Opinion ID: 187401
Heading Depth: 1
Heading Rank: 4

Heading: Simplified SAC

Text: In addition to challenging the relief caps, the shippers object to the Board's adoption of simplified SAC itself. They claim that the Board's decision not to require the simplified SAC stand-alone railroad to be optimally efficient guts the entire rationale for adopting simplified SAC in the first place. They also claim that the Board was required to evaluate simplified SAC using test data. We disagree on both counts. In promulgating the simplified SAC method, the Board eliminated the search for inefficiencies in the stand-alone railroad. The shippers argue that this constitutes so significant a deviation from CMP principles as to render the Board's reliance on those principles to justify simplified SAC arbitrary and capricious. But the Board explained that the efficiency inquiry is precisely what renders full SAC presentations so costly, and that in its view modern railroads suffer from too little inefficiency to justify this expense for the purpose of simplified SAC. Decision at 55-56. Specifically, while acknowledging that in its 1996 rulemaking it had rejected the AAR-SSAC proposal because it failed to account for inefficiencies, the Board explained its change in position by observing that rail capacity and traffic conditions have changed, and railroads are no longer burdened by substantial excess capacity. NPRM at 14; see also Decision at 55-56 (referencing NPRM). Given this, the Board concluded that railroads, in most instances, are likely operating at a sufficiently efficient level so that it would not be worth the time and considerable expense required to attempt to measure the amount of inefficiency that could be eliminated by a more efficient stand-alone railroad. Decision at 56. It further noted that railroads have little incentive to build unnecessary facilities given the market realities governing most rail rates, NPRM at 14, that simplified SAC allows limited modifications based on certain easy-to-detect inefficiencies, Decision at 56, and that in any event simplified SAC conforms more closely to CMP principles than does the three benchmark approach, id. at 56. In our view, the shippers are simply second-guessing the Board's determination of how closely simplified SAC must track CMP principlesprinciples the Board itself chose to retain. True, simplified SAC does nothing to serve CMP's objective of eliminating inefficiencies, but it still perfectly serves CMP's other objective: eliminating cross-subsidization of facilities for which shippers see no benefit. See id. at 55. The Board reasonably concluded that this was enough. As we have said: [t]he pursuit of precision in rate proceedings, as in most things in life, must at some point give way to the constraints of time and expense, and it is the agency's responsibility to mark that point. BNSF I, 453 F.3d at 482. The shippers next take issue with the Board's explanation for its change in position from its 1996 rejection of the AAR-SSAC proposal. Although [a]n agency may not ... depart from a prior policy sub silentio or simply disregard rules that are still on the books, Fox, 129 S.Ct. at 1811, here the Board did no such thing. As we have pointed out, it adequately explained the turnabout by noting the decline in excess capacity and overall increase in railroad efficiency since the 1996 rulemaking. See NPRM at 14; Decision at 55-56. The Board's inference that excess capacity signals inefficiency, and the consequent finding that inefficiency had decreased to the point that uncovering it was no longer cost-effective, provide a sufficient explanation for jettisoning that inquiry in simplified cases. According to the shippers, in 1996 the Board treated certain capacity constraints (i.e., railroads running at full capacity in certain situations) as indicative of inefficiency, which they think contradicts its current treatment of capacity constraints as a sign of efficiency. The simple answer to this cryptic objection is that in 1996 the Board did not treat capacity constraints as indicative of inefficiency. The only evidence the shippers cite on this point is the Board making the very different point that existing double-track infrastructure was less efficient than more modern computer-controlled single-track architecture. 1996 Guidelines, 1 S.T.B. at 1015 n. 33. But this remark has nothing at all to do with capacity constraints, so it can hardly conflict with the Board's current reasonable treatment of capacity constraints as signaling lower excess capacity and greater efficiency. Next, the shippers complain that the Board failed to test its simplified SAC procedure with sample data. Acknowledging that nothing in the statute requires such testing, the shippers nonetheless maintain that since the Board tested AAR-SSAC and found that it produced unreliable results, the Board acted arbitrarily by failing to test its own simplified SAC proposal. For its part, the Board explained that the Commission only tested AAR-SSAC because the AAR refused to provide the source code for the program, thus preventing the Commission from learning its precise details. Decision at 54. And although AAR-SSAC was similar to simplified SAC in disregarding inefficiencies, it also had very significant differences, as it expanded the stand-alone railroad to include other profitable traffic and excluded certain insufficiently profitable traffic, steps absent from the Board's simplified SAC. Compare id. at 13 n. 18 (describing AAR-SSAC method) with id. at 15-16 (describing the Board's simplified SAC). Given this difference between the two methods, we see nothing arbitrary about the decision to test the first but not the second, even after the first's poor showing.