Expedited Relief for Service Inadequacies

DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Parts 1146 and 1147

[STB Ex Parte No. 628]

Expedited Relief for Service Inadequacies

AGENCY: Surface Transportation Board.

ACTION: Final rules.

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SUMMARY: The Surface Transportation Board (Board) is issuing final

rules establishing procedures for obtaining temporary alternative rail

service when there has been a substantial measurable deterioration or

other demonstrated inadequacy in rail service provided by the incumbent

carrier.

DATES: These rules are effective January 27, 1999.

FOR FURTHER INFORMATION CONTACT: Joseph H. Dettmar, (202) 565-1600.

[TDD for the hearing impaired: (202) 565-1695.]

SUPPLEMENTARY INFORMATION: In April 1998, the Board conducted hearings,

at the request of Congress, to examine issues of rail access and

competition in today's railroad industry. A recurring complaint voiced

by rail shippers at those hearings was the delay and ineffectiveness of

existing procedures for obtaining relief from localized service

failures, and the railroads agreed that we should reexamine how such

service failures can best be addressed.1 Accordingly, in a

notice of proposed rulemaking in this proceeding served May 12, 1998,

and published in the Federal Register on May 18, 1998 (63 FR 27253)

(May Notice), we sought comments on a proposal to establish expedited

procedures for shippers to obtain localized temporary alternative rail

service from another carrier when the incumbent carrier cannot properly

serve them.

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\1\ See Review of Rail Access and Competition Issues, STB Ex

Parte No. 575 (STB served Apr. 17, 1998) (Review), slip op. at 6-7.

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Under the proposed procedures, parties could seek alternative rail

service, under 49 U.S.C. 10705, 11102, or 11123, when, over an

identified time period, there has been a substantial measurable

deterioration in the rail service provided by an incumbent carrier. We

did not list particular factors to be used in making that assessment,

or propose a specific test period, but rather sought to retain the

flexibility needed to address widely varying circumstances. We

explained, however, that these procedures were not meant to redress

minor service disruptions, but rather would be directed only at

substantial service problems that cannot readily be resolved by the

incumbent railroad. Petitioners would be required to first discuss and

assess with the incumbent carrier whether adequate service would be

restored within a reasonable time (and, if not, to explain why not); to

obtain from another railroad the necessary commitment'should it be

afforded access--to meet the service needs; and to describe how the new

service could be provided safely, without degrading service to its

existing customers and without unreasonably interfering with the

incumbent's overall ability to provide service. Where relief is granted

and the incumbent carrier can later demonstrate that it has restored,

or is prepared to restore, adequate service, it could petition to

terminate that relief.

In a supplemental notice of proposed rulemaking served October 15,

1998, and published in the Federal Register on October 20, 1998 (63 FR

55996) (October Notice), we sought comments on a request by the

American Short Line and Regional Railroad Association (ASLRRA) for

similar expedited procedures for Class II and Class III railroads to

obtain temporary access to an additional carrier under similar

circumstances.

We have received comments in response to both the May Notice

2 and the October Notice.3 The comments express

near-universal support for both proposals,4 although the

commenting parties differ somewhat on what the rules should provide and

how they should be applied. After considering the comments,5

we are clarifying and modifying the earlier proposals and are adopting

the rules set forth below, to be codified at 49 CFR Parts 1146 and

1147.

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\2\ Comments were submitted by ACE Cogeneration Company (ACE);

Alliance for Rail Competition; AmerenUE; ASLRRA; Arkansas, Louisiana

& Mississippi Railroad Company (AL&M); Association of American

Railroads (AAR); BHP Copper Inc. (BHP); California Public Utilities

Commission (CPUC); Cemex USA Management, Inc. (Cemex); Chemical Lime

Company (CLC); Chemical Manufacturers Association (CMA); Edison

Electric Institute, Farmland Industries, Inc. and The Fertilizer

Institute (Edison-Farmland-Fertilizer); Empire Electric District

Company (Empire); Entergy Services, Inc. and Entergy Arkansas, Inc.

(Entergy); International Paper Company (IPC); Lower Colorado River

Authority and the City of Austin, TX (LCRA); National Grain and Feed

Association (NGFA); National Industrial Traffic League (NITL);

National Lime and Stone Company; National Mining Association (NMA);

North Dakota Grain Dealers Association, North Dakota Public Service

Commission, and North Dakota Wheat Commission (North Dakota); Ohio

Rail Development Commission, Public Utilities Commission of Ohio,

and Ohio Attorney General Antitrust Section; PP&L, Inc. (PP&L);

Shell Oil Company and Shell Chemical Company (Shell); Society of

Plastics Industry, Inc. (SPI); Swanson-Superior Forest Products,

Inc.; United States Department of Agriculture; United States

Department of Transportation (DOT); United Transportation Union

(UTU); U.S. Clay Producers Traffic Associations, Inc. (US Clay);

Joseph C. Szabo, for and on behalf of United Transportation Union-

Illinois Legislative Board (UTU-IL); and Western Coal Traffic League

(WCTL).

Replies were filed by AL&M; AAR; BHP; CPUC; Empire; Entergy;

IPC; LCRA; NITL, CMA, Edison-Farmland-Fertilizer, NMA, SPI, US Clay,

AmerenUE, and PP&L (NITL et al.); Shell; and WCTL.

\3\ Supplemental comments were filed by AL&M; CPUC; Cemex;

Edison-Fertilizer; Empire; Farmrail System, Inc. (Farmrail); NGFA;

NITL; Reagent Chemical & Research, Inc.; UTU; UTU-IL; WCTL; and

Western Railroad Company, Inc.

Supplemental replies were filed by AAR; ASLRRA; Edison-

Fertilizer; Farmrail; and DOT.

\4\ UTU-IL is the only commenter opposing the proposals. It

argues that new procedures are unnecessary. Its assertion, however,

is belied by the overwhelming consensus, expressed in the comments

of the shipper and railroad communities alike, that such procedures

would be useful and would assist parties in overcoming temporary

service problems.

We also note that the national UTU, while voicing ``serious

concerns'' about issues that could arise in individual cases

regarding safety and adverse effects on rail employees, does not

oppose the proposals.

\5\ Individual suggestions or arguments not specifically

referenced here are embraced by our general discussion in this

decision setting forth the positions of various groups and our

response thereto.

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Discussion and Conclusions

Overview

The procedures we are adopting here are designed to enable the

Board to provide temporary relief from serious, localized railroad

service problems more quickly and effectively. They do not provide

permanent remedies; to the contrary, they include specific procedures

for terminating the relief as soon as the incumbent carrier is ready

and able to serve the traffic again. Moreover, they are not intended to

address demands for more competitive service. The ``competitive

access'' regulations, at 49 CFR 1144, remain available for obtaining

more permanent relief where the incumbent railroad has acted in a way

``that is contrary to the competition policies of 49 U.S.C. 10101[] or

is otherwise anticompetitive,'' 49 CFR 1144.5(a)(1)(i).

Choice of Remedies

In the May Notice we proposed a single set of procedures under

which parties could seek temporary alternative rail service under

either the ``access'' provisions of sections 10705 or 11102 or the

``emergency service'' provisions of

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section 11123. Under section 10705(a), the Board has broad authority to

prescribe alternative through routes when we ``consider[] it desirable

in the public interest.'' Similarly, under section 11102, we have broad

authority to order the use of another carrier's terminal facilities (in

subsection (a)) or to order switching arrangements (in subsection (c))

when we find such arrangements ``to be practicable and in the public

interest.'' 6 Finally, we have very broad authority under

section 11123 to direct the handling of traffic and the use of rail

facilities for a limited time (not more than 270 days) when there is an

``emergency situation'' causing ``substantial adverse effects on

shippers,'' or ``on rail service in a region'' of the country, or when

a rail carrier ``cannot transport the traffic offered to it in a manner

that properly serves the public.'' 7 We explained that

providing a choice of relief would afford flexibility in addressing

individual circumstances.8

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\6\ We may also order switching arrangements upon a finding that

they are ``necessary to provide competitive service.'' 49 U.S.C.

11102(c). However, as noted above, the rules adopted here are not

designed to address such needs. A party seeking relief based on a

desire for more competitive service must proceed under the

``competitive access'' rules at 49 CFR 1144.5(a). See Intramodal

Rail Competition, 1 I.C.C. 2d 822 (1985), aff'd sub nom. Baltimore

Gas & Elec. Co. v. United States, 817 F.2d 108 (D.C. Cir. 1987)

(adopting the competitive access rules); Midtec Paper Corp. v.

Chicago & N.W. Transp. Co., 3 I.C.C.2d 171 (1986), aff'd sub nom.

Midtec Paper Corp. v. United States, 857 F.2d 1487 (D.C. Cir. 1988).

\7\ As we explained in the May Notice, although section 11123

typically has been used to respond to regional service emergencies,

it is not limited to regional emergencies, but by its terms is also

available to address more localized situations.

\8\ We noted that the relief available under sections 10705 and

11102 is limited in nature (for example, trackage rights can only be

granted to terminal facilities), whereas the emergency relief

available under section 11123 is limited in duration (restricted to

a maximum 270-day period) but not in nature.

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AAR argues that temporary relief for service problems may only be

afforded under section 11123, and not under sections 10705 or 11102.

AAR reasons that, because section 11123 addresses emergency situations

requiring expedited action and embraces the types of service relief

that would be available under sections 10705 or 11102, we cannot

circumvent the limitations imposed under section 11123--the 30-day

reappraisal requirement and the 270-day total time limit 9--

by providing the same relief under sections 10705 or 11102.

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\9\ 49 U.S.C. 11123(c)(1).

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We agree with AAR, but only in part. We conclude that it would not

be appropriate to provide emergency service relief under sections 10705

or 11102 based on an accelerated or summary process, as section 11123

is specifically tailored for that purpose. Indeed, section 11123

permits us to act immediately, without observing normal due process

procedures, 49 U.S.C. 11123(b)(1), but our actions under those

circumstances must therefore be short-term (not to exceed 270 days).

Under the rules that we had proposed, and those that we have decided to

adopt in Part 1146 for requests brought under section 11123,

significant process will in fact be provided,10 but under

very short time frames given the urgency of the situations for which

they are designed. It is therefore appropriate that the relief granted

be limited to a specific duration, as it will be based upon the limited

record that can be developed under such a tight schedule.

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\10\ The incumbent railroad will be served with a copy of the

petition for relief and afforded an opportunity to reply. Moreover,

while the time for filing a reply is short, the incumbent will

receive additional actual notice, because the petitioner is required

to discuss the service problems with the incumbent carrier prior to

filing the petition for relief. In addition, we will issue a written

decision addressing the record and containing our findings.

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However, contrary to AAR's position, the statute does not preclude

us from prescribing alternative service under sections 10705 and 11102

to alleviate service problems on a fuller, less hastily developed

record. Inherent in the power to provide permanent relief under those

sections is the authority to provide the lesser included remedy of

temporary alternative service. Accordingly, we have decided to adopt

separate rules, in Part 1147, under which requests for temporary

alternative service under sections 10705 and 11102 based on service

problems will be entertained under less pressing time frames, and under

which the authority granted will be temporary but not limited to a

specific duration.

Upon the adoption of these new rules, we will have three different

sets of rules under which parties may seek alternative rail service.

Each set of rules will serve a different purpose. The Part 1146 rules

will apply to requests for expedited, short-term emergency relief under

section 11123.11 The Part 1147 rules will apply to requests

for temporary alternative service under sections 10705 or 11102, on a

more fully developed record, to address serious (but not necessarily

emergency) service problems. The Part 1144 rules will remain available

for requests for more permanent alternative service under sections

10705 or 11102 to address competitive abuses.

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\11\ Our adoption of the Part 1146 rules for handling requests

for localized immediate service relief is not intended to preclude

us from handling broader, regional service emergencies, as we have

in the past, under ad hoc, case-by-case procedures, as in Joint Pet.

for Service Order, STB Service Order No. 1518 (Oct. 31, 1997),

modified and extended (Dec. 4, 1997), further modified and extended

(Feb. 17 and 25, 1998), terminated with wind-down period (July 31,

1998) (UP/SP Service Order).

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These various procedures are not mutually exclusive; parties may

seek relief under more than one set of rules. For example, parties may

need temporary access under Part 1147 to address serious ongoing

service problems while they prepare a case for more permanent

alternative arrangements under Part 1144 to address a more basic

underlying competitive problem. Or, in emergency situations, parties

may need immediate, short-term relief under Part 1146, while they

pursue longer-term relief through the necessarily slower proceedings

under Part 1147 and/or Part 1144. In short, to obtain both immediate

and complete relief, multiple proceedings may be needed, requiring a

separate record to be developed in each proceeding. This is necessary,

however, so that the speed of the process, and extent of the showing

required, can be appropriately tailored to the nature and extent of the

relief sought. Moreover, we believe that the resulting selection of

procedures--Part 1146 for expedited, short-term emergency relief; Part

1147 for temporary, service-based access; and Part 1144 for permanent,

competition-based access--will be both fair to the interests of the

affected railroads and responsive to the transportation needs of the

shippers involved.

Nature and Extent of Service Problems

The comments reflect differing views on the nature and extent of

service problems to be addressed by these rules. AAR, supported by UTU,

argues for a somewhat more restrictive approach than we had envisioned,

while various shippers advocate a broader approach than we believe is

appropriate. We emphasize that the temporary service relief to be

offered under these rules is meant only to address serious service

problems and only to the extent necessary to meet a demonstrated need

for rail service; it is to be used for restorative or alleviative

purposes only, and not as a punitive or preventive measure.

Thus, we reject AAR's attempt to exclude from the reach of these

rules those service problems for which the incumbent railroad is not at

fault.12

[[Page 71398]]

After all, the potentially ruinous impacts on affected shippers and

connecting carriers of not having adequate rail transportation

generally do not depend upon the root cause of the carrier's service

problems. Moreover, because this temporary relief is not a punishment

against the incumbent railroad--the relief is terminable as soon as

that carrier is ready and able to provide adequate service itself--we

need not assign fault for service problems in order to provide relief

from them.

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\12\ AAR seeks to carve out service reductions caused by a

change in demand for rail service or by other shifts in market

conditions. AAR offers the following examples of what it considers

to be major market shifts: the Russian grain purchases of the 1970s;

shifts in traffic due to coal type changes resulting from the Clean

Air Act; and the primary market for Pacific Northwest lumber

changing from Asia to the Eastern United States.

AAR also argues that car supply issues--such as car acquisition,

allocation, and maintenance--should not addressed in these rules, as

they can be addressed under 49 U.S.C. 11121 (under which we may,

after a hearing, require a railroad to furnish safe and adequate car

service if we make certain findings). We do not believe that section

11121 precludes us from taking other, temporary measures to enable

traffic to move by other means while a carrier confronts its own car

supply problems. Indeed, section 11123 expressly includes a

``shortage of equipment'' among the urgent situations to be

addressed under that section.

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Similarly, these rules are designed only to address serious ongoing

service disruptions. They are not intended to anticipate problems that

have not yet occurred (and might not occur), as mentioned by AL&M. Nor

are they meant for situations where service is adequate, but simply not

up to the level that a particular shipper or connecting carrier might

desire. In other words, while transportation needs are crucial,

individual service desires are not necessarily the proper determinant

of the adequacy or inadequacy of rail service, as some shippers have

suggested.

Many comments addressed the level of service problems that would

warrant relief under these rules. AAR argues that relief should be

restricted to instances of ``severe'' service deterioration

13 occurring over a meaningful time period 14 as

measured against an appropriate comparison period.15 Various

other parties advocate a looser standard based upon the particular

needs and viewpoint of the shippers involved. Still others would have

us set out in advance more definitive service standards, presumptions

or benchmarks that would entitle petitioners to relief.

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\13\ AAR advocates using the adjective ``severe'' so as to limit

relief to instances of a major service decline and to prevent the

rules from being used as a subterfuge for universal ``open access.''

It further suggests that this is necessary to avoid chilling

railroads from taking initiatives to improve service, out of fear

that any improvement in service that cannot be sustained will serve

as a new benchmark for a later determination that service has since

deteriorated. We plan to administer these rules in such a manner

that these fears should not be realized, and our application of

these rules in individual cases is, of course, subject to judicial

review.

\14\ AAR argues that this time period should be 90 days, to

distinguish a sustained decline in service quality from the ordinary

variability of rail service. AAR concedes, however, that a shorter

test period could be appropriate where there have been ``extreme and

undisputed service breakdowns,'' as in bankruptcies.

ASLRRA suggests a 30-day time period, arguing that for a small

railroad such a period is ``extremely damaging and intolerable . . .

[and] long enough to rule out temporary, minor or fleeting service

problems.'' Various shippers urge even shorter time periods.

BHP and IPC argue against a specific test period, and for

maintaining the flexibility to address varying situations. We agree

that it is not necessary or appropriate at this time to prescribe a

minimum period. We note, however, that petitioners have the burden

of demonstrating the inadequacy of the existing service, and,

presumably, the longer problems continue, the easier it should be

for petitioners to document those problems and to demonstrate the

gravity of the situation.

\15\ AAR suggests that the base period for comparison should

consist of several equivalent time intervals over a span of prior

years, in order to guard against a ratcheted approach where every

temporary improvement in service that results from seasonality and

traffic ups and downs could establish a new baseline standard. Such

concerns, however, can and should be addressed on a case-by-case

basis. Both petitioners and the incumbent carriers should submit any

relevant evidence of instructive base periods in making their

respective presentations.

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We do not believe that it is possible or appropriate to attempt to

delineate or define in the abstract what constitutes adequate service

for all traffic under all circumstances at all times. Rather, we remain

convinced that such issues are best addressed on a case-by-case basis,

under flexible general rules, because transportation needs and service

difficulties can vary substantially. Moreover, we believe that the

``substantial measurable deterioration'' language we had proposed

appropriately describes serious, objectively determinable service

declines for which relief should be available under these rules.

However, we are persuaded by the comments that there may be an

equally compelling need for relief in instances where there has been no

deterioration from prior service levels because service has been

continuously inadequate or because there are new rail transportation

needs (by newly located shippers or existing shippers with changed

transportation needs) for which adequate service is not being provided.

To address such situations, we are also providing for relief from

``other demonstrated inadequacy in rail service provided by the

incumbent carrier.'' 16

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\16\ This change is consistent not only with sections 10705 and

11102, but also section 11123(a), which refers to transportation

``that properly serves the public,'' and with the railroads'

overarching common carrier obligation, embodied in 49 U.S.C.

11101(a), to provide service upon reasonable request.

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Available Traffic

AAR argues that we lack authority to provide any relief for

transportation that has been exempted from our regulation pursuant to

49 U.S.C. 10502 or that is the subject of a rail transportation

contract under 49 U.S.C. 10709.

AAR is clearly wrong with respect to exempt traffic. We retain full

jurisdiction to deal with exempted transportation, as we can revoke the

exemption at any time, in whole or in part, under section 10502(d). G&T

Terminal Packaging Co. v. Consolidated Rail Corp., 830 F.2d 1230, 1235

(3rd Cir. 1987), cert. denied, 485 U.S. 988 (1988). We will do so to

the extent required to provide relief shown to be justified under these

rules.

As for transportation that is provided under a rail transportation

contract, AAR is correct that we cannot enforce, interpret, or disturb

the contracts themselves, nor can we directly regulate transportation

that is provided under such a contract. 49 U.S.C. 10709(b), (c).

However, where no transportation is being provided, we do not believe

that the mere existence of a contract precludes us from providing for

temporary emergency service, upon a proper showing, so that traffic can

move while any contract-related issues are being litigated in the

courts. Moreover, there may be other instances where it is possible and

appropriate to exercise our broad regulatory authority to ensure that

traffic can move, as in the recent UP/SP Service Order. Thus, we are

not inclined to disavow in advance any possible exercise of

jurisdiction. Such jurisdictional issues are best left to a case-by-

case examination and, again, our assertion of jurisdiction in any

specific case will be subject to judicial review.

Discussions With the Incumbent Carrier

AAR supports the requirement that prospective petitioners discuss

service problems in advance with the incumbent railroad, and that their

petitions address the reasons why the incumbent carrier is unlikely to

restore adequate rail service in a reasonable period of time. AAR

suggests adding a further requirement that the petitioner act

responsibly, cooperate reasonably with the incumbent railroad to allow

provision of adequate service, and not be allowed to reject reasonable

alternatives proposed by the incumbent carrier to solve the service

problems.

Some commentors take a different view. WCTL objects to imposing an

additional burdens on petitioners. AL&M submits that the advance

discussions with the incumbent should

[[Page 71399]]

be simply for the purpose of establishing facts about the service

problem, such as its causes, magnitude, and the forecast for service

restoration; in an expedited process, they argue, parties should not

have to engage in deeper discussions. Shell expresses concern that

requiring projections of when service will be restored may lead the

incumbent railroad to project dates that it knows it cannot meet in

order to forestall the introduction of an alternative service provider.

We see no need to reduce, expand, or otherwise place conditions on

the requirement that was proposed. Advance discussions between the

parties are indispensable. They may help solve or ameliorate the

service problems; narrow the issues in dispute; or, at a minimum,

enable a more complete and informative record to be developed upon

which we can assess the situation and the proposal for relief. Thus, it

is in all parties' interests to engage in full, good faith

discussions.17 Any allegations that either party is acting

unreasonably or in bad faith can and will be considered on a case-by-

case basis.

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\17\ We agree with AAR that, as part of the pre-petition

communications, the parties should not withhold, but rather should

make fully available to each other, any documentation of the service

history.

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Arrangements With an Alternative Carrier

Several commentors express concern about the requirement that a

petition include a commitment from another carrier to provide the

alternative service. CMA suggests that a potential alternative carrier

may be unwilling to participate because taking on new business for a

short period of time may be unattractive financially. Or a carrier may

be hesitant to serve for fear of retaliation by the incumbent carrier,

particularly if the alternative carrier is a small railroad. CMA and

CPUC suggest that an unwilling carrier be required to explain its

objections and, unless they are reasonable, we should order it to

provide service. Because the cooperation of the alternative carrier is

essential, we must reject this suggestion. As we explained in the May

Notice, at 6, even temporary access is a serious remedy, given the

potentially significant operational, safety, and financial implications

for the carriers involved. Forcing a second carrier to provide service

unwillingly could create safety concerns, impair service to its

customers, or hurt its finances.

BHP and IPC seek clarification that a shipper can seek alternative

service from any entity that is ready, willing, and able to provide

service, including third-party rail switchers or other entities that

may not be certificated carriers.18 AAR objects, arguing

that a carrier is not in a position to help if it does not own its own

infrastructure. We do not foreclose the possibility that third-party

rail switchers and others can provide genuine service relief in certain

circumstances, and we will allow any competent carrier to serve,

provided it can do so safely. However, inasmuch as an entity authorized

under these provisions will be required to interface directly and fully

with other rail carriers as common carriers by rail, the entity

authorized to provide alternative service should be a carrier

certificated by the Board. That is not to say, as noted, that

noncarrier entities would be foreclosed from participation, only that

such entities would be required to use our 7-day notice procedures (at

49 CFR 1150.31) to obtain the requisite operating authority. In these

circumstances, and in order to expedite the process and minimize

burdens on temporary operators, filing fees for such authority will be

waived.

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\18\ BHP and IPC assert that third-party rail switchers are

fully capable of operating on rail lines and moving cars in and out

of a shipper's plant and, in emergencies, can safely operate over an

incumbent railroad's track for short distances to interchange

points.

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AAR seeks clarification that the alternative carrier must be able

to provide better service than the incumbent carrier is currently

providing. We consider that to be implicit in the reason for providing

relief under these rules, and we will deal with this matter on a case-

by-case basis. We will authorize relief where the combination of the

alternative carrier and the incumbent carrier will provide better

service than the incumbent carrier is providing by itself. In this

regard, we note that providing authority to an alternative carrier does

not supplant the service furnished by the existing carrier, but rather

supplements it.

AAR further suggests that these rules should apply only to

exclusively-served petitioners, and not to those that already have

access to an alternative carrier. We agree that as a general rule no

relief is necessary for petitioners that can already access another

carrier capable of handling the service needs. If neither of the

incumbent carriers is providing adequate service, however, relief under

these rules is not foreclosed.

Safe Implementation

Petitions for relief under these rules must show how the

alternative carrier would provide the service safely and without

degrading service to its existing customers or unreasonably interfering

with the incumbent's overall ability to provide service. Several of the

comments specifically addressed this requirement.

AAR voiced a concern that alternative service remedies could be

counterproductive, because the incumbent carrier's crews would have to

train the crews of the alternative carrier, or the incumbent carrier's

crews might have to be diverted from other service in order to run the

trains of the alternative carrier. UTU expressed concern that,

particularly where the incumbent's lines are already congested, the

inexperience of employees of the alternative carrier on the incumbent's

trackage could lead to greater delays or accidents. UTU asks that new

crews be given significant training whenever an alternative carrier

enters another carrier's lines. BHP and IPC agree that having the crews

of the incumbent carrier train the new crews or run the alternative

carrier's trains may may be necessary for safety reasons, but they

argue that we should not deny a request for alternative service relief

on that basis. And of course, as NITL notes, there should be little

effect on an incumbent carrier's operations and safety when only

reciprocal switching or through route/joint rate remedies are sought.

NITL argues that, to avoid delay, it should be the responsibility

of the incumbent carrier, not the petitioner, to identify and address

likely safety issues, as it would be more difficult for a shipper to

anticipate and address operational issues. While the incumbent carrier

will undoubtedly wish to address any such issues, the alternative

carrier is expected to anticipate and address them as well. Therefore,

we believe that it is appropriate to have the petition describe the

alternative carrier's operational plans and discuss how the proposed

operations can be conducted safely.19 Moreover, the carriers

involved need to discuss with each other how they can work together to

make the alternative service work smoothly, and any problems or

disputes should be raised and dealt with as early in the process as

possible.

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\19\ The simple one-page commitment suggested by US Clay

(consisting merely of a pledge to adequately and safely serve the

traffic) would not be sufficient. Advance planning will be necessary

to assure safe integration of the operations of the alternative

carrier and the incumbent carrier. We believe it is appropriate for

us to require the respective carriers to demonstrate that they have

undertaken the requisite planning.

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Given the importance of safety issues, DOT asks that a copy of

petitions be served on the Federal Railroad

[[Page 71400]]

Administration (FRA) and that the parties be required to cooperate with

FRA to ensure that safety is not compromised. We agree and are adding a

requirement for service on FRA,20 and we expect parties to

cooperate fully with FRA.

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\20\ UTU-IL asks that petitioners also be required to serve

their petitions on employee organizations and to include unspecified

employee information in the petition. However, UTU-IL--a local

legislative body located in Illinois--would not be the entity to

receive such petitions under its proposal, and no entity that would

has joined in the request. We are reluctant to impose unnecessary

burdens on the filing of these petitions. Moreover, we are confident

that safety issues can and will be addressed fully without these

additional requirements.

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Finally, AAR argues that we should impose the least intrusive

remedy that will address the particular service problem

presented.21 Cemex, on the other hand, asks that we provide

the best, most expeditious, available relief. We believe it is best to

maintain the flexibility to weigh issues of intrusiveness, feasibility,

effectiveness, and speed of relief on a case-by-case basis. However, it

is worth repeating at this juncture that the remedy provided is

designed to most effectively address identified service problems, not

to punish the incumbent carrier.

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\21\ AAR notes that a new through route can be less disruptive

or costly than other remedies, and that in most cases reciprocal

switching is less intrusive than trackage rights.

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Compensation, Rates and Divisions

NITL argues that the Board, rather than the carriers, should set

the amount of compensation to be paid to the incumbent carrier for the

use of its property. However, that would be contrary to the statute,

which authorizes the Board to set compensation only if the parties

cannot agree on terms. 49 U.S.C. 11102(a), (c), 11123(b)(2).

Various parties address the need for the incumbent carrier to be

fairly compensated if it is required to provide services and/or

facilities to the alternative carrier. NITL et al. argue that any

payment to the incumbent carrier should be limited to costs incurred by

the incumbent, including a return on investment, and not include

compensation for lost profits. They suggest that fair compensation can

be developed from our railroad cost accounting system, known as URCS.

We agree that the incumbent railroad is entitled to fair compensation

for whatever services and facilities it provides, but not for lost

profits for service it is not providing. Because the type of access to

an incumbent carrier's facilities and the services the incumbent will

be required to provide to an alternative carrier will vary widely,

depending on the service inadequacy and the relief that is fashioned,

we will not attempt to prescribe in the abstract a compensation formula

applicable to all situations. Rather, where appropriate we will be

guided by established precedent, taking into account the circumstances

of the particular case.

BHP and IPC argue that affected shippers should not have to pay

more for receiving the alternative service than would be paid for the

incumbent carrier's service, and NITL argues that affected shippers

should not have to pay more than the URCS variable costs for moving

their traffic. We do not have the authority, however, to prescribe the

rates that a carrier will charge to a shipper unless we first find that

the carrier has market dominance over the traffic involved and that the

rate selected by the carrier is unlawful. 49 U.S.C. 10701(c), (d),

10704(a)(1), 10709. Thus, the rates to be charged for the alternative

service are a matter for discussion between the shipper and alternative

carrier. We would note, however, that attempting to limit what the

alternative railroad may charge to what the incumbent would have

charged, even though the alternative carrier will incur different

costs, could disserve the shippers' interests by discouraging carriers

from offering to provide alternative service.

Finally, ACE asks that we set standards for determining the

division between the carriers of any joint rates. We have such

standards in place, at 49 CFR 1137, and see no need to revise them at

this time. We note, however, that those regulations are meant to serve

as a last resort only; carriers are encouraged to negotiate divisions

among themselves.22

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\22\ Official-Southwestern Divisions In the Matter of Joint

Rates Between Official and Southwestern Territories, Docket No.

29886 (Sub-No. 1) (ICC served Jan. 28, 1987).

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Case Procedures

We proposed very short time frames for the development of a record

under Part 1146--with a reply by the incumbent railroad due in 5

business days, and any rebuttal by the petitioner due 3 business days

later--to enable us to provide prompt relief for service emergencies.

As noted above, we have decided to lengthen the time periods in Part

1147 applicable to petitions for temporary, service-based access under

sections 10705 and 11102 of the statute--with a reply by the incumbent

railroad due in 30 days, and any rebuttal by the petitioner due 15 days

later.

With respect to the abbreviated time frames proposed for Part 1146,

some commenters seek to lengthen the schedule,23 while

others would have us shorten it even more.24 We do not

believe that a shorter time frame is feasible, given the nature of the

relief sought, the need for an adequately developed record regarding

the factual predicate for such action, and the ability of the parties

to implement the proposed arrangement safely and without harm to either

railroad or their other shippers. By the same token, we are not

persuaded that a longer time frame is necessary or appropriate given

the emergency nature of the situations for which the Part 1146 rules

are reserved. (We remind the commenters that parties will actually have

additional notice of the controversy, because they are required to

discuss the service problems prior to the filing of the petition.) To

ensure that the limited time provided can be used effectively, however,

we adopt the NITL suggestion that service of all pleadings be by hand

or by overnight delivery.

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\23\ AAR suggests that the reply be due in 14 days, and

petitioner's rebuttal 7 days thereafter. As NITL points out, that

would serve to triple the originally proposed time frame. North

Dakota suggests that petitioners have 5 business days for rebuttal.

\24\ BHP and IPC would have us require the filing and service of

pleadings (on a designated ``service officer'' for the incumbent

railroad) by facsimile, with a reply due within 2 calendar days. To

further speed the process, they suggest that we appoint an ombudsman

of the Board to receive and quickly act on such petitions, with

appeals available to the Board.

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Finally, several parties ask that we set a time for Board action on

a petition for temporary alternative service.25 Our goal is

to issue a decision as soon as possible after the record closes, taking

into account the degree of urgency involved in the particular request

before us. We are not persuaded that this goal will be furthered by

prescribing in advance an arbitrary deadline for Board action in all

such cases.

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\25\ The dates suggested ranged from 5 (Shell and CPUC) to 7

(CLC) to 15 (US Clay) days after rebuttal.

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Duration of Relief

The relief available under Part 1146 is, of course, subject to both

the 30-day reappraisal requirement and the maximum 270-day time limit

for actions taken under section 11123. Part 1146 contains a rebuttable

presumption that an emergency for which relief is granted will extend

beyond the initial 30-day period, unless otherwise indicated in the

Board's initial order. AAR argues against such a presumption, on the

ground that we cannot avoid the requirement in section 11123 for a

reappraisal of the situation at the end of the first 30 days. Contrary

to AAR's impression, the presumption was not intended to obviate the

need for a

[[Page 71401]]

further Board order at the end of the 30-day period. Rather, it is

designed to simplify and expedite the 30-day reexamination by avoiding

a rehashing of the original inquiry into whether relief is appropriate

and limiting the evidentiary presentations and our analysis to the

issue of whether the emergency is over so that the relief is no longer

needed. The presumption can be rebutted by the incumbent railroad.

Moreover, the presumption will not apply in those cases where the Board

in its original order finds that the emergency is unlikely to continue

for more than 30 days.

Of course, under both Parts 1146 and 1147, the incumbent railroad

will be free to petition to terminate the relief as soon as the

emergency is over, regardless of when that occurs. The statement in the

proposed rules that would have discouraged carriers from filing a

petition to terminate relief less than 90 days after the relief is

granted, absent special circumstances, would not have barred earlier

termination petitions. Rather, we intended for it to serve as an

admonition to carriers not to file such petitions too hastily or

prematurely. Accordingly, we have changed the language to express that

purpose more directly and clearly.

Some shippers seek a minimum period of relief to which the

petitioner would be entitled.26 While we appreciate their

concern, we do not believe that establishing a minimum time would be

appropriate, given the nature and (non-punitive, restorative) purpose

of actions taken under Parts 1146 or 1147.27 As discussed

above, parties desiring alternative service that extends beyond

correction of any serious service problems may proceed under Part 1144.

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\26\ NITL argues for a 90-day minimum period, arguing that any

shorter period will be insufficient to justify the time and expense

spent by alternative carriers in providing service. Others proposed

minimum periods ranging from 30 days (AL&M) to 180 days (SPI) to one

year (PP&L and AmerenUE).

\27\ For the same reason, we do not believe it is necessary or

appropriate to place an outside limit on the duration of relief that

is provided under Part 1147. (Relief granted under Part 1146 is

statutorily limited to 270 days.) Unitl the incumbent railroad is

ready to provide adequate service on its own, the basis and need for

frelief continue.

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Railroad Petitioners

We agree with AAR that the rules as originally proposed did not

preclude railroads (of any size) from seeking relief under the rules,

and the rules will so specify. As ASLRRA points out, there may well be

situations where a railroad is seriously affected by the service

disruptions of a connecting (incumbent) carrier and may need to obtain

a connection with a second (alternative) carrier and access (by either

the petitioning or alternative carrier) over track of the incumbent

carrier for a reasonable distance to reach the alternative carrier. The

primary issues 28 regarding railroad- (as opposed to

shipper-) initiated petitions relate to mandatory interchange

requirements and relief from ``paper barriers'' 29 or other

contractual impediments to access. 30

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\28\ ASLRRA's suggestion that we assess qualifying service

disruptions based upon a preset (30-day) time period, and AAR's

attempt to remove car supply issues from the service problems for

which relief may be granted, are rejected for the reasons discussed

above under ``Nature and Extent of Service Problems.''

\29\ ``Paper barriers'' refer to contractual restrictions that

limit the ability of some small carriers to interchange traffic with

carriers other than their primary connecting carrier. See Review, at

8.

\30\ DOT and Farmrail agree that there may be other contractual

impediments that limit the service that a small railroad can

provide, such as car supply requirements and exclusive rate making

authority by the larger, connecting carrier.

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ASLRRA asserts that a railroad-petitioner should not need an

advance commitment from an alternative carrier, in view of the

mandatory interchange requirements applicable to all railroads in 49

U.S.C. 10742. AAR argues against compelling an unwilling second

railroad to participate in an emergency service arrangement. AAR

asserts that the principal, if not only, reason that a second railroad

would decline to handle additional traffic via a new connection would

be operating considerations, which are a significant factor in

determining whether to grant relief. AAR argues that requiring the

willingness of the second carrier will filter out those situations

where there are operational problems. DOT suggests an intermediate

position short of requiring a binding commitment from a prospective

connecting railroad--that the prospective railroad be consulted to

ensure that any relief granted would not unduly affect its operations.

31 ASLRRA concedes that as a practical matter the

petitioning railroad will need to work closely with the alternative

carrier to work out the details of how traffic would be handled

efficiently and safely in a manner acceptable to each. We agree and

thus we would expect the carriers normally to have worked out an

agreement. If for some reason they have not been able to reach

agreement, we will take that into consideration, on a case-by-case

basis, in determining whether the relief sought is operationally

feasible and safe and will not harm service to existing customers.

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\31\ WCTL agrees that the petitioning railroad should be

required to show, as any petitioner would, that the requested relief

is operationally feasible, but should not be required to ``pre-clear

its petition with the second carrier's marketing department.'' WCTL

Supplemental Comments at 6.

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AAR agrees that contract terms that would directly prevent the

exercise of the remedy granted by the Board should be superseded, but

argues that broader relief is inappropriate. Such issues are likely to

be fact-dependent, and are thus best left to consideration on any

individual case basis.

This action will not significantly affect either the quality of the

human environment or the conservation of energy resources. Moreover, we

certify that this action will not have a substantial impact upon a

significant number of small entities.

List of Subjects in 49 CFR Parts 1146 and 1147

Railroads, Service.

Decided: December 18, 1998.

By the Board, Chairman Morgan and Vice Chairman Owen.

Vernon A. Williams,

Secretary.

For the reasons set forth in the preamble, the Board adds new parts

1146 and 1147 to title 49, chapter X, of the Code of Federal

Regulations, to read as follows:

PART 1146--EXPEDITED RELIEF FOR SERVICE EMERGENCIES

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

Sec. 1146.1. Prescription of alternative rail service.

(a) General. Alternative rail service will be prescribed under 49

U.S.C. 11123(a) if the Board determines that, over an identified period

of time, there has been a substantial, measurable deterioration or

other demonstrated inadequacy in rail service provided by the incumbent

carrier.

(b)(1) Petition for Relief. Affected shippers or railroads may seek

the relief described in paragraph (a) of this section by filing an

appropriate petition containing:

(i) A full explanation, together with all supporting evidence, to

demonstrate that the standard for relief contained in paragraph (a) of

this section is met;

(ii) A summary of the petitioner's discussions with the incumbent

carrier of the service problems and the reasons why the incumbent

carrier is unlikely to restore adequate rail service consistent with

current transportation needs within a reasonable period of time;

(iii) A commitment from another available railroad to provide

alternative service that would meet current transportation needs (or,

if the

[[Page 71402]]

petitioner is a railroad and does not have an agreement from the

alternative carrier, an explanation as to why it does not), and an

explanation of how the alternative service would be provided safely

without degrading service to the existing customers of the alternative

carrier and without unreasonably interfering with the incumbent's

overall ability to provide service; and

(iv) A certification of service of the petition, by hand or by

overnight delivery, on the incumbent carrier, the proposed alternative

carrier, and the Federal Railroad Administration.

(2) Reply. The incumbent carrier must file a reply to a petition

under this paragraph within five (5) business days.

(3) Rebuttal. The party requesting relief may file rebuttal no more

than three (3) business days later.

(c) Presumption of continuing need. Unless otherwise indicated in

the Board's order, a Board order issued under paragraph (a) of this

section shall establish a rebuttable presumption that the

transportation emergency will continue for more than 30 days from the

date of that order.

(d)(1) Petition to terminate relief. Should the Board prescribe

alternative rail service under paragraph (a), of this section the

incumbent carrier may subsequently file a petition to terminate that

relief. Such a petition shall contain a full explanation, together with

all supporting evidence, to demonstrate that the carrier is providing,

or is prepared to provide, adequate service. Carrier are admonished not

to file such a petition prematurely.

(2) Reply. Parties must file replies to petitions to terminate

filed under this subsection within five (5) business days.

(3) Rebuttal. The incumbent carrier may file any rebuttal no more

than three (3) business days later.

(e) Service. All pleadings under this part shall be served by hand

or overnight delivery on the Board, the other parties, and the Federal

Railroad Administration.

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

SERVICE INADEQUACIES

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

Sec. 1147.1. Prescription of alternative rail service.

(a) General. Alternative rail service will be prescribed under 49

U.S.C. 11102(a), 11102(c) or 10705(a) if the Board determines that,

over an identified period of time, there has been a substantial,

measurable deterioration or other demonstrated inadequacy in rail

service provided by the incumbent carrier.

(b)(1) Petition for Relief. Affected shippers or railroads may seek

relief described in paragraph (a) of this section by filing an

appropriate petition containing:

(i) A full explanation, together with all supporting evidence, to

demonstrate that the standard for relief contained in paragraph (a) of

this section is met;

(ii) A summary of the petitioner's discussions with the incumbent

carrier of the service problems and the reasons why the incumbent

carrier is unlikely to restore adequate rail service consistent with

current transportation needs within a reasonable period of time;

(iii) A commitment from another available railroad to provide

alternative service that would meet current transportation needs (or,

if the petitioner is a railroad and does not have an agreement from the

alternative carrier, an explanation as to why it does not), and an

explanation of how the alternative service would be provided safely

without degrading service to the existing customers of the alternative

carrier and without unreasonably interfering with the incumbent's

overall ability to provide service; and

(iv) A certification of service of the petition, by hand or by

overnight delivery, on the incumbent carrier, the proposed alternative

carrier, and the Federal Railroad Administration.

(2) Reply. The incumbent carrier must file a reply to a petition

under this paragraph within thirty (30) days.

(3) Rebuttal. The party requesting relief may file rebuttal no more

than fifteen (15) days later.

(c)(1) Petition to terminate relief. Should the Board prescribe

alternative rail service under paragraph (a) of this section, the

incumbent carrier may subsequently file a petition to terminate that

relief. Such a petition shall contain a full explanation, together with

all supporting evidence, to demonstrate that the carrier is providing,

or is prepared to provide, adequate service to affected shippers.

Carriers are admonished not to file such a petition prematurely.

(2) Reply. Parties must file replies to petitions to terminate

filed under this subsection within five (5) business days.

(3) Rebuttal. The incumbent carrier may file any rebuttal no more

than three (3) business days later.

(d) Service. All pleadings under this part shall be served by hand

or by overnight delivery on the Board, other parties, and the Federal

Railroad Administration.

[FR Doc. 98-34187 Filed 12-24-98; 8:45 am]

BILLING CODE 4915-00-P