Issues Robert A. Wimbish
Baker & Miller PLLC
DISCLAIMER
This is a survey presentation.
Interchange Commitments/Paper Barriers, STB Docket No. EP 714 (pending)
Assessment of Arbitration and Mediation Procedures, STB Docket No. EP 699 (pending) Demurrage Liability, STB Docket No. EP 707 (pending) Solid Waste Transfer Facilities STB Docket No. EP 684 (effective Dec. 21, 2012) National Trails System Act and RR Rights-of-Way STB Docket No. EP 702 (effective may 30, 2012)
STB Docket No. EP 714 Interchange Commitments/Paper Barriers Interchange Commitment: A contractual clause limiting the incentive or ability of the purchaser or lessee of a rail line or the acquiror of operating rights (such as trackage rights) to interchange traffic with carriers other than the seller, lessor, co-user. A “paper barrier.”
Current rules (as of 2008) •
A railroad acquiring a rail line through purchase or lease or acquiring operating rights over a line of railroad must, indicate whether the transaction includes an interchange commitment.
•
If the transaction includes a paper barrier, the acquiring entity must include with its STB filing a copy of the agreement and any related documents containing the terms of the interchange commitment under seal.
The STB, prompted by griping shippers and shipper groups, and motivated in large part by STB Commissioner Francis P. (“Frank”) Mulvey, proposes making the regulatory process more complicated by adding to the interchange commitment disclosure rules. Slide 1 of 4
STB Docket No. EP 714 - Interchange Commitments/Paper Barriers
STB Proposal If the proposed transaction includes a paper barrier, the following items must be included in the STB filing in addition to existing requirements (italicized items submitted under seal): 1.
a list of shippers that have used the line within the last two years;
2.
the number of carloads handled for each shipper identified above;
3.
a certificate of service upon past and current shippers;
4.
a list of railroads that could physically interchange with the line to be acquired or leased;
5.
the percentage of the purchasing/leasing railroad’s revenue projected to be derived from operations on the subject rail line;
6.
an estimate of the difference between the sale or lease price with/without the paper barrier;
7.
an estimate of the discounted annual value of the paper barrier to the Class I (or other incumbent carrier) leasing or selling the line; and
8.
a caption clearly indicating that the transaction includes an interchange commitment. Slide 2 of 4
STB Docket No. EP 714 - Interchange Commitments/Paper Barriers Response to STB Proposal Short Lines – The proposed rules are overly broad and unnecessary. They unfairly burden smaller railroads, and stifle future Class I spin-offs. The STB has disregarded the role of the Railroad Industry Agreement in protecting and expanding shipper service options. Class I Railroads – The proposed rules are contrary to law, inserting adversarial elements into a relatively simple and expeditious class exemption process that has worked well. Interchange commitments are not inherently anti-competitive. Shippers (some) – Class I use of paper barriers is against the public interest. The proposed rules are not unduly burdensome, and won’t stifle spin-offs. The Railroad Industry Agreement is not a fix for all paper barriers issues. USDA – All paper barriers should be reviewed. Going forward, all paper barriers should be limited to an established period of time. Some have argued that the STB should adopt a per se presumption against paper barriers, so that shippers need not challenge them on a case-by-case basis. Slide 3 of 4
STB Docket No. EP 714 - Interchange Commitments/Paper Barriers Ramifications •
*What kinds of arrangements constitute paper barriers?
•
Will new rules deter future Class I spin-offs?
•
Time will tell – disclosure does not necessarily mean that the STB will do anything.
•
Time will tell – will shippers voice concerns or objections to a paper barrier?
•
What about lease, operating agreement, and trackage rights renewals?
•
Will Class Is simply void the agreements, retake the lines, and force the STB to re-think its policies?
•
Will the STB become a “contract re-formulator,” tying the hands of Class Is?
•
Why the hurry?
Decision expected soon.
Slide 4 of 4
STB Docket No. EP 699 Assessment of Arbitration and Mediation Procedures
STB mediation rules: 49 C.F.R. §§ 1109.1, 1109.3, 1109.4, 1111.2, 1111.9, and 1111.10. STB’s arbitration rules: 49 C.F.R. §§ 1108, 1109.1, 1109.2, 1109.3, and 1115.8.
General Objective: The STB wants potential litigants to resolve disputes through the STB’s mediation and arbitration procedures wherever possible.
Proposal: A new “arbitration program” for disputes involving demurrage charges; accessorial charges; compensation for misrouting or mishandling of rail cars; redress for a carrier’s misapplication of its published rules and practices as applied to particular prior shipments; and compensation for alleged unreasonable practices and procedures related to past service. Slide 1 of 4
STB Docket No. EP 699 Assessment of Arbitration and Mediation Procedures Other considerations: •
Other types of disputes could be arbitrated on a voluntary basis, provided all parties consent.
•
Arbitrations would be used only to redress alleged past wrongs with monetary compensation, and cannot be used to impose prospective or injunctive relief.
•
The STB also may compel mediation in certain types of STB adjudicatory proceedings.
•
Arbitration award cap of $200,000, plus interest.
•
Class Is and IIs would be deemed participants in the STB’s arbitration program unless they “opt out” in writing no later than 20 days after the effective date of the proposed rules.
Slide 2 of 4
STB Docket No. EP 699 Assessment of Arbitration and Mediation Procedures Other considerations (continued): •
Class IIIs may opt in by filing written notice. Such notice could be filed at any time and would take effect immediately. A Class III carrier would remain subject to the arbitration program unless or until it files to opt-out. Notice would take effect 90 in days. Class III carriers may voluntarily agree to participate in arbitration on a case-by-case basis.
•
Shippers may participate in program-eligible disputes on a case-by-case basis.
Response: Shippers •
Increase the $200,000 cap, and broaden the list of dispute subjects.
•
A panel of arbitrators would be better than a single arbitrator.
•
Arbitration decisions should not be made public. Slide 3 of 4
STB Docket No. EP 699 Assessment of Arbitration and Mediation Procedures Response (continued): Railroads
•
Any mandatory arbitration provision should be truly reciprocal. All parties should be able to opt in to the program via written notice.
•
Rate disputes should be expressly excluded.
•
Keep current regulations, but revise its policies to encourage arbitration.
•
Reassess arbitrator selection and roster.
•
Clarify STB standard of review for arbitration awards.
•
Arbitration should not (and cannot legally) be extended to contract disputes. Arbitration and mediation should be limited to a defined number of disputes.
Slide 4 of 4
STB Docket No. EP 707 Demurrage Liability Historically, parties have relied upon a shipment’s bill of lading to determine demurrage liability.
•
Much of demurrage liability common law has been established judicially.
•
The Interstate Commerce Act, as amended by the ICC Termination Act of 1995, also provides that demurrage is subject to STB regulation.
The Issue:
Who is liable when an intermediary that accepts rail cars and detains them too long is named as a consignee in the bill of lading, but claims that it did not know of its consignee status, or claims that it asked not to be named as a consignee? •
The courts of appeal have split in answering the question, so the STB has chosen to intervene on the issue.
Slide 1 of 4
STB Docket No. EP 707 – Demurrage Liability Proposed rule: •
Any person receiving cars from a railroad for loading or unloading who detains the cars beyond a specified time may be liable for demurrage if that person has actual notice of the terms of the demurrage tariff prior to placement of the rail cars.
•
Liability does not begin unless a car is placed at the warehouseman’s facility or proper notice of constructive placement is provided to the entity receiving the rail car.
•
The provisions for imposition of warehouseman liability must be set forth in the carrier’s publicly available demurrage tariffs.
•
The party subject to demurrage must have actual notice of the carrier’s demurrage tariffs prior to placement of the rail cars.
•
The carrier may not assess demurrage on the warehouseman if the carrier receives actual notice that the warehouseman is acting as an agent for another party. The STB clarified that 49 U.S.C. § 10743 (liability for payment of rates) applies to a carrier’s line-haul rates, not to demurrage charges. Slide 2 of 4
STB Docket No. EP 707 – Demurrage Liability Response: Most commenters support the idea of holding an entity in control of rail cars liable for demurrage, but they differ on the details.
ASLRRA STB should drop the actual notice requirement for Class III railroads, so long as the demurrage tariff is published on the short line’s public web site, or, in the alternative, adopt a rebuttable presumption that the receiver was given actual notice.
Class Is STB should abandon the actual notice requirement as unnecessary and vague. The STB’s rule is too broad in scope.
Slide 3 of 4
STB Docket No. EP 707 – Demurrage Liability
Shippers and warehouse/terminal facilities operators Say some: Intermediaries should not be responsible for demurrage at all. Warehousemen should be given more time before demurrage charges accrue. Warehousemen should be able to issue “blanket” notices of agency status, absolving the intermediary of any liability for demurrage (regardless of whether or not there is a legitimate agency relationship between warehouseman and the shipper.)
Slide 4 of 4
STB Docket No. EP 684 Solid Waste Transfer Facilities FINAL RULES EFFECTIVE DECEMBER 21, 2012 Before •
STB preemption extended to railroad owned/operated solid waste transfer facilities.
•
State preclearance and permitting provisions (environmental rules, zoning, land use rules) expressly preempted.
•
Any state regulation or law that, as applied in a given case, unreasonably burdened or interfered with rail transfer activities at transfer facilities also preempted.
Slide 1 of 4
STB Docket No. EP 684 Solid Waste Transfer Facilities After Congress reacts to stretching the federal preemption “rubber band” too far, and passes The Clean Railroads Act of 2008 limiting STB jurisdiction over solid waste rail transfer facilities. •
A solid waste rail transfer facility must comply with federal and state environmental and public health and safety requirements as would any non-railroad facility.
•
The STB may issue “land-use-exemption permits” under limited circumstances, and subject to appropriate STB environmental impacts analysis (typically, an EIS).
•
A state may petition the STB to require a solid waste rail transfer facility in existence on October 16, 2008, to apply for a land-use-exemption permit.
Slide 2 of 4
STB Docket No. EP 684 Solid Waste Transfer Facilities The Aftermath The STB issued interim rules in 2009, and modified them (subject to a solicitation of additional public input) in 2011. The final rules adopted late last year are not very different from the interim rules, but there were a few changes of note: •
The STB removed provision that a solid waste rail transfer facility must comply with environmental, public health, or public safety standards falling under a state’s traditional police powers unless the standards are unreasonably burdensome to interstate commerce of discriminates against rail carriers.
•
The door is open to STB preemption even where there is no unreasonable burden or discrimination. Slide 3 of 4
STB Docket No. EP 684 Solid Waste Transfer Facilities The Aftermath (continued) •
An STB-granted permit only exempts the solid waste facility from complying with state laws, regulations, orders, etc. as specified in the permit.
•
The 2012 final rule broadens the list of entities that are required to receive service of applications for land-use-exemption permits and related Notices of Intent.
•
Both the project applicant and the project opponents may contest whether the law(s) from which the applicant is seeking relief is an environmental, public health, or public safety standard that falling under traditional state police powers. §1155.21(a)(7).
Slide 4 of 4
STB Docket No. EP 702 National Trails System Act and Railroad Rights-of-Way The STB’s trails use regulations are found at 49 C.F.R. § 1152.29.
•
The final rules were published on April 30, 2012, and took effect on May 30, 2012.
New Rules •
Parties must notify the STB when they reach a trails use agreement.
•
Parties must request the STB to issue a new notice or certificate when an agreement covers less than the entire line segment included in the original notice or certificate.
•
A trail sponsor may terminate interim trail use over a portion of the right-of-way covered by the trail use agreement, while continuing interim trail use over the remaining portion of the right-of-way covered by the trail use agreement.
Slide 1 of 2
STB Docket No. EP 702 National Trails System Act and Railroad Rights-of-Way New Rules (continued) •
Changes to “Statement of Willingness” rules at 49 C.F.R. §§ 1152.29(a)(2) and (3) – concerning tail user’s assumption of liability and issues surrounding public trail users that might be immune from liability.
Considered, But Not Adopted •
Adjacent land-owner notification.
•
New newspaper notice requirements.
Slide 2 of 2
Wake up!!!
Uh, I mean . . . thank you!
Baker & Miller PLLC
DISCLAIMER
This is a survey presentation.
Interchange Commitments/Paper Barriers, STB Docket No. EP 714 (pending)
Assessment of Arbitration and Mediation Procedures, STB Docket No. EP 699 (pending) Demurrage Liability, STB Docket No. EP 707 (pending) Solid Waste Transfer Facilities STB Docket No. EP 684 (effective Dec. 21, 2012) National Trails System Act and RR Rights-of-Way STB Docket No. EP 702 (effective may 30, 2012)
STB Docket No. EP 714 Interchange Commitments/Paper Barriers Interchange Commitment: A contractual clause limiting the incentive or ability of the purchaser or lessee of a rail line or the acquiror of operating rights (such as trackage rights) to interchange traffic with carriers other than the seller, lessor, co-user. A “paper barrier.”
Current rules (as of 2008) •
A railroad acquiring a rail line through purchase or lease or acquiring operating rights over a line of railroad must, indicate whether the transaction includes an interchange commitment.
•
If the transaction includes a paper barrier, the acquiring entity must include with its STB filing a copy of the agreement and any related documents containing the terms of the interchange commitment under seal.
The STB, prompted by griping shippers and shipper groups, and motivated in large part by STB Commissioner Francis P. (“Frank”) Mulvey, proposes making the regulatory process more complicated by adding to the interchange commitment disclosure rules. Slide 1 of 4
STB Docket No. EP 714 - Interchange Commitments/Paper Barriers
STB Proposal If the proposed transaction includes a paper barrier, the following items must be included in the STB filing in addition to existing requirements (italicized items submitted under seal): 1.
a list of shippers that have used the line within the last two years;
2.
the number of carloads handled for each shipper identified above;
3.
a certificate of service upon past and current shippers;
4.
a list of railroads that could physically interchange with the line to be acquired or leased;
5.
the percentage of the purchasing/leasing railroad’s revenue projected to be derived from operations on the subject rail line;
6.
an estimate of the difference between the sale or lease price with/without the paper barrier;
7.
an estimate of the discounted annual value of the paper barrier to the Class I (or other incumbent carrier) leasing or selling the line; and
8.
a caption clearly indicating that the transaction includes an interchange commitment. Slide 2 of 4
STB Docket No. EP 714 - Interchange Commitments/Paper Barriers Response to STB Proposal Short Lines – The proposed rules are overly broad and unnecessary. They unfairly burden smaller railroads, and stifle future Class I spin-offs. The STB has disregarded the role of the Railroad Industry Agreement in protecting and expanding shipper service options. Class I Railroads – The proposed rules are contrary to law, inserting adversarial elements into a relatively simple and expeditious class exemption process that has worked well. Interchange commitments are not inherently anti-competitive. Shippers (some) – Class I use of paper barriers is against the public interest. The proposed rules are not unduly burdensome, and won’t stifle spin-offs. The Railroad Industry Agreement is not a fix for all paper barriers issues. USDA – All paper barriers should be reviewed. Going forward, all paper barriers should be limited to an established period of time. Some have argued that the STB should adopt a per se presumption against paper barriers, so that shippers need not challenge them on a case-by-case basis. Slide 3 of 4
STB Docket No. EP 714 - Interchange Commitments/Paper Barriers Ramifications •
*What kinds of arrangements constitute paper barriers?
•
Will new rules deter future Class I spin-offs?
•
Time will tell – disclosure does not necessarily mean that the STB will do anything.
•
Time will tell – will shippers voice concerns or objections to a paper barrier?
•
What about lease, operating agreement, and trackage rights renewals?
•
Will Class Is simply void the agreements, retake the lines, and force the STB to re-think its policies?
•
Will the STB become a “contract re-formulator,” tying the hands of Class Is?
•
Why the hurry?
Decision expected soon.
Slide 4 of 4
STB Docket No. EP 699 Assessment of Arbitration and Mediation Procedures
STB mediation rules: 49 C.F.R. §§ 1109.1, 1109.3, 1109.4, 1111.2, 1111.9, and 1111.10. STB’s arbitration rules: 49 C.F.R. §§ 1108, 1109.1, 1109.2, 1109.3, and 1115.8.
General Objective: The STB wants potential litigants to resolve disputes through the STB’s mediation and arbitration procedures wherever possible.
Proposal: A new “arbitration program” for disputes involving demurrage charges; accessorial charges; compensation for misrouting or mishandling of rail cars; redress for a carrier’s misapplication of its published rules and practices as applied to particular prior shipments; and compensation for alleged unreasonable practices and procedures related to past service. Slide 1 of 4
STB Docket No. EP 699 Assessment of Arbitration and Mediation Procedures Other considerations: •
Other types of disputes could be arbitrated on a voluntary basis, provided all parties consent.
•
Arbitrations would be used only to redress alleged past wrongs with monetary compensation, and cannot be used to impose prospective or injunctive relief.
•
The STB also may compel mediation in certain types of STB adjudicatory proceedings.
•
Arbitration award cap of $200,000, plus interest.
•
Class Is and IIs would be deemed participants in the STB’s arbitration program unless they “opt out” in writing no later than 20 days after the effective date of the proposed rules.
Slide 2 of 4
STB Docket No. EP 699 Assessment of Arbitration and Mediation Procedures Other considerations (continued): •
Class IIIs may opt in by filing written notice. Such notice could be filed at any time and would take effect immediately. A Class III carrier would remain subject to the arbitration program unless or until it files to opt-out. Notice would take effect 90 in days. Class III carriers may voluntarily agree to participate in arbitration on a case-by-case basis.
•
Shippers may participate in program-eligible disputes on a case-by-case basis.
Response: Shippers •
Increase the $200,000 cap, and broaden the list of dispute subjects.
•
A panel of arbitrators would be better than a single arbitrator.
•
Arbitration decisions should not be made public. Slide 3 of 4
STB Docket No. EP 699 Assessment of Arbitration and Mediation Procedures Response (continued): Railroads
•
Any mandatory arbitration provision should be truly reciprocal. All parties should be able to opt in to the program via written notice.
•
Rate disputes should be expressly excluded.
•
Keep current regulations, but revise its policies to encourage arbitration.
•
Reassess arbitrator selection and roster.
•
Clarify STB standard of review for arbitration awards.
•
Arbitration should not (and cannot legally) be extended to contract disputes. Arbitration and mediation should be limited to a defined number of disputes.
Slide 4 of 4
STB Docket No. EP 707 Demurrage Liability Historically, parties have relied upon a shipment’s bill of lading to determine demurrage liability.
•
Much of demurrage liability common law has been established judicially.
•
The Interstate Commerce Act, as amended by the ICC Termination Act of 1995, also provides that demurrage is subject to STB regulation.
The Issue:
Who is liable when an intermediary that accepts rail cars and detains them too long is named as a consignee in the bill of lading, but claims that it did not know of its consignee status, or claims that it asked not to be named as a consignee? •
The courts of appeal have split in answering the question, so the STB has chosen to intervene on the issue.
Slide 1 of 4
STB Docket No. EP 707 – Demurrage Liability Proposed rule: •
Any person receiving cars from a railroad for loading or unloading who detains the cars beyond a specified time may be liable for demurrage if that person has actual notice of the terms of the demurrage tariff prior to placement of the rail cars.
•
Liability does not begin unless a car is placed at the warehouseman’s facility or proper notice of constructive placement is provided to the entity receiving the rail car.
•
The provisions for imposition of warehouseman liability must be set forth in the carrier’s publicly available demurrage tariffs.
•
The party subject to demurrage must have actual notice of the carrier’s demurrage tariffs prior to placement of the rail cars.
•
The carrier may not assess demurrage on the warehouseman if the carrier receives actual notice that the warehouseman is acting as an agent for another party. The STB clarified that 49 U.S.C. § 10743 (liability for payment of rates) applies to a carrier’s line-haul rates, not to demurrage charges. Slide 2 of 4
STB Docket No. EP 707 – Demurrage Liability Response: Most commenters support the idea of holding an entity in control of rail cars liable for demurrage, but they differ on the details.
ASLRRA STB should drop the actual notice requirement for Class III railroads, so long as the demurrage tariff is published on the short line’s public web site, or, in the alternative, adopt a rebuttable presumption that the receiver was given actual notice.
Class Is STB should abandon the actual notice requirement as unnecessary and vague. The STB’s rule is too broad in scope.
Slide 3 of 4
STB Docket No. EP 707 – Demurrage Liability
Shippers and warehouse/terminal facilities operators Say some: Intermediaries should not be responsible for demurrage at all. Warehousemen should be given more time before demurrage charges accrue. Warehousemen should be able to issue “blanket” notices of agency status, absolving the intermediary of any liability for demurrage (regardless of whether or not there is a legitimate agency relationship between warehouseman and the shipper.)
Slide 4 of 4
STB Docket No. EP 684 Solid Waste Transfer Facilities FINAL RULES EFFECTIVE DECEMBER 21, 2012 Before •
STB preemption extended to railroad owned/operated solid waste transfer facilities.
•
State preclearance and permitting provisions (environmental rules, zoning, land use rules) expressly preempted.
•
Any state regulation or law that, as applied in a given case, unreasonably burdened or interfered with rail transfer activities at transfer facilities also preempted.
Slide 1 of 4
STB Docket No. EP 684 Solid Waste Transfer Facilities After Congress reacts to stretching the federal preemption “rubber band” too far, and passes The Clean Railroads Act of 2008 limiting STB jurisdiction over solid waste rail transfer facilities. •
A solid waste rail transfer facility must comply with federal and state environmental and public health and safety requirements as would any non-railroad facility.
•
The STB may issue “land-use-exemption permits” under limited circumstances, and subject to appropriate STB environmental impacts analysis (typically, an EIS).
•
A state may petition the STB to require a solid waste rail transfer facility in existence on October 16, 2008, to apply for a land-use-exemption permit.
Slide 2 of 4
STB Docket No. EP 684 Solid Waste Transfer Facilities The Aftermath The STB issued interim rules in 2009, and modified them (subject to a solicitation of additional public input) in 2011. The final rules adopted late last year are not very different from the interim rules, but there were a few changes of note: •
The STB removed provision that a solid waste rail transfer facility must comply with environmental, public health, or public safety standards falling under a state’s traditional police powers unless the standards are unreasonably burdensome to interstate commerce of discriminates against rail carriers.
•
The door is open to STB preemption even where there is no unreasonable burden or discrimination. Slide 3 of 4
STB Docket No. EP 684 Solid Waste Transfer Facilities The Aftermath (continued) •
An STB-granted permit only exempts the solid waste facility from complying with state laws, regulations, orders, etc. as specified in the permit.
•
The 2012 final rule broadens the list of entities that are required to receive service of applications for land-use-exemption permits and related Notices of Intent.
•
Both the project applicant and the project opponents may contest whether the law(s) from which the applicant is seeking relief is an environmental, public health, or public safety standard that falling under traditional state police powers. §1155.21(a)(7).
Slide 4 of 4
STB Docket No. EP 702 National Trails System Act and Railroad Rights-of-Way The STB’s trails use regulations are found at 49 C.F.R. § 1152.29.
•
The final rules were published on April 30, 2012, and took effect on May 30, 2012.
New Rules •
Parties must notify the STB when they reach a trails use agreement.
•
Parties must request the STB to issue a new notice or certificate when an agreement covers less than the entire line segment included in the original notice or certificate.
•
A trail sponsor may terminate interim trail use over a portion of the right-of-way covered by the trail use agreement, while continuing interim trail use over the remaining portion of the right-of-way covered by the trail use agreement.
Slide 1 of 2
STB Docket No. EP 702 National Trails System Act and Railroad Rights-of-Way New Rules (continued) •
Changes to “Statement of Willingness” rules at 49 C.F.R. §§ 1152.29(a)(2) and (3) – concerning tail user’s assumption of liability and issues surrounding public trail users that might be immune from liability.
Considered, But Not Adopted •
Adjacent land-owner notification.
•
New newspaper notice requirements.
Slide 2 of 2
Wake up!!!
Uh, I mean . . . thank you!
Baker & Miller PLLC
