Experts react on AAR’s request for cost-benefit analysis in STB proceedings

The request by the Association of American Railroads (AAR) asking the Surface Transportation Board (STB) to include a cost-benefit analysis into its rulemaking process is being viewed by some as a positive step towards aligning STB procedure with other U.S. Department of Transportation (DOT) agencies.

“It makes sense for an agency that issues regulations to conduct an analysis on the costs and benefits of those proposed regulations. DOT has to do that for issues impacting trucking companies. Why should rail be treated differently?” said transportation attorney Bill Mullins. Mullins served as chief of staff for the Interstate Commerce Commission, the predecessor of the STB.

A leading freight railroad trade group, the AAR asked the STB in a March 14 petition to consider including a cost-benefit analysis, also known as an economic analysis or regulatory impact analysis, when it considers creating new rules affecting railroads and shippers alike.

Because the STB is considered an independent agency, it hasn’t been mandated to include a cost-benefit analysis in its rulemaking process. But AAR argues that conducting such an analysis would bring the STB more in line with what other federal agencies are already doing.

“We believe the STB would be better positioned to meet its statutory mandate and bring its practices more in line with the spirit of past Executive Orders, which the Board has largely acknowledged to date,” said AAR president Ian Jefferies.

If the STB agrees with AAR’s request, the cost-benefit analysis would be required for proposed rules but not for rate or service disputes between individual parties.

Whether the STB decides to conduct a cost-benefit analysis of existing proceedings, such as EP 711 on reciprocal switching, is up to the Board’s discretion, according to AAR director of public affairs Ted Greener.

In the proceeding on reciprocal switching, which boils down to the way railroads charge shippers if goods are transferred at interchanges from one rail line to another, a cost-benefit analysis would facilitate the STB’s deliberations. The National Industrial Transportation League (NITL) requested that the Board revise the rules on reciprocal switching in July 2011, and that proceeding is still before the agency.

“Any proceeding at the STB is theoretically of interest to railroads and shippers alike. It would be up to the STB, if they were to adopt our petition, to apply the analysis to pending matters, such as switching,” Greener said. “But we of course believe that doing so would show the costs of such a scheme would far outweigh any purported benefits.”

Shippers meanwhile are still assessing what the inclusion of a cost-benefit analysis would mean to them, and several shippers’ groups, including NITL, didn’t return requests for comment.

But a shipper attorney guessed that AAR might be looking at how the DOT regulates transportation modes, based on the AAR petition’s mention of the 2015 U.S. Supreme Court case between Michigan and the U.S. Environmental Protection Agency, in which the highest court said costs would be relevant in setting Clean Air Act standards unless Congress clearly said otherwise.

That logic “may well also apply then to what DOT does – the Federal Railroad Administration, the Pipeline and Hazardous Materials Safety Administration – in regulating the railroads…I wonder if the railroads have thought about the implications of that for their industry,” the attorney said.