STB to AAR: Sorry, No Extension
Written by William C. Vantuono, Editor-in-ChiefThe Surface Transportation Board on Jan. 28 issued a decision denying a request from the Association of American Railroads to extend the procedural schedule in Docket No. EP 711 (Sub-No. 1) et al., Reciprocal Switching; regarding the Board’s NPRM (Notice of Proposed Rulemaking) on reciprocal switching regulations. “All procedural dates remain unchanged, including those for the public hearing beginning on March 15, 2022,” STB said.
The NPRM introduced new regulations under which STB “would exercise its statutory authority to require rail carriers to establish switching arrangements in certain circumstances.” On Jan. 10, 2022, AAR filed a motion to extend the procedural schedule, asking the Board for a 75-day continuance of the schedule, including a corresponding continuance of the public hearing or, alternatively, to extend the deadline for written submissions to March 7, 2022. AAR also asked that the Board permit submission of supplemental written comments “within a reasonable time” following the hearing.
The AAR typically refers to reciprocal switching as “forced access.”
“The Board finds that the amount of notice and time for preparation provided was sufficient and that AAR’s alternative request for extension of the comment deadline would hinder the ability of the Board and the hearing participants to review parties’ submissions before the hearing,” STB said. “The Board will determine after the hearing whether to allow supplemental written comments.”
STB issued a hearing notice on Dec. 28, 2021, which said, in part:
“In assessing whether a switching arrangement would be practicable and in the public interest under the proposed regulations, the Board would consider whether the benefits of a proposed arrangement would outweigh its potential detriments. In making that determination, the Board would consider all relevant factors, such as (1) whether the arrangement would further the rail transportation policies in 49 U.S.C. § 10101; (2) the efficiency of the proposed route; (3) whether the arrangement would allow access to new markets; (4) the impacts, if any, of the arrangement on capital investment, quality of service, and employees; (5) the amount of traffic that would be moved under the arrangement; and (6) the impact, if any, of the arrangement on the rail transportation network.
“In assessing whether a reciprocal switching arrangement would be necessary to provide competitive rail service, the Board would consider whether intermodal and intramodal competition were effective with respect to the movements for which the switching arrangement was sought. The Board would evaluate the effectiveness of competition using quantitative and qualitative factors that the Board has developed in the context of assessing market dominance in rate challenges, but it would not consider product competition or geographic competition.
“The Board’s proposed regulations also state that reciprocal switching would not be ordered, even if one or both of the foregoing standards were met, if the switching was not feasible, would be unsafe, or would unduly hamper a carrier’s ability to serve its customers. As additional limitations, the Board would require the establishment of a switching arrangement only when (1) the shipper or receiver was served by a single Class I carrier; and (2) there was or could be, within a reasonable distance of the shipper or receiver’s facilities, a working interchange between the incumbent carrier and another Class I rail carrier.
“The NPRM sought comments on two alternatives regarding the compensation the Board could impose for switching service if the carriers could not agree within a reasonable time period. Under the first alternative, compensation would be based on factors such as: (1) the geography where the proposed switch would occur; (2) the distance between the shipper/receiver and the proposed interchange; (3) the cost of the service; (4) the capacity of the interchange facility; and (5) other case-specific factors. The NPRM asked for comment on whether the agency should also consider what have been referred to as the incumbent carrier’s lost contribution or opportunity costs. Under the second alternative, compensation would be based on the cost of providing the service plus a fair and reasonable return on the capital that was used to provide the service, analogous to the rental income that applies when the Board orders a carrier to provide trackage rights to another carrier (the Board’s SSW methodology).
“Commenters who generally support the proposed regulations assert that the regulations are within the Board’s statutory authority under 49 U.S.C. § 11102(c). These commenters argue that the showing of anticompetitive conduct … is not required by statute, as § 11102(c) establishes two bases for reciprocal switching: when ‘practicable and in the public interest’ or when ‘necessary to provide competitive rail service.’ These commenters further argue that the proposed regulations (1) would not interfere with rail carriers’ ability to set their own rates; and (2) would not offend any statutory right to the long haul, given that the statutory provision that supports a carrier’s right to the long haul … The proposed regulations would substantially advance the public interest. They argue that the proposed regulations would: (1) foster competition among rail carriers at a time when (due to mergers and acquisitions) shippers’ rail transportation options are limited; (2) limit the availability of switching orders to certain locations and certain conditions, such that the current structure of the rail industry would largely remain in place; and (3) promote competition and efficiency in the U.S. economy overall.
“In contrast, commenters who generally oppose the proposed regulations assert that the regulations would exceed the scope of the Board’s statutory authority. These commenters argue that Congress authorized the Board to compel switching only upon a showing of anticompetitive behavior because railroads, as common carriers, undertake investment and operational responsibilities. These commenters further argue that, in the absence of anticompetitive behavior, the Board’s order of a switching arrangement would impermissibly interfere with both the incumbent carrier’s right to the long haul … and carriers’ discretion to engage in differential pricing, i.e., to charge rates that vary according to the elasticity of a shipper’s demand.
“The same commenters assert that, even if the proposed regulations fall within the Board’s statutory authority, they are misguided as a matter of policy because they would drive rates down to the point of undermining carriers’ ability to raise sufficient capital, thereby threatening the ability of carriers to make the investments necessary to maintain and operate the rail network efficiently and effectively. They also argue that the proposed approach would lead to switching arrangements that are economically inefficient.”
Download the full hearing notice, issued on Dec. 28, 2021:
