Expedited Procedures for Processing Rail Rate Reasonableness, Exemption and Revocation Proceedings

DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Parts 1000 through 1149

[STB Ex Parte No. 527]

Expedited Procedures for Processing Rail Rate Reasonableness,

Exemption and Revocation Proceedings

AGENCY: Surface Transportation Board, DOT.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: Under new 49 U.S.C. 10704(d), enacted as part of section

102(a) of the ICC Termination Act of 1995 (ICCTA), the Surface

Transportation Board (Board) is required to establish procedures to

expedite the handling of challenges to the reasonableness of railroad

rates and of proceedings involving the granting or revocation of

railroad exemptions. Such procedures are to be promulgated by October

1, 1996. The Board solicits comments on how the existing regulations at

49 CFR Parts 1000 through 1149 can be modified to expedite the handling

of rate reasonableness and exemption/revocation proceedings.

DATES: Comments are due on May 6, 1996.

ADDRESSES: Send comments (an original and 10 copies) referring to STB

Ex Parte No. 527 to: Surface Transportation Board, Office of the

Secretary, Case Control Branch, 1201 Constitution Ave., N.W.,

Washington, DC 20423-0001. Parties are encouraged to submit all

pleadings and attachments on a 3.5-inch diskette in WordPerfect 5.1

format.

FOR FURTHER INFORMATION CONTACT: Thomas J. Stilling, (202) 927-7312.

[TDD for the hearing impaired: (202) 927-5721.]

SUPPLEMENTARY INFORMATION: New 49 U.S.C. 10704(d), which was enacted as

part of section 102(a) of the ICC Termination Act of 1995 (ICCTA), Pub.

L. No. 104-88, 109 Stat. 803, provides that:

submit all

pleadings and attachments on a 3.5-inch diskette in WordPerfect 5.1

format.

FOR FURTHER INFORMATION CONTACT: Thomas J. Stilling, (202) 927-7312.

[TDD for the hearing impaired: (202) 927-5721.]

SUPPLEMENTARY INFORMATION: New 49 U.S.C. 10704(d), which was enacted as

part of section 102(a) of the ICC Termination Act of 1995 (ICCTA), Pub.

L. No. 104-88, 109 Stat. 803, provides that:

Within 9 months after the effective date of the ICC Termination

Act of 1995, the Board shall establish procedures to ensure

expeditious handling of challenges to the reasonableness of railroad

rates. The procedures shall include appropriate measures for

avoiding delay in the discovery and evidentiary phases of such

proceedings and exemption and revocation proceedings, including

appropriate sanctions for such delay, and for ensuring prompt

disposition of motions and interlocutory administrative appeals.

New section 10704(d) is one of several specific provisions designed

to implement the new rail transportation policy (RTP) ``to provide for

the expeditious handling and resolution of all [rail related]

proceedings.'' New 49 U.S.C. 10101(15). Other such provisions adopted

by the ICCTA include new 49 U.S.C. 10704(c), which requires the Board

to decide the reasonableness of a challenged rate within 9 months after

the close of the record if the determination is based upon a stand-

alone cost presentation,1 and within 6 months if it is based upon

a simplified methodology.2 In addition, any proceeding to grant or

revoke an exemption ``shall be completed within 9 months after it is

begun.'' New 49 U.S.C. 10502 (b) and (d).

s the Board

to decide the reasonableness of a challenged rate within 9 months after

the close of the record if the determination is based upon a stand-

alone cost presentation,1 and within 6 months if it is based upon

a simplified methodology.2 In addition, any proceeding to grant or

revoke an exemption ``shall be completed within 9 months after it is

begun.'' New 49 U.S.C. 10502 (b) and (d).

\1\ See Coal Rate Guidelines, Nationwide, 1 I.C.C.2d 520 (1985),

aff'd sub nom. Consolidated Rail Corp. v. United States, 812 F.2d

1444 (3d Cir. 1987) (adopting constrained market pricing, including

stand-alone cost, as a test for maximum reasonableness of coal

rates).

\2\ New 49 U.S.C. 10701(d)(3) requires the Board ``to establish

[within 1 year] a simplified and expedited method for determining

the reasonableness of challenged rail rates in those cases in which

a full stand-alone cost presentation is too costly.'' In Rate

Guidelines--Non-Coal Proceedings, Ex Parte No. 347 (Sub-No. 2) (ICC

Dec. 1, 1995), 60 FR 62256 (1995), simplified guidelines have been

proposed for public comment.

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These various provisions were included in the ICCTA, in part, in

response to concerns raised by parties that litigate before the Board.

We hope, and expect, that the parties that raised these concerns will

now participate in a constructive way to assist us in establishing

appropriate procedures to expedite cases. Accordingly, we institute

this proceeding to examine ways in which we can comply with the new RTP

and, in particular, the specific requirements of new section

10704(d).3

ed by parties that litigate before the Board.

We hope, and expect, that the parties that raised these concerns will

now participate in a constructive way to assist us in establishing

appropriate procedures to expedite cases. Accordingly, we institute

this proceeding to examine ways in which we can comply with the new RTP

and, in particular, the specific requirements of new section

10704(d).3

\3\ In New Procedures in Rail Exemption Revocation Proceedings,

Ex Parte No. 400 (Sub-No. 4) (ICC Apr. 28, 1995), the Interstate

Commerce Commission (ICC) solicited comments on a proposal by the

Railway Labor Executives' Association to establish formal procedural

rules to govern petitions to revoke exemptions. In a separate

decision served today, that proceeding is being discontinued because

the concerns that were to be addressed there can and should be

subsumed into this broader proceeding. The comments filed in that

proceeding will be incorporated into the record in this proceeding

and need not be refiled.

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New section 10704(d) addresses the need to expedite two distinct

types of proceedings--rate reasonableness and exemption/revocation

cases. We note that, whereas the decisional time limits in rate

reasonableness cases run from the date on which the administrative

record is closed, in exemption/revocation cases they run from the date

on which the proceeding is instituted. Therefore, any delay in the

record-building stage of an exemption/revocation proceeding caused by a

protracted discovery or evidentiary process can hinder a party's

ability to effectively present its case within the allotted time. For

that reason, special discovery and evidentiary procedures might be

needed for exemption/revocation proceedings

the date

on which the proceeding is instituted. Therefore, any delay in the

record-building stage of an exemption/revocation proceeding caused by a

protracted discovery or evidentiary process can hinder a party's

ability to effectively present its case within the allotted time. For

that reason, special discovery and evidentiary procedures might be

needed for exemption/revocation proceedings.

The existing regulations that govern the filing and processing of

rate reasonableness and exemption/revocation cases are contained in the

Rules of Practice at 49 CFR 1000 through 1129 (Rules of General

Applicability), and at 49 CFR 1130 through 1149 (Rate Procedures).

These regulations provide a starting point in the search for new ways

of expediting cases. We recognize that some provisions of the existing

regulations have been rendered obsolete by the ICCTA and are now in the

process of being eliminated. Moreover, certain provisions will require

minor conforming changes, such as updating references to statutory

provisions or replacing the reference to the ICC with the Surface

Transportation Board. Those changes, which do not materially affect the

way in which a case is argued or a decision reached, can be handled

ministerially without comment from the public. In this proceeding, by

contrast, we are focusing on those procedures (both codified and

uncodified) that have a direct and significant impact on the time

devoted to developing the administrative record and the adequacy of

that record.

Discovery

hich do not materially affect the

way in which a case is argued or a decision reached, can be handled

ministerially without comment from the public. In this proceeding, by

contrast, we are focusing on those procedures (both codified and

uncodified) that have a direct and significant impact on the time

devoted to developing the administrative record and the adequacy of

that record.

Discovery

In any proceeding in which discovery is needed to develop an

adequate evidentiary record, the discovery process can have a

substantial impact on how quickly the case proceeds. We recognize that

the evidentiary process in the larger rate reasonableness cases where

stand-alone cost is used--such as challenges to the rate charged for

large volume movements of coal--can involve extensive discovery. In

these cases, discovery disputes often arise as each party attempts to

acquire the data needed to present its case fully. The number of such

disputes and how they are handled by the parties (and by the decisional

body) can be a major factor in protracting these proceedings.

In exemption/revocation proceedings, the development of an adequate

factual record can also be a substantial undertaking. With the new

statutory deadlines, it is imperative that the discovery process be

structured so as to enable discovery to be conducted fully and

completed quickly.4 It is equally important that discovery

procedures not be abused so as to limit an opposing party's ability to

effectively participate in a proceeding within the time allotted.

\4\ In some cases, exemptions have been granted based on the

evidence filed with the petition and without receiving comment from

other interested parties. In such cases, it may be appropriate to

develop procedures that would permit a party wishing to petition to

revoke the exemption to conduct discovery prior to the filing of a

petition for revocation.

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been granted based on the

evidence filed with the petition and without receiving comment from

other interested parties. In such cases, it may be appropriate to

develop procedures that would permit a party wishing to petition to

revoke the exemption to conduct discovery prior to the filing of a

petition for revocation.

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We solicit comments, particularly from parties that have been

involved in litigating cases, as to how we can speed up the discovery

process, how discovery disputes can be avoided, and how we can more

effectively resolve the discovery disputes that require resolution by

the Board. In particular, parties should suggest changes to the

discovery regulations (49 CFR 1114.21-1114.31) that they believe would

expedite the processing of cases.

Some particular areas on which commenters may wish to focus include

the need for Board approval prior to discovery; the use and role of

administrative law judges (ALJs) in handling discovery matters in major

rate cases; and the best way to handle interlocutory appeals of

discovery orders.

The existing discovery rules, for example, require prior Board

approval for all discovery other than interrogatories and requests for

admissions. See 49 CFR 1114.21(b)(2). The discovery rules also provide

for the filing of certain discovery documents with the Board, even

though the documents are not ``evidence,'' and will not be evidence

unless and until they are filed in an evidentiary submission. See 49

CFR 1114.24(h). Every unnecessary filing that is required to be made

with the Board, or processed by the Board, slows down the process for

the parties and impedes the Board in its ability to complete its cases

quickly.5 Therefore, we ask commenters to consider ways in which

discovery can proceed without the need for any Board action or

involvement, at least until a conflict arises.

n. See 49

CFR 1114.24(h). Every unnecessary filing that is required to be made

with the Board, or processed by the Board, slows down the process for

the parties and impedes the Board in its ability to complete its cases

quickly.5 Therefore, we ask commenters to consider ways in which

discovery can proceed without the need for any Board action or

involvement, at least until a conflict arises.

\5\ Similar internal paperwork burdens result from the practice

of permitting emergency filings by facsimile (FAX) [See 54 FR 52587

(Dec. 22, 1989)]. Although the concept of FAX filings was well

conceived, in practice it burdens the Secretary's Office, by

requiring it to process each FAX, and then to process, for a second

time, the same document when it is submitted in hard copy. As the

existing regulations already contemplate the use of overnight

delivery services (see 49 CFR 1004.6), we are considering

restricting the use of FAXes in the future. Commenters may wish to

address this issue.

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A difficult issue in major rate cases involves disputes over

discovery. On the one hand, we must assure that

parties obtain the information they need to make their case; on the

other hand, we are concerned that discovery not become overreaching and

unduly burdensome. Also, we are directed by statute to assure that the

process can be completed in a timely fashion. Thus, we seek a process

that will quickly produce proper discovery rulings in the first

instance, and that will then provide only narrow grounds for

interlocutory appeals.

In the past, we have used ALJs initially to resolve discovery

disputes in significant cases

reaching and

unduly burdensome. Also, we are directed by statute to assure that the

process can be completed in a timely fashion. Thus, we seek a process

that will quickly produce proper discovery rulings in the first

instance, and that will then provide only narrow grounds for

interlocutory appeals.

In the past, we have used ALJs initially to resolve discovery

disputes in significant cases. Given the highly technical issues raised

in major rate cases, and the need to curtail the appellate process, our

preliminary view is that the Board's staff--which is thoroughly

familiar with the practical application of the agency's maximum rate

procedures--should be involved in the resolution of discovery disputes

from the outset. Commenters should address how we can best utilize the

talents of an ALJ and/or our own staff to produce initial discovery

rulings that will balance the burdens of production with the needs for

information.6

\6\ For example, it may be that discovery in major rate cases

should be handled directly by the Board; that the ALJ handling

discovery should be directed to include Board staff in all discovery

conferences; or that the ALJ should only prepare a recommended

decision on discovery.

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New section 10704(d) directs the Board to dispose of motions and

interlocutory administrative appeals promptly. Many of these motions

and interlocutory appeals concern discovery. The ICC was not always

consistent in its handling of, for example, interlocutory appeals.

Sometimes, it treated interlocutory appeals under the rules governing

appellate procedures found at 49 CFR 1115. Sometimes, it treated them

under its regulations governing interlocutory appeals from hearing

officers found at 49 CFR 1113.5

any of these motions

and interlocutory appeals concern discovery. The ICC was not always

consistent in its handling of, for example, interlocutory appeals.

Sometimes, it treated interlocutory appeals under the rules governing

appellate procedures found at 49 CFR 1115. Sometimes, it treated them

under its regulations governing interlocutory appeals from hearing

officers found at 49 CFR 1113.5. Assuming that we can devise procedures

that will advance prompt and proper rulings in the first instance, we

would be inclined to adopt interlocutory appeals procedures along the

lines of those found at 49 CFR 1113.5, which permit interlocutory

appeals only in extremely narrow circumstances. We would also be

inclined to provide that such matters will be handled by the entire

Board, rather than the Chairman, in order to limit the number of

appellate levels available. Commenters should address this issue as

well.7

\7\ We also, of course, seek comment on how we should handle

motions and interlocutory appeals related to matters other than

discovery.

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Evidentiary Phase

The number and timing of evidentiary filings can also greatly

affect the length of a rate reasonableness proceeding. For example, in

a rate case we can proceed with the market dominance and rate

reasonableness phases sequentially or simultaneously. In some cases in

the past, the ICC conducted the two phases of the case sequentially;

only if it found market dominance did the ICC schedule the filing of

rate reasonableness evidence.8 More recently, the ICC provided for

the market dominance and rate reasonableness evidence to be filed

simultaneously.

d with the market dominance and rate

reasonableness phases sequentially or simultaneously. In some cases in

the past, the ICC conducted the two phases of the case sequentially;

only if it found market dominance did the ICC schedule the filing of

rate reasonableness evidence.8 More recently, the ICC provided for

the market dominance and rate reasonableness evidence to be filed

simultaneously.

\8\ In the new law, as in the law prior to the ICCTA, a

prerequisite to our exercise of jurisdiction over the reasonableness

of a rail rate is the requirement that a rail carrier have market

dominance over the transportation at issue. New 49 U.S.C. 10707.

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The sequential procedure can extend the time needed to close the

record, but has the advantage of sparing the parties the expense

associated with presenting evidence on the reasonableness of a rate in

cases where the carrier is found not to possess market dominance. The

simultaneous procedure allows faster completion of the record, but

always requires the parties to incur the expense of filing evidence on

the reasonableness of a rate. We ask for comments on whether to adopt a

general policy that would govern all cases, or whether we should

continue to decide on a case-by-case basis whether to bifurcate the two

phases of a rate proceeding.9

\9\ One option would be not to bifurcate cases unless all

parties to the proceeding favored bifurcation.

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ate. We ask for comments on whether to adopt a

general policy that would govern all cases, or whether we should

continue to decide on a case-by-case basis whether to bifurcate the two

phases of a rate proceeding.9

\9\ One option would be not to bifurcate cases unless all

parties to the proceeding favored bifurcation.

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Different evidentiary considerations apply to exemption and

revocation proceedings. Exemption or revocation requests may be very

particularized (i.e., for an individual transaction) or quite broad

(for an entire class of traffic or transactions). Generally, the

broader the request, the more extensive and complicated the evidentiary

record that needs to be developed. However, even a narrowly drawn

individual exemption petition can require a lengthy evidentiary

process. Exemption petitions involving construction or abandonment

activity, for example, often require extensive environmental analyses

(either an environmental assessment or environmental impact statement).

In such cases, it can be difficult to complete the environmental review

within 9 months. Comments are solicited on how proceedings requiring

extensive environmental analysis can best be accommodated in an

exemption context. One approach may be to issue an exemption that is

conditional pending completion of the environmental analysis.

More generally, to speed the exemption/revocation process in all

cases, it would seem that any party seeking either an exemption or a

revocation of an exemption should be required to provide all of its

supporting information at the time it submits its exemption or

revocation request. We welcome suggestions on fashioning appropriate

procedural schedules, including how much time should be allowed for the

filing of reply and rebuttal evidence

important by the opposing party. We request

comments as to whether we should adopt a general policy on simultaneous

or sequential briefing in rate reasonableness and exemption/revocation

proceedings, or whether we should make that decision on a case-by-case

basis. We also request comments on whether page limits generally should

be imposed and, if so, what the page limit should be.

Sanctions

New section 10704(d) specifically calls for ``sanctions to be

imposed for dilatory tactics in rate cases and revocation

proceedings.'' 10 H.R. Conf. Rep. No. 422, 104th Cong., 1st Sess.

172 (1995), reprinted in 1996 U.S. Code Cong. & Admin. News 856. The

current sanctions for failure to respond to discovery are found at 49

CFR 1114.31, and the current sanctions for failure to comply with the

procedural schedule are found at 49 CFR 1112.3. Parties should review

these provisions and comment on whether there are other sanctions, such

as monetary sanctions or other sanctions used by the courts,

that would be more appropriate and effective.

\10\ The Board has general powers to carry out the provisions

of the statute, including the imposition of sanctions. New 49 U.S.C.

721.

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Other Issues

Finally, we welcome any other suggestions on ways to improve the

processing of rate reasonableness and exemption/revocation

cases.11 In general, we expect to expedite the record-building

stage of cases by looking with disfavor on requests to extend the

procedural schedule. We intend to deny all requests for extensions of

time that fail to demonstrate a compelling need for additional time.

s

Finally, we welcome any other suggestions on ways to improve the

processing of rate reasonableness and exemption/revocation

cases.11 In general, we expect to expedite the record-building

stage of cases by looking with disfavor on requests to extend the

procedural schedule. We intend to deny all requests for extensions of

time that fail to demonstrate a compelling need for additional time.

\11\ In several recent cases, we have required that pleadings

be filed in paper form and on computer disk in WordPerfect format.

We have also required that spreadsheets be filed in Lotus 1-2-3.

Having evidence on electronic media in a format that is familiar to

the staff has been quite beneficial as we analyze the record. We

intend to require that evidence be filed on computer disks in the

future.

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We tentatively conclude that the proposed action will not have a

substantial adverse impact on a significant number of small entities.

In any event, the impact on small entities should be beneficial because

it should allow parties to more quickly avail themselves of their

statutory right to institute proceedings before the Board and to have

the Board expedite the processing of those proceedings.

This action will not significantly affect either the quality of the

human environment or the conservation of energy resources.

Decided: March 8, 1996.

By the Board, Chairman Morgan, Vice Chairman Simmons, and

Commissioner Owen.

Vernon A. Williams,

Secretary.

[FR Doc. 96-6986 Filed 3-21-96; 8:45 am]

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