[Federal Register Volume 77, Number 53 (Monday, March 19, 2012)]
[Rules and Regulations]
[Pages 15969-15973]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6551]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Part 1244

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


Waybill Data Released in Three-Benchmark Rail Rate Proceedings

AGENCY: Surface Transportation Board, DOT.

[[Page 15970]]


ACTION: Final rule.

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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.
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    \1\ The 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.
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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/VC<INF>COMP</INF>) drawn from the Waybill Sample data of 
the defendant carrier.\3\ Under the Three-Benchmark method as revised 
in Simplified Standards, each party creates and proffers to the Board a 
proposed comparison group (R/VC<INF>COMP</INF>), 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<INF>>180</INF>) 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.
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    \2\ Rate Guidelines--Non-Coal Proceedings, 1 S.T.B. 1004 (1996) 
(Simplified Guidelines).
    \3\ In addition to the R/VC<INF>COMP</INF> benchmark, the two 
other benchmarks in the Three-Benchmark methodology are RSAM and R/
VC<INF>>180</INF>. 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<INF>>180</INF>Calculations, EP 689 (Sub-No. 2), slip op. at 
1 (STB served July 14, 2011) (2009 RSAM and R/VC<INF>>180</INF> 
Calculations). See also 49 U.S.C. 10707(d).
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    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 Three-Benchmark proceeding.\4\
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    \4\ Prior 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.
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    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

[[Page 15971]]

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.
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    \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.''
    \6\ Supplemental 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.''
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    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 six-year 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\
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    \7\ E.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.
    \8\ E.g., AAR Initial at 4.
    \9\ AAR Initial at 6 n.5.
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    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/VC<INF>COMP</INF> 
comparison groups, because the two other benchmarks (RSAM and R/
VC<INF>>180</INF>) are calculated using Waybill Sample data for the 
same four-year period.\10\
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    \10\ Shippers Initial at 8-9.
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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 four-
year 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.
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    \11\ The 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.
    \12\ As 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.
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    Third, making four years of data available is fully consistent with 
the

[[Page 15972]]

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<INF>>180</INF> --to the 
comparison groups. The Three-Benchmark 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<INF>>180</INF> 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.
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    \13\ Likewise, the RSAM / R/VC<INF>>180</INF> adjustment would 
reduce R/VC ratios of the comparison group where the carrier is 
earning greater than adequate revenues from its captive traffic.
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    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/
VC<INF>COMP</INF> benchmark should have no relationship to the time 
period used to calculate the other two benchmarks, and (3) in 
calculating the R/VC<INF>COMP</INF> 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/VC<INF>COMP</INF> 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/
VC<INF>COMP</INF> 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/VC<INF>COMP</INF>) selected through the final 
offer process will approximate the maximum reasonable level permitted 
by the more precise SAC constraint.\16\
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    \14\ The 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.
    \15\ See 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'').
    \16\ The 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/VC<INF>COMP</INF> benchmark should be 
consistent with the time period used to determine the R/
VC<INF>>180</INF> and R/VC<INF>COMP</INF> 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.
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    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

[[Page 15973]]

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.
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    \17\ The 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).
    \18\ Citing our rejection of a rail carrier's proposed 
adjustment for other relevant factors in DuPont, slip 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 non-public 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.
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    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\
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    \19\ Releasing 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<INF>>180</INF> 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.
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    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