The Ascertainable Standards that Guide and Limit the Surface Transportation Board's Authority over the Railroads

Abstract

The Staggers Rail Act of 1980 is the statute that regulates our freight railroad industry. The Surface Transportation Board is the regulatory authority in this industry. The Act contains three ascertainable standards: minimizing regulation subject to certain policy constraints; reasonableness in the rates that rail carriers are to offer shippers; and adequacy in the revenues that the railroads are to earn. Ascertainable standards are both policy objectives that the Surface Transportation Board must use in its decision-making and the standards a reviewing court will use when determining if the Board has acted in an “arbitrary and capricious” manner or has crossed the boundaries of its statutory authority under the Administrative Procedures Act.

This Article explains how the Board should be using these ascertainable standards as a policy guide in its decision-making, including rulemaking, and how a reviewing court should be using these standards when determining if a Board decision is to be set aside. These ascertainable standards are applied to four different fact patterns: the Board’s proposed rule on mandatory reciprocal switching; the practicality of incorporating the “revenue adequacy constraint” into the Board’s constrained market pricing approach to rate setting; a recent Board decision involving a railroad’s common carrier obligation; and the statutory limitations of the Board in restraining the equity stock buybacks of railroads. The overall result of these applications is that the Board is found to be much more legally restrained in its ability to regulate the railroads than is commonly understood. Moreover, the discussion on mandatory reciprocal switching and the recent Board decision on a railroad’s common carrier obligation reveals a tendency by the current Board to prefer regulation over private contracting. If so, this is in direct conflict with the Act’s primary objective of minimizing regulation. This is something that the current Board members need to reflect on and avoid when making future decisions.

Keywords: ascertainable standards, railroads, Staggers Rail Act of 1980, reciprocal switching, common carrier, constrained market pricing, major questions doctrine, nondelegation doctrine, intelligible principle, administrative procedures act, arbitrary and capricious

JEL Classification: K20, K23