The Surface Transportation Board’s (STB) comment period closed Nov. 7 for the Notice of Proposed Rulemaking (NPRM) it issued this fall in Docket No. EP 711 (Sub-No. 2), Reciprocal Switching for Inadequate Service. Many shipper and government stakeholders are supportive of the Board’s action, but say it doesn’t go far enough. Some want it to address competition, too. The Association of American Railroads (AAR), American Short Line and Regional Railroad Association (ASLRRA), and railroads also weigh in.
The STB’s NPRM stemmed from what it called “critical and ongoing service problems” in the freight rail industry. Docket No. EP 711 (Sub-No. 2) proposed a new set of regulations, providing “for the prescription of reciprocal switching agreements to address inadequate rail service, as determined using objective standards based on a carrier’s original estimated time of arrival, transit time, and first-mile and last-mile service,” according to the STB. To help implement the new regulations, the agency said it is seeking “(1) to require Class I carriers to submit certain data, which would be publicly accessible and generalized; and (2) to adopt a new requirement that, upon written request by a customer, a rail carrier must provide to that customer individualized, machine-readable service data.” In the NPRM, STB said it anticipates “acting expeditiously” on the proposal.
While STB continues to post comment filings to its website, Railway Age provides highlights of a sampling below.
“In the 2023 NPRM, the STB is proposing a new set of regulations that would provide for the prescription of reciprocal switching agreements to address inadequate rail service, as determined using objective standards based on a carrier’s original estimated time of arrival, transit time, and first-mile and last-mile service,” AFPM noted in its comments (see above). “In a related decision, the Board also chose to close a 2016 NPRM, which employed the lack of competition clause as its rubric for prescription of a reciprocal switching agreement. The Board’s new approach in the 2023 NPRM instead uses the public interest clause to determine whether such switch is merited but not the preferred clause.”
The group said that it is “supportive of the 2023 NPRM” with the following recommendations:
- “Reciprocal switching should be available when there is a lack of competition, a dire reality the Board has repeatedly recognized in the current rail market.
- “In the absence of broad access to reciprocal switching based solely on lack of competition, a service-based approach is in the public interest and will benefit the American people if crafted carefully. The service metrics proposed will allow rail shippers to hold railroads accountable for service that is wholly deficient.
- “Specific thresholds to trigger reciprocal switching must be carefully considered to ensure that they adequately incentivize railroads to improve service and spare captive shippers the consequences of pervasive service failures. If the thresholds for railroad performance are set too low, it can be sure the railroads will improve no more than required, incentivized to do ‘just enough’ to avoid reciprocal switching.
- “In the absence of broad access to reciprocal switching based on lack of competition, the proposed reporting requirements must apply to contract shipments. Such metrics should be used as grounds for prescribing a reciprocal switching arrangement that would become effective after the contract expires.”
“If the Board determines to impose new reciprocal switching regulations, the Board should categorically exclude Class II and Class III (short line) carriers, as it has proposed in this proceeding,” ASLRRA wrote in its nine-page comment filing (above). “To add clarity, the Board should modify its definition of ‘affiliated companies.’” The association suggested that the STB “specify that an 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 the railroad.” It said this would ensure that “short lines that are not owned by Class I railroads or that are independently operated as a short line are not inadvertently covered by the definition of ‘affiliated companies.’” Responding to the STB’s question as to whether its definition should also include third-party agents of a Class I carrier, ASLRRA said that it “is concerned that including the term ‘third-party agent’ in the scope of the regulations could theoretically capture any short line that contracts with a Class I to provide functions such as switching services or haulage, which would blatantly contradict the exclusion of Class II and Class III short line railroads. The term “third-party agent” is too amorphous and uncertain and should not be included.”
ASLRRA also requested that the STB include a requirement that short line railroads be notified of switches impacting their traffic, so that they “can continue providing excellent customer service.” The association explained: “Given the interconnected nature of the national rail network, any additional switch could result in a delay further down the line. Thus, in addition to the incumbent rail carrier, alternate rail carrier, and FRA, 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. With advanced notice, the short line will be better able to plan and carry out its own service, including keeping its customer informed of any change in the anticipated final delivery timeline.”
In the NPRM, the STB reported that it is separately considering the issue of “whether the prescription of terminal trackage rights would be an appropriate remedy for proven failures in local service,” according to ASLRRA. The association said it “agrees [this] is the better course of action.”
Lastly, ASLRRA noted that the “performance standards set in this NPRM should not be construed as constituting standards for the common carrier obligation.”
“Implementing any forced switching concept, as the Board is aware, has challenges because switching entails complex tradeoffs among a variety of interests,” AAR wrote in its comments (above). “Rigid generalizations are impossible, and forced switching orders, if deployed improvidently or indiscriminately, will have serious negative consequences for the industry and those who rely on it. To take just one facet of the issues: A forced switching order, by definition, requires alternative service that is more operationally and economically complex than existing service. Any such proposal arrives with potential downsides and unintended consequences. Those risks are multiplied by the number of locations at which switching might be ordered, and magnified by their potential to cascade through a complex, interconnected network industry. As the Board knows, forced switching also can discourage investment, pose operational risks, create inefficiencies, come with added costs, and even undermine the long-run economic health of the railroad industry by limiting demand-based differential pricing. Those considerations do not mean switching can never be ordered, but they are weighty reasons for caution.
“With those principles in mind, AAR supports the Board’s decision to close the EP 711 (Sub-No. 1) proceeding that considered on-demand orders to force switching, in favor of a new approach that aims to identify and address service inadequacies …
“The Board has expressed a desire to offer a more structured, predictable, and expeditious process under the Proposed Rule. AAR agrees that those values can have benefits for all stakeholders. But those values come with tradeoffs, and the Board should take care that the framework here does not become a straitjacket. Service issues have many overlapping causes. Not every failure to meet a particular shipper’s desires equals inadequate service, especially in a network where carriers have obligations to all customers. And switching arrangements are economically and operationally complex and varied. Although the Board reasonably wants to promote clarity, clarity should not come in the form of artificially limiting consideration of relevant factors, ordering switching that will not benefit the petitioning shipper, or imposing undue costs on other shippers and the broader network.
“In short, AAR’s members want shippers to have safe, reliable, efficient, cost-effective, quality service. For that reason, AAR agrees that using service metrics to identify a potential service inadequacy worthy of further examination is an appropriate starting point. Ultimately, the Board will need to decide, under settled legal standards, whether the shipper’s petition can and should be remedied with a forced switching order, and if so, how that order will work in the circumstances of an individual case. Working within the Board’s proposed framework, AAR’s opening comments offer a number of important modifications intended to ensure that any rule the Board adopts will be consistent with established law, achieve results that will benefit those that rely on and operate the national rail transportation system, and minimize the inherent and unavoidable downsides that attend regulatory intervention in switching.”
According to the AAR, its “issues of greatest concern” fall into three categories:
- “First, the substance and procedures of the rule should ensure that a proceeding resolves the ultimate statutory question of whether the shipper has ‘some actual necessity or some compelling reason’ for a switching order … In other words, a service metric failure can warrant inquiry, but for relief to be ordered, there must be findings that the service is inadequate for that particular shipper in those particular circumstances and that a switching order will remedy that inadequacy.
- “Second, the Board’s own questions raise important issues about the Proposed Rule’s proper scope, in both legal terms (what is the proper relationship between the Proposed Rule and contract traffic and exempt traffic) and practical terms (how will the Proposed Rule operate depending on how certain quantitative parameters are set).
- “Third, several improvements should be made to the Proposed Rule to promote fair and well-informed adjudications in individual cases by the Board.”
AAR’s comments also covered broad issues affecting the proposed rule. It said that the STB “should further align the proposed rule with the ‘actual necessity or compelling reason’ and practicability standards”; and the “new proposed rule should be designed for remedial use, not coercive or punitive purposes, further reinforcing the need for the Board to consider all relevant facts and circumstances.”
The AAR also addressed “terminal area,” noting that it “agrees with the Board that any forced switching agreement must be limited to traffic within a terminal area.” It requested that the STB “revise proposed 49 C.F.R. 1145.2(c) and 1145.6(a) to state that reciprocal switching will be prescribed only within a terminal area. Without that clarification, a risk exists that the regulatory text of the Proposed Rule could be misunderstood to sweep in operations outside of a terminal area. As AAR has previously explained, a large amount of traffic originating at or destined for a point outside of a terminal area nonetheless moves through a yard within a terminal area … But that traffic is not properly subject to an order under the Board’s reciprocal switching authority. Thus, for example, industries located outside a terminal that are served by road switchers from the terminal complex should not be covered by the Proposed Rule.” It also noted that “the Board’s effort to provide a regulatory definition of ‘terminal area’ is likely to create more confusion than clarity. The Proposed Rule does not need to define that term. A long line of agency precedent describes how to identify a terminal area.”
Additionally, the AAR wrote that the new proposed rule “cannot operate based on the performance of contract traffic or exempt traffic;” and “should not apply to Class II or Class III carriers.”
Regarding service metrics, AAR reported that a “key component of the Proposed Rule’s approach is focusing the Board’s attention on service that fails to meet certain metrics. Although AAR comments in this part on those metrics, AAR emphasizes that its members strive to give their customers excellent, not just adequate, service—and excellent service is not limited to just metrics … Under the Proposed Rule, a petitioning shipper must demonstrate that it has practical physical access to only one Class I carrier and that the incumbent carrier has failed one of the service metrics … AAR agrees that those two requirements are appropriate threshold showings for any switching petition, although the industry spot/pull metric should not be a trigger under this rule because switching traffic to a different line-haul carrier cannot remedy a local service inadequacy. In addition, some refinements to the OETA [Original Estimated Time of Arrival] and transit time metrics that would trigger a proceeding are required to avoid confusion and to harmonize the Proposed Rule with existing regulations. For the rule to operate properly, however, the proposed service metrics should serve as a starting point, but not an ending point, for the Board’s evaluation in any given case of whether a service is inadequate and a switching remedy is warranted. Finally, to prescribe a switch, the Board must affirmatively find that the switch is practicable, and that inquiry should start with an explanation in the petition of the alternative service design.”
In sum, the association wrote that it “appreciates the opportunity to provide comments on this important matter, and it looks forward to continuing to support the Board’s process as the Board evaluates input from all stakeholders. If the Board decides to proceed to a final rule, AAR urges that the final rule conform with the changes” it put forward.
“Our position on reciprocal switching has not changed since the last proposed rule,” BLET wrote in its comments (above). “We reiterate our previous statements that: No additional rights gained via regulation or legislation can surmount the physical limitations that exist where two or more railroads exchange rail cars at an interchange. An equally important factor is that a given type of switching such as ‘reciprocal switching’ cannot change who the controlling railroad is and how that controlling railroad chooses to manage their railroad traffic and switching movements. That means that the owning railroad will still control the movements of trains of another railroad engaged in a ‘reciprocal switch,’ so there is no guarantee that the ‘guest’ railroad’s train will be afforded priority or even equal treatment in authorization for movement … The convoluted strategy of reciprocal switching can be avoided by holding railroads accountable for proper interchange schedules. Railroads also create delays due to running very long trains that can tie up to four miles of railroad per train. This results in two things at once. It helps fulfill a railroad’s cost cutting business model (e.g., Precision Scheduled Railroading or ‘PSR’) by reducing the number of train crews utilized, but it also intensifies rail congestion. Railroad infrastructure was not designed to accommodate trains of such length and weight. Before PSR and before railroads began running very long trains to cut on crew starts, the railroad industry enjoyed higher train velocity. Railroad customers received better and more frequent service. In the 90’s and early 2000’s freight railroads ran more than double the trains that they run today.”
Additionally, the union noted that “reciprocal switching would create numerous adverse impacts upon the scope and seniority provisions within collective bargaining agreements. It would impair the safe operations of crews on both the host and guest railroads. Current longstanding rules and precedent should not be departed from due to a perceived solution that is non-existent and not provided for by a practice labeled ‘reciprocal switching.’ The performance of work by railroad workers, especially operating employees, is governed by different contracts with the railroads which establish their collectively bargained rights over certain railroads’ lines, including which employees have the right to perform such work. Allowing other railroads to use their own employees to perform work on the lines of a railroad covered by a different contract would infringe on these current rights and could cause or allow the railroads to provide service based upon who pays the lowest wages to their workers, rather than on who provides the best or most expedited service. This could have the unintended and undesired effect of cherry-picking the cheapest rate (or least expensive collective bargaining agreement), and not getting the desired high-quality service standards the Board seeks.”
Allowing other railroads to switch on other railroad properties “will likely add to the delays and possibly increase the probability of poor communication and confusion over prevailing operating rules,” BLET reported. “Lastly, the BLET strongly believes that if the Board does adopt new reciprocal switching regulations, it must clearly state that Class II and Class III railroads may not participate in a forced switch over the tracks of a Class I railroad, or in any way be allowed by Board order to operate over the tracks of a Class I railroad. If Class II and III railroads were permitted by STB order to operate over the track of Class I carriers, the issues discussed above concerning the infringement of collectively bargained rights and cherry picking of the least expensive collective bargaining agreement, or possibly no collective bargaining agreement on the Class II or III carrier, will only be exacerbated. Further, to the extent a regulation would permit a switch involving an affiliated company of a Class I, 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 CBA).”
In sum, BLET wrote that it “understands the difficulties the STB faces in trying to ensure that objective performance standards exist, that those standards are feasible, and a predictable level of service can be maintained by railroads for shippers and their customers. BLET does not intend to say what those standards need to be in the instant docket, however, our organization and the members we represent stand ready to be part of the solution in providing high quality service on our nation’s railroads.”
“CPKC agrees that railroad customers should have appropriate remedies in cases where the common carrier rail service they are receiving from the rail carrier that serves them (at origin or destination) is persistently inadequate,” the Class I wrote (comments above). “Where an alternate carrier can reasonably be expected to remedy the inadequacy—and thus provide at least adequate levels of service—an order giving that carrier access to the customer can provide a beneficial relief valve that restores the shipper’s ability to receive adequate service. Of course, it is essential that the finding that the carrier is providing inadequate service be made based on all the facts. At the same time, the remedy must be carefully tailored to address the found service inadequacy and not overreach. If structured appropriately, the potential availability of such a remedy ought to provide salutary incentives for the incumbent rail carrier to devote the resources and management attention necessary to provide service that does not fall short of adequate and, in cases where service levels have fallen short, to return service to an adequate level promptly.
“CPKC is submitting these comments in the spirit of offering constructive suggestions about ways in which the rules could be adjusted to better align with the Board’s objective of providing a remedy for demonstrated inadequacies of rail service. These suggestions supplement (and in some cases amplify) those set forth in the Opening Comments of the Association of American Railroads, which CPKC joins …
“CPKC is focusing its opening comments in two areas. First, we point out ways that the framework of the Board’s Proposed Rule might inadvertently incentivize opportunistic behavior by some shippers (and ‘alternate’ rail carriers) to take advantage of the potential for a switching remedy to improve their access. We offer some suggestions aimed at assisting the Board in ensuring that its Proposed Rule does not encourage opportunistic conduct that would lead to an inappropriate restructuring of the rail network.
“Second, we explain how the data-related obligations established by the Board’s Proposed Rule will require substantial time and investment for CPKC to be able to provide shippers with prompt access to lane-by-lane service metrics. CPKC’s systems—including those used to report data pursuant to the Ex Parte No. 770 requirements—are not set up to generate shipper- and commodity-specific lane-by-lane statistics. Similarly, CPKC’s systems are not set up to capture and retain the data, information, and documentation regarding the circumstances giving rise to specific service outcomes, without which CPKC would not be in a position to place those outcomes in proper context, under the Board’s proposed ‘affirmative defenses’ or otherwise. To be sure, CPKC monitors its service and takes proactive steps to address service issues as they arise, but until the Proposed Rule there has not been any need to maintain granular, network-wide records of every circumstance that affected each shipper’s service levels for potential use in a litigation setting. CPKC urges the Board to convene a series of technical workshops to enable carriers to better understand the specific data-related requirements of the Rule (as proposed or in some future form), to defer the effective date of any final rule for a period sufficient to enable carriers to put appropriate systems in place, and then to apply the Final Rule only to future service levels that post-date the Rule’s effectiveness.”
“CRC does not object to STB’s proposed test to determine inadequate service, nor does it take issue with the concept of STB requiring freight railroads to enter into a reciprocal switching agreements where there is inadequate freight service,” the group wrote in its comments (above). “However, CRC requests that, as part of the final rule, STB require freight railroads and/or the STB to timely notify passenger railroads along the shared corridor of petitions for reciprocal switching agreements. CRC also requests that the STB then provide an opportunity for the passenger railroads to comment on and participate in any proceedings or negotiations for such arrangements to determine how the resulting switching moves could affect passenger rail operations, including whether the proposed switching moves could negatively impact the on-time performance of or otherwise interfere with passenger services that share track with the incumbent or alternate freight railroad. This evaluation would include an assessment of the operational environment, any existing agreements between railroad operators on the shared track, the proximity to the switching location, and any other factors that STB deems relevant. In the case where STB finds that there is a potential for negative impacts to passenger railroad operations, the STB should require the freight railroads to mitigate those impacts to the greatest extent possible.
“Finally, CRC requests that STB add language to the final rule that requires the proponent of a reciprocal switching arrangement to provide notice to any passenger railroads that own, use or have the right to use a subject line, and allows passenger rail providers operating on the shared corridor to participate fully in a petition for a prescribed reciprocal switching agreement. CRC also encourages the STB to require that all users of the shared corridor be a party to any prescribed reciprocal switching agreement.”
NGFA reported that its comments (above) were filed on behalf of its members, and supported by the North American Millers’ Association, Agricultural Retailers Association, and the National Council of Farmer Cooperatives.
“The NGFA agrees with the Board that the Class I railroads must have greater incentives to improve better rail service to all their customers, and to make the continued investments in crews and equipment required to dependably meet reasonable service requests at a reasonable cost to the customer,” the group wrote. “The NGFA believes one of the most effective ways to incentivize rail carriers to provide dependable service at reasonable rates, surcharges, fees, and service terms is to facilitate and maximize rail-to-rail competition wherever possible. If that occurs, then true market-based behavior achieves the desired result without Board intervention. For this reason, the NGFA respectfully requests that the Board reconsider its decision in the NPRM to end over 12 years of efforts to develop effective regulations to provide shippers with competitive alternatives via reciprocal switching in EP No. 711 (Sub-No.1), Reciprocal Switching, and before it, EP No. 711, Petition for Rulemaking to Adopt Competitive Switching Rules, (‘Competitive Switching’), which also focused on increasing competition via reciprocal switching in certain situations. The Board should resume its efforts to promulgate needed revisions to its existing competitive access rules that would incentivize railroads to provide better service and reasonable rates through rail-to-rail competition.”
The association noted that another way rail service could be improved is for the STB “to issue proposed rules in Docket EP No. 768, Petition for Rulemaking to Adopt Rules Governing Private Car Use by Railroads (‘Private Railcars’), that establish financial incentives for Class I railroads to utilize private railcars more efficiently to protect the substantial investment made by shippers and receivers in private railcars.”
Regarding the current NPRM, the association “supports the efforts of the Board to provide shippers and receivers with performance data and urges the Board to place no limits on data sharing.” Among its other comments:
- “[A]ny final rules issued in this proceeding should clearly establish how the Board will prescribe a reciprocal switching arrangement if it concludes the alternative rail carrier’s claims of infeasibility or undue impairment are unfounded or not credible. Unless the final regulations adequately account for this threshold issue and address it in sufficient detail, the NGFA believes that, all things being equal, the NPRM’s underlying premise that the potential threat of an alternative carrier through reciprocal switching provides sufficient incentive to improve and maintain inadequate service will be disproven in practice.”
- The final rulemaking should be expanded to include the remedy of terminal trackage rights in addition to reciprocal switching. “The Board has asked for comments on this option in the NPRM, most particularly in conjunction with the ‘Industry Spot and Pull’ standard,” the group reported. “Terminal trackage rights must be an option in any scenario under which a shipper would seek relief under proposed new Part 1145 because, by definition, it entails a situation where the rail carrier that makes the final delivery to a shipper’s captive facility or to a captive origin from an interchange has been consistently providing substandard service. If the sole remedy for such inadequate service is that the same carrier will continue to be the only railroad making the final deliveries or pickups—only less enthusiastically under a Board-directed reciprocal switching arrangement—can it really be expected that service will improve in the short term? Adding the remedy of terminal trackage rights would achieve a better policy balance of improving service to the customer in the short term and mitigating its business damages while providing an incentive for the incumbent to take steps to improve its service on a longer timeline.”
- The final rules should include “a performance standard that is significantly higher than ‘at least 60% of shipments arrive within 24 hours of the OETA [Original Estimated Time of Arrival].’”
- The NGFA urges the Board to reconsider the NPRM’s proposal to exclude unit trains from the OETA standard, and by extension, the data that would be made available to rail shippers.”
“NS shares the Board’s focus on quality rail service,” the Class I railroad wrote (comments above). “NS works every day to offer the safe delivery of reliable and resilient service that allows for sustainable growth in rail transportation. Recently, NS created the industry’s first ever Vice President of first mile/last mile markets and a new performance excellence team within operations—both innovative investments that reflect NS’s commitment to quality service …
“The Board’s proposal could address service quality in a data-driven way in concert with NS’s customer-centric strategy if deployed in a tailored manner. But great care must be taken not to do more harm than good. The STB has correctly observed that ‘even temporary access is a serious remedy, given the potentially significant operational, safety, and financial implications for the carriers involved.’ Moreover, NS is under constant market pressure to improve its service product to meet its customers’ demands. Government imposition of a ‘serious remedy’ should be applied to only the narrowest set of cases where it can be shown that outcomes in unregulated markets are inconsistent with outcomes observed in competitive markets. Otherwise, the STB risks distorting markets rather than promoting them. It is therefore crucial that the execution of this new proposal complement the industry’s market-driven work to improve service reliability, and not place those efforts in peril, to the detriment of customer service networkwide.
“The NPRM is plainly a thoughtful effort to balance these conflicting considerations and promote the public interest. The level of detail is extraordinary and reveals the depth of work that went into crafting this proposal. Numerous features reflect learnings from prior public comments. And NS is mindful of the overarching goal voiced by the STB to move this proposal forward expeditiously. NS therefore focuses these comments on key ways to constructively improve this proposal:
- “The final rule, while still utilizing service performance metrics, should adopt a less formulaic standard for ultimately deciding whether the unique circumstances of each case justify a temporary switching agreement.”
- “The final rule should require that the switch will remedy harm and improve service, given the potential safety and network implications of even a temporary remedy.”
- “The STB should promote private resolution of service disputes by requiring customers to bring their service concerns to the railroad’s attention during the period of perceived inadequacy.”
- The STB “should improve the service performance metrics as follows: Move from a rolling 12-week period of analysis to a quarterly period of assessment to avoid cherry-picking; shift to an on-time performance metric that captures both the frequency and the degree of delays; use a benchmark of competitive traffic to select the performance metric thresholds that indicate an uncommon level of service irregularity; and use simple statistical tests so the STB can have confidence that the perceived problem is real and not caused by limited observations or noisy metrics.”
- “The STB should defer questions of compensation to individual cases, given its limited role.”
- “The STB should not apply these new rules to private contract traffic, which would place in jeopardy the most customer-centric feature of the Interstate Commerce Act.”
Private Railcar Food and Beverage Association (PRFBA)
PRFBA comprises 21 global food and beverage companies and manufacturers that are headquartered in North America. From Frito-Lay (PepsiCo) and Molson Coors to General Mills, Inc., Tropicana Brands Group, and Land O’ Lakes, Inc., all are major rail shippers that own or lease railcars.
“The Board’s proposed rulemaking is a welcome and necessary action to counteract the lamentable service of American rail carriers,” PRFBA wrote in its filing (above). “The poor quality of that service is reflected not only in the need for the rule, but also even in the still-low aspirational standards that PRFBA requests be included therein. With that in mind and with gratitude for the Board’s action here, PRFBA asks that the Board build on its proposed rules to hold carriers to a higher standard than that initially proposed, one reflective of the owners of railcars and the needs of carriers’ customers and of the American consumer. In service of that aim, PRFBA proposes (1) reciprocal switch agreements lasting a minimum of five years; (2) a service reliability standard that requires 80% performance as opposed to just 60%, and measured over a six-week period; (3) service consistency based on the entire move, and similarly measured over six-week periods rather than twelve-weeks such that carriers have less time to obscure what level of service they truly are providing; and, (4) a slightly higher 90% standard for local service, reflective of one missed and/or incorrect switch per two-business-week period. We fully support the Board instituting the new rules as suggested here by PRFBA.”
The Coalition Associations (American Chemistry Council, The Fertilizer Institute and The National Industrial Transportation League/NITL)
“The scope of the NPRM is much narrower than the scope sought by The NITL in its Petition for Rulemaking in Ex Parte No. 7112 and in the Board’s notice of proposed rulemaking in Sub-Docket No. 1.3,” the Coalition Associations wrote in their filing (above). “Both proposals sought to implement the full scope of § 11102(c) by enhancing rail competition through reciprocal switching. It is through such competition that the Coalition Associations remain convinced that service inadequacies can be most effectively addressed. Moreover, rail competition also fosters reasonable rates, balanced commercial terms, greater innovation, and increased efficiency, which in turn furthers multiple aspects of the national Rail Transportation Policies. Nevertheless, the NPRM proposes regulations that have the potential to be a significant improvement over the existing standards for reciprocal switching and have the support of the Coalition Associations with the modifications proposed herein.”
The group said it responded to multiple questions the Board asked about “limitations that 49 U.S.C. § 10709(c) may impose upon its authority to consider contract traffic as part of these proposals. First, Board precedent in prior reciprocal switch cases makes clear that § 10709(c) does not impair the Board’s authority to consider rail performance pursuant to contracts. Additional precedent also establishes that, when the Board exercises its statutory obligations with respect to rail service–which is the predicate for prescribing reciprocal switching in the NPRM–its decisions may implicate contract traffic without running afoul of § 10709(c). Second, the Board may and should permit shippers to request reciprocal switching at any time prior to the expiration of a contract with the incumbent carrier even when the shipper cannot use the switch prior to expiration of the contract.”
For service reliability, the group proposed four principal modifications:
- “Increase the adequacy threshold for deliveries within 24 hours of the ‘Original Estimated Time of Arrival’ (‘OETA’) from 60% to 70%.
- “Establish additional thresholds that are graduated so that the percentage of delivered railcars increases from 70% to 80% to 90% as the time from OETA increases to 24, 48, and 72 hours, respectively (collectively the ‘Fixed Thresholds’).
- “Adopt alternative adjusting thresholds for the 24-, 48-, and 72-hour time bands that are equal to the average systemwide performance of all Class I carriers for those respective bands (collectively the ‘Adjusting Thresholds’).
- “Clarify that the time bands are measured before and after the OETA, so shipments that arrive excessively early do not count as being delivered within the applicable time band and to remove any incentive for rail carriers to ‘game’ this standard by artificially inflating OETAs.”
Additionally, the group said that the STB should “prescribe a reciprocal switch for unit trains when less than 90% of trains arrive within 24 hours of the OETA” and “reduce its proposed threshold for transit time increases to no more than 15% year over year.” For the industry spot and pull (ISP) standard, the Coalition Associations proposed “two measures, one for missed cars and the other for service-window ‘no shows,’ because the impact of ISP performance failures differs significantly depending on whether a single car was spotted or pulled or the railroad’s local crew did not show at all during the planned service window.”
According to the Coalition Associations, “the Board properly proposes to establish a heavy presumption that, when the incumbent already has a switching arrangement with another carrier within a terminal, a shipper’s traffic would qualify for a switch prescription provided the other conditions in the NPRM are satisfied. The Coalition Associations urge the Board to broaden that presumption to include any terminal where the incumbent and alternate carriers interchange traffic because the act of interchanging rail cars within a terminal is the same for interchanging cars moving via line-haul or reciprocal switch.”
“In closing, although the Board has chosen to close Sub-Docket No. 1, the Coalition Associations are reassured by the Board’s acknowledgment that, ‘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, whether in this sub-docket or otherwise,’” the Coalition Associations wrote. “Like Board Member Primus, we ‘eagerly anticipate the Board’s action to improve access to the statute’s other prong, addressing reciprocal switching that is “necessary to provide competitive rail service,”’ and urge the Board to ‘act soon to ensure that reciprocal switching is available for competitive access to the extent authorized by the language of the statute’ … The full potential of reciprocal switching can only be realized when that occurs.”
“USDA commends the Board for proposing a remedy to address inadequate rail service through reciprocal switching,” it wrote in its comments (above). “Indeed, in March 2022, as the rail service crisis of 2022 was unfolding, the Secretary of Agriculture encouraged the Board to ‘finalize a reciprocal switching rule in EP 711 that provides shippers with relief in the form of an alternative rail option in the face of poor service from their incumbent railroad.’ While levels have improved since, rail service was poor throughout much of 2022 and into 2023. With some modifications, the notice of proposed rulemaking (NPRM) for reciprocal switching should enhance railroads’ incentives to provide good service and will provide shippers with valuable service data to help them in private negotiations with railroads.
“Despite the potential to improve rail service, USDA is concerned that the Board proposes to close Docket No. Ex Parte (EP) 711 (Sub-No. 1) and thus defer indefinitely consideration on the use of reciprocal switching as a means of providing competitive rail service. USDA urges the Board to adopt this proposed rulemaking that institutes reciprocal switching when it is ‘practicable and in the public interest,’ but also continue implementing a rulemaking that institutes reciprocal switching when it is ‘necessary to provide competitive rail service.’”
Under the STB’s proposal, rail service would be measured using three service metrics. USDA said that “the Board should include additional standards around service levels.” Without that perspective, it noted, “the railroads may satisfy the Board’s current metrics, even as other vital, yet unmeasured, aspects of service fall below satisfactory thresholds. The Board should consider additional metrics capturing service levels and monitor rail performance closely to ensure a more complete view of rail service.” Additionally, the STB “should further distinguish the proposed rule (CFR 1145) from existing rules to remedy poor service (e.g., CFR 1146 and CFR 1147) by specifying eligible terminal areas and expediting the decision process,” and it should “use terminal trackage rights to alleviate local service issues.”
“We appreciate the Board’s dedicated work on this important issue of reciprocal switching reform over the last decade and find the Board’s proposal to be a fair and equitable approach to addressing inadequate rail service issues experienced throughout the country,” the departments wrote (comments above). “FRA and DOT remain ready to assist the Board, where appropriate, as this effort proceeds.
“FRA’s mission is to enable the safe, reliable, and efficient movement of people and goods for a strong America, now and in the future. The NPRM on reciprocal switching aligns with FRA’s mission by ‘addressing inadequate rail service.’ In recent years, the Nation has experienced major rail service problems that have negatively impacted shippers, industry, and the public, as well as our economy. The NPRM presents an opportunity to address critical rail service issues through reciprocal switching reform. FRA and DOT are encouraged by the Board’s proposed performance standards ‘intended to reflect a minimum level of rail service below which regulatory intervention may be warranted.’ The use of objective performance standards to determine when a reciprocal switching agreement is required would provide certainty among stakeholders, including carriers, shippers, and receivers, and create a level-playing field. Moreover, these benefits have the potential to contribute to a more reliable, fluid, and efficient rail network.
“FRA and DOT also see benefits in the Board-proposed data requirements. First, the NPRM proposes service-metric data reporting requirements on Class I rail carriers that would be publicly accessible and generalized. Second, the NPRM proposes that Class I rail carriers would be required to provide, upon written request by customer (i.e., a shipper or receiver), that customer’s own individualized service data. FRA notes that certain metrics related to service and employment, currently reported on a temporary basis in Urgent Issues in Freight Rail Service—Railroad Reporting, Docket No. EP 770 (Sub-No. 1), have provided FRA and DOT with invaluable insight into factors that affect the safety, reliability, and efficiency of railroad operations. Additionally, the Board’s proposed data requirements would promote transparency among rail customers and the broader public. FRA and DOT suggest that the Board considers maintaining intermodal traffic data as a reporting requirement. While intermodal is not rate-regulated traffic, it is a valuable metric to monitor supply chain efficiency.”
Additionally, the departments requested that the STB consider as part of the rulemaking “safety, any adverse effects upon passenger rail service, and competition.” They noted that “any new or revised switching requirements must ensure that switching operations are safely executed”; that “any reciprocal switching proposal would not hinder the ability of passenger rail service to run smoothly”; and that “while the NPRM’s focus on existing and recent service issues will undoubtedly improve current competitive conditions, FRA and DOT encourage the Board to continue to consider additional reciprocal switching reforms to address emerging harms and enhance future competition in the freight rail industry.”
“The VPA is grateful for the opportunity to provide these comments to the STB to ensure that port facilities are eligible for the relief that the proposed rule would provide,” the Authority wrote in its comments (above). “Specifically, the VPA requests that the STB modestly expand the categories of parties eligible to avail themselves of the proposed rule by including port facilities (or portions of port facilities) that are served by only one Class I railroad (or affiliates). In addition, the VPA requests that the STB make several conforming changes that would be necessary to ensure that ports are eligible petitioners, namely: permitting ports to request performance data; ensuring that belt or other railroads under the control of a Class I railroad are included as affiliated companies for purposes of determining whether a port facility is served by only one Class I railroad; declaring that ports are terminal areas; and ensuring that port congestion and inefficiency resulting from railroad service can be addressed regardless of commodity exemptions or contracts.”
In its comments (above), WCTL wrote that it “appreciates the Board’s effort to develop a potential approach for addressing inadequate rail service through reciprocal switching.” However, it said it is unlikely the “proposal would provide a meaningful benefit for most unit train shippers of coal. The vast majority of unit train coal service occurs pursuant to contracts that are outside the Board’s jurisdiction … As such, the Board’s new focus on reciprocal switching as a remedy for poor service (as opposed to a tool for unlocking competition between carriers) will prevent most unit train coal shippers from obtaining any reciprocal switching relief.”
Additionally, WCTL noted that the STB’s “proposed regulations appear to assume that a rail carrier’s service in the immediately preceding calendar year necessarily represents adequate service. The Board’s proposed transit-time standard would require that, for loaded manifest cars and loaded unit trains, ‘a petitioner would need to demonstrate that the average transit time for a shipper increased by either 20 or 25% (to be determined in the final rule) over the average transit time for the same 12-week period during the previous year.” According to WCTL, “[t]his standard improperly assumes that the incumbent carrier’s service during the prior year was adequate. There is no basis for such an assumption, particularly given the service-related difficulties that the Board has observed in recent years.” The group requests that the STB “modify its proposed regulations to permit petitioners to submit evidence regarding poor transit times (sufficient to justify the prescription of reciprocal switching) even where the transit times at issue do not meet the 20-25% threshold. Such evidence could take the form of an aggregate showing of steady decline (as shown in the foregoing chart) or could rely on a particularly problematic transit-time performance even in the absence of year-over-year changes in transit times.”
In sum, the group wrote that it “respectfully requests that the Board: (1) take action to update its regulations regarding reciprocal switching as a means of addressing the absence of competition; (2) find that its proposed service-related regulations allow contract shippers to seek reciprocal switching prior to the expiration of their contracts; (3) tailor the transit time standard … to eliminate the existing loopholes that otherwise would allow poorly-performing rail carriers to perpetuate their low-quality service as long as that service does not become appreciably worse in any given year; and (4) expand the proposed geographic scope of reciprocal switching relief.” It noted that a “more appropriate” geographic scope would include “main-line tracks for a reasonable distance outside a terminal. In addition, or in the alternative, allowing consideration of the exact geographic scope of reciprocal switching relief on a case-by-case basis would permit the Board to consider whether the facts and circumstances of any given situation could allow for reciprocal switching relief in poor- service situations outside the strict, geographic limits of the Board’s proposed new standard.”