Reciprocal Switching
| Citation | 87 FR 62 |
| Record Number | 2021-28396 |
| Published date | 03 January 2022 |
| Court | Surface Transportation Board |
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Federal Register / Vol. 87, No. 1 / Monday, January 3, 2022 / Proposed Rules
1
The Board will provide additional instructions
and requirements for facility entry in a subsequent
decision. If the Board determines that the hearing
should be held virtually, either entirely or in part,
the Board will issue a subsequent decision by no
later than March 1, 2022, indicating whether that
is the case and containing registration instructions.
2
The proposed rule was published in the Federal
Register, 81 FR 51149 (Aug. 3, 2016).
information collection activities posted
at www.regulations.gov.
C
OLLECTION OF
I
NFORMATION
Information collection activity Estimated
number of
responses
Hours per
response
Total
estimated
burden hours
Estimated
total cost
LEA-level Maintenance of Equity Data Posting ............................................... 52 8.5 442 $23,900
LEA-level Maintenance of Equity Data Updates ............................................. 20 4.5 90 4,900
Annualized Total ....................................................................................... 72 ........................ 532 28,800
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Ian Rosenblum,
Deputy Assistant Secretary for Policy and
Programs, Delegated the authority to perform
the functions and duties of the Assistant
Secretary for Elementary and Secondary
Education.
[FR Doc. 2021–28376 Filed 12–30–21; 8:45 am]
BILLING CODE 4000–01–P
SURFACE TRANSPORTATION BOARD
49 CFR Parts 1144 and 1145
[Docket No. EP 711 (Sub-No. 1)]
Reciprocal Switching
AGENCY
: Surface Transportation Board.
ACTION
: Notification of public hearing.
SUMMARY
: The Surface Transportation
Board (Board) will hold a public hearing
on March 15 and 16, 2022, concerning
the reciprocal switching regulations it
proposed in this proceeding. The
hearing will be held in the Hearing
Room of the Board’s headquarters,
located at 395 E Street SW, Washington,
DC 20423–0001. All interested persons
are invited to appear. In addition, the
Board will pause the period for ex parte
discussions, beginning January 24, 2022,
and modify the instructions for ex parte
communications in this proceeding to
permit ex parte discussions with up to
two Board members in the same
meeting.
DATES
: The hearing will be held on
March 15 and 16, 2022, beginning at
9:30 a.m., in the Hearing Room of the
Board’s headquarters and will be open
for public observation.
1
The hearing
will be available for viewing on the
Board’s website. Any person wishing to
speak at the hearing should file with the
Board a notice of intent to participate
(identifying the party, proposed speaker,
and time requested) as soon as possible
but no later than January 27, 2022.
Written comments, including required
written testimony by hearing
participants, may be submitted by all
interested persons by February 14, 2022.
Hearing participants are required to
submit written testimony by February
14, 2022. Additionally, by the same
date, any interested person, including
those who will not appear at the
hearing, may submit written comments
addressing matters related to the
proceeding, including the areas of
interest identified below.
ADDRESSES
: All filings should be
submitted via e-filing on the Board’s
website at www.stb.gov. Filings will be
posted to the Board’s website and need
not be served on the other hearing
participants, written commenters, or
any other party to the proceeding.
FOR FURTHER INFORMATION CONTACT
:
Sarah Fancher at (202) 245–0355.
Assistance for the hearing impaired is
available through the Federal Relay
Service at (800) 877–8339.
SUPPLEMENTARY INFORMATION
: In
Reciprocal Switching (NPRM), EP 711
(Sub-No. 1) et al., (STB served July 27,
2016),
2
the Board proposed new
regulations under which the Board
would exercise its statutory authority to
require rail carriers to establish
switching arrangements in certain
circumstances. The Board received
numerous comments in response to the
proposal. In addition, Board members
have been participating in ex parte
meetings with interested persons, and
summaries of those meetings are posted
in the docket pursuant to the procedure
detailed in the NPRM. To allow
interested persons to submit testimony
to update the record, the Board will
hold a public hearing and invite
comments.
Background
Competitive access generally refers to
the ability of a shipper or a competitor
railroad to use the facilities or services
of an incumbent railroad to extend the
reach of the services provided by the
competitor railroad. The provisions of
49 U.S.C. 11102 and 10705 make three
competitive access remedies available to
shippers and carriers: The prescription
of through routes, terminal trackage
rights, and, as relevant here, reciprocal
switching. Under reciprocal switching,
an incumbent carrier transports a
shipper’s traffic to an interchange point,
where it switches the rail cars over to
the competing carrier. The competing
carrier pays the incumbent carrier a
switching fee for bringing or taking the
cars from the shipper’s facility to the
interchange point, or vice versa. The
switching fee is incorporated in some
manner into the competing carrier’s
total rate to the shipper. Reciprocal
switching thus enables a competing
carrier to offer its own single-line rate to
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49 CFR 1144 also contains the Board’s
regulations governing through routes under 49
U.S.C. 10705.
4
The Board’s current regulations in Part 1144
also state that ‘‘[t]he Board will not consider
product competition,’’ and, ‘‘[i]f a railroad wishes
to rely in any way on geographic competition, it
will have the burden of proving the existence of
effective geographic competition by clear and
convincing evidence.’’ 49 CFR 1144.2(b)(1)–(2). See
also NPRM, EP 711 (Sub-No. 1) et al., slip op. at
27.
5
The Board’s proposal left in place the Board’s
existing regulations that govern through routes. See
NPRM, EP 711 (Sub-No. 1) et al., slip op. at 26, 39–
40.
compete with the incumbent carrier’s
single-line rate, even if the competing
carrier’s lines do not physically reach a
shipper’s facility. NPRM, EP 711 (Sub-
No. 1) et al., slip op. at 2.
Reciprocal switching can occur as
part of a voluntary arrangement between
carriers, or it may be ordered by the
Board. Under section 11102, the Board
may require the establishment of a
switching arrangement when it finds
that the arrangement either (1) is
practicable and in the public interest, or
(2) is necessary to provide competitive
rail service. 49 U.S.C. 11102(c)(1).
Section 11102(c)(1) authorizes the Board
to establish the conditions of and
compensation for switching service if
the affected carriers cannot reach
agreement on those matters within a
reasonable period. The Board’s
implementation of section 11102 is
guided by the rail transportation policy
set forth in 49 U.S.C. 10101. See NPRM,
EP 711 (Sub-No. 1) et al., slip op. at 16.
The Board’s current regulations
governing reciprocal switching were
promulgated in 1985 by the Board’s
predecessor, the Interstate Commerce
Commission (ICC), see Intramodal Rail
Competition, 1 I.C.C.2d 822 (1985), aff’d
sub nom. Balt. Gas & Elec. v. United
States, 817 F.2d 108 (D.C. Cir. 1987),
and are codified at 49 CFR 1144.
3
The
regulations provide that reciprocal
switching would only be prescribed if
the agency determines that it ‘‘is
necessary to remedy or prevent an act
that is contrary to the competition
policies of 49 U.S.C. [§] 10101 or is
otherwise anticompetitive,’’ and
‘‘otherwise satisfies the criteria of . . .
[§] 11102(c).’’ 49 CFR 1144.2(a)(1). The
Board’s regulations also provide
relevant factors that the agency shall
consider in determining whether to
prescribe competitive access, along with
a ‘‘standing’’ requirement. 49 CFR
1144.2(a)(1)–(2). The regulations do not
address how the Board should establish
compensation for Board-ordered
switching when the carriers cannot
reach agreement within a reasonable
period.
4
In Midtec Paper Corp. v. Chicago &
North Western Transportation Co., 3
I.C.C.2d 171 (1986), the first case where
the ICC applied 49 CFR 1144.2, the
agency explained that the key issue
under its then-new regulations was
whether the incumbent railroad ‘‘has
engaged in or is likely to engage in
conduct that is contrary to the rail
transportation policy or is otherwise
anticompetitive.’’ Id. at 181. The ICC
further explained that it would find
anticompetitive behavior only when an
incumbent carrier had ‘‘used its market
power to extract unreasonable terms on
through movements’’ or ‘‘because of its
monopoly position . . . shown a
disregard for the shipper’s needs by
rendering inadequate service.’’ Id. The
agency’s competitive access regulations
have not changed substantively since
1985 and few requests for reciprocal
switching have been filed since then.
The Board proposed modified
regulations as set forth in the
NPRM.
5
NPRM, EP 711 (Sub-No. 1) et al.,
slip op. at 13–28. Under the Board’s
proposed regulations, there would be no
need to show anticompetitive conduct,
as had been required in the ICC’s Midtec
decision. Rather, under the Board’s
proposed regulations, the Board would
require the establishment of a switching
arrangement when the switching
arrangement either was practicable and
in the public interest or was necessary
to provide competitive rail service.
NPRM, EP 711 (Sub-No. 1) et al., slip op.
at 16.
In assessing whether a switching
arrangement would be practicable and
in the public interest under the
proposed regulations, the Board would
consider whether the benefits of a
proposed arrangement would outweigh
its potential detriments. In making that
determination, the Board would
consider all relevant factors, such as (1)
whether the arrangement would further
the rail transportation policies in 49
U.S.C. 10101; (2) the efficiency of the
proposed route; (3) whether the
arrangement would allow access to new
markets; (4) the impacts, if any, of the
arrangement on capital investment,
quality of service, and employees; (5)
the amount of traffic that would be
moved under the arrangement; and (6)
the impact, if any, of the arrangement on
the rail transportation network. NPRM,
EP 711 (Sub-No. 1) et al., slip op. at 18.
In assessing whether a reciprocal
switching arrangement would be
necessary to provide competitive rail
service, the Board would consider
whether intermodal and intramodal
competition were effective with respect
to the movements for which the
switching arrangement was sought. The
Board would evaluate the effectiveness
of competition using quantitative and
qualitative factors that the Board has
developed in the context of assessing
market dominance in rate challenges,
but it would not consider product
competition or geographic competition.
Id. at 27.
The Board’s proposed regulations also
state that reciprocal switching would
not be ordered, even if one or both of
the foregoing standards were met, if the
switching was not feasible, would be
unsafe, or would unduly hamper a
carrier’s ability to serve its customers.
As additional limitations, the Board
would require the establishment of a
switching arrangement only when (1)
the shipper or receiver was served by a
single Class I carrier; and (2) there was
or could be, within a reasonable
distance of the shipper or receiver’s
facilities, a working interchange
between the incumbent carrier and
another Class I rail carrier. Id. at 19–21.
The NPRM sought comments on two
alternatives regarding the compensation
the Board could impose for switching
service if the carriers could not agree
within a reasonable time period. Under
the first alternative, compensation
would be based on factors such as: (1)
The geography where the proposed
switch would occur; (2) the distance
between the shipper/receiver and the
proposed interchange; (3) the cost of the
service; (4) the capacity of the
interchange facility; and (5) other case-
specific factors. The NPRM asked for
comment on whether the agency should
also consider what have been referred to
as the incumbent carrier’s lost
contribution or opportunity costs.
Under the second alternative,
compensation would be based on the
cost of providing the service plus a fair
and reasonable return on the capital that
was used to provide the service,
analogous to the rental income that
applies when the Board orders a carrier
to provide trackage rights to another
carrier (the Board’s ‘‘SSW
methodology’’). (Id. at 25–26); see, e.g.,
New England Cent. R.R.—Trackage Rts.
Ord.—Pan Am S. LLC, FD 35842 (STB
served Oct. 31, 2017); St. Louis Sw.
Ry.—Trackage Rts. over Mo. Pac. R.R.—
Kan. City to St. Louis, 4 I.C.C.2d 668
(1987); St. Louis Sw. Ry.—Trackage Rts.
over Mo. Pac. R.R.—Kan. City to St.
Louis, 1 I.C.C.2d 776 (1984).
Overview of Comments
The NPRM generated divergent
responses, briefly described below, from
a variety of stakeholders.
Many of the comments address the
scope of the Board’s authority to
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A party must submit a summary of an ex parte
meeting it participated in within two business days
of the meeting, per the instructions set forth in the
NPRM. Should a party wish to reply to a meeting
summary, it must do so within the time period for
written comments, set out above. To ensure
adequate time for parties to consider ex parte
meeting summaries in advance of the deadline for
written comments, the Board expects that
summaries of meetings held between now and
January 21, 2022, will be posted to the docket
within five business days of submission, but not
later than February 4, 2022.
promulgate revised competitive access
regulations. Commenters who generally
support the proposed regulations assert
that the regulations are within the
Board’s statutory authority under 49
U.S.C. 11102(c). These commenters
argue that the showing of
anticompetitive conduct required in
Midtec is not required by statute, as
section 11102(c) establishes two bases
for reciprocal switching: When
‘‘practicable and in the public interest’’
or when ‘‘necessary to provide
competitive rail service.’’ These
commenters further argue that the
proposed regulations (1) would not
interfere with rail carriers’ ability to set
their own rates; and (2) would not
offend any statutory right to the long
haul, given that the statutory provision
that supports a carrier’s right to the long
haul (49 U.S.C. 10705) is expressly
conditioned by the Board’s authority to
require the establishment of switching
arrangements.
In contrast, commenters who
generally oppose the proposed
regulations assert that the regulations
would exceed the scope of the Board’s
statutory authority. These commenters
argue that Congress authorized the
Board to compel switching only upon a
showing of anticompetitive behavior
because railroads, as common carriers,
undertake investment and operational
responsibilities. These commenters
further argue that, in the absence of
anticompetitive behavior, the Board’s
order of a switching arrangement would
impermissibly interfere with both the
incumbent carrier’s right to the long
haul under section 10705 and carriers’
discretion to engage in differential
pricing, i.e., to charge rates that vary
according to the elasticity of a shipper’s
demand.
The same commenters assert that,
even if the proposed regulations fall
within the Board’s statutory authority,
they are misguided as a matter of policy
because they would drive rates down to
the point of undermining carriers’
ability to raise sufficient capital, thereby
threatening the ability of carriers to
make the investments necessary to
maintain and operate the rail network
efficiently and effectively. They also
argue that the proposed approach would
lead to switching arrangements that are
economically inefficient.
Commenters who generally support
the proposal counter that the proposed
regulations would substantially advance
the public interest. They argue that the
proposed regulations would: (1) Foster
competition among rail carriers at a time
when (due to mergers and acquisitions)
shippers’ rail transportation options are
limited; (2) limit the availability of
switching orders to certain locations
and certain conditions, such that the
current structure of the rail industry
would largely remain in place; and (3)
promote competition and efficiency in
the U.S. economy overall.
Many commenters urge the Board to
adopt revisions to the proposed
regulations. Some sought more specific
standards or thresholds for when the
Board would require the establishment
of a switching arrangement. Some
suggest expanding the availability of
Board-prescribed switching, for example
by making it available to shippers who
are served by more than one Class I
carrier, shippers who are served by
carriers other than Class I carriers, or
shippers who are seeking to switch to a
carrier other than a Class I carrier.
Several commenters urge the Board to
adopt streamlined procedures for
reviewing requests for switching
arrangements, while others offer
proposals on how to allocate the burden
of proof in switching proceedings.
In response to an invitation in the
NPRM, many commenters address what
would constitute a reasonable distance
between a shipper’s facilities and a
location where the Board could require
switching. Commenters who generally
support the proposed regulations
suggest that what constitutes a
reasonable distance should be liberally
construed. Some advocate a mileage-
based approach to determining a
reasonable distance. Others suggest that
what constitutes a reasonable distance
should turn on case-by-case operational
considerations, such as where a switch
could be accomplished effectively.
Commenters who generally oppose the
proposed regulations argue, in contrast,
that the Board’s authority to require the
establishment of switching
arrangements is limited to terminal
areas.
Also in response to an invitation in
the NPRM, many commenters address
how the Board should establish
compensation for switching if carriers
cannot reach agreement within a
reasonable time. Some commenters
assert that compensation should include
a contribution to the fixed and common
costs of the incumbent carrier’s network
that the carrier would have recouped
from the switching shipper. Other
commenters disagree, suggesting that
this approach would unreasonably
require a shipper to pay twice for
service. Most of these commenters assert
that compensation should be based on
the incumbent carrier’s fully allocated
cost of providing that service, including
a reasonable rate of return on the capital
that is used to provide the service.
Public Hearing
The Board will hold a public hearing
in this proceeding on March 15 and 16,
2022. Participants in the hearing may
address the issues described below and
any other matters relevant to this
proceeding. Hearing participants are
required to submit written testimony by
February 14, 2022.
Comments Requested
Since the issuance of the NPRM and
the Board’s receipt of written comments
and the occurrence of some of the ex
parte meetings, there have been
significant operational changes in and
affecting the freight rail industry. For
example, Class I carriers have changed
their means of designing rail service.
Commenters may have additional or
modified views on the effects and/or
need for the proposed regulations.
To ensure a full and updated record
in this proceeding, the Board invites
written comments on several broad
areas of interest. First, comments may
identify new developments (i.e.,
developments that have occurred since
the Board previously invited comments
in this proceeding) that a commenter
finds are relevant to a final decision in
this matter and address any change or
significant development in a
commenter’s views since the previous
round of comments. Second, comments
may address topics that were discussed
in ex parte communications that have
taken place since October 25, 2016, in
this proceeding.
6
Participants should
understand that the Board has reviewed
the comments filed to date, and that
repeating those same arguments in the
written comments is strongly
discouraged.
Written comments on these areas of
interest may be filed by any interested
person, regardless of intent to
participate at the hearing, by February
14, 2022. Those intending to participate
at the hearing may include in their
written testimony comments on the
issues raised above and any other
matters relevant to this proceeding.
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In 2018, the Board revised its regulations to
permit ex parte communications in informal
rulemaking proceedings pursuant to specified
procedures. See Ex Parte Commc’ns in Informal
Rulemaking Proc., EP 739 (STB served Feb. 28,
2018); 49 CFR 1102.2(g). However, those regulations
do not apply to informal rulemaking proceedings,
such as this one, that were initiated prior to April
4, 2018.
Pause of the Ex Parte Period and
Modification of the Ex Parte Waiver
As discussed in the NPRM, the Board
provided a limited waiver of the ex
parte prohibitions that otherwise apply
to this proceeding.
7
Many stakeholders
and interested persons have met with
Board members, and summaries of those
meetings are posted in the public
docket. Beginning January 24, 2022, the
Board will pause the scheduling of any
further ex parte communications until
the completion of the hearing set for
March 15–16, 2022. The period for
further ex parte communication will
resume following the hearing and will
close on April 6, 2022. Although
allowing for the resumption of ex parte
meetings will provide an opportunity
for hearing participants and other
interested persons to address any matter
that may remain to be addressed
following the hearing, all interested
persons should endeavor to make their
hearing presentations, both written and
oral, complete so that the hearing will
be as comprehensive as possible,
repetition can be avoided, and the
record in this matter can be closed
expeditiously.
The Board will also modify the
procedures for such ex parte
communications to allow ex parte
discussions with up to two Board
Members in the same meeting, with the
consent of the Board Members with
whom the meeting is requested. When
the NPRM was issued, the Board was
composed of three Board members, such
that two members constituted a
majority, which could have implications
under the Government in the Sunshine
Act, 5 U.S.C. 552b. Accordingly, the
NPRM specified that if a party wished
to meet with multiple Board members,
separate meetings must be scheduled.
NPRM, EP 711 (Sub-No. 1) et al., slip op.
at 29. Given that two members no longer
constitute a majority under the Board’s
current composition (and provided the
composition remains at no fewer than
four members), interested persons may
have ex parte discussions with up to
two members between now and the
closing of the period for ex parte
communications.
Board Releases and Transcript
Availability: Decisions and notices of
the Board, including this document, are
available on the Board’s website at
www.stb.gov. The Board will issue a
separate notice containing instructions
for attendance at the hearing and the
schedule of appearances. Once the
transcript is available, it will be posted
on the Board’s website.
It is ordered:
1. A public hearing will be held on
March 15 and 16, 2022, at 9:30 a.m., in
the Hearing Room of the Board’s
headquarters, located at 395 E Street
SW, Washington, DC 20423–0001.
2. The period for ex parte
communications in this proceeding will
be paused beginning January 24, 2022,
and will resume from March 17, 2022
until April 6, 2022.
3. By January 27, 2022, any person
wishing to speak at the hearing shall file
with the Board a notice of intent to
participate identifying the party, the
proposed speaker, and the time
requested.
4. Written testimony and written
comments shall be filed by February 14,
2022.
5. Filings will be posted to the Board’s
website and need not be served on any
hearing participants or other
commenters.
6. This decision is effective on its
service date.
7. This decision will be published in
the Federal Register.
Decided: December 27, 2021.
By the Board, Board Members Fuchs,
Oberman, Primus, and Schultz.
Kenyatta Clay,
Clearance Clerk.
[FR Doc. 2021–28396 Filed 12–30–21; 8:45 am]
BILLING CODE 4915–01–P
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