United States Court of Appeals 

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 7, 2009 Decided October 23, 2009 

No. 07-1369 

CSX TRANSPORTATION, INC., 

PETITIONER

v. 

SURFACE TRANSPORTATION BOARD AND UNITED STATES OF 

AMERICA, 

RESPONDENTS

AMERICAN CHEMISTRY COUNCIL, ET AL., 

INTERVENORS

Consolidated with 07-1370, 07-1371, 07-1372, 07-1410,

08-1194 

On Petition for Rehearing 

Before: ROGERS, TATEL, and GRIFFITH, Circuit Judges. 

Opinion for the Court filed by Circuit Judge TATEL. 

TATEL, Circuit Judge: This petition for rehearing asks 

that we reconsider one aspect of our earlier opinion denying 

petitions for review of a Surface Transportation Board 

regulation that provides two simplified methods for resolving 
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rail rate disputes too small to bring under ordinary procedures. 

As part of its challenge to the regulation, Petitioner Norfolk 

Southern argued that in violation of the Administrative 

Procedure Act the Board’s Notice of Proposed Rulemaking 

had failed to give notice of a significant change that surfaced 

only in the final rule. Given that no party had presented that 

argument to the Board in a petition for reconsideration, we 

declined to consider it. Because we now agree with Norfolk 

Southern that we should have addressed the issue, and 

because we conclude that the Board failed to provide 

adequate notice, we vacate the relevant portions of the 

regulation, as well as of our earlier opinion. 

I. 

 Our earlier opinion describes the background of this case 

and the two simplified methods for resolving rail rate 

disputes. CSX Transp., Inc. v. Surface Transp. Bd., 568 F.3d 

236, 238–40 (D.C. Cir. 2009). The three benchmark method, 

the one at issue here, compares the challenged rate to three 

benchmark figures, one of which—the R/VCCOMP—is derived 

by comparing the rail movement at issue with a group of 

similar movements. The Board selects this comparison group 

from groups of movements the parties propose, and the parties 

in turn choose the comparison movements from a survey of 

movements across the nation, the so-called waybill sample. 

Under the proposed rule, parties could suggest comparison 

groups drawn from the most recent year of waybill sample 

data. Simplified Standards for Rail Rate Cases (“NPRM”), 

STB Ex Parte No. 646 (Sub-No.1), at 33 (served July 28, 

2006) (notice of proposed rulemaking). Under the final rule, 

however, parties may draw from the four most recent years of 

data. Simplified Standards for Rail Rate Cases (“Decision” or 

“final rule”), STB Ex Parte No. 646 (Sub-No. 1), at 80, 83 

(served Sept. 5, 2007). 
3 

 In their petition for review, Norfolk Southern and several 

other railroads argued that the proposed rule violated the 

Administrative Procedure Act because it failed to provide 

notice that the Board was considering switching from one 

year to four years’ worth of data. See 5 U.S.C. § 553(b)(3) 

(requiring agencies to give notice of “the terms or substance 

of the proposed rule or a description of the subjects and issues 

involved”). As petitioners pointed out, nothing in the NPRM 

expressly indicated that the Board was considering expanding 

the data from which parties can draw comparison groups. 

The Board did not argue otherwise. Yet because the railroads 

had failed to present this argument to the Board, we declined 

to address it. CSX, 568 F.3d at 246–47. Although the 

railroads argued that they had no way of knowing of any lack 

of notice until the Board promulgated its final rule, we 

pointed out that they could have presented the argument to the 

Board in a petition for reconsideration. See 49 C.F.R. 

§ 1110.10. In so ruling, we acknowledged the holding of 

Darby v. Cisneros, 509 U.S. 137 (1993), that absent a 

statutory or regulatory requirement, courts have no authority 

to require parties to exhaust administrative procedures before 

seeking judicial review. We distinguished Darby, however, 

finding that nothing in that case extinguished the general 

requirement that parties give the agency a chance to rule on 

all objections in the first instance. CSX, 568 F.3d at 247. 

 In its petition for rehearing, Norfolk Southern challenges 

our characterization of Darby. According to Norfolk 

Southern, Darby bars courts from imposing an exhaustion 

requirement where agency action has become final under the 

APA. See Darby, 509 U.S. at 143–53. Although a party’s 

failure to raise an issue during agency proceedings prior to a 

final appealable rule or order may result in waiver of that 

issue, Norfolk Southern argues that a court may not require a 

party to return to the agency to raise an issue that arises only 
4 

at the final rulemaking. In response, the Board insists that our 

earlier opinion correctly interpreted Darby: Darby addresses 

only exhaustion of remedies, leaving in place the requirement 

that a petitioner present its argument to the agency at least 

once before seeking judicial review. 

 Having reconsidered this issue, we now agree with 

Norfolk Southern. “Wisdom,” Justice Frankfurter once said, 

“too often never comes, and so one ought not to reject it 

merely because it comes late.” Henslee v. Union Planters 

Nat’l Bank & Trust Co., 335 U.S. 595, 600 (1949) 

(Frankfurter, J., dissenting). 

 

Darby stands for the proposition that absent a statutory or 

regulatory requirement to the contrary, courts have no 

authority to require petitioners seeking judicial review of a 

final agency action to further exhaust administrative 

procedures. Here, although Board regulations do permit a 

petition for rehearing, neither the ICC Termination Act of 

1995 nor the Board’s regulations requires one. See 49 U.S.C. 

§ 722; 49 C.F.R. §§ 1110.10, 1115.3(f). Under Darby, 

therefore, we had no authority to require Norfolk Southern to 

file a petition for rehearing once the agency issued its final 

rule. 

 Our earlier opinion relied on ExxonMobil Oil Corp. v. 

FERC, 487 F.3d 945 (D.C. Cir. 2007), in which we rejected 

petitioners’ argument that the absence of a rehearing 

requirement in the Interstate Commerce Act (which was 

implicated because the case involved oil pipelines) meant that 

they had no obligation to present their arguments to FERC. 

But neither we nor any party noticed that the ExxonMobil 

petitioners had never alleged an inability to raise their 

arguments before issuance of the final rule. Because they 

could have presented their arguments to the agency in the first 
5 

instance, ExxonMobil applied the well-established doctrine of 

issue waiver, which permits courts to decline to hear 

arguments not raised before the agency where the party had 

notice of the issue. See, e.g., United States v. L.A. Tucker 

Truck Lines, 344 U.S. 33, 35–37 (1953); Appalachian Power 

Co. v. EPA, 251 F.3d 1026, 1036 (D.C. Cir. 2001). As 

ExxonMobil explains, petitioners’ “error was not failing to 

seek rehearing, but rather failing to raise the issue at all.” 

ExxonMobil, 487 F.3d at 962. 

Unlike the ExxonMobil petitioners, Norfolk Southern 

insists that it had no way to raise the notice argument until the 

Board issued its final rule. This is clearly correct. The 

NPRM mentions providing only one year’s worth of data 

from which parties could draw comparison groups and 

nowhere indicates that the Board might consider expanding 

that to four years’ worth of data. Given that, and given that 

Norfolk Southern had no obligation to file a petition for 

reconsideration, it had a right under Darby to seek judicial 

review of its argument that the Board failed to give adequate 

notice of the change from one-year to four-year data samples. 

II. 

 To satisfy the APA’s notice requirement, the NPRM and 

the final rule need not be identical: “[a]n agency’s final rule 

need only be a ‘logical outgrowth’ of its notice.” Covad 

Commc'ns Co. v. FCC, 450 F.3d 528, 548 (D.C. Cir. 2006). 

A final rule qualifies as a logical outgrowth “if interested 

parties ‘should have anticipated’ that the change was possible, 

and thus reasonably should have filed their comments on the 

subject during the notice-and-comment period.” Ne. Md. 

Waste Disposal Auth. v. EPA, 358 F.3d 936, 952 (D.C. Cir. 

2004) (citations omitted). By contrast, a final rule fails the 

logical outgrowth test and thus violates the APA’s notice 

requirement where “interested parties would have had to 
6 

‘divine [the agency’s] unspoken thoughts,’ because the final 

rule was surprisingly distant from the proposed rule.” Int’l 

Union, United Mine Workers of Am. v. Mine Safety & Health 

Admin., 407 F.3d 1250, 1259–60 (D.C. Cir. 2005) (internal 

citations omitted). 

 In this case, the Board offers a two-part argument that its 

final rule represents a logical outgrowth of the NPRM. It first 

claims that the release of four-year data—albeit for another 

purpose—was “a foreseeable and reasonable result of other 

changes advocated by the railroads.” Resp’t Br. 33. Under 

the previous three benchmark approach, two benchmarks—

the RSAM and R/VC>180—were calculated using four years’ 

worth of private data. See Rate Guidelines—Non-Coal 

Proceedings, S.T.B. Ex Parte No. 347 (Sub-No. 2) at 16, 20 

(served Dec. 31, 1996). By contrast, the NPRM proposed to 

calculate those two benchmarks based on the railroads’ public

filings. NPRM at 23. Although no release of private data 

would be necessary under the proposed rule, the NPRM 

indicated that if the method for calculating the two 

benchmarks remained the same, parties would be unable to 

verify the benchmarks unless the Board released the data. Id. 

at 23 & n.41. According to the Board, given that the railroads 

themselves persuaded the Board not to adopt the public filings 

proposal, see Decision at 80–82, railroad petitioners should 

have foreseen that the Board would release the four-year data 

to enable parties to verify the benchmarks. 

Second, the Board argues that the railroads had notice 

that parties would draw comparison groups from whatever 

data the Board released. In support, the Board notes that the 

NPRM and the final rule contain identical language regarding 

the comparison groups. Compare NPRM at 20 (“The 

[comparison] movements would be drawn from the Waybill 

Sample provided to the parties by the Board.”), with Decision 
7 

at 18 (“The [comparison] movements must be drawn from the 

Waybill Sample provided to the parties by the Board at the 

outset of the case.”), and Decision at 83 (“As explained in the 

NPRM, we will select the comparison group based on 

information contained in the Waybill Sample released to the 

parties at the outset of the case . . . .”) (internal citations 

omitted). As a result, the Board argues, the railroads should 

have foreseen that the same data released for the other two 

benchmarks would be used for comparison groups. 

The railroads respond that the Board’s “convoluted 

‘explanation’ of its heretofore undisclosed, ‘complex’ path” to 

the final rule’s use of four-year data stands as “cogent proof 

that this change was anything but a logical outgrowth of the 

Board’s proposal.” Railroad Petr’s’ Reply Br. 15. The 

railroads point out that the NPRM proposed drawing 

comparison groups from the most recent year’s worth of data 

and never mentioned the possibility that the Board might 

consider using data for a longer period of time. See NPRM at 

33. Indeed, the railroads tell us, and the Board nowhere 

disagrees, that not one commenter indicated that it understood 

the proposal to mean that the Board might consider using 

more than one year’s worth of private data. Railroad Pet’rs’ 

Br. 8. 

Responding to the Board’s second argument, the 

railroads contend that the proposal to calculate two 

benchmarks from public data “had nothing to do with the 

number of years from which comparable movements would 

be drawn.” Railroad Pet’rs’ Reply Br. 15–16. Noting that the 

final rule expanded the data available for comparison 

movements “in a very oblique and indirect manner,” the 

railroads protest that “two separate sections of the final rule, 

which decide wholly unrelated issues, must be cobbled 

together” to conclude that the rule authorizes the use of four 
8 

years’ worth of data for comparison movements. Railroad 

Pet’rs’ Br. 12. According to the railroads, because the NPRM 

nowhere suggested that the two sections were linked, it failed 

to give adequate notice that the Board was considering using 

anything other than the most recent year’s data to derive 

comparison groups. 

As mentioned above, a final rule qualifies as a logical 

outgrowth of the proposed rule if interested parties “‘should 

have anticipated’ that the change was possible.” Ne. Md. 

Waste Disposal Auth., 358 F.3d at 952. We have found that a 

final rule represents a logical outgrowth where the NPRM 

expressly asked for comments on a particular issue or 

otherwise made clear that the agency was contemplating a 

particular change. For example, in Owner-Operator 

Independent Drivers Ass’n v. Federal Motor Carrier Safety 

Administration, 494 F.3d 188 (D.C. Cir. 2007), we considered 

a rule that allowed long-haul truck drivers to satisfy their tenhour off-duty requirement in two separate resting periods as 

long as one period was at least eight hours long. We 

concluded that the final rule was a logical outgrowth of the 

NPRM, which stated that “FMCSA will consider a variety of 

possible changes . . . including . . . establishing a minimum 

time for one of the two ‘splits,’ such as 5 hours, 8 hours, or 

some other appropriate level.” Id. at 209–10. Similarly, in 

City of Portland v. Environmental Protection Agency, 507 

F.3d 706 (D.C. Cir. 2007), we concluded that a final rule 

requiring uncovered reservoirs to be treated for a particular 

parasite was a logical outgrowth of the proposed rule because 

the NPRM expressly requested comments on whether the 

agency should consider requiring cities to inactivate the 

parasite. Id. at 715. 

By contrast, our cases finding that a rule was not a logical 

outgrowth have often involved situations where the proposed 
9 

rule gave no indication that the agency was considering a 

different approach, and the final rule revealed that the agency 

had completely changed its position. For example, in 

International Union, we concluded that a final rule setting a 

maximum mine belt air velocity of 500 feet per minute was 

not a logical outgrowth of a proposed rule providing that “[a] 

minimum air velocity of 300 feet per minute must be 

maintained.” 407 F.3d at 1259. We explained that “the 

Secretary could not have expected interested parties to realize 

that she would consider abandoning her proposed regulatory 

approach . . . simply because she invited commentary on a 

proposed rule that included a minimum air velocity.” Id. at 

1260. We reached a similar result in Environmental Integrity 

Project v. Environmental Protection Agency, 425 F.3d 992 

(D.C. Cir. 2005), in which EPA published a proposed rule 

clarifying that a set of regulations operate independently of 

one another. In its final rule, however, EPA adopted just the 

opposite position, declaring that those regulations are in fact 

not separate regulatory standards. Id. at 994–95. We rejected 

EPA’s argument that it had satisfied its notice-and-comment 

obligations by “repudiat[ing] its proposed interpretation and 

adopt[ing] its inverse” in the final rule. Id. at 998. 

This case presents a closer question. Although the 

NPRM neither asked for comments on a particular issue nor 

otherwise indicated that the Board was contemplating a 

particular change, the final rule did not amount to a complete 

turnaround from the NPRM. That said, we think this case far 

more like those in which we found that agencies had failed to 

give adequate notice. In essence, the Board contends that the 

mere mention of the release of one-year data for comparison 

groups gave notice that the amount of data available for that 

purpose might change. We rejected just that argument in both 

International Union and Environmental Integrity Project, and 

we do so here as well. Although the NPRM proposed several 
10 

revisions to the existing system, it nowhere even hinted that 

the Board might consider expanding the number of years from 

which comparison groups could be derived. Unlike the 

notices in Owner-Operator and City of Portland, in which we 

found that the final rules qualified as logical outgrowths, the 

Board’s NPRM requested comments on no particular issue at 

all. To be sure, expanding from one to four years’ worth of 

data is less dramatic than adopting a maximum velocity cap 

where a minimum was proposed (International Union) or a 

completely different reading of a set of regulatory standards 

(Environmental Integrity Project). Even so, we see no way 

that commenters here could have anticipated which 

“particular aspects of [the Board’s] proposal [were] open for 

consideration.” Envtl. Integrity Project, 425 F.3d at 998 

(emphasis omitted); see also Fertilizer Inst. v. EPA, 935 F.2d 

1303, 1312 (D.C. Cir. 1991). Indeed, were we to conclude 

that commenters had notice merely because the NPRM 

mentioned one year’s worth of data, the Board could issue 

broad NPRMs “only to justify any final rule it might be able 

to devise by whimsically picking and choosing within the four 

corners of a lengthy ‘notice.’” Envtl. Integrity Project, 425 

F.3d at 998. Such a rule would hardly promote the purposes 

of the APA’s notice requirement. 

We are similarly unpersuaded by the Board’s argument 

that making private data available to verify the other two 

benchmarks gave commenters notice that the same data would 

be used to derive comparison groups. Although both the 

NPRM and the final rule note that comparison groups will be 

drawn from data released to the parties, neither makes clear 

that the Board was referring to all data released to the parties 

for any purpose. Indeed, the language regarding the release of 

data appears in portions of the NPRM discussing comparison 

groups, suggesting that it refers only to data released for that 

purpose. Moreover, even under the Board’s broader reading, 
11 

commenters could hardly be expected to pick this single 

sentence out of a sixty-four page NPRM absent any indication 

that the comparison group data might change. 

To be sure, in retrospect we might be able to discern the 

Board’s reasoning, i.e., that the railroads’ other unrelated 

comments suggested keeping the four-year averages for two 

benchmarks, that as a result the Board might release four-year 

data, and that the four-year data might then be used to 

calculate comparison groups. Under the APA, however, 

notice must come from the NPRM. See 5 U.S.C. § 553(b). 

Here, because nothing in the NPRM (1) indicated that the 

Board might consider expanding the comparison group data 

from one to four years, or (2) linked data released for other 

purposes to the comparison groups, we are unable to conclude 

that the final rule qualifies as a logical outgrowth of the 

NPRM. 

The Board next argues that even if we conclude that it 

failed to give adequate notice, there is no reason to vacate the 

rule because the change was neither prejudicial to the 

railroads nor important. See 5 U.S.C. § 706 (requiring courts 

to take “due account” of “the rule of prejudicial error”); First 

Am. Discount Corp. v. Commodity Futures Trading Comm’n, 

222 F.3d 1008, 1015 (D.C. Cir. 2000) (declining to decide 

whether final rule represented a logical outgrowth where 

petitioner suffered no prejudice); Transmission Access Policy 

Study Group v. FERC, 225 F.3d 667, 729 (D.C. Cir. 2000) 

(declining to apply logical outgrowth analysis to minor 

change), aff’d New York v. FERC, 535 U.S. 1 (2002). In 

support, the Board points out that the final rule allows parties 

to demonstrate in individual cases that comparison 

movements drawn from older data are “unreasonable.” 

Although this is certainly true, the railroads’ point, with 

which we agree, is that they were prejudiced by their inability 
12 

to persuade the Board not to adopt the four-year rule in the 

first place, thus requiring them to litigate the issue in 

individual proceedings. “Had the Board given notice that it 

proposed to include four years’ historical Waybill Samples,” 

the railroads tell us, they “would have made additional 

objections and presented significantly more (and different) 

evidence (concerning, for example, changes in market 

conditions over four-to-six year periods) to support those 

objections.” Railroad Pet’rs’ Br. 10. The railroads also point 

out that because the Board needs one to two years to gather 

and release the data, see Decision at 84, expansion to four 

years’ worth of data means that comparison groups could be 

drawn from movements that are up to six years old, and older 

data increases the “likelihood of distorted comparisons and 

results.” Railroad Pet’rs’ Br. 12. We thus agree with the 

railroads that the change from one year to four years’ worth of 

data was important and potentially prejudicial. 

III. 

For the foregoing reasons, we conclude that the Board 

failed to comply with the APA’s notice and comment 

requirements. We therefore vacate (1) the portion of our 

earlier opinion rejecting the railroads’ notice argument, see 

CSX, 568 F.3d at 246–47, and (2) the portion of the final rule 

that makes four years of data available for comparison groups, 

see STB Ex Parte No. 646 (Sub-No. 1), at 83 (served Sept. 5, 

2007); see also Allied-Signal, Inc. v. U.S. Nuclear Regulatory 

Comm'n, 988 F.2d 146, 150–51 (D.C. Cir. 1993). We also 

vacate the portion of our opinion rejecting the railroads’ 

argument regarding regulatory lag, see CSX, 568 F.3d at 247–

48, an issue we had no need to reach given our conclusion 

here that the Board failed to provide the required notice.

So ordered.