United States: STB Revisits Its Ban On Ex Parte Communications In Rulemaking Proceedings

Paul Hitchcock is Senior Policy Advisor in the Jacksonville office

The Surface Transportation Board has taken a significant step in modernizing its regulatory processes by proposing to eliminate its long-standing prohibition on ex parte communications in its informal rulemaking proceedings. In doing so, the STB would bring its procedures into alignment with a recent consensus recommendation of the Administrative Conference of the United States, a body charged by Congress with recommending agency best practices.

For over a century, the STB (and its predecessor, the Interstate Commerce Commission) have played a quasi-judicial role in resolving disputes between private parties, such as disputes between a railroad and a shipper over the maximum lawful rate. This role has no doubt long contributed to a heightened sensitivity at the agency to avoiding even appearances of impropriety – not just in adjudicative proceedings, but in its rulemakings as well.

The case law is now more favorable toward ex parte communications (with safeguards), and the STB has been pleased with its experience with limited ex parte communications in two recent rulemakings. Accordingly, the Board is now proposing specific rules that would permit carefully circumscribed direct interaction between Board members and/or staff and stakeholders as the agency considers new rules. Central to the proposed process are a set of disclosure requirements.

Strictly speaking, the new approach would only apply in informal rulemakings under the Administrative Procedure Act, not formal rulemakings under 5 USC Sec. 556-557. However, the STB has not used the formal APA process with hearings and a presiding officer in recent memory, favoring the informal notice and comment process of 5 USC Sec. 553. The current prohibition against ex parte communications in adjudicative proceedings would be retained.

The first significant change the Board proposes would allow ex parte communications that might occur while the agency is considering a rule, but has not yet reached the point of a Notice of Proposed Rulemaking. These contacts would not have to be disclosed. The practical effect of this change would be to allow informal, unstructured one-on-one exchanges between stakeholders and the members of the Board long before there were any consensus of the members to actually consider action. It would also permit the Board to proceed with an Advance Notice of Proposed Rulemaking, gather formal comments, and engage in discussion – even negotiation – before taking the proposal to the next step. While this risks increased "politicization" of the process, it is to be hoped that the improved understanding that should result from freer exchanges will improve the practicality and economic soundness of the agency's ultimate decisions.

The STB proposal would not change its current rule that it may sanction or revoke the privilege of practicing before the agency of anyone who knowingly and willfully engages in unpermitted ex parte communications. Neither would it remove the existing rule that the Board can deny a party the relief it is seeking in a proceeding.

The Board proposes a set of disclosure requirements. Participants in an ex parte communication must submit a disclosure memorandum to the staff person or office of the Board member with whom they met. This must be done within two business days. The memo must identify the date and location, list the names and titles of participants (including those participating remotely) and must summarize the data and arguments presented. Any written or electronic material shown to the staff or Board member must be attached. If a group of participants attends, a single memorandum may be submitted if all participants can reach agreement on it. The memorandum must be of sufficient detail to describe the substance of the discussion, and the Member or staff may require the participant to re-submit the memorandum if it is not sufficiently detailed.

The proposal helpfully permits parties to designate some of the information presented as confidential. This must be done at the time of the presentation, and the disclosure memorandum must be submitted in a public (redacted) and confidential version. If no protective order has yet been entered in the matter, the presenter must file a request for a protective order at the time it submits its disclosure memoranda.

Ex parte communications must end twenty days before the deadline for reply comments. This will allow parties in the proceeding to review and respond to the substance and arguments of the ex parte communications in their reply comments.

The author of this blog participated in an early STB experiment in ex parte communications in US Rail Service Issues – Performance Data Reporting, Ex Parte 724 (Sub-No. 4). Board staff were able to ask questions and exchange ideas directly with subject matter experts from a Class I railroad, cutting through much confusion and greatly enhancing their understanding of what kinds of data were available, and what could and couldn't be developed with existing carrier data systems. These kinds of highly technical issues are tailor-made for direct, face-to-face exchanges between staff and managers of the regulated entity. To be sure, there was no consensus on the actual need for the data. But, in this author's view, the ex parte process contributed greatly to a workable regulatory outcome. Without the understanding that was gained, it is highly likely that the Board's efforts would have led to a rule that would have been difficult – or even impossible -- to comply with, resulting in court appeals and on-going litigation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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