On October 19, 2022, the Surface Transportation Board (Board) issued a decision accepting the post-remand briefs and comments filed in a declaratory order proceeding involving Soo Line Railroad Company (CP) and Wisconsin Central, Ltd. (CN) and soliciting public comments regarding the broad legal issues presented by the proceeding.  Wisconsin Central, Ltd.—Pet. for Declaratory Order—Interchange with Soo Line R.R. Co., FD 36397 (STB served Oct. 19, 2022). 

On October 28, 2022, the Surface Transportation Board (Board) announced the final evidentiary hearing dates – November 17 and November 18, 2002 – for the March 16, 2021 application by the National Railroad Passenger Corporation (Amtrak) requesting an order that allowed additional Amtrak train operations over CSX Transportation, Inc. (CSXT) and Norfolk Southern Railway Company (NSR) lines along the Gulf Coast.  Application of the Nat’l Passenger R.R. Corp. Under 49 U.S.C. § 24308(E)—CSX Transp., Inc. & Norfolk S. Ry. Co., FD 36496 (STB served Oct. 28, 2022).  The Board also announced that it would hold a voting conference on December 7, 2022.  Id.

On September 28, 2022, the Surface Transportation Board (Board) commenced a public hearing in the proposed Kansas City Southern (KCS) and Canadian Pacific (CP) merger proceeding.  See Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD 36500 (STB served September 21, 2022).

Practitioners in the modes are familiar with the role administrative agencies can alter the shape of compliance obligations through administrative decisions and rulemakings. The National Labor Relations Board (NLRB) is similar in most respects. One of these is the authority of the Board to assess part decisional practice and, in a decision, issued a new rule, as a case holding, without the necessity for formal rulemaking. The most well-known example is the case of John Deklewa & Sons, Inc. https://www.nlrb.gov/case/06-RC-012417 (creating a new test for when a collective bargaining agreement is revokable).

This edition of the Passenger Rail Update highlights how the Surface Transportation Board (STB) has come to serve as an increasingly important venue for the National Railroad Passenger Corporation (“Amtrak”) to assert federal statutory rights and obligations aimed at improving intercity passenger rail service across the country. The shift can be seen in the STB’s establishment of a new Office of Passenger Rail and in Amtrak’s ongoing bid to restart its Gulf Coast service.

The possibility of an imminent rail labor strike has created uncertainties for rail shippers and receivers, of course for the railroads themselves, this autumn.  Shippers of hazardous materials (HazMat) have been particularly affected by preemptive measures taken by carriers to limit their exposure to risks of HazMat being delayed in transit on the rail network.  These include curtailing shipments of chlorine and other HazMat, suspending freight train service, and repositioning locomotives, as reported by the Association of American Railroads and the online service advisories of various Class I railroads.

In this passenger rail update we cover the Federal Railroad Administration’s (“FRA”) new regulations concerning fatigue management and FRA’s introduction of the new intercity passenger Corridor Identification and Development Program. We also provide an update on the Amtrak Gulf Coast proceedings currently pending before the Surface Transportation Board (“STB” or “Board”).

FRA Amends Regulations to Implement Statutory Requirements for Fatigue Management

Pursuant to the requirements of Section 103 of the Rail Safety Improvement Act of 2008 (“RSIA”), 49 U.S.C. § 20156, on June 13, 2022, FRA issued a Notice of Final Rule in the Federal Register requiring that certain railroads include “fatigue management plans” in their safety risk reduction plans (87 Fed. Reg. 35,660).  This requirement applies specifically to Class I railroads, railroads that have been deemed by the Secretary of the Department of Transportation to have inadequate safety performance, and intercity passenger and commuter railroads.  Under current FRA regulations, Class I railroads and those deemed to have inadequate safety performance are required to submit Risk Reduction Program (“RRP”) plans to the FRA while intercity passenger and commuter railroads are required to submit System Safety Program (“SSP”) plans.  However, Section 20156 also requires that fatigue management plans be included in a railroad’s safety risk reduction plan (either an RRP or SSP), which had not previously been included in the applicable regulations (49 C.F.R. Part 270 and Part 271), thus prompting this rulemaking.

In this edition of the Passenger Rail Highlight we cover recent updates and guidance from the Federal Transit Administration (FTA) regarding implementation of changes to requirements for federal transit funding recipients and applicants provided under the recently passed Infrastructure and Investment Jobs Act, Public Law 117-58 (IIJA). First, FTA Administrator Nuria Fernandez issued a Dear Colleague Letter reminding transit agencies of new requirements regarding the establishment of Safety Committees. FTA also issued new proposed guidance regarding its Capital Investment Grants (CIG) program, while signaling more comprehensive changes to CIG policy guidance on the horizon.

Introduction

This edition of the Commuter Rail Update delves into a recent decision issued by the Surface Transportation Board (“STB”) concerning cost allocation between Regional Transportation Authority’s Commuter Rail Division (“Metra”) and the National Railroad Passenger Corporation (“Amtrak”) for use of Amtrak’s Chicago Union Station. We also highlight New Jersey Transit’s award of a $1.6 billion contract to conduct a much-needed replacement of the Portal North Bridge connecting New Jersey to New York City.

Surface Transportation Board Issues Decision in Dispute Between Amtrak and City of Chicago Over Access to the Chicago Union Station

On March 23, 2021, Canadian Pacific Railway Limited (Canadian Pacific), Canadian Pacific Railway Company, and their U.S. rail carrier subsidiaries, Soo Line Railroad Company, Central Maine & Quebec Railway US Inc., Dakota, Minnesota & Eastern Railroad Corporation, and Delaware & Hudson Railway Company, Inc. (collectively, CP), and Kansas City Southern and its U.S. rail carrier subsidiaries, The Kansas City Southern Railway Company (KCSR), Gateway Eastern Railway Company, and The Texas Mexican Railway Company (collectively, KCS), notified the Surface Transportation Board (Board) of CP and KCS’s (collectively, Applicants) intent to file an application seeking authority under 49 U.S.C. §§ 11323-25 for the acquisition of control by Canadian Pacific, through its indirect, wholly owned subsidiary, Cygnus Merger Sub 2 Corporation (Cygnus Merger Sub 2), of Kansas City Southern.  Canadian Pac. Ry. Ltd.—Control—Kansas City S., FD No. 36500 (filed Mar. 23, 2021).  Applicants are also seeking authority for the acquisition of control by Canadian Pacific, through Kansas City Southern, of KCSR and its railroad affiliates, and for the resulting common control by Canadian Pacific of both its U.S. railroad subsidiaries and KCSR and its railroad affiliates.  Id. at 1.  Applicants intend to file the application on or after June 28, 2021.  Id.

On February 25, 2021, CSX Corporation (CSXC), CSX Transportation, Inc. (CSXT), 747 Merger Sub 2, Inc. (747 Merger Sub 2), Pan Am Systems, Inc. (Systems), Pan Am Railways, Inc. (PAR), Boston and Maine Corporation (Boston & Maine), Maine Central Railroad Company, Northern Railroad, Portland Terminal Company, Springfield Terminal Railway Company (Springfield Terminal), Stony Brook Railroad Company, and Vermont & Massachusetts Railroad Company (collectively, Applicants), filed an application pursuant to 49 U.S.C. §§ 11323(a)(1), (3), (4), and (5) and 49 C.F.R. Part 1180, seeking approval from the Surface Transportation Board (Board) for: (1) CSXC, CSXT, and 747 Merger Sub 2 to control the railroads controlled by Systems and PAR; and (2) CSXT to merge certain PAR subsidiaries into CSXT.  CSX Corp.—Control and Merger—Pan Am Systems, Inc., FD 36472 (filed Feb. 25, 2021). 

The Biden Administration has issued a number of directives to public transportation providers, including operators of passenger rail service, directing operating entities to require that all persons working in their systems or using their services wear masks to prevent the spread of COVID-19.  While these directives provide that any individual who fails to comply with the mask mandate will violate federal law, the directives make public transportation providers responsible for requiring masks, but do not specify a mechanism for enforcing those requirements.  As the directives stand as of the date of this blog entry, the policy goal is clear and the directives identify various means for penalizing public transportation providers who fail to adhere to the requirements – but they do not specify an enforcement regime. We expect TSA and FTA will issue further guidance, so watch this space.

On December 30, 2020, the Surface Transportation Board (the Board or STB) issued a decision initiating a rulemaking proceeding to consider a joint petition by several Class I railroads, Union Pacific Railroad Company (UP), Norfolk Southern Railway Company (NS), and the U.S. rail operating affiliates of Canadian National Railway Company (collectively, CN), to change the Board’s procedures for annually determining whether Class I rail carriers are revenue adequate under 49 U.S.C. § 10704(a)(3).  Joint Petition for Rulemaking—Annual Revenue Adequacy Determinations, Ex Parte 766 (STB served Dec. 30, 2020). 

The Surface Transportation Board (the Board or STB) issued a decision on December 30, 2020, denying a request by the Association of American Railroads (AAR) for a declaratory order regarding preemption of the Clean Water Act’s (CWA) National Pollutant Discharge Elimination System (NPDES) permitting program and discharge prohibition.  Ass’n of Am. R.R.—Pet. for Declaratory Order, FD 36369 (STB served Dec. 30, 2020).

On January 5, 2021, the Surface Transportation Board (STB or Board) issued a decision addressing the transportation merits of the proposed construction and operation of an approximately 85-mile rail line in Utah.  Seven County Infrastructure Coalition—Construction and Operation—in Utah, Carbon, Duchesne, and Uintah Counties, UT,FD 36284 (STB served Jan. 5, 2021) (with Board Member Oberman dissenting).  The Board preliminarily concluded, subject to completion of the ongoing environmental review, that the transportation aspects of the proposed project meet the statutory exemption standard under 49 U.S.C. § 10502.  Id., slip op. at 1.

Last summer, the long-running In re: Rail Freight Fuel Surcharge Antitrust Litigation ¹ case took a detour through a rarely cited section of the Staggers Rail Act of 1980 (“Staggers”)² that excludes certain communications and agreements between competing rail lines from evidence in antitrust cases. In response to the parties’ briefing on the scope of the statute, the Court requested the Department of Justice’s views on the statute. Though the DOJ’s guidance was specifically focused on the statute at issue, the advice it contained is relevant for competitors in any industry that have legitimate reasons in certain contexts to communicate with competitors or agree on prices with competitors, even as they otherwise compete on prices with them in the market. In the Rail Freight Fuel Surcharge litigation, the legitimate communications involve interline pricing between rail carriers shipping freight across multiple rail networks. In other industries, for example, it can involve a vertically-integrated company providing logistical or back-office services to a customer-facing competitor with which they compete for retail customers, or other dual distribution circumstances.

The Federal Motor Carrier Safety Administration (“FMCSA”) requested public comments on petitions for rulemaking backed by owner-operator/small-fleet groups to address the transparency of broker rates. The notice is in response to petitions filed by the Owner-Operator Independent Drivers Association (“OOIDA”) and the Small Business in Transportation Coalition (“SBTC,” and, together with OOIDA, the “Petitioners”).   

On September 1, 2020, Petitioners Union Pacific Railroad Company (UP), Norfolk Southern Railway Company (NS), and the U.S. rail operating affiliates of Canadian National Railway Company (collectively, CN) filed a joint petition urging the Surface Transportation Board (STB or Board) to initiate a rulemaking proceeding to adopt rules that would revise and modernize annual revenue adequacy determinations under 49 U.S.C. § 10704(a).  Joint Petition for Rulemaking to Modernize Annual Revenue Adequacy Determinations, Ex Parte 766 (filed Sept. 1, 2020).

Petitioners stated that Congress charged the Board with annually measuring the financial health of the rail industry and assisting each railroad in achieving revenue adequacy, and the Board has committed itself to “evidence-based decision-making,” using tools that were designed three decades ago.  Id., slip op. at 1.  According to Petitioners, the Board currently relies on accounting measures of return on investment (ROI), rather than the current economic value of those investment assets, then removes billions of dollars of accumulated deferred taxes from that investment base, which adds yet another distortion, and analyzes these findings without considering evidence about typical rates of return for the companies with which railroads compete for capital.  Id., slip op. at 1-2.

On July 31, 2020, five Class I railroads, Canadian National Railway Company (CN), CSX Transportation, Inc. (CSX), Norfolk Southern Corporation (NS), Union Pacific Railroad Company (UP), and the Kansas City Southern Railway Company (KCS) (collectively, Petitioners), submitted a joint petition requesting that the Surface Transportation Board (STB or Board) initiate a rulemaking proceeding to establish a new voluntary arbitration program for small rate disputes.  Joint Petition for Rulemaking to Establish an Alternative Voluntary Arbitration Program for Small Rate Disputes, Ex Parte 765 (filed July 31, 2020).

Petitioners stated that Congress had instructed the Board to develop “simplified and expedited methods for determining the reasonableness of challenged rates in those cases in which a full stand-alone cost presentation is too costly, given the value of the case.”  Id., slip op. at 1.  Over the last thirty years, “the Board has responded by creating multiple new simplified, and increasingly less precise, rate review methodologies.”  Id.  However, some stakeholders in the shipping community have continued to complain that the Board’s implied methodologies are insufficient in regard to flexibility, cost, and speed.  Id.

Introduction

Recent news in the passenger rail transportation regulatory field includes the following:

♦   FRA Awards $47.5M to CRISI Grant to NCDOT
♦   FRA Plans Releases Final Rule of Particular Applicability and Record of Decision for Texas Central Railroad
♦   Massachusetts’ Lawmakers Push for State Acquisition of Pan Am Railways
♦   Colorado Receives Funding for Passenger Rail Study
♦   Montana Hosts Virtual Rail Passenger Summit

Read on for details.