The Surface Transportation Board (Board or STB) recently issued decisions in ex parte proceedings, extending employment data reporting and amending the Board’s emergency service regulations. Additionally, the Board issued a decision finding that a proposal to resolve an interchange dispute in the Chicago area was inconsistent with the reasonableness requirement of 49 U.S.C. § 10742.
On January 31, 2024, the Board issued a decision in EP 770 (Sub-No. 1) extending the period for temporary reporting of employment data for all Class I carriers to December 31, 2024, and requiring certain updated information from BNSF Railway Company (BNSF), CSX Transportation, Inc. (CSXT), Norfolk Southern Railway (NSR), and Union Pacific Railroad Company (UP) (together, the Four Carriers). The decision declined to extend the service performance data reporting previously required in EP 770, Urgent Issues in Freight Rail Service.
The Board held a public hearing on April 26 and 27, 2022 to discuss rail service issues and recovery efforts. In response to testimony regarding service metrics and crew shortages, the Board issued decisions directing the Four Carriers to submit recovery plans and progress reports, participate in biweekly conference calls, and report performance metrics and employment data for a six-month period. The Four Carriers were directed to select key service performance indicators and targets that each carrier expected to meet. The Board also directed the Four Carriers to include labor force targets.
On October 28, 2022, the Board decided to continue monitoring the Four Carriers’ service performance and hiring efforts because the Four Carriers would not meet all of their six-month targets, and service issues continued to affect the network. On May 2, 2023, the Board extended the temporary reporting period for all Class I carriers to December 31, 2023, while modifying some reporting requirements for CSXT.
In the January 31 decision, the Board declined to extend service data reporting. The Board explained that service performance data from recent weeks indicated that the Four Carriers’ service performance levels have improved since the Board initiated this proceeding and required the Four Carriers to set targets and report on their service performance. In particular, the Board noted that key performance indicators such as velocity, terminal dwell, first-mile/last-mile service (i.e., industry spot and pull), operating inventory, and trip plan compliance show that service has improved. The Board did not extend the requirement that all Class I railroads submit weekly performance data in this docket or that BNSF, NSR, and UP submit biweekly service progress reports.
The Board directed all Class I railroads to continue to submit monthly employment data in this docket beginning on February 15, 2024 and through December 31, 2024. BNSF, NSR, and UP were directed to continue to submit data about trainees in their monthly employment data. Additionally, BNSF, CSXT, NSR, and UP were directed to provide a second interim update by February 29, 2024, containing labor force targets for employees actually on the job by July 1, 2024 and by December 31, 2024. Pursuant to the Board’s January 31 decision, BNSF, CSXT, NSR, and UP each filed a second interim update on February 29, 2024.
On February 20, 2024, the Freight Rail Customer Alliance and National Coal Transportation Association jointly filed a petition for reconsideration of the Board’s January 31 decision, with respect to the discontinuation of the service performance data previously required in the proceeding. Several other parties have filed comments in support of, or in opposition to, the petition for reconsideration. The petition remains pending.
On January 24, 2024, the Board issued a decision adopting a final rule amending its emergency service regulations. The final rule clarifies that the Board may act on its own initiative to direct emergency service, modifies the procedures for petitioners seeking emergency relief, and establishes a new accelerated process for certain acute emergencies.
Under 49 U.S.C. § 11123(a), the Board may issue an emergency service order when it determines that there exists an emergency situation of such magnitude as to have substantial adverse effects on shippers, or on rail service in a region of the United States, or that a rail carrier cannot transport the traffic offered to it in a manner that properly serves the public. When the Board determines that such a situation exists, it may (1) direct the handling, routing, and movement of the traffic of a rail carrier and its distribution over its own or other railroad lines; (2) require joint or common use of railroad facilities; (3) prescribe temporary through routes; and (4) give directions for a preference or priority in transportation, embargoes, or movement of traffic under permits. If the service failure is caused by a cessation of service by Amtrak, the Board may direct the continuation of operations and related functions. Board orders under 49 U.S.C. § 11123 are subject to an initial time limit of 30 days but may be extended up to an additional 240 days if the Board finds that emergency conditions continue to exist. Under the current regulations at 49 C.F.R. § 1146.1(a), a petitioner seeking relief must show a substantial, measurable deterioration or other demonstrated inadequacy in rail service by the incumbent carrier over an identified period of time.
On April 22, 2022, the Board issued a notice of proposed rulemaking (NPRM), proposing to amend its emergency service regulations by: “(1) modifying the procedures for parties seeking a Board order directing an incumbent carrier to take action to remedy a service emergency, (2) indicating that the Board may act on its own initiative to direct emergency service, (3) modifying the informational requirements for parties in emergency service proceedings, (4) shortening the filing deadlines in emergency service proceedings and establishing a timeframe for Board decisions, and (5) establishing an accelerated process for certain acute service emergencies.”
The final rule clarifies that, in prescribing alternative rail service or directed action by an incumbent carrier, the Board may act on its own initiative or pursuant to a petition. The final rule also modifies the procedures for parties seeking a Board order for emergency service. In particular, petitioners will no longer be required to demonstrate an advance commitment from an alternative carrier to provide service. Instead, petitioners may submit a list of possible alternative carriers, based on the petitioner’s understanding of other rail carriers’ nearby operations. Additionally, the final rule shortens the filing deadlines for replies and rebuttals. The revised regulations state that the Board will endeavor to issue its decision within five business days after receiving the rebuttal or the rebuttal deadline.
Furthermore, the final rule establishes a new accelerated process in 49 C.F.R. § 1146.2 for certain acute service emergencies presenting potential imminent harm and threatening potentially severe adverse consequences to the petitioner, its customers, or the public. Petitioners seeking relief through this accelerated process must first seek, in good faith, to resolve its service issue through an informal dispute resolution process. Under the revised regulations, such emergencies exist when there is a clear and present threat to public health, safety, national defense, or food security, or a high probability of business closures or immediate plant shutdowns. The timing of potential harm and consequences must render potential relief under § 1146.1 ineffective. After a petition is received, a telephonic or virtual conference led by Board staff will be held, between 24-28 hours after receipt of the filing, with the petitioner, incumbent carrier, any proposed potential alternative carriers, and any other required parties. The Board will endeavor to issue an initial decision within three business days of the conclusion of the conference. Any relief ordered will not extend beyond 20 days. Subsequent relief may be requested under § 1146.1. Parties may petition the Board for reconsideration, and such petitions will be subject to § 1115.3.
The final rule became effective on February 23, 2024.
On January 29, 2024, the Board issued a decision finding that Wisconsin Central, Ltd.’s (CN) proposal to unilaterally designate the Belt Railway of Chicago’s Clearing Yard as the location where it will receive traffic in interchange from Soo Line Railroad Company (CP) is inconsistent with the reasonableness requirement of 49 U.S.C. § 10742.
This proceeding stems from a petition for declaratory order filed by CN on April 14, 2020, regarding a disagreement with CP involving interchange operations in the Chicago area between the two carriers. CN asked the Board to decide whether CN has the right to designate Clearing Yard, owned by the Belt Railway of Chicago (BRC), as the point at which CN will receive interchange traffic from CP, and whether each railroad must bear its own costs for the interchange of that traffic, including BRC’s fees for switching services.
On October 30, 2020, the Board issued a declaratory order finding that CN cannot unilaterally designate BRC’s Clearing Yard as the interchange point for inbound CP traffic. The Board concluded that, in the absence of a physical interchange, there was nothing for the Board to decide regarding how cars should be exchanged between CN and CP under 49 U.S.C. § 10742. The Board stated that, since a receiving carrier does not have an obligation under § 10742 to provide interchange facilities in the absence of a physical intersection, “it follows that there is no corresponding right to unilaterally designate any interchange location with non-intersecting carriers.” The Board also concluded that it did not need to decide whether each railroad must bear its own costs for interchanging traffic at Clearing Yard.
On January 7, 2021, the Board issued a decision providing notice that a court action was instituted by CN on December 23, 2020 in the United States Court of Appeals for the Seventh Circuit. On December 8, 2021, the Seventh Circuit vacated the Board’s October 30, 2020 decision and remanded the matter to the Board. The court stated that, “[i]f the parties cannot agree about where to exchange traffic, three distinct questions could require resolution: (1) may the receiving carrier ever designate a willing third party to receive traffic on its behalf?; (2) if yes, is the proposed location for interchange ‘reasonable’ . . . compared with the place where switching otherwise would occur?; (3) if yes to both of these questions, who pays the third party?” The court found that the Board erred “[b]y mixing these up, and smuggling an assumption about the answer to Question 3 into its decision about Question 1.” The court further noted that “this fight is principally about who should bear the cost of Belt Railway’s services, but the Board did not resolve that dispute.”
On February 2, 2022, CN filed a post-remand brief, “arguing that the sole remaining issue in the case is whether CP should be required to pay BRC’s switching fees for interchange traffic that CP will deliver to Clearing Yard.” CP moved to strike CN’s brief on February 14, 2022, arguing that “the Board has not directed the parties to file post-remand briefs, and it is for the Board, not CN, to decide what procedures to follow on remand.” CP filed a reply to CN’s post-remand brief on March 21, 2022. On April 20, 2022, CN filed a reply to CP’s reply, and CP subsequently asked the Board to reject CN’s reply. Additionally, the Commuter Rail Division of the Regional Transportation Authority d/b/a Metra filed comments on April 25, 2022.
On October 19, 2022, the Board issued a decision denying CP’s request to strike CN’s post-remand brief and accepting all post-remand briefs and comments filed to date. The Board noted that it “does not have specific regulations or procedures for cases following a judicial remand.” The Board also stated that, “[g]iven the Seventh Circuit’s discussion of the Board’s reliance on agency precedent and industry practice[,] . . . a post-remand decision resolving the dispute between CN and CP has the potential to significantly alter such precedent and practices regarding the interchange of rail traffic.” Thus, the Board stated that since its resulting interpretation of § 10702 “could have wide-reaching consequences for the rail industry, the Board [was] soliciting input from stakeholders and other interested persons.”
The Board received comments from CN, CP, BNSF, NSR, the Freight Rail Customer Alliance, and the American Short Line and Regional Railroad Association (ASLRRA). CP, BNSF, and NSR argued that the court’s decision was narrow, and, together with ASLRRA, these parties further asserted that: “(1) in determining whether an interchange location is ‘reasonable,’ it is relevant to consider the associated costs to the delivering carrier; and (2) a receiving carrier generally should not be permitted to unilaterally designate an interchange location on a third party’s line and require the delivering carrier to bear the associated costs.”
The Board subsequently provided CN and CP the opportunity to file post-comment initial briefs and replies. CN argued, in part, that the court determined that § 10742 allows CN to designate a willing third party to receive interchange traffic on its behalf, and that CP waived the question of whether Clearing is a “reasonable” interchange location because it failed to raise that issue during the Board proceedings prior to remand. CP disagreed, arguing that “the court’s decision was narrow and held only that a receiving carrier can have the ‘power to provide’ interchange facilities via a contractual arrangement with a third party” and further noting that it had not waived the issue of whether Clearing is “reasonable.” In reply, CN argued that, to the extent CP did not waive the reasonableness issue, the Board should find that Clearing is a reasonable interchange point.
In the Board’s January 29, 2024 decision, the Board disagreed with CN’s argument that the Board should not consider the issue of reasonableness and stated that the only question addressed in its decision is whether CN’s proposed designation of interchange facilities, which includes a requirement that CP pay all the BRC fees for delivery, is consistent with the requirements of § 10742.
The Board considered five factors in assessing reasonableness: (1) local operational concerns, (2) costs imposed on the parties, (3) the parties’ past practices and representations, (4) industry practice, and (5) the implications for the national network. The Board concluded that a majority of the factors weighed against the reasonableness of CN’s proposal to require CP to interchange at Clearing under the conditions proposed by CN.
In support of its conclusion that CN’s proposal, as currently presented, is inconsistent with the reasonableness requirement of § 10742, the Board stated:
CN’s proposed designation would depart from the parties’ own past practice, industry practice, and CN’s prior claims regarding the benefits of removing traffic from Clearing. It also attempts unfairly to shift significant costs associated with interchange facilities—which, under § 10742, CN is obligated to provide—to obtain a benefit for CN, while also setting a precedent that is likely to have detrimental effects on the national network.
The Board further noted, however, that the decision “does not speak to the merits of any alternative arrangement for interchanging traffic at Clearing (e.g., one that involves a different percentage allocation of the BRC fees—a change that could affect the reasonableness of the proposed interchange location).”
