E6-12433. Simplified Standards for Rail Rate Cases

AGENCY:

Surface Transportation Board, DOT.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Surface Transportation Board has instituted a proceeding to seek public comments on proposed changes to revise and clarify its guidelines for deciding small rate cases. In particular, the Board proposes to: create a simplified stand-alone cost (Simplified-SAC) method to be used in medium-size rate disputes for which a full stand-alone cost (Full-SAC) presentation would be too costly, given the value of the case; retain the Three-Benchmark method for small rate disputes for which a Simplified-SAC presentation would be too costly; and establish eligibility presumptions to distinguish between large, medium-size, and small rail rate disputes. These changes are intended to advance Congress' mandate to “establish a simplified and expedited method for determining the reasonableness of challenged rail rates in those cases in which a full SAC presentation is too costly, given the value of the case.” 49 U.S.C. 10701(d)(3).

DATES:

Notices of intent to participate are due on September 1, 2006. Comments are due on September 29, 2006. Replies are due on October 30, 2006. Rebuttals are due on December 1, 2006.

ADDRESSES:

All notices of intent to participate and comments may be submitted either via the Board's e-filing format or in the traditional paper format. Any person wishing to submit an e-filing should comply with the instructions found on the Board's http://www.stb.dot.gov Web site, at the “E-FILING” link. Any person submitting a filing in the traditional paper format should send an original and 20 paper copies of the filing (referring to STB Ex Parte No. 646 (Sub-No. 1)) to: Surface Transportation Board, 1925 K Street, NW., Washington, DC 20423-0001.

FOR FURTHER INFORMATION CONTACT:

Joseph Dettmar, 202-565-1609. [Assistance for the hearing impaired is available through the Federal Information Relay Service (FIRS) at 1-800-877-8339.]

SUPPLEMENTARY INFORMATION:

The Surface Transportation Board is instituting a proceeding to revise and clarify its guidelines for deciding small rate cases. The Board proposes a new methodology, Simplified-SAC, to be applied in medium-size rate cases. The Board also proposes to revise and clarify existing guidelines for deciding small rate cases and to establish new eligibility criteria for determining which cases would be considered under each of the three methodologies.

Simplified-SAC would provide an economical, streamlined methodology that nonetheless approximates the court-approved SAC method used in large rate cases. Simplified-SAC achieves this goal by using the framework of the Full-SAC methodology but eliminating or restricting evidentiary submissions on certain issues. For example, shippers, in constructing a stand-alone railroad (SARR) under Simplified-SAC, would generally use the existing facilities along the selected route of the movements at issue. The test year would be limited to one year, the traffic group would consist of the movements that traveled over the selected route in the test year, road property investment would be drawn from the Board's prior experience in Full-SAC cases, and operating expenses would be estimated using the uniform rail costing system (URCS). The case would be decided in 18 months from the filing of the complaint under a proposed three-phase procedural schedule. The Board also proposes new, standardized discovery procedures for cases under Simplified-SAC.

The existing methodology for small disputes, the Three-Benchmark standard, would be refined to eliminate uncertainties in how the methodology would be applied. The proposal would use final offer selection to choose between comparison traffic groups offered by the complainant and the defendant, and would use a single unadjusted Revenue Shortfall Allocation Methodology (RSAM) figure. This proposal would prescribe a specific formula for applying the benchmarks and would use unadjusted URCS to calculate variable costs. In addition, the Board proposes to adopt a tight procedural schedule for determining eligibility, resolving discovery disputes, and issuing a decision on the merits within 9 months of the filing of the complaint. The proposal would also streamline discovery, establish procedures for the release of certain waybill data, and modify the methods for computing two of the benchmarks by basing them on publicly available data.

New eligibility criteria for each methodology are proposed, based on the maximum value of the case, defined as the maximum relief the complainant could obtain over a 5-year period if the challenged rate were reduced to 180% of variable cost. A case with a maximum value exceeding $3.5 million would be presumed appropriate for handling under the Full-SAC methodology. For a case with a maximum value between $200,000 and $3.5 million, the complainant could use either the Full-SAC or Simplified-SAC methodology, but the Board would presume it could not use the Three-Benchmark methodology. A case with a maximum value of less than $200,000 would be eligible for handling under the Three-Benchmark methodology. These eligibility presumptions could be rebutted based on the likely actual (as opposed to maximum) value of the case.

Additional information is contained in the Board's decision served on July 28, 2006. To obtain a copy of the decision, visit the Board's Web site at http://www.stb.dot.gov.

Comments

The Board invites comments on the proposed revisions to the simplified standards and on the proposed regulations. Notices of intent to participate are due on September 1, 2006. Comments are due on September 29, 2006. Replies are due on October 30, 2006. Rebuttals are due on December 1, 2006. All comments must comply with the Board's requirements at 49 CFR part 1104. A service list will be available at the Board's Web site by September 15, 2006.

Regulatory Flexibility Analysis

This action will not have a significant economic impact upon a substantial number of small entities, within the meaning of the Regulatory Flexibility Act (5 U.S.C. 601 et seq.).

This action will not significantly affect either the quality of the human environment or the conservation of energy resources.

List of Subjects in 49 CFR Parts 1111, 1114, 1115, and 1244

• Administrative practice and procedure
• Railroads

Authority: 5 U.S.C. 553.

Decided: July 26, 2006.

By the Board, Chairman Buttrey and Vice Chairman Mulvey.

Vernon A. Williams,

Secretary.

For the reasons set forth in the decision, the Surface Transportation Board proposes to amend parts 1111, 1114, 1115 and 1244 of title 49, chapter X, of the Code of Federal Regulations as follows:

PART 1111—COMPLAINT AND INVESTIGATION PROCEDURES

1. The authority citation for part 1111 continues to read as follows:

Authority: 49 U.S.C. 721, 10704, and 11701.

2. Amend § 1111.1 as follows:

A. Revise paragraphs (a)(1) through (11).

B. Redesignate current paragraphs (b) through (d) as paragraphs (c) through (e).

C. Add new paragraph (b).

§ 1111.1

Content of formal complaints; joinder.

(a) * * *

(1) The carrier or region identifier.

(2) The type of shipment (local, received-terminated, etc.).

(3) The one-way distance of the shipment.

(4) The type of car (by URCS code).

(5) The number of cars.

(6) The car ownership (private or railroad).

(7) The commodity type (STCC code).

(8) The weight of the shipment (in tons per car).

(9) The type of movement (individual, multi-car, or unit train).

(10) A narrative addressing whether there is any feasible transportation alternative for the challenged movements.

(11) Evidence and argument on eligibility.

(b) Disclosure with simplified standards complaint. The complainant must provide to the respondent all documents relied upon in formulating its assessment of a feasible transportation alternative and all documents relied upon to determine the inputs to the URCS Phase III program.

* * * * *

3. Amend § 1111.4 as follows:

A. In paragraph (a), add a new sentence to the end of the paragraph.

B. Redesignate current paragraphs (b) through (d) as paragraphs (c) through (e).

C. Add new paragraph (b).

§ 1111.4

Answers and cross complaints.

* * * * *

(a) * * * In response to a complaint filed under the simplified standards, the answer must include the defendant's preliminary estimate of the variable cost of each challenged movement calculated using the unadjusted figures produced by the URCS Phase III program.

(b) Disclosure with simplified standards answer. The defendant must provide to the complainant all documents that it relied upon to determine the inputs used in the URCS Phase III program.

* * * * *

4. Revise § 1111.9 to read as follows:

§ 1111.9

Procedural schedule in cases using simplified standards

(a) Procedural schedule. Absent a specific order by the Board, the following general procedural schedules will apply in cases using the simplified standards:

(1) In cases relying upon the Simplified-SAC methodology:

Phase 1

Day 0—Complaint filed (including evidence and argument on eligibility and disclosure).

Day 20—Defendant's answer to complaint (including reply on eligibility and initial disclosure).

Day 30—Complainant's rebuttal on eligibility.

Day 50—Board decision on eligibility.

Phase 2

Day 50—Discovery begins.

Day 80—Complainant's opening evidence on selected route.

Day 100—Defendant's reply on selected route.

Day 110—Complainant's rebuttal on selected route.

Day 140—Staff decision on route.

Day 170—Defendant's second disclosure.

Day 180—Discovery closes.

Phase 3

Day 250—Opening evidence.

Day 310—Reply evidence.

Day 340—Rebuttal evidence

Day 350—Technical conference (market dominance and merits).

Day 360—Final briefs.

(2) In cases relying upon the Three-Benchmark method:

Phase 1

Day 0—Complaint filed (including evidence and argument on eligibility and complainant's disclosure).

Day 20—Defendant's answer to complaint (including reply on eligibility and initial disclosure).

Day 30—Complainant's rebuttal on eligibility.

Day 50—Board decision on eligibility.

Phase 2

Day 50—Board production of Waybill Sample to parties. Discovery commences.

Day 100—Discovery closes.

Phase 3

Day 120—Complainant's opening (initial tender of comparison group and opening evidence on market dominance). Defendant's opening (initial tender of comparison group).

Day 125—Technical conference on comparison group.

Day 150—Parties' final tenders on comparison group. Defendant's reply on market dominance.

Day 180—Parties' replies to final tenders. Complainant's rebuttal on market dominance.

(b) Defendant's Second Disclosure. In cases using the Simplified-SAC methodology, the defendant must make the following initial disclosures to the complainant by Day 170 of the procedural schedule.

(1) Identification of all traffic that moved over the routes replicated by the SARR in the Test Year.

(2) Information about those movements, in electronic format, aggregated by origin-destination pair and shipper, showing the origin, destination, volume, and total revenues from each movement.

(3) Total operating and equipment cost calculations for each of those movements, provided in electronic format.

(4) Revenue allocation for the on-SARR portion of each cross-over movement in the traffic group provided in electronic format.

(5) All workpapers and documentation necessary to support the calculations.

(c) Conferences with parties. The Board may convene a conference of the parties with Board staff to facilitate voluntary resolution of discovery disputes and to address technical issues that may arise.

5. Amend § 1111.10 as follows:

A. In paragraph (a), revise the first sentence.

B. In paragraph (b), revise the paragraph heading and first sentence.

§ 1111.10

Meeting to discuss procedural matters.

(a) Generally. In all complaint proceedings, other than those challenging the reasonableness of a rail rate based on stand-alone cost or the simplified standards, the parties shall meet, or discuss by telephone, discovery and procedural matters within 12 days after an answer to a complaint is filed. * * *

(b) Stand-alone cost or simplified standards complaints. In complaints challenging the reasonableness of a rail rate based on stand-alone cost or the simplified standards, the parties shall meet, or discuss by telephone, discovery and procedural matters within 7 days after an answer to a complaint is filed. * * *

PART 1114—EVIDENCE; DISCOVERY

6. The authority citation for part 1114 continues to read as follows:

Authority: 5 U.S.C. 559, 49 U.S.C. 721.

7. Amend § 1114.21 by adding new paragraph (a)(3) to read as follows:

§ 1114.21

Applicability; general provisions.

(a) * * *

(3) In cases using the simplified standards Three-Benchmark method, the number of discovery requests that either party can submit are limited as set forth in §§ 1114.22, 1114.26, and 1114.30, absent advance authorization from the Board.

* * * * *

8. Amend § 1114.22 by adding new paragraph (c) to read as follows:

§ 1114.22

Deposition.

* * * * *

(c) Limitation under simplified standards. In a case using the Three-Benchmark methodology, each party is limited to one deposition absent advance authorization from the Board.

9. Amend § 1114.26 by adding new paragraph (d) to read as follows:

§ 1114.26

Written interrogatories to parties.

* * * * *

(d) Limitation under simplified standards. In a case using the Three-Benchmark methodology, each party is limited to ten interrogatories (including subparts) absent advance authorization from the Board.

10. Amend § 1114.30 by adding new paragraph (c) to read as follows:

§ 1114.30

Production of documents and records and entry upon land for inspection and other purposes.

* * * * *

(c) Limitation under simplified standards. In a case using the Three-Benchmark methodology, each party is limited to ten document requests (including subparts) absent advance authorization from the Board.

11. Amend § 1114.31 by revising paragraphs (a)(1) through (4) to read as follows:

§ 1114.31

Failure to respond to discovery.

(a) * * *

(1) Reply to motion to compel generally. Except in rate cases to be considered under the stand-alone cost methodology or simplified standards, the time for filing a reply to a motion to compel is governed by 49 CFR 1104.13.

(2) Reply to motion to compel in stand-alone cost and simplified standards rate cases. A reply to a motion to compel must be filed with the Board within 10 days thereafter in a rate case to be considered under the stand-alone cost methodology or under the simplified standards.

(3) Conference with parties on motion to compel. Within 5 business days after the filing of a reply to a motion to compel in a rate case to be considered under the stand-alone cost methodology or under the simplified standards, Board staff may convene a conference with the parties to discuss the dispute, attempt to narrow the issues, and gather any further information needed to render a ruling.

(4) Ruling on motion to compel in stand-alone cost and simplified standards rate cases. Within 5 business days after a conference with the parties convened pursuant to paragraph (a)(3) of this section, the Secretary will issue a summary ruling on the motion to compel discovery. If no conference is convened, the Secretary will issue this summary ruling within 10 days after the filing of the reply to a motion to compel. Appeals of a Secretary's ruling will proceed under 49 CFR 1115.9, and the Board will attempt to rule on such appeals within 20 days after the filing of the reply to the appeal.

* * * * *

PART 1115—APPELLATE PROCEDURES

12. The authority citation for part 1115 continues to read as follows:

Authority: 5 U.S.C. 559, 49 U.S.C. 721.

13. Amend § 1115.9 by revising the first sentence of paragraph (b) to read as follows:

§ 1115.9

Interlocutory appeals.

* * * * *

(b) In stand-alone cost complaints or in cases filed under the simplified standards, any interlocutory appeal of a ruling shall be filed with the Board within three (3) business days of the ruling. * * *

* * * * *

PART 1244—WAYBILL ANALYSIS OF TRANSPORTATION OF PROPERTY-RAILROADS

13. The authority citation for part 1244 continues to read as follows:

Authority: 49 U.S.C. 721, 10707, 11144, 11145.

14. Amend § 1244.9 as follows:

A. Redesignate paragraph (b)(5) as (b)(6) and add new paragraph (b)(5).

B. In paragraph (c), remove the word “(b)(5)” and add, in its place, the word “(b)(6)”.

C. In paragraph (d) introductory text, remove the word “(b)(5)” and add, in its place, the word “(b)(6)”.

§ 1244.9

Procedures for the release of waybill data.

* * * * *

(b) * * *

(5) Transportation practitioners, consulting firms and law firms in simplified standards cases. Once the Board determines that a complainant is eligible to use the Three-Benchmark method, the Board, without any further request from the parties, would release all movements in the most recent Waybill Sample of the same 2-digit STCC code as the issue movement and with a revenue-to-variable cost ratio above 180%. Confidential contract rate information will be encrypted. A signed confidentiality agreement consistent with paragraph (b)(4)(v) of this section must accompany the parties' complaint and answer.

* * * * *