Opinion ID: 2679706
Heading Depth: 2
Heading Rank: 3

Heading: adoption of alternative atc

Text: CSX’s third challenge goes to the Board’s modification of its cross-over-revenue allocation method. CSX argues that the Board failed to respond to important comments regarding the Board’s reasoning in adopting the Alternative Average Total Cost formula for revenue allocation. The Board justified its proposal, in part, on the rationale that Average Total Cost had produced the “illogical” and “implausible” 18 result of allocating revenues insufficient to cover segments’ variable costs on the stand-alone railroad. But according to CSX, commenters demonstrated that below-variable-cost allocations were consistent with the logic and application of the Alternative Total Cost formula. The Board erred in ignoring these comments in this rulemaking. To see why CSX’s argument fails, we must tour the convoluted procedural history from which this rulemaking sprang. As we noted earlier, the Board originally discarded Average Total Cost in the midst of the Western Fuels Association proceeding, and adopted in its place Modified Average Total Cost. WFA II, 741 F.3d at 164. It was in this original proceeding that the Board explained that ATC had the “illogical and unintended result” of producing “scenarios in which revenue generated by some movements would not cover the variable costs of those movements” on the standalone railroad. Id. at 165. When we remanded to the Board to address BNSF’s double-counting objection, BNSF maintained that Modified ATC was an irrational response to the problem created by ATC, but it also suggested a different approach: Alternative ATC. The Board, recognizing the merits of BNSF’s suggestion, initiated a rulemaking to consider whether Alternative ATC might in fact be a better allocation method than Modified ATC. It is this—the Board’s subsequent decision to adopt Alternative ATC—that CSX now challenges. But the character of this decision is not whether the Board should discard ATC or, relatedly, whether there was a problem with it. The Board based its proposal in the NPRM on its consideration of cross-over revenue allocation in the Western Fuels Association proceedings. See NPRM, at 8. There the Board had already rejected ATC, and by framing its proposal as an offshoot of these proceedings, the Board put 19 commenters on notice that it was not considering whether to revert to Average Total Cost, or whether below-variable-cost allocations were problematic. On the contrary, the rulemaking we now review assumed that below-variable-cost allocations were illogical, and operated on that assumption. More to the point, the Board addressed the same arguments in the Western Fuels Association proceedings that CSX accuses it of ignoring now:  First, CSX claims the Board ignored comments to the effect that below-variable-cost allocations under ATC are not illogical. But as the Board noted in the Western Fuels Association proceedings, allowing such allocations “creates the illusion that . . . more revenue is available to help pay for [fixed] costs . . . than is available in reality.” Western Fuels Association Remand, at 7.  Second, CSX highlights comments arguing that it is meaningless to compare stand-alone railroad revenues to actual variable costs, because “the Stand-Alone Railroad is optimally efficient and would have different variable costs on the on-Stand-Alone- Railroad segment tha[n] [the] defendant carrier would have in the real world.” Pets. Br., at 52–53. The Board addressed this concern in the Western Fuels Association proceedings. There it considered the stand-alone railroad’s efficiency irrelevant “because the fairness of a revenue-allocation procedure should not depend on . . . the complainant having to design a [[s]tand-[a]lone [r]ailroad] that is more efficient than the incumbent railroad.” Western Fuels Association Remand, at 4. 20  The Board also rejected a third argument CSX now highlights. Commenters argued that the Board’s use of Uniform Rail Costing System costs is “inappropriate both because that segment may have significantly different costs than the carrier’s overall average costs, and because some Uniform Rail Costing System costs are unattributable [fixed] costs . . . , not variable costs.” Pets. Br., at 53. As the Board noted in the Western Fuels Association proceedings, use of Uniform Rail Costing System in a SAC analysis is appropriate because the Uniform Rail Costing System is “a measure of intermediate-variable costs,” which includes costs that are “fixed in the short term . . . but variable over the longer term.” Western Fuels Association Remand, at 8.  Fourth, in the Western Fuels Association proceedings, the Board rejected the contention that the burden should be on the complainant to avoid below-variablecost allocations, an argument revived in this proceeding. See Western Fuels Association Remand, at 8.  Finally, commenters argued that the Board need not be concerned with below-variable-cost allocations for artificially segmented portions of a rail that would in the real world be priced in its entirety. In the Western Fuels Association proceedings, however, the Board noted that carriers will “in general, estimate revenues attributable to the segment in an amount at least equal to the long-run variable costs of providing service over that segment.” Western Fuels Association Remand, at 7. 21 In short, the Board addressed the arguments CSX now accuses it of ignoring in the original proceeding in which it discarded the Average Total Cost formula. The Board had no reason to repeat its responses in this proceeding, which addressed only whether to replace Modified ATC with Alternative ATC.