AGENCY:

Surface Transportation Board.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Surface Transportation Board (Board) proposes to amend its regulations with respect to the Waybill Sample data that railroads are required to submit to the Board. The proposed amendments to the Waybill Sample regulations would simplify the sampling rates of non-intermodal carload shipments and specify separate sampling strata and rates for intermodal shipments.

DATES:

Comments are due by January 28, 2020. Replies are due by February 27, 2020.

ADDRESSES:

Comments and replies may be filed with the Board either via e-filing or in writing addressed to: Surface Transportation Board, Attn: Docket No. EP 385 (Sub-No. 8), 395 E Street SW, Washington, DC 20423-0001. Comments and replies will be posted on the Board's website at www.stb.gov.

FOR FURTHER INFORMATION CONTACT:

Jonathon Binet at (202) 245-0368. Assistance for the hearing impaired is available through the Federal Relay Service at (800) 877-8339.

SUPPLEMENTARY INFORMATION:

A waybill is a “document or instrument prepared from the bill of lading contract or shipper's instructions as to the disposition of the freight, and [is] used by the railroad(s) involved as the authority to move the shipment and as the basis for determining the freight charges and interline settlements.” 49 CFR 1244.1(c). Among other things, a waybill currently contains the following data: (1) The originating and terminating freight stations; (2) the railroads participating in the movement; (3) the points of all railroad interchanges; (4) the number and type of cars; (5) the car initial and number; (6) the movement weight in hundredweight; (7) the commodity; and (8) the freight revenue. Rail carriers are required to file a sample of waybills, which includes this data. See 49 CFR 1244.2(a). The Board creates an aggregate compilation of the sampled waybills of all reporting carriers, referred to as the Waybill Sample. The Waybill Sample is the Board's principal source of data about freight rail shipments. It has broad application in, among other things, rate cases, the development of costing systems, productivity studies, exemption decisions, and analyses of industry trends.

First collected in 1946 by the Board's predecessor,^[1] the Interstate Commerce Commission (ICC), the Waybill Sample is also used by other Federal agencies, state and local government agencies, the transportation industry, shippers, research organizations, universities, and others that have a need for rail shipment data. Because some of the submitted waybill data is commercially sensitive, the Board's regulations place limitations on the release and use of confidential Waybill Sample data. See 49 CFR 1244.9; see also 49 U.S.C. 11904.^[2]

In January 2018, the Board established its Rate Reform Task Force (RRTF), with the objectives of developing recommendations to reform and streamline the Board's rate review processes for large cases, and determining how to best provide a rate review process for smaller cases. After holding informal meetings throughout 2018, the RRTF issued a report on April 25, 2019 (RRTF Report).^[3] Among other recommendations, the RRTF Report included a recommendation that the Board change the sampling rates for its Waybill Sample. RRTF Report 14. The RRTF explained that data from the Waybill Sample is critical to certain rate cases, in particular the Three-Benchmark methodology, and that a more robust sample size would address issues with those cases. Id. at 47. Having considered the recommendations included in the RRTF Report and the overall utility of the current Waybill Sample, the Board now proposes to simplify the sampling rate for non-intermodal carload shipments and specify separate sampling strata and rates for intermodal shipments, as explained below.

Current Waybill Sampling Requirements. A railroad is required to file with the Board a sample of its waybill data for all line-haul revenue waybills terminated on its lines in the United States,^[4] if the railroad: (a) Terminated at least 4,500 revenue carloads in any of the three preceding years, or (b) terminated at least 5% of the revenue carloads terminating in any state in any of the three preceding years. 49 CFR 1244.2(a). Currently, the number of waybills that a railroad is required to file (i.e., the sampling rate) is set forth at 49 CFR 1244.4(b) and (c), and varies based on the number of carloads on the waybill.^[5] The current sampling rates for the computerized system of reporting waybills are shown in Table 1 below.

RRTF Proposal and Board Rationale. In its report, the RRTF recommended changing the current waybill sampling rates for all non-intermodal shipments to 1/10. RRTF Report 48. For intermodal shipments, the RRTF recommended two strata: (1) Intermodal shipments with one or two trailer or container units (TCUs) per waybill, recommended to be sampled at the current 1/40 rate, and (2) intermodal shipments with three or more TCUs per waybill, recommended to be sampled at the same rate proposed for non-intermodal shipments, 1/10. Id. at 48-49. Although these recommendations would both increase the sampling rates for most smaller shipments (with 1 to 15 carloads per waybill) from 1/40 or 1/12 to 1/10 and decrease the sampling rates for larger shipments (with 16 or more carloads per waybill) from 1/2, 1/3, or 1/4 to 1/10, the RRTF determined that the net effect of the recommended changes would be an increase in the overall number of waybills sampled. Id. at 48. In addition, by sampling intermodal traffic separately and (for one or two TCUs) at the current 1/40 rate, the RRTF concluded that a greater portion of the Waybill Sample data would represent regulated traffic instead of traffic that is currently exempt.^[7] Id. at 49.

The RRTF supported its recommendation by describing the anticipated effect the changes would have in rate cases under the Board's Three-Benchmark methodology.^[8] The RRTF stated that, by increasing its sampling of traffic, “the Board could avoid the scarcity issue that has plagued some past Three-Benchmark cases.” Id. at 47. See, e.g., US Magnesium, L.L.C. v. Union Pac. R.R., NOR 42114, slip op. at 9 n.12 (STB served Jan. 28, 2010) (“We acknowledge that the failure of either party to submit a comparison group more similar to the traffic at issue here is likely due to limitations in the number of comparable movements in the Waybill Sample.”). The RRTF also stated that a robust sample size is a critical component of the Three-Benchmark methodology and explained that there must be enough observations in the Waybill Sample to select a group of traffic that reflects the nuances of the traffic in dispute. RRTF Report 47. It stated that its recommendation to modify waybill sampling rates would alleviate concerns about non-representative samples and minimize the need for “other relevant factors” arguments. Id.

The Board agrees with the RRTF that a modification to its waybill sampling rates is warranted. Specifically, a net increase in sample size would provide more comprehensive information to the Board and other users of Waybill Sample data in a variety of contexts, such as exemption decisions, stratification reports, traffic volume and rate studies, Board-initiated investigations, certain rate cases (discussed in more detail below), and any other waybill data-related analysis the Board currently performs or might seek to perform in the future. A more robust data sample would augment the Board's ability to make informed, well-reasoned decisions in these areas. In addition, the Board agrees that it should change its sampling requirements so that a greater portion of the Waybill Sample data would represent regulated traffic instead of exempt traffic.

Additionally, the added number of observations in the Waybill Sample would likely allow the Board to avoid redacting, for confidentiality reasons, as many results from some of the Board's routine analysis published on its website, such as the STCC 7 stratification report. While such analysis serves as a useful barometer for stakeholders, its publication is limited by the Board's commitment to protect the confidentiality of identifiable railroad and shipper information when too few records exist within a given category of traffic. Moreover, because the Board currently receives monthly waybill data from Class I carriers and quarterly data from Class I, II, and III carriers, increasing the sampling rate would provide the Board with more observations in any given month or quarter from which it could draw meaningful insights throughout the year.

The Board agrees with the RRTF that increasing waybill sampling rates would also assist parties in Three-Benchmark cases by providing a greater number of potentially comparable movements from which they could create their comparison group proposals.^[9] Parties proposing comparison groups use a variety of comparability factors, such as the length of movement, commodity type, and traffic densities of the likely routes involved. In general, as more comparability factors are added to make the comparison group more specific to the case, the number of observations from the Waybill Sample that match those factors is likely to decrease. By increasing the observations in the Waybill Sample, parties generally would have more observations to choose from and increased flexibility to design comparison groups with relevant comparability factors. Accordingly, a more robust Waybill Sample could lead to more representative comparison groups, thereby increasing the reliability of the parties' presentations.

The increased comparison group flexibility would also increase the number of potentially comparable movements available to shippers of categories of traffic for which there are currently insufficient observations in the Waybill Sample to create a representative comparison group.^[10] The Board's proposed changes in sampling, discussed below, would result in more shipments being included in the Waybill Sample, some of which may fall into categories of traffic that previously had fewer than 25 movements in the Waybill Sample.^[11] Moreover, for the reasons noted above, even for categories of traffic for which a comparison group with 25 or more observations can already be formed, more observations in the Waybill Sample could allow for the addition of more specific traffic characteristics and would further increase the reliability of the parties' presentations.^[12]

The issue of whether to enlarge the Waybill Sample to include a larger sample of common carrier movements was briefly discussed in the Board's decision in Simplified Standards, EP 646 (Sub-No. 1), slip op. at 83. There, the Board declined to increase the waybill sampling size at that time due to concerns about the cost of gathering, processing, and costing a larger sample. However, it is now appropriate to revisit the issue. The Board finds that the expenses associated with increased sampling can be better managed by the agency because of technological and computing advances now available to it, and finds that the largely computerized and automated processes allow for the management of additional data at a reasonable additional cost. All reporting carriers submit waybill data in computerized form today, and the Board does not anticipate that it would be a significant burden for rail carriers, or the entity the carriers use to manage the data, to adjust their data collection and reporting mechanism(s) for the proposed sampling rates. Given that this data is critical to central regulatory functions of the Board, the additional cost is justified by the anticipated improvements in reliability of comparison group presentations and by the increased granularity of analyses performed by the Board.

For the reasons discussed above, the Board proposes to adjust the waybill sampling rate for carriers using the computerized system of reporting as discussed below. The Board's proposal is intended to provide a more comprehensive sampling of waybills that would improve the utility of the Waybill Sample for both the Board and other users of waybill data in a variety of contexts (e.g., increasing the reliability of parties' evidentiary presentations in certain rate reasonableness proceedings), which would further the rail transportation policy goals of 49 U.S.C. 10101. See 49 U.S.C. 10101(2), (4), (6), (13).

Proposed Waybill Sampling Rates. The Board proposes revisions to the sampling rates for the Waybill Sample for carriers using the computerized system of reporting. Although the RRTF recommended a sampling rate for all non-intermodal shipments of 1/10, based on additional analyses, described below, the Board instead proposes to increase the sampling rates to 1/5 for non-intermodal shipments in each of the existing sampling strata, as shown in Table 2 below. Under this proposed rule, the Board would continue to use separate strata for the sampling of non-intermodal shipments, with the strata differentiated by the number of carloads on the waybill. For non-intermodal shipments, the effect of the proposed rate would be an increase in the sampling rate for waybills with 1 to 15 carloads and a decrease in the sampling rate for waybills with 16 or more carloads.

Because of the unique characteristics of intermodal shipment billing practices,^[13] the Board also proposes to separate sampling of intermodal shipments from carload shipments. Specifically, the Board would create two sampling strata specific to intermodal shipments—one for shipments with one to two TCUs per waybill and another for shipments with three or more TCUs per waybill. As shown in Table 2, intermodal shipments with one or two TCUs per waybill would be sampled at a rate of 1/40, and intermodal shipments with three or more TCUs per waybill would be sampled at the same proposed rate as non-intermodal shipments, 1/5. An increase in sampling of intermodal shipments with one or two TCUs per waybill, which comprise the vast majority of intermodal shipments, would lead to an over-sampling of those movements.^[14] The Board's proposed approach would not only appropriately differentiate sampling strata based on industry waybill practices, but it would also avoid instances in which blocks of TCUs comprising a single intermodal shipment are over-sampled.

The Board's proposal for intermodal shipments largely mirrors the RRTF recommendation that the Board adopt a sampling rate of 1/40 for waybills with one to two TCUs and apply the same sampling rate recommended for non-intermodal shipments for waybills with three or more TCUs. Consistent with the approach recommended by the RRTF, the Board proposes the same sampling rate for intermodal waybills with three or more TCUs as it proposes for non-intermodal shipments.

Analysis of Proposed Waybill Sampling Rates. As discussed above, these proposed changes would both provide a more robust sample generally and address the shortcomings that were acknowledged by the Board and parties in Board proceedings concerning the scarcity of data in some rate cases. See US Magnesium, L.L.C., NOR 42114, slip op. at 9-12, 9 n.12 (noting the dearth of observations for certain toxic-by-inhalation commodities in the parties' comparison groups); Simplified Standards, EP 646 (Sub-No. 1), slip op. at 83 (acknowledging that there may be instances in Three-Benchmark cases where a particular movement is so unique that there would be insufficient comparable movements in the Waybill Sample).

To determine the impact of increasing its sampling rates, the Board has reviewed Waybill Sample data from 2014 to 2017; grouped the movements into categories based on commodity,^[16] mileage ranges,^[17] and terminating railroad; and analyzed how the proposed sampling rates would affect the number of these movement categories having fewer than 25 observations.^[18] Under the current sampling rates, the Board found that, in an average year, approximately 7.6% of those movement categories have 25 or more observations. Under the Board's proposed sampling rates, an estimated 20.4% of those categories would have 25 or more observations, nearly triple the current number. Even though only one-fifth of the categories would have at least 25 observations under the Board's proposal, this segment represents most of the total revenue in the Waybill Sample. Under the current sampling rate, 84.2% of the revenue is represented in movement categories with at least 25 observations. Under the proposed sampling rate, 93.4% of the revenue would be represented in movement categories with at least 25 observations. The proposed modification would therefore capture more than half of the revenue that is currently moving in categories with fewer than 25 movements. These percentage breakdowns are shown in Table 3 below.

Similarly, under the current regulations, when aggregating the Waybill Sample data over the four-year 2014 to 2017 period, 19.7% of the same categories include 25 or more observations. Using the four-year approach, under the proposed sampling rate, the number of categories with 25 or more observations would nearly double to 38.5%. Here the proposed modification would capture approximately two-thirds of the currently missed revenue, increasing from 94.0% to 97.9% of total revenue. This breakdown is shown in Table 4 below.

The Board considered the 1/10 sampling rate for non-intermodal shipments recommended by the RRTF. The Board's analysis, however, showed that a 1/5 sampling rate had a better chance of reducing the number of movement categories with scarce observations. Although the improvement was modest—for example, 90.4% of the revenue in the Waybill Sample would be in movement categories with 25 or more observations in an average year with a 1/10 sampling rate compared to 93.4% with a 1/5 sampling rate—the potential increase in covered movement categories would lead to a more robust sample without a significantly increased burden on reporting carriers. While the waybill sampling rates listed in Table 2 above may still, in some instances, fail to produce a representative sample for comparison, the proposed changes would significantly improve the chances of having sufficient observations for a representative sample as well as add to the robustness of any of Board analyses using the Waybill Sample.

For movement categories that already have 25 or more observations, such as traffic in categories with a higher volume of movements by rail, the Board analyzed the extent to which more observations in the Waybill Sample would allow for more granular or even additional comparability factors. As can be seen in Table 5 below, the Board estimates that the proposed sampling rate would increase the median number of observations for categories that already have at least 25 observations in an average year from 59 to 269, which is more than four times as many observations. This illustrates how the proposed sampling rate would shift the number of observations upwards across categories, even if the categories already had 25 observations. Such an increase in observations would increase the representativeness of potential comparison groups defined using the same criteria as these categories. Furthermore, as noted above, by having more observations in a comparison group, it would be possible to define the comparison group even more narrowly and still maintain robustness.

Table 6 below shows similar estimated increases in observations over four years of data. The Board estimates that the proposed sampling rate would increase the median number of observations for categories that already have at least 25 observations over the course of a four-year period from 70 to 320.

Once again, the proposed sampling rate is estimated to result in more than four times as many observations as under the current rate. For example, consider the median category with at least 25 observations over four years as shown in Table 6. Using a 500-mile range as a comparability factor, a party would have 70 observations to include in a potential comparison group. If that party wanted to define the mileage range more narrowly, they would lose some of those observations depending on the mileage range chosen and, at some point, would likely have fewer than 25 observations. If, however, a party started with 320 available observations with a 500-mile range, as we estimate would be the case in the median category under the proposed sampling rates, they could likely narrow the mileage range further without dropping below a sufficient number of observations. In other words, with more observations available, interested parties would be able to choose additional and more narrow comparability factors to identify movements that are more similar to the issue traffic but also still maintain a sufficient number of observations.

Conclusion. For the reasons described above, the changes proposed in this NPRM (as shown below) would create a more robust Waybill Sample and result in more comprehensive information that would assist both the Board in its decision-making and analyses and other users of waybill data in their analyses without creating an undue burden on railroads (as shown below and in the Appendix). The changes also appropriately differentiate sampling strata based on current industry waybill practices for intermodal shipments. The Board invites public comment on this proposal.

Regulatory Flexibility Act. The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, generally requires a description and analysis of new rules that would have a significant economic impact on a substantial number of small entities. In drafting a rule, an agency is required to: (1) Assess the effect that its regulation would have on small entities; (2) analyze effective alternatives that may minimize a regulation's impact; and (3) make the analysis available for public comment. Section 601-604. In its notice of proposed rulemaking, the agency must either include an initial regulatory flexibility analysis, section 603(a), or certify that the proposed rule would not have a “significant impact on a substantial number of small entities,” section 605(b). Because the goal of the RFA is to reduce the cost to small entities of complying with federal regulations, the RFA requires an agency to perform a regulatory flexibility analysis of small entity impacts only when a rule directly regulates those entities. In other words, the impact must be a direct impact on small entities “whose conduct is circumscribed or mandated” by the proposed rule. White Eagle Coop. v. Conner, 553 F.3d 467, 480 (7th Cir. 2009). An agency has no obligation to conduct a small entity impact analysis of effects on entities that it does not regulate. United Dist. Cos. v. FERC, 88 F.3d 1105, 1170 (DC Cir. 1996).

This proposal would not have a significant economic impact upon a substantial number of small entities, within the meaning of the RFA.^[19] Under the Board's existing regulations, a railroad is required to file Waybill Sample data for all line-haul revenue waybills terminated on its lines if: (a) It terminated at least 4,500 revenue carloads in any of the three preceding years; or (b) it terminated at least 5% of the revenue carloads terminating in any state in any of the three preceding years. 49 CFR 1244.2. Under this criteria, 53 railroads are currently required to report Waybill Sample data. Of these 53, the Board estimates that 36 are Class III carriers, and thus small businesses within the meaning of the RFA. Of the 53 railroads required to report Waybill Sample data, 45 railroads currently use Railinc Corporation (Railinc)—a wholly-owned information technology subsidiary of the Association of American Railroads—to sample their waybills.^[20] Eight railroads currently sample their own waybills.

For the railroads that submit their waybills to Railinc for sampling, there would be no additional burden or costs on entities as result of the changes proposed in this NPRM. These entities would continue to submit all of their waybills to Railinc, which would then sample the data in accordance with the Board's revised sampling rates. Because the Board contracts with Railinc to sample railroads' waybills, the entities that use Railinc to sample their waybills would incur no additional costs from Railinc as a result of the Board's proposed changes. Of the approximately 36 Class III carriers, the Board estimates that 34 fall into this category and therefore would not incur any additional burden or cost.

For the railroads that choose to sample their own waybills, the proposed amendments would not result in a significant economic impact. The purpose of the changes proposed in this NPRM is to create a more robust Waybill Sample, resulting in more comprehensive information that would assist both the Board in its decision-making and analyses and other users of waybill data in their analyses. The proposal would increase the rate at which the Board samples certain railroad shipments and appropriately differentiate sampling strata based on industry waybill practices for intermodal shipments. These changes would result in additional observations for certain shipments, but the proposed amendments would not significantly alter small entities' current practices for sampling their shipments. Based on the total burden hours described in the Paperwork Reduction Act analysis below, the Board estimates that, for railroads conducting their own sampling, the change in reporting procedures would result in an estimated one-time burden of approximately 80 hours per railroad. Moreover, this impact would not be on a substantial number of small entities, as the Board estimates that only two of the approximately 36 Class III carriers would incur this burden.

For the reasons described above, the Board certifies under 5 U.S.C. 605(b) that this proposed rule, if promulgated, would not have a significant economic impact on a substantial number of small entities within the meaning of the RFA.

Paperwork Reduction Act. Pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3521, Office of Management and Budget (OMB) regulations at 5 CFR 1320.8(d)(3), and in the Appendix, the Board seeks comments about the impact of the revisions in the proposed rules to the currently approved collection of Waybill Sample data (OMB Control No. 2140-0015) regarding: (1) Whether the collection of data, as modified in the proposed rule and further described below, is necessary for the proper performance of the functions of the Board, including whether the collection has practical utility; (2) the accuracy of the Board's burden estimates; (3) ways to enhance the quality, utility, and clarity of the data collected; and (4) ways to minimize the burden of the collection of data on the respondents, including the use of automated collection techniques or other forms of information technology, when appropriate.

The Board estimates that the proposed requirements would add a total one-time hour burden of 640 hours (or approximately 213.3 hours per year as amortized over three years) because the railroads, in most cases, would need to edit their software programs to implement these changes. Once the burden of the one-time programming changes is incurred, the annual burden would remain the same as before this modification. The Board welcomes comment on the estimates of actual time and costs of collection of Waybill Sample data, as detailed below in the Appendix.^[21] The proposed rules will be submitted to OMB for review as required under 44 U.S.C. 3507(d) and 5 CFR 1320.11. Comments received by the Board regarding the data collection will also be forwarded to OMB for its review when the final rule is published.

List of subjects in 49 CFR Part 1244

• Freight
• Railroads
• Reporting and recordkeeping requirements

It is ordered:

1. The Board proposes to amend its rules as detailed in this decision. Notice of the proposed rules will be published in the Federal Register.

2. Comments are due by January 28, 2020. Replies are due by February 27, 2020.

3. A copy of this decision will be served upon the Chief Counsel for Advocacy, Office of Advocacy, U.S. Small Business Administration, 409 3rd Street SW, Washington, DC 20416.

4. This decision is effective on its service date.

For the reasons set forth in the preamble, the Surface Transportation Board proposes to amend part 1244 of title 49, chapter X, of the Code of Federal Regulations as follows:

PART 1244—WAYBILL ANALYSIS OF TRANSPORTATION OF PROPERTY—RAILROADS

1. The authority citation for part 1244 continues to read as follows:

Authority: 49 U.S.C. 1321, 10707, 11144, 11145.

2. Amend § 1244.4 by revising the first sentence of paragraph (c)(1) and replacing the current table in paragraph (c)(2) with a new table to read as follows:

Footnotes