Market Matters Blog

The Surface Transportation Board (STB) established a voluntary arbitration program and an entirely new procedure for rate challenges, known as Final Offer Rate Review (FORR). The rate review mechanisms will substantially improve shippers' access to rate reasonableness reviews for smaller rate disputes, noted the STB on their website.

In establishing these two new rate reasonableness procedures, the STB provided that the voluntary arbitration program (ADR) will become operative only if all seven Class I carriers 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 Class I carriers do so, they will be exempt from the FORR procedure.

In September 2019, the STB issued a notice of proposed rulemaking (NPRM) and sought public comment on its proposal for the new FORR procedure. In the press release on the STB website, the STB stated that "Five Class I railroads filed a joint petition urging the Board to exempt them from the FORR procedure, promising in return to agree to resolve rate challenges through binding arbitration, a methodology in which the carriers had previously refused to participate for many years.

"The Board 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, following this effort, the Board advanced rulemakings in both FORR and the establishment of a voluntary arbitration program. The Dec. 19 action is the culmination of this rigorous project."

STB Chairman Marty Oberman said, "The Board today has taken great strides in its long-term quest to make the adjudication of smaller rate disputes more accessible, reasonable and less time-consuming. I want to underscore the leadership of former Chairman Ann Begeman in establishing the Rate Reform Task Force in 2018 whose thorough effort led to the ideas incorporated in these two new procedures. The Board has long sought a suitable method of making adjudication of smaller rate disputes accessible, reasonable and less time-consuming for affected parties. Experience has shown that the Board's prior efforts to provide rate review methods suitable for smaller disputes have been rarely used by shippers."

NGFA President and CEO Mike Seyfert said, "We thank Chairman Martin Oberman, STB commissioners and staff for their efforts to improve the rules for reviewing the reasonableness of railroad rates and to make them more workable, accessible and useful for agricultural shippers. We appreciate the incorporation of several of NGFA's recommendations into both the arbitration program and the FORR process. We look forward to continuing to work with the STB on other pending proceedings that would further facilitate more reliable rail service at competitive rates."

The Association of American Railroads called the FORR "fatally flawed" and said the rule modeled on "baseball-style arbitration, flatly exceeds the agency's authority. In a case filed under the new rule, the agency would do no independent analysis or engage in any reasoned decision-making, but instead would simply choose the 'final offer' rate proposed either by the shipper or by the railroad."

AAR President and CEO Ian Jefferies said, "On its face, the 'all or none' approach misses the mark and risks undermining the Board's stated desire for alternative dispute resolution over litigated outcomes. As it stands, even if a vast majority of railroads sign up for ADR, 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. Unfortunately, today's decisions could very well result in a missed opportunity to create a workable solution for shippers and railroads alike."

The STB's decision in Final Offer Rate Review, Docket No. EP 755 (with two Board Members dissenting), and the STB's decision in Joint Petition for Rulemaking to Establish a Voluntary Arbitration Program for Small Rate Disputes, Docket No. EP 765 (with two Board Members concurring), may be viewed and downloaded from the links provided at the end of the STB press release: https://www.stb.gov/…

Link to NGFA press release: https://imis.ngfa.org/…

Link to AAR press release: https://www.aar.org/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

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