Feud Over Proposal to Regulate Private Railcar Handling

Written by Marybeth Luczak, Executive Editor

Associations representing private railcar owners are rebutting responses to their request that the Surface Transportation Board institute a rulemaking updating the demurrage and accessorial rules governing the railroads’ use and handling of their equipment.

The North America Freight Car Association (NAFCA), National Grain and Feed Association (NGFA), Chlorine Institute (CI), and National Oilseed Processors Association (NOPA) in a Sept. 10 filing called the arguments raised by railroads that the STB does not have authority to adopt the proposed regulations “strained and utterly without any merit.” They asked that the STB grant them a “Motion for leave” to file a response.

“Although the Board’s rules do not permit the submission of a reply to a reply as a matter of right, 49 C.F.R § l 104.13(c), the Board has waived this restriction in situations where good cause has been shown in the interest of compiling a full record,” the Petitioners said. “Good cause exists here because the railroad parties’ [Association of American Railroads (AAR), Union Pacific (UP) and CSX] replies contain several novel and therefore unanticipated arguments asserting that the Board does not have statutory authority to grant the Petition and adopt the proposed regulations it requests. Petitioners submit that a brief rebuttal to those arguments (which Petitioners submit are erroneous) would assist the Board in having a complete record upon which to make a decision.”

Here’s the background: On July 26, the four organizations sought the STB’s adoption of a “regulatory mechanism that utilizes existing principles governing demurrage and accessorial charges to provide greater incentives for railroads to utilize [such cars] in their possession more efficiently. More efficient use … by railroads will protect the huge investment non-railroad entities have made acquiring and maintaining them, and will result in the national railcar fleet being of a more rational size to utilize existing rail system capacity and meet demand. The overall goal of this proposal … is to maximize the Class I railroads’ efficient use of private railcars without unduly infringing upon the railroads’ freight operations over their respective systems, recognizing that some level of service variability is inherent in any railroad’s operations.”

AAR, plus CSX and UP, on Aug. 30 separately called on the STB to deny the Petition for Rulemaking.

AAR stated that the “Board should reject the Petition outright.” The proceeding the associations “desire is ill-conceived and would be a waste of the Board’s resources. …”

AAR offered the following reasons:

• “The Board does not have the authority to do what Petitioners ask because the Board’s ‘car service’ authority does not extend to the micromanagement of rail transportation services, much less the subset of those services that happen to entail the use of private cars.
• “[T]here is no car service problem or any other problem warranting a new regulatory scheme.
• “The kind of micromanagement of railroad transportation service Petitioners propose would be misguided and inconsistent with the well-established legal framework governing railroad service levels.
• “Petitioners’ proposed rulemaking would raise a host of complex issues relating to car supply, railroad operations, and the Board’s regulatory authority that Petitioners—with their narrow and pecuniary interests as private car owners—have not even begun to address. The endeavor would be a profoundly poor subject of the Board’s regulatory attention.”

The four organizations representing private car owners noted in their Sept. 10 response (download below) that “[d]espite AAR’s verbal gymnastics to the contrary, Petitioners’ proposal cannot in any way be construed to ask the Board to directly order the Railroads to take any action regarding their provision of transportation services. As such, neither of these cases [that AAR presented] have any application to the issues in this proceeding nor do they diminish the Board’s authority to grant the Petition for Rulemaking and commence a proceeding that leads to the adoption of regulations that establish financial incentives to encourage (not direct) railroads to more efficiently use the Private Railcars that are provided to them by their customers.”

Among other comments, the organizations also wrote “UP claims that the absence of the term ‘freight cars’ from 49 U.S.C. 1(14)(a)(ii) in the ‘4R Act’9 prevents the Board from adopting regulations concerning the use of private freight cars even though the term was added back into item (ii) in 1978 and has remained in the provision ever since. According to UP, because of this alleged drafting error the Board can only regulate the compensation paid to Private Car owners for the use of their cars. UP’s argument is spurious.”

The remainder of the arguments in the railroad replies to the Petition “are all matters that can and should be addressed in a notice and comment rulemaking proceeding commenced by the Board after granting the Petition, or in any other proceeding the Board deems appropriate to address this extremely important and timely industry issue,” the organizations stated.

The next move: STB’s.

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