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Calculation of Variable Costs in Rate Complaint Proceedings Involving Non-Class I Railroads

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Surface Transportation Board, DOT.


Notice of Proposed Rulemaking.


The Surface Transportation Board institutes a proceeding to settle how it will estimate the variable costs of non-Class I railroads in future rate complaint proceedings.


Comments are due by July 1, 2002. Replies, if any, are due July 31, 2002.


Send comments (an original and 10 copies) referring to STB Ex Parte No. 589 to: Office of the Secretary, Case Control Branch, 1925 K Street, NW., Washington, DC.

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Thomas J. Stilling, 202-565-1567. Federal Information Relay Service (FIRS) for the hearing impaired: 1-800-877-8339.

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A user of rail transportation can file a complaint with the Board challenging the reasonableness of a rate charged for common carriage rail transportation. 49 U.S.C. 11701(b). However, the Board may only consider the reasonableness of a challenged rail rate if the carrier has “market dominance” over the traffic at issue. 49 U.S.C. 10701(d)(1). The statute precludes a finding of market dominance if the revenue produced by the shipment at issue is less than 180% of the defendant carrier's variable cost. 49 U.S.C. 10707(d)(1)(A). It also specifies that the variable cost calculation be developed “using the Uniform Rail Costing System [URCS] cost finding methodology (or an alternative methodology adopted by the Board in lieu thereof).” 49 U.S.C. 10707(d)(1)(B).

Non-Class I railroads, however, have traditionally not been required to maintain the necessary financial and operating data to enable development of variable costs using URCS. Historically, the average regional URCS variable costs for the Class I railroads have been used as a surrogate for a non-Class I carrier's variable costs. However, in Minnesota Power, Inc. v. Duluth, M.&I.R. Ry., STB Docket No. 42038, we initially ordered the defendant non-Class I railroad to collect the necessary operational and financial data needed to develop variable cost information using URCS. We later stayed that order in response to a petition for reconsideration, so that we could consider the industry-wide implications associated with the accounting/record-keeping order. Before we ruled on the petition, the parties settled that rate dispute.

The issue of whether, as a general matter, it is appropriate and administratively practical in rate cases involving non-Class I railroads to place a case in abeyance for an extended period of time and to subject a carrier to the expense of developing URCS-compatible data for a single case has therefore not been resolved. In this proceeding, we propose to return to a policy of estimating non-Class I carriers' variable costs using Class I regional average variable costs, and we seek comments of interested parties on this proposal and/or any alternative proposal they may wish to make.

Additional information is contained in the Board's decision. To purchase a copy of the full decision, write to, call, or visit the Board's contractor, Dā-To-Dā Legal, Suite 405, 1925 K Street, NW., Washington, DC 20006, phone (202) 293-7776. [Assistance for the hearing impaired is available through Federal Information Relay Service (FIRS) at 1-800-877-8339.] The full decision is also available on the Board's website:

This action will not significantly affect either the quality of the human environment or energy conservation.

Pursuant to 5 U.S.C. 605(b), we conclude that our action will not have a significant economic impact on a substantial number of small entities within the meaning of the Regulatory Flexibility Act.

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Decided: April 22, 2002.

By the Board, Chairman Morgan and Vice Chairman Burkes.

Vernon A. Williams,


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[FR Doc. 02-10473 Filed 4-29-02; 8:45 am]