STB Advances Rate Review Rulemakings for Small Rate Disputes

Two rulemakings to establish rate reasonableness processes for small rate disputes are moving forward, the Surface Transportation Board (STB) reported on Nov. 15.

STB said it issued concurrently a Notice of Proposed Rulemaking (NPRM) to establish a voluntary arbitration program for small rate disputes, and a supplemental Notice of Proposed Rulemaking (SNPRM) for the Final Offer Rate Review (FORR) procedure to “ensure parallel consideration of both” by STB and stakeholders before final action is taken on either.

“Both the NPRM for voluntary arbitration and the FORR SNPRM continue the efforts of the Board’s Rate Reform Task Force to determine, among other things, how best to provide a rate review process for small cases,” STB said.

In response to a joint petition filed by five Class I railroads—CN, CSX, Kansas City Southern (KCS), Norfolk Southern (NS) and Union Pacific Railroad (UP)—STB proposes to modify its existing arbitration rules and establish a new voluntary arbitration program for small rate disputes, which would function alongside its existing arbitration program (download STB’s Nov. 12 decision below).

Board Members Ann D. Begeman (a Railway Age 2020 Women in Rail honoree) and Robert Primus provided separate comments in the STB decision. Begeman noted:

“I am convinced that a voluntary arbitration program could provide a rate review alternative to litigation that some stakeholders might prefer. In fact, I have repeatedly voted to improve the Board’s existing voluntary arbitration program, yet that program remains unused. That is why I welcomed Petitioners’ proposal and supported instituting this proceeding under my Chairmanship, even planning that the Board would work to propose a rule by March of this year. …

“While I generally support the Board’s attempt here to try yet again to establish a voluntary arbitration program that will be utilized, this time one designed for smaller rate disputes (and am pleased that the notice of proposed rulemaking is finally being issued and will provide the opportunity for public input), I do not support every aspect of this proposal. Most significantly, I strongly disagree with the decision calling into question whether the Board will ever adopt a rate review process to ensure shippers with smaller disputes have a means to formally challenge the reasonableness of a rate before the Board.

“The Board’s existing rate review processes are unworkable for shippers with smaller disputes, and frankly many with larger ones. As Olin Corporation correctly points out in its August 20, 2020 reply, the Board has an obligation to establish effective rate relief rules for all shippers, and that obligation is not discretionary.”

Primus noted:

“While I support the concept of arbitration and concur in this decision, regrettably, I do not believe the proposal will do enough on its own to adequately mitigate the small rate disputes that continue to negatively impact our national rail network. My doubts center on the railroads’ history, or lack thereof, of participation in voluntary Board-sponsored arbitration.

“On its face, arbitration can be a very useful tool to settle disputes between conflicting parties. However, it seems as if the railroads believe arbitration is a tool better kept unused and locked in the toolbox. Since the Board’s implementation of arbitration nearly twenty-five years ago, there has not been one instance where the railroads have utilized the voluntary program. Even after the program was expanded five years ago to include matters involving rate disputes, there continued to be no real desire to participate.”

In addition, STB’s FORR SNPRM invites comment on certain modifications to the new rate case procedure proposed in the NPRM issued on Sept. 12, 2019 (download STB’s Nov. 12 decision below).

Board Member Begeman noted in a separate expression to the STB’s Nov. 12 decision:

“During my tenure, I became convinced that not all shippers have a viable rate review process available to them at the Board, which was a driving factor in why I established the Rate Reform Task Force in 2018 while serving as the Acting Chairman. I know many stakeholders share in my frustration that, here we are, nearly four years since the Task Force went to work, and the Board has still not adopted a rate review process to enable shippers with smaller disputes to bring a rate case here. To continue, indefinitely, with the status quo is not acceptable. That is why I strongly dissent on today’s [Nov. 12] decision to the extent it further delays adoption of a final rule to reform the Board’s rate review regulations.

“As interested parties may have gleaned through the Board’s quarterly reports on Pending Regulatory Proceedings, the Board has had ample opportunity to adopt a final rule to provide a viable rate review process for smaller rate disputes, after proposing and receiving public comment on the FORR proposal in 2019 and 2020 and then developing a final rule for action in October 2020. But it takes the support of a Board majority for that much-needed final action. Until then, shippers, and particularly smaller shippers, are the ones who may be literally paying the price for the Board’s inaction on a final rule. I am not okay with that.

“Today’s decision recognizes that, prior to the Task Force’s creation, years of work had already been expended in trying to determine how the Board could best improve the accessibility of rate relief. Yet it was not until the Board proposed FORR that many stakeholders coalesced around a new rate review option. And while I support exploring the feasibility of a new voluntary arbitration program specific to small rate disputes and the effort to provide another alternative to litigation, that effort should not come at the expense of shippers’ ability to pursue formal rate relief while consideration of an arbitration proposal plays out.

“But rather than amending the Board’s regulations today and finally ensuring that all shippers have access to Board rate review, the Board is instead issuing a supplemental notice of proposed rulemaking, even though a well-reasoned final rule was prepared by staff and ready for final Board action over a year ago. The only substantive change in today’s decision from last year’s draft final rule is permitting additional ex parte communications. It is my hope those meetings will finally convince a Board majority to vote in support of a final rule.

“My time at the Board has almost run out, and I know some shippers may be thinking that theirs has too. I thank the Task Force, the great team of staff who prepared the FORR notice of proposed rulemaking and draft final rule, and the many stakeholders for their contributions to helping bring needed reform to the agency’s rate review processes. Please don’t give up.”

Comments to both rulemakings are due by Jan. 14, 2022, and reply comments are due by March 15, 2022; ex parte communications regarding matters related to both rulemakings are allowed between Nov. 15, 2021 and Feb. 23, 2022.