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Rail News Home Federal Legislation & Regulation

12/20/2022



Rail News: Federal Legislation & Regulation

STB adopts, AAR criticizes new smaller rate dispute rules


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The Surface Transportation Board yesterday adopted two final rules that establish new rate reasonableness procedures providing two streamlined approaches for shippers and railroads to resolve smaller rate disputes.

The board established a voluntary arbitration program and a new procedure for rate challenges known as "final offer rate review" (FORR). Either rate review mechanism will “substantially improve shippers’ access to rate reasonableness reviews for smaller rate disputes," STB officials said in a press release.

Through the new rate reasonableness procedures, the voluntary arbitration program will take effect only if all seven Class Is commit to participating in the program for five years and do so within 50 days of the date of publication of the final rule in the Federal Register. If all do so, they will be exempt from the FORR procedure, board officials said.

In September 2019, the STB proposed a rule and sought public comment on a proposal for the new FORR procedure. Subsequently, five Class Is filed a joint petition urging the board to exempt them from the FORR procedure. In return, the Class Is promised to agree to resolve rate challenges through binding arbitration, a methodology in which the carriers had previously refused to participate for many years.

The STB reviewed that petition and explored whether establishing a voluntary arbitration program would provide a practical alternative dispute resolution mechanism to address smaller rate disputes. In November 2021, the board advanced rulemakings in both FORR and the establishment of a voluntary arbitration program. Yesterday’s decision is the culmination of those actions.

Both review mechanisms are limited to rate disputes worth up to $4 million in relief over two years. Under the new FORR procedure, if the board finds a rate to be unreasonable, it will decide the rate by selecting either the complainant’s or the defendant’s final offer, subject to an expedited procedural schedule that adheres to firm deadlines.

The two rules are an attempt to strike a balance between shippers and railroads, said STB Chairman Martin Oberman.

But Association of American Railroads (AAR) officials characterize the FORR as "fatally flawed." And the new arbitration rule ignores key principals that could otherwise make STB-sponsored arbitration of small rate disputes a viable option, AAR officials said in a press release.

"The FORR rule abdicates the agency’s statutory responsibility to determine the maximum reasonable rate," said AAR President and CEO Ian Jefferies. "Sound economic principles are abandoned, in favor of an arbitrary procedure that offers no certainty to any stakeholder and instead rewards legal brinksmanship."

The arbitration procedures are an "all or none approach" that risk undermining the STB’s desire for alternative dispute resolutions, Jefferies added.

"The rule will prevent small rate disputes that could quickly and cost-effectively be arbitrated because anything short of 100% industry participation prevents anyone from using it," he said.

The AAR and its members are reviewing the board’s decision to determine next steps.

The STB's decision on the final offer rate review can be read here; the board's decision regarding the joint petition for rule making to establish an arbitration program can be read here.



Contact Progressive Railroading editorial staff.

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