[Federal Register Volume 87, Number 67 (Thursday, April 7, 2022)]
[Proposed Rules]
[Pages 20370-20374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-07349]


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SURFACE TRANSPORTATION BOARD

49 CFR Chapter X

[Docket No. EP 768]


Petition for Rulemaking To Adopt Rules Governing Private Railcar 
Use by Railroads

AGENCY: Surface Transportation Board.

[[Page 20371]]


ACTION: Petition for rulemaking.

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SUMMARY: The Board seeks public comment on a petition by the North 
America Freight Car Association, The National Grain and Feed 
Association, The Chlorine Institute, and The National Oilseed 
Processors Association to adopt regulations governing railroads' use of 
private freight cars and several specific related issues.

DATES: Comments are due by June 30, 2022; replies are due by August 1, 
2022.

FOR FURTHER INFORMATION CONTACT: Amy Ziehm at (202) 245-0391. 
Assistance for the hearing impaired is available through the Federal 
Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION: On July 26, 2021, the North America Freight 
Car Association (NAFCA), The National Grain and Feed Association 
(NGFA), The Chlorine Institute (CI), and The National Oilseed 
Processors Association (NOPA) (collectively, Petitioners) filed a joint 
petition for rulemaking proposing that the Board adopt regulations 
allowing private railcar providers \1\ to assess a ``private railcar 
delay charge'' if railroads delay private freight cars beyond a 
specified period of time. (Pet. 18.)
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    \1\ Petitioners define a ``private railcar provider'' as ``a 
shipper, receiver, or other party who owns or leases a private 
railcar and provides it to a railroad for transportation.'' (Pet. 
23.)
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    Petitioners assert that the Board may adopt their proposed 
regulations pursuant to its authority under 49 U.S.C. 11122(a)(2), 
which provides that the Board's car service regulations may include, in 
addition to the compensation to be paid, ``the other terms of any 
arrangement for the use by a rail carrier of a locomotive, freight car, 
or other vehicle not owned by the rail carrier using the locomotive, 
freight car, or other vehicle, whether or not owned by another carrier, 
shipper, or third person.''
    After receiving a number of replies and notices of intent to 
participate in response to the petition, the Board opened a proceeding 
in this docket on November 23, 2021.

Background

    Petitioners' Proposed Regulations. The regulations that Petitioners 
propose would allow private railcar providers to assess a charge when a 
private freight car does not move for more than 72 hours at any point 
on a railroad's system between the time it is ``released for 
transportation'' and the time it is ``either constructively placed or 
actually placed at the private railcar provider's facility or 
designated location.'' \2\ (Pet. 24.) Petitioners propose that Car 
Location Message (CLM) Event Sighting Codes published by Railinc \3\ 
would be used to measure time, and charges would be assessed when the 
``CLM location city of CLM Sighting Code has not changed for more than 
[72] hours.'' (Id. at 18.) Petitioners suggest that the amount of the 
charge would be equivalent to the greater of the carrier's applicable 
demurrage or storage charge. (Id. at 24.) Charges would be assessed 
unless ``the rail carrier demonstrates that it was not a cause of the 
allowable transit idle time being exceeded despite exercising due 
diligence.'' (Id.) Furthermore, carriers would be able to dispute the 
amount of the charges in ``an appropriate proceeding in which the rail 
carrier shall bear the burden of proof to demonstrate that the private 
railcar delay charge is unreasonable and inappropriate.'' (Id.) 
Petitioners also argue that the Board should explore monetary penalties 
for noncompliance. (Id. at 17, 24.)
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    \2\ Constructive placement occurs when a railcar is available 
for delivery but cannot actually be placed at the receiver's 
destination because of a condition attributable to the receiver, 
such as lack of room on the tracks in the receiver's facility. See 
Pol'y Statement on Demurrage & Accessorial Rules & Charges, EP 757, 
slip op. at 8 n.22 (STB served Apr. 30, 2020).
    \3\ Railinc, a subsidiary of the Association of American 
Railroads (AAR), provides rail data and messaging services to the 
freight rail industry.
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    Petitioners argue that their proposed regulations are necessary to 
encourage the efficient use of private freight cars because carriers do 
not presently have sufficient incentives to use private freight cars 
efficiently. (Id. at 8-10.) Petitioners assert that there are no Board 
regulations and few tariff provisions that provide such incentives. 
(Id. at 9-10.) Petitioners also contend that carriers ``have little or 
no commercial incentive (other than revenue generation)'' to use 
private freight cars efficiently because most private railcar providers 
do not have the necessary commercial strength to negotiate service-
standard contract provisions. (Id. at 11.) Moreover, petitioners argue 
that the ``lack of clarity and guidance as to the definition of the 
common carrier obligation, and the circumstances in which it is 
considered violated'' deter private railcar providers from pursuing 
formal complaints. (Id.) Petitioners contend that their proposal uses 
``existing principles governing demurrage and accessorial charges'' to 
incentivize carriers to use private freight cars more efficiently. (Id. 
at 2.)
    Petitioners also argue that their proposed regulations are 
necessary to compensate private railcar providers for the costs they 
incur when carriers use private freight cars inefficiently. (Id. at 12-
13.) Petitioners state that private freight cars comprise most of the 
national fleet and that the costs of owning and maintaining private 
freight cars have increased significantly over the past 10 years. (Id. 
at 5-7.) Although Petitioners acknowledge that private railcar 
providers receive compensation from carriers for the use of their 
private freight cars, they argue that carriers' inefficient use of 
private freight cars deprives them of the use of their assets and makes 
it harder for them to earn a reasonable return on their investment. 
(Id. at 2, 12-13, 20-21.) Petitioners offer examples of carriers' 
inefficient use of private freight cars, including one in which a 
shipper's private freight cars were held by Class I carriers for 
periods of between eight and 61 days, as well as examples of the 
resulting harm to private railcar providers, including one in which a 
shipper incurred increased costs for trucks and special switches. (Id. 
at 13-14.)
    Replies. The Board received replies to the petition from AAR; CSX 
Transportation, Inc. (CSXT); Union Pacific Railroad Company (UP); the 
Institute for Scrap Recycling Industries, Inc. (ISRI); a group of 
several shipper associations including the American Chemistry Council, 
The Fertilizer Institute, and the National Industrial Transportation 
League (collectively, Joint Shippers); the National Association of 
Chemical Distributors (NACD); the National Coal Transportation 
Association (NCTA); the Private Railcar Food and Beverage Association 
(PRFBA); American Fuel & Petrochemical Manufacturers (AFPM); the 
Freight Rail Customer Alliance (FRCA); and the Canadian Oilseed 
Processors Association (COPA), as well as notices of intent to 
participate from NGFA and the American Short Line and Regional Railroad 
Association. AAR, CSXT, and UP oppose the petition, while ISRI, Joint 
Shippers, NACD, NCTA, PRFBA, AFPM, FRCA, and COPA support it.
    UP and AAR claim that the Board lacks the statutory authority under 
Sec.  11122(a)(2) to adopt Petitioners' proposed regulations.\4\ (UP 
Reply 2-3, Aug. 30, 2021; AAR Reply 3-6, Aug. 30, 2021.) UP argues that 
the Board must ``disregard the reference to `freight cars' '' in the 
current version of Sec.  11122(a)(2) because, prior to 1978, the 
relevant part of this paragraph (allowing the agency to regulate ``the 
other terms'' of arrangements) did not reference

[[Page 20372]]

freight cars specifically but rather only locomotives and other 
vehicles.\5\ (UP Reply 2-3, Aug. 30, 2021.) UP contends that although 
the current language of Sec.  11122(a)(2) may suggest a broader 
authority to regulate arrangements for railroads' use of freight cars, 
substantive differences between the two versions of the provision must 
be resolved in favor of the pre-1978 Recodification statute because 
Congress expressly indicated that the 1978 Recodification may not be 
construed as making a substantive change to the existing laws. (UP 
Reply 3, Aug. 30, 2021 (citing N. Am. Freight Car Ass'n v. Union Pac. 
R.R., NOR 42144, slip op. at 5 (STB served Mar. 22, 2021).)
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    \4\ CSXT states that it joins AAR's comments. (CSXT Reply 2.)
    \5\ The predecessor to Sec.  11122(a) stated, in relevant part:
    It is the intent of the Congress to encourage the purchase, 
acquisition, and efficient utilization of freight cars. In order to 
carry out such intent, the Commission may, upon complaint of an 
interested party or upon its own initiative without complaint, and 
after notice and an opportunity for a hearing, establish reasonable 
rules, regulations, and practices with respect to car service by 
common carriers by railroad subject to this part, including (i) the 
compensation to be paid for the use of any locomotive, freight car, 
or other vehicle, (ii) the other terms of any contract, agreement, 
or arrangement for the use of any locomotive or other vehicle not 
owned by the carrier by which it is used (and whether or not owned 
by another carrier, shipper, or third party), and (iii) the 
penalties or other sanctions for nonobservance of such rules, 
regulations, or practices.
    Railroad Revitalization and Regulatory Reform Act of 1976 (4R 
Act), Public Law 94-210, 1(14)(a), 90 Stat. 31, 46-47. In 1978, 
Congress recodified the Interstate Commerce Act, enacting it as 
Title 49 of the U.S. Code, and stated that the agency's car service 
regulations may include ``the other terms of any arrangement for the 
use by a rail carrier of a locomotive, freight car, or other vehicle 
not owned by the rail carrier using the locomotive, freight car, or 
other vehicle, whether or not owned by another carrier, shipper, or 
third person.'' Act of Oct. 17, 1978, Public Law 95-473, 
11122(a)(2), 92 Stat. 1337, 1421-22 (1978 Recodification).
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    AAR argues that the Board does not have the authority to adopt 
Petitioners' proposed regulations under Sec.  11122(a)(2) because the 
Board's authority to regulate car service does not extend to the 
regulation of the transportation services railroads provide. (AAR Reply 
4, Aug. 30, 2021.) In support, AAR cites to Peoria & Pekin Union 
Railway v. United States, 263 U.S. 528 (1923), and Atchison, Topeka & 
Santa Fe Railway v. ICC, 607 F.2d 1199 (7th Cir. 1979). (AAR Reply 4-5, 
Aug. 30, 2021.) In Peoria, the Supreme Court found that the ICC could 
not use its car service authority to require switching because the term 
``car service'' means ``the use to which the vehicles of transportation 
are put; not the transportation service rendered by means of them.'' 
Peoria, 263 U.S. at 533-35. Pursuant to this definition, the court in 
Atchison determined that the ICC could not require tariff publication 
of operating schedules under its car service authority because tariff 
operating schedules were ``directly related to transportation service 
and do not fall within the definition of car service.'' Atchison, 607 
F.2d at 1205. According to AAR, Petitioners' proposal would regulate 
transportation service because it would ``establish rigid standards 
relating to the details of how railroads provide transportation during 
the course of a car's movement across the network'' and essentially 
establish ``transportation service guarantees under another name.'' 
(AAR Reply 3-4, Aug. 30, 2021.) Moreover, AAR contends that, although 
the Board may establish regulations to ensure an adequate supply of 
freight cars, Petitioners have not demonstrated that a freight car 
shortage exists. (Id. at 5.)
    AAR, CSXT, and UP additionally contend that Petitioners' proposed 
regulations are unnecessary because (1) carriers already have ample 
incentives to move private freight cars efficiently, as delays hinder 
operations and reduce revenue, (CSXT Reply 3-4; UP Reply 7-8, Aug. 30, 
2021; AAR Reply 8-9, Aug. 30, 2021); (2) a significant portion of 
traffic moves under contract and would not be covered by Petitioners' 
proposed regulations, (CSXT Reply 7); (3) no freight car shortage 
exists justifying Board intervention, (UP Reply 4-6, Aug. 30, 2021; AAR 
Reply 5, Aug. 30, 2021); (4) private railcar providers have other 
avenues to pursue relief, such as through specific service commitments 
in contracts and the complaint process, (UP Reply 10-11, Aug. 30, 
2021); and (5) private freight car ownership already conveys benefits, 
such as greater control over equipment and economic compensation from 
carriers, (AAR Reply 7, 10, Aug. 30, 2021). They also argue that 
Petitioners' proposed regulations will have a negative impact on the 
efficiency of the rail network by incentivizing carriers to move cars 
inefficiently to avoid the charges and by reducing cooperation between 
carriers during periods of network stress. (CSXT Reply 6; UP Reply 9, 
Aug. 30, 2021; AAR Reply 16, Aug. 30, 2021.)
    Several respondents indicate that they support the petition because 
Petitioners' proposed regulations would provide appropriate financial 
incentives for Class I carriers to use private freight cars more 
efficiently, (see, e.g., NCTA Comments 1-2; PRFBA Comments 1; FRCA 
Comments 1), and offer reciprocity for demurrage charges (see, e.g., 
NACD Comments 1; AFPM Comments 2; COPA Comments 1-2). ISRI contends 
that carriers have essentially forced scrap metal companies to lease or 
own private freight cars after carriers reduced the number of system 
cars available to scrap steel shippers and shifted those available 
system cars to more profitable products. (ISRI Reply 5.) Joint Shippers 
ask the Board to solicit comments on ways to achieve greater 
reciprocity for the treatment of private freight cars during first-mile 
and last-mile service,\6\ and on how Petitioners' proposed regulations 
would be implemented, including whether carriers would be responsible 
for monitoring railcar delays and crediting amounts owed under the 
proposed regulations against their demurrage invoices. (Joint Shippers 
Reply 3, 5.)
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    \6\ ISRI states that it supports Joint Shippers' request for 
comments on first-mile and last-mile service. (ISRI Comments 3.)
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    On September 10, 2021, Petitioners submitted a surreply to the 
replies, along with a motion for leave to file. Petitioners argue that 
the cases cited by AAR cannot be analogized to their proposal because 
Petitioners do not ``ask the Board to directly order the Railroads to 
take any action regarding their provision of transportation services.'' 
(Petitioners Surreply 4.) Furthermore, Petitioners assert that UP's 
argument contravenes the language of the 4R Act Sec.  1(14)(a), 90 
Stat. at 46, in which Congress expressed the clear intent to 
``encourage the purchase, acquisition, and efficient utilization of 
freight cars'' and, ``[i]n order to carry out such intent,'' authorized 
the agency to ``establish reasonable rules, regulations, and practices 
with respect to car service.'' (Petitioners Surreply 5.) Petitioners 
also contend that prior agency decisions have construed Sec.  11122(a) 
as authorizing the regulation of the terms of railroads' use of freight 
cars. (Pet. 15-17 (citing Shippers Comm., OT-5 v. Ann Arbor R.R., 5 
I.C.C. 2d 856, 863-64 (1989) (determining, pursuant to Sec.  11122(a), 
that carriers may not restrict the access of private freight cars 
except under exceptional circumstances), aff'd sub nom. Shippers Comm., 
OT-5 v. ICC, 968 F.2d 75 (D.C. Cir. 1992); Petitioners Surreply 6.)
    On September 23, 2021, AAR and UP submitted replies to Petitioners' 
motion for leave. AAR contends that Petitioners' efforts to distinguish 
Peoria and Atchison are unavailing since ``the proposed Board action 
would dictate how railroads perform transportation services, namely 
switching services.'' (AAR Reply 1-2, Sept. 23, 2021.) UP argues that 
the Board should reject Petitioners' claim that the agency has 
construed Sec.  11122(a) as allowing it to regulate the terms of 
railroads' use of

[[Page 20373]]

freight cars. (UP Reply 1, Sept. 23, 2021.)
    On November 23, 2021, the Board granted Petitioners' motion for 
leave to file a surreply, opened a proceeding to consider Petitioners' 
proposal, and stated that it would establish procedures for public 
comment in a subsequent decision.

Request for Comments

    The Board invites comment on the issues raised in the petition 
generally as well as on the following specific questions:
    1. Petitioners assert that the Board's current regulations and 
policies do not create sufficient incentives for Class I carriers to 
use private freight cars efficiently. (Pet. 2.) The Board invites 
commenters to provide detailed, concrete examples of carriers' 
inefficient use of private freight cars (i.e., the carriers and car 
owners involved, relevant dates and times, etc.). They may also wish to 
provide context for their comments by including information about the 
quantity of private freight cars owned or leased, volume of traffic 
shipped, storage capacity, and seasonality of shipments (if any). If 
requested, a protective order may be issued that would allow sensitive 
information to be filed under seal. In particular, the Board asks 
commenters to address the following:
    a. How frequently do carriers hold private freight cars for more 
than 72 consecutive hours? The Board requests that commenters provide 
supporting data on the frequency of this occurrence, where available.
    b. To the extent known by the commenter, why do carriers hold 
private freight cars for more than 72 consecutive hours?
    c. To the extent known by the commenter, at which location(s) on 
the rail system are private freight cars held for more than 72 
consecutive hours?
    d. How are rail users' operations, facilities, production, and/or 
finances affected?
    e. Has the frequency and severity of the issue changed with the 
implementation of operating changes by Class I railroads?
    2. UP asserts that Petitioners' proposed regulations are 
unnecessary because private railcar providers have other avenues to 
pursue relief, such as through specific service commitments in 
contracts. (UP Reply 10-11, Aug. 30, 2021.) Do such contract service 
commitments include similar terms to the regulations proposed by 
Petitioners?
    3. How, if at all, would Petitioners' proposal regulate ``car 
service'' within the meaning of 49 U.S.C. 11122(a) by ``encourag[ing] 
the purchase, acquisition, and efficient use of freight cars''?
    a. The Board invites commenters to address AAR's argument that 
Petitioners' proposal would regulate the ``transportation services'' 
that railroads provide, rather than ``car service'' within the meaning 
of Sec.  11122(a). (See AAR Reply 3-6, Aug. 30, 2021.)
    b. To what extent is a finding of inadequate car supply a 
prerequisite for the Board to adopt Petitioners' proposed regulations?
    c. Do rail users currently lack access to an adequate supply of 
freight cars or anticipate a future freight car shortage?
    i. If so, how would the proposed regulations help solve or mitigate 
the issue? The Board requests that commenters provide supporting data 
on any claim of a current or future inadequacy of car supply, where 
available.
    d. Petitioners contend that their proposed regulations would 
``result in the national railcar fleet being of a more rational size to 
utilize existing rail system capacity and meet demand.'' (Pet. 2.)
    i. How would the proposed regulations lead to a more rationally 
sized freight car fleet?
    ii. How, if at all, would a more rationally sized freight car fleet 
ensure an adequate supply of freight cars?
    4. How would Petitioners' proposed regulations affect rail users 
that do not use private freight cars? For example, CSXT, UP, and AAR 
argue that Petitioners' proposed regulations would create incentives 
for carriers to prioritize private freight cars to the disadvantage of 
rail users that use railroad-owned freight cars. (CSXT Reply 2; UP 
Reply 8 n.26, Aug. 30, 2021; AAR Reply 16, Aug. 30, 2021.)
    5. Petitioners propose that charges would be assessed unless ``the 
rail carrier demonstrates that it was not a cause of the [72 hours] 
being exceeded despite exercising due diligence.'' (Pet. 24.)
    a. In what kinds of circumstances should carriers be able to show 
that they were not ``a cause'' of the 72 hours being exceeded?
    b. What kind of actions should constitute ``due diligence''?
    c. How would this standard account for the possibility raised by 
AAR that carriers may hold private freight cars longer than 72 
consecutive hours to improve the overall efficiency of the rail network 
(i.e., to prevent congestion at terminals during times of peak demand 
or to recover from network disruptions caused by weather events)? (See 
AAR Reply 16, Aug. 30, 2021.)
    d. How would this standard account for rail users' own car supply 
decisions? For example, UP argues that Petitioners' proposed 
regulations would ``incentivize shippers to acquire additional freight 
cars and deploy them during service disruptions, despite their 
potential to contribute to congestion problems.'' (UP Reply 13-14, Aug. 
30, 2021.)
    6. How would rail network efficiency be affected by the proposal?
    a. The Board requests that commenters provide data, where 
available, to support claims that the rail network would be more (or 
less) efficient as a result of Petitioners' proposed rule.
    b. Under Petitioners' approach, to what extent would carriers have 
incentives to make potentially inefficient movements solely to avoid 
charges? (See CSXT Reply 6; AAR Reply 16, Aug. 30, 2021; UP Reply 9, 
Aug. 30, 2021.)
    7. Under Petitioners' proposed regulations, private railcar 
providers would be able to assess charges if the ``CLM location city of 
CLM Sighting Code'' of a private freight car has not changed for more 
than 72 consecutive hours. (Pet. 18.)
    a. Why is 72 hours an appropriate timeframe and not, for example, 
48 hours or 96 hours?
    b. Why should charges be based on when cars are idle for more than 
72 consecutive hours, as opposed to, for example, overall transit idle 
times for the entire trip or when the placement of private freight cars 
exceeds projected transit times?
    c. Are CLM Event Sighting Codes a practical way to measure idle 
time?
    i. If not, what metric, if any, would be more useful as the basis 
for assessing delay charges?
    d. At what point should the timeframe begin (i.e., as soon as a 
rail user releases a private freight car, when the carrier picks up the 
private freight car, or some other point)?
    i. And if the 72-hour timeframe begins when private freight cars 
are released, how would this timeframe apply to rail users that receive 
service only once or twice per week?
    8. Petitioners' proposal contemplates that the amount of the 
``private railcar delay charge'' would correspond to the carrier's 
applicable demurrage or storage charge unless the carrier could 
demonstrate that such a charge would be ``unreasonable and 
inappropriate'' in a particular situation. (Pet. 24.)
    a. Is it appropriate for the Board to equate the amount of the 
``private railcar delay charge'' to a demurrage or storage charge in 
most cases?

[[Page 20374]]

    b. To what extent are there practical alternatives to equating 
Petitioners' proposed ``private railcar delay charge'' to a demurrage 
or storage charge and what are the merits of those alternatives?
    9. Commenters should address the following questions about how the 
regulations proposed by Petitioners would be implemented:
    a. Which party would be responsible for tracking the CLM Event 
Sighting Codes for private freight cars and invoicing in accordance 
with the proposed regulations?
    b. Joint Shippers suggest that the Board could require carriers to 
credit charges against their demurrage invoices. (Joint Shippers Reply 
5.) How would compensation be handled under this proposal for rail 
users that do not incur demurrage charges or incur fewer charges than 
would be owed pursuant to the proposed regulations?
    10. Petitioners suggest that the proposed regulations should apply 
only to Class I carriers. (Pet. 1-2.) How, if at all, would Class II 
and Class III carriers be impacted by the proposed regulations, if 
limited to Class I carriers?
    Interested persons may file comments by June 30, 2022. Replies will 
be due by August 1, 2022.
    It is ordered:
    1. Comments are due by June 30, 2022; replies are due by August 1, 
2022.
    2. Notice of this decision will be published in the Federal 
Register.
    3. This decision is effective on its service date.

    Decided: April 1, 2022.

    By the Board, Board Members Fuchs, Hedlund, Oberman, Primus, and 
Schultz.
Jeffrey Herzig,
Clearance Clerk.
[FR Doc. 2022-07349 Filed 4-6-22; 8:45 am]
BILLING CODE 4915-01-P