The U.S. Surface Transportation Board has adopted final rules establishing disclosure requirements for rail transactions involving interchange agreements.
An interchange agreement is a contractual commitment in the sale or lease of a railroad line to a newly created short line or regional railroad that restricts the purchasing railroad from interchanging traffic with any railroad but the seller.
Under the board’s former rules, if a proposed rail line acquisition involved an interchange commitment, the proponent had to inform the board of the commitment and file a confidential version of the agreement containing that commitment. In November 2012, STB proposed additional reporting for interchange commitments in both leases and sales. The board will now require parties to file information concerning shippers, carloads and potential interchanging railroads on the affected line; a verification that shippers on the line have been notified; an estimate of the lease or sale price differential with and without an interchange commitment; and a case caption that indicates an interchange commitment.
The American Chemistry Council welcomed the STB’s new disclosure requirements, saying the modified rules will “help shine a light on railroad agreements that limit access to competitive freight rail service.”
“Interchange commitments clearly inhibit potential competition between Class I railroads and interfere with market-based rates,” ACC said in a written statement. “In fact, a significant purpose of such an agreement is to ensure that in spinning off a short line railroad, a Class I railroad will not have to compete with another carrier for the covered traffic.”
“While the decision does not address existing agreements, this action will allow for increased transparency and more open consideration of future transactions,” ACC explained. “To ensure the new requirements provide meaningful improvements, we urge the STB to inform the public specifically how the information it collects will be used to evaluate the potential anti-competitive impacts of interchange commitments in future rail transactions.”