The Board Issues a Notice of Public Hearing Concerning the Proposed Reciprocal Switching Regulations

On December 28, 2021, the Surface Transportation Board (Board) issued a decision announcing that it would hold a public hearing on March 15 and 16, 2022, concerning the reciprocal switching regulations that it proposed in this proceeding. Reciprocal Switching¸ EP 711 (Sub-No. 1), slip op. at 1 (STB served Dec. 28, 2021).

The Board’s current regulations governing reciprocal switching, codified at 49 C.F.R. § 1144, were promulgated in 1985 by the Interstate Commerce Commission (ICC).  See Intramodal Rail Competition, 1 I.C.C.2d 822 (1985), aff’d sub nom. Balt. Gas & Elec. v. United States, 817 F.2d 108 (D.C. Cir. 1987).  In the first case where the ICC applied 49 C.F.R. § 1144.2, Midtec Paper Corp. v. Chicago & N. W. Transp. Co., 3 I.C.C.2d 171 (1986), the ICC explained that the key issue under the regulations was whether the incumbent railroad “has engaged in or is likely to engage in conduct that is contrary to the rail transportation policy or is otherwise anticompetitive.”  3 I.C.C.2d at 181.

On July 27, 2016, the Board issued a decision, granting in part a petition for rulemaking filed by the National Industrial Transportation League, seeking revised reciprocal switching regulations.  Reciprocal Switching¸ EP 711 (Sub-No. 1) (STB served July 27, 2016) (the NPRM).  As set forth in the NPRM, the Board proposed new regulations governing reciprocal switching, “which would allow a party to seek a reciprocal switching prescription that is either practicable and in the public interest or necessary to provide competitive rail service.”  Id., slip op. at 1.  Under the proposed regulations, “there would be no need to show anticompetitive conduct.”  Reciprocal Switching¸ EP 711 (Sub-No. 1), slip op. at 3 (STB served Dec. 28, 2021).

In assessing whether a switching arrangement would be practicable and in the public interest under the proposed regulations, “the Board would consider whether the benefits of a proposed arrangement would outweigh its potential detriments [and, in] making that determination, the Board would consider all relevant factors.”  Id.  In assessing whether a switching arrangement would be necessary to provide competitive rail service, “the Board would consider whether intermodal and intramodal competition were effective with respect to the movements for which the switching arrangement was sought.”  Id., slip op. at 4.  Additionally, “[t]he Board would evaluate the effectiveness of competition using quantitative and qualitative factors that the Board has developed in the context of assessing market dominance in rate challenges, but it would not consider product competition or geographic competition.”  Id.

Under the proposed regulations, “reciprocal switching would not be ordered, even if one or both of the foregoing standards were met, if the switching was not feasible, would be unsafe, or would unduly hamper a carrier’s ability to serve its customers.”  Id.  Furthermore, “the Board would require the establishment of a switching arrangement only when (1) the shipper or receiver was served by a single Class I carrier; and (2) there was or could be, within a reasonable distance of the shipper or receiver’s facilities, a working interchange between the incumbent carrier and another Class I rail carrier.”  Id.  The Board received numerous comments in response to the NPRM.  Id., slip op. at 2. Additionally, “Board members have been participating in ex parte meetings with interested persons.”  Id.

In its decision served on December 28, 2021, the Board stated that, “[s]ince the issuance of the NPRM and the Board’s receipt of written comments and the occurrence of some of the ex parte meetings, there have been significant operational changes in and affecting the freight rail industry.”  Id., slip op. at 6.  Thus, in order “[t]o ensure a full and updated record in this proceeding,” the Board invited written comments on the following broad areas of interest: First, comments identifying new developments that a commenter finds are relevant to a final decision and address any change or significant development in a commenter’s views since the previous round of comments.  Id.  Second, comments addressing topics that were discussed in ex parte communications that have taken place in this proceeding since October 25, 2016.  Id. Written comments may be filed by any interested person.  Id.  Participants in the March 15-16, 2022 hearing may address these issues, as well as any other matters relevant to this proceeding.  Id.  Written testimony and written comments are due by February 14, 2022.  Id.

Additionally, the Board stated that, beginning January 24, 2022, it would pause the scheduling of further ex parte communications until the completion of the public hearing.  Id., slip op. at 7.  Ex parte communications will resume after the hearing and will close on April 6, 2022.  Id.

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