Non-Railroad Entities File Petition Requesting the Surface Transportation Board Adopt Rules Governing Use of Private Railcars by Railroads

On July 26, 2021, the North America Freight Car Association, The National Grain and Feed Association, The Chlorine Institute, and The National Oilseed Processors Association (collectively, Petitioners) filed a petition for rulemaking requesting that the Surface Transportation Board (Board) exercise its authority under 49 U.S.C. §§ 1312 and 11122(a)(2) “to promulgate regulations governing the use by the Nation’s Class I railroads of freight railcars supplied to them by rail car owners, shippers, and other non-railroad entities (‘Private Railcars’).”  Petition for Rulemaking to Adopt Rules Governing Private Railcar Use by Railroads, EP 768 at 1 (filed July 26, 2021).

Petitioners argued that an update to the rules governing railroads’ use of Private Railcars is long overdue because, although railroads once owned all of the railcars used in transportation, the railroad industry has evolved to the point that approximately 73% of the railcars in service today nationwide are “Private Railcars which are purchased or leased, and maintained, by non-railroad entities at little or no cost to the railroads that use them.”  Id. at 1, 5.

According to Petitioners, insufficient incentives exist for Class I railroads to efficiently utilize private railcars.  Id. at 8.  Petitioners stated that “[m]any of the rules governing demurrage and accessorial charges and other mechanisms to increase efficiency of railcar usage were developed when the railroads provided the majority of railcars for service nationwide,” and “there are no Board regulations and very few, if any, Class I railroad tariff provisions, that create incentives for a railroad to maximize the efficiency with which it possesses and uses Private Railcars.”  Id. at 9-10.  Petitioners also claimed that there are “no viable commercial mechanisms for the vast majority of rail shippers to negotiate reciprocal incentives, such as rail contract service-standard provisions.”  Id. at 10.  Petitioners argued that “[t]he lack of sufficient regulatory and commercial incentives for railroads to efficiently use Private Railcars in their possession has resulted in harm to non-railroad entities who make the enormous investment in Private Railcars, as well as the incurrence of other substantial damages and costs as a result of such inefficient usage.”  Id. at 12.

Petitioners submitted that the time has come for the Board to update its rules and policies by adopting appropriate incentives so that Class I railroads more efficiently utilize the Private Railcars in their possession, and “the appropriate mechanism is to implement a monetary penalty/incentive when a railroad holds on to a Private Railcar beyond a reasonable time that takes into account reasonably expected service variations.”  Id. at 14.  Specifically, Petitioners proposed that the Board “establish by regulation a ‘private railcar delay charge’ that could be assessed by a private railcar provider if a railroad exceeded an ‘allowable transit idle time’” of 72 consecutive hours.  Id. at 18.  Under the proposal, the applicable charge for exceeding the allowable transit idle time would be the greater of:

(i) the applicable demurrage charge that a rail carrier assesses its customers pursuant to the railroad’s tariffs or other common carrier publications for holding on to railroad-owned or leased railcars beyond the free time established by the railroad, or

(ii) the applicable storage charge that a rail carrier could assess the Private Railcar provider pursuant to the rail carrier’s tariffs or other common carrier publications for holding onto or storing the private railcar beyond the free time established by the railroad.

Id.  A railroad would be permitted to seek a ruling from the Board that paying the assessed charges for exceeding the allowable transit idle time was inappropriate, in an appropriate proceeding, which could include arbitration.  Id. at 19.

Petitioners requested that the Board commence a notice-and-comment rulemaking on the petition and the proposed regulations at the earliest opportunity.  Id. at 21-22.  Pursuant to a request by the Association of American Railroads, the Board extended the reply period until August 30, 2021.  Petition for Rulemaking to Adopt Rules Governing Private Railcar Use by Railroads, EP 768 (STB served Aug. 9, 2021).  The Board received several comments from stakeholders.  Non-railroad entities generally expressed support for the petition.  CSX Transportation, Inc., Union Pacific Railroad Company, and the Association of American Railroads urged the Board to reject the petition.

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