The U.S. Court of Appeals for the Eighth Circuit recently vacated the Surface Transportation Board's (STB) Final Offer Rate Review (FORR) in Union Pacific Railroad v. Surface Transportation Board (No. 22-3648) and Association of American Railroads v. Surface Transportation Board (No. 23-1325). The FORR, a regulation designed to address rate increases proposed by railroads, has been a subject of intense debate within the transportation industry.
The FORR established a process for reviewing rate increases proposed by railroads. Under the rule, if the STB determines that a proposed rate increase is excessive, it can impose a rate that is either the railroad's or the shipper’s final offer. The STB rulemaking specifically states “[T]he Board chooses one of those [final offers] groups without modification.” This was intended to provide a more efficient way to determine maximum rates than the traditional Stand-Alone Cost (SAC), Simplified SAC, or Three-Benchmark processes.
The 8th Circuit found that the STB had exceeded its statutory authority by using the FORR process to determine rates. The court noted that the statute governing the STB only authorizes the agency to "review" rates, not to "determine" them. “FORR effectively prevents the Board from giving ‘due consideration’ to the statutory factors that the Board is required to consider in assessing a rate’s reasonableness, see 49 U.S.C. § 10701(d)(2), by limiting the Board to the two final offers the parties propose in prescribing the maximum reasonable rate.”
Click here to read the U.S. Court of Appeals for the Eighth Circuit decision.
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