciprocal 
switching agreement on the alternate carrier's operations and 
economics. (AAR Comments 78-79.) Related concerns could be raised under 
the provisions in part 1145 on impracticability, including operational 
feasibility and undue impairment. See 49 CFR 1145.6(b).
    The Board clarifies that the ``extraordinary circumstances'' 
defense in Sec.  1145.3(a) would not be interpreted broadly to include 
any event beyond a railroad's control, as AAR suggests. (See AAR 
Comments 81.) Rather, as indicated in the NPRM, the extraordinary 
circumstances defense will be narrowly construed as applying to the 
type of events that would qualify a railroad for an emergency trackage 
rights exemption, including natural disasters, severe weather events, 
flooding, accidents, derailments, and washouts, though not necessarily 
resulting in a track outage. See NPRM, 88 FR at 63908, 49 CFR 
1180.2(d)(9).
    The Board appreciates the carriers' suggestion to include 
``scheduled maintenance and capital improvement projects'' as an 
affirmative defense and recognizes that several shipper interests do 
not oppose such an addition, but the Board finds that such instances 
are better addressed on a case-by-case basis. The Board does not intend 
for the rule to disincentivize capital investment and in fact expects 
that this rule will help promote investments necessary for adequate 
service. However, the Board observes that the nature of ``scheduled'' 
maintenance and capital improvement projects suggests that carriers 
have a degree of control over their execution, and the Board expects 
carriers to exercise that control with reasonable consideration of 
shippers' service levels.
    Lastly, the Board clarifies that the affirmative defense pertaining 
to a surprise surge in a petitioner's traffic is distinct from the 
affirmative defense regarding a petitioner's highly unusual shipment 
patterns. For the former, a surprise surge is defined by rule as an 
increase in traffic by 20% or more during the 12-week period in 
question (compared to the 12 weeks prior for non-seasonal traffic or 
the same 12-week period during the previous year for seasonal traffic), 
without timely advance notification from the shipper. See Sec.  
1145.3(b). In contrast, a shipment pattern might be considered highly 
unusual if a shipper projected traffic of 120 cars in a month and 30 
cars per week, but due to a plant outage for three weeks, the shipper 
then requests shipment of 120 cars in a single week. See Sec.  
1145.3(c). Thus, the former would apply to an unexpected increase in 
traffic of 20% or more over the 12-week period in question, whereas the 
latter would apply to other types of atypical shipping patterns 
involving a single week within the 12-week period.

Compensation

    The NPRM sought comment on two methodologies that the Board could 
use to set compensation under a reciprocal switching agreement under 
proposed part 1145, in the event that the affected rail carriers failed 
to reach agreement on compensation within a reasonable time, as 
contemplated in 49 U.S.C. 11102(c). Both proposed methodologies would 
establish a fee based on the incumbent carrier's cost of performing 
services under the reciprocal switching agreement, as determined by the 
carrier's embedded and variable costs of providing that service. NPRM, 
88 FR at 63909.

    Cost of Service. One proposed methodology is to set reciprocal 
switching fees based on the cost-of-service approach that has been 
used in past cases on switching fees. See, e.g., Increased Switching 
Charges at Kan. City, Mo.-Kan., 344 I.C.C. 62 (1972). This approach 
could either use the ICC Terminal Form F, 9-64, Formula for Use in 
Determining Rail Terminal Freight Service Costs (Sept. 1964), or the 
Board's Uniform Rail Costing System (URCS) to develop the cost of 
service.
    SSW Compensation. The other proposed methodology would adapt the 
Board's ``SSW Compensation'' methodology to reciprocal switching 
fees.\64\ The Board noted in the NPRM that, while SSW Compensation 
is used primarily in trackage rights cases, where one rail carrier 
operates over another rail carrier's lines, many of the principles 
that inform the methodology would apply in the reciprocal switching 
context as well.
---------------------------------------------------------------------------

    \64\ The SSW Compensation methodology, which has been used by 
the Board for setting trackage rights compensation, involves 
calculating the sum of three elements: (1) the variable cost 
incurred by the owning carrier due to the tenant carrier's 
operations over the owning carrier's track; (2) the tenant carrier's 
usage-proportionate share of the track's maintenance and operation 
expenses; and (3) an interest rental component designed to 
compensate the owning carrier for the tenant carrier's use of its 
capital dedicated to the track. See St. Louis SW Ry.--Trackage Rts. 
over Mo. Pac. R.R.--Kan. City to St. Louis, 1 I.C.C.2d 776 (1984), 4 
I.C.C.2d 668 (1987), 5 I.C.C.2d 525 (1989) (SSW Compensation III), 8 
I.C.C.2d 80 (1991), and 8 I.C.C.2d 213 (1991), aff'd sub nom. Union 
Pac. Corp. v. ICC, 978 F.2d 745 (D.C. Cir. 1992), cert. denied, 508 
U.S. 951 (1993).

NPRM, 88 FR at 63910.
    AAR and NSR assert that, as under part 1147, the Board should take 
a case-by-case approach to setting fees under part 1145. AAR and NSR 
reason that the Board plays a limited role in setting compensation 
under section 11102(c) and that cases in which the Board would need to 
set compensation would be rare. (NSR Comments 15, 17; AAR Comments 92; 
see also CSXT Comments 52.) AAR also suggests that the methodologies 
proposed in the NPRM would be insufficient to achieve appropriate 
compensation. AAR contends that compensation based on cost of service 
would fail to account for differential pricing and revenue adequacy, 
including the ability of rail carriers to make investments necessary to 
meet demand. (AAR Comments 92-93 (citing Intramodal Rail Competition, 1 
I.C.C.2d 822, 835 (1985)); see also NSR Comments 15-16.) CSXT adds that 
neither of the proposed methodologies would enable carriers to recover 
their full fixed and common costs. (CSXT Comments 52-53.) AAR also 
asserts that the Board should analyze the impact of part 1145 on 
revenue adequacy before deciding how to set compensation under part 
1145. (AAR Comments 92.) With respect to the SSW Compensation 
methodology, AAR and NSR assert that the NPRM provides no clear 
explanation for how a methodology that is used to develop trackage 
rights fees could be used to calculate a reciprocal switching rate. 
(AAR Comments 94; NSR Comments 16-17.)
    The Coalition Associations support the Board's use of the SSW 
Compensation methodology, (Coal. Ass'ns Comments 59), and suggest that

[[Page 38687]]

the SSW Compensation methodology could be adapted for setting 
reciprocal switching fees as follows: To develop the incumbent 
carrier's variable costs of transporting the petitioner's traffic 
between the origin or destination and the point of transfer with the 
alternate carrier, the Board would use the incumbent carrier's URCS 
Phase III model. (Id., V.S. Crowley/Fapp 9.) To develop the incumbent 
carrier's fixed costs of providing the service in question, the Board 
would use either URCS or a modified STB Average Total Cost (ATC) 
revenue division methodology. (Id.) Finally, under the Coalition 
Associations' approach, the interest rental component would be based on 
system average return on investment per car-mile, multiplied by the 
number of miles that were involved in the reciprocal switching 
movement. (Id., V.S. Crowley/Fapp 17-20.)
    AAR disagrees with the Coalition Associations' proposal because it 
attempts to set fees based on the incumbent carrier's fully allocated 
costs, an approach that AAR claims contradicts the Board's precedent. 
(AAR Reply 70.) According to AAR, approaches that are based on fully 
allocated costs of service inappropriately use depreciated historic 
costs rather than forward-looking costs. AAR also argues that these 
approaches fail to account for revenue adequacy and the ability to 
engage in demand-based differential pricing. (Id. at 70-71.)
    LyondellBasell stresses the need for an efficient regulatory 
process to set a reciprocal switching fee, noting that, while the 
regulatory process to set compensation is underway, a petitioner that 
has successfully obtained a reciprocal switching prescription would 
bear a provisional fee either as a pass through or as part of the 
alternate carrier's rate for line-haul service. (LyondellBasell 
Comments 3-4.) According to LyondellBasell, this outcome would 
discourage use of the reciprocal switching agreement. (Id. at 4.) 
LyondellBasell further asserts that the incumbent carrier would have an 
incentive to demand an excessive reciprocal switching fee as an 
indirect means to retain the petitioner's traffic and to apply 
differential pricing to that traffic. (Id. at 3.)
    PCA asks the Board to set reciprocal switching fees at levels that 
facilitate effective, aggressive competition and improved service. (PCA 
Comments 14-15.) PCA also requests that the final rule incorporate the 
NPRM's finding that it would be inappropriate to use a methodology that 
would allow the incumbent carrier to recover any loss in profits that 
the incumbent carrier incurred as a result of losing the petitioner's 
line-haul service to the alternate carrier. (Id. at 15.)
    Ravnitzky proposes that, unless otherwise agreed by the parties or 
determined by the Board based on compelling evidence, the Board should 
establish a default reciprocal switching fee based on the average cost 
of providing switching service in similar circumstances. (Ravnitzky 
Comments 2.)
    The Coalition Associations urge the Board to clarify that, even 
when the carriers agree to a reciprocal switching fee, the petitioner 
may challenge that fee before the Board using the same methodology that 
the Board adopts for setting reciprocal switching fees itself. (Coal. 
Ass'ns Comments 60.) AAR replies that there is no legal basis for 
allowing the petitioner to challenge a reciprocal switching fee that 
was mutually agreed upon by the carriers. (AAR Reply 69.) AAR reasons 
that the Board has no role in establishing a reciprocal switching fee 
unless the carriers fail to reach agreement within a reasonable period. 
(Id.) AAR further reasons that shippers may not challenge a division of 
rates between carriers. (Id.)
    The Board encourages rail carriers that are party to a Board-
prescribed reciprocal switching agreement to reach agreement on 
compensation within a reasonable period, as contemplated in section 
11102(c). The Board has concluded that, if the carriers fail to do so, 
it is appropriate to determine the compensation methodology on a case-
by-case basis because the relevant circumstances in a particular case 
might warrant the use of one methodology over the other.
    While the Board thus declines to choose a single methodology by 
rule, the Board expects that, in individual cases, the two proposed 
methodologies will be considered in establishing compensation. As 
stated in the NPRM, reciprocal switching fees that allow the incumbent 
carrier to recover its cost of service are consistent with longstanding 
practice.\65\ While the Board has accounted for differential pricing in 
rate reasonableness proceedings, the Board has consistently viewed it 
as appropriate to set reciprocal switching fees based on the direct 
cost of providing service and not include any lost profits from lost 
line-haul service. See, e.g., CSX Corp.--Control & Operating Leases/
Agreements--Conrail Inc., FD 33388, slip op. at 13 (STB served May 20, 
1999) (considering the actual cost of providing a switching service in 
approving a switching fee). AAR's assertion that reciprocal switching 
fees should also account for differential pricing appears to be a 
variation on AAR's assertion that fees for reciprocal switching should 
account for lost profits, an assertion that the Board fully rejects. 
See NPRM, 88 FR at 63909. To compensate the incumbent carrier for that 
loss would seem to defeat the purpose of introducing a competing 
carrier and associated legislative objectives and could be tantamount 
to rewarding the incumbent carrier for inadequate service. See id.
---------------------------------------------------------------------------

    \65\ NPRM, 88 FR at 63909; see Increased Switching Charges at 
Kan. City, Mo., 356 I.C.C. 887, 890 (1977) (``[T]he cost of 
performing the service is the most important factor in determining 
the justness and reasonableness of a proposed switching charge.''); 
Intramodal Rail Competition, 1 I.C.C.2d 822, 834 (1985) (noting the 
``increasing trend for carriers to price each element of their 
services, including switching, in accordance with its cost''). In 
Intramodal Rail Competition, the ICC stated that compensation for 
reciprocal switching would be determined on a case-by-case basis. 
Id., 1 I.C.C.2d at 835. The ICC declined to adopt a proposed 
methodology that set a price ceiling for reciprocal switch rates 
because the ICC, in considering the agency's prior costing 
methodology (Rail Form A), assessed at that time that it did not 
have ``a satisfactory accounting method of allocating the 
substantial joint and common costs in the rail industry.'' Id.
---------------------------------------------------------------------------

    With respect to the SSW Compensation methodology, the Board 
continues to find that, in some cases, this might inform the Board's 
determination of the appropriate compensation. The SSW Compensation 
methodology is a flexible approach that can be (and has been) modified 
to account for the particular facts of each case, including 
difficulties in valuation, various types of costs, and the specific 
nature and extent of the line's use. See, e.g., CSX Corp.--Control & 
Operating Leases/Agreements--Conrail Inc., 3 S.T.B. 196, 344-45 (1998); 
Ark. & Mo. R.R. v. Mo. Pac. R.R., 6 I.C.C.2d 619, 622-27 (1990), aff'd 
sub nom. Mo. Pac. R.R. v. ICC, 23 F.3d 531 (D.C. Cir. 1994); SSW 
Compensation III, 5 I.C.C.2d at 529. This methodology therefore might 
be useful when there is a significant difference between the incumbent 
carrier's historic costs and the value of the facilities that would be 
used for reciprocal switching. The Board remains open to evidence and 
argument on these points as they apply to a particular case. The Board 
notes that the facilities that are used to perform reciprocal switching 
within a terminal area, the value of which might appropriately be 
considered under the SSW Compensation methodology, are far more limited 
in geographic scope compared to the facilities that would be used to 
provide the line-haul. However, the Board reiterates that it would be 
inappropriate to set reciprocal switching fees to allow the incumbent 
carrier to

[[Page 38688]]

recover any lost profits associated with line-haul service to the 
petitioner, as discussed above. See NPRM, 88 FR at 63909.
    The Board declines to address the Coalition Associations' request 
(1) to clarify that a petitioner could challenge a reciprocal switching 
fee that was mutually agreed upon between the carriers, and (2) to 
identify what methodology the Board would use in such a case. The 
associated issues are outside the scope of this proceeding.

Duration and Termination

Duration

    The Board proposed that a prescribed agreement under part 1145 
would ordinarily have a term of two years from the date on which 
reciprocal switching operations thereunder began and could have a term 
of up to four years if the petitioner demonstrated that the longer 
minimum term was necessary for the prescription to be practical given 
the petitioner's or alternate carrier's legitimate business needs. 
NPRM, 88 FR at 63910. The Board stated that it was essential that the 
duration of a prescribed agreement be ``sufficiently long to make 
alternative service feasible and reasonably attractive to potential 
alternate carriers.'' Id. The Board sought comment on whether a minimum 
term longer than two years and/or a maximum term longer than four years 
is necessary to make the proposed rule practicable and effective. Id.
    AAR and some rail carriers assert that a two-year term would be 
disproportionate to the 12 weeks of service that constituted the basis 
for the order. (AAR Comments 96; CN Comments 26; CSXT Comments 49.) AAR 
and CSXT state that the Board should determine the initial duration of 
a prescribed switching agreement on a case-by-case basis and tailor the 
remedy to the service problem to ensure that the term corresponds to 
the actual need that the shipper has shown. (AAR Comments 97; CSXT 
Comments 50.) CN asserts that a lengthy prescription term with no 
option for earlier termination would be contrary to the public interest 
of addressing a ``service inadequacy at present'' and may 
disincentivize investment in the rail network because of increased 
uncertainty regarding volumes, density, potential impact on revenues, 
and return on investment. (CN Comments 26.)
    AAR asserts that one year is sufficient to make alternative service 
attractive and feasible to potential alternate carriers, as an 
attractive alternate would most likely involve integrating the 
shipper's lane into the alternate carrier's existing traffic, using 
existing assets. (AAR Comments 97-98; see also CN Comments 26-27 
(proposing a presumption that a switching order would be one year in 
duration).) BNSF argues that, where a switch is practicable, a two-year 
duration is sufficient to meet the Board's goal. (BNSF Comments 15.)
    AAR asserts that the Board should make clear that authorizing a 
term longer than two years would apply only in cases where such a term 
is absolutely necessary to remedy the service inadequacy shown, such as 
situations involving a particularly persistent service failure that 
would be expected to last for a long time. (AAR Comments 98-99.) BNSF 
contends that any situation where it would take two years (or more) for 
an alternate carrier to make service feasible cannot, by definition, 
satisfy the statutory requirement that switching be practicable. (BNSF 
Comments 15.)
    Shipper interests assert that a five-year minimum term is necessary 
to provide sufficient incentive for an alternate carrier to make the 
investment to implement the switch. (Coal. Ass'ns Comments 47 (also 
proposing a ten-year maximum term); DCPC Comments 11 (same); EMA 
Comments 3; NSSGA Comments 4; PRFBA Comments 10; see also AFPM Comments 
16 (supporting a two-year minimum term but removing any maximum term so 
that the prescription remains in place until the service inadequacy is 
resolved); Ravnitzky Comments 2 (proposing a four-year term).)
    The Coalition Associations argue that, in considering the minimum 
term, the Board should look to the duration of rail contracts for 
competitive traffic, which may be longer than three years, as the 
carrier has an incentive to ``lock up'' competitive traffic for an 
extended period. (Coal. Ass'ns Comments 48.) The Coalition Associations 
further note that a longer period may be required for the alternate 
carrier to recover its investment in competitive rail traffic, as such 
traffic ``tends to have lower rates.'' (Id.) The Coalition Associations 
also assert that, given the narrow scope of the rule, lower volumes of 
traffic would likely move under the prescription, thus requiring a 
longer term to justify an alternate carrier's investment of time and 
resources. (Id.) DCPC asserts that the prescription duration should be 
based on the complexity of the switching operation and the financial 
commitment required on behalf of the alternate carrier. (DCPC Comments 
11.)
    The Board will modify the proposed rule such that, in prescribing a 
reciprocal switching agreement, the Board shall prescribe a minimum 
term of three years and may prescribe a longer term of service up to 
five years, depending on what is necessary for the prescription to be 
practical given the petitioner's or alternate carrier's legitimate 
business needs.\66\ As noted by the Coalition Associations, the 
duration of rail contracts for competitive traffic provides useful 
guidance as to the term of an arrangement that would make alternative 
rail service feasible and attractive to a potential alternate rail 
carrier. (Coal. Ass'ns Comments 48.) To this end, the Board finds that 
a term of three-to-five years would be an adequate duration to 
facilitate a commercial rail option through prescription of a 
reciprocal switching arrangement. (See Coal. Ass'ns Comments 48 (noting 
that contracts for competitive rail service may be longer than one to 
three years); Coal. Ass'ns Reply 24 (asserting that ``the alternate 
railroad must have the opportunity to compete for and serve the 
eligible traffic for a typical contract cycle of at least two years and 
potentially longer depending upon the volume of traffic and any 
investment requirements''); see also DCPC Comments 11 (proposing a 
five-year minimum term); EMA Comments 3 (same); NSSGA Comments 4 
(same); PRFBA Comments 10 (same); Ravnitzky Comments 2 (proposing a 
four-year prescription term).) At the same time, the Board does not 
conclude that a five-year minimum term is necessary, as the Coalition 
Associations and others suggest. The flexibility to prescribe a three-
to-five-year term is sufficient to achieve the Board's goal in 
providing a shipper a rail option consistent with commercial practices.
---------------------------------------------------------------------------

    \66\ BNSF comments that the Board should ``clarify that an 
alternate carrier has a reasonable time period from when the 
prescription order is entered to establish regular linehaul 
service.'' (BNSF Comments 7.) BNSF asserts that, although the NPRM 
contemplates a ramp-up period of six months for a ``substantial 
volume of traffic,'' even less ``substantial'' volumes of new 
traffic may take some time to be incorporated into the alternate 
carrier's network (to account for, e.g., possible hiring and 
training of new crews or qualifying existing crews on new service 
territories), and the actual amount of ramp-up time needed may turn 
on many factors that need to be considered. (Id. at 8 (citing NPRM, 
88 FR at 63910 n.36).) BNSF urges that any final rule should allow 
the Board to design a switching remedy that effectively addresses 
these issues. (BNSF Comments 8.) As noted in the NPRM, the Board 
recognizes that the legitimate business needs of an alternate 
carrier (including, among other things, the possible need to hire, 
train, and/or qualify crews) can bear on the appropriate duration of 
a reciprocal switch prescription. See NPRM, 88 FR at 63910 & n.36. 
Accordingly, the final rule provides a range within which the Board 
may set the duration of a reciprocal switch prescription so as to 
take the relevant considerations into account.

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

[[Page 38689]]

    While rail carriers argue that a prescription term should 
correspond to the time needed to remedy a service inadequacy, the 
duration of a prescribed reciprocal switching agreement reflects what 
the Board considers at this time sufficient to introduce competition 
through a commercial rail option in the petitioner's case and 
incentivize adequate service throughout the rail industry in general. 
For the same reason, the duration of a prescribed agreement need not be 
proportionate to the 12-week period that served as the basis for the 
Board's prescription.
    Moreover, the Board finds that a set time period promotes 
transparency and certainty for petitioners and carriers and therefore 
helps ensure the effectiveness of the rule. Setting a clear minimum 
helps petitioners, who are served by a single rail carrier, better 
assess whether to incur the costs of bringing a case and changing 
carriers, (Coal. Ass'ns Comments 50-52), and it helps alternate 
carriers make complex business decisions about investments needed to 
provide service on a relatively short-term basis. Meanwhile, a clear 
maximum helps incumbent carriers plan their businesses and reduces 
negative effects, if any, that may come from intervention, relative to 
an indefinite switching arrangement.

Termination Process

    Under the timetable set forth in the NPRM, the incumbent rail 
carrier may file a petition to terminate no more than 180 days and no 
less than 120 days before the end of the prescribed period. NPRM, 88 FR 
at 63915.\67\ The Board would endeavor to issue a decision on a 
petition to terminate within 90 days from the close of briefing. Id. If 
the Board does not act within 90 days from the close of briefing, the 
prescribed agreement would automatically terminate at the end of the 
original term. Id. If the Board is unable to act within that time 
period due to extraordinary circumstances, the prescribed agreement 
would be automatically renewed for an additional 30 days from the end 
of the current term. Id. In such cases, the Board would issue an order 
alerting the parties to the extraordinary circumstances and the 
renewal. Id.
---------------------------------------------------------------------------

    \67\ Under proposed Sec.  1145.7, a reply to the petition to 
terminate would be due within 15 days of the filing of the petition, 
and a rebuttal may be filed within seven days of the filing of the 
reply. NPRM, 88 FR at 63915. AAR urges the Board to allow more time 
for the incumbent carrier to reply to a shipper's objections to 
termination. (AAR Comments 104.) The Board will extend the rebuttal 
period and finds ten days to be sufficient and consistent with the 
streamlined process set forth in the rule.
---------------------------------------------------------------------------

    AAR and some rail carriers assert that the incumbent carrier should 
be allowed to seek termination once it establishes adequate service. 
(AAR Comments 101-02 (proposing that, to terminate a switching order, 
the incumbent demonstrate ``materially changed circumstances'' if it 
has addressed the circumstances that led to the imposition of a 
switching order); CN Comments 28-29 (proposing that a switching order 
automatically terminate ``absent a showing of some enduring actual 
necessity or compelling reason and practicability put forth by the 
petitioner''); CSXT Comments 51.) BNSF argues that the switching 
prescription should automatically terminate after two years, and if the 
petitioner would like to extend the switching prescription past two 
years, the petitioner should be required to demonstrate, at the end of 
the term, that an extension would be in the public interest. (BNSF 
Comments 15.)
    The Coalition Associations express the need for adequate time for a 
shipper to transition its operations from an alternate carrier to the 
incumbent carrier upon termination of a switch prescription. (Coal. 
Ass'ns Comments 50-52.) They assert that time is needed for a shipper 
to, among other things, negotiate a new contract with the incumbent 
carrier, update the shipper's internal systems, and assess the need for 
fleet and supply adjustments. (Id.) Given these concerns, the Coalition 
Associations propose: (1) allowing a switch prescription to continue in 
effect until 30 days after the Board serves a decision that grants a 
petition to terminate; and (2) moving the window for the incumbent to 
file a petition to terminate, so that a petition can be filed no more 
than 210 days and no less than 150 days before the end of the 
prescribed period. (Id.)
    The Board recognizes that a shipper needs adequate lead time prior 
to the end of a prescription arrangement to switch its operations from 
the alternate carrier to the incumbent carrier. To this end, the Board 
will modify the rule by requiring a petition to terminate to be filed 
no less than 150 days before the end of the prescription period.\68\ In 
doing so, should the Board issue a decision granting a petition to 
terminate within 90 days from the close of briefing (or not issue a 
decision within 90 days, such that the prescribed agreement 
automatically terminates at the end of the prescription period), a 
shipper would have at least 30 days to transition its operations prior 
to the expiration of a prescription. (See Coal. Ass'ns Comments 50 
(noting that, under the proposed process, a Board decision may be 
issued with only eight days left before the switch prescription 
expired).) Similarly, the Board will modify the rule to allow for the 
prescribed agreement to continue in effect until 30 days after the 
Board serves a decision that grants a petition to terminate or after 
the end of the prescription period, whichever is later.\69\
---------------------------------------------------------------------------

    \68\ The Board declines to adopt the Coalition Associations' 
proposal to allow a petition to terminate to be filed 210 days 
before the end of the prescription term. As proposed in the NPRM, a 
petition to terminate may not be filed more than 180 days before the 
end of the prescription term so that such petitions are not filed 
prematurely. 88 FR at 63910. Thus, the final rule provides for a 30-
day window of time to file a petition to terminate rather than a 60-
day window.
    \69\ AAR requests that the Board explain the circumstances under 
which it would extend its timeframe for deciding a pending request 
for termination. (AAR Comments 104-05.) While the Board finds it 
unnecessary to delineate specific extraordinary circumstances under 
which additional time would be required, the Board emphasizes that 
it expects such circumstances, by their very nature, to arise 
infrequently, if ever. If the Board does not decide the termination 
proceeding within 90 days from the close of record, and does not 
issue an extension order, the switching arrangement will 
automatically terminate. See NPRM, 88 FR at 63910.
---------------------------------------------------------------------------

    The Board declines to adopt the modifications proposed by rail 
carriers that would allow the incumbent carrier to petition to 
terminate at any time once it has established adequate service or allow 
a prescribed agreement to automatically terminate absent a showing of 
compelling need by the shipper. Rail carriers assert that these 
proposals are consistent with the notion that a prescription must 
correspond to a remedial need. However, as discussed, the purpose of 
the rule is to provide for a rail option as a means to avoid drops in 
network performance, both with respect to a given petitioner when the 
incumbent carrier's service failed to meet a performance standard and 
more generally throughout the network. As noted, the transparency and 
certainty of a set time range for a switching arrangement are important 
components for incentivizing performance. Indeed, the duration of 
three-to-five years is appropriate to securing a rail option as a means 
to address service issues; the possibility of earlier termination would 
be less consistent with providing that option and therefore could 
undermine the purposes of this rule. As also noted in the NPRM, the 
prescription of a reciprocal switching agreement does not prevent the 
incumbent rail carrier from competing to keep its traffic and 
attempting to win back the traffic by voluntary agreement of the 
petitioner at any time during the prescription period. NPRM, 88 FR at 
63910.

[[Page 38690]]

Termination Standard

    As set forth in the NPRM, the Board would grant a petition to 
terminate a prescribed agreement if the incumbent rail carrier 
demonstrates that, for a consecutive 24-week period prior to the filing 
of the petition to terminate, the incumbent rail carrier's service for 
similar traffic on average met the performance standard that provided 
the basis for the prescription. NPRM, 88 FR at 63915. Under the 
proposed rule, this requirement includes a demonstration by the 
incumbent carrier that it consistently has been able to meet, over the 
most recent 24-week period, the performance standards for similar 
traffic to or from the relevant terminal area. Id. The Board defines 
``similar traffic'' as the broad category type (e.g., manifest traffic) 
to or from the terminal area that is affected by the prescription. Id. 
at 63910.
    AAR proposes that, rather than examining ``similar traffic,'' as 
defined in the rule, the Board should consider the incumbent carrier's 
performance on any traffic that would cast light on the relevant 
question before the Board, i.e., whether the carrier has addressed the 
causes of the prior service shortcoming in such a way to assure 
adequate service for the traffic then subject to the prescription. (AAR 
Comments 103.) AAR also proposes that, in a petition to terminate, the 
rule should require the incumbent to demonstrate that it has met the 
performance standard over a 12-week period rather than a 24-week 
period, as, AAR argues, a 24-week period is disproportionate to the 12-
week period that served as the basis for the prescription. (Id.) AAR 
states that the language of the standard is ambiguous and requests that 
the Board clarify that it will grant a termination petition if the 
carrier's performance for similar traffic on average satisfies the 
specific service metric that triggered the initial switching 
prescription (rather than with respect to multiple metrics) during the 
24-week period immediately prior to filing the petition. (Id. at 103-
04.)
    The Coalition Associations urge the Board to adopt a narrower 
definition of ``similar traffic,'' depending on which of the service 
metrics is being measured, as the proposed definition could lead to 
``irrelevant comparisons.'' (Coal. Ass'ns Comments 55.) The Coalition 
Associations assert that, for the OETA and transit time standards, 
``similar traffic'' should be defined as other manifest traffic moving 
between the terminal where the reciprocal switch occurs and the 
terminal or local serving yard at the other end of the movement of the 
switched traffic. (Id. at 55-56.) For the ISP service metric, the 
Coalition Associations assert that only the shipper's own traffic is 
relevant because the incumbent still provides ISP service for switched 
traffic. (Id. at 56.) The Coalition Associations also propose modifying 
the rule to require the incumbent carrier to demonstrate compliance 
with all three standards for similar traffic, reasoning that otherwise 
the Board could terminate a switch prescription when the incumbent was 
providing service that would merit a prescription. (Id. at 54-55.) AAR 
opposes this proposal, reasoning that a termination proceeding should 
be focused on whether the particular service inadequacy that formed the 
basis of the initial prescription has been remedied. (AAR Reply 79.) 
AAR asserts that the Board's determination of whether a prescription 
was warranted for other reasons would be more readily answered in the 
context of the Board's evaluation of a new petition. (Id.)
    The Board declines to modify its proposed definition of ``similar 
traffic.'' While AAR urges the Board to consider any traffic relevant 
to its inquiry, (see AAR Comments 103), the Board finds that the 
incumbent carrier's performance with respect to ``similar traffic,'' as 
defined in the NPRM, provides a strong indication as to whether the 
incumbent has demonstrated its commitment and ability to provide 
adequate service, as shown in its service with similar traffic. NPRM, 
88 FR at 63910. The Board notes that parties having a clearer, common 
understanding of similar traffic is consistent with the expedited 
nature of a termination proceeding. The proposed definition also makes 
it more likely that the incumbent carrier will have a relevant pool of 
operational data on which to base its petition; limiting what the Board 
would consider to be ``similar traffic,'' as proposed by the Coalition 
Associations, (see Coal. Ass'ns Comments 55-56), may hamper an 
incumbent carrier's ability to provide a meaningful representation of 
its current operations.
    The Board will, however, modify the standard for a petition to 
terminate by requiring an incumbent carrier to demonstrate that it has 
met all three performance standards for similar traffic on average, 
rather than only the performance standard that provided the basis for 
the prescription. As the Coalition Associations note, it would 
undermine the goal of the rule to terminate a prescribed agreement when 
an incumbent carrier is providing service that would otherwise warrant 
a reciprocal switching prescription. (See Coal. Ass'ns Comments 54-55.) 
Moreover, it would be inefficient for the Board to terminate a 
prescription, only to then have the shipper file a new petition based 
on operational shortcomings that would have otherwise come to light in 
the termination proceeding.
    The Board will also modify the rule such that the Board would grant 
a petition to terminate a prescribed agreement if the incumbent rail 
carrier demonstrates that its service for similar traffic met 
performance standards for the most recent 12-week period prior to the 
filing of the petition to terminate, rather than the prior 24-week 
period. The Board finds that a 12-week period is sufficient to provide 
the Board an accurate representation of the incumbent carrier's 
operations, and that it is reasonable to ``harmonize'' the time period 
that serves as the basis for the prescription to the period examined 
for purposes of a petition to terminate, as AAR suggests. (See AAR 
Comments 103.) The Board clarifies that this 12-week time period shall 
be the most recent 12-week period prior to the filing of a petition to 
terminate.\70\
---------------------------------------------------------------------------

    \70\ The Board notes that nothing in this rule prevents a 
shipper/receiver from informing the Board of any changes in relevant 
circumstances during the pendency of the petition to terminate. The 
Board may consider such information when determining whether the 
incumbent railroad has met its burden to demonstrate that the 
prescription is no longer warranted.
---------------------------------------------------------------------------

Automatic Renewal

    Under the proposed rule, in the event the incumbent rail carrier 
does not timely file a petition for termination, or files such a 
petition and fails to sustain its burden of proof, the prescribed 
reciprocal switching agreement would automatically renew for the same 
period as the initial prescription. NPRM, 88 FR at 63910. The Board 
sought comment on whether, alternatively, the renewal should be for 
only one additional year. Id.
    AAR and some rail carriers assert that automatic renewal is not 
consistent with the need for a switching order to address an actual 
necessity or compelling need. (AAR Comments 99; CN Comments 27-28; CSXT 
Comments 50.) AAR proposes that, rather than automatic renewal, the 
Board should provide for an orderly opportunity for the shipper to show 
that the term of the switching order should be extended, with no break 
in service. (AAR Comments 100; see also CSXT Comments 50 (asserting 
that the petitioner should bear the burden of establishing a continuing 
compelling need that justifies ongoing forced

[[Page 38691]]

switching); CN Comments 28 (proposing automatic termination absent a 
showing of some enduring actual necessity or compelling reason and 
practicability put forth by the petitioner).) AAR asserts that, if the 
Board declines to remove the automatic renewal provision, ``it should 
limit the automatic renewal to the period of the initial prescription 
or a single additional year, whichever is shorter,'' to ``give the 
incumbent carriers more frequent opportunities to seek to terminate the 
prescription.'' (AAR Comments 101.)
    The Coalition Associations support automatic renewal for the same 
duration as the initial term, noting that the feasibility and 
attractiveness of handling a shipper's traffic to an alternate carrier 
is directly related to the potential contract duration, whether access 
to that traffic is via an initial or renewed switch prescription. 
(Coal. Ass'ns Comments 57; see also Coal. Ass'ns Reply 24 (``Automatic 
renewal for the same term keeps in place the competitive incentives to 
improve service until the incumbent carrier firmly establishes its 
ability both to achieve and maintain adequate service.'').)
    Under the final rule, if the incumbent carrier does not timely file 
a petition for termination, the prescribed agreement will automatically 
renew at the end of its term for the same period as the initial 
prescription. However, the Board will modify the proposed rule so that, 
if a petition to terminate is denied, the Board will determine, on a 
case-by-case basis, the appropriate renewal period based on the 
evidentiary record, but for a duration no longer than the initial 
prescription. This will allow the Board to account for the unique 
circumstances presented in a particular termination proceeding. (See CN 
Comments 28.) At the end of the renewed term, if the incumbent carrier 
does not timely file a petition for termination, the prescribed 
agreement will automatically renew for the same number of years as the 
renewed term.\71\
---------------------------------------------------------------------------

    \71\ BNSF seeks clarification as to whether automatic renewal 
would apply only to the original term prescribed and not a term 
established by renewal under proposed Sec.  1145.7. (BNSF Comments 
15 n.7.) The Board clarifies that a prescribed agreement would 
continue to automatically renew until the incumbent seeks, and the 
Board grants, termination or until the prescribed agreement 
automatically terminates under Sec.  1145.7(f). As discussed, 
automatic renewal is consistent with the placement of the burden on 
the incumbent railroad when formulating a petition to terminate.
---------------------------------------------------------------------------

    While AAR and rail carriers argue that automatic renewal is 
inconsistent with the need for a prescription to address an actual 
necessity or compelling need, the purpose of the rule, as discussed, is 
to introduce a second rail option when there is sufficient cause based 
on application of the performance standards in part 1145. Automatically 
renewing the prescribed agreement, absent a petition to terminate, 
furthers this goal and is consistent with rule's placement on the 
incumbent railroad of the burden of demonstrating that the prescription 
is no longer warranted. Further, the Board reiterates that nothing in 
the rule prevents the incumbent carrier from competing to keep its 
traffic or attempting to win back the traffic by voluntary agreement 
during the prescription period. See NPRM, 88 FR at 63910.

Other Issues

Permanent Prescription
    The Board sought comment on whether the Board should prescribe a 
reciprocal switching agreement on a permanent basis when an incumbent 
rail carrier had been subject to a prescription under part 1145 and 
when, within a specified time after termination of the prescribed 
agreement, that carrier again failed to meet a performance standard 
under part 1145 (without demonstrating an affirmative defense or 
impracticability as provided for in part 1145). NPRM, 88 FR at 63910. 
The Coalition Associations support the imposition of a permanent 
prescription following a subsequent failure, as such a provision would 
serve as a safeguard against an incumbent carrier who may ``deploy 
resources'' to meet the termination criteria but subsequently remove 
those resources upon the prescription terminating. (Coal. Ass'ns 
Comments 57.) AAR asserts that a permanent prescription would ``go well 
beyond what is necessary to remedy the identified inadequacy.'' (AAR 
Comments 100.)
    The Board declines at this time to adopt a provision that would 
impose a permanent switching order following a subsequent failure by 
the incumbent carrier. The Board is not persuaded that ``gamesmanship'' 
by an incumbent carrier is likely, particularly given that the 
termination process will require proof that incumbent carrier's 
operations for similar traffic meet all three standards set forth in 
this rule for a 12-week period.
Access to Data
    The Coalition Associations propose to require the incumbent carrier 
to provide the shipper with all data for ``similar traffic'' that are 
relevant to the standards the incumbent must satisfy to terminate a 
prescription, and assert that this should be the same type of data the 
incumbent carrier is required to provide to a shipper under proposed 
Sec.  1145.8(a). (Coal. Ass'ns Comments 53.) AAR urges the Board to 
reject this proposal, arguing that it is unnecessary, burdensome, and 
raises significant confidentiality concerns. (AAR Reply 78.) The Board 
anticipates that an incumbent carrier seeking termination will provide 
the Board with the relevant data to support its petition to terminate. 
As noted in the NPRM, in a termination proceeding, the shipper/receiver 
has the right to access and examine the facts and data underlying a 
carrier's petition to terminate, subject to an appropriate protective 
order. NPRM, 88 FR at 63910. The Board will determine on a case-by-case 
basis whether any deadlines in the procedural schedule should be 
adjusted in an individual proceeding based on, for example, time needed 
to resolve a potential discovery dispute involving a shipper's effort 
to obtain data from the carrier relevant to a termination petition. The 
Board expects any discovery requests to be narrowly tailored to the 
issues presented and that the parties will work diligently to resolve 
any disputes. To the extent a dispute is brought to the Board, the 
Board will work expeditiously to resolve it and minimize any potential 
delay affecting the expected timing of a decision as provided in this 
rule.

Contract Traffic

    In the NPRM, the Board requested comments about the application of 
the proposed rule to traffic that is the subject of a rail 
transportation contract under 49 U.S.C. 10709. The Board sought comment 
on ``all legal and policy issues relevant to this question.'' NPRM, 88 
FR at 63909. In addition, the Board posed two main questions. First, 
the Board sought ``comment on whether the Board may consider the 
performance data described above, based on service that a carrier 
provided by contract, as the grounds for prescribing a reciprocal 
switching agreement that would become effective after the contract 
expired.'' Id. Related to this first question, the NPRM sought comment 
on ``whether the Board may require a carrier to provide performance 
metrics to a rail customer during the term of a contract upon that 
customer's request.'' Id. Second, the Board requested comment on 
``when, prior to the expiration of a transportation contract between 
the shipper and the incumbent carrier, the Board may prescribe a 
reciprocal switching agreement that would not become effective until 
after the contract expires.'' Id. The Board noted that the D.C. Circuit 
had held, under a different statutory scheme, that the Board was not 
authorized to order a carrier to file a

[[Page 38692]]

common carrier tariff more than a year before contract service was 
expected to end. Id. (citing Burlington N. R.R. v. STB, 75 F.3d 685, 
687 (D.C. Cir. 1996)). The Board asked whether any similar ``legal or 
policy issues'' should be considered when determining how far in 
advance of contract expiration, if at all, the Board may prescribe 
reciprocal switching that would go into effect after expiration. Id.

Use of Contract Service Data To Determine Whether an Incumbent Carrier 
Failed To Meet a Performance Standard

    With respect to the first question, AAR and all Class I rail 
carriers oppose the use of performance data for contract service as the 
basis for determining that an incumbent carrier is not meeting the 
performance standards and therefore prescribing a reciprocal switching 
agreement that would become effective when the contract expires.\72\ 
Their main argument is that 49 U.S.C. 10709 prohibits the use of 
performance data regarding contract service for this purpose. The 
subsections of section 10709 relevant to their arguments provide that a 
party to a contract entered into under section 10709 has no duty in 
connection with services provided under the contract other than those 
duties the contract specifies and the contract and transportation under 
such contract, is not subject to title 49, subtitle IV, part A], and 
may not be subsequently challenged before the Board or in any court on 
the grounds that such contract violates a provision of part A. The only 
remedy for any alleged breach of a contract is an action in an 
appropriate State court or United States district court, unless the 
parties otherwise agree.
---------------------------------------------------------------------------

    \72\ (See AAR Comments 32-37; BNSF Comments 12-13; CN Comments 
50-54; CSXT Comments 8; NSR Comments 17-20; AAR Reply 6-18; BNSF 
Reply 4-5; CN Reply 12-17; CPKC Reply 30-34; CSXT Reply 7 n.14; NSR 
Reply 3-9.) Although UP did not mention the contract issue 
specifically, it joined the opening and reply comments of AAR in 
their entirety. (See UP Comments 1; UP Reply 1 n.1.)
---------------------------------------------------------------------------

    AAR and several carriers argue that, in light of section 10709(b), 
the Board may not use performance data for contract traffic as the 
basis for finding that the performance standards were not met and 
prescribing post-expiration reciprocal switching because doing so would 
create a new ``duty''--compliance with the performance standards--that 
is not ``specified by the terms of the contract.'' (See, e.g., AAR 
Comments 34; BNSF Comments 12; AAR Reply 1-2, 6-7; CN Reply 14; NSR 
Reply 4; CPKC Reply 31.) Also, AAR and several carriers argue that 
evaluating the performance of an incumbent carrier under contract as a 
basis for reciprocal switching would violate section 10709(c)(1) 
because it would make the contract traffic ``subject'' to the rule and 
section 11102(c)(1) and because a reciprocal switching petition would 
amount to a ``challenge[]'' to contract transportation before the 
Board. (See, e.g., AAR Comments 33; CN Comments 50-52; AAR Reply 1, 6-
7; CN Reply 13-14; NSR Reply 4-5.) CN says that the statutory bar on 
regulation of ``transportation'' under contract also bars challenges to 
the ``terms and conditions'' related to that transportation, including 
allegations of failure to provide adequate service. (CN Comments 52 
(citing Ameropan Oil Corp. v. Canadian Nat'l Ry., NOR 42161, slip op. 
at 2, 4 (STB served Apr. 17, 2019)).) In addition, AAR and several 
carriers argue that reciprocal switching would be a regulatory 
``remedy'' for poor performance, which they say would violate section 
10709(c)(2)'s requirement that the ``exclusive remedy'' for any alleged 
breach of contract is an action in court. (See, e.g., CN Comments 51; 
NSR Comments 19; AAR Reply 7; CN Reply 14; CPKC Reply 31; NSR Reply 5.) 
In light of section 10709, AAR argues, a shipper under contract may 
pursue reciprocal switching only by allowing the contract to expire, 
using common carrier service, and then seeking reciprocal switching if 
the common carrier service fell short of the performance standards. 
(AAR Comments 36.)
    AAR argues that its position is consistent with the two cases cited 
in the NPRM, Burlington Northern and FMC Wyoming Corp. v. Union Pacific 
Railroad, FD 33467 (STB served Dec. 16, 1997). (AAR Comments 36-37; AAR 
Reply 12-14.) AAR distinguishes FMC Wyoming--in which the Board 
indicated that it could require a railroad to establish a common 
carrier rate when the contract was set to expire ``in a matter of 
weeks,'' FMC Wyo., FD 33467, slip op. at 3 n.7--on the ground that 
ordering a carrier to establish a rate does not ``require any 
examination of the service provided under the contract,'' whereas 
``ordering switching under the Proposed Rule plainly would'' require 
such examination. (AAR Comments 36-37.) Regarding Burlington Northern, 
AAR says that the D.C. Circuit accepted as a general principle that the 
Board lacks authority over contract traffic and that, therefore, the 
only issue before the court was whether the statute that required 
carriers to file a common carrier rate could overcome section 10709's 
jurisdictional bar, specifically when the contract was expected to 
expire in ``more than a year.'' (AAR Reply 12-14.) Here, AAR explains, 
there is no statute that arguably could overcome section 10709. (Id.)
    AAR and several carriers also say that applying the proposed rule 
to traffic that is subject to a transportation contract is bad policy, 
primarily because they say it would interfere with contract 
negotiations. (See, e.g., AAR Comments 33-34; BNSF Comments 13; CN 
Comments 53; NSR Comments 19-20; AAR Reply 16-17; CPKC Reply 33-34.) 
AAR and CPKC argue that the proposed rule would deny a contracting 
shipper the option to forgo performance guarantees in exchange for 
something that the shipper might value more, such as lower rates. (AAR 
Comments 33-34; CPKC Reply 33-34; see also NSR Comments 19-20 (arguing 
that the rule will require contracting parties to adjust the rate to 
reflect the ``risk'' that reciprocal switching may be prescribed based 
on performance); BNSF Comments 13 (``contract parties often consider 
service levels as part of their economic analysis'').) \73\ AAR and 
several carriers contend that the availability of reciprocal switching 
based on contract performance would deter carriers from entering 
contracts, which they say would contravene Congress's intent to promote 
the use of rail transportation contracts. (BNSF Comments 13; NSR 
Comments 18-19; AAR Reply 11; BNSF Reply 4.) CN highlights language in 
the legislative history of section 10709's predecessor that said that 
``[r]ail carriers and shippers should be free to negotiate and enter 
into contracts without concern'' about regulatory interference. (CN 
Comments 53 (quoting H.R. Rep. No.

[[Page 38693]]

96-1035, at 58 (1980)).) NSR suggests that ``[e]ven unresolved 
questions'' about the application of the proposed rule to contract 
traffic could deter the use of contracts. (NSR Comments 20.)
---------------------------------------------------------------------------

    \73\ AAR, CN, and CPKC also argue that, because of how the 
metrics work, using contract data as the basis for reciprocal 
switching could deter carriers from negotiating contracts that 
ensure better performance. AAR presents a hypothetical example of a 
contract that requires a railroad, in exchange for a premium rate, 
to move shipments in half the time it had moved similar shipments in 
the past. (AAR Comments 34.) When the contract expires and the 
carrier reverts to its usual transit time, the higher level of 
performance under contract would become the baseline against which 
to compare the subsequent common carrier service, creating a risk 
that the carrier would fail the ``service consistency'' metric. 
(Id.) AAR says that ``no carrier would enter into such a contract,'' 
as least without insisting on more concessions from the shipper. 
(Id. at 34-35; see also CN Comments 53-54 (stating that comparing 
contract data with non-contract data is especially problematic with 
the transit time metric); CPKC Reply 34 (stating that comparing 
contract service with post-expiration service is particularly 
problematic for contracts that require premium service levels).)
---------------------------------------------------------------------------

    Shippers and shipper organizations that address the contract issue 
argue that the Board can and should use an incumbent carrier's contract 
performance data as the basis for post-expiration reciprocal switching 
prescriptions.\74\ The Coalition Associations argue that using contract 
performance data for this purpose is consistent with section 10709 
because it would not amount to regulating or interpreting the contract, 
nor would it modify any party's contractual obligations or purport to 
find that the contract violates the law. (Coal. Ass'ns Comments 10; see 
also Coal. Ass'ns Reply 6, 9; WCTL Reply 12-13.) In response to AAR's 
and the carriers' argument that using contract performance as a basis 
for post-expiration reciprocal switching would violate section 10709(b) 
by imposing an additional ``duty'' on the contracting carrier, the 
Coalition Associations say that the proposed rule would not require the 
carrier to provide ``any specific level of contract service.'' (Coal. 
Ass'ns Reply 9.) \75\ The Coalition Associations also say that there is 
no conflict with section 10709(c)(2) because ``Board is not proposing 
to decide any dispute about contract restrictions that prevent a 
shipper from using a prescribed switch.'' (Coal. Ass'ns Comments 12 
n.11.)
---------------------------------------------------------------------------

    \74\ (See, e.g., Coal. Ass'ns Comments 9-20; AFPM Comments 15-
16; DCPC Comments 5; FRCA/NCTA Comments 4; NMA Comments 7; WCTL 
Comments 4-5; Coal. Ass'ns Reply 5-10; ACD Reply 2-3; Dow Reply 5; 
WCTL Reply 6-7, 12-15.)
    \75\ The Coalition Associations note that the Board said that it 
does not view it as appropriate to ``apply, or draw from'' the 
rule's proposed performance standards to regulate or enforce the 
common carrier obligation. (Coal. Ass'ns Reply 9 (quoting NPRM, 88 
FR at 63902).) They argue that ``[i]f this proposal does not impose 
any duty upon common-carrier service, it does not impose any duty 
upon contract service either.'' (Coal. Ass'ns Reply 9.)
---------------------------------------------------------------------------

    The Coalition Associations make an additional statutory 
interpretation argument regarding section 10709. They point out that 49 
U.S.C. 10705 says that the Board may require a rail carrier to include 
substantially less than the entire length of railroad in a through 
route only in certain limited situations, including when required under 
sections 10741, 10742, or 11102. (Coal. Ass'ns Reply 7.) The Coalition 
Associations note that section 10741 expressly states that it shall not 
apply to contracts covered by section 10709, whereas section 11102 
(which includes the reciprocal switching provision) and section 10742 
have no such statement. (Id.) Thus, the Coalition Associations argue, 
the ``clear inference'' is that the statutory scheme provides that the 
Board can consider contract transportation when exercising its 
authority under section 11102. (Id.)
    The Coalition Associations and other commenters argue that there is 
precedent for the Board's use of contractual performance data to 
address service issues. The Coalition Associations and ACD claim that 
in two decisions--Midtec and Vista Chemical Company v. Atchison, Topeka 
& Santa Fe Railway, 5 I.C.C.2d 331 (1989)--the ICC considered evidence 
regarding contract service when deciding whether to prescribe 
reciprocal switching. (Coal. Ass'ns Comments 11; ACD Reply 3.) The 
Coalition Associations also point to two decisions involving the 
fluidity of the rail network in which the Board specifically said that 
it would examine contract and non-contract traffic. (Coal. Ass'ns 11-12 
n.10 (citing U.S. Rail Serv. Issues, EP 724, slip op. at 7 (STB served 
Dec. 30, 2014), and U.S. Rail Serv. Issues--Performance Data Reporting, 
EP 724 (Sub-No. 4), slip op. at 17 (STB served Nov. 30, 2016)).) They 
also point out that the Board's 1998 decision adopting 49 CFR parts 
1146 and 1147 said that ``where no transportation is being provided, we 
do not believe that the mere existence of a contract precludes us from 
providing for temporary emergency service upon a proper showing, so 
that traffic can move while any contract-related issues are being 
litigated in the courts.'' (Coal. Ass'ns Comments 11-12 n.10 (quoting 
Expedited Relief for Serv. Inadequacies, 3 S.T.B. at 976).) WCTL says 
that the Board ``routinely evaluates the details of rail transportation 
contracts when considering the reasonableness of rates provided for 
common carrier service,'' (WCTL Reply 13-14 (citing cases)), and the 
Coalition Associations similarly argue that the Board ``will consider 
contract traffic data in the exercise of its rate review regulatory 
authority,'' (Coal. Ass'ns Comments 10 n.6 (citing Simplified Standards 
for Rail Rate Cases, EP 646 (Sub-No. 1), slip op. at 83 (STB served 
Sept. 5, 2007))).\76\
---------------------------------------------------------------------------

    \76\ Although the Coalition Associations' discussion of 
Burlington Northern focuses primarily on the second question raised 
in the NPRM (how long in advance of contract expiration the Board 
may consider a reciprocal switching petition), their arguments 
suggest that they view Burlington Northern as irrelevant to the 
first question. (See Coal. Ass'ns Comments 16-18.) They argue that 
Burlington Northern was not based on section 10709 and that the 
balancing of carrier and shipper interests in that statutory scheme 
has no parallel in the reciprocal switching context. (Coal. Ass'ns 
Comments 16.)
---------------------------------------------------------------------------

    Shipper organizations also make policy arguments in favor of 
considering contract performance data as the basis for post-expiration 
reciprocal switching. They say that the overwhelming majority of rail 
traffic moves under contract and that the proposed rule will provide 
little benefit to the overall rail network if contract traffic is 
excluded. (See, e.g., Coal. Ass'ns Reply 5, 9; AFPM Comments 15; WCTL 
Comments 2-3, 5; ACD Reply 2.) The Coalition Associations say that the 
contract questions are ``existential'' for any proposal to address 
inadequate rail service and that ``the Board's entire proposal would be 
meaningless'' if contract performance cannot be considered. (Coal. 
Ass'ns Reply 5.) \77\ The Coalition Associations also claim that 
excluding contract performance would set a precedent that would render 
the alternative reciprocal switching standards in 49 CFR parts 1144 and 
1147 ``similarly useless.'' (Coal. Ass'ns Reply 5.) Shipper 
organizations say that the path proposed by AAR and the carriers--that 
shippers should allow their rail contracts to expire, accept common 
carrier service, and wait to see if the carrier meets the performance 
standards--would be so cumbersome that the proposed rule would rarely, 
if ever, be used. (See Coal. Ass'ns Reply 5-6; WCTL Reply 14-15; ACD 
Reply 2.) Shipper organizations also explain that railroads do not 
segregate services and facilities between contract and common carrier 
traffic, and any proposal to improve the fluidity of the national rail 
network needs to consider contract traffic performance. (See Coal. 
Ass'ns Reply 8.) AFPM argues that, because facilities often are used 
for both contract and tariff traffic, it will be ``very difficult for a 
shipper to show specific poor service only applies to . . . just the 
tariff shipments.'' (AFPM Comments 15-16; see also Coal. Ass'ns Reply 8 
(arguing that metrics are necessarily intertwined for common carrier 
and contract traffic, which ``renders it impractical and unnecessary, 
if not impossible, to filter for any of these traffic types''); DCPC 
Comments 3, 5 (discussing logistical problems that limiting the rule to 
non-contract traffic

[[Page 38694]]

would create in industries that ship both contract and non-contract 
traffic)).
---------------------------------------------------------------------------

    \77\ The Coalition Associations propose that if the Board cannot 
definitively conclude that the proposed rules allow consideration of 
contract performance, it should reopen Docket No. EP 711 (Sub-No. 
1). (Coal. Ass'ns Reply 47-48.) The Coalition Associations also 
propose modifications that aim to address potential problems with 
the proposal in the 2016 NPRM. (Coal. Ass'ns Reply 47-52.)
---------------------------------------------------------------------------

    Numerous shippers and shipper organizations respond to the 
arguments made by AAR and the carriers about the purported effects that 
relying on contract performance data will have on contract 
negotiations. They argue that shippers, especially captive shippers, 
are at a disadvantage in contract negotiations with railroads, with 
contracts often presented on a take-it-or-leave-it basis. (See, e.g., 
AFPM Comments 15; DCPC Comments 5.) \78\ As a result, they say, 
contractual commitments to maintain a minimum level of service are 
virtually non-existent. (See, e.g., Coal. Ass'ns Reply 8 n.10; NMA 
Comments 7; AFPM Comments 15; Dow Reply 5.) DCPC notes that the Board 
has not defined the word ``contract,'' and it says that some purported 
contracts are rates published in a non-distribution tariff with 
``Contract'' stamped on the title page. (DCPC Comments 5; DCPC Reply 
3.) \79\ DCPC objects to the railroads' use of this type of ``non-
signatory `Contract' '' and says that contracts ``should be agreed to 
and signed by all parties to the agreement.'' (DCPC Reply 3.) Some 
shipper organizations support the proposed rule in part on the ground 
that the potential for a reciprocal switch will help them in contract 
negotiations with railroads. (AFPM Comments 16; FRCA/NCTA Comments 4.)
---------------------------------------------------------------------------

    \78\ AFPM says that ``almost three quarters of AFPM members are 
captive shippers,'' with the result that railroads have all the 
leverage and the resulting contracts are ``tremendously 
advantageous'' for the railroads. (AFPM Comments 15.)
    \79\ DCPC says railroads contend that this kind of purported 
contract ``becomes binding when the shipper moves traffic on the 
rate,'' but the shipper has little choice because the rate is 
presented on a take-it-or-leave-it basis. (DCPC Reply 3.)
---------------------------------------------------------------------------

    After considering the comments, the Board will not use incumbent 
carriers' contract performance data as the basis for reciprocal 
switching prescriptions under part 1145. Using contract performance 
data as the basis for reciprocal switching under the rule would attach 
the potential for a regulatory consequence to the carriers' failure to 
meet Board-specified numerical performance standards while under 
contract, which the Board views as inconsistent with the limitations 
that section 10709 imposes. Given the particular design of part 1145, 
this would effectively create a ``duty'' that was not present in the 
contract, which does not reasonably align with section 10709(b)'s 
statement that contracting parties shall have ``no duty in connection 
with services provided under such contract other than those duties 
specified by the terms of the contract.'' Shipper organizations are 
correct that the availability of reciprocal switching would not require 
carriers under contract to comply with the performance standards, (see, 
e.g., Coal. Ass'ns Reply 9). Even for non-contract traffic, part 1145 
does not create a service standard with which carriers must comply; 
rather, it identifies the service levels under which the Board 
concludes it is appropriate to consider the introduction of an 
additional line-haul carrier as a means to address service concerns. 
See Legal Framework. But with regard to traffic moving under contract, 
the application of part 1145 would introduce a new incentive for 
carriers to meet those standards, even if their contracts contain 
different performance requirements or none at all based on negotiated 
bargaining.\80\ Even though the Board recognizes that the potential for 
future application of a regulation may influence contract negotiation 
and compliance already, the likely effect on the carriers' incentives 
if the prescription of a reciprocal switch under part 1145 could be 
based on contract traffic would be specific and significant enough to 
implicate section 10709(b).\81\ For similar reasons, the Board also 
agrees with carriers that basing reciprocal switching on contract 
traffic raises concerns under section 10709(c)(1), which says that 
contracts and contract transportation ``shall not be subject'' to the 
entirety of Part IV of the Act, which includes the reciprocal switching 
statute. Creating numerical standards that apply to contract 
performance, and prescribing reciprocal switching when performance fell 
short of the standards, would be tantamount to subjecting the contract 
transportation to the reciprocal switching statute.\82\
---------------------------------------------------------------------------

    \80\ Several shipper organizations emphasize that many contracts 
lack any performance standards. (Coal. Ass'ns Reply 8 n.10; NMA 
Comments 7; AFPM Comments 15.) But the fact that a contract does not 
address an issue does not open the door to regulation of that issue. 
See, e.g., Ameropan Oil Corp., NOR 42161, slip op. at 4 (``[W]here 
transportation is provided pursuant to a contract, the Board lacks 
regulatory authority over the terms and conditions related to that 
transportation, whether or not explicitly addressed in the 
contract.'') (emphasis added).
    \81\ As noted above, the Coalition Associations argue that if 
applying the performance standards to common carrier service does 
not create a duty under the common carrier statute (which they claim 
is what the NPRM meant when it said that the Board would not 
``apply, or draw from'' the performance standards to enforce the 
common carrier obligation), applying the performance standards to 
contractual service would not create a ``duty'' under section 
10709(b) either. (Coal. Ass'ns Reply 9 (quoting NPRM, 88 FR at 
63902).) This argument misconstrues the NPRM. The Board's point was 
that finding that a carrier violated the common carrier obligation 
could have consequences beyond a reciprocal switching prescription, 
such as an obligation to pay compensation to a private party, and, 
for these and other reasons described in this rule, the proposed 
rule is not intended (and it would not be appropriate) to apply or 
draw from these standards to expose carriers to those additional 
consequences.
    \82\ Because other provisions of section 10709 bar the 
application of the rule to contract performance, the Board need not 
decide whether considering performance during the term of a contract 
would violate section 10709(c)(2) by creating a non-judicial 
``remedy'' for an alleged breach of contract. (See CN Comments 51, 
NSR Comments 19; AAR Reply 7; CN Reply 14; CPKC Reply 31; NSR Reply 
5.)
---------------------------------------------------------------------------

    The Coalition Associations' argument based on 49 U.S.C. 10705 is 
not persuasive. Section 10705 provides that the Board may require a 
rail carrier to include in a through route substantially less than the 
entire length of railroad only in certain limited situations, including 
when required under 49 U.S.C. 10741, 10742, or 11102. The Coalition 
Associations point out that section 10741 (a discrimination provision) 
specifically states that the provision shall not apply to contracts 
described in section 10709, in contrast to section 11102, which is 
silent as to section 10709 contracts. (Coal. Ass'ns Reply 7-8.) Relying 
on the principle that ``where Congress includes particular language in 
one section of a statute but omits it in another . . . , it is 
generally presumed that Congress acts intentionally and purposely in 
the disparate inclusion or exclusion,'' the Coalition Associations 
argue that the lack of a reference to contracts in section 11102 should 
be interpreted as an intentional congressional choice to allow the 
Board to apply reciprocal switching to contract traffic. (Id. at 7-8 & 
n.8 (quoting Russello v. United States, 464 U.S. 16, 23 (1983)).) But 
inferences based on the statutory structure are appropriate only when 
the statute's meaning is not clear from the statutory text. See, e.g., 
In re Rail Freight Fuel Surcharge Antitrust Litig., 34 F.4th 1, 9 (D.C. 
Cir. 2022) (explaining that statutory interpretation begins ``with the 
language of the statute itself'' and then, ``if necessary,'' ``may turn 
to other customary statutory interpretation tools, including structure, 
purpose, and legislative history'' (quoting Genus Med. Techs. LLC v. 
FDA, 994 F.3d 631, 637 (D.C. Cir. 2021))). Section 10709 is clear that 
the Board may not add duties to the contract or subject contract 
transportation to ``this part,'' which includes section 11102. In light 
of this language, it is unnecessary to make inferences based on the 
statute's structure.
    The cases cited by shipper organizations where the agency discussed 
contract performance in

[[Page 38695]]

connection with (and ultimately denied) reciprocal switching requests 
are clearly distinguishable and do not support the conclusion that the 
Board should use contract performance as the basis for a post-
expiration reciprocal switching order under the proposed rule. (See 
Coal. Ass'ns Comments 11; ACD Reply 3.) First, neither Midtec nor Vista 
Chemical considered section 10709 (or its predecessor, 49 U.S.C. 
10713). Cases in which the Board did not consider the potential 
implications of section 10709 do not provide meaningful guidance as to 
the proper interpretation or application of that section. See, e.g., 
Cent. Power & Light Co. v. S. Pac. Transp. Co., 1 S.T.B. 1059, 1074-75 
(1996).
    Second, Midtec and Vista Chemical do not stand for the proposition 
that the Board may prescribe a reciprocal switching agreement based on 
a determination that a carrier provided inadequate service during the 
term of a contract. In those cases, the Board considered whether the 
carrier's commercial practices, as reflected in contracts offered by 
the carrier, contradicted an allegation that the carrier had engaged in 
anticompetitive conduct. See, e.g., Midtec, 3 I.C.C. at 183; Vista 
Chemical, 5 I.C.C.2d at 338-39. If the agency had prescribed a 
reciprocal switching agreement in those cases (which it did not), 
presumably it would have arisen out of a finding of anticompetitive 
conduct, not out of a determination that the carrier's contract service 
was inadequate.
    In Midtec, the shipper asked the ICC to impose a reciprocal 
switching agreement under part 1144, which provides in relevant part 
for the prescription of a reciprocal switching agreement based on 
anticompetitive conduct. The shipper's alleged ground was that the 
incumbent Chicago and North Western Transportation Company (CNW) was 
engaging in ``monopolistic'' conduct. Midtec, 3 I.C.C.2d at 172. CNW 
argued that its commercial conduct demonstrated that it did not behave 
in an anticompetitive manner, pointing out the fact that it had been 
willing to ``initiate and concur in joint rate proposals and rate 
reductions in tariffs or rail transportation contracts.'' Id. at 183. 
The ICC agreed, based on CNW's evidence, that ``[t]his is hardly the 
picture of a monopolist indifferent to the needs of its shipper.'' Id. 
This type of general consideration of the incumbent's commercial 
conduct in respect of contracts--as one piece of evidence regarding 
whether the incumbent was acting in an anticompetitive manner that 
might warrant reciprocal switching--is very different from shippers' 
proposal here that the Board rely on part 1145's numerical standards 
for performance under contract as the basis for a reciprocal switching 
prescription.
    Similarly, in Vista Chemical, the shipper asked the ICC to 
prescribe reciprocal switching under part 1144. Vista Chemical, 5 
I.C.C.2d at 331. The ICC considered whether the incumbent carrier was 
likely to engage in anticompetitive conduct, taking into account any 
past anticompetitive conduct by the incumbent. Id. at 337-42. The ICC 
noted that the incumbent carrier had offered contracts at reduced rates 
and had shown a willingness to amend contracts to make them more 
favorable to shippers. Id. at 338-39. Based on this and other evidence 
that the incumbent carrier had not engaged in anticompetitive conduct, 
the ICC declined to prescribe the proposed reciprocal switching 
agreement. The ICC therefore did not reach the question of whether the 
agency could have prescribed the proposed agreement under part 1144 
based on a determination that the incumbent carrier's contract rates 
were excessive. Without the ICC having reached that question, nothing 
in Vista Chemical suggests that the Board may apply performance 
standards to contract traffic as the basis for prescribing a post-
termination reciprocal switching agreement.
    Nor do United States Rail Service Issues, EP 724 (STB served Dec. 
30, 2014), and United States Rail Service Issues--Performance Data 
Reporting, EP 724 (Sub-No. 4) (STB served Nov. 30, 2016) support the 
shipper organizations' position. (See Coal. Ass'ns Comments 11 n.10.) 
Those decisions required reporting of data regarding contract traffic 
to the Board as part of overall network reporting,\83\ but they did not 
take further action that would regulate contract traffic. In the 2014 
proceeding in Docket No. EP 724, BNSF opposed certain proposals made by 
a party to the proceeding on the ground that ``[t]he Board does not 
have authority to impose service recovery obligations on BNSF that 
would over-ride'' contractual obligations. BNSF Reply 13, U.S. Rail 
Serv. Issues, EP 724 (Nov. 3, 2014). While the Board acknowledged that 
this was a ``significant concern'' and that ``[section] 10709 could 
have an impact on the scope of any prospective relief,'' it also 
explained that ``[t]he national rail system carries both regulated and 
non-regulated traffic and the Board necessarily must look to the 
fluidity of that network.'' U.S. Rail Serv. Issues, EP 724, slip op. at 
7. The Board's order required production of data to the Board but did 
not adopt the farther-reaching service recovery obligations that were 
the primary focus of BNSF's objections. Id. In the 2016 proceeding in 
Docket No. EP 724 (Sub-No. 4), the Board adopted a final rule requiring 
Class I railroads to report certain service performance metrics. AAR 
objected to the requirements on the ground that most coal 
transportation takes place under contract, but the Board responded that 
this argument ``does not take into account our statutory responsibility 
to advance the goals of the RTP, which . . . includes monitoring 
service in order to ensure the fluidity of the national rail network.'' 
U.S. Rail Serv. Issues--Performance Data Reporting, EP 724 (Sub-No. 4), 
slip op. at 18 (citing 49 U.S.C. 10101(3), (4)). The Board went on to 
say: ``The Board is not asserting jurisdiction regarding the rights and 
obligations of shippers and carriers associated with coal moving under 
contracts; rather, the Board is taking action to gain a better 
understanding of and insight into the general flow of traffic on the 
system.'' Id.
---------------------------------------------------------------------------

    \83\ The Board has authority to require carriers to report 
information pursuant to 49 U.S.C. 1321 and 49 U.S.C. 11145(a)(1).
---------------------------------------------------------------------------

    Neither decision supports the use of contract performance data as 
the basis for prescribing a reciprocal switching agreement under part 
1145. Both decisions merely affirm that the Board itself may collect 
general network data that may include contract movements for the 
purpose of monitoring and understanding network fluidity. Indeed, the 
2014 decision in Docket No. EP 724 cautions that section 10709 will 
limit the scope of prospective relief that the Board can provide with 
respect to contract traffic, describing this issue as a ``significant 
concern.'' U.S. Rail Serv. Issues, EP 724, slip op. at 7. Thus, the 
Board recognized that, even though it has broad authority to monitor 
contract traffic, its authority to order relief with respect to 
contract traffic, even to promote network fluidity, is far more 
limited.
    The Coalition Associations also argue that language in the Board's 
decision in Expedited Relief for Service Inadequacies supports their 
position that the Board's actions to promote network fluidity may 
extend to contract traffic. (Coal. Ass'ns Comments 11-12 & n.10.) In 
that decision, the Board said that:

    As for transportation that is provided under a rail 
transportation contract, AAR is correct that we cannot enforce, 
interpret, or disturb the contracts themselves, nor can we directly 
regulate transportation that is provided under such a contract. 49 
U.S.C.

[[Page 38696]]

10709(b), (c). However, where no transportation is being provided, 
we do not believe that the mere existence of a contract precludes us 
from providing for temporary emergency service, upon a proper 
showing, so that traffic can move while any contract-related issues 
are being litigated in the courts. Moreover, there may be other 
instances where it is possible and appropriate to exercise our broad 
regulatory authority to ensure that traffic can move, as in the 
recent UP/SP Service Order. Thus, we are not inclined to disavow in 
advance any possible exercise of jurisdiction. Such jurisdictional 
issues are best left to a case-by-case examination and, again, our 
assertion of jurisdiction in any specific case will be subject to 
judicial review.

Expedited Relief for Serv. Inadequacies, 3 S.T.B. at 976.\84\
---------------------------------------------------------------------------

    \84\ In its 2024 decision revising its emergency service 
regulations, the Board said that it saw ``no reason to revisit'' its 
statements about contract traffic in Expedited Relief for Serv. 
Inadequacies. Expedited Relief for Serv. Emergencies, EP 762, slip 
op. at 28.
---------------------------------------------------------------------------

    The Board disagrees that this passage from the Board's 1998 
decision in Expedited Relief for Serv. Inadequacies supports the 
Coalition Associations' position. First, the proposed rule here is not 
designed to provide ``temporary emergency service'' in situations where 
``no transportation is being provided,'' so that language has little 
relevance here. Second, regarding the Board's statements that it would 
not ``disavow in advance any possible exercise of jurisdiction'' and 
that it would consider such issues via a ``case-by-case examination,'' 
the Board does not foresee any situations where it would order 
reciprocal switching under the proposed rule based on the failure of 
contract traffic to meet the performance standards for the reasons 
discussed above. Accordingly, the Board does not need to preserve a 
``case-by-case examination'' of this sort with respect to contract 
traffic under this rule.
    Nor do Burlington Northern and FMC Wyoming support the use of 
contract performance data as a basis for post-expiration reciprocal 
switching. Taken together, these cases suggest that the Board can 
require a carrier to establish a common carriage rate while still under 
contract--as long as the contract would expire ``within a matter of 
weeks,'' FMC Wyo., slip op. at 3 n.7, rather than ``more than a year,'' 
Burlington N., 75 F.3d at 688.\85\ But requiring a carrier to file a 
tariff rate prior to expiration does not attach any regulatory 
consequences to the carrier's conduct while under contract. Thus, it is 
not analogous to the use of contract performance data for reciprocal 
switching, which conflicts with section 10709 precisely because it 
creates consequences for contractual performance.
---------------------------------------------------------------------------

    \85\ In the ICC decision that led to the D.C. Circuit decision 
in Burlington Northern, the ICC found that ordering Burlington 
Northern to file a common carrier rate while still under contract 
would not violate the former 49 U.S.C. 10713 (the predecessor to 
section 10709). W. Tex. Utils. Co. v. Burlington N. R.R., NOR 41191, 
slip op. at 4 (ICC served Oct. 14, 1994). The ICC reasoned that it 
could order carriers to file common carrier rates while still under 
contract because this was an exercise of authority with respect to 
future common carrier transportation, not over contract 
transportation. Id. at 4 & n.9. The D.C. Circuit's ruling did not 
specifically address the ICC's conclusion about section 10713, 
instead finding that other components of the statutory scheme 
limited the ICC's ability to order the filing of common carrier 
rates more than a year before the contract expires. The D.C. Circuit 
did not, however, suggest that section 10713 or any other provision 
requires the Commission to wait until after expiration to issue such 
an order.
---------------------------------------------------------------------------

    The Board's use of contract data in ``Three Benchmark'' rate cases 
also does not support the use of contract data as the basis for a 
reciprocal switching prescription under the proposed rule. (See Coal. 
Ass'ns Comments 10 n.6; WCTL Comments 4-5; WCTL Reply 13-14.) The 
Coalition Associations point to language in Simplified Standards for 
Rail Rate Cases, EP 646 (Sub-No. 1) (STB served Sept. 5, 2007), in 
which the Board decided that it would look to contract traffic rates to 
establish a benchmark to determine the maximum lawful rate for the 
challenged movement in rate cases.\86\ (Coal. Ass'ns Comments 10 n.6.) 
The use of contract rates for this purpose in rate cases is 
distinguishable from the possible use of contract performance data 
under the proposed rule. In rate cases, the Board uses contract traffic 
data as the basis for possible regulatory consequences for similar 
common carrier traffic, not for the traffic moving under contract. In 
contrast, using contract traffic data as the basis for reciprocal 
switching under part 1145 would attach potential regulatory 
consequences based on performance under the contract itself. Similarly, 
in the cases that WCTL cites, (see WCTL Reply 13-14), the Board looked 
to contract traffic only as evidence and not as the basis for 
regulatory action with respect to that traffic. See W. Fuels Ass'n, 
Inc. v. BNSF Ry., NOR 42088, slip op. at 38-39 (STB served Sept. 10, 
2007); Ariz. Elec. Power Coop., Inc. v. BNSF Ry., NOR 42113, slip op. 
at 25 (STB served Nov. 22, 2011).
---------------------------------------------------------------------------

    \86\ In that case, carriers argued that contract movements 
``cannot be easily compared with a challenged common carrier 
movement.'' Simplified Standards for Rail Rate Cases, EP 646 (Sub-
No. 1), slip op. at 82 (STB served Sept. 5, 2007). The Board 
rejected the argument, observing that contract rates may provide 
useful information as to the maximum lawful rate and that excluding 
contract rates may, in some cases, ``leave insufficient movements in 
the Waybill Sample to perform a statistically meaningful comparison 
analysis.'' Id. at 83.
---------------------------------------------------------------------------

    The Board appreciates the concerns of shippers and shipper 
organizations that the Board's decision not to consider the performance 
of contract traffic may limit the impact of the proposed rule.\87\ As 
these commenters have noted, a large percentage of rail traffic is 
shipped under contract, and the rule will be less effective at 
promoting overall network fluidity if poor contract traffic performance 
is beyond the direct reach of the rule. (See, e.g., Coal. Ass'ns Reply 
5, 9; AFPM Comments 15; WCTL Comments 2-3, 5; ACD Reply 2.) \88\ The 
Board also recognizes the concerns of shipper organizations that 
excluding contract performance data will create a cumbersome path for 
contract shippers to take advantage of the rule, requiring them to 
allow their contracts to expire and accept a period of common carrier 
service before becoming potentially eligible to seek relief under the 
rule. (See Coal. Ass'ns Reply 5-6; WCTL Reply 14-15; ACD Reply 2.) 
Congress has limited the Board's statutory authority with respect to 
contract traffic, as discussed above.\89\ To the extent the

[[Page 38697]]

rule achieves its objectives with respect to common carrier traffic, 
the Board expects that it will improve network performance overall, 
which could benefit contract shippers in this interconnected industry. 
The Board notes that many trains haul both common carrier and contract 
traffic, and a congested yard or line can degrade the performance of 
both types of traffic, whether hauled together or separately. 
Incentives for the reliability and consistency of common carrier 
transportation may therefore positively affect both types of traffic by 
promoting the fluidity of shared facilities.
---------------------------------------------------------------------------

    \87\ The Board does not agree with the Coalition Associations, 
however, that ``the Board's entire proposal would be meaningless'' 
if contract performance cannot be considered. (See Coal. Ass'ns 
Reply 5.) The Board's jurisdiction is focused on common carrier 
traffic by congressional design; thus, if the rule can achieve its 
objectives with respect to common carrier traffic, this would make 
it worthwhile.
    \88\ Several shipper organizations argue that common carrier 
traffic and contract traffic are so intertwined that the rule would 
be difficult to administer if contract traffic is excluded. (See, 
e.g., AFPM Comments 15-16; Coal. Ass'ns Reply 8; DCPC Comments 3, 
5.) To the extent that these commenters are concerned that it will 
be difficult to filter the performance of common carrier traffic 
from that of contract traffic, (see AFPM Comments 15-16; Coal. 
Ass'ns Reply 8), the Board does not share this concern. It is 
reasonable to expect that shippers will have access to the 
information they need to know which of their traffic moves under 
contract and which moves under common carriage, as that is a key 
factor for Board regulation in general. DCPC argues that shippers 
will find it difficult to ensure that contract shipments are never 
inadvertently moved via the alternate carrier because ``for various 
reasons, whenever people are involved in a process, mistakes 
happen.'' (DCPC Comments 3.) In light of section 10709, the 
extension of the rule to contract traffic is not a viable solution 
to this problem, to the extent it exists.
    \89\ DCPC suggests that the Board should apply part 1145 to 
contracts because the term ``rail contract'' is not defined and that 
railroads sometimes publish rates in non-distribution tariffs, with 
the word ``contract'' on the title page, that railroads deem binding 
``when a shipper moves traffic on the rate,'' even when the shipper 
has not signed or otherwise agreed to the terms. (DCPC Reply 3; see 
also DCPC Comments 5.) DCPC's concern is beyond the scope of this 
proceeding. See Rail Transp. Conts. Under 49 U.S.C. 10709, EP 676, 
slip op. at 5 (STB served Jan. 22, 2010) (determining that the Board 
will ``continue to address on a case-by-case basis the issue of 
whether a document constitutes'' a contract under section 10709 or a 
tariff). Consistent with this case-by-case approach, a shipper may 
seek a determination from the Board as to whether a particular 
arrangement is not a section 10709 contract, notwithstanding how the 
document is labeled.
---------------------------------------------------------------------------

Requiring a Carrier To Provide Performance Data to a Shipper During the 
Term of a Contract

    Related to the first question, the Board requested comment in the 
NPRM on whether the agency may require a railroad to provide 
performance metrics to a rail customer during the term of a contract 
upon that customer's request. NPRM, 88 FR at 63909. AAR argues that 
requiring a rail carrier to provide information to a customer while 
under contract is barred by section 10709(b) because that would add an 
additional ``duty'' to the carrier's existing contractual obligation. 
(AAR Comments 35-36; AAR Reply 14-15.) AAR argues that, if a shipper 
wants a carrier to provide metrics for performance under contract, then 
it can bargain for them in contractual negotiations. (AAR Comments 36.) 
Although AAR recognizes that the Board's decision in Demurrage Billing 
Requirements, EP 759, did not distinguish between contract and common 
carrier traffic when it required carriers to provide information to 
their customers in demurrage invoices, AAR says that the decision 
contains no discussion of section 10709 and is therefore a ``drive-by 
jurisdictional ruling[]'' that has ``no precedential effect.'' (AAR 
Reply 15 (quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 
83, 91 (1998)).)
    The Coalition Associations argue that because the Board has 
authority, in their view, to consider contract performance data when 
deciding whether to prescribe reciprocal switching, it follows that the 
Board has authority to require carriers to provide performance data to 
contract customers. (Coal. Ass'ns Comments 13.) The Coalition 
Associations point to Demurrage Billing Requirements, EP 759, as 
precedent for requiring railroads to provide information to contract 
customers, noting that one item required on demurrage invoices is OETA, 
which is also one of the performance metrics under this rule. (Coal. 
Ass'ns Comments 13-14.) WCTL notes that the Board requires railroads to 
provide data to the Board regarding contract service pursuant to 49 
U.S.C. 11145 and suggests that requiring them to provide data about 
contract service to shippers is no different. (WCTL Reply 14.) In 
addition, WCTL argues that providing data is permitted by section 10709 
because it does not fall within the definition of ``transportation'' 
under 49 U.S.C. 10102. (WCTL Reply 14.)
    The Board need not address whether it has statutory authority to 
require carriers to provide, to the relevant customer, data regarding 
the railroad's performance under a contract. Because the Board will not 
prescribe reciprocal switching under part 1145 based on performance 
during the term of a contract, the Board sees no basis to require 
railroads to provide the data in question to customers that are not 
eligible to file a petition under the rule. Though the Board values 
open communication between carriers and shippers generally and 
encourages carriers to voluntarily provide performance data relevant to 
transportation under contract, in this proceeding commenters did not 
identify any purpose for requiring the provision of contract 
performance data other than using it as the basis for a petition under 
part 1145.

Whether a Reciprocal Switching Petition May Be Filed Prior to Contract 
Expiration

    Regarding the second question in the NPRM--``when, prior to the 
expiration of a transportation contract between the shipper and the 
incumbent carrier, the Board may prescribe a reciprocal switching 
agreement that would not become effective until after the contract 
expires''--the Board received only a few comments. AAR asserts that the 
Board cannot consider a prescription for reciprocal switching until the 
contract has expired (and any petition must be based on common carrier 
service that the shipper received after expiration). (See AAR Comments 
36.) WCTL proposes that, ``consistent with practice in maximum rate 
cases,'' the rule should allow shippers to seek agency reciprocal 
switching relief within the final calendar quarter of any given rail 
transportation contract's term.'' (WCTL Comments 4.) The Coalition 
Associations propose a schedule that would allow contract shippers to 
file petitions while the contract is in effect, and the reciprocal 
switching prescription, if granted, would go into effect no more than 
one year from the date of the shipper's petition. (Coal. Ass'ns 
Comments 19.) This would allow shippers to file up to one year before 
contract expiration and receive the full benefit of the prescription. 
(Id. at 19-20.) CN opposes the Coalition Associations' proposal on the 
ground that a petition filed one year before the contract expires 
``will have no bearing on whether service to that shipper is inadequate 
one year later.'' (CN Reply 16-17.)
    Given the Board's decision not to rely on performance that occurs 
during the term of a contract as the basis for a prescription under 
part 1145, it is unnecessary to consider how far in advance of contract 
termination the Board may issue such a prescription. Because a 
prescription under part 1145 must be based on common carrier 
transportation performance, shippers will need to petition under part 
1145 after contract termination and after experiencing service under 
common carriage for at least 12 weeks.

Other Issues

    Commenters made additional contract-related suggestions that were 
not directly related to one of the questions above: (1) allowing 
reciprocal switching prescriptions to go into effect before contract 
termination, with respect to volume that exceeds the shipper's minimum 
volume commitment as specified in a contract; and (2) treating 
contractual provisions that preclude the application of reciprocal 
switching relief as violations of the common carrier obligation.\90\
---------------------------------------------------------------------------

    \90\ In addition, the Coalition Associations suggested reopening 
Docket No. EP 711 (Sub-No. 1) as a way of addressing contract 
performance, given that they view the application of part 1145 to 
contract performance as ``fraught with appellate risk.'' (Coal. 
Ass'ns Reply 47-48.) The Board addresses this proposal in the 
Introduction.
---------------------------------------------------------------------------

    First, the Coalition Associations ``perceive an implicit 
assumption'' in the NPRM that ``the existence of a contract forecloses 
any reciprocal switching until the contract has expired.'' (Coal. 
Ass'ns Comments 15.) They argue that this assumption is incorrect 
because ``many rail contracts do not contain 100% volume commitments,'' 
and, absent such a commitment, ``there more than likely is some volume 
that a shipper can tender to an alternate carrier even before its 
contract with the incumbent carrier expires.'' (Id.) Similarly, NMA 
argues that ``absent any type of minimum annual volume guarantee or 
exclusive

[[Page 38698]]

use guarantee with the incumbent,'' a shipper could ``maintain its 
contract with the incumbent railroad'' and still ``ship with the 
alternative carrier.'' (NMA Comments 7.) CPKC responds that even if the 
contract does not specifically prohibit the use of an alternate 
carrier, the Board cannot prescribe a reciprocal switching agreement 
that would go into effect during the term of a contract because it 
would need to base such a prescription on contract performance data. 
(CPKC Reply 30-33.)
    The Board will not extend part 1145 to allow prescribed reciprocal 
switching agreements to go into effect prior to the expiration of a 
contract, even with respect to a volume of traffic that exceeds the 
contract minimum. Doing so would require the Board to use contract 
performance as the basis for action under part 1145, which, as the 
Board has explained, is inconsistent with section 10709. Moreover, the 
NPRM did not propose allowing reciprocal switching prescriptions to go 
into effect during the term of a contract. See NPRM, 88 FR at 63909 
(asking whether the Board may consider performance data as the grounds 
for a reciprocal switching agreement ``that would become effective 
after the contract expired,'' and when the Board may prescribe a 
reciprocal switching agreement ``that would not become effective until 
after the contract expires'' (emphasis added)).\91\
---------------------------------------------------------------------------

    \91\ NMA appears to argue that the NPRM did provide notice of 
this option, stating: ``The STB noted such a scenario in the 
Decision when it stated that the petitioner, i.e., the shipper, 
would not be required to rely on the alternate carrier for any 
portion of the petitioner's traffic during the term of the 
prescription.'' (NMA Comments 7 & n.17 (citing NPRM, 88 FR at 
63901).) This statement, which appears outside the contract section 
of the NPRM and makes no reference to contracts, is not enough to 
provide notice that the Board was contemplating reciprocal switching 
agreements that would go into effect prior to expiration.
---------------------------------------------------------------------------

    Second, FRCA and NCTA argue that: ``It may become appropriate to 
consider whether new contracts that preclude the application of 
reciprocal switching relief for inadequate service are consistent with 
49 U.S.C. [] 11101(a) (`Commitments which deprive a carrier of its 
ability to respond to reasonable requests for common carrier service 
are not reasonable.').'' (FRCA/NCTA Comments 4.) This suggestion arises 
in connection with their observation that ``the NPRM proposal may 
become a baseline against which parties negotiate contracts.'' (Id.) 
AAR says that the Board should reject this proposal because ``it comes 
with no substantive rationale,'' and ``it is unclear why a carrier's 
contract terms about whether one shipper could seek a switching order 
would create a danger of the carrier violating its common carrier 
obligation to other shippers.'' (AAR Reply 17-18.) This issue is beyond 
the scope of this proceeding. Indeed, FRCA and NCTA do not appear to 
argue that the Board should act on their proposal in the final rule, 
framing it instead as something that ``may become appropriate'' in the 
event that the NPRM proposal becomes a baseline against which parties 
negotiate contracts. (FRCA/NCTA Comments 4.)

Exempt Traffic

    In the NPRM, the Board noted that ``some transportation that has 
been exempted from Board regulation pursuant to 49 U.S.C. 10502 could 
be subject to an order providing reciprocal switching under part 
1145.'' NPRM, 88 FR at 63909. The Board explained that it retains 
``full jurisdiction to deal with exempted transportation, which 
includes considering whether service received by the petitioner prior 
to filing the petition meets the performance standards under this 
proposed part.'' Id. The Board further explained that it is ``well 
established that the Board can revoke the exemption at any time, in 
whole or in part, under section 10502(d),'' and that the Board ``would 
do so to the extent required.'' Id.
    Comments from railroads and AAR focus primarily on three arguments. 
First, they contend that the Board cannot use performance metrics from 
the incumbent carrier's exempt traffic as the basis for reciprocal 
switching prescriptions. (See, e.g., AAR Comments 37-41; CN Comments 
55-56; BNSF Comments 13-14.) Even if the Board revokes the exemption, 
they argue, the Board cannot rely on pre-revocation performance data as 
the basis for a reciprocal switching prescription because this would 
amount to unlawful retroactive regulation. (See, e.g., AAR Comments 37-
41; CN Comments 55-56; BNSF Comments 13-14.) Instead, they say, a 
shipper must petition for partial revocation of an exemption to the 
extent necessary to permit reciprocal switching, and then, if the Board 
grants partial revocation, the shipper may file a petition for 
reciprocal switching in the future based solely on the incumbent 
carrier's post-revocation performance. (See, e.g., AAR Comments 41; CN 
Comments 56; BNSF Comments 13; AAR Reply 23; BNSF Reply 5.) In support 
of this argument, they rely on Pejepscot Industrial Park--Petition for 
Declaratory Order, 6 S.T.B. 886 (2003), and Sanimax USA LLC v. Union 
Pacific Railroad (2022 Sanimax Decision), NOR 42171 (STB served Feb. 
25, 2022), both of which concluded that the Board could not award 
damages for conduct that took place while the relevant traffic was 
exempt. (See, e.g., AAR Comments 37-41; CN Comments 55-56; BNSF 
Comments 13-14.)
    Second, AAR and some railroads argue that the Board cannot grant 
partial revocation to allow reciprocal switching based solely on a 
carrier's failure to meet the performance standards. (See, e.g., AAR 
Comments 37; AAR Reply 19-20; CPKC Reply 36.) They contend that poor 
service does not by itself demonstrate that revocation is necessary to 
carry out the RTP of 49 U.S.C. 10101, as required by the statutory 
standard for revocation in 49 U.S.C. 10502(d). (See, e.g., AAR Reply 
19-20; CPKC Reply 36.) AAR also contends that poor service is not 
enough to establish that the carrier abused its market power, which AAR 
says is a required showing for revocation. (See AAR Reply 19; see also 
BNSF Reply 5 n.2 (citing cases that discuss the significance of market 
power in revocation proceedings).) Third, AAR and several railroads 
reject the arguments of some shippers that the Board could revoke 
exemptions to the extent necessary to permit reciprocal switching in 
the final rule, as opposed to in a separate proceeding in the future. 
(See, e.g., AAR Reply 20-23; BNSF Reply 6; CPKC Reply 34-35.)
    Shipper organizations that commented on the issue argue that 
shippers of exempt traffic should be able to obtain a reciprocal 
switching prescription without the need for cumbersome proceedings, and 
they offer various suggestions regarding how the Board could facilitate 
this. FRCA and NCTA argue that the Board should partially revoke an 
exemption whenever the performance of exempt traffic becomes 
``inadequate,'' because poor service demonstrates that market forces 
are insufficient to carry out the RTP and to protect shippers from the 
abuse of market power. (FRCA/NCTA Comments 4.) PCA as well as AF&PA and 
ISRI urge the Board to revoke certain exemptions \92\ in the final rule 
to the extent necessary to allow reciprocal switching, because this 
would ensure that shippers will not need to initiate time-consuming 
revocation proceedings

[[Page 38699]]

before they can pursue reciprocal switching. (PCA Comments 10; AF&PA/
ISRI Comments 6-7, 10-15.) \93\ AF&PA and ISRI argue that partially 
revoking these exemptions in the final rule would be a logical 
outgrowth of the NPRM. (See AF&PA/ISRI Comments 6-7; AF&PA/ISRI Reply 
13-15.) \94\
---------------------------------------------------------------------------

    \92\ Specifically, AF&PA and ISRI argue for partial revocation 
of exemptions for certain forest and paper products and scrap metal 
commodities, as well as the boxcar exemption to the extent it covers 
transportation of these commodities, and PCA argues for partial 
revocation of the hydraulic cement exemption. (AF&PA/ISRI Comments 
6; PCA Comments 10.) PCA and DCPC, as well as AF&PA and ISRI, also 
urge the Board to revoke certain exemptions in their entirety, 
although not necessarily as part of the final rule. (PCA Comments 
10; AF&PA/ISRI Reply 15; DCPC Reply 3.)
    \93\ AF&PA and ISRI argue that the procedure proposed by 
carriers--requiring shippers to petition for revocation, wait at 
least 12 weeks until the newly regulated service fell short of a 
performance metric, and then petition for reciprocal switching--
would ``effectively exclude[]'' shippers of exempt traffic from the 
benefits of the rule. (AF&PA/ISRI Reply 15.)
    \94\ AF&PA and ISRI also argue that if the Board does not 
partially revoke these exemptions in the final rule due to concerns 
that it is not a logical outgrowth of the NPRM, the agency should 
issue a supplemental notice of proposed rulemaking or open a new 
sub-docket to address the issue. (AF&PA/ISRI Reply 15.)
---------------------------------------------------------------------------

    Moreover, AF&PM and ISRI reject the contention that consideration 
of pre-revocation performance as a basis for reciprocal switching is 
impermissibly retroactive. (AF&PA/ISRI Reply 10-13.) They point out 
that the Board's 2022 Sanimax Decision said that ``prospective 
relief,'' unlike damages, may be based on pre-revocation facts. (AF&PA/
ISRI Reply 12 (citing 2022 Sanimax Decision, NOR 42171, slip op. at 
4).) They argue that reciprocal switching is prospective because it 
``would only affect future movements and future competition between the 
incumbent and the alternate carrier.'' (AF&PA/ISRI Reply 11; see also 
NSSGA Reply 6 (``[T]he Board has recognized that past periods of exempt 
service may be rightly considered in future proceedings.'').)
    Finally, some shipper organizations suggest that the Board could 
prescribe a reciprocal switching agreement with respect to some exempt 
traffic without partially revoking the exemptions, because the 
``commodities may have been exempted for reasons related to 
competition,'' but ``that rationale should not extend to this rule 
which is by contrast explicitly designed to address universally poor 
service.'' (See NSSGA Comments 5; EMA Comments 4-5; PRFBA Comments 5.) 
AF&PA and ISRI point out that in PYCO Industries, Inc.--Alternative 
Rail Service--South Plains Switching, Ltd. (June 2006 PYCO Decision), 
FD 34802 et al. (STB served June 21, 2006), the Board announced that it 
could order alternative rail service with respect to exempt traffic 
when traffic consists of a mix of regulated and exempt commodities and 
it would not be practical to provide separate service for the two types 
of traffic. (AF&PA/ISRI Reply 11-12 (citing June 2006 PYCO Decision, FD 
34802 et al., slip op. at 1, 3-4).) \95\
---------------------------------------------------------------------------

    \95\ As AF&PA and ISRI acknowledge, the Board in PYCO revoked 
the exemption even though it said that revocation was not necessary. 
(AF&PA/ISRI Reply 12 (citing June 2006 PYCO Decision, FD 34802 et 
al.).) But AF&PA and ISRI note that the Board initially prescribed 
alternative rail service without revocation, ``and the Board never 
stated that that decision was in error.'' (Id.)
---------------------------------------------------------------------------

    First, the Board will not, as a general matter, prescribe 
reciprocal switching or require the production of data under Sec.  
1145.8(a) with respect to exempt traffic unless it first revokes the 
exemption at least to the extent necessary to do so. Although NSSGA, 
EMA, and PRFBA suggest that the Board may prescribe reciprocal 
switching with respect to exempt commodities that were exempted ``for 
reasons related to competition'' rather than service issues, (NSSGA 
Comments 5, EMA Comments 4-5, PRFBA Comments 5), the Board's commodity 
exemptions do not make such a distinction. Rather, the commodity 
exemptions apply to all of Subtitle IV of Title 49 of the U.S. Code, 
except where otherwise indicated in the exemption or required by 
statute. Because the reciprocal switching statute, 49 U.S.C. 11102, 
falls within Subtitle IV, regulations promulgated under this provision 
generally cannot be applied to these commodities, regardless of the 
original rationale for the exemption or the purposes of this rule. The 
only exception is the boxcar exemption, which expressly retains Board 
regulation with respect to reciprocal switching.\96\ With respect to 
the production of data, the Board will not require carriers to provide 
performance data for exempt traffic because, as discussed below, the 
Board will not rely on the performance of exempt traffic as the basis 
for reciprocal switching under the rule.
---------------------------------------------------------------------------

    \96\ See 49 CFR 1039.14(b)(3). The Board may therefore require 
the production of data and prescribe reciprocal switching with 
respect to any traffic that is subject only to the boxcar exemption.
---------------------------------------------------------------------------

    As AF&PA and ISRI point out, the Board ordered alternative rail 
service with respect to exempt traffic in the PYCO matter. (See AF&PA/
ISRI Reply 11-12 (citing June 2006 PYCO Decision, FD 34802 et al., slip 
op. at 1, 3-4).) In PYCO Industries, Inc.--Alternative Rail Service--
South Plains Switching, Ltd. (January 2006 PYCO Decision), FD 34802 
(STB served Jan. 25, 2006), without addressing the presence of exempt 
commodities because it had not been raised by the parties, the Board 
initially issued an emergency service order under 49 U.S.C. 11123 and 
49 CFR part 1146 that covered a mix of exempt and regulated traffic 
without revoking the exemption. See January 2006 PYCO Decision, FD 
34802, slip op. at 9. After the exemption issue was raised, the Board 
extended the emergency service order, stating that when ``the rail 
traffic at issue consists of both regulated and exempt commodities and 
it would not be practical to provide separate service for the two types 
of traffic,'' it could ``order alternative rail service as to all of 
the shipments.'' See June 2006 PYCO Decision, FD 34802 et al., slip op. 
at 4. Nevertheless, the Board revoked the exemption to the extent 
necessary to order alternative rail service, id., and did so again in a 
subsequent alternative rail service order under 49 U.S.C. 11102(a) and 
part 1147, PYCO Indus.--Alt. Rail Serv.--S. Plains Switching, Ltd. 
(November 2006 PYCO Decision), FD 34889 et al., slip op. at 5-6 (STB 
served Nov. 21, 2006). At most, the PYCO decisions indicate that when 
it is not practical to separate exempt and regulated traffic, the Board 
could consider issuing an order that affects traffic generally rather 
than abstaining from regulating the non-exempt traffic, particularly in 
emergency situations. But it is significant that the Board ultimately 
revoked the exemption in PYCO after the issue was raised. For purposes 
of part 1145, shippers in a PYCO-like situation (with movements that 
involve both exempt and regulated traffic) should generally obtain 
revocation before filing a petition for a prescription.\97\
---------------------------------------------------------------------------

    \97\ Nothing would prevent shippers with PYCO-like mixed traffic 
from seeking a partial revocation with respect to their exempt 
traffic to the extent necessary so that the Board can order 
reciprocal switching with respect to the non-exempt traffic. 
Shippers would not need to wait until a service issue arises to file 
such a petition.
---------------------------------------------------------------------------

    Second, the Board will not partially revoke any exemptions as part 
of this final rule, as some shipper organizations have requested. (PCA 
Comments 10; AF&PA/ISRI Comments 6-7, 10-15.) AF&PA and ISRI argue that 
the NPRM's statement that the Board ``would'' revoke exemptions ``to 
the extent required,'' NPRM, 88 FR at 63909, along with the NPRM's 
statements indicating that the Board was assessing how to deal with 
exempt traffic, are sufficient to justify a partial revocation to carve 
out reciprocal switching in the final rule. (AF&PA/ISRI Reply 13-15.) 
It was not the Board's intent to propose an exemption revocation in 
this proceeding, nor did the NPRM identify any specific exemptions that 
it intended to revoke. Thus, the Board concludes that partial 
revocation in the final rule would not be an appropriate option.\98\

[[Page 38700]]

As discussed below, however, the Board is exploring future actions that 
would facilitate swifter access to part 1145 for petitioners with 
exempt commodities.
---------------------------------------------------------------------------

    \98\ AF&PA and ISRI say that if the Board is concerned that 
partial revocation is not a logical outgrowth of the NPRM, it should 
issue a supplemental notice of proposed rulemaking or open a new 
sub-docket to clarify that the Board is contemplating revoking the 
exemptions in the final rule. (AF&PA/ISRI Reply 15.) As discussed 
below, the Board will deal separately with any possible exemption 
revocations and avoid unnecessary delays to the implementation of 
this rule.
---------------------------------------------------------------------------

    Third, regarding the standard the Board will use to evaluate 
petitions for partial revocation to the extent necessary to permit a 
prescription of a reciprocal switching agreement, (see AAR Comments 37; 
AAR Reply 19-20; CPKC Reply 36), the Board concludes that a rail 
carrier's likely failure to meet a performance standard (based on data 
available from carrier online platforms or other sources) would be 
strong evidence to support partial revocation, but parties would be 
allowed to present counterbalancing evidence to demonstrate why partial 
revocation would not be warranted. The statutory standard for 
revocation provides that the Board may revoke an exemption when it 
finds that regulation ``is necessary to carry out the transportation 
policy of section 10101 of this title.'' 49 U.S.C. 10502(d). Although 
the statements in the NPRM about the RTP of section 10101 could provide 
support for revocation, see, e.g., NPRM, 88 FR at 63898, 63900, 63901, 
the Board would not prevent parties from making other arguments in 
revocation proceedings to develop a fuller record. Accordingly, in a 
proceeding to adjudicate a petition for partial revocation (either in a 
specific case or on a commodity-wide basis), the Board will consider 
other evidence that the affected parties believe is relevant regarding 
whether revocation is necessary to carry out the RTP. Failure to meet a 
performance standard would be relevant to this inquiry, but it would 
not necessarily be dispositive.\99\ Moreover, evidence of poor service 
may be relevant to this inquiry even if it would not establish that a 
rail carrier likely has failed to meet a performance standard. For 
example, a period of bad service could be relevant to a revocation 
inquiry even if it would not be long enough to cause a carrier to fail 
a performance standard.
---------------------------------------------------------------------------

    \99\ Reliance on a railroad's past conduct as a basis for 
revocation is not impermissibly retroactive, and carriers do not 
contend otherwise. Congress expressly gave the Board the power to 
revoke exemptions and placed no limitations on the type of evidence 
that the Board may consider when determining whether regulation is 
necessary to carry out the RTP. Accordingly, the Board must be able 
to examine carrier actions as the basis for revocation.
---------------------------------------------------------------------------

    In addition to RTP evidence, parties in some revocation proceedings 
also submit evidence regarding whether revocation is necessary to 
address the potential for abuse of market power. See, e.g., Sanimax USA 
LLC v. Union Pac. R.R., NOR 42171, slip op. at 3, 5 (STB served Nov. 2, 
2021). Although the market power inquiry is not required by the 
statute, the Board may consider and has considered such evidence in 
case-specific revocation proceedings, and the potential for abuse of 
market power generally weighs in favor of granting revocation.\100\ See 
generally Exclusion of Demurrage Regul. From Certain Class Exemptions, 
EP 760, slip op. at 6-7 (STB served Feb. 28, 2020). FRCA and NCTA argue 
that the existence of service inadequacies is sufficient proof that 
regulation is necessary to protect shippers from abuse of market power, 
(see, e.g., FRCA/NCTA Comments 4), and carriers retort that service 
inadequacies might occur for reasons unrelated to market power, (see, 
e.g., AAR Reply 19-20). Service inadequacies certainly can be 
indicative of market power, but there may also be other evidence in 
specific cases. Accordingly, in case-specific revocation proceedings, 
the Board will consider any relevant evidence submitted by the parties, 
including evidence, if any, about the existence of (and potential for 
abuse of) market power.\101\
---------------------------------------------------------------------------

    \100\ The Board has issued exemption revocation decisions 
without mentioning market power. See Exclusion of Demurrage Regul. 
from Certain Class Exemptions, EP 760, slip op. at 6-7. Nothing in 
this decision should be construed to suggest that a shipper or 
receiver needs to argue, let alone prove, that a carrier has market 
power to succeed on its petition to revoke an exemption.
    \101\ In the PYCO decisions, the Board relied on poor service as 
the basis for revocation, stating in one decision that ``[w]e view 
SAW's rail service as having been so inadequate as to amount to an 
abuse of market power,'' and that revocation will ``ensure the 
continuation of a sound rail system to meet the needs of the 
shipping public,'' consistent with 49 U.S.C. 10101(4). June 2006 
PYCO Decision, FD 34802 et al., slip op. at 4; see also November 
2006 PYCO Decision, FD 34889 et al., slip op. at 5 (relying on the 
analysis in the June 21, 2006 decision as the basis for revocation). 
There were myriad service issues considered in the PYCO decisions, 
based on the record developed by the parties in that case. See, 
e.g., January 2006 PYCO Decision, FD 34802, slip op. at 5 
(explaining that the carrier had significantly reduced the number of 
cars that the shipper could load per day, that the carrier had 
halted shipping entirely for a six-day period without an adequate 
explanation, and that the service was so bad that the shipper would 
need to ``curtail or close operations'' if there was no 
improvement). There was also evidence that the railroad was not 
likely to take measures to improve future service. See, e.g., June 
2006 PYCO Decision, FD 34802 et al., slip op. at 5-6 (describing 
evidence that the carrier appeared to be unable and unwilling to 
provide adequate service in the future). Thus, while the PYCO 
proceedings show that bad service can be the basis for revocation 
under some circumstances, they do not suggest that the Board should 
treat failure to satisfy a performance standard as dispositive in a 
partial revocation proceeding.
---------------------------------------------------------------------------

    Fourth, should the Board partially revoke an exemption, the Board 
clarifies that it will not rely on pre-revocation performance as the 
basis for a prescription of a reciprocal switching agreement under this 
rule. As noted above, AAR and several carriers argue that the Board 
cannot rely on pre-revocation performance as the basis for a 
prescription under part 1145 because this would amount to retroactive 
regulation. (See, e.g., AAR Comments 37-41; CN Comments 55-56; BNSF 
Comments 13-14.) AF&PA and ISRI respond that the Board has considered 
pre-revocation conduct as the basis for relief in other cases and that 
reciprocal switching is prospective in nature. (AF&PA/ISRI Reply 10-
13.) Given the specific features of this rule, the Board concludes that 
using pre-revocation data as the basis for a prescription would be 
retroactive in a way that raises fairness concerns. Although AF&PA and 
ISRI are correct that the Board has relied on pre-revocation conduct in 
the past as the basis for relief, the Board will not do so here because 
of how closely the rule links specific pre-revocation conduct to post-
revocation relief.
    In Pejepscot and Sanimax, the Board said that pre-revocation 
conduct cannot be the basis for damages under the common carrier 
obligation. Pejepscot, 6 S.T.B. at 892-93, 899; 2022 Sanimax Decision, 
NOR 42171, slip op. at 4. In Pejepscot, the Board reasoned that the 
railroad's conduct while an exemption was in effect could not have 
violated the common carrier obligation and that, therefore, the Board 
could not award damages for violation of the common carrier obligation 
based on that conduct. Pejepscot, 6 S.T.B. at 892-93, 899. Pejepscot 
says that the appropriate path for a shipper in such circumstances is 
to obtain partial revocation, after which the carrier could be liable 
for violations of the common carrier obligation based on post-
revocation conduct. Id. at 893 n.15. Like Pejepscot, Sanimax held that 
a shipper is not entitled to ``relief, including damages,'' for conduct 
that occurred prior to the Board's revocation of the exemption. 2022 
Sanimax Decision, NOR 42171, slip op. at 4. Sanimax explained that 
``[p]ermitting regulatory relief for the period the exemptions were in 
effect'' would be ``contrary to the principle that retroactive 
application of administrative determinations is disfavored,'' noting 
that there is a presumption against actions that would ``increase a 
party's liability for past conduct, or impose new

[[Page 38701]]

duties with respect to transactions already completed.'' Id. (quoting 
Landgraf v. USI Film Prods., 511 U.S. 244, 280 (1994)).
    Although AF&PA and ISRI correctly point out that Sanimax left the 
door open to some consideration of pre-revocation conduct in connection 
with ``prospective relief,'' (see AF&PA/ISRI Reply 12-13), there are 
important differences between how pre-revocation conduct would be used 
under part 1145 and how Sanimax contemplated that it would be used. In 
Sanimax, the Board said that ``UP's actions prior to [revocation] may 
be relevant to the Board's ultimate determination about what kind of 
prospective relief is warranted, if any.'' 2022 Sanimax Decision, NOR 
42171, slip op. at 4. Sanimax explains that the Board's ``broad'' 
discovery regulations allow parties to ``obtain discovery on any matter 
that is relevant'' and that some ``relevant facts giving rise to the 
complaint'' may have occurred prior to revocation. Id. But, although 
reciprocal switching under the rule is ``prospective'' in some 
respects,\102\ the rule's numerical performance standards establish a 
more direct link between pre-revocation conduct and post-revocation 
regulatory consequences that would have hallmarks of retroactive 
regulation. If the Board adopts AF&PA and ISRI's approach, pre-
revocation performance would be a decisive factor that would serve as 
the direct basis for a prescription of a reciprocal switching 
agreement, effectively creating new legal consequences for pre-
revocation conduct. This would go beyond merely looking at pre-
revocation conduct to the extent it ``may be relevant'' to the scope of 
prospective relief; rather, it effectively ``[p]ermit[s] regulatory 
relief for the period the exemptions were in effect.'' See 2022 Sanimax 
Decision, NOR 42171, slip op. at 4.\103\
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    \102\ Part 1145 is ``prospective'' in that it is not designed to 
punish carriers for poor performance or compensate shippers for 
losses incurred due to poor performance, but rather is intended ``to 
help ensure that the transportation system as a whole meets the 
public need.'' NPRM, 88 FR at 63902. And, as AF&PA and ISRI point 
out, reciprocal switching prescriptions ``would only affect future 
movements and future competition between the incumbent and the 
alternate carrier.'' (AF&PA/ISRI Reply 11.)
    \103\ The Board granted the parties' joint motion for voluntary 
dismissal in the Sanimax proceeding on February 15, 2024. Sanimax 
USA LLC v. Union Pac. R.R., NOR 42171 (STB served Feb. 15, 2024). At 
the time of dismissal, the Board had not granted prospective relief 
or addressed in further detail how pre-revocation conduct can be 
used when determining prospective relief.
---------------------------------------------------------------------------

    The two PYCO decisions on which AF&PA and ISRI rely, (AF&PA/ISRI 
Reply 11-12), do not compel the conclusion that the Board should rely 
on pre-revocation conduct as the basis for a prescription under part 
1145. In those decisions, the Board relied on pre-revocation conduct as 
the basis for prescribing alternative rail service under parts 1146 and 
1147.\104\ But, under its part 1147 regulation, the Board did so 
primarily as part of a broader inquiry into the incumbent railroad's 
conduct, acknowledging the carrier did not oppose PYCO's request for 
temporary alternative service on the merits. November 2006 PYCO 
Decision, FD 34889 et al., slip op. at 2. In both decisions, the Board 
determined that service was not likely to improve--a determination that 
was based primarily on the fact that the incumbent carrier all but 
refused to serve the petitioner--and ordered prospective relief under 
parts 1146 and 1147. See June 2006 PYCO Decision, FD 34802 et al., slip 
op. at 5-6; November 2006 PYCO Decision, FD 34889 et al., slip op. at 
4-5.\105\ In contrast, under shippers' proposed application of part 
1145, the Board would focus on a single aspect of the railroad's pre-
revocation conduct--failure to satisfy a performance standard--and 
would use that conduct as the very basis for prescribing a reciprocal 
switching agreement rather than a piece of evidence that supports 
predictions about future conduct. In effect, in contrast to the PYCO 
rulings, applying part 1145 to pre-revocation performance would 
specifically create consequences for that past performance.
---------------------------------------------------------------------------

    \104\ Because the PYCO decisions partially revoked the 
exemptions and ordered alternative service in the same decision, 
they necessarily relied on pre-revocation conduct as the basis for 
the alternative service. See June 2006 PYCO Decision, FD 34802 et 
al. (partially revoking the exemption to the extent necessary to 
grant emergency relief under 49 U.S.C. 11123 and 49 CFR part 1146 
and ordering emergency alternative service in the same decision); 
November 2006 PYCO Decision, FD 34889 et al. (same, with respect to 
alternative service under 49 U.S.C. 11102(a) and 49 CFR part 1147).
    \105\ The alternative rail service regulations at issue in the 
PYCO decisions, 49 CFR 1146.1 and 1147.1, require the petition to 
explain why the incumbent is unlikely to provide adequate rail 
service in the future. See 49 CFR 1146.1(b)(1)(ii) (requiring the 
petitioner to provide ``the reasons why the incumbent carrier is 
unlikely to restore adequate rail service consistent with the 
petitioner's current transportation needs within a reasonable 
time''); part 1147.1(b)(1)(ii) (same, with minor wording 
differences).
---------------------------------------------------------------------------

    The Board understands that this determination means that a shipper 
or receiver would need to obtain partial revocation of the exemption, 
and then wait until the newly regulated service fell short of the 
performance standards in part 1145, before filing a petition under part 
1145. To mitigate impediments arising from this two-step process, 
petitions for partial revocation filed in furtherance of part 1145 
cases will be prioritized in order to resolve them expeditiously. 
Moreover, the Board intends to explore whether it should partially 
revoke all exemptions, on its own initiative, to allow for reciprocal 
switching petitions, as is currently the case for the boxcar exemption. 
See 49 CFR 1039.14(b)(3) (expressly allowing for regulation of 
reciprocal switching for rail transportation of commodities in 
boxcars).\106\
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    \106\ The Board also notes that its NPRM proposing to revoke 
certain exemptions in their entirety remains under consideration. 
See Rev. of Commodity, Boxcar, & TOFC/COFC Exemptions, EP 704 (Sub-
No. 1) (STB served Mar. 23, 2016); see also Rev. of Commodity, 
Boxcar, & TOFC/COFC Exemptions, EP 704 (Sub-No. 1) (STB served Sept. 
30, 2020) (requesting comment on an approach developed by the Board 
for use in considering revocation issues).
---------------------------------------------------------------------------

Class II Carriers, Class III Carriers, and Affiliates

    The Board proposed to limit prescriptions under part 1145 to 
situations in which the incumbent rail carrier is a Class I carrier or, 
for purposes of the industry spot and pull standard, an affiliated 
company \107\ that serves the relevant terminal area. NPRM, 88 FR at 
63907. The Board explained that the service data the Board had been 
examining in Docket No. EP 770 (Sub-No. 1) focused on Class I rail 
carriers and that the Board has not received as many informal or formal 
complaints about smaller carriers. Id. Moreover, the Board noted that 
data collection may be more burdensome for Class II and Class III rail 
carriers, as they have not been submitting service-related data to the 
Board under performance metrics dockets, such as Docket Nos. EP 724 
(Sub-No. 4) and EP 770 (Sub-No. 1). Id. at 63907-08. Nevertheless, the 
Board sought comment on whether proposed part 1145 should be broadened 
to include Class II and Class III rail carriers that are providing 
inadequate service. Id. at 63908.
---------------------------------------------------------------------------

    \107\ For purposes of the NPRM and the proposed regulatory text, 
the Board proposed that ``affiliated companies'' has the same 
meaning as ``affiliated companies'' in Definition 5 of the Uniform 
System of Accounts (49 CFR part 1201, subpart A): ``Affiliated 
companies means companies or persons that directly, or indirectly 
through one or more intermediaries control, or are controlled by, or 
are under common control with, the accounting carrier.'' The Board 
also sought public comment as to whether its definition should also 
include third-party agents of a Class I carrier. NPRM, 88 FR at 
63902 n.9.
---------------------------------------------------------------------------

    Some shipper groups fear that the Board's proposal is too limited. 
NMA asserts that, for a number of its members, the interchanging Class 
III rail carrier is not affiliated with a Class I rail carrier. (NMA 
Comments 5.) ACD raises similar concerns, noting that a sizeable

[[Page 38702]]

portion of its members ``receive rail deliveries through short line 
railroads that take cargo from Class I railroads and are then delivered 
to a shared railyard.'' (ACD Comments 2.) It asserts that these members 
are effectively captive and experience many of the same issues 
addressed in this rulemaking. (Id.) NMA also suggests that Class I 
railroads could limit access to what would otherwise be an effective 
interchange location. (NMA Comments 6.) Similarly, PCA claims that 
exempting short lines from these rules may create perverse incentives 
for Class I carriers to include a short line as their agent in the 
transportation shipments to avoid the rules altogether. (PCA Comments 
15-16; see also VPA Comments 8 (seeking clarification of definition of 
``affiliated companies'' to specifically include belt railroads in 
which a Class I carrier has controlling authority).) ACD, NMA, and PCA 
therefore ask that the Board permit petitioners to seek a prescription 
based on a short line's service. However, in light of the Board's 
concerns about smaller railroads being required to comply with the data 
reporting obligations, ACD suggests that another option could be to 
limit the application of the rules only to Class II rail carriers, 
excluding Class III rail carriers. (ACD Comments 2.)
    Some groups also argue that the Board should allow a Class II or 
Class III rail carrier to be an alternate carrier. For example, PCA 
argues that the Board should allow a reciprocal switching agreement to 
be prescribed under part 1145 where a Class I railroad provides origin 
or destination service, but a short line railroad is able to 
participate in a reciprocal switching arrangement. (PCA Comments 15; 
see also DCPC Comments 12.) ACD adds that short line railroads have 
historically provided superior service compared to Class I railroads 
and that it believes short lines would be more receptive to accepting 
its members' smaller shipments. (ACD Comments 2.)
    AAR and ASLRRA oppose permitting a petition under part 1145 to be 
filed against a short line. ASLRRA asserts that none of the shipper 
comments cite legal authority or facts supporting their position, only 
anecdotal conclusory statements. (ASLRRA Reply 6-8.) ASLRRA also argues 
that there have been very few complaints about the service provided by 
short lines, that imposing the metrics outlined in the NPRM would be 
burdensome on the short lines, and that short lines provide good 
service based on local connections with their shippers. (Id.) In 
response to suggestions that an alternate carrier could be a Class II 
or Class III railroad, AAR suggests that, rather than departing from 
the NPRM and complicating the proposed rule, the Board should simply 
recognize that part 1147 can be invoked to address the highly unusual 
situations in which a shipper might want reciprocal switching to a 
Class II or Class III railroad. (AAR Reply 36; see also ASLRRA Reply 
5.)
    ASLRRA also proposes a definition for ``affiliated companies'' to 
ensure Class II and III rail carriers are not ``inadvertently covered'' 
under the new regulations:

    Affiliated companies means companies or persons that directly or 
indirectly through one or more intermediaries control, or are 
controlled by, or are under common control with the accounting 
carrier. . . . [A]n affiliated company is one that is included in a 
Class I railroad's annual combined rail reporting to the STB and 
that acts as an operating division of [a Class I] railroad.

(ASLRRA Comments 6.) \108\ ASLRRA is also concerned that including the 
term ``third-party agent'' in the definition of ``affiliated 
companies'' could theoretically capture any short line that contracts 
with a Class I railroad to provide functions such as switching services 
or haulage, which would blatantly contradict the exclusion of Class II 
and Class III short line railroads from the rule. It asserts that the 
term ``third-party agent'' is too amorphous and uncertain and should 
not be included. (ASLRRA Comments 5-7.)
---------------------------------------------------------------------------

    \108\ To the extent a regulation would permit a switch involving 
an affiliated company, BMWE argues that the Board should limit the 
meaning of ``affiliated company'' to subsidiaries or affiliates that 
are themselves Class I railroads (or are covered by a Class I 
railroad collective bargaining agreement). (BMWE Comments 4.) BMWE's 
argument, however, seems to stem from its belief that a Class II or 
Class III railroad would participate in a switch over the tracks of 
a Class I railroad or operate over the tracks of a Class I railroad. 
(Id.) BLET also raises concerns about Class II and Class III 
railroads operating on Class I lines and how that could infringe on 
collective bargaining rights, (BLET Comments 3), but these 
organizations' concerns seem to relate to trackage rights rather 
than reciprocal switching. The Board notes, however, that the Board 
may impose employee protective conditions on a reciprocal switching 
order under 49 U.S.C. 11102(c)(2).
---------------------------------------------------------------------------

    The Board will not extend its rule to permit a petitioner to seek 
prescription of a reciprocal switching agreement based on a Class II or 
Class III rail carrier's service. While there are surely times when 
short line railroads provide a lower level of service, they are 
historically not a significant source of the service problems this rule 
seeks to address, and the record here has not demonstrated a need to 
expand part 1145 to include the smaller carriers.\109\ See NPRM, 88 FR 
at 63907; (see also ACD Comments 2.) As proposed in the NPRM, the final 
rules adopted here generally will not apply to Class II and Class III 
rail carriers, except to the extent those carriers are ``affiliated 
companies'' as defined in Definition 5 of the Uniform System of 
Accounts (49 CFR part 1201, subpart A).\110\ For example, the final 
rule will not apply to a Class II and III rail carrier where a Class I 
rail carrier holds a stake but the Class II or III carrier is not an 
affiliated company of the Class I rail carrier (e.g., the New York, 
Susquehanna & Western, Railway Corporation or the Indiana Rail Road 
Company). The Board therefore does not agree with ASLRRA that the 
definition of ``affiliated companies'' should be revised.\111\ As such, 
the definition of ``affiliated companies'' that was proposed in the 
NPRM will be adopted. The Board will gain experience with this final 
rule before considering whether to expand the definition to include 
Class II, Class III, or third-party agents of a Class I carrier.
---------------------------------------------------------------------------

    \109\ ASLRRA also explains that a reciprocal switching 
prescription resulting in the loss of revenue from even one customer 
could be financially difficult for short lines because of their 
light density operations, high infrastructure costs, and smaller 
number of customers. (ASLRRA Comments 4.) However, if an independent 
Class II or independent Class III rail carrier is providing poor 
service, shippers can seek relief under parts 1146 and 1147.
    \110\ As to PCA's concern that the final rule will create 
perverse incentives for Class I rail carriers to include a short 
line as their agent to avoid the rule altogether, the Board finds 
that scenario unlikely. However, the Board would consider such 
arguments if they were more developed based on a specific situation.
    \111\ VPA asks that the Board clarify the definition of 
``affiliated companies'' to specifically include belt railroads in 
which a Class I carrier has controlling authority.'' (VPA Comments 
8.) Nothing on the face of the definition excludes belt line 
railroads, where other conditions in the definition are met. A 
separate question--one to be addressed on a case-by-case basis, 
based on the facts of the case at hand--is whether the Board could 
prescribe a reciprocal switching agreement that would require a belt 
line railroad to switch traffic with a given Class I carrier.
---------------------------------------------------------------------------

    The Board also will not prescribe a reciprocal switching agreement 
under part 1145 if the alternate line haul carrier would be a Class II 
or Class III rail carrier, other than Class II or Class III carriers 
that are affiliated companies of a Class I carrier. To allow an 
unaffiliated Class II or Class III rail carrier to serve as an 
alternate line haul carrier would raise a question of fairness in 
applying part 1145; a Class I railroad could lose its line haul to a 
Class II or Class III carrier under part 1145, but the Class II or 
Class III carrier would not be subject to the same possibility under 
part 1145. This determination is not meant to address whether a shipper 
could seek prescription of a reciprocal switching agreement under part 
1144 or

[[Page 38703]]

part 1147 where the alternate carrier would be a Class II or Class III 
rail carrier.

Labor

    AAR suggests that the NPRM is unclear on how labor's interests 
would be taken into account and who would bear the cost of labor 
protection requirements. (AAR Comments 94.) AAR asserts that, if the 
Board does not address those matters in this proceeding, it should do 
so in individual cases. (Id. at 95.) Labor interests also raise 
concerns about reciprocal switching prescriptions. For example, TTD 
asserts that reciprocal switching can interfere with labor agreements 
in some cases and cause the dislocation of existing operating 
employees. (TTD Comments 1.) SMART-TD also expresses concern about the 
specifics of how reciprocal switching prescriptions would work within 
the boundaries of its long-established collectively bargained 
agreements, and how it could be done without treading on the seniority 
rights that have long been established in the industry's workforce. 
(SMART-TD Comments 2.)
    The Board appreciates these concerns but does not anticipate that 
the prescription of a reciprocal switching agreement would frequently 
conflict with the scope clauses of a collective bargaining agreement. 
Under 49 U.S.C. 11102(c)(2), the Board may require a prescribed 
agreement to contain provisions for the protection of the interests of 
affected employees. The Board will consider on a case-by-case basis 
whether any such provision is appropriate based on the facts of that 
case.

Environmental Matters

    CSXT argues that the potential additional car handlings, yard 
activity, and transit delays from a Board-ordered switch could lead to 
more emissions and environmental impacts.\112\ (CSXT Comments 48.) It 
asserts that declines in network efficiency due to more switching could 
also push traffic to trucks. (Id. at 48-49.) CSXT further argues that 
switching could also alter traffic patterns for toxic by inhalation/
poisonous by inhalation (TIH/PIH) traffic or prompt high-volume 
shippers to add significant new traffic to alternative routes, which 
could trigger the Board's thresholds for environmental review. (Id. at 
49.) It claims that the Board should require environmental 
documentation for switching with the potential to create significant 
environmental effects pursuant to 49 CFR 1105.6(d).
---------------------------------------------------------------------------

    \112\ CSXT does not contest that the rulemaking itself is 
categorically excluded from environmental review. See NPRM, 88 FR at 
63911 (citing 49 CFR 1105.6(c)).
---------------------------------------------------------------------------

    Environmental review under the National Environmental Policy Act 
(NEPA), 42 U.S.C. 4321-4370m-11, for operational changes is only 
required where the Board's thresholds for environmental review would be 
met. The thresholds for assessing environmental impacts from increased 
rail traffic on rail lines are an increase in rail traffic of at least 
100% (measured in gross ton miles annually) or an increase of at least 
eight trains per day. 49 CFR 1105.7(e)(5)(i). For rail lines located in 
areas that are in nonattainment status under the Clean Air Act (42 
U.S.C. 7401-7671q), the threshold for air quality analysis is an 
increase in rail traffic of at least 50% (measured in gross ton miles 
annually) or an increase of at least three trains per day. 49 CFR 
1105.7(e)(5)(ii). Here, however, the Board doubts that a shipper 
choosing to reroute its traffic to an alternate carrier based on a 
Board prescription would result in enough rerouted traffic to reach any 
of these thresholds. Most switches would likely involve additional cars 
per day rather than additional trains per day.\113\ Moreover, because a 
prescription under this rule would ``involve interchange between two 
carriers,'' it would be ``closely analogous'' to an order providing for 
the common use of rail terminals, which is categorically excluded from 
environmental review under 49 CFR 1105.6(c)(3). Cape Cod & Hyannis 
R.R.--Exemption from 49 U.S.C. Subtitle IV, FD 31229, slip op. at 2 
(ICC served Mar. 25, 1988).\114\
---------------------------------------------------------------------------

    \113\ The Board also doubts that there would be an increase in 
truck traffic based on prescriptions under part 1145. As discussed 
in Performance Standards, a number of shippers seeking reciprocal 
switching reform do so because poor rail service forces them to ship 
by truck. The better service that could be created by a prescription 
could therefore lead to less truck traffic, as shippers that 
experienced rail service problems gain a new rail alternative. And, 
while CSXT raises concerns about TIH/PIH traffic, as noted in the 
Practicability section, carriers will be handling traffic subject to 
existing safety and health regulations. FRA itself, who will be 
served with all petitions, notes that, in general, it does not 
foresee safety concerns with reciprocal switching. (DOT/FRA Comments 
3 n.3.)
    \114\ Indeed, the Board may explore whether to propose revising 
its environmental regulations specifically to include prescriptions 
made under part 1145 as categorically excluded from environmental 
review under 49 CFR 1105.6(c).
---------------------------------------------------------------------------

    For these reasons, the Board will not require specific 
environmental documentation for proceedings under part 1145 unless a 
showing is made in a particular case that there is enough potential for 
environmental impacts to warrant an environmental review. See 49 CFR 
1105.6(d). Nevertheless, petitioners bringing cases under part 1145, 
and/or alternate carriers, should address whether environmental review 
may be needed under Sec.  1105.7(e)(5) at the outset of the proceeding 
if they have reason to believe the case has the potential for 
environmental impacts.

Environmental Review

    The final rule is categorically excluded from environmental review 
under 49 CFR 1105.6(c).

Regulatory Flexibility Act

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, 
generally requires a description and analysis of new rules that would 
have a significant economic impact on a substantial number of small 
entities. In drafting a rule, an agency is required to: (1) assess the 
effect that its regulation will have on small entities; (2) analyze 
effective alternatives that may minimize a regulation's impact; and (3) 
make the analysis available for public comment. Sections 601-604. In 
its notice of proposed rulemaking, the agency must either include an 
initial regulatory flexibility analysis, section 603(a), or certify 
that the proposed rule would not have a ``significant impact on a 
substantial number of small entities,'' section 605(b). The impact must 
be a direct impact on small entities ``whose conduct is circumscribed 
or mandated'' by the proposed rule. White Eagle Coop. Ass'n v. Conner, 
553 F.3d 467, 480 (7th Cir. 2009).
    The final rule is directed at Class I railroads and their 
affiliated companies. As such, the regulations will not impact a 
substantial number of small entities.\115\ Accordingly, pursuant to 5 
U.S.C. 605(b), the Board again certifies that the regulations 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.
---------------------------------------------------------------------------

    \115\ For the purpose of RFA analysis for rail carriers subject 
to the Board's jurisdiction, the Board defines a ``small business'' 
as including only those rail carriers classified as Class III rail 
carriers under 49 CFR 1201.1-1. See Small Entity Size Standards 
Under the Regul. Flexibility Act, EP 719 (STB served June 30, 2016). 
Class III rail carriers have annual operating revenues of $46.3 
million or less in 2022 dollars. Class II rail carriers have annual 
operating revenues of less than $1.03 billion but more than $46.3 
million in 2022 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 Ann. 
Operating Revenues of R.Rs., EP 748 (STB served June 29, 2023).

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[[Page 38704]]

Paperwork Reduction Act

    The Board sought comments in the NPRM pursuant to the Paperwork 
Reduction Act (PRA), 44 U.S.C. 3501-3521, and Office of Management and 
Budget (OMB) regulations at 5 CFR 1320.8(d)(3) about the impact of the 
collection for the Reciprocal Switching for Inadequate Service 
Regulations (OMB Control No. 2140-00XX), concerning: (1) whether the 
collections of information, as added in the proposed rule, and further 
described in Appendix B, are necessary for the proper performance of 
the functions of the Board, including whether the collections have 
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. NPRM, 88 FR at 63911-12.
    In the NPRM, the Board estimated that the proposed requirements 
would add an hourly annual burden of 2,564 hours for six respondents, 
all Class I railroads. NPRM, 88 FR at 63916-17. This estimate consisted 
of the cumulative total of five types of filings required to collect 
information and allow the Board to implement the reciprocal switching 
regulations under part 1145. First, the Board anticipated that the 
requirement for the Class I railroads to update their internal data 
collections systems in order to standardize and harmonize them with the 
proposed reporting requirements would add an estimated total one-time 
hourly burden of 480 hours across all six Class I rail carriers. NPRM, 
88 FR at 63912, 63916. Second, the weekly reports on service 
reliability and industry ISP were estimated to require an annual hour 
burden of approximately 1,248 hours. NPRM, 88 FR at 63916. Third, 
requests for individualized service data by shippers or receivers were 
estimated to require approximately 36 hours. NPRM, 88 FR at 63912, 
63916. In calculating this estimate, the Board assumed that the Class I 
rail carriers could provide this information by making a minimal number 
of selections within a computer program once their systems had been 
updated. Fourth, petitions to initiate a reciprocal switching agreement 
were estimated to require approximately 700 hours, and fifth, the 
petitions to terminate a prescription were estimated to require about 
100 hours. NPRM, 88 FR at 63912, 63916.
    The Board received comments from AAR and a number of carriers 
addressing the Board's burden analysis for two types of collections of 
information under the PRA.
    First, UP challenges the NPRM's estimate of 480 hours (80 hours per 
carrier) for the ``one-time update to data collection software to 
standardize with the Board's data definition for service reliability 
and industry spot and pull.'' As noted above in the Implementation 
section, UP estimates that between one and two years would be required 
to complete the design, programming, and testing of such systems before 
they could be implemented. (UP Comments 18.) Similarly, as also 
discussed in that section, CSXT contends that ``designing and 
implementing such a platform could take a year.'' (CSXT Reply 16.) As a 
result, both carriers argue that the required system updates will 
constitute a significant undertaking, estimating broadly one to two 
years of burden hours as opposed to the 480 hours estimated in the 
NPRM.\116\
---------------------------------------------------------------------------

    \116\ Despite UP's and CSXT's general estimate that the proposed 
rule will take them one to two years to implement, the railroads 
fail to provide a specific estimate of burden hours.
---------------------------------------------------------------------------

    For the reasons explained in the Implementation section, the Board 
disagrees with UP's stated concern that an entirely new system will be 
needed to meet the reporting requirements of this rule and similarly 
disagrees with CSXT's assertion that it will take a year to update its 
existing software. It is true that the new rule creates a standardized 
definition of OETA for purposes of part 1145. But, because the 
railroads' systems already have the code in place to measure OETA 
(under the demurrage definition), the new definition of OETA should 
require limited changes to their system codes. Therefore, to meet the 
new rules, the only change that should be required is an update to the 
OETA and ISP definitions within the railroads' existing software.
    In their conclusory claims about the need for extreme 
alternatives--creating a whole new system or engaging in a year-long 
software update--UP and CSXT fail to provide a reasonable basis for the 
Board to update its estimate of hourly burdens based on either 
carrier's actual system requirements. Even so, upon further 
consideration, the Board recognizes that the update of definitions may 
require more time to edit, test, and implement than estimated in the 
NPRM. For example, the Board recognizes that the change will require 
some coding, testing, and validity checks upon updating their current 
software, and that the estimates in the NPRM may not have accounted for 
some of the complexities raised by UP and other railroads. Thus, the 
Board will revise estimates upwards to reflect that additional 
complexity. The estimated one-time hourly burden for an update to the 
carriers' systems will increase from 480 hours (80 hours per carrier) 
to 1,440 hours (240 hours per carrier). See Table--Changes in Total 
Burden Hours from the NPRM to Final Rule.\117\
---------------------------------------------------------------------------

    \117\ In Demurrage Billing Requirements, the Board recognized a 
similar one-time burden, which included the time Class I carriers 
would need to undertake the software redesign necessary to provide 
minimum information to be included on or with Class I carriers' 
demurrage invoices. See Demurrage Billing Requirements, EP 759, slip 
op. at 34-35. While the Board estimated a burden of 80 hours per 
respondent in that case, the Board recognizes that the one-time 
update in this reciprocal switching rule may pose a greater level of 
complexity. As noted, the individual burden per carrier is being 
adjusted to 240 hours, for a total of 1440 hours.
---------------------------------------------------------------------------

    Second, CN, CSXT, and UP challenge the data disclosure requirement 
of proposed Sec.  1145.8(a) (concerning shipper/receiver requests for 
data from railroads) as vague and overly broad. (CN Comments 35; CSXT 
Comments 39; UP Reply 3; see also CPKC Comments 2 (claiming that its 
systems are not set up to generate shipper and commodity-specific lane-
by-lane statistics but not providing hourly burden data).) As proposed, 
this information collection would require Class I rail carriers to 
respond to requests for individualized service data from shippers and 
receivers. The Board addresses the railroads' broad arguments in the 
Data Production to an Eligible Customer section and is modifying those 
requirements.
    AAR contends that the estimates in the NPRM significantly 
underestimate the burden to Class I carriers of responding to requests 
for data from shippers and receivers. (AAR Comments 110.) AAR fails to 
provide specific hourly estimates to support its contentions, and there 
is also little or no data in the carriers' comments to support what 
hourly burden might be required. At the same time, in the adopted 
regulations, the Board is modifying the data disclosure requirements 
that were proposed in Sec.  1145.8(a) to make the written data request 
more limited and specific. These modifications should address AAR's 
concern about workload burden. In addition, out of an abundance of 
caution, the Board will increase its estimate of the annual number of 
written data requests to 72 (12 per carrier) and its estimate of the 
hourly burden per request to 16 hours. The total estimate for written 
requests is

[[Page 38705]]

therefore increased to 1,152 hours. See Table--Changes in Total Burden 
Hours from the NPRM to Final Rule.

    Table--Changes in Total Burden Hours From the NPRM to Final Rule
------------------------------------------------------------------------
                                               NPRM         Final Rule
                                         -------------------------------
             Type of Filing                Total burden    Total burden
                                               hours           hours
------------------------------------------------------------------------
One-time update to data collection                   480           1,440
 software to standardize with the
 Board's data definition for service
 reliability and ISP....................
Weekly reporting on service reliability            1,248           1,248
 and ISP (new 49 CFR 1145.8(b)).........
Written request identifying the specific              36           1,152
 12-week period and lane and response to
 request for individualized service data
 (new 49 CFR 1145.8(a)).................
Petition for Prescription of a                       700             700
 Reciprocal Switching Agreement (new 49
 CFR 1145.5)............................
Petition to Terminate Prescription of a              100             100
 Reciprocal Switching Agreement (new 49
 CFR 1145.7)............................
                                         -------------------------------
    Total Burden Hours..................           2,564           4,640
------------------------------------------------------------------------

    This collection, along with the comments from AAR and the railroads 
and the Board's response, will be submitted to OMB for review as 
required under the PRA, 44 U.S.C. 3507(d), and 5 CFR 1320.11. That 
submission will also address the comments discussed above as part of 
the PRA approval process.

Congressional Review Act

    Pursuant to the Congressional Review Act, 5 U.S.C. 801-808, the 
Office of Information and Regulatory Affairs has designated this rule 
as non-major, as defined by 5 U.S.C. 804(2).

Table of Commenters

Alliance for Chemical Distribution ACD
American Forest & Paper Association and the Institute of Scrap 
Recycling Industries AF&PA/ISRI
American Fuel & Petrochemical Manufacturers AFPM
American Petroleum Institute API
American Short Line & Regional Railroad Association ASLRRA
Association of American Railroads AAR
U.S. Senators Baldwin and Capito
Brotherhood of Locomotive Engineers and Trainmen BLET
Brotherhood of Maintenance of Way Employes Division/IBT, et al. BMWE
BNSF Railway Company BNSF
Canadian National Railway Company CN
Canadian Pacific Kansas City Limited CPKC
Cargill, Incorporated Cargill
Celanese Corporation Celanese
The Coalition Associations Coal. Ass'ns \118\
---------------------------------------------------------------------------

    \118\ The Coalition Associations include the American Chemistry 
Council, The Fertilizer Institute, and The National Industrial 
Transportation League. The Board refers to these organizations as 
the Coalition Associations except when citing to one of their 
filings.
---------------------------------------------------------------------------

Commuter Rail Coalition CRC
CSX Transportation Company, Inc. CSXT
Diversified CPC International, Inc. DCPC
U.S. Department of Transportation and the Federal Railroad 
Administration DOT/FRA
The Dow Chemical Company Dow
Essential Minerals Association EMA
Freight Rail Customer Alliance and the National Coal Transportation 
Association FRCA/NCTA
Glass Industry Supply Chain Council GISCC
Glass Packaging Institute GPI
International Warehouse Logistics Association IWLA
Lyondell Chemical Company, et al. LyondellBasell
Metrolink Metrolink
National Grain and Feed Association NGFA
National Mining Association NMA
National Stone, Sand, and Gravel Association NSSGA
Dr. James Nolan
Norfolk Southern Railway Company NSR
Olin Corporation Olin
Portland Cement Association PCA
Private Railcar Food and Beverage Association, Inc. PRFBA
Michael Ravnitzky Ravnitzky
Transportation Division of the International Association of Sheet 
Metal, et al. SMART-TD
Transportation Trades Department, AFL-CIO TTD
Union Pacific Railroad Company UP
United States Department of Agriculture USDA
Virginia Port Authority VPA
Western Coal Traffic League WCTL

List of Subjects in 49 CFR Part 1145

    Common carrier, Freight, Railroads, Rates and fares, Reporting and 
recordkeeping requirements, and Shipping.

    It is ordered:
    1. The Board adopts the final rule as set forth in this decision. 
Notice of the adopted rule will be published in the Federal Register.
    2. This decision is effective on September 4, 2024.
    3. A copy of this decision will be served upon the Chief Counsel 
for Advocacy, Office of Advocacy, U.S. Small Business Administration.
    By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and 
Schultz. Board Member Primus concurred with a separate expression.
BOARD MEMBER PRIMUS, concurring:
    The final rule adopted today is unlikely to accomplish what the 
Board set out to do under the statute's authorization of reciprocal 
switching that is ``practicable and in the public interest.'' See 49 
U.S.C. 11102(c). And, despite my urging, the Board is not taking action 
to improve access to the statute's other prong, addressing reciprocal 
switching that is ``necessary to provide competitive rail service.'' 
Id. I am voting for the final rule because something is better than 
nothing. But there is far less ``something'' here than I had hoped 
there would be.
    This final rule relies on service performance standards, which the 
incumbent carrier must fail during a 12-week period before a petitioner 
can seek a reciprocal switching order. The NPRM requested comment as to 
whether the Board may consider performance data based on service 
provided under a contract. NPRM, 88 FR at 63909. In this way, the NPRM 
left open the possibility that a petitioner would already know, before 
taking any steps towards filing its petition (aside from requesting the 
data), that 12 weeks of data are available to demonstrate failure under 
one of the performance standards.
    The same is not true, however, with respect to the final rule. A 
large proportion of rail traffic moves under contract, and the final 
rule establishes that the Board will not prescribe a reciprocal 
switching agreement under part 1145 based on performance that occurs 
during the term of a contract. See 49 U.S.C. 10709. In other words, a 
customer receiving substandard service under a contract cannot seek 
relief under part 1145. A prospective petitioner would instead need to 
shift from transportation under a contract to transportation under a 
tariff and then

[[Page 38706]]

receive 12 weeks of substandard service before it could seek relief. 
Changing from contract to tariff transportation is something that rail 
customers generally prefer to avoid, as tariff rates can be 
substantially higher than contract rates. See, e.g., Occidental Chem. 
Corp. Comments 2-3, Oct. 23, 2012, Rate Regul. Reforms, EP 715; PPG 
Indus., Inc. Comments 3-4, Oct. 23, 2012, Rate Regul. Reforms, EP 715.
    A would-be petitioner under the final rule could incur this 
``tariff premium'' indefinitely; 11 weeks into the customer's payment 
of tariff rates, for example, the carrier's average performance for the 
period could move above the threshold before falling again. Depending 
on the magnitude of this blip in the data, the 12-week period could 
effectively begin again. Rather than incurring the costs of tariff 
transportation indefinitely--before knowing whether a reciprocal 
switching petition is even a possibility--I expect contract customers 
will simply avoid trying to use part 1145.\1\
---------------------------------------------------------------------------

    \1\ The decision refers to concerns that this process will be 
``cumbersome,'' a term that understates the final rule's expectation 
that prospective petitioners would pay the ``tariff premium'' for an 
undetermined period of time based on a chance that they might 
eventually become eligible to file a petition that attempts to 
secure reciprocal switching. (See Coal. Ass'ns Comments 13 (``[I]f 
the Board could not consider rail performance metrics for contract 
transportation, that effectively would neutralize the use of 
reciprocal switching to address the adequacy of rail service, given 
the large proportion of rail traffic that moves pursuant to 
contracts. A contract shipper currently experiencing service below 
the service thresholds in the proposed rules would have to wait for 
its contract to expire and then ship pursuant to tariff rates while 
waiting to see if its service improves.''); Coal. Ass'ns Reply 5-6, 
47-52 (reiterating these concerns and asking the Board to reopen 
Docket No. EP 711 (Sub-No. 1)--the docket containing the 2016 
NPRM).)
---------------------------------------------------------------------------

    The decision opines that, ``if the rule can achieve its objectives 
with respect to common carrier traffic, this would make it 
worthwhile.'' As the decision acknowledges, however, only a small 
percentage of traffic moves in common carrier service. And part 1145 
does not even apply to all common carrier traffic; the traffic must 
also be non-exempt, among other requirements.\2\ Because the decision 
``clarifies that [the Board] will not rely on pre-revocation 
performance as the basis for a prescription of a reciprocal switching 
agreement under this rule,'' customers whose transportation is exempt 
will face obstacles similar to those of contract customers should they 
wish to seek reciprocal switching. Such a customer would need to obtain 
partial revocation of the exemption--litigation that may be costly and 
time-consuming in itself, given the Board's statement that ``parties 
would be allowed to present counterbalancing evidence to demonstrate 
why partial revocation would not be warranted'' \3\--before potentially 
usable performance data even begins to accrue. Similar to contract 
customers, a customer who litigates and wins a partial revocation would 
do so unaware of whether it would ever become eligible to file a 
petition attempting to obtain reciprocal switching.
---------------------------------------------------------------------------

    \2\ According to the decision, part 1145 is expected to improve 
network performance overall, which could benefit contract shippers 
in this interconnected industry. But this speculation--relying, for 
example, on the idea that the rule will promote the fluidity of 
shared facilities--loses sight of just how small the pool of 
potentially eligible traffic will be. As the decision itself points 
out, ``only a relatively small portion of all Class I movements are 
even potentially eligible for a prescription under part 1145,'' 
because the rule excludes not only contract and exempt traffic, but 
also shippers and receivers that are served by more than one Class I 
railroad or are outside a terminal area.
    \3\ The Board's stated intent to prioritize petitions for 
partial revocation filed in furtherance of part 1145 cases will have 
limited effect if the counterbalancing evidence, permitted under 
today's decision, is sufficiently voluminous or complex.
---------------------------------------------------------------------------

    I disagree with the conclusion that aiming so low is worthwhile, 
given that the Board could have implemented the public interest prong 
without the deterrent effect I have described. See 2016 NPRM, slip op. 
at 17-18 (proposing a ``practicable and in the public interest'' test 
that did not require 12 weeks of performance data). And that is not to 
mention the fact that the Board is ``choosing to focus reciprocal 
switching reform on service issues at this time,'' while deferring to 
some uncertain future date any action on the competitive rail service 
prong. Cf. id., slip op. at 19, 21-23 (proposing a ``necessary to 
provide competitive rail service'' test).
    Contrary to an assertion in the decision above, the final rule 
therefore does not provide most rail customers with a reasonably 
predictable and efficient path toward a prescription under section 
11102(c). I also do not share the optimism reflected in the decision's 
expectation that part 1145 will be a significant step in incentivizing 
Class I railroads through competition to achieve and maintain higher 
service levels on an ongoing basis. Rather, the Board's action is 
likely to have far less benefit than it intends.
    This is a missed opportunity. Almost 13 years after the National 
Industrial Transportation League filed its petition for rulemaking with 
regard to reciprocal switching, the Board is adopting rules that do 
nothing with respect to the statute's competitive rail service prong 
and may not do very much under the public interest prong. We should do 
more, we should do better, and we should do it without letting another 
decade pass.

Jeffrey Herzig,
Clearance Clerk.

Final Rule

0
For the reasons set forth in the preamble, the Surface Transportation 
Board amends title 49, chapter X, of the Code of Federal Regulations by 
adding part 1145 to read as follows:

PART 1145--RECIPROCAL SWITCHING FOR INADEQUATE SERVICE

Sec.
1145.1 Definitions
1145.2 Performance standards
1145.3 Affirmative defenses
1145.4 Negotiations
1145.5 Procedures
1145.6 Prescription
1145.7 Termination
1145.8 Data

    Authority:  49 U.S.C. 1321 and 11102


Sec.  1145.1  Definitions.

    The following definitions apply to this part:
    Affiliated companies has the same meaning as ``affiliated 
companies'' in Definition 5 of the Uniform System of Accounts (49 CFR 
part 1201, subpart A).
    Cut-off time means the deadline for requesting service during a 
service window, as determined in accordance with the rail carrier's 
established protocol.
    Delivery means when a shipment is actually placed at a designated 
destination or is constructively placed at a local yard that is 
convenient to the designated destination. In the case of an interline 
movement, a shipment will be deemed to be delivered to the receiving 
carrier or its agent or affiliate when the shipment is moved past a 
designated automatic equipment identification reader at the point of 
interchange or is placed on a designated interchange track, depending 
on the specific interchange that is involved. For purposes hereof, 
constructive placement of a shipment at a local yard constitutes 
delivery only when:
    (1) The recipient has the option, by prior agreement between the 
rail carrier and the customer, to have the rail carrier hold the 
shipment pending the recipient's request for delivery to the designated 
destination and the recipient has not yet requested delivery; or
    (2) The recipient is unable to accept delivery at the designated 
destination.
    Designated destination means the final destination as specified in 
the bill

[[Page 38707]]

of lading or, in the case of an interline movement, the interchange 
where the shipment is transferred to the receiving carrier, its agent, 
or affiliated company.
    Incumbent rail carrier means a Class I rail carrier that currently 
provides line-haul service to the petitioner to or from the point of 
origin or final destination that would be covered by the proposed 
reciprocal switching agreement.
    Lane means a shipment's point of origin and designated destination. 
Shipments of the same commodity that have the same point of origin and 
the same designated destination are deemed to travel over the same 
lane, regardless of which route(s) the rail carrier uses to move the 
shipments from origin to destination. In the case of an interline 
movement, the designated destination is the designated interchange.
    Manifest traffic means shipments that move in carload or non-unit 
train service.
    Original estimated time of arrival or OETA means the estimated time 
of arrival that the incumbent rail carrier provides when the shipper 
tenders the bill of lading or when the incumbent rail carrier receives 
the shipment from a delivering carrier.
    Petitioner means a shipper or a receiver that files a petition 
hereunder for prescription of a reciprocal switching agreement.
    Planned service window means a service window for which the shipper 
or receiver requested local service, provided that the shipper or 
receiver made its request by the cut-off time for that window.
    Practical physical access means a feasible line-haul option on a 
rail carrier, including but not limited to: direct physical access to 
that carrier or its affiliated company; an existing switching 
arrangement between an incumbent rail carrier and another rail carrier; 
terminal trackage rights; or contractual arrangement between a local 
rail carrier and a line-haul carrier.
    Receipt of a shipment means when the preceding rail carrier 
provides a time stamp or rail tracking message that the shipment has 
been delivered to the interchange.
    Reciprocal switching agreement means an agreement for the transfer 
of rail shipments between one Class I rail carrier or its affiliated 
company and another Class I rail carrier or its affiliated company 
within the terminal area in which the rail shipment begins or ends its 
rail journey. Service under a reciprocal switching agreement may 
involve one or more intermediate transfers to and from yards within the 
terminal area.
    Service window means a window during which the incumbent rail 
carrier offers to perform local service (placements and/or pick-ups of 
rail shipments) at a shipper's or receiver's facility. A service window 
must be made available by a rail carrier with reasonable advance notice 
to the shipper or receiver and in accordance with the carrier's 
established protocol. For purposes of this part, a service window is 12 
hours in duration, beginning at the start of the work shift for the 
crew that will perform the local service, without regard to whether the 
incumbent rail carrier specified a longer or shorter service window.
    Shipment means a loaded railcar that is designated in a bill of 
lading.
    Similar traffic means traffic that is of the same broad type 
(manifest traffic or unit train) as the traffic that is governed by a 
prescribed reciprocal switching agreement, and is transported by the 
incumbent rail carrier or its affiliated company to or from the 
terminal area in which transfers occur under the prescribed reciprocal 
switching agreement.
    Terminal area means a commercially cohesive area in which two or 
more railroads engage in the local collection, classification, and 
distribution of rail shipments for purposes of line-haul service. A 
terminal area is characterized by multiple points of loading/unloading 
and yards for such local collection, classification, and distribution. 
A terminal area (as opposed to main-line track) must contain and cannot 
extend significantly beyond recognized terminal facilities, such as 
freight or classification yards. A point of origin or final destination 
on the rail system must be within a terminal area to be eligible for a 
prescription under this part.
    Time of arrival means the time that a shipment is delivered to the 
designated destination.
    Transit time means the time between a rail carrier's receipt of a 
shipment, upon either the tender of the bill of lading to that rail 
carrier or the rail carrier's receipt of the shipment from a delivering 
carrier and the rail carrier's delivery of that shipment to the agreed-
upon destination. Transit time does not include time spent loading and 
unloading cars.


Sec.  1145.2  Performance standards.

    The performance standards in this section apply only to petitions 
for prescription of a reciprocal switching agreement under this part.
    (a) Service reliability (original estimated time of arrival). The 
service reliability standard applies to shipments that travel as 
manifest traffic. The service reliability standard measures a rail 
carrier's success in delivery of a shipment from its original or 
interchange location by the original estimated time of arrival, 
accounting for the applicable grace period. Determination of a rail 
carrier's compliance with the service reliability standard is based on 
all shipments from the same original or interchange location to the 
same delivery location over a period of 12 consecutive weeks. A rail 
carrier meets the service reliability standard when A/B ratio is 
greater than or equal to 70%, where A is the number of shipments that 
are delivered within 24 hours of the original estimated time of 
arrival, and B is the total number of shipments.
    (1) A car that is delivered more than 24 hours before or after its 
OETA will not be considered as being delivered within 24 hours of OETA.
    (2) Once a carrier has communicated an original estimated time of 
arrival to a customer, that time will not be changed by any subsequent 
changes to the original trip plan of the car, no matter what the cause 
of the changed trip plan may be.
    (b) Service consistency (transit time). The service consistency 
standard applies to shipments in the form of a unit train and to 
shipments that travel as manifest traffic. The service consistency 
standard measures a rail carrier's success over time in maintaining the 
transit time for a shipment. A rail carrier fails the service 
consistency standard if it fails either the standard in paragraph 
(b)(1) of this section or the standard in paragraph (b)(2) of this 
section, with both paragraphs being subject to paragraph (b)(3) of this 
section.
    (1) Year-to-year comparison. A is more than 20% longer than B, 
where A is the average transit time for all shipments from the same 
location to the same designated destination over a period of 12 
consecutive weeks, and B is the average transit time for all shipments 
from the same location to the same designated destination over the same 
12-week period during the previous year.
    (2) Multi-year comparison. A is more than 25% longer than B, where 
A is the average transit time for all shipments from the same location 
to the same designated destination over a period of 12 consecutive 
weeks, and B is the average transit time for all shipments from the 
same location to the same designated destination over the same 12-week 
period during any of the previous three years.
    (3) A carrier will not fail the service consistency standard if the 
increase in

[[Page 38708]]

transit time between B and A is 36 hours or less, notwithstanding the 
percentages stated in paragraphs (b)(1) and (b)(2) of this section.
    (c) Lanes. Compliance with the performance standards in paragraphs 
(a) and (b) of this section is determined separately for each lane of 
traffic to or from the petitioner's facility. Shipments of the same 
commodity from the same point of origin to the same designated 
destination are deemed to travel over the same lane, without regard to 
the route between the point of origin and designated destination. In 
the case of an interline movement, the designated destination is the 
designated interchange.
    (d) Empty railcars. (1) For private or shipper-leased railcars, a 
rail carrier fails to meet the service consistency standard in 
paragraph (b) of this section if the rail carrier's average transit 
time for delivering empty cars to a designated destination over a 12-
week period increases by more than 20% compared to average transit time 
for delivering empty cars to the same designated destination during the 
same 12-week period during the previous year or by more than 25% 
compared to average transit time for delivering empty cars to the same 
designated destination during the same 12-week periods during any of 
the previous three years. However, notwithstanding the previous 
sentence, a carrier will not fail the service consistency standard if 
the increase in average transit time for delivering empty cars is 36 
hours or less.
    (2) A rail carrier's failure to meet a performance standard as 
provided in this paragraph (d) provides the basis for prescribing a 
reciprocal switching agreement that governs both the delivery of the 
empty cars and the delivery of the associated shipments of loaded cars.
    (e) Industry spot and pull. The industry spot and pull standard 
measures a rail carrier's success in performing local placements 
(``spots'') and pick-ups (``pulls'') of loaded railcars and unloaded 
private or shipper-leased railcars at a shipper's or receiver's 
facility during the planned service window. The industry spot and pull 
standard does not apply to unit trains or intermodal traffic.
    (1) A rail carrier meets the industry spot and pull standard if, 
over a period of 12 consecutive weeks, the carrier has a success rate 
of 85% or more in performing requested spots and pulls within the 
planned service window, as determined based on the total number of 
planned service windows during that 12-week period.
    (2) Failure to spot constructively placed cars that have been 
ordered in by the cut-off time applicable to the customer for a planned 
service window is included as a failure in calculating compliance with 
the industry spot and pull standard.
    (3) Failure to spot ``spot on arrival'' railcars for a planned 
service window results in a missed service window only if the railcars 
arrived at the local yard that services the customer and are ready for 
local service before the cut-off time applicable to the customer.
    (4) If a rail carrier cancels a service window other than at the 
shipper's or receiver's request, that window is included as a failure 
in calculating compliance with the industry spot and pull standard.
    (5) When a rail customer causes a carrier to miss a planned service 
window, that window will not be considered a miss in determining the 
success rate under this paragraph (e).
    (6) If a rail carrier reduces the frequency of its local service to 
a shipper's or receiver's facility, and if rail carrier cannot 
demonstrate that reduction is necessary based on a commensurate 
reduction in customer demand, then the industry spot and pull standard 
increases to a success rate of 90% for two years.
    (f) The performance standards in paragraphs (a) and (b) of this 
section apply to movements within the United States and to the U.S. 
portion of movements between the United States and another country, in 
the latter case when the carrier's general practice with respect to 
such movements is to record receipt or delivery of the shipment at a 
point at or near the U.S. border (including where the carrier receives 
the shipment from or delivers the shipment to an affiliated carrier).


Sec.  1145.3  Affirmative defenses.

    An incumbent rail carrier shall be deemed not to fail a performance 
standard in Sec.  1145.2 if any of the conditions described in this 
section are met. The Board will also consider, on a case-by-case basis, 
affirmative defenses that are not specified in this section.
    (a) The rail carrier experiences extraordinary circumstances beyond 
the carrier's control, including but not limited to unforeseen track 
outages stemming from natural disasters, severe weather events, 
flooding, accidents, derailments, and washouts. A carrier's intentional 
reduction or maintenance of its workforce at a level that itself causes 
workforce shortage, or, in the event of a workforce shortage, failure 
to use reasonable efforts to increase its workforce, would not, on its 
own, be considered a defense for failure to meet any performance 
standard. A carrier's intentional reduction or maintenance of its power 
or car supply, or failure to use reasonable efforts to maintain its 
power or car supply, that itself causes a failure of any performance 
standard would not, on its own, be considered a defense.
    (b) The petitioner's traffic increases by 20% or more during the 
12-week period in question, as compared to the preceding 12 weeks (for 
non-seasonal traffic) or the same 12 weeks during the previous year 
(for seasonal traffic such as agricultural shipments), where the 
petitioner failed to notify the incumbent rail carrier at least 12 
weeks prior to the increase.
    (c) There are highly unusual shipments by the shipper during any 
week of the 12-week period in question. For example, a pattern might be 
considered highly unusual if a shipper projected traffic of 120 cars in 
a month and 30 cars per week, but the shipper had a plant outage for 
three weeks and then requested shipment of 120 cars in a single week.
    (d) The incumbent rail carrier's failure to meet the performance 
standard is due to the dispatching choices of a third party.
    (e) The incumbent rail carrier's failure to meet the performance 
standard was directly caused by the conduct of a third party. This 
defense will be narrowly construed to avoid undue delay of the 
proceeding and unnecessary litigation costs. When presenting a defense 
under this paragraph (e), the incumbent rail carrier must prove that 
such conduct was outside its reasonable control. The incumbent rail 
carrier must also prove that it took reasonable steps to prevent and 
mitigate the impact of the third-party conduct or, if the impact could 
not be reasonably prevented, that the incumbent carrier took reasonable 
steps to mitigate the impact of the third-party conduct.


Sec.  1145.4  Negotiations.

    At least five days prior to petitioning for prescription of a 
reciprocal switching agreement hereunder, the petitioner must seek to 
engage in good faith negotiations to resolve its dispute with the 
incumbent rail carrier.


Sec.  1145.5  Procedures.

    (a) If a shipper or a receiver believes that a rail carrier 
providing it service failed to meet a performance standard described in 
Sec.  1145.2, it may file a petition for prescription of a reciprocal 
switching agreement.
    (b) The petition must include the information and documents 
described in this paragraph (b).

[[Page 38709]]

    (1) Confirmation that the petitioner attempted good faith 
negotiations as required by Sec.  1145.4, identify the performance 
standard the railroad failed to meet over the requisite period of time, 
identify the requested duration of the prescription of a reciprocal 
switching agreement, and provide evidence supporting its claim and 
requested prescription.
    (2) Identification of at least one possible rail carrier to provide 
alternative service.
    (3) Identification of any relevant switching publications of the 
incumbent rail carrier and the potential alternate carrier(s).
    (4) A motion for a protective order that would govern the 
disclosure of data that the rail carrier provided to the petitioner 
under this part.
    (c) The petition must have been served on the incumbent rail 
carrier, the alternate rail carrier(s), and the Federal Railroad 
Administration.
    (d) A reply to a petition is due within 20 days of a completed 
petition. The burden of proof of establishing infeasibility and/or 
undue impairment is on the rail carrier (either the incumbent or the 
alternate) that is objecting to the petition.
    (e) A rebuttal may be filed within 20 days after a reply to a 
petition.
    (f) The Board will endeavor to issue a decision on a petition 
within 90 days from the date of the completed petition.


Sec.  1145.6  Prescription.

    (a) The Board will prescribe a reciprocal switching agreement under 
this part if all the conditions in this paragraph (a) are met.
    (1) For the lane of traffic that is the subject of the petition, 
the petitioner has practical physical access to only one Class I 
carrier that could serve that lane.
    (2) The petitioner demonstrates that the incumbent rail carrier 
failed to meet one or more of the performance standards in Sec.  1145.2 
with regards to its shipment.
    (3) The incumbent rail carrier fails to demonstrate an affirmative 
defense as provided in Sec.  1145.3.
    (b) Notwithstanding paragraph (a) of this section, the Board will 
not prescribe a reciprocal switching agreement if the incumbent rail 
carrier or alternate rail carrier demonstrates that the agreement is 
not practicable, including: switching service under the agreement, 
i.e., the process of transferring the shipment between carriers within 
the terminal area, could not be provided without unduly impairing 
either rail carrier's operations; switching service under the agreement 
would be operationally infeasible; or the alternate rail carrier's 
provision of line-haul service to the petitioner would be infeasible or 
would unduly impair the incumbent rail carrier or the alternate rail 
carrier's ability to serve its existing customers. If the incumbent 
rail carrier and alternate rail carrier have an existing reciprocal 
switching arrangement in a terminal area in which the petitioner's 
traffic is currently served, the proposed operation is presumed to be 
operationally feasible, and the incumbent rail carrier will bear a 
heavy burden of establishing why the proposed operation should not 
qualify for a reciprocal switching agreement due to infeasibility.
    (c) In prescribing a reciprocal switching agreement, the Board 
shall prescribe a term of service of three years, provided that the 
Board may prescribe a longer term of service of up to five years if the 
petitioner demonstrates that the longer minimum term is necessary for 
the prescription to be practical given the petitioner's or alternate 
carrier's legitimate business needs.
    (d) Upon the Board's prescription of a reciprocal switching 
agreement under this part, the affected rail carriers must set the 
terms of the agreement and offer service thereunder within 30 days of 
service of the prescription and notify the Board within 10 days of when 
the carriers offered service that the agreement has taken effect. 
Additionally, the incumbent carrier must promptly amend its switching 
publication(s) as appropriate to reflect the availability of reciprocal 
switching under the prescription.
    (e) If the affected carriers cannot agree on compensation within 30 
days of the service of the prescription, then the affected rail 
carriers must offer service and petition the Board to set compensation.


Sec.  1145.7  Termination.

    (a) If the incumbent carrier does not timely file a petition for 
termination, a prescription hereunder automatically renews at the end 
of the term established under Sec.  1145.6(c). Automatic renewal is for 
the same term as the original term of the prescription. If the Board 
denies a petition to terminate the prescription, it will determine, on 
a case-by-case basis, the appropriate renewal term based on the 
evidentiary record, not to exceed the original term of the 
prescription. At the end of the renewal term, if the incumbent carrier 
does not timely file a petition for termination, the prescribed 
agreement will automatically renew for the same number of years as the 
renewed term.
    (b) The Board will grant a petition to terminate a prescription if 
the incumbent rail carrier demonstrates that, for the most recent 12-
week period prior to the filing of the petition to terminate, the 
incumbent rail carrier's service for similar traffic on average met all 
three performance standards under this part. This requirement includes 
a demonstration by the incumbent carrier that it has been able to meet, 
over the most recent 12-week period, the performance standards for 
similar traffic to or from the relevant terminal area.
    (c) The incumbent rail carrier may submit a petition to terminate a 
prescription not more than 180 days and not less than 150 days before 
the end of the current term of the prescription.
    (d) A reply to a petition to terminate is due within 15 days of the 
filing of the petition.
    (e) A rebuttal may be filed within 10 days of the filing of the 
reply.
    (f) The Board will endeavor to issue a decision on a petition to 
terminate within 90 days from the close of briefing.
    (1) If the Board does not act within 90 days from the close of 
briefing, the prescription automatically terminates at the end of the 
current term of the prescription.
    (2) If the Board does not issue a decision due to extraordinary 
circumstances, as determined by the Board, the prescription is 
automatically renewed for 30 days from the end of the current term. 
When there are extraordinary circumstances, the Board will issue an 
order alerting the parties that it will not issue a decision within the 
required time period. Under such circumstances, the Board will issue 
its decision as expeditiously as possible.
    (3) A prescribed agreement will continue in effect until 30 days 
after the Board serves a decision that grants a petition to terminate 
or after the end of the prescription period, whichever is later.


Sec.  1145.8  Data.

    (a) A shipper or receiver with practical physical access to only 
one Class I carrier serving the lane of traffic for which 
individualized performance records are sought, and based on a good 
faith belief that the Class I carrier has provided service that does 
not meet at least one performance standard from Sec.  1145.2, may 
submit a written request to the incumbent rail carrier for all 
individualized performance records relevant to the performance 
standard(s) the shipper or receiver believes the rail carrier has 
failed.
    (1) In the request to the rail carrier, the shipper or receiver 
must identify the

[[Page 38710]]

specific performance standard(s) that it believes the rail carrier has 
failed, and the corresponding date range and lane(s).
    (2) Within seven days of the written request, the incumbent rail 
carrier shall provide the shipper or receiver with the requested 
individualized performance records.
    (3) For purposes of this section, ``individualized performance 
records'' means the original estimated times of arrival, transit times, 
and/or industry spot and pull records related to the shipper or 
receiver's traffic, along with the corresponding time stamps.
    (b) All Class I carriers shall report to the Board on a weekly 
basis, in a manner and form determined by the Board, data that shows: 
the percentage of shipments on the carrier's system that moved in 
manifest service and that were delivered within 24 hours of OETA, out 
of all shipments on the carrier's system that moved in manifest service 
during that week; and, for each of the carrier's operating divisions 
and for the carrier's overall system, the percentage of planned service 
windows during which the carrier successfully performed the requested 
local service, out of the total number of planned service windows on 
the relevant division or system for that week, all within the meaning 
of this part.
    (c) Class I carriers shall provide, in the format of their 
choosing, machine-readable access to the information listed in this 
section.
    (1) Machine-readable means data in an open format that can be 
easily processed by computer without human intervention while ensuring 
no semantic meaning is lost.
    (2) Open format is a format that is not limited to a specific 
software program and not subject to restrictions on re-use.
    (d) Class I carriers shall retain all data necessary to respond to 
a request under paragraph (a) of this section for a minimum of four 
years.

[FR Doc. 2024-09483 Filed 5-6-24; 8:45 am]
BILLING CODE 4915-01-P