I. Recent STB Regulatory Developments
A. Ex Parte Proceedings
1. The Board Held Public Hearing on Growth in the Freight Rail Industry
On September 16 and 17, 2024, the Board held a public hearing at the Board’s headquarters in Washington, DC. The hearing was open for public observation and was also available for public viewing on YouTube.
In the Board’s notice announcing the public hearing, the Board stated that the purpose of the hearing was to “gather information about recent trends and strategies for growth in the freight rail industry.” The Board stated that it “has an interest in the health and growth of the industry and the need for rail customers to move their goods efficiently and reliably.” While recognizing that some shifts in volume “may not be primarily within the control of rail carriers, the Board has observed that over the past ten years carload volumes have not grown, and have in fact decreased.” The Board stated that it is “interested in the Class I railroads’ short-, medium-, and long-term growth strategies, including investments, across traffic types[,]” as well as in “shippers’ plans or desire for future use of rail, factors that may affect their shipment decisions, and what rail carriers are doing and can do to increase shippers’ use of rail.” Additionally, the Board would “like the perspective of short line railroads, who can present evidence of their own growth strategies.” The Board stated that “[t]his hearing presents a chance to discuss the opportunities for growth in the freight rail industry, as well as the challenges and effects associated with a failure to grow.”
The Board requested the attendance of executive-level officials from Class I railroads—BNSF Railway Company (BNSF), Canadian National Railway Company (CN), Canadian Pacific Kansas City Limited (CPKC), CSX Transportation, Inc., Norfolk Southern Railway Company, and Union Pacific Railroad Company (UP). The Board also invited testimony from industry analysts, other rail carriers, rail customers, rail suppliers, labor organizations, and other interested parties.
Notices of intent to participate were due by August 14, 2024. Written testimony from hearing participants and written comments from any other interested persons were due by August 16, 2024. Numerous parties, including railroads, trade associations, labor organizations, and shippers, filed notices of intent to participate and/or written testimony, and participated at the hearing.
B. Adjudicatory Proceedings
1. The Board Grants Snohomish County’s Application for Adverse Abandonment; Fuchs’ Concurrence Highlights Potential Reconsideration of the Board’s Adverse Abandonment Authority
On July 11, 2024, the Board issued a decision granting the application by Snohomish County (the “County”) for adverse abandonment of a rail line in that county, subject to interim trail use/railbanking, environmental, and labor protective conditions.
On October 17, 2023, the County had filed an application under 49 U.S.C. § 10903, requesting that the Board authorize the adverse abandonment of an approximately 11.9-mile segment of a freight rail easement owned by GNP RLY, Inc. (GNP). The line is located between milepost 26.38 and milepost 38.25, in Snohomish County, Wash. With its application, the County also filed a request for issuance of a certificate of interim trail use or abandonment (CITU) pursuant to the National Trails System Act (Trails Act).
In its July 11, 2024 decision, the Board granted the County’s unopposed application for adverse abandonment of the line. The Board stated, “[u]nder 49 U.S.C. § 10903(d), the standard that applies to any application for authority to abandon a line of railroad is whether the present or future public convenience and necessity (PC&N) require or permit the proposed abandonment.” In applying this standard in an adverse abandonment context, the Board considers the competing benefits and burdens of abandonment on all interested parties.
The Board stated that, here, the carrier, GNP, supports the application for adverse abandonment and has entered into a settlement agreement with the County to work jointly toward railbanking the line. The Board further stated that, according to the report of the County’s consultant, the line is non-viable and no potential shipper has expressed interest in using the line. Thus, the Board concluded that the record demonstrates that there is no present or future need for common carrier rail service on the Line, and that the present and future PC&N support the requested adverse abandonment.
Additionally, the Board granted the County’s request for a CITU. The Board noted that its role under the Trails Act is limited and largely ministerial. Here, since the County’s request complied with the requirements of 49 C.F.R. § 1152.29, and GNP was willing to negotiate for interim trail use/railbanking, the Board found that interim trail use/railbanking was appropriate in this adverse abandonment proceeding.
Board Member Fuchs concurred with a separate expression. He noted that, in City of S. Bend v. STB, then-Judge Kavanaugh, joined by then-Chief Judge Sentelle, observed that the agency has exercised adverse abandonment authority since 1981, but “[i]t appears…the statute as amended by the ICC Termination Act of 1995 [(‘ICCTA’)] may allow only a railroad that owns the tracks—not a third party—to seek abandonment of a rail line.” Additionally, in a different proceeding in June 2024, “a commenter argued that ICCTA precludes adverse abandonments.”
Board Member Fuchs noted that, in this proceeding, “the Board’s authority to grant adverse abandonments has not been challenged or briefed, and the rail carrier supports the application.” He stated that he is “open to reconsidering whether the Board has adverse abandonment authority,” but he “decline[s] to do so in this docket and instead vote[s] consistent with agency precedent.”
According to Board Member Fuchs, “[t]he statutory arguments and use concerns noted [in this concurrence] suggest that the Board should comprehensively examine its approach to adverse abandonments. The agency should start by reevaluating the textual changes made by ICCTA and deciding whether they preclude adverse abandonments.” Board Member Fuchs stated that he sees “many possible tensions, such as whether adverse abandonment authority (1) compromises other statutory requirements (e.g., Offer of Financial Assistance provisions, information and disclosure requirements, and the National Environmental Policy Act and related environmental laws); (2) implies that a carrier must do more than the common carrier obligation requires; and (3) undermines ICCTA’s expansive preemption provision.” He stated that “[t]he Board should resolve any such tensions and clearly articulate its basis and reasoning.”
Board Member Fuchs stated that, “[i]f the Board concludes it has adverse abandonment authority, it should also evaluate any disparate treatment of reliance interests across licensing proceedings and any inconsistency in its application of the public convenience and necessity standard, particularly where it may not appropriately value interests in continued or future rail service.” However, “[i]f the Board finds no adverse abandonment authority, it should consider the extent to which other mechanisms—for example, reconsideration authority, enforcement actions, or contracts between parties—could address some of the problems currently presented in adverse abandonment cases.” He stated that “[t]he Board should conduct these analyses, as applicable, in an appropriate docket and—to the maximum extent practicable—seek broader public comment.”
On August 22, 2024, the County and GNP filed a letter informing the Board that they have entered into a railbanking agreement and that the freight rail easement at issue in this proceeding has been transferred by deed to the County for interim trail use and railbanking.
2. The Board Establishes a Procedural Schedule and Addresses Other Matters in the Amtrak Sunset Limited On-Time Performance Proceeding
On August 19, 2024, the Board issued a decision establishing a procedural schedule and providing guidance on subjects to be addressed in pleadings in the Amtrak Sunset Limited on-time performance proceeding. The Board also denied Amtrak’s petition requesting that the Board issue a show-cause order to UP regarding certain records, and the Board directed UP to reconsider and resubmit certain filings it had designated as “Highly Confidential.”
By a decision served on July 11, 2023 (the “July 2023 Decision”), the Board had initiated an investigation under section 213 of the Passenger Rail Investment and Improvement Act of 2008 to examine the cause(s) of substandard on-time performance of Amtrak’s Sunset Limited service from October 1, 2021, through December 8, 2022. Amtrak’s Sunset Limited is a 1,997-mile-long passenger train service that runs three times weekly, in each direction, between New Orleans, La., and Los Angeles, Cal.
In the July 2023 Decision, the Board identified UP, BNSF, CN, the New Orleans Public Belt Rail Commission for the Port of New Orleans (NOPB), and the Southern California Railroad Authority (SCRRA) as parties to the investigation. The Board later directed that CPKC also participate as a party to the investigation. The Board assigned and authorized Administrative Law Judge Thomas McCarthy of the Federal Mine Safety and Health Review Commission to entertain and rule upon party-led discovery matters and to resolve initially any disputes concerning that discovery. The Board stated that it would issue a procedural schedule once discovery was completed. The discovery period closed on August 23, 2024.
In its August 19, 2024 decision, the Board provided guidance to the parties on subjects to be addressed in their pleadings. The Board stated that, in the opening, reply, and rebuttal submissions, the parties will be free to address those topics they think relevant to the Board’s determination in this proceeding. However, the parties will be required to address certain topics. For example, the Board directed Amtrak to address “what it alleges would constitute a ‘failure to provide preference to Amtrak’ under 49 U.S.C. § 24308(f)[;]” which parties it believes the Board should consider “host rail carriers” for purposes of 49 U.S.C. § 24308(f); the extent to which the Board should rely on the Federal Railroad Administration’s definition of “host railroad;” the extent of the Board’s legal authority to award damages; and additional topics.
The Board directed UP, BNSF, CN, NOPB, SCRRA, and CPKC to reply to Amtrak’s opening statement, including either a proposed interpretation of “preference” and “host rail carriers,” that contained a description of how, if at all, their interpretations of those terms differ from Amtrak’s, or indicating that it takes no position on the definition of any of these terms. Furthermore, those parties should address the Board’s legal authority to award damages. The Board stated that, “[g]iven that the interpretation of these statutory terms is an issue of first impression and a matter of broad public interest, the Board will also allow non-parties to the investigation to submit replies to Amtrak’s opening statement and the railroad parties’ reply statements.” The railroad parties will be permitted to file a rebuttal to non-party replies, and Amtrak will be permitted to file a consolidated rebuttal to all replies.
The Board established a procedural schedule for this proceeding. Under the procedural schedule, Amtrak’s opening statement is due by October 7, 2024. Railroad party replies to Amtrak’s opening statement are due by December 23, 2024. Non-party replies are due January 22, 2025. Railroad party rebuttals to non-party replies are due February 21, 2025. Amtrak’s rebuttal to all replies is due by February 21, 2025.
The Board also ruled on Amtrak’s petition for a show-cause order. In the July 2023 Decision, the Board granted Amtrak’s request for “a records retention order,” and directed that “[a]ll documents and/or data that relate to the subject matter of this investigation must be preserved.” On April 10, 2024, Amtrak filed a petition requesting that the Board order UP to show cause as to why UP is not obligated to comply with the Board’s order by suspending its 99-hour destruction policy for dispatch “playback” records related to the Sunset Limited route. Amtrak further “request[ed] that the Board confirm that all other parties to this proceeding have suspended any automatic destruction of dispatch playbacks related to the Sunset Limited service.” In its August 19, 2024 decision, the Board found that “the lack of playbacks for the post-Relevant Period will not preclude the Board from conducting a thorough investigation” and ordered that Amtrak’s petition for a show-cause order will be denied.
Finally, in its August 19, 2024 decision, the Board directed UP to reconsider and resubmit certain filings it had designated as “Highly Confidential.” The Board stated that “it has an interest in ensuring that this investigative proceeding is transparent, as it will serve as a model for future cases and involves the public interest.” Thus, “transparency should be pursued in this proceeding to the greatest degree possible and any information submitted by the parties should be made publicly available to the extent that it is not competitively sensitive.” The Board “direct[ed] UP to review and then resubmit its narratives with revised designations that do not take a blanket approach regarding its entire response” and to “include explanations for why it considers the information being redacted to be competitively sensitive or otherwise appropriate for ‘Confidential’ or ‘Highly Confidential’ designations.”
II. Litigation
A. The Eighth Circuit Vacates the Board’s Final Offer Rate Review Final Rule
On August 20, 2024, the United States Court of Appeals for the Eighth Circuit vacated the Board’s Final Offer Rate Review (FORR) final rule, finding that the Board lacks statutory authority to prescribe rates through FORR.
On December 19, 2022, the Board had adopted a final rule (the “Final Rule”) in Docket No. EP 755 to establish a new procedure for challenging the reasonableness of railroad rates in smaller cases. In summary, under the new rate review procedure, “the Board will decide a case by selecting either the complainant’s or the defendant’s final offer, subject to an expedited procedural schedule that adheres to firm deadlines.” Board Members Fuchs and Schultz dissented with separate expressions.
UP and the Association of American Railroads (collectively, “Petitioners”) separately challenged the Final Rule in federal courts. The cases were consolidated for briefing and submission to the Eighth Circuit.
Petitioners challenged the Final Rule on three grounds. First, Petitioners “argue[d] that the Board lacks statutory authority to ‘prescribe railroad rates through [FORR,] a baseball arbitration scheme.’” Second, Petitioners “assert[ed] that ‘FORR is unconstitutionally vague’ because rail carriers ‘do not know how the Board will determine what is ‘reasonable’ in any given case’ considering ‘[t]he Board’s refusal to establish a governing methodology in advance, or to provide any ascertainable standard for how it will make reasonableness determinations.’” Finally, Petitioners “contend[ed] that ‘[t]he final rule adopting FORR is arbitrary and capricious’ because it ‘prevents the Board from engaging in reasoned decisionmaking [by] . . . prohibit[ing] the Board from choosing the correct outcome, unless one of the parties just happens to propose it.’”
In its decision, the court provided an overview of the applicable statute. Under the statute, “[t]he Board resolves rate disputes between rail carriers and shippers when rates are not set by private contract.” The Board may begin a proceeding only on complaint. In deciding a rate dispute, the Board must first find that a rail carrier has market dominance over the transportation to which a particular rate applies. If the rail carrier has market dominance, then the Board must determine whether the rate established by such carrier for such transportation is reasonable. The Board must hold a “full hearing” before determining a rate’s reasonableness. The Board must also determine the rate that the rail carrier actually charged or collected. In assessing a rate’s reasonableness, the Board must give due consideration to the three Long-Cannon factors. If the Board finds that the rail carrier’s rate is unreasonable, the Board may prescribe the maximum rate, classification, rule, or practice to be followed.
The court stated that its “task is to determine whether Congress statutorily authorized the Board to prescribe rail carrier rates through a rate-setting scheme like FORR.” The court held that FORR is not consistent with the Board’s statutory obligations “because some of FORR’s requirements conflict with the Board’s statutory duties.” The court stated that “Section 10704(a)(1) requires the Board to hold a ‘full hearing’ before determining a rate’s reasonableness.” According to the court, the threshold question it must answer is whether this “full hearing” is an adjudication to which the Administrative Procedure Act (APA) applies; and if so, then certain procedural protections apply.
After determining that the requirements set forth in APA § 554(a) are satisfied, the court then examined whether FORR complies with the APA’s procedural requirements. The court stated that it “focus[es] on the APA’s requirement that, ‘[e]xcept as otherwise provided by statute, the proponent of a rule or order has the burden of proof.’” Here, the court found that “FORR is contrary to the APA because it does not require the shipper to carry the burden of persuasion on the final offer; in fact, the shipper need not prove anything. Under FORR, the Board is tasked only with ‘choos[ing] between the parties’ final offers.’” Furthermore, “under FORR, contrary to the statutory language, it is the parties—not the Board—that ‘prescribe the maximum rate’ pursuant to § 10704(a).” Instead, the Board receives and reviews the parties’ reasonableness analysis and final offers reflecting the maximum reasonable rate. FORR then requires that the Board “choose between the parties’ final offers. The court stated that “FORR strips the Board of its ability to modify the selected offer.”
The court concluded that “this procedure falls short of the statutory requirement that ‘the Board . . . prescribe the maximum rate.’” Citing Board Member Schultz’s dissent in the Final Rule, the court stated, “[u]nder FORR, the Board is limited in its ‘ability to exercise its own judgment by weighing each side’s arguments, evaluating the evidence, and considering both the public interest and rail transportation policy.” The court further stated that “FORR effectively prevents the Board from giving ‘due consideration’ to the statutory factors that the Board is required to consider in assessing a rate’s reasonableness . . . by limiting the Board to the two final offers the parties propose in prescribing the maximum reasonable rate.”
Thus, the court held that the Board lacks statutory authority to prescribe rates through FORR. The court granted the petitions for review and vacated the Final Rule. The court noted that, because it held that the Board lacks statutory authority to implement FORR, it need not address Petitioners’ remaining arguments.
III. Labor Issues
A. Canadian Government Orders Arbitration in CN and CPKC Rail Labor Dispute; Union Appeals
On August 22, 2024, CN and CPKC shut down rail service in Canada and locked out workers after failing to reach an agreement in negotiations with the Teamsters Canada Rail Conference (Teamsters) labor union.
Teamsters represents approximately 10,000 workers, who work as locomotive engineers, conductors, train and yard workers, and rail traffic controllers at CN and CPKC. The main points of contention for the workers appear to be scheduling, work hours, and fatigue management.
The shutdown and lockout threatened to cause significant economic consequences in Canada and supply chain disruptions in the U.S. Even before the shutdown on August 22, CN and CPKC, and some of their U.S. competitors, had begun refusing cross-border cargo that would rely on CN and CPKC networks. On August 14, 2024, the Board issued a press release, stating that it is “actively monitoring the potential for a rail labor strike in Canada,” and that it is “aware that embargoes related to the potential strike have been issued and that the scope of the embargoes could expand in the coming days.”
Less than 17 hours after almost all rail freight traffic in Canada came to a standstill, the Canadian government directed a labor board to end the shutdown and ordered arbitration. At a news conference, Canada’s labor minister, Steve MacKinnon, stated that he had told the Canada Industrial Relations Board (CIRB) to formally order the railroads to restart service and to extend the contracts between Teamsters and the railroads. He stated that he expected rail service to resume within days.
Two days later, CIRB issued a decision ordering rail employees back to work and imposing binding arbitration on the parties, beginning August 29, 2024. In response, Teamsters announced that it would comply with the board’s decision but that it planned to appeal the ruling in court.
On August 29, 2024, Teamsters filed multiple, separate appeals with the Federal Court of Appeal, seeking a judicial order quashing the labor minister's directives and the labor tribunal's decisions. Teamsters is arguing that the labor minister’s directives to the board were beyond the power of his jurisdiction, and that the directives and board decisions breached the union’s freedom of association enshrined in the Charter of Rights and Freedoms.
