Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 15969 

incorporation-by-reference effective 

February 4, 1992 (57 FR 4162) . We 

reserve the amendment of 40 CFR part 

272, subpart KK for the codification of 

Ohio’s program changes until a later 

date. 

K. Statutory and Executive Order 

Reviews 

This rule only authorizes hazardous 

waste requirements pursuant to RCRA 

3006 and imposes no requirements 

other than those imposed by state law 

(see SUPPLEMENTARY INFORMATION, 

Section A. Why are revisions to state 

programs necessary?). Therefore, this 

rule complies with applicable executive 

orders and statutory provisions as 

follows: 

1. Executive Order 12866: Regulatory 

Planning and Review and Executive 

Order 13563: Improving Regulations 

and Regulatory Review 

The Office of Management and Budget 

has exempted this rule from its review 

under Executive Orders 12866 (58 FR 

51735, October 4, 1993) and Executive 

Order 13563 (76 FR 3821 January 21, 

2011). 

2. Paperwork Reduction Act 

This rule does not impose an 

information collection burden under the 

provisions of the Paperwork Reduction 

Act of 1995 (44 U.S.C. 3501 et seq.). 

3. Regulatory Flexibility Act 

This rule authorizes state 

requirements for the purpose of RCRA 

3006 and imposes no additional 

requirements beyond those required by 

state law. Accordingly, I certify that this 

rule will not have a significant 

economic impact on a substantial 

number of small entities under the 

Regulatory Flexibility Act (5 U.S.C. 601 

et seq.). 

4. Unfunded Mandates Reform Act 

Because this rule approves preexisting requirements under state law 

and does not impose any additional 

enforceable duty beyond that required 

by state law, it does not contain any 

unfunded mandate or significantly or 

uniquely affect small governments, as 

described in the Unfunded Mandates 

Reform Act of 1995 (Pub. L. 104–4). 

5. Executive Order 13132: Federalism 

Executive Order 13132 (64 FR 43255, 

August 10, 1999) does not apply to this 

rule because it will not have federalism 

implications (i.e., substantial direct 

effects on the States, on the relationship 

between the national government and 

the states, or on the distribution of 

power and responsibilities among the 

various levels of government). 

6. Executive Order 13175: Consultation 

and Coordination With Indian Tribal 

Governments 

Executive Order 13175 (65 FR 67249, 

November 9, 2000) does not apply to 

this rule because it will not have tribal 

implications (i.e., substantial direct 

effects on one or more Indian tribes, or 

on the relationship between the Federal 

Government and Indian tribes, or on the 

distribution of power and 

responsibilities between the Federal 

Government and Indian tribes.) 

7. Executive Order 13045: Protection of 

Children From Environmental Health 

and Safety Risks 

This rule is not subject to Executive 

Order 13045 (62 FR 19885, April 23, 

1997), because it is not economically 

significant as defined in Executive 

Order 12866 and because the EPA does 

not have reason to believe the 

environmental health or safety risks 

addressed by this action present a 

disproportionate risk to children. 

8. Executive Order 13211: Actions That 

Significantly Affect Energy Supply, 

Distribution, or Use 

This rule is not subject to Executive 

Order 13211 (66 FR 28355, May 22, 

2001), because it is not a significant 

regulatory action as defined in 

Executive Order 12866. 

9. National Technology Transfer 

Advancement Act 

EPA approves state programs as long 

as they meet criteria required by RCRA, 

so it would be inconsistent with 

applicable law for EPA, in its review of 

a state program, to require the use of any 

particular voluntary consensus standard 

in place of another standard that meets 

requirements of RCRA. Thus, the 

requirements of section 12(d) of the 

National Technology Transfer and 

Advancement Act of 1995 (15 U.S.C. 

272 note) do not apply to this rule. 

10. Executive Order 12988 

As required by section 3 of Executive 

Order 12988 (61 FR 4729, February 7, 

1996), in issuing this rule, EPA has 

taken the necessary steps to eliminate 

drafting errors and ambiguity, minimize 

potential litigation, and provide a clear 

legal standard for affected conduct. 

11. Executive Order 12630: Evaluation 

of Risk and Avoidance of Unanticipated 

Takings 

EPA has complied with Executive 

Order 12630 (53 FR 8859, March 18, 

1988) by examining the takings 

implications of the rule in accordance 

with the Attorney General’s 

Supplemental Guidelines for the 

Evaluation of Risk and Avoidance of 

Unanticipated Takings issued under the 

executive order. 

12. Executive Order 12898: Federal 

Actions To Address Environmental 

Justice in Minority Populations and Low 

Income Populations 

Because this rule authorizes preexisting State rules and imposes no 

additional requirements beyond those 

imposed by State law and there are no 

anticipated significant adverse human 

health or environmental effects, the rule 

is not subject to Executive Order 12898 

(59 FR 7629, February 16, 1994). 

13. Congressional Review Act 

EPA will submit a report containing 

this rule and other information required 

by the Congressional Review Act (5 

U.S.C. 801 et seq.) to the U.S. Senate, 

the U.S. House of Representatives, and 

the Comptroller General of the United 

States prior to publication in the 

Federal Register. A major rule cannot 

take effect until sixty (60) days after it 

is published in the Federal Register. 

This action is not a ‘‘major rule’’ as 

defined by 5 U.S.C. 804(2). This final 

authorization will be effective March 19, 

2012. 

List of Subjects in 40 CFR Part 271 

Environmental protection, 

Administrative practice and procedure, 

Confidential business information, 

Hazardous materials transportation, 

Hazardous waste, Indian lands, 

Intergovernmental relations, Penalties, 

Reporting and recordkeeping 

requirements. 

Authority: This action is issued under the 

authority of sections 2002(a), 3006 and 

7004(b) of the Solid Waste Disposal Act as 

amended, 42 U.S.C. 6912(a), 6926, 6974(b). 

Dated: February 29, 2012. 

Susan Hedman, 

Regional Administrator, Region 5. 

[FR Doc. 2012–6563 Filed 3–16–12; 8:45 am] 

BILLING CODE 6560–50–P 

DEPARTMENT OF TRANSPORTATION 

Surface Transportation Board 

49 CFR Part 1244 

[Docket No. EP 646 (Sub-No 3)] 

Waybill Data Released in ThreeBenchmark Rail Rate Proceedings 

AGENCY: Surface Transportation Board, 

DOT. 


emcdonald on DSK29S0YB1PROD with RULES
15970 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 

1The Carload Waybill Sample is a sample of 

carload waybills for shipments by all rail carriers 

that terminate at least 4,500 carloads or 5% of the 

carloads in any one state. The Waybill Sample 

identifies originating and terminating freight 

stations, the names of all railroads participating in 

the movement, the point of all railroad 

interchanges, the number of cars, the car types, the 

weight in tons, the commodity type, and the freight 

revenues. The names of the shipper and consignee 

are not included in the data set. Other data in the 

sample, however, may permit the identification of 

a shipper and consignee. Therefore, railroads may 

encrypt, or ‘‘mask,’’ revenue information associated 

with contract shipments to safeguard the 

confidentiality of the contract rates, as required by 

49 U.S.C. 11904. 

2Rate Guidelines—Non-Coal Proceedings, 1 

S.T.B. 1004 (1996) (Simplified Guidelines). 

3 In addition to the R/VCCOMP benchmark, the two 

other benchmarks in the Three-Benchmark 

methodology are RSAM and R/VC>180. The RSAM 

benchmark measures the average markup that the 

rail carrier would need to charge all of its 

‘‘potentially captive’’ traffic to earn adequate 

revenues, as measured by the Board under 49 U.S.C. 

10704(a)(2). The R/VC>180 benchmark measures 

the average markup over variable costs currently 

earned by the defendant carrier on its potentially 

captive traffic. ‘‘Potentially captive’’ traffic is all 

traffic priced at or above the 180% R/VC level, 

which is the statutory floor for regulatory rail rate 

intervention. See Simplified Standards for Rail Rate 

Cases-2009 RSAM and R/VC>180Calculations, EP 

689 (Sub-No. 2), slip op. at 1 (STB served July 14, 

2011) (2009 RSAM and R/VC>180 Calculations). See 

also 49 U.S.C. 10707(d). 

4Prior agency precedent is not definitive. The 

1996 Simplified Guidelines decision did not discuss 

how many years of Waybill Sample data the Board 

would release to the parties. The Interstate 

Commerce Commission’s decision in McCarty 

Farms v. Burlington Northern Inc., 4 I.C.C.2d 262 

(1988), relied on by shippers, was reversed on 

appeal in Burlington Northern Railroad v. ICC, 985 

F.2d 589 (DC Cir. 1993), and the letter issued June 

8, 2005 in B.P. Amoco Chemical Co. v. Norfolk 

Southern Railway, NOR 42093, cited in NSR’s and 

CSXT’s June 1, 2010 reply comments (at 11), was 

an unpublished letter ruling by Board staff; hence, 

neither is precedential. 

5 Initial and Reply comments on the April 2, 2010 

notice of proposed rulemaking were filed jointly by 

American Chemistry Council, Fertilizer Institute, 

National Grain And Feed Association, The National 

Industrial Transportation League, Consumers 

United for Rail Equity, American Forest and Paper 

Association, Glass Producers Transportation 

Council, Alliance for Rail Competition and 

Montana Wheat and Barley Commission 

(collectively Shippers); jointly by Norfolk Southern 

Railway Company (NSR) and CSX Transportation, 

Inc. (CSXT) (collectively, NS/CSXT); and by 

Canadian Pacific Railway Company (CP), 

Association of American Railroads (AAR), and U.S. 

Department of Agriculture (USDA). CSXT also filed 

separate reply comments. We cite to these 

comments as ‘‘Initial’’ or ‘‘Reply.’’ 

ACTION: Final rule. 

SUMMARY: When a shipper files a formal 

complaint that a railroad’s rate is too 

high, the Surface Transportation Board 

(Board) must determine whether the 

challenged rate is reasonable. To present 

its case using the Board’s procedures for 

small cases, the complaining shipper 

needs to obtain from the Board 

confidential information that the Board 

collects regarding the rates that the 

defendant railroad charges other 

shippers for similar shipments. 

Pursuant to the notice of proposed 

rulemaking published in the Federal 

Register on October 27, 2010, the Board 

is formalizing its rules with respect to 

the Three-Benchmark methodology for 

adjudicating simplified rate case 

complaints, making the most recent four 

years of this confidential information 

available to parties and permitting the 

parties to use any combination of the 

four years of confidential information 

when presenting their cases. 

DATES: Effective March 12, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Scott Zimmerman at (202) 245–0386. 

Assistance for the hearing impaired is 

available through the Federal 

Information Relay Service (FIRS) at 1– 

800–877–8339. 

SUPPLEMENTARY INFORMATION: The Board 

is formalizing its rules with respect to 

the Three-Benchmark methodology used 

to adjudicate simplified rate case 

complaints. Under the rule we are 

adopting here, the Board will release to 

the parties in Three-Benchmark 

proceedings the unmasked Carload 

Waybill Sample data (Waybill Sample 

data) 1 of the defendant carrier for the 

four years that correspond with the most 

recently published Revenue Shortfall 

Allocation Method (RSAM) figures. The 

parties may then form their traffic 

comparison groups by choosing the 

movements from the released four-year 

Waybill Sample data that they believe 

are the most comparable to the issue 

movements. 

Background 

In Simplified Standards for Rail Rate 

Cases (Simplified Standards), EP 646 

(Sub-No. 1) (STB served Sept. 5, 2007), 

aff’d sub nom. CSX Transp., Inc. v. STB 

(CSXT I), 568 F.3d 236 (DC Cir. 2009), 

vacated in part on reh’g, CSX Transp., 

Inc. v. STB (CSXT II), 584 F.3d 1076 (DC 

Cir. 2009),the Board modified its 

simplified rail rate guidelines, creating 

a Simplified Stand-Alone Cost approach 

for medium-size rail rate disputes and 

revising its Three-Benchmark approach 

for smaller rail rate disputes. 

The Three-Benchmark method, 

originally promulgated in 1996,2

compares a challenged rate of the ‘‘issue 

traffic’’ (the traffic at issue in the case), 

measured as the ratio of the traffic’s 

revenues to variable costs (R/VC ratio), 

to the R/VC ratios of a comparison 

group of traffic (R/VCCOMP) drawn from 

the Waybill Sample data of the 

defendant carrier.3 Under the ThreeBenchmark method as revised in 

Simplified Standards, each party creates 

and proffers to the Board a proposed 

comparison group (R/VCCOMP), and the 

Board selects the one that it concludes 

is most similar in the aggregate to the 

issue movements. The Board then 

applies a ‘‘revenue adequacy 

adjustment’’ (the ratio of RSAM ÷ R/ 

VC>180) to each movement in the 

comparison group and calculates the 

mean and standard deviation of the 

resulting R/VC ratios. If the challenged 

rate exceeds a reasonable confidence 

interval around the estimated mean, it 

will be presumed unreasonable, and, 

absent any ‘‘other relevant factors,’’ the 

maximum lawful rate will be prescribed 

at that boundary level. 

The rule proposed in Simplified 

Standards would have required parties 

to draw their traffic comparison groups 

from the most recently available one 

year of Waybill Sample data derived 

from the defendant carrier’s shipments 

of non-issue traffic. Simplified 

Standards, slip op. at 32–33 (STB 

served July 28, 2006) (Notice of 

Proposed Rulemaking). The final rule, 

however, allowed parties to form 

comparison groups using Waybill 

Sample data from the four years that 

correspond with the most recently 

published RSAM figures. Simplified 

Standards, slip op. at 80. 

On judicial review, the court 

concluded that the Board had failed to 

provide adequate notice of the final rule 

regarding the available date range of 

Waybill Sample data. Accordingly, the 

court vacated that portion of Simplified 

Standards. CSX II, 584 F.3d at 1078. As 

a result, there is currently a gap in the 

Board’s rules; i.e., there is no defined 

period for which unmasked Waybill 

Sample data is to be released in a ThreeBenchmark proceeding.4

On April 2, 2010, the Board issued a 

notice of proposed rulemaking for a rule 

that would provide to the parties in 

Three-Benchmark proceedings the 

unmasked Waybill Sample data of the 

defendant carrier for the four years that 

correspond with the most recently 

published RSAM figures. The parties 

would then draw their comparison 

groups in any combination they choose 

from the released Waybill Sample data. 

The Board received comments on this 

proposal from shippers, rail carriers, the 

U.S. Department of Agriculture, and 

other interested organizations.5 AAR, 

CP and NSR/CSXT expressed concern 

that the Board did not provide the 

rationales and regulatory objectives 

behind the proposed rules. In response, 

on October 22, 2010, the Board 

published a revised notice, which 

proposed rules identical to those 

proposed on April 2, 2010, and 


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Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 15971 

6Supplemental initial or reply comments on the 

October 22, 2010 notice were filed by American 

Chemistry Council, Fertilizer Institute, National 

Grain And Feed Association, and National 

Industrial Transportation League jointly, and by 

AAR, CP, and NSR/CSXT. We cite to these as 

‘‘Supp.’’ or ‘‘Suppl. Reply.’’ 

7E.g., AAR Supp. at 6–9; CP Initial at 4–9 and 

Supp. at 2–5; NSR/CSXT Initial at 7–18 and Supp. 

at 9–12. CP and NSR/CSXT mistakenly assumed in 

their initial comments that the release of one year 

of Waybill Sample data was ‘‘the existing rule.’’ 

Seesupra note 5. 

8E.g., AAR Initial at 4. 

9AAR Initial at 6 n.5. 10Shippers Initial at 8–9. 

11The Board noted in Simplified Standards: 

‘‘This Three-Benchmark approach rests on the 

selection of a useable comparison group. If a 

particular movement is so unique that there are 

insufficient comparable movements in the Waybill 

Sample, we will entertain a reasonably tailored 

request for comparable movements from the 

defendant’s own traffic tapes. Such motions will be 

decided on a case-by-case basis, but are not 

encouraged, as they will expand the cost and time 

of pursuing relief under this simplified approach.’’ 

Slip op. at 83. 

12As part of the preparation of the Waybill 

Sample data for each calendar year, the Board 

calculates the variable costs for each movement in 

the sample using its Uniform Rail Costing System 

program and the carriers’ R–1 annual financial 

reports. 

included an expanded explanation of 

the rationales and regulatory objectives 

behind the proposed rules. Following 

publication, the Board received 

additional comments from rail carriers, 

shippers, and other interested 

organizations.6 Although the final rules 

adopted in this decision are identical to 

those published in the two previous 

notices, the Board responds in further 

detail to the comments received in 

response to the April 2, 2010 and 

October 22, 2010 notices. 

AAR and the commenting rail carriers 

object to permitting shippers to draw 

their comparison group from the four 

most recently available years of Waybill 

Sample data, because of what they 

characterize as ‘‘regulatory lag.’’ 7 They 

argue that even the most recent one year 

of Waybill Sample data is unlikely to 

reflect current market conditions 

because the data may be up to two years 

old by the time the Board publishes the 

Waybill Sample. They contend that the 

proposed rule increases the likelihood 

of distorted comparison groups and 

results by permitting parties to use sixyear old data.8 AAR further contends 

that the Board can address any issues of 

data insufficiency in individual cases 

from the one-year data release by 

requiring the carrier to provide its traffic 

tapes for all movements of the 

commodity at issue for the current 

period.9

Shippers, on the other hand, generally 

support adoption of the four-year 

Waybill Sample data rule. They argue 

that using multiple years of Waybill 

Sample data will smooth out the effects 

of short term variations in prices and 

costs that make up the data. They also 

claim that it is necessary to permit the 

use of four years of Waybill Sample data 

because a single year’s traffic may not 

contain sufficient data from which to 

derive meaningful or representative 

comparison groups. Shippers maintain 

that the Board should require, rather 

than merely permit, parties to 

incorporate data from each year of the 

current four-year Waybill Sample data 

in developing their R/VCCOMP

comparison groups, because the two 

other benchmarks (RSAM and R/VC>180) 

are calculated using Waybill Sample 

data for the same four-year period.10

Discussion and Conclusions 

Parties in a Three-Benchmark rate 

case may submit a comparison group 

from the four-year Waybill Sample data 

we provide them at the beginning of the 

case. This rule simply defines the range 

of data that will be available to the 

parties; it does not dictate how the data 

will be used. We are not imposing a rule 

that forces the parties to submit a 

comparison group that includes 

movements from each year of the fouryear period, or just from the first year, 

or the last year, or any particular 

combination of years. Parties may 

construct their comparison groups from 

any combination of movements drawn 

from the four-year Waybill Sample data. 

We will continue to use the final offer 

selection process to select the best 

comparison group on a case-by-case 

basis. 

We have three reasons for adopting 

this rule. First, this rule provides the 

parties the flexibility needed to tailor 

their comparison groups as they see fit. 

In some cases, a shipper might believe 

it needs to use more than one year of 

data to demonstrate that rates for the 

issue traffic were unreasonably high. 

Thus, a party may, for example, select 

its comparison group from data across 

all four years and argue that a group 

selected from all four years is the most 

comparable to the movements at issue. 

On the other hand, a party may select 

its comparison group from a single 

year’s data and argue, based on that 

case’s facts, that the best comparison 

group is one drawn from only that year. 

The Board remains the ultimate arbiter 

in each case of which litigant’s 

comparison group it will use to judge 

the challenged rate. 

Second, permitting the parties to draw 

a comparison group from the four-year 

Waybill Sample data should provide 

enough observations to draw a valid 

inference about the maximum lawful 

rate. One year of data may in some cases 

be insufficient to provide a meaningful 

benchmark for comparison purposes. 

The Board was particularly concerned 

in Simplified Standards with having 

sufficient movements of certain 

hazardous cargoes (known as toxic 

inhalation hazards or ‘‘TIH’’) for parties 

to develop appropriate comparison 

groups, but our concern about data 

sufficiency is broader than that. As 

USDA noted in its comments (at 3), for 

example, because production of some 

specialty crops may vary significantly 

from year to year, shippers of such crops 

must have the flexibility to draw upon 

data generated during multiple year 

periods. 

The rail carriers argue that, instead of 

permitting the use of four years of 

Waybill Sample data, we should instead 

require the carrier to make available its 

most recent traffic data. Using the most 

recent traffic data would, according to 

the carriers, meet the Board’s desire for 

both flexibility in the selection of the 

comparison group and enough 

observations to make an informed 

decision. 

We disagree. Based on our experience 

in Stand-Alone Cost (SAC) cases and in 

processing the annual Waybill Sample 

data, we have already concluded that 

using the prepared Waybill Sample data 

is one of the linchpins to the simplified 

rate review process. The release of four 

years of Waybill Sample data to the 

parties minimizes the possibility that 

additional traffic data will be needed for 

the parties to develop their comparison 

groups.11 Moreover, the costs and delays 

associated with the collection, 

preparation, production, verification, 

and use of the carrier’s most recent 

traffic data run contrary to Congress’s 

directive and the Board’s objective of 

devising simplified procedures for use 

in small rate cases. Because relief in 

Three-Benchmark cases is limited, the 

costs associated with extensive 

discovery could significantly offset, or 

even eliminate, any rate reduction 

benefits from such cases and deter 

shippers from seeking relief. For 

example, relying only on data provided 

by the carrier presents the problem that, 

unlike the Waybill Sample data, the 

traffic data provided by the carriers 

would not include the variable cost data 

necessary to determine R/VC ratios.12

Adopting the carriers’ proposal would 

substantially increase the cost of 

bringing a Three Benchmark case and 

impede shippers’ ability to seek relief 

for smaller disputes. 

Third, making four years of data 

available is fully consistent with the 


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15972 Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 

13Likewise, the RSAM ÷ R/VC>180 adjustment 

would reduce R/VC ratios of the comparison group 

where the carrier is earning greater than adequate 

revenues from its captive traffic. 

14The carriers’ evidence regarding changes over 

time in rates and costs within the industry 

generally, and for specific commodities, does not 

support their position on the issue of data 

availability, because the Three-Benchmark method 

does not compare current rates against older rates 

or current costs against historical costs, but rather 

R/VC ratios. The carriers have provided no reason 

to believe that comparisons of a carrier’s R/VC 

ratios for similar traffic over different time periods 

are prima facie misleading or otherwise invalid. 

Indeed, the comments submitted by the rail carriers 

contain virtually no discussion of R/VC ratios 

themselves and are devoid of any evidence that 

comparisons of R/VC ratios of similar traffic for 

different years would skew the results of the final 

offer process. 

15See Simplified Standards at 76 (observing that 

R/VC ratios in the upper end of the comparison 

group ‘‘might overstate a reasonable rate, as those 

rates might themselves be unlawfully high’’). 

16The shippers argue that we mandate that 

comparison groups be drawn from the same time 

period as the two other benchmarks. Parties are free 

to argue that the time period from which data may 

be drawn to determine the R/VCCOMP benchmark 

should be consistent with the time period used to 

determine the R/VC>180 and R/VCCOMP benchmarks 

because the three benchmarks are interrelated. See 

Simplified Standards at 85. On the other hand, a 

party may believe that, for other reasons, a 

comparison group drawn from only one or two 

years of Waybill Sample data is superior to one 

drawn from four years of data in a given case. 

Allowing, but not requiring, comparison groups to 

be drawn from four years of Waybill Sample data 

is consistent with the Board’s goal of making 

available to the parties a sufficiently robust yet 

easily (and equally) accessible data set from which 

the parties are given the maximum flexibility to 

draw as they see fit to shape their comparison 

groups. 

17The rail carriers argue, nonetheless, that they 

will be prejudiced by this four-year rule because the 

Board has not stated that the age of the movements 

in a comparison group will be a factor in deciding 

which comparison group is most similar to the 

issue traffic. This argument is erroneous. The Board 

has stated previously that the list of comparability 

factors in Simplified Standards is not exclusive and 

that a rail carrier is free to limit its proposed 

comparison group to the most recent movements 

available in the Waybill Sample data and to argue 

that its group is more appropriate for the Board to 

select. E.I. Du Pont De Nemours & Co. v. CSXT 

Transp. Inc. (DuPont), NOR 42099, slip op. at 2 n.4 

(STB served Jan. 15, 2008). 

18Citing our rejection of a rail carrier’s proposed 

adjustment for other relevant factors in DuPont, slip 

basic idea behind the Three-Benchmark 

approach. As the Board stated in 

Simplified Standards (at 73), in the 

absence of any other suitable method, a 

comparison approach can be instructive 

as to the reasonable level of contribution 

to fixed costs (the R/VC ratio) for a 

particular captive movement when a 

second, cost-based approach is also 

employed to constrain rail rates. The 

Three-Benchmark methodology 

embodies this approach: it is a 

comparison-based methodology that 

applies a cost-based adjustment— the 

ratio of RSAM ÷ R/VC>180 —to the 

comparison groups. The ThreeBenchmark method begins with the 

assumption that, in setting rail rates for 

captive traffic, ‘‘the carrier will not 

exceed substantially the level permitted 

by the SAC constraint.’’ Id. An 

adjustment to the R/VC levels of captive 

traffic is needed, however, because the 

rates may be priced below the SAC 

constraint due to market forces. Id. 

Applying the RSAM ÷ R/VC>180

adjustment factor to the R/VC ratios of 

the comparison group adjusts those 

ratios to those that would be needed for 

the carrier to achieve revenue 

adequacy.13 Assuming that the 

comparison group has been drawn 

properly from other captive traffic with 

similar characteristics—and the final 

offer procedures were adopted to create 

incentives for both parties to submit a 

reasonable comparison group—we 

concluded that ‘‘these adjusted R/VC 

ratios would fairly reflect the maximum 

lawful rates the carrier could charge 

those potentially captive movements.’’ 

Id. Accordingly, the selection of the best 

comparison group ‘‘will be governed by 

which group the Board concludes 

provides the best evidence as to the 

reasonable level of contribution to joint 

and common costs for the issue 

movement.’’ Id. at 18. 

The rail carriers argue against using 

four years of Waybill Sample data 

because, they claim, (1) The data will be 

too stale, (2) the R/VCCOMP benchmark 

should have no relationship to the time 

period used to calculate the other two 

benchmarks, and (3) in calculating the 

R/VCCOMP benchmark, there is no need 

to smooth out business variations in the 

pricing of similar traffic. The carriers 

also claim the proposal is flawed 

because rates and costs in the industry 

and for specific commodities change 

over time. These objections are best 

summarized by NSR and CSXT, both of 

which declare that ‘‘the goal of the R/ 

VCCOMP is not to smooth out annual 

variations; it is to reflect as accurately 

as possible current market conditions in 

which the carrier establishes the 

challenged rate.’’ NSR/CSXT Supp. at 

6–7. 

The carriers’ arguments are not 

persuasive. The fundamental purpose of 

the Three-Benchmark approach is not to 

reflect a snapshot of current market 

conditions; it is to use the three 

benchmarks to decide the reasonable 

maximum contribution to joint and 

common costs for the issue movement 

where no cost-based approach is 

feasible. The R/VCCOMP benchmark is 

used to approximate the maximum 

reasonable rate that a rail carrier could 

charge under the SAC constraint. The 

Three-Benchmark method compares the 

R/VC ratios (i.e., percentage markups 

over variable cost) of particular current 

movements against the R/VC ratios of 

comparable movements selected from 

any mix of movements within the four 

years of Waybill Sample data.14 One 

weakness in employing this benchmark 

to protect shippers from unreasonable 

rates is that the constraint may not 

always approximate the maximum 

reasonable rate under the SAC 

constraint, particularly over relatively 

short observational periods.15 By giving 

parties the opportunity to select their 

comparison groups from as much or as 

little data as they choose from within 

multiple years of Waybill Sample data, 

the Board can have greater confidence 

that the adjusted R/VC ratios of the 

comparison group (R/VCCOMP) selected 

through the final offer process will 

approximate the maximum reasonable 

level permitted by the more precise SAC 

constraint.16

Moreover, we use the parties’ 

comparison group to prescribe the 

maximum lawful rate not just at the 

moment a carrier’s rates are challenged, 

but for a five year period. The maximum 

lawful rate for a movement (i.e., the 

maximum reasonable contribution to 

joint and common costs expressed as an 

R/VC ratio) may change from year to 

year, as it is a function of the amount 

of joint and common costs that need to 

be recovered, as well as the level and 

the mix of traffic, and the revenue 

generated by that traffic. See Simplified 

Standards at 82. For example, a carrier 

with little revenue from competitive 

traffic in a given year will need to 

recover a larger share of joint and 

common costs from its potentially 

captive traffic, id., while in a boom year 

when the carrier enjoys stronger 

revenues from competitive traffic, a 

carrier would need to recover less from 

its potentially captive traffic. It is 

therefore reasonable to permit parties 

broad latitude to draw information 

about the R/VC levels charged to 

comparable traffic from any or all of the 

most recent four years of Waybill 

Sample data for all three benchmarks. 

Again, the parties may argue that the 

circumstances of a particular case 

caution against drawing information 

from a four-year time period, or that a 

comparison group drawn from, say, only 

one or two years of Waybill Sample data 

is superior to one drawn from four years 

of data because of other characteristics 

of the selected movements,17 or that, 

due to the inevitable regulatory lag, a 

further adjustment to all three 

benchmarks is needed (so-called ‘‘other 

relevant factors’’).18 We reiterate that the 


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Federal Register / Vol. 77, No. 53 / Monday, March 19, 2012 / Rules and Regulations 15973 

op. at 17–18 (STB served June 30, 2008), some rail 

carrier commenters maintain that the Board has 

foreclosed such adjustments. The carriers are 

mistaken. While the Board did not accept the 

carrier’s adjustment factor in that case, it rejected 

the proposal because the adjustment was 

incomplete. The carriers also argue that the 

proposed rule’s prohibition on the use of nonpublic information from their files—particularly 

evidence of changes in costs or market conditions— 

hampers their ability to show that a shipper’s 

comparison group consisting of older movements is 

not comparable to the issue traffic and effectively 

precludes them from proving changed conditions as 

an ‘‘other relevant factor.’’ To the contrary, 

however, evidence outside the four years of Waybill 

Sample data provided under this rule may be used 

to attempt to demonstrate ‘‘other relevant factors.’’ 

See Simplified Standards, slip op. at 77–78. 

19Releasing the Waybill Sample for the four years 

that correspond with the most recently published 

RSAM (as opposed to five years or three years of 

data) is reasonable because (1) complainants must 

have access to that data anyway to verify the 

Board’s calculation of the RSAM and R/VC>180

benchmarks; and (2) it provides the complainant 

the ability to use the same four-year time period to 

estimate all three benchmarks used in this analysis. 

No party has demonstrated that the release of more 

Waybill Sample data is appropriate. 

Board remains the ultimate arbiter of 

which litigant’s comparison group it 

will use to assess the challenged rate(s), 

and the Board will consider the extent 

to which a party’s comparison group is 

most similar in the aggregate to the issue 

traffic on a case-by-case basis. The final 

offer process gives both parties the 

opportunity to convince the Board that 

its comparison group is most similar to 

the issue traffic. 

In addition, complainants should 

have access to multiple years of data so 

that they can make year-to-year 

comparisons of rate changes to identify 

potentially unreasonable carrier pricing 

behavior. Although the R/VC ratios of 

the issue traffic might well be similar to 

the R/VC ratios of comparable 

movements in the current year, they 

might be dramatically higher than the R/ 

VC ratios of comparable shipments from 

prior years. We see no reason why a 

complainant should be deprived at the 

outset of the case of readily available 

Waybill Sample data needed to make 

that case.19

Finally, NSR and CSXT argue that 49 

U.S.C. 10701(d)(1) compels us to use the 

most current data when evaluating the 

reasonableness of rates. They maintain 

that the statute ‘‘requires at a minimum 

that the comparison group movements 

reflect the same market conditions that 

exist when the railroad established the 

challenged rate.’’ NSR/CSXT Supp. at 7. 

Put differently, they argue that when 

asked to judge the reasonableness of a 

rate set in 2010, we cannot perform an 

analysis of whether the rate was 

comparable to rates from 2005–2008. Id. 

This statutory argument is 

unpersuasive for a number of reasons. 

First, the statute contains no such 

directive. Second, when judging the 

reasonableness of a particular rate, we 

routinely look to information beyond 

the year when the rate was established. 

For example, our SAC test does not 

judge the reasonableness of the 

challenged rate by looking only at a 

snapshot of the current financial 

circumstances. Rather, the SAC test 

requires a 10-year analysis that is 

structured to reflect the variations in the 

business cycle. See Major Issues In Rail 

Rate Cases, EP 657 (Sub-No. 1), slip op. 

at 61 (STB served Oct. 30, 1996). Some 

of the variables it takes into account are 

the annual tonnage fluctuation, change 

in tax laws, equity investor 

expectations, and inflation in the prices 

of the assets utilized by the industry. 

Coal Trading Corp. v. B&O R.R., 6 

I.C.C.2d 361, 411 (1990). Third, in their 

example above, the Three-Benchmark 

approach would not compare the rate 

set in 2010 against the rates from 2005– 

2008; it would judge the reasonableness 

of the challenged rate by comparing the 

R/VC ratio (the level of contribution to 

joint and common cost) against the 

adjusted R/VC ratios of comparable 

traffic from 2005–2008. Finally, in a rate 

case, we are not asked to determine the 

maximum lawful rate on the day the 

tariff was issued, but for a multi-year 

prescriptive period. 

This decision will not significantly 

affect either the quality of the human 

environment or the conservation of 

energy resources. 

It is ordered: 

1. The Board will adopt the rule as set 

forth in this decision. 

2. This decision is effective on the day 

of service. 

3. This decision will be published in 

the Federal Register. 

Decided: March 8, 2012. 

By the Board, Chairman Elliott, Vice 

Chairman Mulvey, and Commissioner 

Begeman. 

Jeffrey Herzig, 

Clearance Clerk. 

[FR Doc. 2012–6551 Filed 3–16–12; 8:45 am] 

BILLING CODE 4915–01–P 

DEPARTMENT OF COMMERCE 

National Oceanic and Atmospheric 

Administration 

50 CFR Part 660 

[Docket No. 110211137–2141–02] 

RIN 0648–BA87 

Fisheries Off West Coast States; 

Highly Migratory Species Fisheries; 

Swordfish Retention Limits 

AGENCY: National Marine Fisheries 

Service (NMFS), National Oceanic and 

Atmospheric Administration (NOAA), 

Commerce. 

ACTION: Final rule. 

SUMMARY: NMFS issues a final rule 

under the Magnuson-Stevens Fishery 

Conservation and Management Act 

(MSA) to modify retention limits for 

swordfish harvested in the U.S. West 

Coast-based deep-set tuna longline 

(DSLL) fishery. The DSLL fishery is 

managed under the Fishery 

Management Plan for U.S. West Coast 

Fisheries for Highly Migratory Species 

(HMS FMP). The final rule implements 

the Pacific Fishery Management 

Council’s (Council) recommendation to 

modify HMS FMP regulations governing 

the possession and landing limits of 

swordfish captured in the DSLL fishery 

as follows: if a vessel without an 

observer onboard uses any J-hooks (tuna 

hooks), the trip limit is 10 swordfish; if 

a vessel without an observer onboard 

uses only circle hooks, the trip limit is 

25 swordfish; if the vessel carries a 

NMFS-approved observer during the 

entire fishing trip, there is no limit on 

swordfish retained. 

DATES: This final rule is effective April 

18, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Craig Heberer, Sustainable Fisheries 

Division, NMFS, 760–431–9440, ext. 

303. 

SUPPLEMENTARY INFORMATION: 

Electronic Access 

This final rule is also accessible at 

(http://swr.nmfs.noaa.gov/). An 

electronic copy of the current HMS FMP 

and accompanying appendices are 

available on the Pacific Fishery 

Management Council’s Web site at 

http://www.pcouncil.org/hms/ 

hmsfmp.html. 

The HMS FMP was developed by the 

Council in response to the need to 

coordinate state, Federal, and 

international management of HMS 

stocks. The management unit in the 

FMP consists of highly migratory 

species (tunas, billfish, and sharks) that 


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