Market Dominance Streamlined Approach, 48882-48890 [2019-20087]

Download as PDF 48882 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules such interrogatories, the Board on motion and notice may strike out all or any part of any pleading of that party or person, or dismiss the proceeding or any part thereof. Such a motion may not be filed in a case under Final Offer Rate Review. In lieu of any such order or in addition thereto, the Board shall require the party failing to act or the attorney advising that party or both to pay the reasonable expenses, including attorney’s fees, caused by the failure, unless the Board finds that the failure was substantially justified or that other circumstances make an award of expenses unjust. * * * * * PART 1115—APPELLATE PROCEDURES 12. The authority citation for part 1115 continues to read as follows: ■ Authority: 5 U.S.C. 559; 49 U.S.C. 1321; 49 U.S.C. 11708. 13. Amend § 1115.3 by revising paragraph (e) to read as follows: ■ § 1115.3 Board actions other than initial decisions. * * * * * (e) Petitions must be filed within 20 days after the service of the action or within any further period (not to exceed 20 days) as the Board may authorize. However, in cases under Final Offer Rate Review, petitions must be filed within 5 days after the service of the action, and replies to petitions must be filed within 10 days after the service of the action. * * * * * Note: The following appendix will not appear in the Code of Federal Regulations. jbell on DSK3GLQ082PROD with PROPOSALS Appendix Information Collection Under the Paperwork Reduction Act Title: Complaints under 49 CFR 1111. OMB Control Number: 2140–0029. STB Form Number: None. Type of Review: Revision of a currently approved collection. Summary: As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act of 1995, 44 U.S.C. 3501–3521 (PRA), the Surface Transportation Board (Board) gives notice that it is requesting from the Office of Management and Budget (OMB) approval for the revision of the currently approved information collection, Complaints under 49 CFR part 1111, OMB Control No. 2140–0029, as further described below. The requested revision to the currently approved collection is necessitated by this Notice of Proposed Rulemaking (NPRM), which proposes to add an alternative (Final Offer Rate Review) complaint to the types of complaints collected by the Board in this information VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 collection. All other information collected by the Board in the currently approved collection is without change from its approval. Respondents: Affected shippers, railroads, and communities that seek redress for alleged violations related to unreasonable rates, unreasonable practices, service issues, and other statutory claims. Number of Respondents: Eight. Frequency: On occasion. In recent years, respondents have filed approximately four complaints per year with the Board. It is anticipated that four additional complaints would be filed annually under the proposed procedure. In Market Dominance Streamlined Approach, EP 756 (STB served September 12, 2019), the Board simultaneously issued a separate NPRM that also would impact the Board’s existing collection of complaints. But that decision, which expects to add an additional five complaints a year (including the four complaints estimated to filed under Final Offer Rate Review), is being treated as separate and subsequent—for the purposes of estimation—to this NPRM’s modification of the existing collection of complaints. The decision in EP 756 will include the modification here. Total Burden Hours (annually including all respondents): 2,876 (sum of (i) estimated hours per complaint (469) × total number of estimated, existing complaints (4) and (ii) estimated hours per proposed alternative complaint (250) × total number of those complaints (4)). Total ‘‘Non-Hour Burden’’ Cost (such as start-up costs and mailing costs): $8,968 (sum of (i) estimated non-hour burden cost per complaint ($1,462) × total number of estimated, existing complaints (4) and (ii) estimated non-hour burden cost per proposed alternative complaint ($780) × total number of those complaints (4)). Needs and Uses: Under the Board’s regulations, persons may file complaints before the Board pursuant to 49 CFR part 1111 seeking redress for alleged violations of provisions of the Interstate Commerce Act, Public Law 104–88, 109 Stat. 803 (1995). In the last few years, the most significant complaints filed at the Board allege that railroads are charging unreasonable rates or that they are engaging in unreasonable practices. See, e.g., 49 U.S.C. 10701, 10704, and 11701. As described in more detail above in the NPRM, the Board is proposing to add a new procedure to provide stakeholders with a more streamlined option to challenge rate reasonableness for smaller cases. The collection by the Board of these complaints, and the agency’s action in conducting proceedings and ruling on the complaints, enables the Board to meet its statutory duties. SURFACE TRANSPORTATION BOARD 49 CFR Parts 1011 and 1111 [Docket No. EP 756] Market Dominance Streamlined Approach Surface Transportation Board. Notice of Proposed Rulemaking. AGENCY: ACTION: The Surface Transportation Board (STB or Board) proposes a streamlined approach for pleading market dominance in rate reasonableness proceedings. The Board expects that this streamlined approach would reduce burdens on parties, expedite proceedings, and make the Board’s rate relief procedures more accessible, especially for complainants with smaller cases. DATES: Comments are due by November 12, 2019; replies are due by January 10, 2020. ADDRESSES: Comments and replies may be filed with the Board either via efiling or in writing addressed to: Surface Transportation Board, Attn: Docket No. EP 756, 395 E Street SW, Washington, DC 20423–0001. Comments and replies will be posted on the Board’s website at www.stb.gov. FOR FURTHER INFORMATION CONTACT: Sarah Fancher at (202) 245–0355. Assistance for the hearing impaired is available through the Federal Relay Service at (800) 877–8339. SUPPLEMENTARY INFORMATION: In January 2018, the Board established its Rate Reform Task Force (RRTF), with the objectives of developing recommendations to reform and streamline the Board’s rate review processes for large cases, and determining how to best provide a rate review process for smaller cases. After holding informal meetings throughout 2018, the RRTF issued a report on April 25, 2019 (RRTF Report).1 Among other recommendations, the RRTF Report included a proposal that the Board develop ‘‘a standard for pleading market dominance that will reduce the cost and time of bringing a rate case,’’ stating that the market dominance inquiry for rate reasonableness cases was a ‘‘costly and time-consuming undertaking.’’ RRTF Report 52–53. Moreover, the RRTF concluded that an effort to streamline the market dominance inquiry was a necessary part of making rate relief available for smaller rate disputes. Id. at 52. Having considered the SUMMARY: [FR Doc. 2019–20093 Filed 9–16–19; 8:45 am] 1 The RRTF Report was posted on the Board’s website on April 29, 2019, and can be accessed at https://www.stb.gov/stb/rail/Rate_Reform_Task_ Force_Report.pdf. BILLING CODE 4915–01–P PO 00000 Frm 00089 Fmt 4702 Sfmt 4702 E:\FR\FM\17SEP1.SGM 17SEP1 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules recommendations included in the RRTF Report, and the broader market dominance issues discussed below, the Board is proposing a streamlined market dominance approach that would be available to complainants for rate cases under all of the Board’s rate review methodologies. Background jbell on DSK3GLQ082PROD with PROPOSALS Determining the reasonableness of challenged rail transportation rates is one of the Board’s core functions. See 49 U.S.C. 10101(6) (stating the rail transportation policy ‘‘to maintain reasonable rates where there is an absence of effective competition and where rail rates provide revenues which exceed the amount necessary to maintain the rail system and to attract capital’’). In order to adjudicate the reasonableness of a rate, the Board must first find that the defendant rail carrier has market dominance over the transportation to which the rate applies. 49 U.S.C. 10701(d)(1), 10707(b), (c). Market dominance is defined as ‘‘an absence of effective competition from other rail carriers or modes of transportation for the transportation to which a rate applies.’’ 49 U.S.C. 10707(a). The Board’s market dominance inquiry comprises two components: A quantitative threshold and a qualitative analysis. The statute establishes a conclusive presumption that a railroad does not have market dominance if the rate charged produces revenues that are less than 180% of the variable costs 2 of providing the service. 49 U.S.C. 10707(d)(l)(A). However, a finding by the Board that a movement’s R/VC ratio is 180% or greater does not establish a presumption that the rail carrier providing the transportation has market dominance over the movement. 49 U.S.C. 10707(d)(2)(A). Accordingly, if the quantitative 180% R/VC threshold is met, the Board moves to the second component, a qualitative analysis. In this analysis, the Board determines whether there are any feasible transportation alternatives sufficient to constrain the railroad’s rates for the traffic to which the challenged rates apply (the issue traffic). See, e.g., M&G Polymers 2012, NOR 42123, slip op. at 2, 11–18; Consumers Energy Co. v. CSX 2 Variable costs are those railroad costs of providing service that vary with the level of output. See M&G Polymers USA, LLC v. CSX Transp., Inc. (M&G Polymers 2012), NOR 42123, slip op. at 2 n.4 (STB served Sept. 27, 2012). The comparison of revenues to variable costs, reflected as a percentage figure, is known as a revenue-to-variable cost (R/ VC) ratio. Id. VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 Transp., Inc., NOR 42142, slip op. at 287–98 (STB served Jan. 11, 2018). The Board considers two types of competition in its qualitative market dominance analysis: 3 • Intramodal (i.e., whether the complainant can use other railroads to transport the same commodity between the same points); and • Intermodal (i.e., whether the complainant can use other transportation modes, such as trucks or barges, to transport the same commodity between the same points). It is established Board precedent that the burden is on the complainant to demonstrate the lack of effective competition. See, e.g., Total Petrochems. & Ref. USA, Inc. v. CSX Transp., Inc. (Total Petrochems. 2013), NOR 42121, slip op. at 28 (STB served May 31, 2013) (with Board Member Begeman dissenting on other matters) (‘‘In the qualitative market dominance inquiry, the complainant bears the burden of establishing the absence of effective competition from other rail carriers or modes of transportation for the traffic to which the challenged rate applies.’’). The evidentiary process requires the complainant to prove a negative proposition on opening—that intermodal and intramodal competition are not effective constraints on rail rates. The Board then must determine what evidence is sufficient to make such a showing and how that evidence should be presented.4 The market dominance inquiry is a costly and time-consuming undertaking, resulting in a significant burden on rate case litigants.5 Given the hypothetical nature of some competitive options proposed by defendant railroads in past cases, complainants essentially have to predict what a defendant railroad might argue regarding potential, but unused, competitive options—all without knowing precisely what constitutes a prima facie showing of an absence of 3 M&G Polymers 2012, NOR 42123, slip op. at 2. e.g., Pet. of the Ass’n of Am. R.Rs. to Institute a Rulemaking Proceeding to Reintroduce Indirect Competition as a Factor Considered in Market Dominance Determinations for Coal Transported to Util. Generation Facilities, EP 717 (STB served Mar. 19, 2013); Gen. Procedures for Presenting Evidence in Stand-Alone Cost Rate Cases, 5 S.T.B. 441, 442–46 (2001). 5 The Board’s rate review methodologies generally have proven to be costly and time-consuming. Further, the Board has recognized that, for smaller disputes, the litigation costs required to bring a case under the Board’s existing rate reasonableness methodologies can quickly exceed the value of the case. Expanding Access to Rate Relief, EP 665 (SubNo. 2), slip op. at 10 (STB served Aug. 31, 2016). In a decision issued concurrently with this one, the Board is proposing an alternative rate review procedure for challenging the reasonableness of rates in smaller cases. See Final Offer Rate Review, EP 755 et al. (STB served September 12, 2019). 4 See, PO 00000 Frm 00090 Fmt 4702 Sfmt 4702 48883 effective competition. In the most recent rate reasonableness case, Consumers Energy Co. v. CSX Transportation, Inc., Docket No. NOR 42142, the parties’ market dominance presentations alone (throughout their filings) exceeded 200 pages of narrative discussion and included multiple expert reports. See also Total Petrochems. & Ref. USA, Inc. v. CSX Transp., Inc., Docket No. NOR 42121 (including over 340 pages of narrative discussion on market dominance). In two cases where the market dominance inquiry was bifurcated from the rate reasonableness inquiry, the market dominance procedural schedules alone were three months long. See M&G Polymers USA, LLC v. CSX Transp., Inc., NOR 42123, slip op. at 5 (STB served May 6, 2011); Total Petrochems. & Ref. USA, Inc. v. CSX Transp., Inc., NOR 42121, slip op. at 7–8 (STB served Apr. 5, 2011). In smaller rate cases, the expense associated with the market dominance inquiry may be particularly out of balance with the remedy being sought. For some complainants whose case may involve a limited number of carloads per year, the expense of the market dominance inquiry could make even the Board’s least costly rate methodology, currently the Three-Benchmark methodology, cost-prohibitive. See RRTF Report 44 (noting carload shipper concerns ‘‘that even a Three-Benchmark case under our current methodology (including, e.g., a required showing of market dominance) is still too expensive and time-consuming’’). Public comments in other Board proceedings state that current options for challenging the reasonableness of rates do not meet their need for expeditious resolution at a reasonable cost. See, e.g., Alliance for Rail Competition Opening Comments 22, June 26, 2014, Rail Transp. of Grain, Rate Regulation Review, EP 665 (SubNo. 1) (stating that the ThreeBenchmark test is too costly and complex in its current form); Western Coal Traffic League Opening Comments 74–76, Oct. 23, 2012, Rate Regulation Reforms, EP 715 (stating that the cost and complexity of Simplified-SAC discourage its use). The RRTF concluded that streamlining the market dominance inquiry is a necessity to making rate relief available for smaller rate disputes and that a streamlined inquiry, available to complainants for rate cases under all of the Board’s methodologies, could reduce the cost and time required to bringing a rate case while preserving a railroad’s right to rebut market dominance arguments. RRTF Report 52–54. An overly complicated and costly market E:\FR\FM\17SEP1.SGM 17SEP1 jbell on DSK3GLQ082PROD with PROPOSALS 48884 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules dominance inquiry can itself be a barrier to rate relief, even in cases where there is no effective competitive restraint on rail rates. A less complex market dominance inquiry that still provides ample opportunity for both parties to present evidence would help ensure both that the burden of the process will not dissuade complainants with meritorious cases from bringing those cases to the Board, and that rate cases are processed more expeditiously. The agency’s predecessor, the Interstate Commerce Commission, noted the Congressional intent expressed in the market dominance statute and in the legislative history, stating that Congress ‘‘envisioned the market dominance determination simply as a practical threshold jurisdictional determination to be made without lengthy litigation or administrative delay.’’ Westmoreland Coal Sales Co. v. Denver & Rio Grande W. R.R., 5 I.C.C.2d 751, 754 (1989) (discussing 49 U.S.C. 10709, the predecessor of the current section 10707). Having considered the RRTF’s recommendation, the Board proposes a streamlined market dominance approach to further the rail transportation policy, which requires that the Board regulate in such a way to provide for the expeditious handling and resolution of all proceedings, 49 U.S.C. 10101(15), foster sound economic conditions in transportation and ensure effective competition, section 10101(5), and maintain reasonable rates where there is an absence of effective competition, section 10101(6). The streamlined market dominance approach would expedite the handling of rate cases and make rate relief procedures more accessible to those complainants that find the current processes cost prohibitive. A streamlined approach to market dominance would also be consistent with the policy of allowing, to the maximum extent possible, competition and the demand for services to establish reasonable transportation rates, section 10101(1). Under the proposed streamlined approach described below, complainants would still be required to demonstrate, with sufficient evidence, the absence of effective competition.6 Streamlining the market dominance inquiry would also be consistent with clear Congressional directives not only in the rail transportation policy but also in the Surface Transportation Board 6 Because the market dominance inquiry is a threshold determination, even in cases where a complainant demonstrates the absence of effective competition, the Board, after considering evidence from the parties, may find a challenged rate to be reasonable. VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 Reauthorization Act of 2015 (STB Reauthorization Act), Public Law 114– 110, 129 Stat. 2228. Section 11 of the STB Reauthorization Act modified 49 U.S.C. 10704(d) to require that the Board ‘‘maintain procedures to ensure the expeditious handling of challenges to the reasonableness of railroad rates.’’ 7 Section 11 also shortened the time for deciding rate cases brought under the Stand-Alone Cost (SAC) methodology. In addition, appropriate Board-imposed measures to avoid delay in the discovery and evidentiary phases of rate proceedings, especially on a threshold issue like market dominance, fulfill those Congressional directives. See, e.g., 49 U.S.C. 10704(d)(1). It is well established that the Board has the authority to review and modify its rate reasonableness methodologies and processes—including its market dominance inquiry—to ensure that they remain accessible to the complainants that are entitled to use them.8 For example, in Market Dominance Determinations—Product & Geographic Competition (Product & Geographic Competition 1998), 3 S.T.B. 937, 938 (1998), the Board examined whether product and geographic competition should be considered in market dominance inquiries. The Board concluded that ‘‘it appears that the burdens associated with litigating product and geographic competition issues may serve to deny captive shippers with valid claims access to the Board and thus their only avenue of rate relief.’’ 9 In a subsequent decision, following remand from the U.S. Court of Appeals for the District of Columbia Circuit for consideration of the rail transportation policy, the Board reaffirmed its elimination of product and geographic competition from consideration, stating that ‘‘Congress has directed us to apply the market dominance provision in a practical manner.’’ Product & Geographic Competition 2001, EP 627, slip op. at 2. 7 Prior to the enactment of the STB Reauthorization Act, section 10704(d) began with a sentence stating that, ‘‘[w]ithin 9 months after January 1, 1996, the Board shall establish procedures to ensure expeditious handling of challenges to the reasonableness of railroad rates.’’ 8 See, e.g., Rate Regulation Reforms, EP 715, slip op. at 1–2 (STB served Mar. 13, 2015); Simplified Standards for Rail Rate Cases, EP 646 (Sub-No. 1) (STB served Sept. 5, 2007), aff’d sub nom. CSX Transp., Inc. v. STB, 568 F.3d 236 (D.C. Cir. 2009), vacated in part on reh’g, 584 F.3d 1076 (D.C. Cir. 2009). 9 Product & Geographic Competition 1998, 3 S.T.B. at 949, remanded sub nom. Ass’n of Am. R.Rs. v. STB, 237 F.3d 676 (D.C. Cir. 2001), reaff’d on remand, 5 S.T.B. 492 (2001), corrected, EP 627 (STB served Apr. 6, 2001) (Product & Geographic Competition 2001), aff’d sub nom. Ass’n of Am. R.Rs. v. STB, 306 F.3d 1108 (D.C. Cir. 2002). PO 00000 Frm 00091 Fmt 4702 Sfmt 4702 The Board stated that ‘‘the complications and delays resulting from consideration of product and geographic competition are contrary to the Congressional directive that the administrative market dominance procedures be easily administrable.’’ Id. at 8 (citing Ass’n of Am. R.Rs., 237 F.3d at 680; Rail Revitalization & Regulatory Reform Act of 1976, Public Law 94–210 section 202(d), 90 Stat. 31). Most significantly, the Board found that elimination of product and geographic competition from consideration advanced the equally important goal of expediting rate cases. Id. (citing 49 U.S.C. 10101(2), (15)). In affirming the Board’s 2001 decision, the D.C. Circuit noted that it is up to the Board to arrive at a reasonable accommodation of the conflicting policies set out in the Staggers Rail Act of 1980, and that Congress had expressly required the Board to provide for the expeditious handling and resolution of all proceedings. Ass’n of Am. R.Rs., 306 F.3d at 1111. The court found that the Board’s construction of the statute furthered its statutory mandate ‘‘to establish procedures to ensure expeditious handling of challenges to the reasonableness of railroad rates, including ‘appropriate measures for avoiding delay in the discovery and evidentiary phases of such proceedings.’ ’’ Id. (emphasis omitted) (citing 49 U.S.C. 10704(d)(1)). In a similar vein, the D.C. Circuit affirmed the Board’s decision in Major Issues in Rail Rate Cases, EP 657 (SubNo. 1), slip op. at 60 (STB served Oct. 30, 2006), to eliminate ‘‘movementspecific adjustments’’ to the uniform method for determining the variable costs in the quantitative market dominance inquiry. BNSF Ry. v. STB, 526 F.3d 770, 776–77 (D.C. Cir. 2008). Prior to the decision in Major Issues, parties to rate cases were permitted to make movement-specific adjustments to the Board’s standard variable cost calculations generated by the Uniform Railroad Costing System (URCS). In Major Issues, the Board eliminated the use of those movement-specific adjustments in market dominance presentations, finding that they made proceedings ‘‘inordinately complex, time consuming, and expensive, and [did] not necessarily result in more reliable results.’’ Major Issues, EP 657 (Sub-No. 1), slip op. at 60. In affirming the Board’s decision, the D.C. Circuit found that the elimination of movement-specific adjustments ‘‘balances inherently incommensurable cost and benefits,’’ and is a decision that E:\FR\FM\17SEP1.SGM 17SEP1 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules ‘‘falls within the expertise of the agency.’’ BNSF Ry., 526 F.3d at 776. The expeditious treatment of market dominance issues is essential to the Board’s ability to consider rate reasonableness cases where there is an absence of effective competition. In order to meet its statutory duty to ensure the expeditious handling of challenges to the reasonableness of railroad rates, it is important for the Board to consider ways to streamline the presentation of market dominance evidence, particularly in smaller cases where the cost of making a market dominance presentation can outweigh the value of the case. jbell on DSK3GLQ082PROD with PROPOSALS Proposed Rule To reduce the burden on the parties, the Board proposes to establish that a complainant has made a prima facie showing of market dominance when it can demonstrate the following: • The movement has an R/VC ratio of 180% or greater; • The movement would exceed 500 highway miles between origin and destination; • There is no intramodal competition from other railroads; • There is no barge competition; • The complainant has used truck for 10% or fewer of its movements subject to the rate at issue over a five-year period; and • The complainant has no practical build-out alternative due to physical, regulatory, financial, or other issues (or combination of issues). As discussed below, these proposed prima facie factors are relevant to the Board’s consideration of the existence (or lack) of effective competition for a rail movement and would be sufficient to make a prima facie showing of market dominance. If a complainant could demonstrate each of the factors listed above, the Board would have significant evidence about the status of effective competition, without requiring a more complicated evidentiary showing by the complainant or the railroad. Complainants that cannot make a showing under the six factors—and therefore choose not to attempt a streamlined market dominance showing in the first place—would be required at the outset to establish market dominance in a non-streamlined market dominance presentation by introducing additional detailed evidence regarding effective competition. In either scenario, defendant railroads would continue to have the opportunity to rebut the complainant’s evidence or argue against a finding of market dominance based on other factors. VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 Proposed Prima Facie Factors R/VC of 180% or Greater. As discussed earlier, this is a statutory requirement for quantitative market dominance and must be established, even under a streamlined approach. This is not often a contentious issue in rate cases and is often established by stipulation. The revenue figure is taken from the tariff rate plus applicable fuel surcharge and escalation clauses. The URCS Phase III movement costing program, which is available for download on the Board’s website, calculates the variable costs of a particular movement based on usersupplied information. Calculating variable costs using the URCS Phase III program is a quick and simple process. In demonstrating the R/VC ratio, a complainant must show its quantitative calculations. Movement Length Greater than 500 Highway Miles. The Board proposes a 500-highway-mile threshold as a factor to identify when trucking is not likely to provide effective competition. The Board has previously indicated that ‘‘[t]rucking becomes less viable when the length of haul exceeds 500 miles because any transport over that threshold, in many instances, could not be completed in one day.’’ Review of Commodity, Boxcar, & TOFC/COFC Exemptions, EP 704 (Sub-No. 1), slip op. at 7 n.12 (STB served Mar. 23, 2016).10 Given the reduced likelihood of effective truck competition for movements exceeding 500 highway miles, rail movements that meet this criterion are more likely to be served by market dominant carriers. If a complainant can establish this prima facie factor, it would assist the Board in making a market dominance determination more expeditiously. The Board recognizes that the 500highway-mile threshold may be underinclusive for certain commodities that are more difficult to move by truck (e.g., particularly heavy commodities). Further, the Board has received public comment that ‘‘trucking generally becomes cost-competitive to rail only for agricultural movements of 200 miles or less.’’ National Grain & Feed Assoc. Opening Comments 11, Nov. 14, 2016, 10 See also Rail Gen. Exemption Auth.— Exemption of Grease or Inedible Tallow, 10 I.C.C.2d 453, 461 (1994) (finding that movements over 500 miles ‘‘were thus less likely to be the subject of direct truck competition’’). Additionally, the Board sought comment on using 500 highway miles between origin and destination as a preliminary screen as part of a potential rate review methodology. Rail Transp. of Grain, Rate Regulation Review, EP 665 (Sub-No. 1) et al., slip op. at 16 (STB served Aug. 31, 2016) (responsive comments docketed in Docket No. EP 665 (Sub-No. 2)). PO 00000 Frm 00092 Fmt 4702 Sfmt 4702 48885 Expanding Access to Rate Relief, EP 665 (Sub-No. 2). Accordingly, the Board specifically seeks comment on whether, and if so how, the mileage threshold could be varied by commodity group(s). The Board invites public commenters to include detailed quantitative and qualitative information in support of any alternative mileage threshold. The Board also recognizes that movements in excess of the proposed 500-highway-mile threshold could still have effective competitive transportation alternatives. See CSX Transportation, Inc. Opening Comments 7, Nov. 14, 2016, Expanding Access to Rate Relief, EP 665 (Sub-No. 2) (noting instances where the Board has found market dominance for movements over 500 miles). Under the Board’s proposal, a defendant railroad would have the opportunity in its reply evidence to argue that despite the 500-highway-mile threshold, the carrier is not market dominant for the movement. Absence of Intramodal Competition. Because the Board must consider whether other railroads provide effective competition regarding a challenged rate, the absence of intramodal competition is an important factor that could streamline the Board’s analysis. While the existence of intramodal competition is not often litigated, there are exceptions. See, e.g., Total Petrochems. 2013, NOR 42121, slip op. at 50–51 (addressing railroad’s arguments that shipper had a direct rail option for one of the lanes at issue). If a complainant can demonstrate the complete absence of such competition, it would assist the Board in making a market dominance determination more expeditiously. The Board expects that, in most cases, the complainant would demonstrate the absence of intramodal competition by submitting a verified statement from an appropriate official attesting that the complainant does not have practical physical access to another railroad. Practical physical access encompasses feasible shipping alternatives on another railroad, including switching arrangements, where ‘‘an alternative is possible from a practical standpoint given real-world constraints.’’ Total Petrochems. 2013, NOR 42121, slip op. at 4 n.9. Absence of Barge Competition. The existence of barge competition, like truck competition, can be an issue in cases where a complainant’s or receiver’s facility is located on a navigable waterway. See, e.g., Consumers Energy Co. v. CSX Transp., Inc., NOR 42142, slip op. at 287 (STB served Jan. 11, 2018). Accordingly, if a complainant can demonstrate the absence of such competition (e.g., E:\FR\FM\17SEP1.SGM 17SEP1 jbell on DSK3GLQ082PROD with PROPOSALS 48886 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules because the complainant or receiver, or both, is landlocked), it would assist the Board in making a determination more expeditiously as to whether barge competition constrains market power. The Board expects that, in most cases, the complainant would demonstrate the absence of barge competition by submitting a verified statement from an appropriate official attesting that the complainant does not have practical physical access to barge competition. No More Than 10% of Recent Movements by Truck. Board precedent makes clear that traffic that regularly and routinely moves by truck or truckrail transloading is less likely to be served by a market dominant rail carrier. See, e.g., E.I. DuPont de Nemours & Co. v. Norfolk S. Ry. (E.I. DuPont), NOR 42125, slip op. at 307–08 (STB served Mar. 24, 2014), corrected and updated (STB served Oct. 3, 2014); M&G Polymers 2012, NOR 42123, slip op. at 48. However, market dominance can still be found in cases where truck competition exists if the truck competition is found not to be a constraint on the defendant railroad’s rates. See, e.g., Total Petrochems. & Ref. USA, Inc. v. CSX Transp., Inc., NOR 42121, slip op. at 9 (STB served Dec. 19, 2013) (‘‘But the fact that some [truck] competition exists, or that the price of the alternative happens to be similar to the challenged rate, does not in itself demonstrate that such competition is effectively constraining a carrier’s pricing—i.e., whether the competitive alternative is sufficient to deter the carrier from charging monopoly prices for the transportation at issue.’’). Cases that require a review of the comparative pricing between truck and rail raise many complicated issues that do not appear to be suitable for a streamlined market dominance approach. But most cases that raise no such issues, because truck competition is simply not a factor providing effective competition, would benefit from a streamlined approach, and it would assist the Board in making a market dominance determination more expeditiously. Accordingly, the Board proposes that a showing that truck movements for the issue traffic are minimal would establish this factor. See, e.g., E.I. DuPont, NOR 42125, slip op. at 323 n.1709 (noting that ‘‘there are a variety of reasons unrelated to transportation economics that [a shipper] might use certain alternatives (e.g., to serve customers without rail access, to accommodate low volume purchasers, or to expedite emergency shipments)’’). As might be expected in a case-by-case fact-specific inquiry, the agency has accepted varying percentages of truck VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 movements as proof of effective competition. Compare Amstar Corp. v. Atchison, Topeka & Santa Fe Ry., NOR 37478, slip op. at 7 (ICC served Dec. 8, 1987) (finding that effective competition existed even where complainants had shipped 98.5% of the issue movements by rail), with McCarty Farms v. Burlington N. Inc., 3 I.C.C.2d 822, 829– 33 (1987) (finding no effective competition existed despite a trucking alternative accounting for 20%-25% of the movements). Given today’s transportation market, including the state of truck competition, and the Board’s experience with market dominance determinations in recent rate cases, the Board proposes that a complainant that shows that it has used trucking for 10% or fewer of its movements subject to the rate at issue over a five-year period will have made a prima facie showing for this factor concerning the absence of effective truck competition. Although the agency has found an absence of market dominance in cases where less than 10% of the issue traffic has moved by truck, the Board proposes that a 10% level is an appropriate threshold for a complainant to demonstrate that its truck options are ineffective, based on its limited use of the option over a historical period. Unlike complainants that regularly move large volumes of traffic by truck, complainants that move less than 10% of their traffic by truck, despite rates with high R/VC ratios and the absence of intramodal and barge competition, are reasonably likely to have persuasive arguments for why trucking does not provide effective competition, including customer contracts, product characteristics, and price of the trucking alternative. See, e.g., M&G Polymers 2012, NOR 42123, slip op. at 19–21, 24–34 (addressing, among other things, customer requirements and product integrity issues in the context of a market dominance analysis). Such a showing would assist the Board in making a market dominance determination more expeditiously. The Board recognizes that it has found market dominance in cases where complainants utilize trucks for more than 10% of their movements. Accordingly, the Board specifically seeks comment on whether, and if so, how the truck movement percentage threshold should be implemented. The Board invites public commenters to include detailed quantitative and qualitative information in support of any alternative truck movement percentage threshold. As with the 500highway-mile threshold, and all the PO 00000 Frm 00093 Fmt 4702 Sfmt 4702 other factors as well, a defendant railroad would have the opportunity in its reply evidence to argue that despite the 10% threshold, the carrier is not market dominant for the movement. The Board proposes that five years 11 is an appropriate lookback period for truck movement data because it is recent enough to reflect a complainant’s current business operations and long enough to capture a snapshot of its historical use of trucks. No Practical Build-out Option. The term ‘‘build-out’’ has been used by the agency to refer to possible competitive alternatives that could be accessed if the complainant makes certain infrastructure investments. The Board proposes that one factor of a prima facie showing of market dominance under the streamlined approach would be that a complainant demonstrate, by a short plain statement in a verified statement from an appropriate official or other means, that it has no practical build-out option due to physical, regulatory, financial, or other issues (or combination of issues).12 The streamlined market dominance option would not be available when build-out alternatives are practical, although such a complainant could still attempt to show in a non-streamlined market dominance presentation that the buildout does not provide effective competition. In cases where there is no practical build-out option, it would assist the Board in making a market dominance determination more expeditiously. Railroad arguments that potential build-outs are available—although not typically found by the Board to be practical alternatives 13—can significantly complicate market dominance presentations. A complainant may not have information 11 Complainants with new traffic that does not go back a full five years would be permitted to submit the available months or years of data for the movement. 12 Physical issues include geographic constraints, such as the inability to obtain a right-of-way to the connecting carrier. Regulatory issues include legal barriers, such as prohibitive environmental permitting processes. Financial issues include a determination that the expense of the build-out would not be cost effective in light of the potential transportation rate savings. 13 See, e.g., Consumers Energy Co. v. CSX Transp., Inc., NOR 42142, slip op. at 295–96 (STB served Jan. 11, 2018) (finding an alternative which would require building additional rail infrastructure to be not feasible); Tex. Mun. Power Agency v. Burlington N. & Santa Fe Ry., 6 S.T.B. 573, 584 (2003) (finding that constructing a 13.5mile spur track to reach a competing railroad that would cost at least $49 million was not feasible); W. Tex. Utils. Co. v. Burlington N. R.R., 1 S.T.B. 638, 651 (1996), aff’d sub nom. Burlington N. R.R. v. STB, 114 F.3d 206 (D.C. Cir. 1997) (finding two potential rail line build-out alternatives costing $62 million and $79 million to not be realistic). E:\FR\FM\17SEP1.SGM 17SEP1 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules jbell on DSK3GLQ082PROD with PROPOSALS to address build-out options unless it has studied those options. But a defendant railroad might be able to identify hypothetical potential competitive options for the complainant’s traffic. This possibility likely leaves some complainants unsure as to how much information to affirmatively include in their opening presentation about potential competitive options that a railroad might identify. Such uncertainty could significantly increase litigation costs and dissuade complainants from bringing cases to the Board. Therefore, the Board proposes a factor that would limit the evidentiary burden and simplify the requirement for complainants while also ensuring that the Board obtains information about build-out alternatives that may be relevant to the competitive landscape. To demonstrate this factor of a market dominance prima facie showing, a complainant would need to submit a short plain statement in a verified statement by an appropriate official, or otherwise demonstrate, that it has no practical build-out alternative. For example, the complainant must state whether the impracticality is due to physical, regulatory, financial, or other issues (or combination of issues). If that showing cannot be made, the complainant would be required at the outset to address in some detail in its opening, through the non-streamlined market dominance presentation, why any potential build-out(s) would not provide effective competition. Mechanics Many of the facts to support these proposed prima facie factors are available to complainants at the pleading stage. Accordingly, the Board expects that complainants would be able to plead these factors in most cases and potentially negotiate stipulations with defendant carriers that would avoid costly discovery. Further, as discussed above, with respect to some of the factors, a verified statement from an appropriate official(s) with knowledge of the facts would be sufficient to meet the complainant’s prima facie showing. By establishing the list of factors set out above, the Board would find by rule that a complainant that meets each of the required factors will have made a prima facie showing of market dominance. If a complainant determines that it is not able to demonstrate one of the required factors, it would not choose this streamlined approach at the beginning of the case, but would instead need to choose a non-streamlined market dominance presentation with additional detailed information about its VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 transportation options. If a complainant elects to use the streamlined market dominance approach and the Board finds that market dominance has not been shown, the complainant may not submit a new rate case involving the same traffic using the non-streamlined market dominance presentation unless there are changed circumstances (or other factors under 49 U.S.C. 1322(c)). For purposes of this streamlined approach, the disclosures required under 49 CFR 1111.2(a) and (b) 14 would apply to a complainant electing to use this streamlined approach. The Board’s proposed streamlined market dominance approach would not result in a shifting of the burden for market dominance. The burden for establishing market dominance remains on the complainant, as it does with other issues in rate reasonableness cases. But the proposed approach would allow a complainant that can demonstrate the factors to make a prima facie showing that it has met its ‘‘burden of establishing the absence of effective competition from other rail carriers or modes of transportation for the traffic to which the challenged rate applies.’’ Total Petrochems. 2013, NOR 42121, slip op. at 28. As stated above, this streamlined approach would not deprive railroads of their opportunity to defend themselves by rebutting a complainant’s prima facie showing. Carriers would be permitted to refute any of the prima facie factors of the complainant’s case, or otherwise show that effective competition exists for the traffic at issue. As in a nonstreamlined market dominance presentation, a complainant under this new approach would have the opportunity to respond to the railroad’s reply evidence in its rebuttal submission (or in the case of a matter brought under the Final Offer Rate Review procedure in the optional hearing described below). The new approach described in this decision should help narrow the focus of arguments on reply and rebuttal. Accordingly, the Board would impose a 50-page limit, inclusive of exhibits and verified statements, on each of the parties’ reply and rebuttal submissions on market dominance in proceedings where the complainant uses the 14 Under the Board’s existing regulations, section 1111.2(a) requires that, with any rate complaint submitted under simplified standards, a complainant must submit, inter alia, the URCS Phase III inputs. Likewise, section 1111.2(b) requires such a complainant to ‘‘provide to the defendant all documents relied upon in formulating its assessment of a feasible transportation alternative and all documents relied upon to determine the inputs to the URCS Phase III program.’’ PO 00000 Frm 00094 Fmt 4702 Sfmt 4702 48887 streamlined approach.15 ‘‘The Board believes the page limit will encourage parties to focus their [arguments] on the most important issues.’’ Expediting Rate Cases, EP 733, slip op. at 12 (STB served Nov. 30, 2017). To help facilitate building the record on market dominance under the streamlined approach, the Board proposes a new delegation of authority under 49 CFR 1011.6 to an Administrative Law Judge (ALJ) to hold an on-the-record telephonic market dominance evidentiary hearing, at the complainant’s option, within seven days after the due date of complainant’s rebuttal (or in the case of a matter brought under the Final Offer Rate Review procedure within seven days after the due date of the parties’ reply). The ALJ’s role would be to allow the parties to clarify their market dominance positions under oath, and to build upon issues presented by the parties through critical and exacting questioning. Given this hearing, the complainant may elect whether to file rebuttal evidence on market dominance issues (in cases that provide for rebuttal, i.e. cases not brought under the Final Offer Rate Review procedure) or to rely on the ALJ hearing to rebut the defendant’s reply evidence. Within four days of the evidentiary hearing, a transcript of the hearing would be entered into the docket. The Board would take the entire record into consideration, including the transcript from the ALJ hearing, when reaching its final conclusion on market dominance. The Board’s determinations would occur in accordance with the deadlines set out in 49 CFR 1111.9 and 1111.10, and, if adopted, the new deadlines proposed in Final Offer Rate Review, Docket No. EP 755 et al. The Board concludes that the proposed approach would have the benefit of reducing the complexity of market dominance presentations for many complainants without limiting railroads’ ability to mount a thorough defense. The Board finds that the availability of a streamlined market dominance approach would reduce unneeded burdens that could dissuade complainants from bringing cases. Moreover, reducing the time and expense associated with litigating market dominance is particularly 15 The Board has found that a 50-page limit is an appropriate threshold to provide the parties with an adequate opportunity to address complex issues in rate cases, including petitions for reconsideration and briefs. E.I. DuPont de Nemours & Co. v. Norfolk S. Ry., NOR 42125, slip op. at 2 (STB served June 11, 2014); Sunbelt Chlor Alkali Partnership v. Norfolk S. Ry., NOR 42130, slip op. at 2 (STB served July 25, 2014). E:\FR\FM\17SEP1.SGM 17SEP1 48888 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules important for smaller rate disputes. The proposed rule would also help the Board achieve the statutory requirement to ensure the expeditious handling of challenges to the reasonableness of railroad rates, 49 U.S.C. 10704(d)(1), and further the rail transportation policies of providing for the expeditious handling and resolution of all proceedings, section 10101(15), fostering sound economic conditions in transportation and ensuring effective competition, section 10101(5), and maintaining reasonable rates where there is an absence of effective competition, section 10101(6). Accordingly, the Board invites comment on the proposed streamlined market dominance approach. jbell on DSK3GLQ082PROD with PROPOSALS 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 notice of proposed rulemaking, the agency must either include an initial regulatory flexibility analysis, section 603(a), or certify that the proposed rule would not have a ‘‘significant impact on a substantial number of small entities,’’ section 605(b). Because the goal of the RFA is to reduce the cost to small entities of complying with federal regulations, the RFA requires an agency to perform a regulatory flexibility analysis of small entity impacts only when a rule directly regulates those entities. In other words, the impact must be a direct impact on small entities ‘‘whose conduct is circumscribed or mandated’’ by the proposed rule. White Eagle Coop. v. Conner, 553 F.3d 467, 480 (7th Cir. 2009). This proposal would not have a significant economic impact upon a substantial number of small entities, within the meaning of the RFA.16 The 16 For the purpose of RFA analysis for rail carriers subject to Board jurisdiction, 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 $39,194,876 or less when adjusted for inflation using 2018 data. Class II rail carriers have annual operating revenues of less than $250 million or $489,935,956 when adjusted for inflation using VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 proposal imposes no additional recordkeeping by small railroads or any reporting of additional information. Nor do these proposed rules circumscribe or mandate any conduct by small railroads that is not already required by statute: The establishment of reasonable transportation rates when a carrier is found to be market dominant. Small railroads have always been subject to rate reasonableness complaints and their associated litigation costs, including addressing whether they have market dominance over traffic. Finally, as the Board has previously concluded, the majority of railroads involved in these rate proceedings are not small entities within the meaning of the Regulatory Flexibility Act. Simplified Standards, EP 646 (Sub-No. 1), slip op. at 33–34. Furthermore, since the inception of the Board in 1996, only three of the 51 cases filed challenging the reasonableness of freight rail rates have involved a Class III rail carrier as a defendant. Those three cases involved a total of 13 Class III rail carriers. The Board estimates that there are approximately 656 Class III rail carriers. Therefore, the Board certifies under 5 U.S.C. 605(b) that this proposed rule, if promulgated, will not have a significant economic impact on a substantial number of small entities within the meaning of the RFA. This decision will be served upon the Chief Counsel for Advocacy, Offices of Advocacy, U.S. Small Business Administration, Washington, DC 20416. Paperwork Reduction Act Pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501–3521, Office of Management and Budget (OMB) regulations at 5 CFR 1320.8(d)(3), and in the Appendix, the Board seeks comments about the impact of the revisions in the proposed rule to the currently approved collection of Complaints (OMB Control No. 2140– 0029) regarding: (1) Whether the collection of information, as modified in the proposed rule and further described below, 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 2018 data. The Board calculates the revenue deflator factor annually and publishes the railroad revenue thresholds in decisions and on its website. 49 CFR 1201.1–1; Indexing the Annual Operating Revenues of R.Rs., EP 748 (STB served June 14, 2019). PO 00000 Frm 00095 Fmt 4702 Sfmt 4702 automated collection techniques or other forms of information technology, when appropriate. The proposed simplified market dominance approach is intended to provide a less burdensome alternative to a non-streamlined market dominance presentation and is estimated, on balance, to result in five additional complaints filed each year. Filing a complaint has been estimated to require an annual hour burden of 469 hours and an annual ‘‘non-hour burden’’ cost of $1,462. See Supporting Statement for Modification & OMB Approval Under the Paperwork Reduction Act & 5 CFR pt. 1320, OMB Control No. 2140–0029 (Jan. 2018), available at https:// www.reginfo.gov/public/do/Download Document?objectID=78860402. For the reasons discussed above, filing a complaint with the streamlined market dominance approach is likely to require less time and expenditure than other complaints. Accordingly, the Board estimates that this new proposed method would entail an annual hour burden of 250 hours per complaint and an annual ‘‘non-hour burden’’ cost of $780 per complaint. These additional complaints are estimated to add a total annual hour burden of 1,250 hours and $3,900 of total annual ‘‘non-hour burden’’ cost under the PRA. The Board welcomes comment on the estimates of actual time and costs of complaints, as detailed below in the Appendix. Other information pertinent to complaints, including the simplified market dominance presentations, is also included in the Appendix. The proposed rule will be submitted to OMB for review as required under 44 U.S.C. 3507(d) and 5 CFR 1320.11. Comments received by the Board regarding the information collection will also be forwarded to OMB for its review when the final rule is published. Administrative Practice and Procedure; Investigations It is ordered: 1. The Board proposes to amend its rules as set forth in this decision. Notice of the proposed rules will be published in the Federal Register. 2. Comments regarding the proposed rules are due by November 12, 2019. Replies are due by January 10, 2020. 3. 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. 4. This decision is effective on its service date. E:\FR\FM\17SEP1.SGM 17SEP1 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules market dominance approach. The complainant must provide to the defendant all documents relied upon in formulating its assessment of a feasible transportation alternative and all documents relied upon to determine the inputs to the URCS Phase III program. * * * * * ■ 5. Amend § 1111.9 by revising paragraph (a) to read as follows: List of Subjects 49 CFR part 1011 Administrative practice and procedure; Authority delegations (government agencies); Organization and functions (government agencies). 49 CFR part 1111 Administrative practice and procedure; Investigations. § 1111.9 Procedural schedule in standalone cost cases. Decided: September 11, 2019. By the Board, Board Members Begeman, Fuchs, and Oberman. Jeffrey Herzig, Clearance Clerk. For the reasons set forth in the preamble, the Surface Transportation Board proposes to amend parts 1011 and 1111 of title 49, chapter X, of the Code of Federal Regulations as follows: PART 1011—BOARD ORGANIZATION; DELEGATIONS OF AUTHORITY 1. The authority citation for part 1011 continues to read as follows: ■ Authority: 5 U.S.C. 553; 31 U.S.C. 9701; 49 U.S.C. 1301, 1321, 11123, 11124, 11144, 14122, and 15722. 2. Amend § 1011.6 by adding paragraph (i) to read as follows: ■ § 1011.6 Delegations of authority by the Chairman. * * * * * (i) In matters involving the streamlined market dominance approach, authority to hold a telephonic evidentiary hearing on market dominance issues is delegated to administrative law judges, as described in § 1111.12(e) of this chapter. PART 1111—COMPLAINT AND INVESTIGATION PROCEDURES 3. The authority citation for part 1111 is revised to read as follows: ■ Authority: 49 U.S.C. 10701, 10702, 10704, 10707, 11701, and 1321. 4. Amend § 1111.2 by revising the last sentence of paragraph (a) introductory text and paragraph (b) to read as follows: ■ jbell on DSK3GLQ082PROD with PROPOSALS § 1111.2 joinder. Content of formal complaints; (a) * * * If the complainant seeks to use the simplified standards or the streamlined market dominance approach, it should support this request by submitting, at a minimum, the following information: * * * * * (b) Disclosure required with complaints in simplified standards cases and in cases using the streamlined VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 (a) Procedural schedule. Absent a specific order by the Board, the following general procedural schedule will apply in stand-alone cost cases after the pre-complaint period initiated by the pre-filing notice: (1) Day 0—Complaint filed, discovery period begins. (2) Day 7 or before—Conference of the parties convened pursuant to § 1111.11(b). (3) Day 20—Defendant’s answer to complaint due. (4) Day 150—Discovery completed. (5) Day 210—Complainant files opening evidence on absence of intermodal and intramodal competition, variable cost, and stand-alone cost issues. (6) Day 270—Defendant files reply evidence to complainant’s opening evidence. (7) Day 305—Complainant files rebuttal evidence to defendant’s reply evidence. (8) Day 312—In cases using the streamlined market dominance approach, a telephonic evidentiary hearing before an administrative law judge, as described in § 1111.12(e), will be held at the discretion of the complainant within 7 days after the complainant’s rebuttal evidence on market dominance issues is due. (9) Day 335—Complainant and defendant file final briefs. (10) Day 485 or before—The Board issues its decision. * * * * * ■ 6. Amend § 1111.10 by revising paragraph (a) to read as follows: § 1111.10 Procedural schedule in cases using simplified standards. (a) Procedural schedule. Absent a specific order by the Board, the following general procedural schedules will apply in cases using the simplified standards: (1)(i) In cases relying upon the Simplified-SAC methodology: (A) Day 0—Complaint filed (including complainant’s disclosure). (B) Day 10—Mediation begins. (C) Day 20—Defendant’s answer to complaint (including defendant’s initial disclosure). PO 00000 Frm 00096 Fmt 4702 Sfmt 4702 48889 (D) Day 30—Mediation ends; discovery begins. (E) Day 140—Defendant’s second disclosure. (F) Day 150—Discovery closes. (G) Day 220—Opening evidence. (H) Day 280—Reply evidence. (I) Day 310—Rebuttal evidence. (J) Day 317—In cases using the streamlined market dominance approach, a telephonic evidentiary hearing before an administrative law judge, as described in § 1111.12(e), will be held at the discretion of the complainant within 7 days after the complainant’s rebuttal evidence is due. (K) Day 320—Technical conference (market dominance and merits, except for cases using the streamlined market dominance approach, in which the technical conference will be limited to merits issues). (L) Day 330—Final briefs. (ii) In addition, the Board will appoint a liaison within 10 business days of the filing of the complaint. (2)(i) In cases relying upon the ThreeBenchmark methodology: (A) Day 0—Complaint filed (including complainant’s disclosure). (B) Day 10—Mediation begins. (STB production of unmasked Waybill Sample.) (C) Day 20—Defendant’s answer to complaint (including defendant’s initial disclosure). (D) Day 30—Mediation ends; discovery begins. (E) Day 60—Discovery closes. (F) Day 90—Complainant’s opening (initial tender of comparison group and opening evidence on market dominance). Defendant’s opening (initial tender of comparison group). (G) Day 95—Technical conference on comparison group. (H) Day 120—Parties’ final tenders on comparison group. Defendant’s reply on market dominance. (I) Day 150—Parties’ replies to final tenders. Complainant’s rebuttal on market dominance. (J) Day 157—In cases using the streamlined market dominance approach, a telephonic evidentiary hearing before an administrative law judge, as described in § 1111.12(e), will be held at the discretion of the complainant within 7 days after the complainant’s rebuttal evidence is due. (ii) In addition, the Board will appoint a liaison within 10 business days of the filing of the complaint. * * * * * ■ 7. Add section § 1111.12 to read as follows: § 1111.12 Streamlined Market Dominance. (a) A complainant may elect to pursue the streamlined market dominance E:\FR\FM\17SEP1.SGM 17SEP1 jbell on DSK3GLQ082PROD with PROPOSALS 48890 Federal Register / Vol. 84, No. 180 / Tuesday, September 17, 2019 / Proposed Rules approach to market dominance if the challenged movement satisfies the factors listed in paragraphs (a)(1) through (a)(6) of this section. The Board will find a complainant has made a prima facie showing on market dominance when it can demonstrate the following with regard to the traffic subject to the challenged rate: (1) The movement has an R/VC ratio of 180% or greater; (2) The movement would exceed 500 highway miles between origin and destination; (3) There is no intramodal competition from other railroads; (4) There is no barge competition; (5) The complainant has used truck for 10% or fewer of its movements subject to the rate at issue over a fiveyear period; and (6) The complainant has no practical build-out alternative due to physical, regulatory, financial, or other issues (or combination of issues). (b) A complainant may rely on any competent evidence, including a verified statement from an appropriate official(s) with knowledge of the facts, in demonstrating the factors set out in paragraph (a) of this section. In demonstrating the revenue to variable cost ratio, a complainant must show its quantitative calculations. (c) When a complainant elects to utilize the streamlined market dominance approach, it must provide the initial disclosures found in § 1111.2 (a) and (b), regardless of the rate reasonableness methodology selected (including stand-alone cost cases). (d) A defendant’s reply evidence under the streamlined market dominance approach may address the factors in paragraph (a) of this section and any other issues relevant to market dominance. A complainant may elect to submit rebuttal evidence on market dominance issues (in cases that provide for rebuttal, i.e. cases not brought under the Final Offer Rate Review procedure). Reply and rebuttal filings under the streamlined market dominance approach are each limited to 50 pages, inclusive of exhibits and verified statements. (e) Pursuant to the authority under § 1011.6 of this chapter, an administrative law judge will hold a telephonic evidentiary hearing on the market dominance issues at the discretion of the complainant within 7 days after the complainant’s rebuttal evidence is due. In Final Offer Rate Review matters, the hearing will be held within 7 days after the parties’ replies are due. The Board will arrange to receive the hearing transcript within 4 days of when the evidentiary hearing is VerDate Sep<11>2014 16:32 Sep 16, 2019 Jkt 247001 held. The oral hearing transcript will be part of the docket in the proceeding. Market dominance determinations will be made by the Board. Note: The following appendix will not appear in the Code of Federal Regulations. Title: Complaints under 49 CFR part 1111. OMB Control Number: 2140–0029. STB Form Number: None. Type of Review: Revision of a currently approved collection. Summary: As part of its continuing effort to reduce paperwork burdens, and as required by the Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501–3521, the Surface Transportation Board (Board) gives notice that it is requesting from the Office of Management and Budget (OMB) approval for the revision of the currently approved information collection, Complaints under 49 CFR part 1111, OMB Control No. 2140–0029, as further described below. The requested revision to the currently approved collection is necessitated by this Notice of Proposed Rulemaking (NPRM), which is expected to increase the number of complaints filed with the Board because of the addition of the proposed streamlined market dominance approach. All other information collected by the Board in the currently approved collection is without change from its approval. Respondents: Affected shippers, railroads, and communities that seek redress for alleged violations related to unreasonable rates, unreasonable practices, service issues, and other statutory claims. Number of Respondents: Nine. Frequency: On occasion. In recent years, respondents have filed approximately four complaints per year with the Board. In Final Offer Rate Review, EP 755 et al. (STB served September 12, 2019), the Board simultaneously issued a separate NPRM that also impacts the Board’s existing collection of complaints. In that decision, the Board estimates that the proposed alternative (Final Offer Rate Review) complaint would result in the collection of approximately four additional complaints annually. The modification of the Board’s existing collection for those additional complaints is noticed in Docket No. EP 755 et al. and incorporated in the burdens below. In this NPRM, based on the addition of the simplified market dominance approach, the Board anticipates that approximately five additional complaints would be filed annually, including those from Docket No. EP 755 et al. Combining the existing complaints and the additional complaints resulting from the proposed rules in Docket No. EP 755 et al. and this NPRM, the estimated number of complaints filed annually is approximately nine. Total Burden Hours (annually including all respondents): 3,126 (sum of (i) estimated hours per complaint (469) × total number of estimated, existing complaints (4), and (ii) estimated hours per additional complaints (250) × total number of those complaints (5)). Total ‘‘Non-Hour Burden’’ Cost (such as start-up costs and mailing costs): $9,748 (sum of (i) estimated non-hour burden cost per complaint ($1,462) × total number of PO 00000 Frm 00097 Fmt 4702 Sfmt 4702 estimated, existing complaints (4), and (ii) estimated non-hour burden cost per additional complaint ($780) × total number of those complaints (5)). Needs and Uses: Under the Board’s regulations, persons may file complaints before the Board pursuant to 49 CFR part 1111 seeking redress for alleged violations of provisions of the Interstate Commerce Act, Public Law 104–88, 109 Stat. 803 (1995). In the last few years, the most significant complaints filed at the Board allege that railroads are charging unreasonable rates or that they are engaging in unreasonable practices. See, e.g., 49 U.S.C. 10701, 10704, and 11701. As described in more detail above in the NPRM, the Board is proposing new rules that would allow complainants in these rate cases to use a new simplified market dominance approach to make a prima facie showing before the Board. As a result of the reduction in burden from this new simplified approach, it is expected that additional complaints would be filed. The collection by the Board of these complaints, and the agency’s action in conducting proceedings and ruling on the complaints, enables the Board to meet its statutory duties. [FR Doc. 2019–20087 Filed 9–16–19; 8:45 am] BILLING CODE 4915–01–P DEPARTMENT OF COMMERCE National Oceanic and Atmospheric Administration 50 CFR Part 622 [Docket No. 190909–0025] RIN 0648–BI98 Fisheries of the Caribbean, Gulf of Mexico, and South Atlantic; SnapperGrouper Fishery of the South Atlantic Region; Amendment 42 National Marine Fisheries Service (NMFS), National Oceanic and Atmospheric Administration (NOAA), Commerce. ACTION: Proposed rule; request for comments. AGENCY: NMFS proposes to implement management measures described in Amendment 42 to the Fishery Management Plan (FMP) for the Snapper-Grouper Fishery of the South Atlantic Region (Amendment 42), as prepared and submitted by the South Atlantic Fishery Management Council (South Atlantic Council). This proposed rule would add three new devices to the Federal regulations as options for fishermen with Federal commercial or charter vessel/headboat permits for South Atlantic snapper-grouper to meet existing requirements for sea turtle release gear, and would update the regulations to simplify and clarify the requirements for other sea turtle release SUMMARY: E:\FR\FM\17SEP1.SGM 17SEP1

Agencies

[Federal Register Volume 84, Number 180 (Tuesday, September 17, 2019)]
[Proposed Rules]
[Pages 48882-48890]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-20087]


-----------------------------------------------------------------------

SURFACE TRANSPORTATION BOARD

49 CFR Parts 1011 and 1111

[Docket No. EP 756]


Market Dominance Streamlined Approach

AGENCY: Surface Transportation Board.

ACTION: Notice of Proposed Rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Surface Transportation Board (STB or Board) proposes a 
streamlined approach for pleading market dominance in rate 
reasonableness proceedings. The Board expects that this streamlined 
approach would reduce burdens on parties, expedite proceedings, and 
make the Board's rate relief procedures more accessible, especially for 
complainants with smaller cases.

DATES: Comments are due by November 12, 2019; replies are due by 
January 10, 2020.

ADDRESSES: Comments and replies may be filed with the Board either via 
e-filing or in writing addressed to: Surface Transportation Board, 
Attn: Docket No. EP 756, 395 E Street SW, Washington, DC 20423-0001. 
Comments and replies will be posted on the Board's website at 
www.stb.gov.

FOR FURTHER INFORMATION CONTACT: Sarah Fancher at (202) 245-0355. 
Assistance for the hearing impaired is available through the Federal 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: In January 2018, the Board established its 
Rate Reform Task Force (RRTF), with the objectives of developing 
recommendations to reform and streamline the Board's rate review 
processes for large cases, and determining how to best provide a rate 
review process for smaller cases. After holding informal meetings 
throughout 2018, the RRTF issued a report on April 25, 2019 (RRTF 
Report).\1\ Among other recommendations, the RRTF Report included a 
proposal that the Board develop ``a standard for pleading market 
dominance that will reduce the cost and time of bringing a rate case,'' 
stating that the market dominance inquiry for rate reasonableness cases 
was a ``costly and time-consuming undertaking.'' RRTF Report 52-53. 
Moreover, the RRTF concluded that an effort to streamline the market 
dominance inquiry was a necessary part of making rate relief available 
for smaller rate disputes. Id. at 52. Having considered the

[[Page 48883]]

recommendations included in the RRTF Report, and the broader market 
dominance issues discussed below, the Board is proposing a streamlined 
market dominance approach that would be available to complainants for 
rate cases under all of the Board's rate review methodologies.
---------------------------------------------------------------------------

    \1\ The RRTF Report was posted on the Board's website on April 
29, 2019, and can be accessed at https://www.stb.gov/stb/rail/Rate_Reform_Task_Force_Report.pdf.
---------------------------------------------------------------------------

Background

    Determining the reasonableness of challenged rail transportation 
rates is one of the Board's core functions. See 49 U.S.C. 10101(6) 
(stating the rail transportation policy ``to maintain reasonable rates 
where there is an absence of effective competition and where rail rates 
provide revenues which exceed the amount necessary to maintain the rail 
system and to attract capital''). In order to adjudicate the 
reasonableness of a rate, the Board must first find that the defendant 
rail carrier has market dominance over the transportation to which the 
rate applies. 49 U.S.C. 10701(d)(1), 10707(b), (c). Market dominance is 
defined as ``an absence of effective competition from other rail 
carriers or modes of transportation for the transportation to which a 
rate applies.'' 49 U.S.C. 10707(a).
    The Board's market dominance inquiry comprises two components: A 
quantitative threshold and a qualitative analysis. The statute 
establishes a conclusive presumption that a railroad does not have 
market dominance if the rate charged produces revenues that are less 
than 180% of the variable costs \2\ of providing the service. 49 U.S.C. 
10707(d)(l)(A). However, a finding by the Board that a movement's R/VC 
ratio is 180% or greater does not establish a presumption that the rail 
carrier providing the transportation has market dominance over the 
movement. 49 U.S.C. 10707(d)(2)(A). Accordingly, if the quantitative 
180% R/VC threshold is met, the Board moves to the second component, a 
qualitative analysis. In this analysis, the Board determines whether 
there are any feasible transportation alternatives sufficient to 
constrain the railroad's rates for the traffic to which the challenged 
rates apply (the issue traffic). See, e.g., M&G Polymers 2012, NOR 
42123, slip op. at 2, 11-18; Consumers Energy Co. v. CSX Transp., Inc., 
NOR 42142, slip op. at 287-98 (STB served Jan. 11, 2018).
---------------------------------------------------------------------------

    \2\ Variable costs are those railroad costs of providing service 
that vary with the level of output. See M&G Polymers USA, LLC v. CSX 
Transp., Inc. (M&G Polymers 2012), NOR 42123, slip op. at 2 n.4 (STB 
served Sept. 27, 2012). The comparison of revenues to variable 
costs, reflected as a percentage figure, is known as a revenue-to-
variable cost (R/VC) ratio. Id.
---------------------------------------------------------------------------

    The Board considers two types of competition in its qualitative 
market dominance analysis: \3\
---------------------------------------------------------------------------

    \3\ M&G Polymers 2012, NOR 42123, slip op. at 2.
---------------------------------------------------------------------------

     Intramodal (i.e., whether the complainant can use other 
railroads to transport the same commodity between the same points); and
     Intermodal (i.e., whether the complainant can use other 
transportation modes, such as trucks or barges, to transport the same 
commodity between the same points).
    It is established Board precedent that the burden is on the 
complainant to demonstrate the lack of effective competition. See, 
e.g., Total Petrochems. & Ref. USA, Inc. v. CSX Transp., Inc. (Total 
Petrochems. 2013), NOR 42121, slip op. at 28 (STB served May 31, 2013) 
(with Board Member Begeman dissenting on other matters) (``In the 
qualitative market dominance inquiry, the complainant bears the burden 
of establishing the absence of effective competition from other rail 
carriers or modes of transportation for the traffic to which the 
challenged rate applies.''). The evidentiary process requires the 
complainant to prove a negative proposition on opening--that intermodal 
and intramodal competition are not effective constraints on rail rates. 
The Board then must determine what evidence is sufficient to make such 
a showing and how that evidence should be presented.\4\
---------------------------------------------------------------------------

    \4\ See, e.g., Pet. of the Ass'n of Am. R.Rs. to Institute a 
Rulemaking Proceeding to Reintroduce Indirect Competition as a 
Factor Considered in Market Dominance Determinations for Coal 
Transported to Util. Generation Facilities, EP 717 (STB served Mar. 
19, 2013); Gen. Procedures for Presenting Evidence in Stand-Alone 
Cost Rate Cases, 5 S.T.B. 441, 442-46 (2001).
---------------------------------------------------------------------------

    The market dominance inquiry is a costly and time-consuming 
undertaking, resulting in a significant burden on rate case 
litigants.\5\ Given the hypothetical nature of some competitive options 
proposed by defendant railroads in past cases, complainants essentially 
have to predict what a defendant railroad might argue regarding 
potential, but unused, competitive options--all without knowing 
precisely what constitutes a prima facie showing of an absence of 
effective competition. In the most recent rate reasonableness case, 
Consumers Energy Co. v. CSX Transportation, Inc., Docket No. NOR 42142, 
the parties' market dominance presentations alone (throughout their 
filings) exceeded 200 pages of narrative discussion and included 
multiple expert reports. See also Total Petrochems. & Ref. USA, Inc. v. 
CSX Transp., Inc., Docket No. NOR 42121 (including over 340 pages of 
narrative discussion on market dominance). In two cases where the 
market dominance inquiry was bifurcated from the rate reasonableness 
inquiry, the market dominance procedural schedules alone were three 
months long. See M&G Polymers USA, LLC v. CSX Transp., Inc., NOR 42123, 
slip op. at 5 (STB served May 6, 2011); Total Petrochems. & Ref. USA, 
Inc. v. CSX Transp., Inc., NOR 42121, slip op. at 7-8 (STB served Apr. 
5, 2011).
---------------------------------------------------------------------------

    \5\ The Board's rate review methodologies generally have proven 
to be costly and time-consuming. Further, the Board has recognized 
that, for smaller disputes, the litigation costs required to bring a 
case under the Board's existing rate reasonableness methodologies 
can quickly exceed the value of the case. Expanding Access to Rate 
Relief, EP 665 (Sub-No. 2), slip op. at 10 (STB served Aug. 31, 
2016). In a decision issued concurrently with this one, the Board is 
proposing an alternative rate review procedure for challenging the 
reasonableness of rates in smaller cases. See Final Offer Rate 
Review, EP 755 et al. (STB served September 12, 2019).
---------------------------------------------------------------------------

    In smaller rate cases, the expense associated with the market 
dominance inquiry may be particularly out of balance with the remedy 
being sought. For some complainants whose case may involve a limited 
number of carloads per year, the expense of the market dominance 
inquiry could make even the Board's least costly rate methodology, 
currently the Three-Benchmark methodology, cost-prohibitive. See RRTF 
Report 44 (noting carload shipper concerns ``that even a Three-
Benchmark case under our current methodology (including, e.g., a 
required showing of market dominance) is still too expensive and time-
consuming''). Public comments in other Board proceedings state that 
current options for challenging the reasonableness of rates do not meet 
their need for expeditious resolution at a reasonable cost. See, e.g., 
Alliance for Rail Competition Opening Comments 22, June 26, 2014, Rail 
Transp. of Grain, Rate Regulation Review, EP 665 (Sub-No. 1) (stating 
that the Three-Benchmark test is too costly and complex in its current 
form); Western Coal Traffic League Opening Comments 74-76, Oct. 23, 
2012, Rate Regulation Reforms, EP 715 (stating that the cost and 
complexity of Simplified-SAC discourage its use). The RRTF concluded 
that streamlining the market dominance inquiry is a necessity to making 
rate relief available for smaller rate disputes and that a streamlined 
inquiry, available to complainants for rate cases under all of the 
Board's methodologies, could reduce the cost and time required to 
bringing a rate case while preserving a railroad's right to rebut 
market dominance arguments. RRTF Report 52-54. An overly complicated 
and costly market

[[Page 48884]]

dominance inquiry can itself be a barrier to rate relief, even in cases 
where there is no effective competitive restraint on rail rates. A less 
complex market dominance inquiry that still provides ample opportunity 
for both parties to present evidence would help ensure both that the 
burden of the process will not dissuade complainants with meritorious 
cases from bringing those cases to the Board, and that rate cases are 
processed more expeditiously. The agency's predecessor, the Interstate 
Commerce Commission, noted the Congressional intent expressed in the 
market dominance statute and in the legislative history, stating that 
Congress ``envisioned the market dominance determination simply as a 
practical threshold jurisdictional determination to be made without 
lengthy litigation or administrative delay.'' Westmoreland Coal Sales 
Co. v. Denver & Rio Grande W. R.R., 5 I.C.C.2d 751, 754 (1989) 
(discussing 49 U.S.C. 10709, the predecessor of the current section 
10707).
    Having considered the RRTF's recommendation, the Board proposes a 
streamlined market dominance approach to further the rail 
transportation policy, which requires that the Board regulate in such a 
way to provide for the expeditious handling and resolution of all 
proceedings, 49 U.S.C. 10101(15), foster sound economic conditions in 
transportation and ensure effective competition, section 10101(5), and 
maintain reasonable rates where there is an absence of effective 
competition, section 10101(6). The streamlined market dominance 
approach would expedite the handling of rate cases and make rate relief 
procedures more accessible to those complainants that find the current 
processes cost prohibitive. A streamlined approach to market dominance 
would also be consistent with the policy of allowing, to the maximum 
extent possible, competition and the demand for services to establish 
reasonable transportation rates, section 10101(1). Under the proposed 
streamlined approach described below, complainants would still be 
required to demonstrate, with sufficient evidence, the absence of 
effective competition.\6\
---------------------------------------------------------------------------

    \6\ Because the market dominance inquiry is a threshold 
determination, even in cases where a complainant demonstrates the 
absence of effective competition, the Board, after considering 
evidence from the parties, may find a challenged rate to be 
reasonable.
---------------------------------------------------------------------------

    Streamlining the market dominance inquiry would also be consistent 
with clear Congressional directives not only in the rail transportation 
policy but also in the Surface Transportation Board Reauthorization Act 
of 2015 (STB Reauthorization Act), Public Law 114-110, 129 Stat. 2228. 
Section 11 of the STB Reauthorization Act modified 49 U.S.C. 10704(d) 
to require that the Board ``maintain procedures to ensure the 
expeditious handling of challenges to the reasonableness of railroad 
rates.'' \7\ Section 11 also shortened the time for deciding rate cases 
brought under the Stand-Alone Cost (SAC) methodology. In addition, 
appropriate Board-imposed measures to avoid delay in the discovery and 
evidentiary phases of rate proceedings, especially on a threshold issue 
like market dominance, fulfill those Congressional directives. See, 
e.g., 49 U.S.C. 10704(d)(1).
---------------------------------------------------------------------------

    \7\ Prior to the enactment of the STB Reauthorization Act, 
section 10704(d) began with a sentence stating that, ``[w]ithin 9 
months after January 1, 1996, the Board shall establish procedures 
to ensure expeditious handling of challenges to the reasonableness 
of railroad rates.''
---------------------------------------------------------------------------

    It is well established that the Board has the authority to review 
and modify its rate reasonableness methodologies and processes--
including its market dominance inquiry--to ensure that they remain 
accessible to the complainants that are entitled to use them.\8\ For 
example, in Market Dominance Determinations--Product & Geographic 
Competition (Product & Geographic Competition 1998), 3 S.T.B. 937, 938 
(1998), the Board examined whether product and geographic competition 
should be considered in market dominance inquiries. The Board concluded 
that ``it appears that the burdens associated with litigating product 
and geographic competition issues may serve to deny captive shippers 
with valid claims access to the Board and thus their only avenue of 
rate relief.'' \9\ In a subsequent decision, following remand from the 
U.S. Court of Appeals for the District of Columbia Circuit for 
consideration of the rail transportation policy, the Board reaffirmed 
its elimination of product and geographic competition from 
consideration, stating that ``Congress has directed us to apply the 
market dominance provision in a practical manner.'' Product & 
Geographic Competition 2001, EP 627, slip op. at 2. The Board stated 
that ``the complications and delays resulting from consideration of 
product and geographic competition are contrary to the Congressional 
directive that the administrative market dominance procedures be easily 
administrable.'' Id. at 8 (citing Ass'n of Am. R.Rs., 237 F.3d at 680; 
Rail Revitalization & Regulatory Reform Act of 1976, Public Law 94-210 
section 202(d), 90 Stat. 31). Most significantly, the Board found that 
elimination of product and geographic competition from consideration 
advanced the equally important goal of expediting rate cases. Id. 
(citing 49 U.S.C. 10101(2), (15)).
---------------------------------------------------------------------------

    \8\ See, e.g., Rate Regulation Reforms, EP 715, slip op. at 1-2 
(STB served Mar. 13, 2015); Simplified Standards for Rail Rate 
Cases, EP 646 (Sub-No. 1) (STB served Sept. 5, 2007), aff'd sub nom. 
CSX Transp., Inc. v. STB, 568 F.3d 236 (D.C. Cir. 2009), vacated in 
part on reh'g, 584 F.3d 1076 (D.C. Cir. 2009).
    \9\ Product & Geographic Competition 1998, 3 S.T.B. at 949, 
remanded sub nom. Ass'n of Am. R.Rs. v. STB, 237 F.3d 676 (D.C. Cir. 
2001), reaff'd on remand, 5 S.T.B. 492 (2001), corrected, EP 627 
(STB served Apr. 6, 2001) (Product & Geographic Competition 2001), 
aff'd sub nom. Ass'n of Am. R.Rs. v. STB, 306 F.3d 1108 (D.C. Cir. 
2002).
---------------------------------------------------------------------------

    In affirming the Board's 2001 decision, the D.C. Circuit noted that 
it is up to the Board to arrive at a reasonable accommodation of the 
conflicting policies set out in the Staggers Rail Act of 1980, and that 
Congress had expressly required the Board to provide for the 
expeditious handling and resolution of all proceedings. Ass'n of Am. 
R.Rs., 306 F.3d at 1111. The court found that the Board's construction 
of the statute furthered its statutory mandate ``to establish 
procedures to ensure expeditious handling of challenges to the 
reasonableness of railroad rates, including `appropriate measures for 
avoiding delay in the discovery and evidentiary phases of such 
proceedings.' '' Id. (emphasis omitted) (citing 49 U.S.C. 10704(d)(1)).
    In a similar vein, the D.C. Circuit affirmed the Board's decision 
in Major Issues in Rail Rate Cases, EP 657 (Sub-No. 1), slip op. at 60 
(STB served Oct. 30, 2006), to eliminate ``movement-specific 
adjustments'' to the uniform method for determining the variable costs 
in the quantitative market dominance inquiry. BNSF Ry. v. STB, 526 F.3d 
770, 776-77 (D.C. Cir. 2008). Prior to the decision in Major Issues, 
parties to rate cases were permitted to make movement-specific 
adjustments to the Board's standard variable cost calculations 
generated by the Uniform Railroad Costing System (URCS). In Major 
Issues, the Board eliminated the use of those movement-specific 
adjustments in market dominance presentations, finding that they made 
proceedings ``inordinately complex, time consuming, and expensive, and 
[did] not necessarily result in more reliable results.'' Major Issues, 
EP 657 (Sub-No. 1), slip op. at 60. In affirming the Board's decision, 
the D.C. Circuit found that the elimination of movement-specific 
adjustments ``balances inherently incommensurable cost and benefits,'' 
and is a decision that

[[Page 48885]]

``falls within the expertise of the agency.'' BNSF Ry., 526 F.3d at 
776.
    The expeditious treatment of market dominance issues is essential 
to the Board's ability to consider rate reasonableness cases where 
there is an absence of effective competition. In order to meet its 
statutory duty to ensure the expeditious handling of challenges to the 
reasonableness of railroad rates, it is important for the Board to 
consider ways to streamline the presentation of market dominance 
evidence, particularly in smaller cases where the cost of making a 
market dominance presentation can outweigh the value of the case.

Proposed Rule

    To reduce the burden on the parties, the Board proposes to 
establish that a complainant has made a prima facie showing of market 
dominance when it can demonstrate the following:
     The movement has an R/VC ratio of 180% or greater;
     The movement would exceed 500 highway miles between origin 
and destination;
     There is no intramodal competition from other railroads;
     There is no barge competition;
     The complainant has used truck for 10% or fewer of its 
movements subject to the rate at issue over a five-year period; and
     The complainant has no practical build-out alternative due 
to physical, regulatory, financial, or other issues (or combination of 
issues).
    As discussed below, these proposed prima facie factors are relevant 
to the Board's consideration of the existence (or lack) of effective 
competition for a rail movement and would be sufficient to make a prima 
facie showing of market dominance. If a complainant could demonstrate 
each of the factors listed above, the Board would have significant 
evidence about the status of effective competition, without requiring a 
more complicated evidentiary showing by the complainant or the 
railroad. Complainants that cannot make a showing under the six 
factors--and therefore choose not to attempt a streamlined market 
dominance showing in the first place--would be required at the outset 
to establish market dominance in a non-streamlined market dominance 
presentation by introducing additional detailed evidence regarding 
effective competition. In either scenario, defendant railroads would 
continue to have the opportunity to rebut the complainant's evidence or 
argue against a finding of market dominance based on other factors.

Proposed Prima Facie Factors

    R/VC of 180% or Greater. As discussed earlier, this is a statutory 
requirement for quantitative market dominance and must be established, 
even under a streamlined approach. This is not often a contentious 
issue in rate cases and is often established by stipulation. The 
revenue figure is taken from the tariff rate plus applicable fuel 
surcharge and escalation clauses. The URCS Phase III movement costing 
program, which is available for download on the Board's website, 
calculates the variable costs of a particular movement based on user-
supplied information. Calculating variable costs using the URCS Phase 
III program is a quick and simple process. In demonstrating the R/VC 
ratio, a complainant must show its quantitative calculations.
    Movement Length Greater than 500 Highway Miles. The Board proposes 
a 500-highway-mile threshold as a factor to identify when trucking is 
not likely to provide effective competition. The Board has previously 
indicated that ``[t]rucking becomes less viable when the length of haul 
exceeds 500 miles because any transport over that threshold, in many 
instances, could not be completed in one day.'' Review of Commodity, 
Boxcar, & TOFC/COFC Exemptions, EP 704 (Sub-No. 1), slip op. at 7 n.12 
(STB served Mar. 23, 2016).\10\ Given the reduced likelihood of 
effective truck competition for movements exceeding 500 highway miles, 
rail movements that meet this criterion are more likely to be served by 
market dominant carriers. If a complainant can establish this prima 
facie factor, it would assist the Board in making a market dominance 
determination more expeditiously.
---------------------------------------------------------------------------

    \10\ See also Rail Gen. Exemption Auth.--Exemption of Grease or 
Inedible Tallow, 10 I.C.C.2d 453, 461 (1994) (finding that movements 
over 500 miles ``were thus less likely to be the subject of direct 
truck competition''). Additionally, the Board sought comment on 
using 500 highway miles between origin and destination as a 
preliminary screen as part of a potential rate review methodology. 
Rail Transp. of Grain, Rate Regulation Review, EP 665 (Sub-No. 1) et 
al., slip op. at 16 (STB served Aug. 31, 2016) (responsive comments 
docketed in Docket No. EP 665 (Sub-No. 2)).
---------------------------------------------------------------------------

    The Board recognizes that the 500-highway-mile threshold may be 
underinclusive for certain commodities that are more difficult to move 
by truck (e.g., particularly heavy commodities). Further, the Board has 
received public comment that ``trucking generally becomes cost-
competitive to rail only for agricultural movements of 200 miles or 
less.'' National Grain & Feed Assoc. Opening Comments 11, Nov. 14, 
2016, Expanding Access to Rate Relief, EP 665 (Sub-No. 2). Accordingly, 
the Board specifically seeks comment on whether, and if so how, the 
mileage threshold could be varied by commodity group(s). The Board 
invites public commenters to include detailed quantitative and 
qualitative information in support of any alternative mileage 
threshold.
    The Board also recognizes that movements in excess of the proposed 
500-highway-mile threshold could still have effective competitive 
transportation alternatives. See CSX Transportation, Inc. Opening 
Comments 7, Nov. 14, 2016, Expanding Access to Rate Relief, EP 665 
(Sub-No. 2) (noting instances where the Board has found market 
dominance for movements over 500 miles). Under the Board's proposal, a 
defendant railroad would have the opportunity in its reply evidence to 
argue that despite the 500-highway-mile threshold, the carrier is not 
market dominant for the movement.
    Absence of Intramodal Competition. Because the Board must consider 
whether other railroads provide effective competition regarding a 
challenged rate, the absence of intramodal competition is an important 
factor that could streamline the Board's analysis. While the existence 
of intramodal competition is not often litigated, there are exceptions. 
See, e.g., Total Petrochems. 2013, NOR 42121, slip op. at 50-51 
(addressing railroad's arguments that shipper had a direct rail option 
for one of the lanes at issue). If a complainant can demonstrate the 
complete absence of such competition, it would assist the Board in 
making a market dominance determination more expeditiously. The Board 
expects that, in most cases, the complainant would demonstrate the 
absence of intramodal competition by submitting a verified statement 
from an appropriate official attesting that the complainant does not 
have practical physical access to another railroad. Practical physical 
access encompasses feasible shipping alternatives on another railroad, 
including switching arrangements, where ``an alternative is possible 
from a practical standpoint given real-world constraints.'' Total 
Petrochems. 2013, NOR 42121, slip op. at 4 n.9.
    Absence of Barge Competition. The existence of barge competition, 
like truck competition, can be an issue in cases where a complainant's 
or receiver's facility is located on a navigable waterway. See, e.g., 
Consumers Energy Co. v. CSX Transp., Inc., NOR 42142, slip op. at 287 
(STB served Jan. 11, 2018). Accordingly, if a complainant can 
demonstrate the absence of such competition (e.g.,

[[Page 48886]]

because the complainant or receiver, or both, is landlocked), it would 
assist the Board in making a determination more expeditiously as to 
whether barge competition constrains market power. The Board expects 
that, in most cases, the complainant would demonstrate the absence of 
barge competition by submitting a verified statement from an 
appropriate official attesting that the complainant does not have 
practical physical access to barge competition.
    No More Than 10% of Recent Movements by Truck. Board precedent 
makes clear that traffic that regularly and routinely moves by truck or 
truck-rail transloading is less likely to be served by a market 
dominant rail carrier. See, e.g., E.I. DuPont de Nemours & Co. v. 
Norfolk S. Ry. (E.I. DuPont), NOR 42125, slip op. at 307-08 (STB served 
Mar. 24, 2014), corrected and updated (STB served Oct. 3, 2014); M&G 
Polymers 2012, NOR 42123, slip op. at 48. However, market dominance can 
still be found in cases where truck competition exists if the truck 
competition is found not to be a constraint on the defendant railroad's 
rates. See, e.g., Total Petrochems. & Ref. USA, Inc. v. CSX Transp., 
Inc., NOR 42121, slip op. at 9 (STB served Dec. 19, 2013) (``But the 
fact that some [truck] competition exists, or that the price of the 
alternative happens to be similar to the challenged rate, does not in 
itself demonstrate that such competition is effectively constraining a 
carrier's pricing--i.e., whether the competitive alternative is 
sufficient to deter the carrier from charging monopoly prices for the 
transportation at issue.''). Cases that require a review of the 
comparative pricing between truck and rail raise many complicated 
issues that do not appear to be suitable for a streamlined market 
dominance approach. But most cases that raise no such issues, because 
truck competition is simply not a factor providing effective 
competition, would benefit from a streamlined approach, and it would 
assist the Board in making a market dominance determination more 
expeditiously.
    Accordingly, the Board proposes that a showing that truck movements 
for the issue traffic are minimal would establish this factor. See, 
e.g., E.I. DuPont, NOR 42125, slip op. at 323 n.1709 (noting that 
``there are a variety of reasons unrelated to transportation economics 
that [a shipper] might use certain alternatives (e.g., to serve 
customers without rail access, to accommodate low volume purchasers, or 
to expedite emergency shipments)''). As might be expected in a case-by-
case fact-specific inquiry, the agency has accepted varying percentages 
of truck movements as proof of effective competition. Compare Amstar 
Corp. v. Atchison, Topeka & Santa Fe Ry., NOR 37478, slip op. at 7 (ICC 
served Dec. 8, 1987) (finding that effective competition existed even 
where complainants had shipped 98.5% of the issue movements by rail), 
with McCarty Farms v. Burlington N. Inc., 3 I.C.C.2d 822, 829-33 (1987) 
(finding no effective competition existed despite a trucking 
alternative accounting for 20%-25% of the movements). Given today's 
transportation market, including the state of truck competition, and 
the Board's experience with market dominance determinations in recent 
rate cases, the Board proposes that a complainant that shows that it 
has used trucking for 10% or fewer of its movements subject to the rate 
at issue over a five-year period will have made a prima facie showing 
for this factor concerning the absence of effective truck competition. 
Although the agency has found an absence of market dominance in cases 
where less than 10% of the issue traffic has moved by truck, the Board 
proposes that a 10% level is an appropriate threshold for a complainant 
to demonstrate that its truck options are ineffective, based on its 
limited use of the option over a historical period. Unlike complainants 
that regularly move large volumes of traffic by truck, complainants 
that move less than 10% of their traffic by truck, despite rates with 
high R/VC ratios and the absence of intramodal and barge competition, 
are reasonably likely to have persuasive arguments for why trucking 
does not provide effective competition, including customer contracts, 
product characteristics, and price of the trucking alternative. See, 
e.g., M&G Polymers 2012, NOR 42123, slip op. at 19-21, 24-34 
(addressing, among other things, customer requirements and product 
integrity issues in the context of a market dominance analysis). Such a 
showing would assist the Board in making a market dominance 
determination more expeditiously.
    The Board recognizes that it has found market dominance in cases 
where complainants utilize trucks for more than 10% of their movements. 
Accordingly, the Board specifically seeks comment on whether, and if 
so, how the truck movement percentage threshold should be implemented. 
The Board invites public commenters to include detailed quantitative 
and qualitative information in support of any alternative truck 
movement percentage threshold. As with the 500-highway-mile threshold, 
and all the other factors as well, a defendant railroad would have the 
opportunity in its reply evidence to argue that despite the 10% 
threshold, the carrier is not market dominant for the movement. The 
Board proposes that five years \11\ is an appropriate lookback period 
for truck movement data because it is recent enough to reflect a 
complainant's current business operations and long enough to capture a 
snapshot of its historical use of trucks.
---------------------------------------------------------------------------

    \11\ Complainants with new traffic that does not go back a full 
five years would be permitted to submit the available months or 
years of data for the movement.
---------------------------------------------------------------------------

    No Practical Build-out Option. The term ``build-out'' has been used 
by the agency to refer to possible competitive alternatives that could 
be accessed if the complainant makes certain infrastructure 
investments. The Board proposes that one factor of a prima facie 
showing of market dominance under the streamlined approach would be 
that a complainant demonstrate, by a short plain statement in a 
verified statement from an appropriate official or other means, that it 
has no practical build-out option due to physical, regulatory, 
financial, or other issues (or combination of issues).\12\ The 
streamlined market dominance option would not be available when build-
out alternatives are practical, although such a complainant could still 
attempt to show in a non-streamlined market dominance presentation that 
the build-out does not provide effective competition. In cases where 
there is no practical build-out option, it would assist the Board in 
making a market dominance determination more expeditiously.
---------------------------------------------------------------------------

    \12\ Physical issues include geographic constraints, such as the 
inability to obtain a right-of-way to the connecting carrier. 
Regulatory issues include legal barriers, such as prohibitive 
environmental permitting processes. Financial issues include a 
determination that the expense of the build-out would not be cost 
effective in light of the potential transportation rate savings.
---------------------------------------------------------------------------

    Railroad arguments that potential build-outs are available--
although not typically found by the Board to be practical alternatives 
\13\--can significantly complicate market dominance presentations. A 
complainant may not have information

[[Page 48887]]

to address build-out options unless it has studied those options. But a 
defendant railroad might be able to identify hypothetical potential 
competitive options for the complainant's traffic. This possibility 
likely leaves some complainants unsure as to how much information to 
affirmatively include in their opening presentation about potential 
competitive options that a railroad might identify. Such uncertainty 
could significantly increase litigation costs and dissuade complainants 
from bringing cases to the Board.
---------------------------------------------------------------------------

    \13\ See, e.g., Consumers Energy Co. v. CSX Transp., Inc., NOR 
42142, slip op. at 295-96 (STB served Jan. 11, 2018) (finding an 
alternative which would require building additional rail 
infrastructure to be not feasible); Tex. Mun. Power Agency v. 
Burlington N. & Santa Fe Ry., 6 S.T.B. 573, 584 (2003) (finding that 
constructing a 13.5-mile spur track to reach a competing railroad 
that would cost at least $49 million was not feasible); W. Tex. 
Utils. Co. v. Burlington N. R.R., 1 S.T.B. 638, 651 (1996), aff'd 
sub nom. Burlington N. R.R. v. STB, 114 F.3d 206 (D.C. Cir. 1997) 
(finding two potential rail line build-out alternatives costing $62 
million and $79 million to not be realistic).
---------------------------------------------------------------------------

    Therefore, the Board proposes a factor that would limit the 
evidentiary burden and simplify the requirement for complainants while 
also ensuring that the Board obtains information about build-out 
alternatives that may be relevant to the competitive landscape. To 
demonstrate this factor of a market dominance prima facie showing, a 
complainant would need to submit a short plain statement in a verified 
statement by an appropriate official, or otherwise demonstrate, that it 
has no practical build-out alternative. For example, the complainant 
must state whether the impracticality is due to physical, regulatory, 
financial, or other issues (or combination of issues). If that showing 
cannot be made, the complainant would be required at the outset to 
address in some detail in its opening, through the non-streamlined 
market dominance presentation, why any potential build-out(s) would not 
provide effective competition.

Mechanics

    Many of the facts to support these proposed prima facie factors are 
available to complainants at the pleading stage. Accordingly, the Board 
expects that complainants would be able to plead these factors in most 
cases and potentially negotiate stipulations with defendant carriers 
that would avoid costly discovery. Further, as discussed above, with 
respect to some of the factors, a verified statement from an 
appropriate official(s) with knowledge of the facts would be sufficient 
to meet the complainant's prima facie showing. By establishing the list 
of factors set out above, the Board would find by rule that a 
complainant that meets each of the required factors will have made a 
prima facie showing of market dominance. If a complainant determines 
that it is not able to demonstrate one of the required factors, it 
would not choose this streamlined approach at the beginning of the 
case, but would instead need to choose a non-streamlined market 
dominance presentation with additional detailed information about its 
transportation options. If a complainant elects to use the streamlined 
market dominance approach and the Board finds that market dominance has 
not been shown, the complainant may not submit a new rate case 
involving the same traffic using the non-streamlined market dominance 
presentation unless there are changed circumstances (or other factors 
under 49 U.S.C. 1322(c)). For purposes of this streamlined approach, 
the disclosures required under 49 CFR 1111.2(a) and (b) \14\ would 
apply to a complainant electing to use this streamlined approach.
---------------------------------------------------------------------------

    \14\ Under the Board's existing regulations, section 1111.2(a) 
requires that, with any rate complaint submitted under simplified 
standards, a complainant must submit, inter alia, the URCS Phase III 
inputs. Likewise, section 1111.2(b) requires such a complainant to 
``provide to the defendant all documents relied upon in formulating 
its assessment of a feasible transportation alternative and all 
documents relied upon to determine the inputs to the URCS Phase III 
program.''
---------------------------------------------------------------------------

    The Board's proposed streamlined market dominance approach would 
not result in a shifting of the burden for market dominance. The burden 
for establishing market dominance remains on the complainant, as it 
does with other issues in rate reasonableness cases. But the proposed 
approach would allow a complainant that can demonstrate the factors to 
make a prima facie showing that it has met its ``burden of establishing 
the absence of effective competition from other rail carriers or modes 
of transportation for the traffic to which the challenged rate 
applies.'' Total Petrochems. 2013, NOR 42121, slip op. at 28.
    As stated above, this streamlined approach would not deprive 
railroads of their opportunity to defend themselves by rebutting a 
complainant's prima facie showing. Carriers would be permitted to 
refute any of the prima facie factors of the complainant's case, or 
otherwise show that effective competition exists for the traffic at 
issue. As in a non-streamlined market dominance presentation, a 
complainant under this new approach would have the opportunity to 
respond to the railroad's reply evidence in its rebuttal submission (or 
in the case of a matter brought under the Final Offer Rate Review 
procedure in the optional hearing described below). The new approach 
described in this decision should help narrow the focus of arguments on 
reply and rebuttal. Accordingly, the Board would impose a 50-page 
limit, inclusive of exhibits and verified statements, on each of the 
parties' reply and rebuttal submissions on market dominance in 
proceedings where the complainant uses the streamlined approach.\15\ 
``The Board believes the page limit will encourage parties to focus 
their [arguments] on the most important issues.'' Expediting Rate 
Cases, EP 733, slip op. at 12 (STB served Nov. 30, 2017).
---------------------------------------------------------------------------

    \15\ The Board has found that a 50-page limit is an appropriate 
threshold to provide the parties with an adequate opportunity to 
address complex issues in rate cases, including petitions for 
reconsideration and briefs. E.I. DuPont de Nemours & Co. v. Norfolk 
S. Ry., NOR 42125, slip op. at 2 (STB served June 11, 2014); Sunbelt 
Chlor Alkali Partnership v. Norfolk S. Ry., NOR 42130, slip op. at 2 
(STB served July 25, 2014).
---------------------------------------------------------------------------

    To help facilitate building the record on market dominance under 
the streamlined approach, the Board proposes a new delegation of 
authority under 49 CFR 1011.6 to an Administrative Law Judge (ALJ) to 
hold an on-the-record telephonic market dominance evidentiary hearing, 
at the complainant's option, within seven days after the due date of 
complainant's rebuttal (or in the case of a matter brought under the 
Final Offer Rate Review procedure within seven days after the due date 
of the parties' reply). The ALJ's role would be to allow the parties to 
clarify their market dominance positions under oath, and to build upon 
issues presented by the parties through critical and exacting 
questioning. Given this hearing, the complainant may elect whether to 
file rebuttal evidence on market dominance issues (in cases that 
provide for rebuttal, i.e. cases not brought under the Final Offer Rate 
Review procedure) or to rely on the ALJ hearing to rebut the 
defendant's reply evidence. Within four days of the evidentiary 
hearing, a transcript of the hearing would be entered into the docket. 
The Board would take the entire record into consideration, including 
the transcript from the ALJ hearing, when reaching its final conclusion 
on market dominance. The Board's determinations would occur in 
accordance with the deadlines set out in 49 CFR 1111.9 and 1111.10, 
and, if adopted, the new deadlines proposed in Final Offer Rate Review, 
Docket No. EP 755 et al.
    The Board concludes that the proposed approach would have the 
benefit of reducing the complexity of market dominance presentations 
for many complainants without limiting railroads' ability to mount a 
thorough defense. The Board finds that the availability of a 
streamlined market dominance approach would reduce unneeded burdens 
that could dissuade complainants from bringing cases. Moreover, 
reducing the time and expense associated with litigating market 
dominance is particularly

[[Page 48888]]

important for smaller rate disputes. The proposed rule would also help 
the Board achieve the statutory requirement to ensure the expeditious 
handling of challenges to the reasonableness of railroad rates, 49 
U.S.C. 10704(d)(1), and further the rail transportation policies of 
providing for the expeditious handling and resolution of all 
proceedings, section 10101(15), fostering sound economic conditions in 
transportation and ensuring effective competition, section 10101(5), 
and maintaining reasonable rates where there is an absence of effective 
competition, section 10101(6). Accordingly, the Board invites comment 
on the proposed streamlined market dominance approach.

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 notice of proposed rulemaking, the agency must either include an 
initial regulatory flexibility analysis, section 603(a), or certify 
that the proposed rule would not have a ``significant impact on a 
substantial number of small entities,'' section 605(b). Because the 
goal of the RFA is to reduce the cost to small entities of complying 
with federal regulations, the RFA requires an agency to perform a 
regulatory flexibility analysis of small entity impacts only when a 
rule directly regulates those entities. In other words, the impact must 
be a direct impact on small entities ``whose conduct is circumscribed 
or mandated'' by the proposed rule. White Eagle Coop. v. Conner, 553 
F.3d 467, 480 (7th Cir. 2009).
    This proposal would not have a significant economic impact upon a 
substantial number of small entities, within the meaning of the 
RFA.\16\ The proposal imposes no additional record-keeping by small 
railroads or any reporting of additional information. Nor do these 
proposed rules circumscribe or mandate any conduct by small railroads 
that is not already required by statute: The establishment of 
reasonable transportation rates when a carrier is found to be market 
dominant. Small railroads have always been subject to rate 
reasonableness complaints and their associated litigation costs, 
including addressing whether they have market dominance over traffic. 
Finally, as the Board has previously concluded, the majority of 
railroads involved in these rate proceedings are not small entities 
within the meaning of the Regulatory Flexibility Act. Simplified 
Standards, EP 646 (Sub-No. 1), slip op. at 33-34. Furthermore, since 
the inception of the Board in 1996, only three of the 51 cases filed 
challenging the reasonableness of freight rail rates have involved a 
Class III rail carrier as a defendant. Those three cases involved a 
total of 13 Class III rail carriers. The Board estimates that there are 
approximately 656 Class III rail carriers. Therefore, the Board 
certifies under 5 U.S.C. 605(b) that this proposed rule, if 
promulgated, will not have a significant economic impact on a 
substantial number of small entities within the meaning of the RFA.
---------------------------------------------------------------------------

    \16\ For the purpose of RFA analysis for rail carriers subject 
to Board jurisdiction, 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 $39,194,876 or less when adjusted for inflation using 
2018 data. Class II rail carriers have annual operating revenues of 
less than $250 million or $489,935,956 when adjusted for inflation 
using 2018 data. The Board calculates the revenue deflator factor 
annually and publishes the railroad revenue thresholds in decisions 
and on its website. 49 CFR 1201.1-1; Indexing the Annual Operating 
Revenues of R.Rs., EP 748 (STB served June 14, 2019).
---------------------------------------------------------------------------

    This decision will be served upon the Chief Counsel for Advocacy, 
Offices of Advocacy, U.S. Small Business Administration, Washington, DC 
20416.

Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3521, 
Office of Management and Budget (OMB) regulations at 5 CFR 
1320.8(d)(3), and in the Appendix, the Board seeks comments about the 
impact of the revisions in the proposed rule to the currently approved 
collection of Complaints (OMB Control No. 2140-0029) regarding: (1) 
Whether the collection of information, as modified in the proposed rule 
and further described below, 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.
    The proposed simplified market dominance approach is intended to 
provide a less burdensome alternative to a non-streamlined market 
dominance presentation and is estimated, on balance, to result in five 
additional complaints filed each year. Filing a complaint has been 
estimated to require an annual hour burden of 469 hours and an annual 
``non-hour burden'' cost of $1,462. See Supporting Statement for 
Modification & OMB Approval Under the Paperwork Reduction Act & 5 CFR 
pt. 1320, OMB Control No. 2140-0029 (Jan. 2018), available at https://www.reginfo.gov/public/do/DownloadDocument?objectID=78860402. For the 
reasons discussed above, filing a complaint with the streamlined market 
dominance approach is likely to require less time and expenditure than 
other complaints. Accordingly, the Board estimates that this new 
proposed method would entail an annual hour burden of 250 hours per 
complaint and an annual ``non-hour burden'' cost of $780 per complaint. 
These additional complaints are estimated to add a total annual hour 
burden of 1,250 hours and $3,900 of total annual ``non-hour burden'' 
cost under the PRA. The Board welcomes comment on the estimates of 
actual time and costs of complaints, as detailed below in the Appendix. 
Other information pertinent to complaints, including the simplified 
market dominance presentations, is also included in the Appendix. The 
proposed rule will be submitted to OMB for review as required under 44 
U.S.C. 3507(d) and 5 CFR 1320.11. Comments received by the Board 
regarding the information collection will also be forwarded to OMB for 
its review when the final rule is published.

Administrative Practice and Procedure; Investigations

    It is ordered:
    1. The Board proposes to amend its rules as set forth in this 
decision. Notice of the proposed rules will be published in the Federal 
Register.
    2. Comments regarding the proposed rules are due by November 12, 
2019. Replies are due by January 10, 2020.
    3. 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.
    4. This decision is effective on its service date.

[[Page 48889]]

List of Subjects

49 CFR part 1011

    Administrative practice and procedure; Authority delegations 
(government agencies); Organization and functions (government 
agencies).

49 CFR part 1111

    Administrative practice and procedure; Investigations.

    Decided: September 11, 2019.

    By the Board, Board Members Begeman, Fuchs, and Oberman.
Jeffrey Herzig,
Clearance Clerk.

    For the reasons set forth in the preamble, the Surface 
Transportation Board proposes to amend parts 1011 and 1111 of title 49, 
chapter X, of the Code of Federal Regulations as follows:

PART 1011--BOARD ORGANIZATION; DELEGATIONS OF AUTHORITY

0
1. The authority citation for part 1011 continues to read as follows:

    Authority: 5 U.S.C. 553; 31 U.S.C. 9701; 49 U.S.C. 1301, 1321, 
11123, 11124, 11144, 14122, and 15722.

0
2. Amend Sec.  1011.6 by adding paragraph (i) to read as follows:


Sec.  1011.6  Delegations of authority by the Chairman.

* * * * *
    (i) In matters involving the streamlined market dominance approach, 
authority to hold a telephonic evidentiary hearing on market dominance 
issues is delegated to administrative law judges, as described in Sec.  
1111.12(e) of this chapter.

PART 1111--COMPLAINT AND INVESTIGATION PROCEDURES

0
3. The authority citation for part 1111 is revised to read as follows:

    Authority:  49 U.S.C. 10701, 10702, 10704, 10707, 11701, and 
1321.

0
4. Amend Sec.  1111.2 by revising the last sentence of paragraph (a) 
introductory text and paragraph (b) to read as follows:


Sec.  1111.2  Content of formal complaints; joinder.

    (a) * * * If the complainant seeks to use the simplified standards 
or the streamlined market dominance approach, it should support this 
request by submitting, at a minimum, the following information:
* * * * *
    (b) Disclosure required with complaints in simplified standards 
cases and in cases using the streamlined market dominance approach. The 
complainant must provide to the defendant all documents relied upon in 
formulating its assessment of a feasible transportation alternative and 
all documents relied upon to determine the inputs to the URCS Phase III 
program.
* * * * *
0
5. Amend Sec.  1111.9 by revising paragraph (a) to read as follows:


Sec.  1111.9  Procedural schedule in stand-alone cost cases.

    (a) Procedural schedule. Absent a specific order by the Board, the 
following general procedural schedule will apply in stand-alone cost 
cases after the pre-complaint period initiated by the pre-filing 
notice:
    (1) Day 0--Complaint filed, discovery period begins.
    (2) Day 7 or before--Conference of the parties convened pursuant to 
Sec.  1111.11(b).
    (3) Day 20--Defendant's answer to complaint due.
    (4) Day 150--Discovery completed.
    (5) Day 210--Complainant files opening evidence on absence of 
intermodal and intramodal competition, variable cost, and stand-alone 
cost issues.
    (6) Day 270--Defendant files reply evidence to complainant's 
opening evidence.
    (7) Day 305--Complainant files rebuttal evidence to defendant's 
reply evidence.
    (8) Day 312--In cases using the streamlined market dominance 
approach, a telephonic evidentiary hearing before an administrative law 
judge, as described in Sec.  1111.12(e), will be held at the discretion 
of the complainant within 7 days after the complainant's rebuttal 
evidence on market dominance issues is due.
    (9) Day 335--Complainant and defendant file final briefs.
    (10) Day 485 or before--The Board issues its decision.
* * * * *
0
6. Amend Sec.  1111.10 by revising paragraph (a) to read as follows:


Sec.  1111.10  Procedural schedule in cases using simplified standards.

    (a) Procedural schedule. Absent a specific order by the Board, the 
following general procedural schedules will apply in cases using the 
simplified standards:
    (1)(i) In cases relying upon the Simplified-SAC methodology:
    (A) Day 0--Complaint filed (including complainant's disclosure).
    (B) Day 10--Mediation begins.
    (C) Day 20--Defendant's answer to complaint (including defendant's 
initial disclosure).
    (D) Day 30--Mediation ends; discovery begins.
    (E) Day 140--Defendant's second disclosure.
    (F) Day 150--Discovery closes.
    (G) Day 220--Opening evidence.
    (H) Day 280--Reply evidence.
    (I) Day 310--Rebuttal evidence.
    (J) Day 317--In cases using the streamlined market dominance 
approach, a telephonic evidentiary hearing before an administrative law 
judge, as described in Sec.  1111.12(e), will be held at the discretion 
of the complainant within 7 days after the complainant's rebuttal 
evidence is due.
    (K) Day 320--Technical conference (market dominance and merits, 
except for cases using the streamlined market dominance approach, in 
which the technical conference will be limited to merits issues).
    (L) Day 330--Final briefs.
    (ii) In addition, the Board will appoint a liaison within 10 
business days of the filing of the complaint.
    (2)(i) In cases relying upon the Three-Benchmark methodology:
    (A) Day 0--Complaint filed (including complainant's disclosure).
    (B) Day 10--Mediation begins. (STB production of unmasked Waybill 
Sample.)
    (C) Day 20--Defendant's answer to complaint (including defendant's 
initial disclosure).
    (D) Day 30--Mediation ends; discovery begins.
    (E) Day 60--Discovery closes.
    (F) Day 90--Complainant's opening (initial tender of comparison 
group and opening evidence on market dominance). Defendant's opening 
(initial tender of comparison group).
    (G) Day 95--Technical conference on comparison group.
    (H) Day 120--Parties' final tenders on comparison group. 
Defendant's reply on market dominance.
    (I) Day 150--Parties' replies to final tenders. Complainant's 
rebuttal on market dominance.
    (J) Day 157--In cases using the streamlined market dominance 
approach, a telephonic evidentiary hearing before an administrative law 
judge, as described in Sec.  1111.12(e), will be held at the discretion 
of the complainant within 7 days after the complainant's rebuttal 
evidence is due.
    (ii) In addition, the Board will appoint a liaison within 10 
business days of the filing of the complaint.
* * * * *
0
7. Add section Sec.  1111.12 to read as follows:


Sec.  1111.12  Streamlined Market Dominance.

    (a) A complainant may elect to pursue the streamlined market 
dominance

[[Page 48890]]

approach to market dominance if the challenged movement satisfies the 
factors listed in paragraphs (a)(1) through (a)(6) of this section. The 
Board will find a complainant has made a prima facie showing on market 
dominance when it can demonstrate the following with regard to the 
traffic subject to the challenged rate:
    (1) The movement has an R/VC ratio of 180% or greater;
    (2) The movement would exceed 500 highway miles between origin and 
destination;
    (3) There is no intramodal competition from other railroads;
    (4) There is no barge competition;
    (5) The complainant has used truck for 10% or fewer of its 
movements subject to the rate at issue over a five-year period; and
    (6) The complainant has no practical build-out alternative due to 
physical, regulatory, financial, or other issues (or combination of 
issues).
    (b) A complainant may rely on any competent evidence, including a 
verified statement from an appropriate official(s) with knowledge of 
the facts, in demonstrating the factors set out in paragraph (a) of 
this section. In demonstrating the revenue to variable cost ratio, a 
complainant must show its quantitative calculations.
    (c) When a complainant elects to utilize the streamlined market 
dominance approach, it must provide the initial disclosures found in 
Sec.  1111.2 (a) and (b), regardless of the rate reasonableness 
methodology selected (including stand-alone cost cases).
    (d) A defendant's reply evidence under the streamlined market 
dominance approach may address the factors in paragraph (a) of this 
section and any other issues relevant to market dominance. A 
complainant may elect to submit rebuttal evidence on market dominance 
issues (in cases that provide for rebuttal, i.e. cases not brought 
under the Final Offer Rate Review procedure). Reply and rebuttal 
filings under the streamlined market dominance approach are each 
limited to 50 pages, inclusive of exhibits and verified statements.
    (e) Pursuant to the authority under Sec.  1011.6 of this chapter, 
an administrative law judge will hold a telephonic evidentiary hearing 
on the market dominance issues at the discretion of the complainant 
within 7 days after the complainant's rebuttal evidence is due. In 
Final Offer Rate Review matters, the hearing will be held within 7 days 
after the parties' replies are due. The Board will arrange to receive 
the hearing transcript within 4 days of when the evidentiary hearing is 
held. The oral hearing transcript will be part of the docket in the 
proceeding. Market dominance determinations will be made by the Board.

    Note:  The following appendix will not appear in the Code of 
Federal Regulations.

    Title: Complaints under 49 CFR part 1111.
    OMB Control Number: 2140-0029.
    STB Form Number: None.
    Type of Review: Revision of a currently approved collection.
    Summary: As part of its continuing effort to reduce paperwork 
burdens, and as required by the Paperwork Reduction Act of 1995 
(PRA), 44 U.S.C. 3501-3521, the Surface Transportation Board (Board) 
gives notice that it is requesting from the Office of Management and 
Budget (OMB) approval for the revision of the currently approved 
information collection, Complaints under 49 CFR part 1111, OMB 
Control No. 2140-0029, as further described below. The requested 
revision to the currently approved collection is necessitated by 
this Notice of Proposed Rulemaking (NPRM), which is expected to 
increase the number of complaints filed with the Board because of 
the addition of the proposed streamlined market dominance approach. 
All other information collected by the Board in the currently 
approved collection is without change from its approval.
    Respondents: Affected shippers, railroads, and communities that 
seek redress for alleged violations related to unreasonable rates, 
unreasonable practices, service issues, and other statutory claims.
    Number of Respondents: Nine.
    Frequency: On occasion. In recent years, respondents have filed 
approximately four complaints per year with the Board. In Final 
Offer Rate Review, EP 755 et al. (STB served September 12, 2019), 
the Board simultaneously issued a separate NPRM that also impacts 
the Board's existing collection of complaints. In that decision, the 
Board estimates that the proposed alternative (Final Offer Rate 
Review) complaint would result in the collection of approximately 
four additional complaints annually. The modification of the Board's 
existing collection for those additional complaints is noticed in 
Docket No. EP 755 et al. and incorporated in the burdens below. In 
this NPRM, based on the addition of the simplified market dominance 
approach, the Board anticipates that approximately five additional 
complaints would be filed annually, including those from Docket No. 
EP 755 et al. Combining the existing complaints and the additional 
complaints resulting from the proposed rules in Docket No. EP 755 et 
al. and this NPRM, the estimated number of complaints filed annually 
is approximately nine.
    Total Burden Hours (annually including all respondents): 3,126 
(sum of (i) estimated hours per complaint (469) x total number of 
estimated, existing complaints (4), and (ii) estimated hours per 
additional complaints (250) x total number of those complaints (5)).
    Total ``Non-Hour Burden'' Cost (such as start-up costs and 
mailing costs): $9,748 (sum of (i) estimated non-hour burden cost 
per complaint ($1,462) x total number of estimated, existing 
complaints (4), and (ii) estimated non-hour burden cost per 
additional complaint ($780) x total number of those complaints (5)).
    Needs and Uses: Under the Board's regulations, persons may file 
complaints before the Board pursuant to 49 CFR part 1111 seeking 
redress for alleged violations of provisions of the Interstate 
Commerce Act, Public Law 104-88, 109 Stat. 803 (1995). In the last 
few years, the most significant complaints filed at the Board allege 
that railroads are charging unreasonable rates or that they are 
engaging in unreasonable practices. See, e.g., 49 U.S.C. 10701, 
10704, and 11701. As described in more detail above in the NPRM, the 
Board is proposing new rules that would allow complainants in these 
rate cases to use a new simplified market dominance approach to make 
a prima facie showing before the Board. As a result of the reduction 
in burden from this new simplified approach, it is expected that 
additional complaints would be filed. The collection by the Board of 
these complaints, and the agency's action in conducting proceedings 
and ruling on the complaints, enables the Board to meet its 
statutory duties.

[FR Doc. 2019-20087 Filed 9-16-19; 8:45 am]
 BILLING CODE 4915-01-P