[Federal Register: November 8, 2002 (Volume 67, Number 217)]
[Rules and Regulations]
[Page 68041-68045]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr08no02-10]
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DEPARTMENT OF TRANSPORTATION
Federal Railroad Administration
49 CFR Part 244
[FRA Docket No. 1999-4985, Notice No. 5]
RIN 2130-AB24
Regulations on Safety Integration Plans Governing Railroad
Consolidations, Mergers, and Acquisitions of Control
AGENCY: Federal Railroad Administration (FRA), DOT.
ACTION: Final rule; response to petitions for reconsideration.
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SUMMARY: On March 15, 2002, the Federal Railroad Administration
(``FRA'') and the Surface Transportation Board (``STB'' or ``Board'')
published joint final rules on regulations on safety integration plans
(``SIPs'' or ``plans'') governing railroad mergers, consolidations, and
acquisitions of control, and procedures governing the STB's
consideration of SIPs in cases involving these type of transactions.
Two interested parties filed petitions for reconsideration of FRA's
final rule, addressing certain issues and concerns relating to the
agency's rule text or regulatory impact statement. (The Board received
no petitions for reconsideration of its final rule.) In this document,
FRA responds to the petitions and clarifies and amends discrete
provisions of the final rule, where appropriate.
DATES: Effective Date: The amendments to the final rule are effective
November 8, 2002.
FOR FURTHER INFORMATION CONTACT: Jon Kaplan, Trial Attorney, Office of
Chief Counsel, FRA, 1120 Vermont Avenue, NW, Mail Stop 10, Washington,
DC 20590 (telephone: (202) 493-6053 and E-mail:
jonathan.kaplan@fra.dot.gov).
SUPPLEMENTARY INFORMATION:
Background
On March 15, 2002, FRA and the STB published joint final rules in
the
[[Page 68042]]
Federal Register establishing procedures for developing and
implementing SIPs by a Class I railroad proposing to engage in certain
specified merger, consolidation, or acquisition of control transactions
with another Class I railroad, or a Class II railroad with which it
proposes to amalgamate operations. 67 FR 11582, 11604, and 11607, March
15, 2002. The effective date of the final rules was April 15, 2002. Id.
at 11583. FRA and the STB invited interested persons to file petitions
for reconsideration of the final rules, id., with FRA requiring that a
petition summarize the complaint and explain ``why compliance with the
rule is not possible, is not practicable, is unreasonable, or is not in
the pubic interest.'' 49 CFR 211.29(a).
Two parties--the Association of American Railroads (``AAR'') and
the Canadian National Railway Company (``CN'') filed petitions with
FRA, seeking amendments to FRA's final rule governing SIPs. (The STB
received no petitions and accordingly, its final rule remains
unchanged.) The parties request that FRA revise its regulations
concerning the approval of SIPs and SIP amendments and personnel
staffing information required in a SIP. (Collaterally, CN raises
questions about the agency's Regulatory Impact Analysis (``RIA'') and
information collection requirements (``ICRs'') under the Paperwork
Reduction Act of 1995 (``PRA''), 44 U.S.C. 3501 et seq.)
In response to the petitions, FRA agrees that certain amendments to
its final rule are warranted. The changes, which are fully discussed in
the ``Section-by-Section Analysis'' portion of the preamble, are
practicable and consistent with the public interest. The agency,
however, denies other aspects of the petitions for the reasons provided
below.
Discussion of Petitions for Reconsideration
A. Disposition of Proposed SIPs and Amendments Thereto
1. Petitions for Reconsideration
As summarized earlier, the AAR and CN request that FRA reconsider
the regulation governing the approval of SIPs and SIP amendments. Under
Sec. 244.19, FRA reviews and approves a railroad's SIP based on the
plan's ``reasonable assurance of safety at every step of a
transaction,'' and the company's execution of the elements in the plan,
including any amendments thereto. See 49 CFR 244.19(a), (b) at 67 FR
11607. Both the AAR and CN take issue with the agency's formal review
process codified in the rule text. They assert that FRA's authority to
approve a SIP, and amendments to it, seems to duplicate the STB's
approval of the transaction as a whole. The petitioners also claim that
the paradigm invites confusion and uncertainty in the application
process vis-a-vis FRA's and the STB's respective roles.
Concurrently, the AAR and CN maintain that the process does not
promote flexibility in responding to new information and experience
that an informal iteration process facilitates. During an application
process, the parties assert that integration plans, targets, and
programs are fluid based on new information received, experience of the
parties that are participants in the transactions, and unforeseen
circumstances. CN, for example, cites its mergers with the Illinois
Central Railroad Company \1\ and the Wisconsin Central Transportation
Corporation \2\ in support of establishing an informal ``collaborative
relationship'' with FRA in developing and implementing SIPs rather than
the formal approval process currently provided in FRA's SIP rules.
Petition of Canadian National Railway Company for Reconsideration of
Federal Railroad Administration Rules (``CN Petition'') 5 (filed April
5, 2002). Informal consultations, the petitioners reiterate, promote
expeditious changes to a plan or its implementation, whereas the
approval process invites delay in reviewing a SIP and correspondingly,
imposes added costs on the applicant. At bottom, the AAR and CN suggest
that FRA amend its rule to reflect the agency's consultative role on
SIPs in past mergers.
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\1\ Canadian National Railway Company, Grand Trunk Corporation,
and Grand Trunk Western Railroad Incorporated--Control--Illinois
Central Corporation, Illinois Central Railroad Company, Chicago,
Central and Pacific Railroad Company, and Cedar River Railroad
Company, STB Finance Docket No. 33556 (STB Decision Nos. 5 and 6,
served June 23, 1998, and Aug. 14, 1998) (hereinafter ``CN/IC'').
\2\ Canadian National Railway Company, et al.--Control--
Wisconsin Central Transportation Corporation. et al., STB Finance
Docket No. 34000, 66 FR 23757 (May 9, 2001) (hereinafter ``CN/
WCTC'').
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In the event that FRA maintains the SIP approval requirement, the
petitioners ask the agency to modify the procedures for handling SIP
amendments. The parties submit that the current amendment process,
which requires the agency to approve all amendments to a plan that are
requested by an applicant before they take effect, should be changed to
authorize approval of any amendment filed with FRA absent any
objections by the agency. The AAR and CN propose that the amendment
would promote flexibility in addressing a change in circumstances,
reduce regulatory delay in the application process, conserve regulatory
resources, and facilitate implementation of time-sensitive changes to a
SIP while enabling the agency to reject an amendment within its
discretion. This change, the parties contend, would prove beneficial to
both the regulated community and FRA without any compromise to railroad
safety.
2. FRA's Response to Request That FRA Adopt a Consultative Role Rather
Than an Approval Role on SIPs
The basic arguments advanced by the petitions in support of their
position that FRA should adopt the informal SIP consultative process
used in the past were fully considered and rejected by the agency when
it issued the final rule. The agency's reasoning was discussed in
detail in the preamble to the final rule and is reaffirmed by this
response to the petitions for reconsideration. Rather than fully
restating this discussion, FRA will only lightly touch upon some of the
points made in the preamble.
First, the agency restates that a SIP and its implementation
present critical safety issues during the merger, consolidation, or
acquisition of a Class I or Class II railroad. FRA's approval process
provides a mechanism to oversee railroad operations subject to a
transaction and enables the agency to exercise its expertise in the
railroad disciplines--operating practices, motive power and equipment,
signal and train control, track safety, and hazardous materials--that
are the subject of those operations. See 67 FR 11585. FRA believes that
its approval process will provide a forum for the agency to coordinate
informally with an applicant in approving a SIP and monitoring its
implementation, thereby meeting the flexibility needs of an applicant.
See id. at 11586, 11599. FRA thus concludes that an approval process
regulates the safety aspects of a SIP in a coordinated, consistent, and
efficient manner.
Second, FRA disagrees with the petitioner's assertion that its
approval process overlaps with the STB's approval process. As the
agency explained in its final rule:
FRA believes that it and the STB have so interpreted their
respective statutes and jurisdiction as to reconcile them
seamlessly, thereby serving the public interest by assuring that all
parts of the affected statutes are given effect and the purposes of
Congress are fully carried out.
Id. at 11585. FRA recognizes that it has ``primary jurisdiction,
expertise, and oversight responsibility in rail safety
[[Page 68043]]
matters,'' id. at 11586, whereas the STB ``has sole authority to
regulate * * * economic transactions.'' Id. at 11585. Within this
rubric, the agencies have framed their respective roles in the SIP
process, with FRA reviewing and approving or disapproving plans and the
implementation thereof, and the STB approving or vetoing a proposed
transaction. See id. at 11587. FRA's role is to ``provide expert advice
to the STB on safety issues presented by a proposed transaction,'' id.,
by filing its findings and conclusions on a SIP to the STB, which then
independently reviews the transaction and plan. See 49 CFR 1106.4(b).
Therefore, FRA's and the STB's final rules clearly define the roles and
responsibilities of the respective agencies, obviating any confusion or
duplication during the application process.
More important, FRA posits that the approval process is necessary
to provide a baseline for enforcement. Contrary to the consultative
process proposed, an approval process enables the agency to take
enforcement action if a railroad fails either to obtain an approved SIP
or implement the approved plan. See 67 FR 11586, 11599. Such remedies
include assessing civil penalties, issuing compliance,
disqualification, or emergency orders, seeking the issuance of an
injunction, or referring certain matters to the Department of Justice
for criminal investigation and prosecution. See id. at 11591-92; 63 FR
72225, 72229, Dec. 31, 1998. Put another way, the approval process
ensures that an applicant ``obtain[s] agency approval of a proposed SIP
before implementing a regulated transaction.'' 67 FR 11592. SIP
compliance and railroad safety thus mandate that FRA retain the
approval process. Accordingly, FRA reaffirms its approval process and
denies the petitioners' request to eliminate the formal SIP approval
provision from its regulations at Sec. 244.19(b).
3. FRA's Response to Request That FRA Modify Its Procedures for
Handling SIP Amendments
FRA agrees with the petitioners that amendments to a SIP should be
presumed approved unless it rejects the changes because the
modifications do not, e.g., provide a logical and workable transition
or are insufficiently detailed to provide ``a reasonable assurance of
safety.'' See id. at 11586; 49 CFR 244.19(a). The AAR proposed that the
amendments become effective 20 days after their submission to FRA
unless rejected by the agency. This is too short of a time period for
adequate agency review of amendments that may have serious safety
consequences. Instead, FRA will amend Sec. 244.19(c)(1) to provide for
a 30-day review period before proposed amendments can become effective
absent earlier FRA approval or disapproval.
B. Personnel Staffing
1. Petition for Reconsideration
The AAR requests that FRA modify the personnel staffing rule (49
CFR 244.13(j)). As currently worded, Sec. 244.13(j) requires an
applicant to identify in its SIP the number of current and proposed
employees in each of eight job classification categories when there is
a projected change of operations that will impact workforce duties or
responsibilities. The AAR requests that Sec. 244.13(j) be changed to
require the applicant to provide information on personnel staffing with
respect to only those job categories that are impacted by a
transaction. The organization believes that this modification would
narrow the safety issues of job categories that an applicant would be
required to address, obviating the need to file extraneous or
irrelevant personnel staffing information in a plan.
2. FRA's Response
FRA agrees with the AAR's suggestion that Sec. 244.13(j) should be
clarified, and has adopted the language proposed by the organization.
The agency intended to require a railroad to ``only address the
personnel staffing element when it project[ed] a change of operations
that [would] impact workforce duties or responsibilities.'' 67 FR
11597. An applicant ``may omit this section if it expects operations
will remain constant after the transaction is consummated.'' Id.
C. Regulatory Evaluation Concerns
1. Petition for Reconsideration
In its petition, CN questions FRA's RIA based on its experience in
the CN/IC and CN/WCTC mergers. Specifically, CN argues that the agency
erred in its cost/benefits analysis because the costs identified are
based on transactions that were consummated before the final rule was
effective, and the benefits identified do not show any material gain in
adopting a formal rather than an informal review process. Consequently,
CN contends that the agency's regulatory impact statement is arbitrary
and capricious, in violation of the Administrative Procedure Act, 5
U.S.C. 706(2)(A).\3\
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\3\ CN also alleges in a footnote that FRA's costs associated
with the ICRs in its final rule appear to be ``unrealistically
low.'' See CN Petition at 9 n. 6. The railroad cites no authority
and provides no basis for the allegation. Absent evidence to the
contrary, FRA maintains that the ICRs, which the Office of
Management and Budget reviewed and approved, are accurate and
satisfy the requirements under the PRA.
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2. FRA's Response
FRA believes that CN's analysis is misplaced. Consistent with
Executive Order 12866, the agency issued its RIA that evaluated the
potential costs and benefits of its final rule, and addressed the
assumptions, inferences, and conclusions employed in its assessment.
See 67 FR 11600-01. The cost estimates are premised on the transactions
cited in the final rules, namely, the Conrail Acquisition,\4\ which was
the first transaction in which the parties--Norfolk Southern Railway
Company and CSX Transportation, Incorporated--prepared SIPs. The agency
analyzed the railroads' individual and collective expenses in
establishing the cost figures identified in its final rule. Evidence in
the administrative record supports the cost estimates, which FRA
incorporated in the preamble to its final rule. See id. at 11600.
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\4\ CSX Corporation and CSXT Transportation, Inc., Norfolk
Southern Corporation and Norfolk Southern Railway Company--Control
and Operating Leases/Agreements--Conrail Inc. and Consolidated Rail
Corporation, STB Finance Docket No. 33388 (hereinafter ``Conrail
Acquisition'').
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Likewise, the benefits measured are founded on, for example, the
merger of the Union Pacific Railroad Company and the Southern Pacific
Transportation Company and societal losses associated with the service
difficulties caused by the disruption of safety and operating practices
during the merger. See id. The RIA also considered alternatives to the
rulemaking action, but concluded that the SIP process ensured that
safety programs were continued and closely monitored. See id.
Accordingly, FRA's assessment satisfies the regulatory analysis
requirements under the Executive Order.
Finally, FRA notes that CN's efforts to draw a distinction between
voluntary and required information filed in a SIP is irrelevant. The
model used in the RIA is predicated on a SIP/no SIP analysis because
SIPs were not prepared as a matter of normal business practice before
the Conrail Acquisition proceeding. See 63 FR 72228; Conrail
Acquisition, STB Decision No. 52, served Nov. 3, 1997. This model
provides the necessary analytical tools in determining the costs and
benefits associated with the rule given the lack of any such planning
before the Conrail Acquisition. See Administrative Conference of the
United States Recommendation 85-02, Agency Procedures for Performing
Regulatory Analysis of Rules, 50 FR 28364, July 12,
[[Page 68044]]
1985 (agency should discuss selected set of models employed in
regulatory analysis). FRA submits that this model comports with the
Executive Order and thus withstands judicial review. See Center for
Auto Safety v. Peck, 751 F.2d 1336, 1342 (D.C. Cir. 1985) (court will
not substitute its judgment for that of an agency ``when the agency is
called upon to weigh the costs and benefits of alternative policies,
since such cost-benefit analyses epitomize the types of decisions that
are most appropriately entrusted to the expertise of an agency'')
(internal quotations and citation omitted); Motor Vehicle Mfrs. Ass'n
v. State Farm Mut. Ins. Co., 463 U.S. 29, 43 (1983) (``arbitrary and
capricious'' standard of review requires an agency to ``examine the
relevant data and articulate a satisfactory explanation for its action,
[including] a rational connection between the facts found and the
choice made''); Western Coal Traffic League v. Surface Transportation
Board, 216 F.3d 1168, 1177 (D.C. Cir. 2000) (agency action is not
arbitrary and capricious when it provides ``ample opportunity for
public comment in its proceeding [and] ample justification for its
decision''); State of Louisiana v. Verity, 853 F.2d 322, 327 (5th Cir.
1988) (``agency's decision need not be ideal * * * so long as [it] gave
at least minimal consideration to relevant facts contained in the
record'').
Section-by-Section Analysis
FRA is making minor modifications to certain provisions of 49 CFR
part 244 in response to the petitions for reconsideration. This section
of the preamble explains the changes made to the final rule in response
to the petitions. FRA respectfully refers interested parties to the
agency's Section-by-Section Analysis of the final rule and the Notice
of Proposed Rulemaking for a full discussion of those aspects of the
rulemaking action that remain unchanged. See 67 FR 11590-600; 63 FR
72228-35.
Subpart B--Safety Integration Plans
Section 244.13(j)--Personnel Staffing
Paragraph (j) of this section is modified in response to the AAR's
suggestion that the regulatory text be clarified to reflect that an
applicant need only provide information on personnel staffing with
respect to those job categories that are impacted by a transaction. The
amendment requires an applicant to identify the number of employees by
job category, currently and proposed, to perform the types of functions
enumerated at Sec. 244.13(j)(1)-(8) when there is a projected change
of operations that will impact workforce duties or responsibilities for
employees of that job category.
Section 244.19--Disposition
FRA is revising paragraph (c)(1) of this section in response to the
AAR's and CN's petitions for reconsideration. As amended, the
regulation authorizes an applicant to amend its SIP, provided it
explain the need for the amendment and inform FRA about the change. An
amendment to a plan is presumed approved and takes effect no sooner
than 30 days after it is filed with FRA, unless the agency either
approves or disapproves the change within that period. Consistent with
FRA's approval of a plan, the agency must determine that the amendment
does not provide ``a reasonable assurance of safety'' should it reject
the modification. See 49 CFR 244.19(a), (b).
FRA agrees with the petitioners that this revision promotes
flexibility in enabling a railroad to address a change in circumstances
should it decide to amend its SIP. This change, which is consistent
with the agency's Railroad Workplace Safety and Qualification and
Certification of Locomotive Engineers rules at 49 CFR 214.307(c) and
240.103(c), respectively, facilitates a railroad's ability to implement
time-sensitive changes to a plan yet retains agency discretion to
intervene should circumstances warrant.
Regulatory Impact of FRA's Final Rule
Executive Order 12866 and DOT Regulatory Policies and Procedures
The response to petitions for reconsideration of the final rule has
been evaluated in accordance with Executive Order 12866 and DOT
policies and procedures. Although the final rule met the criteria for
being considered a significant rule under those policies and
procedures, the amendments contained in the response to the petitions
are not considered significant because they either clarify requirements
currently contained in the final rule or allow for greater flexibility
in complying with the rule. The economic impact of the amendments and
clarifications contained in this response will generally reduce the
cost of compliance with the rule.
The cost reduction, however, is not easily quantified and does not
significantly alter FRA's original analysis of the costs and benefits
associated with the original final rule. Additionally, the agency
believes that the modifications and clarifications increase the
benefits associated with the final rule by facilitating amendments to a
SIP and conserving agency resources in reviewing and approving a plan.
Accordingly, FRA reaffirms the economic arguments and estimates
advanced in its RIA for the final rule.
Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980 (``RFA''), 5 U.S.C. 601 et
seq., requires an assessment of the impact of rules on ``small
entities.'' FRA certifies that the response to petitions for
reconsideration does not have a significant impact on a substantial
number of small entities. Because the amendments contained in this
document either clarify requirements currently contained in the final
rule or allow for greater flexibility in complying with the rule, FRA
has concluded that there is no substantial economic impact on small
units of government, businesses, or other organizations.
Proper Consideration of Small Entities in Agency Rulemaking
The response to petitions for reconsideration of the final rule has
been reviewed in accordance with Executive Order 13272 (67 FR 53461,
August 16, 2002), which requires agencies to assess and take
appropriate account of the potential impact on small businesses, small
governmental jurisdictions, and small organizations, as provided by
RFA. FRA certifies that this rulemaking action does not have a
significant economic impact on these entities under the RFA.
Paperwork Reduction Act
The response to petitions for reconsideration of the final rule
does not significantly change any of the ICRs contained in the original
final rule.
Environmental Impact
FRA has evaluated the response to petitions for reconsideration of
the final rule in accordance with its ``Procedures for Considering
Environmental Impacts'' (64 FR 28545, May 26, 1999) as required by the
National Environmental Policy Act, 42 U.S.C. 4321 et seq., other
environmental statutes, Executive Orders, and related regulatory
requirements. FRA has determined that this document is not a major FRA
action for environmental purposes.
Federalism Implications
The response to petitions for reconsideration of the final rule has
been analyzed in accordance with the principles and criteria contained
in Executive Order 13132, and it has been determined that this action
does not have sufficient federalism implications
[[Page 68045]]
to warrant the preparation of a Federalism Assessment.
Statement of Energy Effects
The response to petitions for reconsideration of the final rule has
been reviewed in accordance with Executive Order 13211 (66 FR 28355,
May 22, 2001), which requires agencies to prepare a Statement of Energy
Effects describing the effects of certain regulatory actions on energy
supply, distribution, or use when such measures are identified as
``significant energy actions.'' FRA certifies that this rulemaking
action is not a significant energy action to warrant the preparation of
such a statement.
List of Subjects in 49 CFR Part 244
Administrative penalties, practice and procedure, Railroad safety,
Railroads, Safety Integration Plans.
In consideration of the foregoing, FRA amends part 244 of chapter
II of title 49, Code of Federal Regulations, to read as follows:
PART 244--[AMENDED]
1. The authority citation for Part 244 continues to read as
follows:
Authority: 49 U.S.C. 20103, 20107, 21301; 5 U.S.C. 553 and 559;
Sec. 31001(s)(1), Pub. L. No. 104-134, 110 Stat. 1321-373 (28 U.S.C.
2461 note); and 49 CFR 1.49.
2. Section 244.13 is amended by revising paragraph (j) introductory
text to read as follows:
Sec. 244.13 Subjects to be addressed in a Safety Integration Plan
involving an amalgamation of operations.
* * * * *
(j) Personnel staffing. Each applicant shall identify the number of
employees by job category, currently and proposed, to perform the
following types of functions when there is a projected change of
operations that will impact workforce duties or responsibilities for
employees of that job category:
* * * * *
3. Section 244.19 is amended by revising paragraph (c)(1) to read
as follows:
Sec. 244.19 Disposition.
* * * * *
(c) * * *
(1) By the applicant. The applicant may amend its Safety
Integration Plan, from time to time, provided it explains the need for
the proposed amendment in writing to FRA. Any amendment shall take
effect no earlier than 30 days after its submission to FRA, unless it
is either approved or disapproved by FRA within that period. Any
disapproval of an amendment shall be in accordance with the
requirements prescribed in paragraph (b) of this section.
* * * * *
Issued in Washington, DC on October 30, 2002.
Allan Rutter,
Federal Railroad Administrator.
[FR Doc. 02-28096 Filed 11-7-02; 8:45 am]
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