The Surface Transportation Board (Board or STB) recently announced a new chairman. The Board has recently addressed various ex parte proceedings and other proceedings regarding freight service issues. Additionally, the Board and the Federal Railroad Administration (FRA) have issued final rules that affect freight service. There have also been several notable court cases and related settlements related to freight service.
On May 10, 2024, the Surface Transportation Board announced the retirement of Chairman Martin J. Oberman. Following his Senate confirmation, Chairman Oberman joined the Board on January 22, 2019. He has served as Chairman since January 21, 2021, as designated by President Biden.
The Board’s announcement stated that, under Chairman Oberman’s leadership, the Board held multiple public hearings on important topics, including serious rail service issues, the Canadian Pacific-Kansas City Southern (CPKC) merger, and the Amtrak Gulf Coast matter. Within the agency, Chairman Oberman has been known “as a consensus builder, always interested in hearing opposing viewpoints and identifying a path forward on which all can agree.”
On May 13, 2024, the Board announced that President Biden has designated Robert E. Primus as Chairman of the Board, effective May 11, 2024. Chairman Primus is serving in his second term on the Board, following his nomination by President Biden on June 22, 2022, and his confirmation by the Senate on December 20, 2022. His current term expires December 31, 2027.
On April 30, 2024, the Board issued a final rule adopting a new set of regulations that would provide for the prescription of reciprocal switching agreements as a means to promote adequate rail service through access to an additional line haul carrier. The final rule is effective 120 days after publication in the Federal Register (i.e., September 4, 2024).
As background, on July 27, 2016, the Board issued a notice of proposed rulemaking (2016 NPRM) in EP 711 (Sub-No. 1), Reciprocal Switching, which would have allowed a party to seek a reciprocal switching prescription that was either practicable and in the public interest or necessary to provide competitive rail service. Numerous parties submitted comments, and the Board held a public hearing on March 15 and 16, 2022.
On September 7, 2023, the Board issued a decision closing EP 711 (Sub-No. 1) and opening a new sub-docket, EP 711 (Sub-No. 2), Reciprocal Switching for Inadequate Service. In its decision, the Board also proposed a new set of regulations that would provide for the prescription of reciprocal switching agreements to address inadequate rail service (NPRM). The Board stated that, due to developments in the freight rail industry since the 2016 NPRM, “including critical and ongoing service problems, the Board has decided to focus, at this time, its reciprocal switching reforms on more specific and objective remedies for inadequate rail service.”
In the final rule served on April 30, 2024, the Board noted that it received many comments and replies from interested parties. The Board noted that, overall, shippers and their supporting trade organizations strongly favor the Board’s proposal, although many sought minor modifications or significant expansions to the scope of the proposed rule. The Board also noted that railroads and their trade organizations generally objected to the Board’s legal foundation for the proposed regulations and otherwise suggested significant changes to those regulations.
As noted in the NPRM, the regulations “would provide for the prescription of a reciprocal switching agreement when service to a terminal-area shipper or receiver fails to meet certain objective performance standards.” The three performance standards adopted by the Board are Service Reliability, Service Consistency, and Inadequate Local Service.
Under the final rule, the Board adopted a version of part 1145 that reflects certain modifications to the proposal in the NPRM, as detailed below:
Service Reliability: Original Estimated Time of Arrival (OETA). The service reliability standard would measure “a Class I rail carrier’s success in delivering a shipment near its OETA, i.e., the estimated time of arrival that the rail carrier provided when the shipper tendered the bill of lading for shipment.” The Board stated that the “OETA would be compared to when the car was delivered to the designated destination” and would be based on all shipments over a given lane over twelve consecutive weeks. In the NPRM, the Board proposed a reliability standard of sixty percent, where a carrier would meet the standard if, over a period of twelve consecutive weeks, the carrier delivered at least sixty percent of the relevant shipments within twenty-four hours of the OETA.
In the final rule, the Board adopted the service reliability standard in the NPRM with the following changes: (1) the reliability standard increased from sixty percent to seventy percent; (2) the definition of “delivery” was clarified for purposes of interchange; (3) the reliability standard was modified to measure early arrivals as well as late arrivals, in each case with a twenty-four-hour grace period; (4) the reliability standard was clarified for cross-border traffic; and (5) the reliability standard was changed to only apply individually to each lane of traffic to/from the petitioner’s facility.
Service Consistency: Transit Time. The service consistency standard measures “a rail carrier’s success in maintaining, over time, the carrier’s efficiency in moving a shipment through the rail system.” In the NPRM, the Board proposed that, for loaded manifest cars and loaded unit trains, a rail carrier would fail the service consistency standard if the average transit time for a shipment over a twelve-week period increased by either twenty percent or twenty-five percent, as compared to the average transit time for that shipment over the same twelve-week period during the previous year.
In the final rule, the Board adopted the service consistency standard that was proposed in the NPRM using a twenty percent standard. The Board also: (1) modified the definition of delivery to better reflect custom and practice; (2) clarified how it measures transit time performance on international lanes; (3) added a three-year measure of twenty-five percent to guard against excessive cumulative increases in transit time; (4) created an absolute floor for both the one-year and three-year measure of thirty-six hours; and (5) provided that the service reliability standard only applies to individual lanes of traffic to/from the petitioner’s facility.
Inadequate Local Service: Industry Spot and Pull (ISP). The inadequate local service standard measures “a rail carrier’s success in performing local deliveries (‘spots’) and pick-ups (‘pulls’) of loaded railcars and unloaded private or shipper-leased railcars during the planned service window.”
In the final rule, the Board adopted the local service standard that was proposed in the NPRM using a twelve-hour work window. The Board also (1) increased the local service standard to eighty-five percent; (2) extended the period during which a ninety percent standard would apply to two years when a rail carrier unilaterally reduces service; (3) clarified how success in spotting “spot on arrival” railcars will be measured; and (4) clarified that the local service standard does not apply to unit trains or intermodal traffic.
Additional key provisions in the final rule are summarized below:
Data Production and Implementation: The Board adopted the data collection proposed in the NPRM and ordered that
all six Class I rail carriers must begin reporting based on the new, standardized definitions of OETA and ISP by 120 days after publication in the Federal Register. The Board’s Office of Public Assistance, Governmental Affairs, and Compliance (OPAGAC) will provide the Class I rail carriers with a standardized template for these new reporting requirements.
Under the final rule, the Board will continue to require Class I railroads to provide data to a customer within seven days of receiving a request, but the Board provided more clarity and specificity in regard to that requirement, as the original proposal could have impeded carriers’ ability to provide timely responses.
Class II and III Railroads: Under the final rule, part 1145 pertains to shippers and receivers that have practical physical access to only one Class I rail carrier or its affiliated company. The affiliated company might be a Class II or Class III railroad. Part 1145 otherwise does not apply to Class II and Class III railroads.
Affirmative Defenses: The finale rule created several affirmative defenses for railroads, and the Board will not prescribe a reciprocal switching agreement if an incumbent rail carrier’s failure to meet a performance standard was caused by any of the following: (a) extraordinary circumstances, such as acts of God, which will be narrowly construed; (b) a surge in the shipper’s/receiver’s traffic of more than twenty percent about which the shipper/receiver did not give the incumbent rail carrier advanced notice; (c) highly unusual shipment patterns by the shipper/receiver; (d) dispatching choices of a third party; or (e) third-party conduct outside the incumbent carrier’s reasonable control. The Board also will consider, on a case-by-case basis, affirmative defenses not specified in part 1145. The Board stated that an incumbent carrier’s intentional reduction or maintenance of its workforce at a level that itself results in a workforce shortage causing the carrier to fail specified service standards would not, on its own, be considered a defense.
Duration and Termination of Prescription: In prescribing a reciprocal switching agreement, the Board shall prescribe a minimum term of three years and may prescribe a longer term of service up to five years when circumstances warrant a longer prescription (rather than the two to four years that was proposed). The incumbent rail carrier may petition the Board to terminate the prescription at the end of the prescribed term if the incumbent rail carrier is able to demonstrate that its service for similar traffic met all three performance standards for the most recent twelve-week period prior to the filing of the petition to terminate (rather than the prior twenty-four-week period that was proposed). If the petition to terminate is denied, then the Board will extend the prescription for up to the same period as the initial prescription. If the incumbent carrier does not file a petition for termination, the prescribed agreement will automatically renew at the end of its term for the same period as the initial prescription.
Contract Traffic: For traffic that is moved under a transportation contract pursuant to 49 U.S.C. § 10709, the Board will not prescribe a reciprocal switching agreement under part 1145 based on the incumbent carriers’ performance occurring during the term of the contract.
Exempt Commodities: Concerning exempt commodities, the Board will not consider pre-revocation performance as the basis for a prescription under part 1145 but intends to prioritize petitions for partial revocation filed in furtherance of part 1145 cases in order to resolve expeditiously those petitions for partial revocation. The Board also intends to explore at a later date whether it should partially revoke exemptions on its own initiative to allow for reciprocal switching petitions, as is currently the case for the boxcar exemption.
Then-Board Member Primus issued a concurring expression, stating that the final rule “is unlikely to accomplish what the Board set out to do under the statute’s authorization of reciprocal switching that is ‘practicable and in the public interest,’” and despite his urging, “the Board is not taking action to improve access to the statute’s other prong, addressing reciprocal switching that is ‘necessary to provide competitive rail service.’” He stated, “I am voting for the final rule because something is better than nothing. But there is far less ‘something’ here than I had hoped there would be.”
On May 15, 2024, the Board issued a notice that a court action was instituted by multiple carriers (Grand Trunk Corporation (GTC), Illinois Central Railroad Company, CSX Transportation, Inc. (CSXT), and Union Pacific Railroad Company (UP)) on May 10, 2024, in the United States Court of Appeals for the Seventh Circuit, seeking judicial review of the Board’s April 30, 2024, final rule decision.
In addition, on May 20, 2024, the Commuter Rail Coalition (CRC) filed a petition for reconsideration in EP 711 (Sub-No. 2). Specifically, CRC requested that the Board reconsider its decision to reject CRC’s proposal to account for passenger rail interests in the final rule or, alternatively, that the Board issue guidance clarifying the effect of a prescribed reciprocal switching agreement on existing third-party agreements.
On April 17, 2024, the Board issued a decision explaining its findings from its review of UP’s embargoes and closing the proceeding. In 2022, UP issued over 1000 embargoes due to congestion on its network, which was nearly ten times as many embargoes as any other railroad. Out of concern regarding the impact that these embargoes were having on UP’s customers and the national rail network, on November 22, 2022, the Board ordered a public hearing to be convened on December 13 and 14, 2022 to examine the use of embargoes by UP. The Board identified eight topics that UP should be prepared to discuss in detail at the hearing, and the Board directed UP to file certain information and documents in support of the eight topics by December 6, 2022.
In response to the Board’s direction, UP filed only a single document. The Board claimed that this document addressed some of the topics identified by the Board, without providing any substantial detail, while other topics were ignored. On December 8, 2022, Chairman Oberman wrote to UP stating that UP’s submission was not fully responsive to the Board’s order.
At the December 2022 hearing and thereafter, the information UP provided showed that, from 2015 through 2017, UP substantially reduced its number of train and engine (T&E) employees. Additionally, in recent years, UP had also made changes to its embargo-related practices, such as changing its calculation of “excess inventory,” its timing of alerts, and its decision-making processes in UP’s “Customer Inventory Management System.”
Following the hearing, and after numerous unsuccessful informal efforts to obtain additional information from UP, the Board issued another order on May 15, 2023, directing UP to provide in detail additional information and documents by June 14, 2023. According to the Board, UP’s initial response to the May 2023 Order was incomplete. The Board stated that UP “finally” submitted the additional requested documents and information in November 2023.
In its decision served on April 17, 2024, the Board first discussed “UP’s repeated failures to comply with Board orders and requests for information during the course of this proceeding.” The Board stated that, going forward, it fully expects UP, like all members of the industry, “to responsibly, timely, and candidly comply with such Board requests for information and will not tolerate the type of conduct exhibited by UP in this docket.”
The Board also explained its findings from its review of UP’s embargoes. The Board stated that it looks at the reasonableness of embargoes on a case-by-case basis, and it is beyond the scope of this proceeding to determine whether particular congestion embargoes imposed by UP were reasonable. However, the Board noted that, under the Board’s traditional factors, the excessive use of embargoes over an extended period to address problems on a carrier’s network could weigh in favor of a finding of a statutory violation. The Board urged UP and all other carriers not to adopt embargo practices that fail to account for carrier-caused problems and relevant physical conditions, and to maintain workforces and other resources necessary to satisfy their common carrier obligation without unreasonable reliance on embargoes.
The Board stated that, encouragingly, following the Board’s institution of this proceeding in late 2022 and the airing of these issues in the December 2022 hearing, UP has made various changes to its embargo-related practices. These changes, along with an increase in UP’s workforce and improved service, significantly dropped the use of congestion embargoes, from 1,081 in 2022 to 181 in 2023, representing a more than an eighty percent reduction in use of congestion embargoes. In light of this dramatic reduction, the Board concluded that this proceeding has served a useful purpose and can be closed. The Board noted, however, that the 181 congestion embargoes issued by UP in 2023 still exceed the number issued by all the other Class I railroads combined. The Board stated that it expects UP to continue to work to reduce and minimize its use of congestion embargoes going forward.
On April 5, 2024, the Board issued a decision denying the request of the Coalition to Stop CPKC (Coalition) to modify the reporting requirements imposed in the CPKC oversight proceeding.
On March 15, 2023, the Board approved the acquisition of control by Canadian Pacific Railway (CP) of Kansas City Southern (KCS), resulting in the newly merged entity, Canadian Pacific Kansas City Limited (CPKC). The Board’s approval is subject to certain conditions, including a seven-year oversight period, during which the Board is closely monitoring CPKC’s compliance with, and the effectiveness of, the conditions imposed by the Board.
On September 1, 2023, the Board instituted an oversight proceeding to implement the general oversight condition and provided further guidance regarding CPKC’s reporting and recordkeeping obligations. As relevant here, the Board ordered CPKC to report “weekly CPKC 25th percentile, median, 75th percentile, and maximum train length” and “weekly CPKC average transit time and weekly maximum transit time” for trains operating on the Milwaukee District-West (MD-W) Line, as part of its monthly operational reporting.
On November 27, 2023, the Coalition filed a petition requesting modifications to two aspects of the data CPKC is required to provide regarding operations on the MD-W Line. First, the Coalition requested that “CPKC report the average length of CP through freight trains traversing the MD-W line between Randall Road and Tower B-17 for all weeks from April 2018 to April 2023, for all weeks from April 2023 to November 15, 2023, and going forward in CPKC’s monthly submissions.” Similarly, the Coalition requested that CPKC report average train speeds or, alternatively, that CPKC supply corrected and validated milepost data. On December 5, 2023, CPKC filed a reply, stating that it does not object to providing certain information requested by the Coalition, but CPKC faulted the underlying premise of the Coalition’s argument in its petition.
In its decision served on April 5, 2024, the Board noted that the Coalition’s request to require additional reporting or recordkeeping amounts to a petition to reopen the Board’s March 15, 2023, decision approving the CPKC transaction. Under 49 U.S.C. § 1322(c) and 49 C.F.R. § 1115.4, a party seeking to reopen an administratively final Board decision must demonstrate material error in the prior decision or identify new evidence or substantially changed circumstances that would materially affect the case. The Board concluded that the Coalition failed to demonstrate material error, substantially changed circumstances, or new evidence sufficient to justify reopening the Board’s decision. Specifically, the Coalition provided no basis for finding that the reporting requirements imposed in the Board’s March 15, 2023, decision are inadequate for monitoring traffic fluidity or for determining whether any operational disruptions on the MD-W Line might warrant further Board action. Thus, the Board denied the Coalition’s request.
On March 29, 2024, the Board issued a decision denying CPKC’s petition seeking reconsideration of the Board’s prior decision to classify a proposed control transaction as a “minor transaction.” The decision also modifies the procedural schedule in this proceeding and directs the applicants to file certain additional information.
On January 30, 2024, Canadian National Railway Company (CN) and GTC, together with Iowa Northern Railway Company (Iowa Northern) (collectively, Applicants), filed an application seeking Board approval for CN and GTC to acquire control of Iowa Northern. Applicants argued the proposed transaction should be classified as a “minor transaction” under 49 C.F.R. § 1180.2(c). On February 29, 2024, the Board issued a decision (Decision No. 1), finding that the proposed transaction would be a minor transaction, and accepting the application for consideration “because it was in substantial compliance with the applicable regulations governing minor transactions.”
CPKC and the National Grain and Feed Association had filed comments on February 26 and 27, respectively, arguing that the proposed transaction should be classified as significant. However, because the Board’s decision had already been made, Decision No. 1 did not address either comment.
On March 1, 2024, CPKC filed a petition requesting that the Board reconsider its finding in Decision No. 1 and instead find that the proposed transaction is a “significant transaction.” CPKC argued that “its petition meets either the ‘new evidence’ or ‘material error’ criteria for reconsideration under 49 U.S.C. § 1322(c) and 49 C.F.R. § 1115.3(b)(1).” Specifically, CPKC argued that its comment constitutes “new evidence” because the comment was not discussed or considered in Decision No. 1, and argued that the “new” evidence in its comment rebuts the Board’s determination that the proposed transaction is minor. CPKC further argued that the Board should not wait until the end of the proceeding to reclassify the proposed transaction as significant because the procedures for a significant transaction, including more stringent application requirements, allowing for responsive applications, and providing additional time for discovery and to prepare comments, are needed here. According to CPKC, it would constitute material error by the Board to disregard the evidence in CPKC’s comment. CPKC further argued that, if the Board does not reclassify the proposed transaction, then the Board should extend the procedural schedule set forth in Decision No. 1.
Several other parties submitted filings in response to CPKC’s petition. On March 5, 2024, Applicants filed a reply arguing that CPKC had not shown material error or presented new evidence and, therefore, that there was no basis for reconsideration.
In its March 29, 2024, decision, the Board denied CPKC’s petition for reconsideration. As a threshold matter, the Board clarified that “CPKC is incorrect when it contends that ‘there is no regulatory deadline restricting submission of evidence regarding the appropriate classification of a transaction to the first 20 days following the filing of a putatively ‘minor’ application.’” The Board stated that, under 49 C.F.R. § 1104.13(a), a party must file a reply to any pleading within twenty days after that pleading is filed with the Board, and “[t]here is no specific merger procedural rule or procedural order in this case that excepts responses challenging Applicants’ designation of their filed Application as minor from the coverage of § 1104.13(a).”
The Board further clarified that CPKC is “also incorrect in suggesting that the Board’s reconsideration standard does not apply to a request that the Board reevaluate a classification decision.” The Board stated that “administrative appeals of any such decisions are subject to the Board’s reconsideration standard.”
The Board found that CPKC had not satisfied either the new evidence or material error criteria of 49 C.F.R. § 1115.3 and, therefore, there was no basis to grant CPKC’s petition for reconsideration. The Board stated that, while CPKC argued that there is evidence in its comment, based on waybill data and the Applicants’ workpapers, that was not available to CPKC prior to the deadline for replying to the application, the record indicated that CPKC could have obtained this evidence sooner and that CPKC could have made most of the arguments it raised in its comment without waybill data or the Applicants’ workpapers. The Board also stated that the material error criterion is intended to address actions that the Board already has taken and, here, that CPKC cannot rationally argue that the Board committed material error by not considering its comment, given that the comment was not filed until after the Board had made its decision.
Notwithstanding the Board’s denial of the petition for reconsideration, the Board stated that, “to ensure that the parties and the Board are able to fully consider the important issues raised,” the Board will require Applicants to file additional information by April 12, 2024, as set forth in Appendix A to the decision. The Board stressed that “its findings regarding the [p]roposed [t]ransaction’s potential anticompetitive effects and/or contributions to the public interest remain preliminary and . . . are subject to change following the development of the record in the upcoming comment period.” Additionally, “regardless of whether the [p]roposed [t]ransaction is classified as ‘minor’ or ‘significant,’ the standards for approval of the transaction and for the potential imposition of conditions remain the same.” The Board also reiterated that a “minor” classification “does not mean that the Board considers this proceeding to be insignificant or of little importance.”
The Board granted CPKC’s request to modify the procedural schedule to allow additional time to submit comments. Comments, protests, requests for conditions, and any other evidence and argument in opposition to the application were due April 29, 2024.
Then-Board Member Primus dissented in part, stating that he agrees with the Board’s decision to direct Applicants to file additional information and extend the procedural schedule to permit further record development, but he disagrees with the decision to maintain the classification of the proposed transaction as “minor.” He stated that the Board’s conclusion about anticompetitive effects in Decision No. 1 fails to withstand the filings subsequently submitted, and he noted certain concerns in this proceeding related to competition. Then-Board Member Primus stated that, based on the current record, he could not conclude that the proposed transaction’s anticipated public benefits clearly outweigh the potential anticompetitive impacts. He also noted that the Board’s decision “sets a troubling precedent” and “signals lack of concern about the competition [that the Board] has been entrusted to protect.”
Board Member Fuchs issued a concurring opinion, joined by Board Member Schultz. Board Member Fuchs stated that he was “writ[ing] separately to emphasize the importance of following the Board’s procedural requirements and promoting a fair and efficient process.” He stated that, “[i]f the Board were ever to reclassify a transaction, it must first address its reconsideration standard as required by statute and regulation” and “any attempt to bypass the reconsideration standard requirements must consider the adverse effects on parties’ incentives to timely file in agency proceedings and on the Board’s fair, expeditious management of its dockets.” Board Member Fuchs further stated that the Board’s non-final “determination” in Decision No. 1 “is best understood to refer to the Board’s initial substantive competition and public interest findings, not the classification itself.” According to Board Member Fuchs, “today’s decision helps the Board fulfill its competition and public interest obligations while abiding by other aspects of the agency’s governing framework.”
On February 6, 2024, the Board issued a decision delegating authority to the Director of the Office of Passenger Rail (OPR) to perform certain functions as part of the On-Time Performance (OTP) of Amtrak’s Sunset Limited Service investigative proceeding.
As background, on December 8, 2022, Amtrak submitted a Complaint and Petition for Board Investigation and Other Relief, requesting that the Board initiate an investigation of the OTP on its Sunset Limited service, a 1,997-mile-long Amtrak passenger train service that runs three times weekly, in each direction, between New Orleans, Louisiana, and Los Angeles, California. The route travels mostly over track that is hosted by UP. Amtrak asserted that “[c]ustomer OTP has fallen below the statutorily prescribed threshold of 80% for the last four quarters that have been reported by the [FRA].” Amtrak requested that the Board initiate an investigation pursuant to 49 U.S.C. § 24308(f) and award damages and other appropriate relief. Additionally, Amtrak filed a separate motion proposing a procedural framework for the proceeding. Replies were submitted by UP and other parties, including BNSF Railway Company (BNSF), and CN.
On July 11, 2023, the Board instituted an investigation into “the substandard on-time performance of the Sunset Limited, Amtrak Trains 1 and 2, a long-distance passenger service between New Orleans, La., and Los Angeles, Cal.”
Under section 213 of the Passenger Rail Investment and Improvement Act of 2008, the Board may initiate an investigation if the OTP of any intercity passenger train averages less than eighty percent for any two consecutive calendar quarters. The Board “shall” initiate such an investigation, upon complaint by Amtrak or another eligible complainant. The purpose of an investigation is to determine whether and to what extent delays or failures to achieve minimum standards are due to causes that could reasonably be addressed by the passenger rail operator or the host railroad. Following the investigation, if the Board determines that Amtrak’s substandard performance is attributable to the rail carrier’s failure to provide preference to Amtrak over freight transportation as required by 49 U.S.C. § 24308(c), the Board may award damages or other appropriate relief from the host railroad(s) to Amtrak. 49 U.S.C. § 24308(f)(2).
In its decision served on July 11, 2023, the Board found that the standard necessary to begin an investigation under 49 U.S.C. § 24308(f) had been met, and, as required by the statute, the Board initiated an investigation. The Board stated that it would separate the investigation into two stages where the second stage is used, if necessary, to determine damages and prescribe other relief. The Board adopted a procedural framework for the investigation, under which the Board will, among other things, conduct an initial round of fact-finding by directing the parties to answer interrogatories and produce documents. The Board stated that it “will use this proceeding to inform future OTP cases and will look for opportunities to make such proceedings more expeditious.” Following the Board’s July 11, 2023, decision, the Board subsequently issued decisions amending its requests for information and directing Amtrak, UP, and BNSF to clarify their responses to several of the Board’s requests for information.
In its February 6, 2024, decision, the Board stated that, “[g]iven the volume and technical nature of the evidence contained in this record, the Board will need to issue additional decisions directing parties to clarify, correct, or supplement the record as the investigation progresses.” The Board further stated that, to expedite the process, it will delegate certain functions, as they related to this docket, to the Director of OPR.
The Board delegated to the Director of OPR the following functions that will terminate at the conclusion of this proceeding:
Parties may appeal decisions issued by the Director of OPR to the Board. Appeals to the Board will be evaluated using the same legal standard applied to appeals under 49 C.F.R. § 1011.2(a)(7). Appeals of decisions issued by the Director of OPR must be filed within five business days of the service date of the decision being appealed, and replies must be filed within five business days of the filing date of the appeal.
Subsequent to the February 6, 2024, decision, on February 13, 2024, the Director of OPR issued a decision directing the parties to respond to additional questions. In a May 24, 2024, decision, the Director of OPR granted in part a request for an extension of time by extending the deadline for Amtrak, UP, BNSF, the Southern California Regional Rail Authority (SCRRA), and CN to provide narrative explanations of the root causes of train delays for Train 1 to June 4, 2024, and extended the deadline to provide narrative explanations of the root causes of train delays for Train 2 to July 24, 2024. On June 13, 2024, the Director of OPR ordered UP to file estimates of when it will file each of the remaining delay narratives for Train 1 of the sunset limited by June 18, 2024, and provided instructions to UP if it could not meet certain dates provided.
On April 2, 2024, the FRA issued a final rule establishing minimum safety requirements for the size of train crews depending on the type of operation. The final rule was published in the Federal Register on April 9, 2024.
The final rule requires railroads to staff every train operation with a minimum of two crew members, including a locomotive engineer and an additional crew member who will typically be a conductor, that travel with the train and can directly communicate with each other even if one crew member is not in the locomotive cab, except for certain one-person train crew operations.
Under the final rule, a “one-person train crew” means either 1) one railroad employee is assigned a train as a train crew, and that single assigned person is performing the duties of both the locomotive engineer and the conductor; or 2) more than one railroad employee is assigned a train as a train crew, but only a single assigned person, who is performing the duty of the locomotive engineer, is traveling on the train when the train is moving, and the remainder of the train crew, that would include the conductor if the locomotive engineer is not the assigned conductor, is assigned to intermittently assist the train’s movements.
The final rule provides criteria for instituting one-person train crew operations in certain circumstances through exceptions to the two-crew member mandate, conditional exceptions based on the type of operation, or a special approval process option. These avenues of relief are intended to address operations by small businesses, which for purposes of this rulemaking are primarily short lines and regional railroads.
The final rule “requires railroads with certain types of one-person train crew operations to notify FRA that they are using such an operation, provide a detailed description of the operations, and, in some circumstances, submit a risk assessment and request FRA’s approval to continue or initiate an operation.” With an exception for certain one-person legacy operations, FRA will require a risk assessment, as well as a special approval process, for most one-person train crew operations that will be transporting twenty or more carloads or intermodal portable tank loads of certain hazardous materials or one or more carloads of hazardous materials designated as rail-security sensitive materials, as defined by the Department of Homeland Security. The final rule includes an annual reporting requirement for railroads that receive special approval to conduct an operation with a one-person train crew. The final rule also establishes an implementation schedule that phases in compliance for certain one-person train crew operations, such as for each Class II and III railroad with a legacy one-person train crew freight train operation.
A railroad may petition FRA for special approval of a one-person train crew operation not covered by an exception. Additionally, the final rule exempts from the two-crew member mandate certain passenger and tourist train operations that do not pose significant safety risks to railroad employees, the public, or the environment. According to FRA, the primary benefit of the final rule is “to ensure that each train is adequately staffed and has appropriate safeguards in place for safe train operations under all operating conditions.” The final rule will be effective June 10, 2024.
Four railroads—UP, BNSF, the Indiana Rail Road, and Florida East Coast Railway—have filed suits in appellate courts, arguing that the final rule is arbitrary, capricious, and an illegal abuse of discretion.
On February 26, 2024, in Norfolk Southern Railway Co. v. Dille Rd. Recycling, LLC, the Court of Appeals for the Sixth Circuit held that Dille Road Recycling’s (Dille) prescriptive easement claim was preempted by the Interstate Commerce Commission Termination Act (ICCTA).
As background, this case concerns a narrow parcel of land (Parcel), running adjacent to Norfolk Southern Railway (NSR) active rail line in Euclid, Ohio. The parties did not dispute that NSR owned the Parcel; however, Dille has occupied and used the Parcel for nearly two decades. After failed attempts to resolve the matter out of court, the parties brought the matter to federal court, where NSR sought a declaration that Dille’s property claims were preempted by ICCTA. The district court held that Dille’s prescriptive-easement claim was not preempted and granted Dille its easement. On appeal, the Sixth Circuit reversed and remanded the district court’s decision.
The Sixth Circuit began its analysis by noting that “Congress included an express-preemption clause in the ICCTA that gave the STB exclusive jurisdiction over most activities directly related to rail transportation . . . .” The Sixth Circuit further noted that its preemption analysis distinguishes between two types of preempted state actions: (1) those that are categorically (facially) preempted actions that “directly conflict with exclusive federal regulation of railroads”; and (2) those that are “preempted as applied” and whose analysis “requires a factual assessment of whether that action would have the effect of preventing or unreasonably interfering with railroad transportation.” The Sixth Circuit noted that, although it has “not previously examined ICCTA preemption in the context of easements, the STB and [the court’s] sister circuits have. In short, whether an easement is preempted is a factual determination based on the specific nature of the easement sought and how it would affect railroad operations broadly.”
In deciding the framework under which to analyze ICCTA preemption in the context of Dille’s prescriptive-easement claim, the Sixth Circuit concluded that “the proper evaluation of ICCTA preemption for prescriptive-easement claims is the as-applied framework.” In making this determination, the Sixth Circuit stated that “an easement is not the type of state action that, by the very act of regulation, interferes with the STB’s exclusive jurisdiction. It is, however, the type of state action that can, in some circumstances, unreasonably interfere with railroad transportation.” The Sixth Circuit further stated that it found the STB’s decision in City of Lincoln—Petition for Declaratory Order, FD 34425 (STB served Aug. 12, 2004) to be “particularly instructive” in its determination to use the as-applied framework.
The Sixth Circuit stated that the touchstone of the as-applied preemption analysis is whether the state regulation imposes an unreasonable burden on railroading. The Sixth Circuit stated that reasonableness is “a question of the scope of the ‘taking.’” The court stated that “the issue here is whether Dille’s prescriptive easement imposes an unreasonable burden on railroading” and noted that the “STB has defined this standard as whether the particular state action has the effect of preventing or unreasonably interfering with rail transportation.”
In conducting its as-applied preemption analysis, the Sixth Circuit noted that “Dille’s easement no doubt ‘takes’ rail corridor for uses other than rail operations—but the determinative inquiry is to what degree.” The Sixth Circuit considered several factors in analyzing the degree of the taking, including that the Parcel is fenced off to the exclusion of NSR (due to a safety requirement of the City to enclose recycling facilities); that “at least two-thirds of the parcel cannot, under any circumstances, accommodate shared use with [NSR]”; and that “the record indicates that coexistence is not really possible.” The Sixth Circuit further stated that “Dille’s easement no doubt excludes [NSR,] and [NSR] has no conceivable way to reclaim any real use of its own property.”
The Sixth Circuit rejected Dille’s arguments that the easement is non-exclusive, that “the easement is not ‘draconian’ enough to warrant preemption”; and that NSR “never explained how limited access would unreasonably burden railroad operations.” In rejecting Dille’s arguments, the Sixth Circuit noted, in part, that “calling something nonexclusive does not magically make it nonexclusive.” The court further stated that “the possession or conflicting use of railroad property can be burdensome even if the railroad is not currently using the contested property.”
Therefore, the Sixth Circuit held that “ICCTA preempts Dille’s prescriptive-easement claim,” and reversed and remanded the district court decision.
On June 16, 2023, the Association of American Railroads (AAR) and the American Short Line and Regional Railroad Association (ASLRRA), on behalf of their members, filed suit against the California Air Resources Board (CARB) in the U.S. District Court for the Eastern District of California, challenging the “In-Use Locomotive Regulation” (Regulation) adopted by CARB on April 27, 2023.
In the complaint, AAR and ASLRRA asserted that the Regulation is preempted by federal law, including ICCTA, the Clean Air Act (CAA), and the Locomotive Inspection Act. AAR and ASLRRA also asserted that the Regulation violates the Dormant Commerce Clause by imposing a clear and substantial burden on interstate transportation. The complaint alleged that freight rail “accounts for just 1.7% of transportation-related greenhouse gas emissions” and that “railroads have continued to explore and invest in emissions-reducing initiatives.” AAR and ASLRRA contended that the Regulation’s dictates are unworkable and counterproductive because the mandates were “premised on unrealistic technology forecasts” regarding when zero-emissions technology would be available. The complaint further alleged that the Regulation’s mandates are counterproductive because they will “disrupt railroads’ existing investments in safety and the environment and because the compliance burdens imposed make the industry less competitive in relation to other forms of freight and passenger transportation that produce far greater levels of criteria, toxic, and climate pollutants, such as trucks.”
On November 6, 2023, East Yard Communities for Environmental Justice, People’s Collective for Environmental Justice, and Sierra Club (collectively, Intervenors) filed a motion to intervene. On November 10, 2023, Defendants filed a motion to dismiss. On November 24, 2023, AAR and ASLRRA filed a motion for summary judgment. On January 8, 2024, the court granted Intervenors’ motion to intervene.
The court issued an order on February 16, 2024, granting in part and denying in part Defendants’ motion to dismiss. The Court explained that the Regulation has four primary components: (1) the Spending Account, which would require railroads to establish an account into which they must make annual deposits for use only for certain categories of projects related to clean locomotives; (2) In-Use Operational Requirements, which would restrict use of older locomotives starting in 2030; (3) Idling Requirements, which would regulate function and maintenance of locomotives; and (4) Reporting and Recordkeeping Requirements for annual reports of emissions information for non-zero emissions locomotives. In addition, the Regulation’s Administrative Payment Provision would require an annual payment to CARB of $175 per locomotive that operates in the state.
The court found that the plaintiffs’ claims regarding the Spending Account and In-Use Operational Requirements were not ripe, including plaintiffs’ ICCTA preemption and Dormant Commerce Clause claims. Additionally, the court found that the plaintiffs could not show that enforcement of these requirements was “sufficiently concrete or imminent” because California could not enforce them absent approval by the U.S. Environmental Protection Agency (EPA) under the CAA Section 209(e)(2), which is interpreted to bar California from regulating new locomotives.
The court also found that the plaintiffs failed to sufficiently allege an economic injury for their Locomotive Inspection Act preemption challenge to the Idling Requirements because they did not allege how the purportedly preempted provision would impose new costs on the plaintiffs. The court found that the plaintiffs did have standing for their ICCTA and dormant Commerce Clause challenges to the Idling Requirements. The court dismissed facial ICCTA preemption and dormant Commerce Clause challenges to the Reporting and Recordkeeping Requirements but allowed as-applied challenges to proceed. The court also found that the plaintiffs adequately stated a dormant Commerce Clause claim challenging the Administrative Payment Provision.
On March 5, 2024, Defendants filed a motion for summary judgment or, in the alternative, motion for a stay or dismissal under the primary jurisdiction doctrine and opposition to the plaintiffs’ motion for summary judgment. The court has not yet ruled on the motions for summary judgment.
On May 23, 2024, the EPA and the Department of Justice announced a settlement with NSR over the February 3, 2023, train derailment in East Palestine, Ohio. The settlement, valued at over $310 million, holds NSR accountable for the damage and, if approved by the U.S. District Court for the Northern District of Ohio, would require NSR to reimburse all Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) and Clean Water Act (CWA) response costs, pay a $15 million civil penalty, establish a $25 million community health program, implement rail safety procedures, adopt coordination programs, and pay for natural resource damages, among other things. NSR estimates it will spend over $1 billion to address the contamination and improve rail safety.
The settlement follows a complaint filed by the United States against NSR in March 2023 for unlawful discharges of pollutants and hazardous substances caused by the train derailment. In February 2023, EPA issued a unilateral administrative order, holding NSR accountable for the damage done to the community. The order required cleanup of spilled substances and impacted soils, as well as payment of all costs to the U.S. government. EPA also issued an order under the CWA to clean up oil spilled into the surrounding waterways. Since then, EPA has been directing and overseeing the extensive cleanup activities. The settlement also stipulates that NSR coordinates with government officials during emergency responses, among other things. The deadline for public comments on the settlement is August 2, 2024.
Separately, on May 21, 2023, Judge Benita Y. Pearson issued an order granting a Motion for Preliminary Approval of Settlement for a $600 million class action settlement in relation to the East Palestine derailment. The settlement covers all class action claims within a twenty-mile radius of the derailment and personal injury claims within a ten-mile radius for participating residents. The agreement does not admit any liability, wrongdoing, or fault on the part of NSR. The settlement is intended to allow individuals and businesses to address potential adverse impacts from the derailment, including healthcare needs, property restoration, and business loss. Residents had until July 1, 2024, to object to or file an opt-out request for the settlement.
On June 25, 2024, the National Transportation Safety Board (NTSB) issued a press release announcing that a rail car’s defective wheel bearing caused the derailment and subsequent hazardous material release in East Palestine. NTSB stated that it will issue its final report in the next few weeks.