A proposed high-speed passenger railroad between Dallas and Houston has successfully convinced the federal Surface Transportation Board (STB) that it has jurisdiction over the proposed Texas rail line. While STB jurisdiction will greatly aid the rail line by generally preempting state and local regulation, the STB's order has added federal requirements that will have to be addressed. FD 36025 (STB Served July 16, 2020)

Texas Central Railroad and Infrastructure Inc. and its subsidiary, Texas Central Railroad LLC (Texas Central), had lost an initial effort to secure federal jurisdiction over its planned line of railroad in 2016. That's when the STB found that Texas Central's operation, as then presented, would be purely in intrastate commerce. With this most recent decision, the STB rules that Texas Central's new plans will make it part of the "interstate rail network" and place it squarely in the realm of interstate commerce and the STB's exclusive jurisdiction.

The Board adopted a final rule establishing a streamlined approach for pleading market dominance in rate reasonableness proceedings.  Market Dominance Streamlined Approach, Ex Parte 756 (STB served Aug. 3, 2020).  This decision finalized a notice of proposed rulemaking (NPRM) served in this proceeding on September 12, 2019.  The Board received comments from over 20 entities on the NPRM.  As explained below, the Board in the final rule adopted the NPRM proposals with minor modifications.

On June 23, the Board withdrew its proposal to revise its methodology for calculating the cost-of-equity component of the railroad industry’s cost of capital by incorporating a third model, based on comments and replies the Board received in response to the notice of proposed rulemaking (NPRM).  Revisions to the Board’s Methodology for Determining the R.R. Indus.’s Cost of Capital, Ex Parte 664 (Sub-No. 4) (STB served June 23, 2020). 

This blog discusses three recent decisions issued by the Surface Transportation Board (STB or Board) in two demurrage proceedings that arose, in part, as a result of testimony and comments submitted in Ex Parte 754, Oversight Hearing on Demurrage & Accessorial Charges.

The Board Issues a Demurrage Policy Statement

            On April 30, 2020, the Board issued a Statement of Board Policy explaining the principles the Board will consider in evaluating the reasonableness of demurrage and accessorial rules and charges.  Policy Statement on Demurrage and Accessorial Rules and Charges, EP 757 (STB served April 30, 2020).  This policy statement was finalized following a notice of proposed statement of Board policy issued in October 2019 and a public comment period.  The Board noted that it is not making any “binding determinations” with the policy statement, and that the Board will continue to adjudicate specific cases based on all facts and arguments presented.  Id., slip op. at 3.

This week’s ATLP Highlights Blog features an interview that I recently conducted with Jay Fox, Deputy General Counsel for the Southeastern Pennsylvania Transportation Authority (“SEPTA”).

SEPTA serves the Philadelphia metropolitan area operating: bus, rapid transit, commuter rail, light rail, and electric trolleybus service.  The transit agency employs over 9,000 people and logs nearly 1.5 trillion passenger miles per year across all modes.

Jay began his career in private practice as a litigator and then as general counsel to an export management firm before joining the Federal Aviation Administration (“FAA”) only a month after the September 11 terrorist attacks.  He then went on to the Federal Transit Administration and Amtrak prior to joining SEPTA. Jay is a graduate of Rutgers Law School.

Jay and I spoke via zoom as both Philadelphia, where Jay lives, and metro Washington D.C., my home, are currently under “stay-at-home” orders in response to the Covid-19 Pandemic.

The United States is awash in oil.  The Coronavirus Pandemic has collapsed global demand and at the same time recent increased oil production by Saudi Arabia and Russia has caused oil supply to surge.  Facing a potential need for storage, Bloomberg is reporting that oil companies are considering rail cars to store excess crude oil.  Railroads and shippers need to understand the regulatory implications of doing so.

Both the Surface Transportation Board (STB or Board) and the Federal Railroad Administration (FRA) have taken certain steps to address impacts of the COVID-19 pandemic.  The Board announced that, starting on March 17, 2020, all filings and other submissions should be made electronically.  Until further notice, the Board will not be accepting paper filings or providing paper copies of any decisions or other materials.  STB Homepage, https://prod.stb.gov/.  The STB has also granted certain deadline extensions in proceedings where requested due to COVID-19 impacts.  E.g., Ass’n of Am. R.Rs.—Petition for Declaratory Order, FD 36369 (STB served March 19, 2020); Petition by the Nat’l R.R. Passenger Corp. (Amtrak) for Proceeding under 49 U.S.C. § 24903(c)(2), FD 36332 (STB served March 17, 2020). 

Welcome to the first Editor-in-Chief commentary under the ATLP’s new blog format.  As you probably know or have deduced, ATLP has transitioned Association Highlights from a bi-monthly newsletter format publishing six issues per year to a blog format endeavoring to publish weekly.  Under this new format, you will continue to receive informative transportation content delivered via email.  You can access the Association Highlights blog posts at the ATLP website, https://www.atlp.org/association-highlights-blog.  We hope that you find this new format to make it easier for you to read all of the high-quality content produced by the ATLP Highlights editors.

On January 2, 2020, the Board provided its fourth quarter 2019 report on Pending STB Regulatory Proceedings, as required by Section 15 of the STB Reauthorization Act of 2015. 

On October 7, 2019, the Board concurrently served three decisions related to demurrage.  These decisions arose, at least in part, as a result of the testimony and comments provided in Oversight Hearing on Demurrage & Accessorial Charges, Ex Parte 754.  Comments on all three of these proposals were due on November 6, 2019, and reply comments were due on December 6, 2019. 

In August, the Board issued a decision discontinuing the Rail Fuel Surcharges (Safe Harbor) proceeding, in which the Board had sought comment on whether to modify or remove the “safe harbor” provision of its current fuel surcharge rules.  Ex Parte 661 (Sub-No. 2) (STB served Aug. 29, 2019).  This proceeding began in May 2014, when the Board issued an advanced notice of proposed rulemaking (ANPRM) to better understand “whether the sort of growing spread between” safe harbor HDF Index-based costs and actual costs seen in Cargill, Inc. v. BNSF Ry., NOR 42120, (STB served Aug. 12, 2013), “was unique to BNSF during a period of particularly high price volatility (or instead a widespread phenomenon in the rail industry).”  Id., slip op. at 2.  The ANPRM was also issued to “determine whether to modify or remove the safe harbor provision.”  Id.  The Board stated that the comments and replies received in response to the ANPRM were “varied,” and many did not directly address the issue raised.  Id.  The Board explained that, since the comment period, it has been unable to reach a majority decision on what action to take in response to the comments received.  Id., slip op. at 3.  Therefore, “the Board Members agree that this docket should be discontinued.”  Id. 

In October, the Board issued a notice of proposed rulemaking to revise its methodology for determining the cost-of-equity component of the cost of capital.  Revisions to the Board’s Methodology for Determining the R.R.  Indus.’s Cost of Capital, Ex Parte 664 (Sub-No. 4) (STB served Oct. 11, 2019).  The proposed rule would add a third model, in addition to the two models (the Capital Asset Pricing Model (CAPM) and the Morningstar/Ibbotson Multi-Stage Discounted Cash Flow Model (MSDCF)) currently used.  Id., slip op. at 3.  The new model, called “Step MSDCF,” would continue to calculate growth of earnings in three stages, like MSDCF.  The first and third stages would be the same as those of MSDCF.  The growth rate of the second stage (years six through 10) of Step MSDCF “would be a gradual transition between the first and third stages.”  Id., slip op. at 5.  Under the proposal, the Board would calculate the cost of capital by using the average of the three models, weighted as follows: CAPM at 50%, MSDCF at 25%, and Step MSDCF at 25%.  Id., slip op. at 3.  As the Board noted, since its move in 2009 from a cost-of-equity estimate based solely on CAPM to one based on the simple average of the CAPM and MSDCF estimates, it has considered revising this calculation at various times.  Id., slip op. at 4-6.

In November 2019, the Board issued a decision seeking additional information on integrating cost-benefit analysis into its rulemaking process.  Ass’n of Am. R.R.s—Petition for Rulemaking, Ex Parte 752 (STB served Nov. 4, 2019).  This decision was issued in response to a petition filed by AAR in March to institute a rulemaking to adopt rules that “would require a cost-benefit analysis in certain Board rulemaking proceedings and would set certain data requirements.”  Id., slip op. at 1.  Specifically, the Board sought information on the following four topics:

This article summarizes the recent Surface Transportation Board (STB or Board) activities and decisions.