STB PROPOSES NEW RAIL MERGER RULES

STB PROPOSES NEW RAIL MERGER RULES    Stepping up its regulatory authority, the U.S. Surface Transportation Board today issued a long list of proposed rules that would govern future Class I rail mergers.
   The proposed regulations will “significantly increase the burden” on railroads in future rail consolidations to show that the proposed transaction is in the public interest, the STB said.
   In particular, the new rules would require rail carriers to show that their proposed transaction would not only preserve, but enhance competition. They would also be subject to an extensive list of STB oversight requirements for at least five years.
   Under the old regime, rail carriers only had to show that a merger would preserve competition at the level prior to the merger.
   When evaluating whether the merger will serve the public interest, the STB would also consider whether the benefits claimed by the applicants could be achieved by means other than a merger.
   “The board believes that other private sector initiatives, such as joint marketing agreements and interline partnerships, can produce many of the efficiencies, while risking less potential harm to the public,” the STB said.
   Applicants must also make “a good faith effort” to calculate any net benefit of the merger.
   Applicants will also be required to propose remedies to mitigate or offset competitive harm.
   The STB’s new policy “represents a major shift … from the pro-merger approach” that has been used by the agency for the last 20 years, the STB said.
   As part of the STB’s five-year formal oversight process, rail carriers would be required to file annual reports showing that merger conditions imposed by the STB are working as intended and that the merged carriers are honoring representations made prior to the merger approval.
   Parties would be able to comment on the annual filings, and the STB would retain jurisdiction to impose additional conditions if it determines they are necessary to remedy or offset unforeseen harms arising from the merger.
   Rail carriers would also have the additional burdens of:
   * Cooperating with the Federal Railroad Administration on a case-by-case basis to ensure safe operations are maintained throughout the merger implementation process.
   * Show that their applications would not go against the North American Free Trade Agreement.
   * Prove that the proposed merger would not undermine U.S. national defense needs.
   Merger applicants would be required to file up-front detailed service assurance plans, including contingency plans that would enable the STB’s staff to assess proposed consolidation operations prior to approval.
   As part of the duty to ensure adequate service during a merger’s transition period and beyond, applicants would have to establish problem resolution teams and specific problem resolution procedures to ensure that post-merger problems are promptly and appropriately addressed.
   In such a process, the STB will expect the establishment of an “Advice Council” comprising shippers, railroads and other parties.
   Comments regarding the proposed rules are due at the STB by Nov. 17. Replies to the comments are due Dec. 18. Rebuttal comments are due by Jan. 11. Final rules will be issued by the STB by June 11.