Proposed Rule2022-07349
Petition for Rulemaking To Adopt Rules Governing Private Railcar Use by Railroads
Primary source
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Published
April 7, 2022
Effective
June 30, 2022
Issuing agencies
Surface Transportation Board
Abstract
The Board seeks public comment on a petition by the North America Freight Car Association, The National Grain and Feed Association, The Chlorine Institute, and The National Oilseed Processors Association to adopt regulations governing railroads' use of private freight cars and several specific related issues.
Full Text
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<title>Federal Register, Volume 87 Issue 67 (Thursday, April 7, 2022)</title>
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[Federal Register Volume 87, Number 67 (Thursday, April 7, 2022)]
[Proposed Rules]
[Pages 20370-20374]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-07349]
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SURFACE TRANSPORTATION BOARD
49 CFR Chapter X
[Docket No. EP 768]
Petition for Rulemaking To Adopt Rules Governing Private Railcar
Use by Railroads
AGENCY: Surface Transportation Board.
[[Page 20371]]
ACTION: Petition for rulemaking.
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SUMMARY: The Board seeks public comment on a petition by the North
America Freight Car Association, The National Grain and Feed
Association, The Chlorine Institute, and The National Oilseed
Processors Association to adopt regulations governing railroads' use of
private freight cars and several specific related issues.
DATES: Comments are due by June 30, 2022; replies are due by August 1,
2022.
FOR FURTHER INFORMATION CONTACT: Amy Ziehm at (202) 245-0391.
Assistance for the hearing impaired is available through the Federal
Relay Service at (800) 877-8339.
SUPPLEMENTARY INFORMATION: On July 26, 2021, the North America Freight
Car Association (NAFCA), The National Grain and Feed Association
(NGFA), The Chlorine Institute (CI), and The National Oilseed
Processors Association (NOPA) (collectively, Petitioners) filed a joint
petition for rulemaking proposing that the Board adopt regulations
allowing private railcar providers \1\ to assess a ``private railcar
delay charge'' if railroads delay private freight cars beyond a
specified period of time. (Pet. 18.)
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\1\ Petitioners define a ``private railcar provider'' as ``a
shipper, receiver, or other party who owns or leases a private
railcar and provides it to a railroad for transportation.'' (Pet.
23.)
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Petitioners assert that the Board may adopt their proposed
regulations pursuant to its authority under 49 U.S.C. 11122(a)(2),
which provides that the Board's car service regulations may include, in
addition to the compensation to be paid, ``the other terms of any
arrangement for the use by a rail carrier of a locomotive, freight car,
or other vehicle not owned by the rail carrier using the locomotive,
freight car, or other vehicle, whether or not owned by another carrier,
shipper, or third person.''
After receiving a number of replies and notices of intent to
participate in response to the petition, the Board opened a proceeding
in this docket on November 23, 2021.
Background
Petitioners' Proposed Regulations. The regulations that Petitioners
propose would allow private railcar providers to assess a charge when a
private freight car does not move for more than 72 hours at any point
on a railroad's system between the time it is ``released for
transportation'' and the time it is ``either constructively placed or
actually placed at the private railcar provider's facility or
designated location.'' \2\ (Pet. 24.) Petitioners propose that Car
Location Message (CLM) Event Sighting Codes published by Railinc \3\
would be used to measure time, and charges would be assessed when the
``CLM location city of CLM Sighting Code has not changed for more than
[72] hours.'' (Id. at 18.) Petitioners suggest that the amount of the
charge would be equivalent to the greater of the carrier's applicable
demurrage or storage charge. (Id. at 24.) Charges would be assessed
unless ``the rail carrier demonstrates that it was not a cause of the
allowable transit idle time being exceeded despite exercising due
diligence.'' (Id.) Furthermore, carriers would be able to dispute the
amount of the charges in ``an appropriate proceeding in which the rail
carrier shall bear the burden of proof to demonstrate that the private
railcar delay charge is unreasonable and inappropriate.'' (Id.)
Petitioners also argue that the Board should explore monetary penalties
for noncompliance. (Id. at 17, 24.)
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\2\ Constructive placement occurs when a railcar is available
for delivery but cannot actually be placed at the receiver's
destination because of a condition attributable to the receiver,
such as lack of room on the tracks in the receiver's facility. See
Pol'y Statement on Demurrage & Accessorial Rules & Charges, EP 757,
slip op. at 8 n.22 (STB served Apr. 30, 2020).
\3\ Railinc, a subsidiary of the Association of American
Railroads (AAR), provides rail data and messaging services to the
freight rail industry.
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Petitioners argue that their proposed regulations are necessary to
encourage the efficient use of private freight cars because carriers do
not presently have sufficient incentives to use private freight cars
efficiently. (Id. at 8-10.) Petitioners assert that there are no Board
regulations and few tariff provisions that provide such incentives.
(Id. at 9-10.) Petitioners also contend that carriers ``have little or
no commercial incentive (other than revenue generation)'' to use
private freight cars efficiently because most private railcar providers
do not have the necessary commercial strength to negotiate service-
standard contract provisions. (Id. at 11.) Moreover, petitioners argue
that the ``lack of clarity and guidance as to the definition of the
common carrier obligation, and the circumstances in which it is
considered violated'' deter private railcar providers from pursuing
formal complaints. (Id.) Petitioners contend that their proposal uses
``existing principles governing demurrage and accessorial charges'' to
incentivize carriers to use private freight cars more efficiently. (Id.
at 2.)
Petitioners also argue that their proposed regulations are
necessary to compensate private railcar providers for the costs they
incur when carriers use private freight cars inefficiently. (Id. at 12-
13.) Petitioners state that private freight cars comprise most of the
national fleet and that the costs of owning and maintaining private
freight cars have increased significantly over the past 10 years. (Id.
at 5-7.) Although Petitioners acknowledge that private railcar
providers receive compensation from carriers for the use of their
private freight cars, they argue that carriers' inefficient use of
private freight cars deprives them of the use of their assets and makes
it harder for them to earn a reasonable return on their investment.
(Id. at 2, 12-13, 20-21.) Petitioners offer examples of carriers'
inefficient use of private freight cars, including one in which a
shipper's private freight cars were held by Class I carriers for
periods of between eight and 61 days, as well as examples of the
resulting harm to private railcar providers, including one in which a
shipper incurred increased costs for trucks and special switches. (Id.
at 13-14.)
Replies. The Board received replies to the petition from AAR; CSX
Transportation, Inc. (CSXT); Union Pacific Railroad Company (UP); the
Institute for Scrap Recycling Industries, Inc. (ISRI); a group of
several shipper associations including the American Chemistry Council,
The Fertilizer Institute, and the National Industrial Transportation
League (collectively, Joint Shippers); the National Association of
Chemical Distributors (NACD); the National Coal Transportation
Association (NCTA); the Private Railcar Food and Beverage Association
(PRFBA); American Fuel & Petrochemical Manufacturers (AFPM); the
Freight Rail Customer Alliance (FRCA); and the Canadian Oilseed
Processors Association (COPA), as well as notices of intent to
participate from NGFA and the American Short Line and Regional Railroad
Association. AAR, CSXT, and UP oppose the petition, while ISRI, Joint
Shippers, NACD, NCTA, PRFBA, AFPM, FRCA, and COPA support it.
UP and AAR claim that the Board lacks the statutory authority under
Sec. 11122(a)(2) to adopt Petitioners' proposed regulations.\4\ (UP
Reply 2-3, Aug. 30, 2021; AAR Reply 3-6, Aug. 30, 2021.) UP argues that
the Board must ``disregard the reference to `freight cars' '' in the
current version of Sec. 11122(a)(2) because, prior to 1978, the
relevant part of this paragraph (allowing the agency to regulate ``the
other terms'' of arrangements) did not reference
[[Page 20372]]
freight cars specifically but rather only locomotives and other
vehicles.\5\ (UP Reply 2-3, Aug. 30, 2021.) UP contends that although
the current language of Sec. 11122(a)(2) may suggest a broader
authority to regulate arrangements for railroads' use of freight cars,
substantive differences between the two versions of the provision must
be resolved in favor of the pre-1978 Recodification statute because
Congress expressly indicated that the 1978 Recodification may not be
construed as making a substantive change to the existing laws. (UP
Reply 3, Aug. 30, 2021 (citing N. Am. Freight Car Ass'n v. Union Pac.
R.R., NOR 42144, slip op. at 5 (STB served Mar. 22, 2021).)
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\4\ CSXT states that it joins AAR's comments. (CSXT Reply 2.)
\5\ The predecessor to Sec. 11122(a) stated, in relevant part:
It is the intent of the Congress to encourage the purchase,
acquisition, and efficient utilization of freight cars. In order to
carry out such intent, the Commission may, upon complaint of an
interested party or upon its own initiative without complaint, and
after notice and an opportunity for a hearing, establish reasonable
rules, regulations, and practices with respect to car service by
common carriers by railroad subject to this part, including (i) the
compensation to be paid for the use of any locomotive, freight car,
or other vehicle, (ii) the other terms of any contract, agreement,
or arrangement for the use of any locomotive or other vehicle not
owned by the carrier by which it is used (and whether or not owned
by another carrier, shipper, or third party), and (iii) the
penalties or other sanctions for nonobservance of such rules,
regulations, or practices.
Railroad Revitalization and Regulatory Reform Act of 1976 (4R
Act), Public Law 94-210, 1(14)(a), 90 Stat. 31, 46-47. In 1978,
Congress recodified the Interstate Commerce Act, enacting it as
Title 49 of the U.S. Code, and stated that the agency's car service
regulations may include ``the other terms of any arrangement for the
use by a rail carrier of a locomotive, freight car, or other vehicle
not owned by the rail carrier using the locomotive, freight car, or
other vehicle, whether or not owned by another carrier, shipper, or
third person.'' Act of Oct. 17, 1978, Public Law 95-473,
11122(a)(2), 92 Stat. 1337, 1421-22 (1978 Recodification).
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AAR argues that the Board does not have the authority to adopt
Petitioners' proposed regulations under Sec. 11122(a)(2) because the
Board's authority to regulate car service does not extend to the
regulation of the transportation services railroads provide. (AAR Reply
4, Aug. 30, 2021.) In support, AAR cites to Peoria & Pekin Union
Railway v. United States, 263 U.S. 528 (1923), and Atchison, Topeka &
Santa Fe Railway v. ICC, 607 F.2d 1199 (7th Cir. 1979). (AAR Reply 4-5,
Aug. 30, 2021.) In Peoria, the Supreme Court found that the ICC could
not use its car service authority to require switching because the term
``car service'' means ``the use to which the vehicles of transportation
are put; not the transportation service rendered by means of them.''
Peoria, 263 U.S. at 533-35. Pursuant to this definition, the court in
Atchison determined that the ICC could not require tariff publication
of operating schedules under its car service authority because tariff
operating schedules were ``directly related to transportation service
and do not fall within the definition of car service.'' Atchison, 607
F.2d at 1205. According to AAR, Petitioners' proposal would regulate
transportation service because it would ``establish rigid standards
relating to the details of how railroads provide transportation during
the course of a car's movement across the network'' and essentially
establish ``transportation service guarantees under another name.''
(AAR Reply 3-4, Aug. 30, 2021.) Moreover, AAR contends that, although
the Board may establish regulations to ensure an adequate supply of
freight cars, Petitioners have not demonstrated that a freight car
shortage exists. (Id. at 5.)
AAR, CSXT, and UP additionally contend that Petitioners' proposed
regulations are unnecessary because (1) carriers already have ample
incentives to move private freight cars efficiently, as delays hinder
operations and reduce revenue, (CSXT Reply 3-4; UP Reply 7-8, Aug. 30,
2021; AAR Reply 8-9, Aug. 30, 2021); (2) a significant portion of
traffic moves under contract and would not be covered by Petitioners'
proposed regulations, (CSXT Reply 7); (3) no freight car shortage
exists justifying Board intervention, (UP Reply 4-6, Aug. 30, 2021; AAR
Reply 5, Aug. 30, 2021); (4) private railcar providers have other
avenues to pursue relief, such as through specific service commitments
in contracts and the complaint process, (UP Reply 10-11, Aug. 30,
2021); and (5) private freight car ownership already conveys benefits,
such as greater control over equipment and economic compensation from
carriers, (AAR Reply 7, 10, Aug. 30, 2021). They also argue that
Petitioners' proposed regulations will have a negative impact on the
efficiency of the rail network by incentivizing carriers to move cars
inefficiently to avoid the charges and by reducing cooperation between
carriers during periods of network stress. (CSXT Reply 6; UP Reply 9,
Aug. 30, 2021; AAR Reply 16, Aug. 30, 2021.)
Several respondents indicate that they support the petition because
Petitioners' proposed regulations would provide appropriate financial
incentives for Class I carriers to use private freight cars more
efficiently, (see, e.g., NCTA Comments 1-2; PRFBA Comments 1; FRCA
Comments 1), and offer reciprocity for demurrage charges (see, e.g.,
NACD Comments 1; AFPM Comments 2; COPA Comments 1-2). ISRI contends
that carriers have essentially forced scrap metal companies to lease or
own private freight cars after carriers reduced the number of system
cars available to scrap steel shippers and shifted those available
system cars to more profitable products. (ISRI Reply 5.) Joint Shippers
ask the Board to solicit comments on ways to achieve greater
reciprocity for the treatment of private freight cars during first-mile
and last-mile service,\6\ and on how Petitioners' proposed regulations
would be implemented, including whether carriers would be responsible
for monitoring railcar delays and crediting amounts owed under the
proposed regulations against their demurrage invoices. (Joint Shippers
Reply 3, 5.)
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\6\ ISRI states that it supports Joint Shippers' request for
comments on first-mile and last-mile service. (ISRI Comments 3.)
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On September 10, 2021, Petitioners submitted a surreply to the
replies, along with a motion for leave to file. Petitioners argue that
the cases cited by AAR cannot be analogized to their proposal because
Petitioners do not ``ask the Board to directly order the Railroads to
take any action regarding their provision of transportation services.''
(Petitioners Surreply 4.) Furthermore, Petitioners assert that UP's
argument contravenes the language of the 4R Act Sec. 1(14)(a), 90
Stat. at 46, in which Congress expressed the clear intent to
``encourage the purchase, acquisition, and efficient utilization of
freight cars'' and, ``[i]n order to carry out such intent,'' authorized
the agency to ``establish reasonable rules, regulations, and practices
with respect to car service.'' (Petitioners Surreply 5.) Petitioners
also contend that prior agency decisions have construed Sec. 11122(a)
as authorizing the regulation of the terms of railroads' use of freight
cars. (Pet. 15-17 (citing Shippers Comm., OT-5 v. Ann Arbor R.R., 5
I.C.C. 2d 856, 863-64 (1989) (determining, pursuant to Sec. 11122(a),
that carriers may not restrict the access of private freight cars
except under exceptional circumstances), aff'd sub nom. Shippers Comm.,
OT-5 v. ICC, 968 F.2d 75 (D.C. Cir. 1992); Petitioners Surreply 6.)
On September 23, 2021, AAR and UP submitted replies to Petitioners'
motion for leave. AAR contends that Petitioners' efforts to distinguish
Peoria and Atchison are unavailing since ``the proposed Board action
would dictate how railroads perform transportation services, namely
switching services.'' (AAR Reply 1-2, Sept. 23, 2021.) UP argues that
the Board should reject Petitioners' claim that the agency has
construed Sec. 11122(a) as allowing it to regulate the terms of
railroads' use of
[[Page 20373]]
freight cars. (UP Reply 1, Sept. 23, 2021.)
On November 23, 2021, the Board granted Petitioners' motion for
leave to file a surreply, opened a proceeding to consider Petitioners'
proposal, and stated that it would establish procedures for public
comment in a subsequent decision.
Request for Comments
The Board invites comment on the issues raised in the petition
generally as well as on the following specific questions:
1. Petitioners assert that the Board's current regulations and
policies do not create sufficient incentives for Class I carriers to
use private freight cars efficiently. (Pet. 2.) The Board invites
commenters to provide detailed, concrete examples of carriers'
inefficient use of private freight cars (i.e., the carriers and car
owners involved, relevant dates and times, etc.). They may also wish to
provide context for their comments by including information about the
quantity of private freight cars owned or leased, volume of traffic
shipped, storage capacity, and seasonality of shipments (if any). If
requested, a protective order may be issued that would allow sensitive
information to be filed under seal. In particular, the Board asks
commenters to address the following:
a. How frequently do carriers hold private freight cars for more
than 72 consecutive hours? The Board requests that commenters provide
supporting data on the frequency of this occurrence, where available.
b. To the extent known by the commenter, why do carriers hold
private freight cars for more than 72 consecutive hours?
c. To the extent known by the commenter, at which location(s) on
the rail system are private freight cars held for more than 72
consecutive hours?
d. How are rail users' operations, facilities, production, and/or
finances affected?
e. Has the frequency and severity of the issue changed with the
implementation of operating changes by Class I railroads?
2. UP asserts that Petitioners' proposed regulations are
unnecessary because private railcar providers have other avenues to
pursue relief, such as through specific service commitments in
contracts. (UP Reply 10-11, Aug. 30, 2021.) Do such contract service
commitments include similar terms to the regulations proposed by
Petitioners?
3. How, if at all, would Petitioners' proposal regulate ``car
service'' within the meaning of 49 U.S.C. 11122(a) by ``encourag[ing]
the purchase, acquisition, and efficient use of freight cars''?
a. The Board invites commenters to address AAR's argument that
Petitioners' proposal would regulate the ``transportation services''
that railroads provide, rather than ``car service'' within the meaning
of Sec. 11122(a). (See AAR Reply 3-6, Aug. 30, 2021.)
b. To what extent is a finding of inadequate car supply a
prerequisite for the Board to adopt Petitioners' proposed regulations?
c. Do rail users currently lack access to an adequate supply of
freight cars or anticipate a future freight car shortage?
i. If so, how would the proposed regulations help solve or mitigate
the issue? The Board requests that commenters provide supporting data
on any claim of a current or future inadequacy of car supply, where
available.
d. Petitioners contend that their proposed regulations would
``result in the national railcar fleet being of a more rational size to
utilize existing rail system capacity and meet demand.'' (Pet. 2.)
i. How would the proposed regulations lead to a more rationally
sized freight car fleet?
ii. How, if at all, would a more rationally sized freight car fleet
ensure an adequate supply of freight cars?
4. How would Petitioners' proposed regulations affect rail users
that do not use private freight cars? For example, CSXT, UP, and AAR
argue that Petitioners' proposed regulations would create incentives
for carriers to prioritize private freight cars to the disadvantage of
rail users that use railroad-owned freight cars. (CSXT Reply 2; UP
Reply 8 n.26, Aug. 30, 2021; AAR Reply 16, Aug. 30, 2021.)
5. Petitioners propose that charges would be assessed unless ``the
rail carrier demonstrates that it was not a cause of the [72 hours]
being exceeded despite exercising due diligence.'' (Pet. 24.)
a. In what kinds of circumstances should carriers be able to show
that they were not ``a cause'' of the 72 hours being exceeded?
b. What kind of actions should constitute ``due diligence''?
c. How would this standard account for the possibility raised by
AAR that carriers may hold private freight cars longer than 72
consecutive hours to improve the overall efficiency of the rail network
(i.e., to prevent congestion at terminals during times of peak demand
or to recover from network disruptions caused by weather events)? (See
AAR Reply 16, Aug. 30, 2021.)
d. How would this standard account for rail users' own car supply
decisions? For example, UP argues that Petitioners' proposed
regulations would ``incentivize shippers to acquire additional freight
cars and deploy them during service disruptions, despite their
potential to contribute to congestion problems.'' (UP Reply 13-14, Aug.
30, 2021.)
6. How would rail network efficiency be affected by the proposal?
a. The Board requests that commenters provide data, where
available, to support claims that the rail network would be more (or
less) efficient as a result of Petitioners' proposed rule.
b. Under Petitioners' approach, to what extent would carriers have
incentives to make potentially inefficient movements solely to avoid
charges? (See CSXT Reply 6; AAR Reply 16, Aug. 30, 2021; UP Reply 9,
Aug. 30, 2021.)
7. Under Petitioners' proposed regulations, private railcar
providers would be able to assess charges if the ``CLM location city of
CLM Sighting Code'' of a private freight car has not changed for more
than 72 consecutive hours. (Pet. 18.)
a. Why is 72 hours an appropriate timeframe and not, for example,
48 hours or 96 hours?
b. Why should charges be based on when cars are idle for more than
72 consecutive hours, as opposed to, for example, overall transit idle
times for the entire trip or when the placement of private freight cars
exceeds projected transit times?
c. Are CLM Event Sighting Codes a practical way to measure idle
time?
i. If not, what metric, if any, would be more useful as the basis
for assessing delay charges?
d. At what point should the timeframe begin (i.e., as soon as a
rail user releases a private freight car, when the carrier picks up the
private freight car, or some other point)?
i. And if the 72-hour timeframe begins when private freight cars
are released, how would this timeframe apply to rail users that receive
service only once or twice per week?
8. Petitioners' proposal contemplates that the amount of the
``private railcar delay charge'' would correspond to the carrier's
applicable demurrage or storage charge unless the carrier could
demonstrate that such a charge would be ``unreasonable and
inappropriate'' in a particular situation. (Pet. 24.)
a. Is it appropriate for the Board to equate the amount of the
``private railcar delay charge'' to a demurrage or storage charge in
most cases?
[[Page 20374]]
b. To what extent are there practical alternatives to equating
Petitioners' proposed ``private railcar delay charge'' to a demurrage
or storage charge and what are the merits of those alternatives?
9. Commenters should address the following questions about how the
regulations proposed by Petitioners would be implemented:
a. Which party would be responsible for tracking the CLM Event
Sighting Codes for private freight cars and invoicing in accordance
with the proposed regulations?
b. Joint Shippers suggest that the Board could require carriers to
credit charges against their demurrage invoices. (Joint Shippers Reply
5.) How would compensation be handled under this proposal for rail
users that do not incur demurrage charges or incur fewer charges than
would be owed pursuant to the proposed regulations?
10. Petitioners suggest that the proposed regulations should apply
only to Class I carriers. (Pet. 1-2.) How, if at all, would Class II
and Class III carriers be impacted by the proposed regulations, if
limited to Class I carriers?
Interested persons may file comments by June 30, 2022. Replies will
be due by August 1, 2022.
It is ordered:
1. Comments are due by June 30, 2022; replies are due by August 1,
2022.
2. Notice of this decision will be published in the Federal
Register.
3. This decision is effective on its service date.
Decided: April 1, 2022.
By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and
Schultz.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2022-07349 Filed 4-6-22; 8:45 am]
BILLING CODE 4915-01-P
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