and for further determinations with regard to the reasonable rate structure there is really let me get to the chase in terms of the two points there's really two points with regard to the appeal one is the adoption of i operate in assumptions in the operating plan not as the result of analysis but as a as a as a result of the adoption of a hump yard and the second point that's really in the briefs is the allowance what we would say is the allowance of the barrier of entry via a mortgage calculation as opposed to a coupon rate calculation with regard to interest and taxes i'd like to take those in that the with regard to the barrier to entry point the structure of the stand stand alone essay r is twenty four percent debt seventy six percent equity with respect to just to clarify something in the briefs that is just so that you've got it there are two tables that are referenced in the briefs table and table i table he is a calculation with regard to interest in mortgage table is that discount a cash flow calculation for the discounted cash flow calculation all of the parties including the board use a coupon method so that's not at issue what is at issue is the interest schedule which is the tax issue and sunbelt uses coupon and they take you right off i think is a very complex case and i don't know the answer for sure but it seems to me  does not take into account at all the repayment of the assets it seems to me that you just laid in a fundamental tenet of the stand alone cost test the sec test and and the rate that would result from that would would have the railroad the hypothetical railroad at the end of the many of the years we talking about that it calculate they would have been no monies from that rate to goto damage as in the principle of the debt and that seems to me to just be wrong and therefore the board is correct in requiring that it be some and much as the asset cost itself thank you your honor because you get right to the issue and our view with regard to that is there certainly case law under the usa see test that stands for the proposition that you just pay you have to pay off the building price right just like i have to pay off my student loans as opposed to fold them into my mortgage to use a real example  in terms of there's another principle however in the standalone task cost test that is enshrined in the case law and in the briefs and that is that there should be no barrier to entry and operating railroads operate under a coupon method so that they simply is or any case where the board is allowed to ship or to use a debt amortization plan similar to the coupon method that you propose the i think that there are cases i think that there are situations that go both ways your honor in terms of this particular situation the coupon and method allows you to and i'm not to be more clear there are certainly for example in the d c s situation right you're using a coupon method in the tax amortizations method they use a mortgage interest method the in terms of so there are certainly occasions in which a coupon method is used our whole point with regard to this is there is a barrier to entry to understand your point but that question was a lot more specific already that the board could have relied on to allow you to use the method that you're advocating for i'm not sure of a third of that goes when i and others know this already to the point i'm trying to understand if there's no authority how could it be arbitrary for the board to rely on its prior precedent that and you not challenge in that i think the barrier was already going to move to my second point the were actually our first point and the first point that we want that we were trying to make is this  with regard to the hump yard ok but as a result of the hump yard all of the operating assumptions in the r t c plan the rail traffic controller plan are adopted so once the board are all that maybe i'm go i assume if you say no downstream differences between what the op yard would have produced in the r t c analysis and what you did have you not waived it didn't bring it up till the petition for rehearing and then you didn't tell the whole story even then well there's a lot of stories told in this record your honor and with regard to it's  to be quite blunt it's amazing that the board got this wrong because it comes right from the r t c model and both parties used three coming in and three coming out and we point that out in our opening brief with regard to the first time and these proceedings when we focus on three and three that is when we're focused on three and three in terms of the record it is in the record below and we point that out i think on page thirty three footnote ten where it's in the record opening brief but with respect to the way that it unfolds in front of the the board is we certainly see the argument considered in the dissent  commissioner bergman i think it is who says the majority use that as a basis to impose hundreds of millions of dollars of costs on the essay are so in terms of the fundamental premise and that is you know the fundamental premise is basically can you take the hump yard out and then you know put it back into a model to run the r t c and in the dissent it is clear that the dissent identifies that as an issue from the briefs and the and the  modeling that was done before it because the dissent clearly identifies the issue of whether it can come out maybe that when a dentist buys that it doesn't mean that it necessarily flowed from anything that had been our argument it may be it may be something that the dissent raised on its own for the first time it is certainly where the dissent would have picked that up when anything that had been argued before i think it comes straight from the modeling that the parties have done because that is an expert agency that does nee it is an expert agency that is need to keep in the modeling that is done and if you dig into the modeling that is done you should be able to tell what the whether or not you can essentially left the hump yard out we  below sun belt in the petition for reconsideration says that the board can and should have substituted the hump yard for sunbelt flight guard in the operating plan and then it's not until the reconsideration decision comes out that you can see that the board completely gets the factual record wrong and they don't explain it at any time prior to this pain and a petition for rehearing petition for reconsideration you say traffic was put in and number two the same dwell times were assumed and put in but you do not say the crucial fact that the receiving thing your honor it's i have the briefs in front of me you're absolutely right so you're reading with regard to its j a twelve forty three in the record in terms of the it is clear that our that s the board that you can lift out the hump yard and it models to the r t c i can't raise cite for you all of the factors that go into that in terms of why it is you can left it  out and so forth but embedded in the record in bed in the expert reports that are done for the board which itself is an expert agency are all of the underlying assumptions so they have a record in front of them that is quite voluminous with regard to this and they can left it out i think i see your consulting i will sit down unless there's some other thank you mr martin you have say five minutes for rebuttal thank you your honor mystery court my name is james reading them appearing today on behalf of the surface transportation board in the united states government i'll be sharing time with the counsel for the intervenor this morning the saar constructed by a complainant must have an operating plan that works some belt's operating plan however could not work it did not have an adequate facility at the birmingham yard to provide classification and blocking for the traffic it intended to serve over ninety percent of the traffic on the system move through the operating plan is there do you concede that they were wrong in that regard oa do you think that they were still right it's a contemptuous question your honor and let me start by saying yes the board was an error in the example it gave of the difference between receiving and departure tracks as modeled in the r t c model itself the what i want to do is back up and talk about this case however that that is not the only issue that has been raised by sunbelt on appeal here they've raised the issue of whether the board erred in terms of adding or selecting allowing n s to submit an entirely new operating plan they raise the issue this primary driver argument that they raised for the first time on appeal which has in their reply brief morphed into an r t c model and put argument which the board has never seen before they talk about the board should have required supplement eleven events on the case which we do not believe was necessary let me tell you a little bit inclined to think the boat is right on all of those things  yard into the sunbelt operating plan and because sunbelt its input with respect to it with respect to the birmingham yard the input was exactly wrong with that would be and correct your honor and here is why the broader point remains the r t c model it's very complex simulation it's actually a computer model in which you have tracks built so you have to put in assumptions about your infrastructure do you double track do you single track do you have sightings do you have yards and you have to model how the tracks interact with your yards in this case the birmingham yard then you have to move your trains and put in assumptions about the as the trains move around the system and you can vary those you can move them quickly adding more engines or more slowly if you're trying to time then then you have to in to deal with bottlenecks that up that create created in the system so the board when it was talking about the complexity of the r t c model it's not only just modeling how the trains move into the hump yard but you also have the timing of when those trains come back out of the hump yard onto the system and you have to make some so you telling me that your opponent is wrong in their argument that the downstream output the  there is no perfect solution to the problem so the board requires the parties to develop the r t c models and then the board selects from the r t c models and it's an adversarial process and as you pointed out when you were talking to mr martin earlier the they never provided analysis of how the hump yard would operate within their own operating plan even on reconsideration and they don't race that hump yard substitution argument until reconsideration right that's correct your honor now and it's the board fault them for having raised it for the first time and then when it denies reconsideration very much so your honor at page six of the of the board's analysis but the board goes on to talk about the other impacts of the hump yard being inserted and it talks about other factors which the board didn't have the record on which to make that decision and including the road property and investment decision so the parties argue about everything from how much is it cost to build a track how much does it cost to build a switching place where trucks cross how much does it cost to build the building in facilities for the yard crews that operate and none of this was on the record and clearly the hump yard was different from the flat yard that sunbelt had proposed including in its evidence i have a question about the procedure that the board followed you argue that the footnote in duke energy requiring o'reilly to make a motion to the board is limited to situations where the shippers evidence is impossible to respond to and here the board found that because some doubt left the humpy are now it's plan there was nothing for the railroad to reply to so doesn't that mean that the duke energy footnote applies here in the board should have required the right to make a motion and then allow it to submit completely separate new evidence on its own all there is another case out there called general procedures which sort of help set out how the evidentiary submissions are supposed to be made and sacked cases and what it basically says is the railroad is limited to replying to deficiencies in the shipper's evidence and that's what that's what the railroad did in this case your honor the railroad looked at an operating plan and the impact of no hump yard was no blocking and classification and intermediate yards on their opening evidence and specifically the sunbelt admits to that error and tries to correct it on rebuttal but not sufficiently because they didn't include the hump yard so they didn't have the facilities necessary for blocking and classification all and as we did was critique that evidence so under the board standard and duke n s if you actually look at the evidentiary standard the shipper if it submits infeasible or unsupported evidence then the railroad is a rep but if the railroad submit is feasible and realistic evidence in its reply evidence the board will use that evidence and that's exactly what happened here so the s in terms of critiquing the duke and his footnote is a little ambiguous it doesn't say what sort of motion is supposed to be brought clearly we don't believe that sunbelt thinks they should brought a motion to dismiss the case that would have been contrary to their interests but in this case the evidence wasn't so flawed as to prevent an ass from actually responding to the evidentiary submission with their own home p r drawn if i could i have a few minutes and not just new you have one thank you your honor i move briefly to the tax issue then i would start by saying judge prior in your earlier question to mr martin you asked whether the board had ever allow the use of a coupon method in a print prior case and the board has never allowed for purposes of calculating the tax shielding effect of the interest payments on the coupon method has never allowed for the debt amortization as a home mortgage loan as the petitioner in this case suggests its longstanding precedent that for purposes of calculating the interest the tatchell in effect on the interest payments the board requires asar to show that it can pay for its assets and therefore must pay down its debt we believe that this barrier to entry argument was waived below because it was never raised because of the foregoing we respectfully ask this court to deny the petition thank you mystery plan that sunbelt itself refused to make on rebuttal the boards as evidence there are rules that are specifically designed to give shippers a second chance to fix problems in their operating plan after they hear the railroads criticisms shippers can then make a choice as to what changes they want to make in that rebuttal operating plan to present to the board because the board has made very clear that it itself will not be delving into the details of operating plans weighing operating statistics it's going to pick one evident one party's evidence or the other and in fact it's even more favorable to shippers than that because as long as the shippers plan a species will it will be accepted regardless of whether the railroads plan is better if it's a ship represents a plan that's feasible that would be accepted here sunbelt failed to present a feasible operating plan and that is not contested on appeal that there is not an argument here that a that a rail at a stand alone railroad that did not have a hump yard at birmingham this keystone of the system which would have to classify twelve hundred cars day that it could operate without you know help facilities and it was not it is it is not and you know it has never been the board's policy that it will delve in operating plans and you know and mix and match items and are simulations but the board first said that when dealing with a yard of this magnitude that this that this yard a simply you're too critical to the system for us to stitch into the plan so i think there are multiple grounds you know for effects might be yes but yes i think i think that's right and i think it's important to you know to understand how what's happening in the hump yard could affect you know other you know train movements on the network so when we're talking about blocking and classification we're talking about you know what are the operations in that yard if you have a train coming and that has traffic that's bound for twenty different customers how are you going to block that and classify that and put it on other trains to move out so for example in norfolk operating plan the you know the blocking classification plan influence the train service plan because until you know what blocks have to go where you don't know what you know trains are moving where so it was reasonable for the board to consider these operating plans you know as a unit and that was that you know as we pointed out in our brief that was how this case was litigated you know below that you know both parties knew that you one plan or the other was going to be selected one other point i'd like to make is that it's easy to get t overstate the impact of this decision the board's decision has sixty pages talking about operating expense issues it delves into many operating expense issues and is weighing the party's evidence on things like you don't recruit rate and local but at least rates that i think in the discussion it was assumed that it was the hump yard that was the failure and sunbelt operating plan to which norfolk southern that that gave norfolk southern the right to reply evidence it was actually a complete absence of blocking a classification plan there was no such plan provided on opening and therefore the billboard held here as it's held in other places that that was a sufficient cause for the board to allow norfolk southern to present its own operating plan thank you your honor the three basic points the first is with regard to this notion of the r t c operating plan assumptions if you look at it as that there is a and then there's a set of r t c operating plan assumptions and that's just a part of the overall plan it's not the whole of the overall plan the board does no analysis whatsoever to railroads operating plan assumptions once you get outside the hump yard with sun belts operating plan assumptions the record is completely devoid of any analysis of that and the reason for that is because the board's decision with regard to hump yard is essential a like a domino and it knocks down the rest of the r t c modeling assumptions so there it is completely devoid of analysis and yes we do not challenge a number of other decisions of the board because they are entitled to deference as an expert agency but just structurally that's the way the model works with regard to the point with regard to the duke energy point and i think the duke energy case is the most on point case with regard to how the procedure is supposed to work the the board has it fundamentally wrong if you look at the duke energy case and there's not only the footnote but if you look at the duke energy case what the board's duty is to do is to look at the operating plan this that that is submitted by the shipper and analyze it in ask this question is it feasible and the board is also supposed to look at which portions are feasible and which portions are not feasible and that is what the debate is about with regard to the other side the railroads just submitting an entire operating plan that essentially is the six billion dollar gold plated operating plan as opposed to the four billion dollar operated operating plan or plan and entirely so with regard to duke energy the appropriate way to do this was that the railroad should have come back and the railroad should have had an analysis for the board to analyze all of those r t c operating assumptions because they actually were divorced and could be divorced from the hump yard decision numbers so there was a for the r t c operating plan right there's just a distinction between the operating plan for the r t c that is the a operating plan that the railroad ha and let's call it the be operating plan that sunbelt had there's nothing to do once you a either accept or reject the assumption that the hump yard is somehow impacting the model by each party and therefore you can essentially lift the model right out so what goes on in the petition for reconsideration is you know obviously sunbelt made the argument that a hump yard was not necessary but then ma alternative argument that that i read to you with regard to the record saying that you can clearly left it out whether they identify each and every factor i don't think is necessary in order to preserve the issue thank you runners thank you  we have your case