Offers of Financial Assistance, 30997-31008 [2017-14044]

Agencies

• Surface Transportation Board

[Federal Register Volume 82, Number 127 (Wednesday, July 5, 2017)]
[Rules and Regulations]
[Pages 30997-31008]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14044]


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SURFACE TRANSPORTATION BOARD

49 CFR Part 1152

[Docket No. EP 729]


Offers of Financial Assistance

AGENCY: Surface Transportation Board.

ACTION: Final rule.

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SUMMARY: The Surface Transportation Board (Board or STB) adopts changes 
to its rules pertaining to Offers of Financial Assistance to improve 
the process and protect it against abuse.

DATES: This rule is effective on July 29, 2017.

ADDRESSES: Information or questions regarding this final rule should 
reference Docket No. EP 729 and be in writing addressed to: Chief, 
Section of Administration, Office of Proceedings, Surface 
Transportation Board, 395 E Street SW., Washington, DC 20423-0001.

FOR FURTHER INFORMATION CONTACT: Jonathon Binet, (202) 245-0368. 
Assistance for the hearing impaired is available through the Federal 
Information Relay Service (FIRS) at (800) 877-8339.

SUPPLEMENTARY INFORMATION: In the ICC Termination Act of 1995, Public 
Law 104-88, 109 Stat. 803 (1995) (ICCTA), Congress revised the process 
for filing Offers of Financial Assistance (OFAs) for continued rail 
service, codified at 49 U.S.C. 10904. Under the OFA process, as 
implemented in the Board's regulations at 49 CFR 1152.27, financially 
responsible parties may offer to temporarily subsidize continued rail 
service over a line on which a carrier seeks to abandon or discontinue 
service, or offer to purchase a line and provide continued rail service 
on a line that a carrier seeks to abandon.
    Upon request, the abandoning or discontinuing carrier must provide 
certain information required under 49 U.S.C. 10904(b) and 49 CFR 
1152.27(a) to a party that is considering making an OFA. A party that 
decides to make an OFA (the offeror) must submit the OFA to the Board, 
including the information specified in 49 CFR 1152.27(c)(1)(ii). If the 
Board determines that the OFA is made by a ``financially responsible'' 
person, the abandonment or discontinuance authority is postponed to 
allow the parties to negotiate a sale or subsidy arrangement. 49 U.S.C. 
10904(d)(2); 49 CFR 1152.27(e). If the parties cannot agree to the 
terms of a sale or subsidy, they may request that the Board set binding 
terms under 49 U.S.C. 10904(f)(1). After the Board has set the terms, 
the offeror can accept the terms or withdraw the OFA. When the 
operation of a line is subsidized to prevent abandonment or 
discontinuance of service, it may only be subsidized for up to one 
year, unless the parties mutually agree otherwise. 49 U.S.C. 
10904(f)(4)(b). When a line is purchased pursuant to an OFA, the buyer 
must provide common carrier service over the line for a minimum of two 
years and may not resell the line (except to the carrier from which the 
line was purchased) for five years after the purchase. 49 U.S.C. 
10904(f)(4)(A); 49 CFR 1152.27(i)(2).
    On May 26, 2015, Norfolk Southern Railway Company (NSR) filed a 
petition to institute a rulemaking proceeding to address abuses of 
Board processes. In particular, NSR sought to have the Board establish 
new rules regarding the OFA process. NSR proposed that the Board 
establish new rules creating: A pre-approval process for filings 
submitted by parties deemed abusive filers; financial responsibility 
presumptions; and additional financial responsibility certifications. 
In a decision served on September 23, 2015, the Board denied NSR's 
petition, stating that the Board would instead seek to address the 
concerns raised in the petition through increased enforcement of 
existing rules and by instituting an Advance Notice of Proposed 
Rulemaking (ANPRM) to consider possible changes to the OFA process. 
Pet. of Norfolk S. Ry. to Institute a Rulemaking Proceeding to Address 
Abuses of Board Processes (NSR Petition), EP 727, slip op. at 4 (STB 
served Sept. 23, 2015).
    The Board issued an ANPRM on December 14, 2015. In that ANPRM, the 
Board explained that its experiences have shown that there are areas 
where clarifications and revisions could enhance the OFA process and 
protect it against abuse. Accordingly, the Board requested public 
comments on whether and how to improve any aspect of the OFA process, 
including enhancing its transparency and ensuring that it is invoked 
only to further its statutory purpose of preserving lines for continued 
rail service. The Board also specifically requested comments on: 
Ensuring offerors are financially responsible; addressing issues 
related to the continuation of rail service; and clarifying the 
identities of potential offerors.
    On September 30, 2016, the Board issued a Notice of Proposed 
Rulemaking (NPRM), addressing the comments on the ANPRM and proposing 
specific amendments to its regulations at 49 CFR 1152.27 based on those 
comments. The Board proposed four amendments intended to clarify the 
requirement that OFA offerors be financially responsible and to require 
offerors to provide additional evidence of financial responsibility to 
the Board; one amendment intended to require that potential offerors 
demonstrate the continued need for rail service over the

[[Page 30998]]

line sought to be acquired; and three amendments intended to clarify 
the identity of offerors in OFAs.
    The Board sought comments on the proposed regulations by December 
5, 2016, and replies by January 3, 2017. The Board received comments 
from six parties: The Association of American Railroads (AAR); the 
Army's Military Surface Deployment and Distribution Command (Army); the 
City of Jersey City, New Jersey (Jersey City); 212 Marin Boulevard, 
LLC, 247 Manila Avenue, LLC, 280 Erie Street, LLC, 317 Jersey Avenue, 
LLC, 354 Cole Street, LLC, 389 Monmouth Street, LLC, 415 Brunswick 
Street, LLC, and 446 Newark Avenue, LLC (filing collectively as the 
LLCs); NSR; and Mr. James Riffin (Riffin). AAR, the LLCs, and Jersey 
City also filed reply comments.
    Below the Board addresses the comments and suggestions submitted by 
parties in response to the NPRM, including discussion of clarifications 
and modifications being adopted in the final rule based on the 
comments. Even if not specifically discussed here, the Board has 
carefully reviewed all comments on the NPRM and has taken each comment 
into account in developing the final rule. The text of the final rule 
is below.
    Most parties commenting on the NPRM were supportive of the Board's 
proposals, suggesting certain modifications to and clarifications of 
the Board's proposals. (See Army NPRM Comments 1; Riffin NPRM Comments 
1; NSR NPRM Comments 9; AAR NPRM Comments 12; LLCs NPRM Comments 2.) 
One commenter suggested the changes proposed in the NPRM were 
insufficient to deter abuse of the OFA process and were ``misfocused.'' 
(See Jersey City NPRM Comments 2, 7-9.)
    Financial Responsibility. As noted, the Board made four proposals 
in the NPRM intended to clarify the requirement that OFA offerors be 
financially responsible and to require offerors to provide additional 
evidence of financial responsibility to the Board. First, the Board 
proposed to further define financial responsibility in its regulations 
by including examples of the kinds of evidence the Board would and 
would not accept to demonstrate financial responsibility. Second, the 
Board proposed to require notices of intent to file an OFA (NOIs) in 
all abandonment or discontinuance proceedings. Third, the Board 
proposed to require a showing of preliminary financial responsibility 
with the filing of an NOI, based on a calculation using the information 
contained in the carrier's filing and other publicly-available 
information. And fourth, the Board proposed to require an offeror to 
demonstrate in its OFA that the offeror has placed in escrow 10% of the 
preliminary financial responsibility amount calculated at the NOI 
stage.
    Examples of evidence of financial responsibility. In the NPRM, the 
Board proposed as examples of documentation that it would accept as 
evidence of financial responsibility at 49 CFR 1152.27(c)(1)(iv)(B) to 
include income statements, balance sheets, letters of credit, profit 
and loss statements, account statements, financing commitments, and 
evidence of adequate insurance or ability to obtain adequate insurance. 
Offers of Financial Assistance (NPRM), EP 729, slip op. at 14 (STB 
served Sept. 30, 2016). In response, Riffin commented that the Board 
should clarify that ``account statements'' means ``financial 
institution account statements,'' and that the Board should revise the 
proposed regulations to allow as evidence of financial responsibility 
lines of credit that provide ``access to cash upon demand,'' verified 
statements of the dollar value of cash, stocks and bonds, and 
``substantial quantities of precious metals.'' (Riffin NPRM Comments 1-
2.)
    The Board finds Riffin's suggested clarification of ``financial 
institution account statements'' is overly restrictive, as it is 
possible that potential offerors, particularly governmental offerors, 
may have funds in accounts other than financial institution accounts. 
Additionally, as stated in response to Riffin's comments on the ANPRM, 
the Board does not believe that some of the examples of the types of 
assets Riffin proposes to include in the regulations would sufficiently 
show an offeror's financial ability to purchase and operate, or 
subsidize, a railroad, which is the purpose of an OFA. See NPRM, EP 
729, slip op. at 3. Specifically, non-liquid assets (such as precious 
metals) and lines of credit that provide ``access to cash upon demand'' 
like credit cards are problematic as evidence of an offeror's 
continuing financial ability to actually operate or subsidize a rail 
line as the OFA process requires. Credit card lines of credit tend to 
be temporary and are for relatively limited amounts, while non-liquid 
assets are not easily accessible by an offeror and may fluctuate in 
value. By contrast, the examples of assets the Board is including in 
the regulations, such as income statements and letters of credit,\1\ do 
not suffer from these problems and provide evidence of an offeror's 
long-term and ongoing ability to finance the actual operation or 
subsidy of a rail line. The Board therefore declines to adopt Riffin's 
proposed changes.
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    \1\ A letter of credit from a bank functions more like a 
guarantee of payment for a specific purchasing transaction, while a 
line of credit (such as a credit card or home equity line) is a 
borrowing limit from a financial institution.
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    As for stocks and bonds, which are relatively liquid assets, we 
find that these may be presented by an offeror in conjunction with 
other evidence of financial responsibility, and will be considered by 
the Board on a case-by-case basis, as will evidence of cash on hand. 
Because these will be considered on a case-by-case basis the Board does 
not find it necessary to include these examples in the regulations.
    Notice of Intent filing. The Board proposed to require NOIs as a 
preliminary step in all OFA cases, with potential offerors being 
presumed preliminarily financially responsible if the Board does not 
issue a decision within 10 days of receiving an NOI. In response, AAR 
commented that the Board should require that a decision be issued on 
all NOIs, not just when the Board is rejecting an NOI or seeking more 
information. (AAR NPRM Comments 5.) AAR proposes that the Board could 
delegate the authority for issuing this decision to the Director of the 
Office of Proceedings and argues that a decision should be issued in 
all cases because ``the proposed rule would inappropriately create 
legal obligations on railroads [to provide valuation information] as a 
result of government inaction.'' (AAR NPRM Comments 5.) The LLCs 
commented in support of AAR's proposal. (LLCs NPRM Reply Comments 2.)
    The Board disagrees with AAR's characterization of this proposal as 
creating legal obligations on railroads because of government inaction. 
In fact, no additional obligation is created for carriers by this 
proposed change. Under 49 CFR 1152.27(a), carriers are currently 
required to provide certain valuation information ``promptly upon 
request'' to any party considering filing an OFA. The only requirement 
potential offerors must currently meet to obtain this information is to 
request it. The changes proposed in the NPRM that would apply to 
potential offerors would give the Board a basis on which to relieve 
railroads of their legal obligations to provide valuation information 
to potential offerors in certain cases. But the failure of the Board to 
issue a decision on the filing of an NOI would not impose on a railroad 
any burden it would not already have under the rules as they currently 
exist.
    The Board proposed those changes, which would require a potential 
offeror to make an initial showing of

[[Page 30999]]

preliminary financial responsibility before the carrier's obligation to 
turn over the valuation information outlined in section 1152.27(a) upon 
request is triggered, because the current approach requiring carriers 
to provide this information to any interested party upon request, is 
vulnerable to abuse and has led to significant delay in the past. 
Carriers receiving requests they do not believe to be legitimate have 
refused to respond, or only belatedly responded, to interested parties 
with the required information, delaying the OFA process. Those 
interested parties have then at times had to ask the Board to issue a 
decision requiring the carrier to provide the information, which 
requires the Board to adjudicate disputes about the legitimacy of a 
party's interest in an OFA at an early stage of the process. The new 
proposal should make this process more efficient and effective by 
requiring some initial information from potential offerors before 
carriers must provide them with valuation information, which in turn 
will encourage carriers to respond more promptly to requests for that 
information. Setting a defined time period after the filing of an NOI 
when the potential offeror is considered preliminarily financially 
responsible, rather than requiring the Board to issue a decision to 
that effect, is part of that efficiency. The Board does not agree that 
it is necessary for a decision to be issued in these instances, even if 
that authority were delegated, and therefore declines to impose such a 
requirement.
    Regarding the Board's proposed changes to the NOI process, Riffin 
suggested that the failure to file an NOI should not bar a timely OFA, 
arguing that restricting OFAs to entities that have filed timely NOIs 
would contravene the language of 49 U.S.C. 10904. Instead, Riffin 
suggested that NOIs should be optional in all cases, though he suggests 
that if a NOI is late-filed, the OFA filing deadline not be tolled. 
(Riffin NPRM Comments 2-3.) In response to this suggestion, AAR 
commented that Riffin's proposal would ignore the stated intent of the 
rulemaking and that the Board has authority to issue regulations 
consistent with the rail transportation policy (RTP) at 49 U.S.C. 
10101. (AAR NPRM Reply Comments 2-3.) Similarly, the LLCs commented 
that Riffin's approach would ``run directly counter to the purpose of 
avoiding abuse.'' (LLCs NPRM Reply Comments 7.)
    The Board does not believe Riffin's proposed changes to the NOI 
process are necessary, but instead agrees with AAR and the LLCs that 
adopting Riffin's proposed changes would be contrary to the purpose of 
this rulemaking. As discussed in the NPRM, the purpose of requiring 
NOIs in all cases is to make the OFA process more efficient by 
providing carriers with earlier notice that parties may be interested 
in purchasing or subsidizing service over rail lines that may otherwise 
be abandoned or discontinued and providing identifying information 
about those parties. See NPRM, EP 729, slip op at 15. Additionally, as 
AAR states, these new requirements would not contravene the language of 
49 U.S.C. 10904--nothing in that provision bars NOIs. In fact, the new 
requirements are consistent with the RTP. See, e.g., 49 U.S.C. 10101(2) 
(minimizing the need for federal regulatory control over the rail 
transportation system); 10101(3) (promoting a safe and efficient rail 
transportation system); 10101(4) (ensuring the development and 
continuation of a sound rail transportation system); 10101(9) 
(encouraging honest and efficient management of railroads).
    Preliminary showing of financial responsibility. In the NPRM, the 
Board proposed that a potential offeror be required to make a 
preliminary financial responsibility showing as part of the NOI, based 
on a calculation using information contained in the carrier's filing 
and publicly-available information. For a potential OFA to subsidize 
service, the Board proposed this calculation be a standard per-mile 
per-year maintenance cost, set by the Board at $4,000, multiplied by 
the length of the rail line in miles. For a potential OFA to purchase a 
line, the Board proposed this calculation be the sum of (a) the current 
rail steel scrap price per ton, multiplied by an assumed track weight 
of 132 tons-per-track-mile, multiplied by the total track length in 
miles, plus (b) the $4,000 minimum maintenance cost per mile described 
above, multiplied by the total track length in miles, multiplied by 
two, because an OFA purchaser is responsible for operating the acquired 
line for at least two years. Commenters generally supported the 
proposal to require this preliminary showing, while also suggesting 
some changes to the proposed calculations.
    Criticisms of, and suggested changes to, the formula. Riffin 
suggested several minor clarifications to the calculations. He 
suggested that the Board specify whether the Board intended long tons, 
short tons, or metric tons be used in the regulations. (Riffin NPRM 
Comments 3.) The calculation in the NPRM used a 2,000 pound per ton 
weight to convert 264,000 pounds to 132 tons, and thus the Board 
intended short tons to be used in the calculation. NPRM, EP 729, slip 
op at 17 n.8. However, the Board will clarify the regulations by 
modifying the language in 49 CFR 1152.27(c)(1)(ii), as shown below, to 
include a weight of rail in both short tons and long tons. This will 
allow a potential offeror to use either measurement in its calculation, 
depending on whether the scrap rail cost it uses, discussed further 
below, is in short tons or long tons.
    Riffin also commented that the final rule should address situations 
where there is no track left on a line subject to an OFA, suggesting 
that in such cases potential offerors should either calculate the track 
value at zero or show themselves financially responsible for 132 tons 
of track (i.e., that offerors show themselves financially responsible 
to acquire one mile of track). (Riffin NPRM Comments 3-4.) Riffin 
suggested the Board adopt the latter option, as he argues this would at 
least show that a potential offeror has sufficient funds to re-install 
some of the track infrastructure. (Riffin NPRM Comments 4.) Jersey City 
commented that, because the Board's formula assumes track exists, it is 
``wholly arbitrary'' in cases where railroads ``have engaged in illegal 
de facto abandonments.'' (Jersey City NPRM Comments 12.)
    The Board will clarify 49 CFR 1152.27(c)(1)(ii) to provide that the 
length of the line listed in the carrier's abandonment or 
discontinuance filing (or the length the potential offeror seeks to 
purchase, as discussed further below) should be used in the calculation 
in place of the actual length of track. This language is reflected in 
below. Because this preliminary calculation is intended to identify an 
estimated theoretical base cost to the potential offeror to subsidize 
or purchase and operate a rail line, using the length of the line is an 
appropriate and non-arbitrary way to address situations even where 
there is no track left on the line, because the purpose of an OFA is to 
enable the provision of rail service. A party that cannot make the 
preliminary financial responsibility showing discussed here would not 
be able to replace the missing track needed to provide rail service, 
thus defeating the purpose of an OFA. Moreover, the preliminary 
financial responsibility calculation is intended to be a conservative 
estimate of what financial resources may be necessary for an OFA, not a 
valuation of the line.
    Riffin further commented that the rule should address when a 
potential offeror does not want to subsidize or acquire the entire 
line. He suggests that, in such cases, offerors should calculate the 
track length that they wish to subsidize or acquire. (Riffin NPRM 
Comments 4.)

[[Page 31000]]

This is already allowed under the Board's regulations, and the changes 
to 49 CFR 1152.27(c)(1)(ii) proposed in the NPRM included a requirement 
that potential offerors demonstrate that they are financially 
responsible ``for the calculated preliminary financial responsibility 
amount of the rail line they seek to subsidize or purchase.'' However, 
as noted, the Board will further clarify here that when a potential 
offeror seeks to subsidize or acquire only a portion of the line (which 
the Board's regulations already permit), the offeror should use the 
length of line it seeks to acquire or subsidize in its preliminary 
financial responsibility calculation, rather than the length of the 
entire line subject to the proceeding. To further clarify this in the 
regulations, the Board will remove the word ``total'' from the 
description of the calculation contained in 49 CFR 1152.27(c)(1)(ii).
    Riffin also suggested that more clarity is needed regarding the 
steel prices to be used in the preliminary financial responsibility 
calculation, suggesting that the Board identify the specific Web sites 
the Board has in mind as sources of scrap steel prices, and that the 
Board indicate specifically the type of steel being priced, as there 
are multiple categories of scrap steel. (Riffin NPRM Comments 4.) 
Jersey City commented that its counsel is ``unaware of any reliable 
generally available sites on the web to price rail steel,'' and that, 
if the Board is going to adopt a requirement related to rail steel 
prices, it should publish its own steel price for purposes of this 
calculation, or identify acceptable Web sites and receive public 
comment on those Web sites. (Jersey City NPRM Comments 11.)
    The Board declines to publish its own steel price for purposes of 
this calculation, as this step is not necessary. A quote from a scrap 
dealer or a verified statement of a quote received telephonically, 
dated within 30 days of the submission of the notice of intent as 
required by this rule, would be acceptable sources for a scrap steel 
price for purposes of the preliminary calculation. If submitted as a 
verified statement, the potential offeror should describe the source of 
the quote, the price quoted, and the date of the conversation. In 
addition, though the Board does not endorse any specific Web site or 
source for scrap prices, there are both paid subscription services and 
free internet services that may also provide such prices.
    Regarding the type of steel being priced, the Board declines to 
more specifically identify the category of scrap steel that a potential 
offeror should use in its calculation beyond what is already in the 
regulations: Rail steel scrap. While there are multiple categories of 
scrap steel, different scrap dealers may use different classifications 
of the sub-categories of rail scrap steel. The Board declines to be 
more specific in order to allow a potential offeror to use the 
available sub-category of rail scrap steel it finds most appropriate. 
As noted, the Board has not devised the formula to be a precise 
calculation of the value of the track assets. Accordingly, it is not 
essential that the category of steel that is used in the calculation be 
any one specific sub-category.
    NSR and AAR both commented suggesting that the Board revise its 
proposed maintenance cost per mile and weight of rail in the 
preliminary calculation, respectively. NSR suggested that the Board 
should either evaluate current maintenance costs across the national 
rail system to determine a system-wide average, or use at least $5,000 
per mile, rather than the $4,000 proposed in the NPRM. (NSR NPRM 
Comments 3-4. See also AAR NPRM Comments 8 n.4 (suggesting that the 
Board's $4,000 proposed maintenance cost is below averages the Board 
has relied on in past proceedings).) NSR argues this is necessary ``so 
as not to unintentionally encourage parties that clearly lack the 
financial capabilities to consummate an OFA.'' NSR also commented that 
the Board should update the maintenance cost number annually for 
inflation. (NSR NPRM Comments 3-4.) AAR similarly suggested that the 
Board should modify the weight of the rail used in the calculation to 
115 pounds per yard (or 202.4 tons), which ``reflect[s] the predominant 
weight of rail currently in the national rail network and likely to be 
subject to the OFA process in the future.'' (AAR NPRM Comments 8-9.)
    The Board declines to adopt these suggestions. Using a system-wide 
average for either or both of the per-mile per-year maintenance cost or 
the weight of the rail in the preliminary calculations could result in 
an overstated preliminary financial responsibility amount in some 
cases. This is particularly likely for rail lines subject to 
discontinuance or abandonment, which often have not been regularly used 
or highly maintained due to low traffic volumes, and may be composed of 
older rail materials. As the Board stated in the NPRM, the purpose of 
this calculation is not to attempt to estimate the eventual offer price 
of the line, but to discourage abuse of the OFA process by requiring a 
reasonable initial showing of financial capacity and interest. See 
NPRM, EP 729, slip op. at 18. For similar reasons, the Board finds it 
unnecessary to update the maintenance cost number annually for 
inflation. This number is intended to be a simple number for potential 
offerors to input into the overall calculation to arrive at an 
intentionally low-end estimate of the financial resources needed to 
subsidize or acquire the line. Thus, indexing this number for inflation 
would needlessly complicate this early step of the OFA process. Rather 
than updating it annually for inflation, the Board will issue a 
decision updating this number as needed in the future to prevent abuse 
of this process.
    Jersey City asserted that the Board's formula for the preliminary 
financial responsibility calculation is ``totally arbitrary,'' arguing 
that there are many additional factors upon which salvage value 
depends, like transportation costs and the costs to remove bridges, 
that the Board has not considered in its proposed calculation, and that 
these factors also vary widely across the country. (Jersey City NPRM 
Comments 10.) Jersey City also argues that the proposed formula will 
``vastly overstate salvage value for any line that has substantial 
bridges,'' as bridges can be costlier to salvage than the value of the 
steel they contain. (Jersey City NPRM Comments 12.) The LLCs also 
suggested modifications to the formula, suggesting that the formula 
should be modified to include the estimated cost of replacing any rail 
or infrastructure that has been removed from the line, and that would 
be reasonably required to carry freight on the line. (LLCs NPRM 
Comments 3-4.)
    The Board declines to adopt these suggestions. As stated above, 
this calculation is not intended to result in an approximation of what 
an eventual offer will be, and it is not intended to consider every 
factor that may affect the cost of subsidizing or purchasing a line. 
Nor is it intended to identify the salvage cost of the line. The 
purpose of this calculation is to identify a conservative, low-end base 
number from which to determine a potential offeror's preliminary level 
of financial responsibility. As such, the Board believes this 
calculation properly balances the need to consider multiple factors 
with the need for a calculation simple enough that any potential 
offeror can participate in this process.
    Certification and retroactivity. The LLCs also suggested that the 
submitted cost calculation should be certified by a licensed 
professional engineer experienced in railroad construction and that the 
Board should include language in the regulations requiring the 
preliminary financial responsibility

[[Page 31001]]

showing to be made for all OFAs filed after the adoption of the rule, 
even if an NOI was filed prior to the adoption of the rule. (LLCs NPRM 
Comments 3, 5, 10-11.) The Board will not adopt either of these 
suggestions. The purpose of laying out a clear formula in the 
regulations and requiring a potential offeror to submit evidence 
supporting its calculation is to enable any potential offeror to use 
the formula to participate in the OFA process, and to allow the Board 
to easily assess the resulting calculation. Requiring a potential 
offeror to have its calculation certified by a licensed professional 
engineer experienced in railroad construction would unnecessarily 
complicate the preliminary financial responsibility process, with 
little benefit to the integrity of the process. Additionally, requiring 
the preliminary financial responsibility showing to be made for offers 
filed after the adoption of the rule, even where a NOI was filed before 
the adoption of the rule, would be inappropriate. The preliminary 
financial responsibility calculation is a change to the NOI stage of 
the OFA process, and the Board will not retroactively impose this new 
requirement on NOIs filed before the effective date of this rule.
    Escrow requirement. As noted, the Board proposed to require an 
offeror to demonstrate in its OFA that the offeror has placed in escrow 
10% of the preliminary financial responsibility amount calculated at 
the NOI stage. The Army commented that federal government entities 
should be exempt from this proposed requirement. (Army NPRM Comments 
1.) The Army argued that this requirement would be inordinately 
burdensome on government entities due to the appropriations process, 
and therefore suggests that section 1152.27(c)(iv)(D) apply only to an 
offeror that is a ``non-government entity.'' (Army NPRM Comments 3.) 
The LLCs, in response, argue that only federal government entities and 
state transportation agencies, not all governmental entities, should be 
exempt from the escrow requirement, because they are ``clearly 
responsible.'' (LLCs NPRM Reply Comments 6.) Jersey City also commented 
that ``it is difficult to understand what purpose [the escrow 
requirement] serves'' because it does not apply at the NOI stage, it is 
unlikely to deter abuse of the OFA process, and the Board's filing fees 
for OFAs are a more effective deterrent. (Jersey City NPRM Comments 12-
13). Jersey City also argued that state and local governments 
frequently have hearing and budgeting requirements that would prevent 
them from being able to comply with the escrow requirement within the 
required time frame. For these reasons, it argued that the escrow 
requirement should not apply to these entities. (Jersey City NPRM 
Comments 12-13. See also Jersey City NPRM Reply Comments 18.) In 
response, AAR argued that Jersey City's comments mischaracterize the 
proposed escrow requirement and that the requirement should apply to 
state and local government entities because many of them obtain waivers 
of the Board's filing fees, and thus those fees are not acting as 
deterrents for those entities. (AAR NPRM Reply Comments 4.)
    Upon review of the comments on the NPRM, the Board will exempt all 
governmental entities from the proposed escrow requirement, as 
reflected in the changes to 49 CFR 1152.27(c)(1)(iv)(D) in below. The 
Board agrees with the Army that this requirement is likely to be 
burdensome on the federal government because of the appropriations 
process, and the similar argument made by Jersey City that the hearing 
and budgeting requirements of state and local governments may cause 
this requirement to be unnecessarily burdensome on those entities as 
well. Additionally, the Board believes there is a low likelihood that 
this exclusion for governmental entities will lead to abuse because, as 
discussed in the NPRM, the presumption that governmental entities are 
financially responsible remains rebuttable, acting as a check on those 
entities. See NPRM, EP 729, slip op. at 5, 18. See also Ind. Sw. Ry.--
Aban. Exemption--in Posey & Vanderburgh Ctys., Ind. (Ind. Sw. Ry. Apr. 
2011), AB 1065X, slip op. at 5 (STB served Apr. 8, 2011) (finding 
government entity was not financially responsible, dismissing its OFA, 
and stating that the presumption that government entities are 
financially responsible, ``although entitled to significant weight, is 
not conclusive''). Accordingly, governmental entities will be required 
under this final rule to submit NOIs, but will not be required to 
complete the preliminary financial responsibility calculation or make 
the preliminary financial responsibility showing with an NOI, see NPRM, 
EP 729, slip op. at 5, 18, or submit evidence with their offer that 
they have placed 10% of that calculated preliminary financial 
responsibility amount in escrow.
    Additionally, the Board disagrees with Jersey City's statements 
that the escrow requirement is unlikely to deter abuse of the OFA 
process overall, and as discussed in the NPRM, the Board believes that 
this requirement allows an offeror to make a concrete showing that its 
offer and interest in a line are legitimate. See NPRM, EP 729, slip op. 
at 18.
    In addition to its other comments related to the escrow 
requirement, Jersey City also asserted that this requirement amounts to 
an effort to re-impose an arbitrary version of the ``bona fide'' 
requirement, a showing that used to be statutorily required but was 
removed by the passage of ICCTA. (Jersey City NPRM Reply Comments 18.) 
Under the bona fide requirement, the Board was required to find that an 
OFA was reasonable in relation to the likely value of the line, in 
addition to finding the offeror financially responsible. Contrary to 
Jersey City's assertion, the Board's escrow account proposal is not a 
re-imposition of that requirement. The Board is simply requiring an 
offeror to make a minimal showing of financial responsibility before 
initiating the OFA process. The Board clearly has authority under 49 
U.S.C. 1321(a) to issue regulations to administer the OFA process under 
49 U.S.C. 10904, including the requirement that an offeror be a 
``financially responsible person.'' As noted, the preliminary financial 
responsibility amount is likely to be less than the eventual offer. A 
party that cannot place even 10% of this already conservative amount in 
escrow at the OFA stage is, in the Board's view, not likely to be found 
a ``financially responsible person.'' Accordingly, the escrow 
requirement, along with the other requirements that will be implemented 
under this final rule, will ensure that the Board carries out the OFA 
process effectively and efficiently.
    Other Financial Responsibility Comments. In addition to responding 
to the specific proposals contained in the NPRM, commenters also 
suggested other changes to the Board's financial responsibility 
requirements. NSR proposed eliminating the presumption of financial 
responsibility that currently exists for state and municipal government 
entities. Instead, NSR proposes requiring those entities to satisfy the 
preliminary financial responsibility showing. (NSR NPRM Comments 2.) 
NSR argues that this would be appropriate because many municipalities 
have filed for bankruptcy since 2010, and that this would be a 
reasonable burden given that governmental entities would already be 
required to file NOIs and comply with the escrow requirement under this 
rule. (NSR NPRM Comments 5.) The LLCs also suggested the elimination of 
the presumption of financial responsibility for all government entities 
other than the federal government, state transportation agencies, and 
other government agencies ``specifically

[[Page 31002]]

created for the purpose of conducting rail freight operations.'' (LLCs 
NPRM Comments 6-7.) The LLCs suggest that these entities, along with 
providing evidence of financial responsibility, should be required to 
submit evidence of ``legal authorization to acquire the line, assume 
common carrier obligations, and available public financing for the 
specific operation and maintenance of any line'' sought to be acquired 
to ``weed out OFA abuse motivated by local political considerations and 
other improper motives.'' (LLCs NPRM Comments 7, 9.)
    The Board declines to eliminate the presumption of financial 
responsibility for governmental entities. As discussed above, carriers 
already have recourse in situations where governmental entities are not 
financially responsible in that the governmental entities' presumption 
is rebuttable. See Ind. Sw. Ry. Apr. 2011, AB 1065X, slip op. at 5 
(finding government entity was not financially responsible and 
dismissing its OFA). Moreover, situations such as the one that NSR and 
the LLCs are concerned about, in which the governmental entity turns 
out to not be financially responsible, are rare.\2\ Accordingly, it is 
appropriate to continue to address governmental entities that may not 
be financially responsible on a case-by-case basis. This final rule 
effectively balances the need for information about an offeror with the 
unique appropriations issues governmental entities may face in the OFA 
process.
---------------------------------------------------------------------------

    \2\ In addition, NSR's argument that requiring governmental 
entities to demonstrate that they are financial responsible is not 
burdensome because they must also comply with the Board's escrow 
account requirement is moot, given that the Board is also finding 
that governmental entities should be exempted from the escrow 
account requirement.
---------------------------------------------------------------------------

    The Board also declines to require governmental entities to provide 
evidence of the additional authorizations suggested by the LLCs. To the 
extent a governmental entity's legal authorization to submit an OFA is 
disputed, a party is free to raise that during the OFA process, at 
which point the Board would take that into consideration. However, the 
Board has not been presented on a regular basis with situations where 
governmental entities have filed OFAs yet lacked the proper authority 
to do so. The Board therefore does not find it necessary to have 
regulations specifically requiring these showings from governmental 
entities.
    The LLCs also proposed several changes to the offer stage of the 
process, including requiring offerors to identify all real property and 
other assets to be acquired from the carrier and any additional 
property or assets required to reinstitute rail service on the line. 
(LLCs NPRM Comments 11.) They also suggested that the Board include in 
the regulations a statement that the Board ``will not approve an offer 
that is contingent, or dependent for its implementation on the 
acquisition of property or other assets from anyone other than the 
applicant for abandonment without a clear showing that all steps 
necessary to provide rail service as a common carrier can be 
accomplished within a reasonable time.'' (LLCs NPRM Comments 11.) The 
LLCs argue that these additions are necessary ``to address the full 
scope of the [offeror's] proposal to provide rail service,'' and to 
make clear to offerors that OFA procedures are limited to the property 
and assets of the applicant for discontinuance or abandonment, and 
cannot be used ``to give an offeror more than can be obtained from the 
railroad seeking abandonment.'' (LLCs NPRM Comments 12.) The LLCs also 
suggest requiring an offeror (or in the case of a legal entity, an 
officer of the offeror with authority to bind the entity) to include in 
its offer a certification under penalty of perjury that the offer is 
made in good faith for the purpose of operating rail service on the 
line; that it is not made for any non-rail purpose; that the person 
certifying the offer is authorized to do so; and that the contents of 
the offer are true and correct. (LLCs NPRM Comments 12-13.)
    The Board does not find it necessary to adopt the LLCs' proposed 
changes to the offer process. With regard to requiring offerors to 
identify real property and other assets to be acquired from the 
applicant for discontinuance or abandonment, or to reinstitute rail 
service, any acquisition of assets other than the line itself is 
outside of the OFA purchase process, and thus would not properly be 
included in the Board's regulations. Additionally, the Board already 
has the authority to reject an OFA when an offeror fails to demonstrate 
its ability to provide rail service as part of the Board's 
determination of financial responsibility at the offer stage.\3\ 
Accordingly, the Board finds it unnecessary to include a requirement in 
these regulations that an offeror make a clear showing of its ability 
to complete all steps necessary to provide service, as the LLCs have 
suggested. The LLCs' suggested certifications to be included with an 
offer are also unnecessary. The Board's existing Rules of Practice 
direct ``all persons appearing in proceedings before it to conform, as 
nearly as possible, to the standards of ethical conduct required of 
practice before the courts of the United States.'' 49 CFR 1103.11 
(emphasis added). By presenting a pleading, written motion, or other 
paper to a federal court, and by extension, to the Board, ``an attorney 
or unrepresented party is certifying that to the best of the person's 
knowledge, information, and belief, formed after an inquiry reasonable 
under the circumstances,'' the document ``is not being presented for an 
improper purpose, such as to harass or to cause unnecessary delay or 
needless increase in the cost of litigation,'' and that the factual 
contentions contained therein ``have evidentiary support.'' See Fed. R. 
Civ. P. 11(b)(1), (3). The Board does not believe that requiring a 
separate certification as proposed by the LLCs would act as any more 
effective a deterrent for abuse of the OFA process than these existing 
requirements.
---------------------------------------------------------------------------

    \3\ Consol. Rail Corp.--Aban. Exemption--in Phila., Pa., AB 167 
(Sub-No. 1191X) et al., slip op. at 8 (STB served Oct. 26, 2012) 
(affirming Director's decision to reject an OFA because offeror did 
not have funds to both acquire the line and to rehabilitate the line 
and install safety equipment).
---------------------------------------------------------------------------

    In reply comments to the NPRM, AAR requested that the Board clarify 
that the preliminary financial responsibility requirement at the NOI 
stage is separate and distinct from the already existing financial 
responsibility determination at the offer stage. (AAR NPRM Reply 
Comments 3.) AAR made this request in response to a statement 
apparently made by Riffin in a court proceeding not involving the Board 
that

    the STB, in its EP 729 Decision, did not make it more difficult 
to prosecute an OFA in the 1189X proceeding [Consol. Rail Corp.--
Aban. Exemption--in Hudson Cty., N.J., Docket No. AB 167 (1189X) et 
al.]. The STB actually made it easier. (By eliminating its prior 
precedent requiring `operation' of a line for two years.) Now one 
only has to demonstrate the financial ability to maintain a line for 
two years, at the minimal cost of $4,000 a year per mile of line.\4\
---------------------------------------------------------------------------

    \4\ Jersey City provided this quotation but did not submit a 
copy of the court pleading it quotes from with its comments. Riffin 
did not respond to Jersey City's comments.

(Jersey City NPRM Comments 3-4.)
    Based on this alleged quote from a court filing by Riffin, he 
appears to be conflating the preliminary financial responsibility 
requirement with the existing requirement in 49 U.S.C. 10904(d) and 49 
CFR 1152.27(c)(1)(ii)(B) that an offeror be financially responsible for 
the full amount of its offer when it files an OFA. The Board clarifies 
here that the addition of the preliminary financial responsibility 
requirement to the Board's regulations does not eliminate or change the 
existing requirement at the OFA stage that an

[[Page 31003]]

offeror show themselves to be financially responsible for the full 
amount of its offer, and this final rule does not alter existing Board 
precedent regarding what constitutes financial responsibility or how 
the Board will evaluate an OFA after one is submitted.
    Continuation of Rail Service. In the NPRM, the Board proposed to 
codify prior precedent requiring all offerors to demonstrate the need 
for and feasibility of continued rail service on the line and proposed 
to list in the regulations the following four examples of how an 
offeror may demonstrate that need: (1) Evidence of a demonstrable 
commercial need for service (as reflected by support from shippers or 
receivers on the line or other evidence of an immediate and significant 
commercial need); (2) evidence of community support for continued rail 
service; (3) evidence that acquisition of freight operating rights 
would not interfere with current and planned transit services; and (4) 
evidence that continued service is operationally feasible. These 
criteria were laid out by the Board in Los Angeles County Metropolitan 
Transportation Authority--Abandonment Exemption--in Los Angeles County, 
California (LACMTA), AB 409 (Sub-No. 5X), slip op. at 3 (STB served 
June 16, 2008).
    In response to the Board's proposal, commenters expressed differing 
opinions about whether the Board should require all four elements of 
the LACMTA criteria to be met for offerors to make the showing of a 
continued need for rail service, or whether offerors should only be 
required to meet one element of the criteria. Riffin commented that the 
offerors should only be required to meet one of the four criteria, 
suggesting that the Board add language to the regulations ``to indicate 
that no one criteri[on] is dominant'' and that ``the STB will `balance' 
the four criteria.'' (Riffin NPRM Comments 5.) In response, the LLCs 
commented that ``satisfying only one criterion is a meaningless 
exercise.'' (LLCs NPRM Reply Comments 8.) Similarly, NSR commented that 
the Board should ``require offerors to satisfy the LACMTA criteria in 
full in order to demonstrate a continued need for rail service,'' 
arguing that the criteria ``are not meant to operate in a piecemeal 
fashion,'' and that ``it is only the sum of the LACMTA criteria that 
allows the STB to make a reasoned decision as to whether there is a 
continued need for rail service.'' (NSR NPRM Comments 6.) NSR, with the 
LLCs' support, also argues that ``the LACMTA criteria themselves are 
broadly worded to provide offerors with some degree of flexibility in 
what is required to demonstrate a continued need for rail service.'' 
(NSR NPRM Comments 6; LLCs NPRM Reply Comments 5.)
    Consistent with prior precedent, the Board's final rule will 
require that all offerors will be required to show a continued need for 
rail service. The criteria the Board laid out in LACMTA, AB 409 (Sub-
No. 5X), are included in the regulations as examples of the types of 
evidence that offerors should present to the Board to illustrate a 
continued need for rail service, not requirements. Offerors will not be 
strictly required to meet any one of (or all) the criteria to show a 
continued need for rail service. The LACMTA criteria are intended to 
provide guidance to offerors as to the types of evidence the Board will 
examine when considering this element of an OFA. Although the Board 
agrees with NSR and the LLCs that an OFA proponent must make a strong 
showing of need, in conducting this evaluation, the Board will look at 
the totality of the circumstances to determine whether there is a 
continued need for rail service on the line. Because the regulations 
the Board proposed in the NPRM already state that the LACMTA criteria 
are included as examples, NPRM, EP 729, slip op. at 26, additional 
changes to the regulations are not necessary.
    In the NPRM's discussion of this proposed requirement, the Board 
stated that ``where there has been no service for at least two years, 
an offeror would need to present concrete evidence of a continued need 
for rail service.'' NPRM, EP 729, slip op. at 19. AAR states that it 
understands this language to mean that there will be ``heightened 
scrutiny on claims that there is continued need for rail service in 
out-of-service exemption proceedings, not that particular and specific 
evidence would not be required in other proceedings,'' and suggests 
that the Board clarify that all offerors are required to show specific 
evidence of a continued need for rail service, not only offerors in two 
year out-of-service notice of exemption cases. (AAR NPRM Comments 6.) 
NSR also argued that the Board should clarify this statement by 
explicitly incorporating a heightened burden in the regulations for 
two-year out-of-service exemption proceedings. (NSR NPRM Comments 7.) 
The LLCs commented in support of NSR's proposal. (LLCs NPRM Reply 
Comments 5.)
    The Board declines to adopt NSR's suggestion of a higher standard 
for notice of exemption proceedings and clarifies that it will not 
apply a heightened scrutiny standard to the continuation of service 
element of OFAs in those proceedings. In making the statement that 
``where there has been no service for at least two years, an offeror 
would need to present concrete evidence of a continued need for rail 
service,'' the Board did not intend to imply a higher burden for notice 
of exemption proceedings or a lower burden for other proceedings. See 
NPRM, EP 729, slip op. at 19 (stating that ``the burden on the offeror 
to show the continued need for rail service would remain the same as in 
other proceedings.''). Rather, the Board simply intended to point out 
that an offeror is likely to have a more difficult time showing a 
continued need for service over a line where there has not been service 
in at least two years. All offerors in all OFA proceedings will be 
required to show specific and concrete evidence of a continued need for 
rail service to make the showing required by this rule, and in all 
proceedings the Board will consider the totality of circumstances in 
evaluating the evidence submitted by offerors.
    As with the escrow account requirement, Jersey City opposes the 
proposed requirement that offerors demonstrate a continued need for 
rail service generally, on the ground that this showing amounts to a 
requirement that OFAs be bona fide, which conflicts with Congress' 
intent in removing such a requirement in ICCTA. (Jersey City NPRM 
Comments 14.) AAR argues that Jersey City is confusing ``the 
requirement that an offer be for continued rail service'' with ``the 
requirement, omitted in [ICCTA] that the Board find an OFA to be bona 
fide before proceeding.'' (AAR NPRM Reply Comments 3.) The LLCs 
commented that Jersey City is incorrect in its assertion that the 
Board's proposal to require a showing of a continued need for rail 
service amounts to a bona fide requirement. (LLCs NPRM Reply Comments 
12-13.) The LLCs argue that in fact this proposal is consistent with 
current law and Board precedent. (LLCs NPRM Reply Comments 13-15.)
    As discussed above, existing Board precedent requires that an OFA 
be for continued rail service. See, e.g., LACMTA, AB 409 (Sub-No. 5X), 
slip op. at 3. The proposal in the NPRM did not create an additional 
requirement, but simply proposed to formally codify the existing 
continued-rail-service requirement in the Board's regulations, so that 
the Board can ensure that it is addressed in all OFAs. See NPRM, EP 
729, slip op. at 19. Additionally, although the Board, when it adopted 
regulations implementing ICCTA, indicated the statute as revised 
removed the requirement that an offer be ``bona fide,'' Aban. & 
Discontinuance of Rail Lines & Rail Transp. Under 49 U.S.C.

[[Page 31004]]

10903, EP 537, slip op. at 15 (STB served Dec. 24, 1996), the 
continued-rail-service requirement is consistent with the statute. 
Section 10904(b)(1) and (3) of title 49 require a carrier applying for 
abandonment or discontinuance authority to provide financial 
information to a potential offeror related to the continued operation 
of the line, and 49 U.S.C. 10904(d) requires an offeror to prove itself 
financially responsible for the amount of its offer, which under 49 
U.S.C. 10904(c) shall be based on the financial information provided by 
the carrier or shall explain the basis of any disparity between the 
offer and the information provided by the carrier. Indeed, after 
adopting its post-ICCTA regulations, the Board later concluded that an 
OFA nevertheless must be for continued rail service. Roaring Fork R.R. 
Holding Auth.--Aban.--in Garfield, Eagle, & Pitkin Ctys., Colo., AB 
547X, slip op. at 4 (STB served May 21, 1999) (finding that ``[t]he OFA 
process is designed for the purpose of continuing to provide freight 
rail service,'' and that ``an offeror must be able to demonstrate that 
its OFA is for continued rail freight service.''). That determination 
has been judicially affirmed. See, e.g., Kulmer v. STB, 236 F.3d 1255, 
1256-57 (10th Cir. 2001); Redmond-Issaquah R.R. Pres. Ass'n v. STB, 223 
F.3d 1057, 1061-63 (9th Cir. 2000). The Board therefore disagrees with 
Jersey City's assertion that this continued-rail-service requirement 
contravenes Congressional intent under ICCTA.
    Jersey City further commented that the requirement to show a 
continued need for rail service should not apply to OFAs filed by 
governmental entities. In particular, Jersey City argues that 
governmental entities should not be required to show non-interference 
with transit projects or community support, because ``[w]hen a 
government files an OFA, the OFA embodies the public project.'' (Jersey 
City NPRM Comments 14.) It also notes that the Board did not 
specifically identify any instances in which governmental entities have 
abused the OFA process. (Id.) Jersey City further argues that to apply 
the LACMTA criteria to governmental entities would also be a departure 
from previous Board precedent, because applying these criteria to 
governmental OFAs would ``amount to substituting the STB's planning 
judgments for those of local and state governments,'' even though the 
Board's predecessor, the Interstate Commerce Commission, stated in a 
1991 decision that it is not a planning agency. (Jersey City NPRM 
Comments 15-16.) Jersey City does, however, support ``requiring private 
parties invoking the OFA process to show an overriding freight rail 
need when their OFA will interfere with a public project of any sort.'' 
(Jersey City NPRM Comments 9.) AAR commented in response that Jersey 
City's statements that the NPRM amounts to substituting the Board's 
planning judgments for those of state and local governments are 
incorrect. (AAR NPRM Reply Comments 4.) Instead, AAR argues, ``the NPRM 
reflects the limited jurisdiction of the STB to impose restrictions on 
the use of private property by railroads.'' (AAR NPRM Reply Comments 
4.) The LLCs also commented in response to Jersey City that 
governmental entities should be required to make the showing of a 
continued need for service, and that the Board's proposal does not 
``usurp the function of local governments' control over land use 
matters.'' (LLCs NPRM Reply Comments 17.)
    The Board disagrees with Jersey City's suggestion that governmental 
entities should not be required to show a continued need for rail 
service because an OFA by a governmental entity ``embodies the public 
project.'' Congress did not give the Board unfettered authority in 
administering abandonments to force the sale of a rail line for any 
public purpose.\5\ The purpose of the OFA process is not to preserve 
rail corridors for any public use or to assist with non-rail public 
projects, but rather, as explained above, to ensure continued rail 
service.
---------------------------------------------------------------------------

    \5\ Indeed, even the Board's public use provision at 49 U.S.C. 
10905 does not provide for the forced sale of a rail line for non-
rail public purposes. Instead, that section contains a process by 
which an abandoning carrier can be required to postpone for 180 days 
disposal of the properties it seeks to abandon so that parties may 
negotiate with the carrier for the possible disposition of the 
property for some other public purpose.
---------------------------------------------------------------------------

    Nor is the Board persuaded by Jersey City's argument that to 
consider the LACMTA criteria when governmental entities file OFAs would 
be to substitute the Board's planning judgments for those of local 
governmental entities. The LACMTA criteria are not general planning 
criteria--they are all rail-oriented. As noted, the requirement that 
the OFA be for continued rail service already exists and has been 
judicially affirmed, and the LACMTA criteria are merely a means for the 
Board to determine if that standard has been met. Moreover, a 
determination by the Board regarding whether there is a need for 
continued rail service does not necessarily create a conflict with a 
local entity's planning; applying the LACMTA criteria when government 
entities file OFAs leaves the planning authority of state and local 
governmental entities intact but properly subject to Congress's terms 
for a forced sale under 49 U.S.C. 10904.
    The Board has authority under 49 U.S.C. 1321(a) to issue these 
regulations to carry out the OFA process. While Jersey City points out 
that the Board has not identified any instances in which governmental 
entities have abused the OFA process, it is not necessary for the Board 
to have done so to make these changes to our regulations. The purpose 
of this proceeding is not only to protect the OFA process from abuse, 
but, after 20 years of experience, to identify ways in which the Board 
can improve the OFA process. The Board believes the continued-rail-
service requirement, along with the other changes contained in this 
final rule, will improve the OFA process overall, including when the 
potential offeror is a governmental entity.
    Finally, Jersey City also commented that ``the showings that the 
agency proposes as a precondition for rail use appear all to deal 
solely with freight,'' which it argues is problematic because the 
proposed language does not acknowledge that the OFA process may be used 
for passenger rail purposes. (Jersey City NPRM Comments 17-18.) But as 
the Board discussed in the NPRM, `` `nothing in section 10904 precludes 
a line from being acquired under the OFA procedures to provide combined 
passenger/freight service and indeed there are situations where . . . 
it is the inclusion of passenger operations that would seem to make it 
financially viable for an operator to offer continued (or restored) 
freight service.' '' NPRM, EP 729, slip op. at 13, quoting Trinidad 
Ry.--Acquis. & Operation Exemption--in Las Animas Cty., Colo., AB 573X 
et al., slip op. at 8 (STB served Aug. 13, 2001). See also Union Pac. 
R.R.--Aban. Exemption--in Rio Grande & Mineral Ctys., Colo., AB 33 
(Sub-No. 132X), slip op. at 3 (STB served Apr. 22, 1999). Thus, as 
explained in these prior Board decisions, even if the OFA process is 
used primarily for passenger rail purposes, the carrier acquiring the 
line must still be willing to provide freight rail service over the 
line for two years. Moreover, as discussed above, the LACMTA criteria 
are included as examples of the types of evidence the Board will look 
for when considering the totality of the circumstances surrounding the 
continued need for rail service, not specific requirements; offerors 
will not be strictly required to meet any one of (or all) the criteria 
to show a continued need for rail service.
    Identity of the Offeror. The Board proposed to require an offeror 
or an

[[Page 31005]]

offeror's representative to provide a mailing address and other contact 
information, and to require an offeror that is a legal entity to 
provide its full legal name, state of organization or incorporation, 
and a description of the ownership of the entity. In addition, for 
multiple parties filing one OFA, the Board proposed requiring that the 
parties provide clear identification of which entity or individual 
would assume the common carrier obligation and clear identification of 
how the parties would allocate financing and, if purchased, the 
operation of the line.
    NSR expressed support for the Board's proposals to require this 
identifying information, saying that it is important for the Board and 
carriers receiving OFAs to be able to identify the party or parties 
involved. (NSR NPRM Comments 7.) The LLCs commented that, in addition 
to the information proposed in the NPRM, the Board should also require 
a legal entity to provide a certificate of good standing from its state 
of incorporation and, where necessary, a certification that it is 
authorized to do business in the state or states where the rail line 
subject to an OFA is located. (LLCs NPRM Reply Comments 2-3.) The 
Board's purpose for requiring the additional information proposed is to 
assist the Board and carriers in identifying the parties involved in an 
OFA. However, the Board believes that requiring certifications of good 
standing or authorizations to do business from an offeror would go 
beyond that purpose, and thus the Board will not adopt the LLCs' 
proposal here. To the extent that the LLCs are concerned about 
potential offerors being in good standing, these concerns should be 
addressed by the fact that the Board will now require potential 
offerors to demonstrate preliminary financial responsibility and a 
continued need for rail service.
    Other Comments. Parties also commented on other ways to prevent 
abuse of the OFA process, and on the OFA process and this proceeding 
generally. NSR commented that it continues to strongly support 
increased enforcement of 49 CFR 1104.8, which allows the Board to 
strike irrelevant or immaterial pleadings. (NSR NPRM Comments 1.) AAR 
similarly suggested that in addition to adopting the changes proposed 
in this proceeding the Board ``should also vigilantly enforce its 
existing rules to protect against abuse of the OFA process.'' (AAR NPRM 
Comments 12.) In denying NSR's 2015 petition to institute a rulemaking 
proceeding to address abuses of Board processes, the Board stated that, 
in addition to instituting this OFA rulemaking proceeding, it would 
increase enforcement of 49 CFR 1104.8. NSR Petition, EP 727, slip op. 
at 4. The Board has done so. See, e.g., Riffin--Pet. for Declaratory 
Order, FD 36078, slip op. 5 (STB served Apr. 27, 2017); Norfolk S. Ry. 
Co.--Acquis. & Operation--Certain Rail Lines of the Del. & Hudson Ry., 
FD 35873, slip op. at 5-6 (STB served Oct. 18, 2016); R. J. Corman 
R.R./Allentown Lines, Inc.--Aban. Exemption--in Lehigh Cty., Pa., AB 
550 (Sub-No. 3X), slip op. at 1-2 (STB served Nov. 25, 2015). The Board 
restated this commitment in the NPRM. NPRM, EP 729, slip op. at 9. In 
this decision, the Board again reiterates its commitment to increasing 
enforcement of 49 CFR 1104.8 to prevent abuse of the OFA process and 
the Board's processes generally.
    Jersey City commented that it believes the chief abuses of the OFA 
process are delay and the use of OFAs to prevent public projects. 
(Jersey City NPRM Reply Comments 8, 11.) With regard to delays in the 
OFA process, Jersey City argues that the proper remedy is ``for the 
agency to adhere to the statutory and regulatory deadlines.'' (Jersey 
City NPRM Comments 8. See also Jersey City NPRM Reply Comments 9.) 
Where delay is caused by railroads not making financial information 
promptly available to potential offerors, Jersey City suggests the 
Board should consider sanctioning such carriers, ``including barring 
the carrier from relying on information it does not promptly provide, 
or dismissing the proceeding in appropriate cases.'' (Jersey City NPRM 
Reply Comments 11.)
    In addition, Jersey City suggests that the Board's focus in 
addressing abuse of the OFA process should be protecting public 
projects, even when those public projects are not rail projects. 
(Jersey City NPRM Comments 9.) Jersey City argues that ``the only real 
`abuse' of the OFA statute that merits examination for possible new 
regulations is situations in which this Board's OFA remedy is invoked 
to prevent or to inhibit a public project.'' (Jersey City NPRM Reply 
Comments 15.) Instead of the Board's proposed rule, Jersey City 
proposes that any offeror filing an OFA ``aimed at thwarting public 
projects'' should be required to show ``an overriding public need for 
rail service.'' (Jersey City NPRM Reply Comments 19. See also Jersey 
City NPRM Comments 14, 19.) In response to Jersey City's comments, AAR 
argues that ``states and municipalities have no right to railroad 
rights of way for public projects, absent a desire and ability to 
obtain the line for continued rail service.'' (AAR NPRM Reply Comments 
4.)
    The Board is aware that the OFA process has been inefficient in 
some past cases. The proposals adopted in this final rule and discussed 
above, however, are geared to address delays associated with the OFA 
process. For example, requiring all offerors to file NOIs and make a 
preliminary financial responsibility showing should prompt rail 
carriers to assemble and provide the required valuation information 
more quickly for OFAs. The Board notes, however, that the OFA process 
is intended to promote continued rail service. See Roaring Fork R.R. 
Holding Auth., AB 547X, slip op. at 4. See also Kulmer, 236 F.3d at 
1256-57; Redmond-Issaquah R.R. Preservation Ass'n, 223 F.3d at 1061-63. 
The Board, therefore, rejects Jersey City's repeated suggestion that 
the OFA process may be invoked for public projects unrelated to the 
continuation of rail service.
    To the extent that Jersey City is concerned that public projects 
may be thwarted by abuse of the OFA process, the regulations proposed 
here should help in that regard, as they will ensure that OFAs are 
being sought for a legitimate need for continued rail service and by 
parties that possess the means to acquire the line. However, to the 
extent Jersey City is arguing that even OFAs that do not abuse the 
process (i.e., OFAs intended for continued rail service) should not be 
able to thwart public projects, the Board rejects that argument. The 
aim of the OFA statute is to preserve rail service where possible, see 
Redmond-Issaquah R.R. Preservation Ass'n, 223 F.3d at 1061, and as a 
result, the Board will grant exemptions from the OFA provisions for a 
valid public purpose only when there is no overriding public need for 
continued freight rail service. See, e.g., Kessler v. STB, 635 F.3d 1, 
5 (D.C. Cir. 2011).\6\
---------------------------------------------------------------------------

    \6\ Accordingly, carriers that believe that an OFA would 
needlessly interfere with a public project can seek an OFA 
exemption, and, as the Board explained in the NPRM, it will address 
these requests on a case-by-case basis. See NPRM, EP 729, slip op. 
at 11.
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    In addition to its comments discussed above regarding the escrow 
requirement and the requirement to show a continued need for rail 
service, Jersey City also generally states throughout its comments that 
it believes the Board's proposals are ``difficult to square with past 
precedent,'' referring to ICCTA's removal of the requirement that an 
OFA be ``bona fide'' from 49 U.S.C. 10904. (Jersey City NPRM Comments 
5. See also Jersey City NPRM Reply Comments 4-7 (``Some of the 
proposals . . . appear to be outside the Board's power given 
Congressional omission of the bona fide

[[Page 31006]]

requirement.'').) Jersey City argues that ``the law has not changed to 
permit the agency as a general matter to apply new requirements to 
potential offerants wholesale.'' (Jersey City NPRM Comments 6.) As 
noted elsewhere in this final rule, contrary to Jersey City's 
assertion, the Board's proposals are not a re-imposition of the bona 
fide requirement, nor are they in conflict with Congressional intent 
under ICCTA. The Board has authority under 49 U.S.C. 1321(a) to issue 
regulations to carry out its statutory obligations, including its 
obligations to carry out the OFA process under 49 U.S.C. 10904. The 
requirements under this final rule will ensure that the Board can meet 
those obligations effectively and efficiently, and will ensure that 
OFAs are initiated for continued rail service--which is the statutory 
objective embodied in 49 U.S.C. 10904. Moreover, as discussed 
throughout this proceeding, the Board does not believe these changes to 
the regulations will be unnecessarily burdensome on potential 
participants in the OFA process. Rather, the Board believes that these 
requirements will benefit participants in the OFA process by improving 
the efficiency, transparency, and reliability of the OFA process.
    The final rule is set forth in full below. This action is 
categorically excluded from environmental review under 49 CFR 
1105.6(c).
    Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980 
(RFA), 5 U.S.C. 601-612, generally requires a description and analysis 
of new rules that would have a significant economic impact on a 
substantial number of small entities. In drafting a rule, an agency is 
required to: (1) Assess the effect that its regulation will have on 
small entities; (2) analyze effective alternatives that may minimize a 
regulation's impact; and (3) make the analysis available for public 
comment. Sections 601-604. In its final rule, the agency must either 
include a final regulatory flexibility analysis, section 603(a), or 
certify that the final rule would not have a ``significant impact on a 
substantial number of small entities.'' section 605(b). The impact must 
be a direct impact on small entities ``whose conduct is circumscribed 
or mandated'' by the rule. White Eagle Coop. v. Conner, 553 F.3d 467, 
480 (7th Cir. 2009).
    In the NPRM, the Board stated that it was possible that the 
proposed rule could have a significant economic impact on certain small 
entities,\7\ and issued an initial regulatory flexibility analysis 
(IRFA) and request for comments in order to explore further the impact, 
if any, of the proposed rule on small rail carriers. The Board did not 
receive any comments regarding the IRFA. The Board now publishes this 
final regulatory flexibility analysis.
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    \7\ Effective June 30, 2016, for the purpose of RFA analysis, 
the Board defines a ``small business'' as only including those rail 
carriers classified as Class III rail carriers under 49 CFR 1201.1-
1. See Small Entity Size Standards Under the Regulatory Flexibility 
Act, EP 719 (STB served June 30, 2016) (with Board Member Begeman 
dissenting). Class III carriers have annual operating revenues of 
$20 million or less in 1991 dollars, or $35,809,698 or less when 
adjusted for inflation using 2016 data. Class II rail carriers have 
annual operating revenues of less than $250 million in 1991 dollars 
or less than $447,621,226 when adjusted for inflation using 2016 
data. The Board calculates the revenue deflator factor annually and 
publishes the railroad revenue thresholds on its Web site. 49 CFR 
1201.1-1.
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    Description of the reasons why the action by the agency is being 
considered.
    On May 26, 2015, NSR filed a petition to institute a rulemaking 
proceeding to address abuses of Board processes. In a decision served 
on September 23, 2015, the Board denied NSR's petition but stated it 
would institute a separate rulemaking proceeding to examine the OFA 
process. On December 14, 2015, the Board instituted this proceeding, 
issuing an ANPRM requesting comments from the public and stating that, 
based on NSR's petition and on the Board's experiences with OFAs under 
49 U.S.C. 10904 (as revised by ICCTA in 1995), there are areas where 
clarifications and revisions to the Board's OFA process could enhance 
the process and protect it against abuse. On September 30, 2016, the 
Board issued an NPRM proposing specific changes to the OFA process. 
Those changes proposed in the NPRM, with the modifications discussed 
above, are adopted in this final rule.
    Succinct statement of the objectives of, and legal basis for, the 
final rule.
    The objectives of this rule are to revise the Board's outdated 
regulations regarding the OFA process and make changes to streamline 
the OFA process and protect it from abuse. The Board believes the 
changes detailed in this final rule achieve this by ensuring that 
parties that seek to acquire lines through the OFA process satisfy the 
requirement that they be ``financially responsible persons'' and that 
OFA sales promote the statutory purpose of preserving rail service. The 
legal basis for the final rule is 49 U.S.C. 1321.
    Description of, and, where feasible, an estimate of the number of 
small entities to which the final rule will apply.
    The rule will apply to all entities making OFAs to subsidize or 
purchase rail lines subject to abandonment or discontinuance under the 
Board's regulations. In the past 20 years since ICCTA was enacted, the 
Board has received approximately 100 OFAs, or an average of five per 
year. Of those, the Board estimates that about 80, or 80%, were filed 
by small entities. Over the last six years, the Board has received six 
OFAs, or an average of one per year. Of those, the Board estimates that 
about four, or 66%, were filed by small entities. The majority of these 
small entities have been small businesses, including shippers and Class 
III railroads, but this has also included small governmental 
jurisdictions and small nonprofits. The Board therefore estimates that 
this rule may affect up to four small entities per year.\8\
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    \8\ The Board does not mean to suggest that four small entities 
per year by itself constitutes a ``substantial number'' under the 
RFA. However, because a high percentage of OFAs are filed by small 
entities, and out of an abundance of caution, the Board provides 
this RFA analysis.
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    Description of the projected reporting, recordkeeping, and other 
compliance requirements of the final rule, including an estimate of the 
classes of small entities that will be subject to the requirement and 
the types of professional skills necessary for preparation of the 
report or record.
    The final rule will require additional information from entities 
interested in or submitting OFAs at two stages. First, an entity will 
have to file a notice of intent (NOI) soon after the railroad files for 
abandonment or discontinuance authority (the NOI stage). Second, 
entities will have to provide new information when the actual offer is 
submitted (the offer stage), which occurs soon after the railroad has 
obtained abandonment or discontinuance authority from the Board. The 
Board is seeking approval from the Office of Management and Budget 
(OMB) pursuant to the Paperwork Reduction Act (PRA) for these 
requirements through a revision to a broader, existing OMB-approved 
collection.
    At the NOI stage, a potential offeror will be required to submit an 
NOI in all notice of exemption, petition for exemption, and application 
proceedings, rather than only in notice of exemption proceedings as was 
previously required. This NOI will be a notice to the Board and the 
carrier involved in the proceeding that a party is interested in making 
an OFA to subsidize or purchase the rail line. A potential offeror will 
also be required to calculate a preliminary financial responsibility 
amount for the line using information contained in the carrier's filing 
and other publicly available

[[Page 31007]]

information, and provide to the Board evidence of its financial 
responsibility at that level. This calculation will require research on 
the part of the potential offeror to determine the current scrap price 
of steel, which is publicly-available at no cost: Under the final rule 
potential offerors may obtain a quote from a scrap dealer or a recent 
scrap price from a free internet source, as explained above in the 
discussion of comments on the Board's proposed formula for determining 
preliminary financial responsibility. This calculation will not require 
professional expertise, however, as it is intended to be relatively 
simple.
    At the offer stage, an offeror will be required to provide 
additional relevant identifying information depending on whether the 
offeror is an individual, a legal entity, or multiple parties seeking 
to submit a joint OFA. An offeror will also be required to address the 
continued need for rail service in its offer, to place 10% of the 
minimum subsidy or purchase price of the line (taken from the 
calculation done at the NOI stage) in an escrow account, and to provide 
evidence with its offer that it has completed the escrow requirement.
    All small entities participating in the OFA process will be subject 
to these requirements, other than small governmental entities, which 
are exempt from some financial responsibility requirements.\9\ As 
discussed above, in the past these small entities have included small 
businesses, Class III railroads, and small nonprofits. Many, but not 
all, entities participating in the OFA process are represented by legal 
counsel, though such representation is not required. These new 
requirements may take additional time, as detailed in the Paperwork 
Reduction Act analysis in the NPRM, but the Board does not believe they 
will require additional professional expertise beyond that already 
required by the OFA process.
---------------------------------------------------------------------------

    \9\ In response to comments regarding the ability of government 
entities to comply with the escrow requirement, as discussed above 
this final rule exempts all government entities from placing 10% of 
the preliminary financial responsibility amount in escrow, as 
otherwise required by the final rule. This exemption includes any 
government entities that may qualify as small entities under the 
RFA. Governmental entities, including those that are small entities, 
are also exempt from conducting the preliminary financial 
responsibility calculation and providing evidence of their financial 
responsibility at the NOI stage.
---------------------------------------------------------------------------

    The Board estimates these new requirements will add a total annual 
hour burden of 42 hours and no total annual ``non-hour burden'' cost 
under the Paperwork Reduction Act, as detailed in the NPRM.
    Identification, to the extent practicable, of all relevant federal 
rules that may duplicate, overlap, or conflict with the final rule.
    The Board is unaware of any duplicative, overlapping, or 
conflicting federal rules.
    Description of any significant alternatives to the final rule that 
accomplish the stated objectives of applicable statutes and that 
minimize any significant economic impact of the rule on small entities, 
including alternatives considered, such as: (1) Establishment of 
differing compliance or reporting requirements or timetables that take 
into account the resources available to small entities; (2) 
clarification, consolidation, or simplification of compliance and 
reporting requirements under the rule for such small entities; (3) use 
of performance rather than design standards; (4) any exemption from 
coverage of the rule, or any part thereof, for such small entities.
    Under the final rule, offerors and potential offerors participating 
in the OFA process will be required to submit additional information as 
described above at the NOI stage and at the offer stage of the process. 
The Board considered alternatives to several of the requirements 
proposed in the NPRM. One alternative to the NOI requirements that was 
considered was to exempt small entities from the preliminary financial 
responsibility showing. An alternative to the escrow requirement that 
was considered was to require small entities to place a smaller 
percentage of the of the minimum subsidy or purchase price of the line 
in escrow, or to exempt small entities from the escrow requirement 
altogether. But because many of the problems with OFAs have involved 
parties that could be classified as small entities, selecting these 
alternatives would have defeated the purpose of the rule.
    Indeed, exempting small entities from compliance with the rule 
would have significantly weakened the effect of the rule because, as 
discussed above, approximately 66% to 80% of OFAs, depending on sample 
size, are filed by small entities. The Board also considered taking no 
action to revise the OFA regulations, but this would not have allowed 
the Board to meet its objectives of improving the OFA process and 
protecting it from abuse.
    A copy of this decision will be served upon the Chief Counsel for 
Advocacy, Office of Advocacy, U.S. Small Business Administration, 
Washington, DC 20416.
    Paperwork Reduction Act. In this proceeding, the Board is modifying 
an existing collection of information that is currently approved by the 
Office of Management and Budget (OMB) through January 31, 2019, under 
OMB Control No. 2140-0022. In the NPRM, the Board sought comments 
pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3521, and 
OMB regulations at 5 CFR 1320.11 regarding: (1) Whether the collection 
of information associated with the proposed changes to the OFA 
regulations is necessary for the proper performance of the functions of 
the Board, including whether the collection has practical utility; (2) 
the accuracy of the Board's burden estimates; (3) ways to enhance the 
quality, utility, and clarity of the information collected; and (4) 
ways to minimize the burden of the collection of information on the 
respondents, including the use of automated collection techniques or 
other forms of information technology, when appropriate. No comments 
were received pertaining to the collection of this information under 
the PRA.
    This modification to an existing collection will be submitted to 
OMB for review as required under the PRA, 44 U.S.C. 3507(d), and 5 CFR 
1320.11.
    It is ordered:
    1. The Board adopts the final rule as set forth in this decision. 
Notice of the adopted rule will be published in the Federal Register.
    2. This decision is effective 30 days after the day of service.
    3. A copy of this decision will be served upon the Chief Counsel 
for Advocacy, Office of Advocacy, U.S. Small Business Administration.

List of Subjects in 49 CFR Part 1152

    Administrative practice and procedure, Railroads, Reporting and 
recordkeeping requirements, Uniform System of Accounts.

    Decided: June 28, 2017.

    By the Board, Board Member Begeman, Elliott, and Miller.
Kenyatta Clay,
Clearance Clerk.
    For the reasons set forth in the preamble, the Surface 
Transportation Board amends title 49, chapter X, subchapter B, part 
1152 of the Code of Federal Regulations as follows:

PART 1152--ABANDONMENT AND DISCONTINUANCE OF RAIL LINES AND RAIL 
TRANSPORTATION UNDER 49 U.S.C. 10903

0
1. The authority citation for part 1152 is revised to read as follows:

    Authority: 11 U.S.C. 1170; 16 U.S.C. 1247(d) and 1248; 45 U.S.C. 
744; and 49 U.S.C. 1301, 1321(a), 10502, 10903-10905, and 11161.


0
2. Amend Sec.  1152.27 as follows:

[[Page 31008]]

0
a. In paragraph (a) introductory text, add the words ``that has proven 
itself preliminarily financially responsible under paragraph (c)(1)(ii) 
of this section'' after the word ``service''.
0
b. Redesignate paragraphs (c)(1)(i) and (ii) as paragraphs (c)(1)(iii) 
and (iv) and add new paragraphs (c)(1)(i) and (ii).
0
c. Revise newly redesignated paragraph (c)(1)(iv)(B), and add new 
paragraphs (c)(1)(iv)(D), (E), (F), (G), and (H).
0
d. In paragraph (c)(2)(i), add the words ``and demonstrating that they 
are preliminarily financially responsible as described in paragraph 
(c)(1)(ii) of this section'' after the words ``(i.e., subsidy or 
purchase)''.
0
e. In paragraph (c)(2)(iii), remove ``(c)(1)(ii)'' and add in its place 
``(c)(1)(iv)''.
0
f. In paragraph (d), remove ``or a formal expression of intent under 
paragraph (c)(2)(i) of this section indicating an intent to offer 
financial assistance'' and add in its place ``, or satisfaction of the 
preliminary financial responsibility requirement under paragraph 
(c)(1)(ii) of this section''.
0
g. In paragraph (e)(1), remove ``(c)(1)(i)(C)'' and add in its place 
``(c)(1)(iii)(C)''.
0
h. In paragraph (e)(2), remove ``(c)(1)(i)(C)'' and add in its place 
``(c)(1)(iii)(C)''.
    The revisions and additions read as follows:


Sec.  1152.27  Financial assistance procedures.

* * * * *
    (c) * * *
    (1) * * *
    (i) Expression of intent to file offer. Persons with a potential 
interest in providing financial assistance must, no later than 45 days 
after the Federal Register publication described in paragraph (b)(1) of 
this section or no later than 10 days after the Federal Register 
publication described in paragraph (b)(2)(i) of this section, submit to 
the carrier and the Board a formal expression of their intent to file 
an offer of financial assistance, indicating the type of financial 
assistance they wish to provide (i.e., subsidy or purchase) and 
demonstrating that they are preliminarily financially responsible as 
described in paragraph (c)(1)(ii) of this section. Such submissions are 
subject to the filing requirements of Sec.  1152.25(d)(1) through 
(d)(3).
    (ii) Preliminary financial responsibility. Persons submitting an 
expression of intent to file an offer of financial assistance as 
described in paragraph (c)(1)(i) or paragraph (c)(2)(i) of this section 
must demonstrate that they are financially responsible, under the 
definition set forth in paragraph (c)(1)(iv)(B) of this section, for 
the calculated preliminary financial responsibility amount of the rail 
line they seek to subsidize or purchase. If they seek to subsidize, the 
preliminary financial responsibility amount shall be $4,000 
(representing a standard annual per-mile maintenance cost) times the 
number of miles of track. If they seek to purchase, the preliminary 
financial responsibility amount shall be the sum of the rail steel 
scrap price per ton (dated within 30 days of the submission of the 
expression of intent), times 132 short tons per track mile or 117.857 
long tons per track mile, times the length of the line in miles, plus 
$4,000 times the number of miles of track times two. Persons submitting 
an expression of intent must provide evidentiary support for their 
calculations. If the Board does not issue a decision regarding the 
preliminary financial responsibility demonstration within 10 days of 
receipt of the expression of intent, the party submitting the 
expression of intent will be presumed to be preliminarily financially 
responsible and, upon request, the applicant must provide the 
information required under paragraph (a) of this section. This 
presumption does not create a presumption that the party will be 
financially responsible for an offer submitted under paragraph 
(c)(1)(iv) of this section.
* * * * *
    (iv) * * *
    (B) Demonstrate that the offeror is financially responsible; that 
is, that it has or within a reasonable time will have the financial 
resources to fulfill proposed contractual obligations. Examples of 
documentation the Board will accept as evidence of financial 
responsibility include income statements, balance sheets, letters of 
credit, profit and loss statements, account statements, financing 
commitments, and evidence of adequate insurance or ability to obtain 
adequate insurance. Examples of documentation the Board will not accept 
as evidence of financial responsibility include the ability to borrow 
money on credit cards and evidence of non-liquid assets an offeror 
intends to use as collateral. Governmental entities will be presumed to 
be financially responsible;
* * * * *
    (D) Demonstrate that the offeror has placed in escrow with a 
reputable financial institution funds equaling 10% of the preliminary 
financial responsibility amount calculated pursuant to paragraph 
(c)(1)(ii) of this section. Governmental entities are exempt from this 
requirement;
    (E) Demonstrate that there is a continued need for rail service on 
the line, or portion of the line, in question. Examples of evidence to 
be provided include: Evidence of a demonstrable commercial need for 
service (as reflected by support from shippers or receivers on the line 
or other evidence of an immediate and significant commercial need); 
evidence of community support for continued rail service; evidence that 
acquisition of freight operating rights would not interfere with 
current and planned transit services; and evidence that continued 
service is operationally feasible;
    (F) Identify the offeror and provide a mailing address, either 
business or personal, and other contact information including phone 
number and email address as available, for the offeror or a 
representative;
    (G) If the offeror is a legal entity, include the entity's full 
name, state of organization or incorporation, and a description of the 
ownership of the entity; and
    (H) If multiple parties seek to make a single offer of financial 
assistance, clearly identify which entity or individual will assume the 
common carrier obligation if the offer is successful, and clearly 
describe how the parties will allocate responsibility for financing the 
subsidy or purchase of the line and, if purchased, the operation of the 
line.
* * * * *
[FR Doc. 2017-14044 Filed 7-3-17; 8:45 am]
 BILLING CODE 4915-01-P