B-199306.OM, MAR 2, 1981

B-199306.OM: Mar 2, 1981

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THE NORTHEAST CORRIDOR TRACKS ARE USED FOR THREE DIFFERENT SERVICES: INTERCITY PASSENGER. THE ISSUE OF WHAT CONSTITUTES CROSS SUBSIDIZATION IS NOW BEING LITIGATED IN THE CASE OF SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY V. THE MAIN ISSUE IS WHETHER THE STANDARDS ISSUED BY THE INTERSTATE COMMERCE COMMISSION'S RAIL SERVICES PLANNING OFFICE. OUTLINING THE WAY IN WHICH COSTS ARE TO BE SHARED. ARE CONSISTENT WITH THE LAW. ONE OF THE CLAIMS IN THE COMPLAINT IS THAT BY PRESCRIBING A FULL ALLOCATION OF COSTS. WHICH IS PROHIBITED BY SECTION 205(D)(5) OF THE REGIONAL RAIL REORGANIZATION ACT OF 1973 (3R ACT). THE COURT IS THUS FACED WITH THE ISSUE OF WHAT CONSTITUTES CROSS SUBSIDIZATION.

B-199306.OM, MAR 2, 1981

SUBJECT: COST SHARING AMONG NORTHEAST CORRIDOR RAIL USERS (FILE B-199306; CODE 340543)

TEAM LEADER, WRO - JOAN B. HAWKINS:

YOU REQUESTED OUR ASSISTANCE IN YOUR REVIEW OF THE ALLOCATION OF COSTS AMONG THE USERS OF THE NORTHEAST CORRIDOR RAILROAD TRACKS. THE NORTHEAST CORRIDOR TRACKS ARE USED FOR THREE DIFFERENT SERVICES: INTERCITY PASSENGER, FREIGHT, AND COMMUTER. THE NATIONAL RAILROAD PASSENGER CORPORATION (AMTRAK) OWNS THE TRACKS AND PROVIDES INTERCITY PASSENGER TRAIN SERVICE. THE CONSOLIDATED RAIL CORPORATION (CONRAIL) OPERATES FREIGHT TRAINS AND, UNDER CONTRACT, RUNS COMMUTER TRAINS FOR VARIOUS STATE AND REGIONAL TRANSPORTATION AUTHORITIES. YOUR REVIEW, REQUESTED BY THE SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION, RAISES SEVERAL LEGAL QUESTIONS.

MANY OF THE LEGAL QUESTIONS YOU ASKED US REVOLVE AROUND THE MEANING OF THE TERM "CROSS SUBSIDIZATION." SECTION 701(A)(6) OF THE RAILROAD REVITALIZATION AND REGULATORY REFORM ACT OF 1976 (4R ACT), 45 U.S.C. 851(A)(6), PROHIBITS CROSS SUBSIDIZATION AMONG INTERCITY, COMMUTER, AND RAIL FREIGHT SERVICES, AND YOU WOULD LIKE TO KNOW WHAT CONSTITUTES CROSS SUBSIDIZATION. SPECIFICALLY, YOU ASK WHETHER THE PROHIBITION OF CROSS SUBSIDIZATION MEANS THAT THERE SHOULD BE A FULL ALLOCATION OF COSTS AMONG USERS, OR THAT FREIGHT AND COMMUTER SERVICES SHOULD PAY ONLY AVOIDABLE COSTS, OR THAT THE COSTS SHOULD BE SHARED IN SOME OTHER WAY.

THE ISSUE OF WHAT CONSTITUTES CROSS SUBSIDIZATION IS NOW BEING LITIGATED IN THE CASE OF SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY V. INTERSTATE COMMERCE COMMISSION, RAIL SERVICES PLANNING OFFICE, NO. 80-1237 (3RD CIR.). THIS LITIGATION INVOLVES COST SHARING BETWEEN THE SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY AND CONRAIL OUTSIDE THE NORTHEAST CORRIDOR. THE MAIN ISSUE IS WHETHER THE STANDARDS ISSUED BY THE INTERSTATE COMMERCE COMMISSION'S RAIL SERVICES PLANNING OFFICE, OUTLINING THE WAY IN WHICH COSTS ARE TO BE SHARED, ARE CONSISTENT WITH THE LAW. ONE OF THE CLAIMS IN THE COMPLAINT IS THAT BY PRESCRIBING A FULL ALLOCATION OF COSTS, THE STANDARDS CALL FOR CROSS SUBSIDIZATION, WHICH IS PROHIBITED BY SECTION 205(D)(5) OF THE REGIONAL RAIL REORGANIZATION ACT OF 1973 (3R ACT), 49 U.S.C. 10362 (B)(5). THE COURT IS THUS FACED WITH THE ISSUE OF WHAT CONSTITUTES CROSS SUBSIDIZATION.

ALTHOUGH THE CROSS SUBSIDIZATION PROVISION IN QUESTION IN THE LITIGATION IS NOT THE SAME ONE THAT IS INVOLVED IN YOUR AUDIT, THEY WERE ENACTED AT THE SAME TIME (SEE SECTIONS 309 AND 701 OF THE 4R ACT, PUB. L. NO. 94-210), SO WE THINK CONGRESS INTENDED THE SAME MEANING FOR CROSS SUBSIDIZATION IN BOTH. THEREFORE, WHEN THE LITIGATION INVOLVING THE SOUTHEASTERN PENNSYLVANIA TRANSPORTATION AUTHORITY HAS BEEN COMPLETED, THE ISSUE OF CROSS SUBSIDIZATION WILL BE CLARIFIED. SINCE IT IS GAO'S POLICY TO AVOID REACHING LEGAL OR FACTUAL CONCLUSIONS ABOUT ISSUES IN LITIGATION, YOU SHOULD NOT REACH ANY CONCLUSIONS IN YOUR REPORT THAT INVOLVE THE ISSUE OF CROSS SUBSIDIZATION. WE SEE NO REASON, HOWEVER, WHY YOU COULD NOT PRESENT VARIOUS ALTERNATIVES FOR COST SHARING, EXPLAINING HOW EACH WOULD WORK, THE RESULTS THAT WOULD FLOW FROM USING EACH, AND THE ADVANTAGES AND DISADVANTAGES OF EACH.

YOU COULD NOT CONCLUDE HOW COSTS SHOULD BE SHARED BECAUSE THAT WOULD DEPEND UPON THE MEANING OF CROSS SUBSIDIZATION, BUT YOU COULD, FOR EXAMPLE, CONCLUDE WHICH COSTS WERE FIXED AND WHICH AVOIDABLE, WHAT COSTS THE RESPECTIVE PARTIES SHOULD BEAR UNDER THE DIFFERENT ALTERNATIVES (THEORIES) OF COST SHARING, AND THE CONSEQUENCES THAT WOULD FLOW FROM EACH. ONE OF THE SPECIFIC QUESTIONS ASKED BY THE COMMITTEE THAT OUR POLICY PRECLUDES US FROM ANSWERING DIRECTLY IS WHETHER THE STANDARDS ISSUED BY THE RAIL SERVICES PLANNING OFFICE ARE CONSISTENT WITH THE LAW. YOU MAY DISCUSS THE STANDARDS AND WHAT THEY REQUIRE, BUT YOU SHOULD NOT CONCLUDE WHETHER THEY ARE CONSISTENT WITH THE LAW. WE WILL BE HAPPY TO HELP YOU DRAFT YOUR REPORT LANGUAGE SO THAT THE REPORT CONFORMS TO OFFICE POLICY REGARDING ISSUES IN LITIGATION.

THOSE QUESTIONS YOU ASKED THAT LITIGATION DOES NOT PRECLUDE US FROM ANSWERING FOLLOW.

QUESTION 1: DOES THE LEGISLATIVE HISTORY OR ANY OTHER RELEVANT INFORMATION INDICATE WHAT THE TERM "EQUITABLE AND FAIR" (AS USED IN SECTION 701(A)(6) OF THE 4R ACT, 45 U.S.C. 851(A)(6), AND SECTION 402(A) OF THE RAIL PASSENGER SERVICE ACT, 45 U.S.C. 562(A)) MEAN? IS THERE ANY INDICATION AS TO WHAT IS MEANT BY THE TERM "ALL RELEVANT FACTORS" AS USED IN SECTION 402(A) OF THE RAIL PASSENGER SERVICE ACT, 45 U.S.C. 562(A)?

ANSWER: THE ONLY INDICATION OF THE MEANING OF THE TERM "EQUITABLE AND FAIR" IS THAT IN DETERMINING COST SHARING, CONSIDERATION SHOULD BE GIVEN TO THE ACTUAL MAGNITUDE AND IMPACT OF OPERATIONS CONDUCTED FOR INTERCITY, PASSENGER, FREIGHT, AND COMMUTER USERS. THE ONLY INDICATION OF THE MEANING OF THE TERM "ALL RELEVANT FACTORS" IS THAT COST ALLOCATIONS SHOULD CONSIDER THE FACT THAT THE DIFFERENT USERS WILL REQUIRE DIFFERENT LEVELS OF IMPROVEMENTS TO MEET THEIR RESPECTIVE OPERATING NEEDS AND THAT THEIR DIFFERENT USES WILL CAUSE VARYING AMOUNTS OF WEAR AND TEAR. BOTH OF THESE TERMS ARE DIFFICULT TO APPLY TO COST SHARING WITHOUT CONSIDERING THE MEANING OF CROSS SUBSIDIZATION. YOU SHOULD NOT USE THESE TERMS AS A BASIS FOR CONCLUDING HOW COSTS ARE TO BE SHARED BECAUSE THAT STILL DEPENDS ON THE MEANING OF CROSS SUBSIDIZATION.

QUESTION 2: DO THE RAIL SERVICE PLANNING OFFICE STANDARDS (49 C.F.R. SEC. 1127.1 ET SEQ.) APPLY TO AMTRAK? DO THEY APPLY TO CONRAIL AND COMMUTER AGENCIES WHERE CONRAIL IS UNDER CONTRACT TO OPERATE TRAIN SERVICE FOR COMMUTER AGENCIES?

ANSWER: THE STANDARDS DO NOT APPLY TO AMTRAK, BUT DO APPLY TO CONRAIL AND THE COMMUTER AGENCIES WHERE CONRAIL IS UNDER CONTRACT WITH THE AGENCIES.

QUESTION 3: WHAT IS A "COMPENSATORY CONTRACT" AS REFERRED TO IN SECTION 701(A)(3) OF THE 4R ACT, 45 U.S.C. 851(A)(3)?

ANSWER: A COMPENSATORY CONTRACT IS AN AGREEMENT FOR REIMBURSEMENT OF COSTS ON A EQUITABLE AND FAIR BASIS, WITHOUT ANY CROSS SUBSIDIZATION.

QUESTION 4: IS IT LEGAL FOR AMTRAK TO REQUIRE REIMBURSEMENT FOR USE OF TRACK IT OWNS ON A BASIS SIGNIFICANTLY DIFFERENT FROM THAT USED OUTSIDE THE CORRIDOR? IS THIS "EQUITABLE AND FAIR"?

ANSWER: THE "EQUITABLE AND FAIR" STANDARD DOES NOT APPLY TO THE SITUATION DESCRIBED IN THIS QUESTION.

QUESTION 5: WHAT APPEAL MEASURES ARE AVAILABLE TO THE THREE GROUPS OF SERVICES IN THE EVENT A JOINT DETERMINATION FOR COMPENSATION CANNOT BE ARRIVED AT?

ANSWER: APPEAL MAY BE MADE TO THE INTERSTATE COMMERCE COMMISSION.

QUESTION 6: MAY THE INTERSTATE COMMERCE COMMISSION INTERVENE IN A DISPUTE ON ITS OWN INITIATIVE - I.E., WITHOUT BEING REQUESTED BY AMTRAK TO DO SO?

ANSWER: YES, THE COMMISSION MAY INTERVENE ON ITS OWN. ALTHOUGH THE STATUTE LITERALLY REQUIRES THE COMMISSION TO ACT "AFTER" A DISPUTE HAS BEEN SUBMITTED TO IT, WE DO NOT THINK CONGRESS INTENDED TO LIMIT THE COMMISSION'S AUTHORITY IN THIS REGARD.

QUESTION 7: MAY AMTRAK, CONRAIL AND/OR THE STATES' PASSENGER AUTHORITIES IGNORE OR BYPASS THE ICC AND/OR THE RSPO AND INSTEAD GO TO A HIGHER LEVEL (SUCH AS CONGRESS) FOR A RESOLUTION OF THE COST ALLOCATION DISPUTE?

ANSWER: SINCE THE LAW HAS ESTABLISHED A MECHANISM FOR SETTLING DISPUTES, IT SHOULD BE FOLLOWED BEFORE RESORTING TO OTHER MEANS TO RESOLVE A DISPUTE.

ATTACHED IS A DISCUSSION OF THESE QUESTIONS AND ANSWERS.

ATTACHMENT

DIGEST:

VARIOUS USERS OF THE NORTHEAST CORRIDOR RAIL TRACKS ARE TO SHARE COSTS IN EQUITABLE AND FAIR WAY, WITHOUT ANY CROSS SUBSIDIZATION. MEMORANDUM DISCUSSES SEVERAL ISSUES RELATING TO COST SHARING.

QUESTION 1: DOES THE LEGISLATIVE HISTORY OR ANY OTHER RELEVANT INFORMATION INDICATE WHAT THE TERM "EQUITABLE AND FAIR" (AS USED IN SECTION 701(A)(6) OF THE RAILROAD REVITALIZATION AND REGULATORY REFORM ACT (4R ACT), 45 U.S.C. 851(A)(6), AND SECTION 402(A) OF THE RAIL PASSENGER SERVICE ACT, 45 U.S.C. 562(A)) MEAN? IS THERE ANY INDICATION AS TO WHAT IS MEANT BY THE TERM "ALL RELEVANT FACTORS" AS USED IN SECTION 402(A) OF THE RAIL PASSENGER SERVICE ACT, 45 U.S.C. 562(A)?

ANSWER: THERE IS AN INDICATION OF THE MEANING OF EACH OF THESE TERMS. "EQUITABLE AND FAIR" AS USED IN THE CITED PROVISIONS DESCRIBES HOW COST SHARING SHOULD BE ACCOMPLISHED. THE TERM "EQUITABLE AND FAIR" BECAME PART OF EACH OF THE CITED PROVISIONS AT THE SAME TIME (SEE SECTIONS 701 AND 705 (WHICH WAS A "CONFORMING AMENDMENT") OF THE 4R ACT, PUB. L. NO. 94-210), AND CONGRESS PRESUMABLY INTENDED THE SAME MEANING IN BOTH. THE ONLY INDICATION OF THAT MEANING IS IN THE PERTINENT CONFERENCE REPORT, S. REP. NO. 94-595, P. 217(1976), WHERE THE CONFERENCE COMMITTEE SAID:

"*** THE COMPENSATION PRINCIPLES FOR OPERATIONS IN THE CORRIDOR WERE CLARIFIED TO MAKE CLEAR THAT THE VARIOUS USERS ARE TO BE TREATED FAIRLY AND EQUITABLY. IT IS CONTEMPLATED THAT IN DETERMINING COMPENSATION COST SHARING, APPROPRIATE CONSIDERATION WILL BE GIVEN TO THE ACTUAL MAGNITUDE AND IMPACT OF OPERATIONS CONDUCTED FOR INTERCITY PASSENGER, FREIGHT, AND COMMUTER USERS."

REGARDING THE TERM "ALL RELEVANT FACTORS," SECTION 402(A) OF THE RAIL PASSENGER SERVICE ACT PROVIDES THAT THE INTERSTATE COMMERCE COMMISSION, IN SETTLING COST SHARING DISPUTES BETWEEN CERTAIN USERS, IS TO CONSIDER "ALL RELEVANT FACTORS." THE SENATE REPORT, S. REP. NO. 94 499, P. 103 (1975), WHICH IS THE ONLY INDICATION OF THE MEANING OF "ALL RELEVANT FACTORS" WE FOUND, OFFERS THE FOLLOWING GUIDANCE:

"*** DEPENDING ON THE PARTICULAR SEGMENT INVOLVED, INTERCITY, COMMUTER, OR RAIL FREIGHT SERVICE COULD BE THE DOMINANT USER, AND THE COMMISSION IS EXPECTED TO TAKE ALL RELEVANT COST FACTORS INTO CONSIDERATION IN ATTEMPTING TO DETERMINE DOMINANT USE. THESE COST ALLOCATIONS SHOULD CONSIDER THE FACT THAT THE DIFFERENT USERS WILL REQUIRE DIFFERENT LEVELS OF IMPROVEMENTS TO MEET THEIR RESPECTIVE OPERATING NEEDS AND THAT THEIR DIFFERENT USES WILL CAUSE VARYING AMOUNTS OF WEAR AND TEAR."

THE TERMS "EQUITABLE AND FAIR" AND "ALL RELEVANT FACTORS" HELP DETERMINE THE WAY IN WHICH COSTS ARE SHARED IN THE NORTHEAST CORRIDOR AND ARE DIFFICULT TO APPLY WITHOUT CONSIDERING THE MEANING OF CROSS SUBSIDIZATION. YOU SHOULD NOT USE THESE TERMS AS A BASIS FOR CONCLUDING HOW COSTS ARE TO BE SHARED BECAUSE THAT STILL DEPENDS ON THE MEANING OF CROSS SUBSIDIZATION.

QUESTION 2: DO THE RAIL SERVICE PLANNING OFFICE (RSPO) STANDARDS (49 C.F.R. SEC. 1127.1 ET SEQ.) APPLY TO AMTRAK? DO THEY APPLY TO CONRAIL AND COMMUTER AGENCIES WHERE CONRAIL IS UNDER CONTRACT TO OPERATE TRAIN SERVICE FOR COMMUTER AGENCIES?

ANSWER: THE RSPO STANDARDS DO NOT APPLY TO AMTRAK, BUT DO APPLY TO CONRAIL AND THE COMMUTER AGENCIES CONRAIL IS UNDER CONTRACT TO THE AGENCIES.

THE RSPO STANDARDS, 49 CFR SEC. 1127.1 ET SEQ., ARE THE RESULT OF THE FOLLOWING PROVISIONS OF THE 3R ACT:

(1) SECTION 304(C)(2)(A), 45 U.S.C. 744(C)(2)(A), PROVIDES THAT NO RAIL SERVICE MAY BE DISCONTINUED AND NO RAIL PROPERTIES ABANDONED IF A FINANCIALLY RESPONSIBLE PARTY (INCLUDING A GOVERNMENT ENTITY) OFFERS A SUBSIDY IN THE FORM OF A RAIL SERVICE CONTINUATION PAYMENT: (A) TO COVER THE DIFFERENCE BETWEEN THE REVENUE ATTRIBUTABLE TO SUCH RAIL PROPERTIES AND THE AVOIDABLE COSTS OF PROVIDING RAIL SERVICE ON SUCH PROPERTIES, TOGETHER WITH A REASONABLE RETURN ON THE VALUE OF SUCH PROPERTIES; OR (B) WHICH IS PAYABLE PURSUANT TO A LEASE OR OTHER AGREEMENT WITH A STATE OR WITH A LOCAL OR REGIONAL TRANSPORTATION AUTHORITY UNDER WHICH FINANCIAL SUPPORT WAS BEING PROVIDED ON JANUARY 2, 1974, FOR THE CONTINUATION OF RAIL PASSENGER SERVICE.

(2) SECTION 205(D)(5)(A) OF THE 3R ACT, 49 U.S.C. SEC. 10362(B)(5)(A), DIRECTS THE RSPO TO ISSUE STANDARDS FOR COMPUTING SUBSIDIES FOR RAIL PASSENGER SERVICE THAT ARE CONSISTENT WITH THE COMPENSATION PRINCIPLES OF THE FINAL SYSTEM PLAN (A PLAN FOR REVIEWING RAIL TRANSPORTATION IN THE MIDWEST AND NORTHEAST) AND WHICH AVOID CROSS SUBSIDIZATION AMONG COMMUTER, INTERCITY, AND FREIGHT RAIL SERVICES.

(3) SECTION 205(D)(6) OF THE 3R ACT, 49 U.S.C. SEC. 10362(D)(6), DIRECTS THE RSPO TO ISSUE STANDARDS FOR DETERMINING THE REVENUE ATTRIBUTABLE TO THE RAIL PROPERTIES, THE AVOIDABLE COSTS OF PROVIDING TRANSPORTATION, A REASONABLE RETURN, AND A REASONABLE MANAGEMENT FEE.

THE RSPO STANDARDS, ISSUED PURSUANT TO SECTIONS 205(D)(5) AND (6) OF THE 3R ACT, 49 U.S.C. SECS. 10362(D)(5) AND (6), SET FORTH A METHOD FOR ESTABLISHING AN ESTIMATED SUBSIDY PAYMENT, WHICH WILL ENABLE A PROSPECTIVE SUBSIDIZER TO FORMULATE A SUBSIDY OFFER WITHIN THE CONTEXT OF SECTION 304 OF THE 3R ACT, 45 U.S.C. SEC. 744.

SECTION 205(D)(5)(A) OF THE 3R ACT (AS AMENDED BY SECTION 309 OF THE 4R ACT AND RECODIFIED BY PUB. L. NO. 95-473), 49 U.S.C. SEC. 10362(B)(5)(A), WHICH AUTHORIZES THE RSPO STANDARDS, PROVIDES AS FOLLOWS:

"(B) THE RAIL SERVICES PLANNING OFFICE SHALL -

* * * * * "(5) MAINTAIN REGULATIONS THAT CONTAIN -

"(A) STANDARDS FOR THE COMPUTATION OF SUBSIDIES FOR RAIL PASSENGER SERVICE (EXCEPT PASSENGER TRANSPORTATION DISPUTES SUBJECT TO THE JURISDICTION OF THE COMMISSION UNDER SECTION 562(A) OF TITLE 45 OF THE U.S. CODE) THAT ARE CONSISTENT WITH THE COMPENSATION PRINCIPLES DESCRIBED IN THE FINAL SYSTEM PLAN ESTABLISHED UNDER THE REGIONAL RAIL REORGANIZATION ACT OF 1973 (87 STAT. 985), AS AMENDED, AND WHICH AVOID CROSS SUBSIDIZATION AMONG COMMUTER, INTERCITY, AND FREIGHT RAIL TRANSPORTATION."

THUS, THE STATUTE EXPLICITLY EXEMPTS FROM THE RSPO STANDARDS PASSENGER TRANSPORTATION DISPUTES SUBJECT TO THE COMMISSION'S JURISDICTION UNDER 45 U.S.C. SEC. 562(A). SECTION 562(A) (WHICH IS SECTION 402(A) OF THE RAIL PASSENGER SERVICE ACT), AUTHORIZES AMTRAK TO CONTRACT WITH OTHERS FOR THE USE OF TRACKS AND OTHER FACILITIES AND THE PROVISION OF SERVICES, AND PROVIDES THAT IF THE PARTIES ARE NOT ABLE TO AGREE ON TERMS, THE INTERSTATE COMMERCE COMMISSION SHALL SET THE TERMS. AMTRAK IS THUS BOUND BY THE COMMISSION'S DETERMINATION OF TERMS, AND NOT SUBJECT TO THE TERMS THAT WOULD BE DICTATED BY THE RSPO STANDARDS.

THE STANDARDS APPLY TO ALL OTHER, INCLUDING CONRAIL AND THE COMMUTER AGENCIES, WITHIN, AS WELL AS OUTSIDE, THE NORTHEAST CORRIDOR. THERE IS NOTHING REMOVING USERS OF THE CORRIDOR FROM COVERAGE OF THE RSPO STANDARDS.

QUESTION 3: WHAT IS A "COMPENSATORY CONTRACT" AS REFERRED TO IN SECTION 701(A)(3) OF THE 4R ACT, 45 U.S.C. 851(A)(3)?

ANSWER: A "COMPENSATORY CONTRACT" IS AN AGREEMENT FOR REIMBURSEMENT OF COSTS ON AN EQUITABLE AND FAIR BASIS, WITHOUT ANY CROSS SUBSIDIZATION. SECTION 701(A)(3) OF THE 4R ACT, 45 U.S.C. 851(A)(3), STATES THAT AMTRAK IS AUTHORIZED TO PROVIDE FOR THE CONTINUOUS OPERATION AND MAINTENANCE OF THE THREE RAIL SERVICES IN THE NORTHEAST CORRIDOR PROVIDED "THAT ANY PROVISION OF RAIL FREIGHT OR RAIL COMMUTER SERVICE SHALL BE EFFECTUATED BY A COMPENSATORY CONTRACT WITH THE RESPONSIBLE CARRIER." THIS PLAINLY MEANS THAT THE PARTY, SUCH AS CONRAIL OR A STATE OR REGIONAL COMMUTER AGENCY, CARRYING OUT A SERVICE UNDER CONTRACT WITH AMTRAK MUST BE COMPENSATED. THE AMOUNT OF COMPENSATION IS GENERALLY DESCRIBED IN SECTION 701(A)(6), WHICH PROVIDES THAT WHEN AMTRAK ENTERS THESE AND OTHER AGREEMENTS IT MUST PROVIDE FOR "REIMBURSEMENT FOR COSTS ON AN EQUITABLE AND FAIR BASIS, EXCEPT THAT CROSS-SUBSIDIZATION AMONG INTERCITY COMMUTER, OR RAIL FREIGHT SERVICES IS PROHIBITED." SEE ANSWER TO QUESTION 1 FOR A DISCUSSION OF "EQUITABLE AND FAIR."

QUESTION 4: IS IT LEGAL FOR AMTRAK TO REQUIRE REIMBURSEMENT FOR USE OF TRACK IT OWNS ON A BASIS SIGNIFICANTLY DIFFERENT FROM THAT USED OUTSIDE THE CORRIDOR? IS THIS "EQUITABLE AND FAIR"?

ANSWER: THE "EQUITABLE AND FAIR" STANDARD DOES NOT APPLY TO THE SITUATION DESCRIBED IN THIS QUESTION. SEE DISCUSSION OF "EQUITABLE AND FAIR" IN ANSWER TO QUESTION 1 AS TO ITS INTENDED APPLICATION. WHETHER OR NOT AMTRAK MAY REQUIRE REIMBURSEMENT FOR USE OF TRACK IT OWNS ON A BASIS SIGNIFICANTLY DIFFERENT FROM THAT USED OUTSIDE THE CORRIDOR DEPENDS UPON THE MEANING OF "CROSS SUBSIDIZATION". TO THE EXTENT THAT "CROSS SUBSIDIZATION" IS CLARIFIED BY THE COURTS, THE BASIS FOR REIMBURSEMENT WITHIN THE CORRIDOR MAY BE KNOWN AND WE MAY THEN BE ABLE TO SAY WHETHER THIS IS DIFFERENT FROM REIMBURSEMENT FOR SERVICES OUTSIDE THE CORRIDOR.

QUESTION 5: WHAT APPEAL MEASURES ARE AVAILABLE TO THE THREE GROUPS OF SERVICES IN THE EVENT A JOINT DETERMINATION FOR COMPENSATION CANNOT BE ARRIVED AT?

ANSWER:IF THE PARTIES CONCERNED ARE UNABLE TO REACH AGREEMENT, THE INTERSTATE COMMERCE COMMISSION IS AUTHORIZED TO ORDER THE PROVISION OF SERVICES ON SUCH TERMS AND FOR SUCH COMPENSATION AS IT DETERMINES EQUITABLE AND FAIR. SEE SECTION 402(A) OF THE RAIL PASSENGER SERVICE ACT OF 1970, 45 U.S.C. 562(A). THUS APPEAL MAY BE MADE TO THE INTERSTATE COMMERCE COMMISSION.

QUESTION 6: MAY THE INTERSTATE COMMERCE COMMISSION INTERVENE IN A DISPUTE ON ITS OWN INITIATIVE - I.E. WITHOUT BEING REQUESTED TO DO SO?

ANSWER: YES, THE INTERSTATE COMMERCE COMMISSION MAY INTERVENE ON ITS OWN. ALTHOUGH THE STATUTE LITERALLY REQUIRES THE COMMISSION TO ACT "AFTER" A DISPUTE HAS BEEN SUBMITTED TO IT, WE DO NOT THINK CONGRESS INTENDED THIS WORD TO LIMIT THE COMMISSION'S AUTHORITY. SECTION 402(A) OF THE RAIL PASSENGER SERVICE ACT OF 1970, 45 U.S.C. 562(A) PROVIDES:

"THE CORPORATION AMTRAK MAY CONTRACT WITH RAILROADS OR WITH REGIONAL TRANSPORTATION AGENCIES FOR THE USE OF TRACKS AND OTHER FACILITIES AND THE PROVISION OF SERVICES ON SUCH TERMS AND CONDITIONS AS THE PARTIES MAY AGREE. IN THE EVENT OF A FAILURE TO AGREE, THE INTERSTATE COMMERCE COMMISSION SHALL, WITHIN NINETY DAYS AFTER APPLICATION BY THE CORPORATION, IF IT FINDS THAT DOING SO IS NECESSARY TO CARRY OUT THE PURPOSES OF THIS CHAPTER, ORDER THE PROVISION OF SERVICES OR THE USE OF TRACKS OR FACILITIES OF THE RAILROAD BY THE CORPORATION, ON SUCH TERMS AND FOR SUCH COMPENSATION AS THE COMMISSION MAY FIX AS JUST AND REASONABLE, ***. NOTWITHSTANDING ANY OTHER PROVISION OF THIS CHAPTER, THE CORPORATION MAY ENTER INTO AGREEMENTS WITH ANY OTHER RAILROADS AND WITH ANY STATE (OR LOCAL OR REGIONAL TRANSPORTATION AGENCY) RESPONSIBLE FOR PROVIDING COMMUTER RAIL OR RAIL FREIGHT SERVICES OVER TRACKS, RIGHTS-OF-WAY, AND OTHER FACILITIES ACQUIRED BY THE CORPORATION PURSUANT TO AUTHORITY GRANTED BY THE REGIONAL RAIL REORGANIZATION ACT OF 1976. IN THE EVENT OF A FAILURE TO AGREE, THE COMMISSION SHALL ORDER THAT RAIL SERVICES CONTINUE TO BE PROVIDED, AND IT SHALL, CONSISTENT WITH EQUITABLE AND FAIR COMPENSATION PRINCIPLES, DECIDE, WITHIN 180 DAYS AFTER THE DATE OF SUBMISSION OF A DISPUTE TO THE COMMISSION, THE PROPER AMOUNT OF COMPENSATION FOR THE PROVISION OF SUCH SERVICES. THE COMMISSION, IN MAKING SUCH A DETERMINATION, SHALL CONSIDER ALL RELEVANT FACTORS, AND SHALL NOT PERMIT CROSS SUBSIDIZATION AMONG INTERCITY, COMMUTER, AND RAIL FREIGHT SERVICE."

THIS PROVISION ORIGINALLY CONTAINED NO LANGUAGE THAT THE COMMISSION ACT WITHIN A SPECIFIED TIME AFTER SUBMISSION OF A DISPUTE. THIS LANGUAGE WAS FIRST ADDED IN 1972 BY SECTION 5(1) OF PUB. L. NO. 92-316, WHICH USED THE PHRASE "WITHIN NINETY DAYS AFTER APPLICATION BY THE CORPORATION." THIS PHRASE WAS ADDED NOT TO REQUIRE A SUBMISSION BEFORE THE COMMISSION COULD ACT, BUT TO PREVENT UNDUE DELAYS BY THE COMMISSION. AS THE PERTINENT SENATE REPORT, S. REP. NO. 92-756, 9-10 (1972), EXPLAINED:

"SECTION 6 AMENDS SECTION 402(A) OF THE ACT TO REQUIRE THAT THE INTERSTATE COMMERCE COMMISSION ACT WITHIN 90 DAYS ON APPLICATIONS BY AMTRAK TO FIX REASONABLE TERMS AND CONDITIONS FOR THE USE OF TRACKS AND FACILITIES. SECTION 402(A) AS NOW WRITTEN PROVIDES A PROCEDURE BY WHICH AMTRAK MAY OBTAIN ACCESS TO WHATEVER LINE OF RAILROAD ON WHICH IT WISHES TO PROVIDE SERVICE. HOWEVER, THIS PRINCIPLE CAN BE FRUSTRATED BY DILATORY ACTION BY THE COMMISSION.

THE TIME LIMIT OF 90 DAYS ON COMMISSION ACTION AFTER AMTRAK MAKES AN APPLICATION IS DESIGNED TO FORECLOSE THAT POSSIBILITY."

THE COMMISSION MAY ACT WITHOUT BEING REQUESTED TO DO SO IF THE PARTIES FAIL TO AGREE, AND A PARTY OTHER THAN AMTRAK MAY REQUEST THE COMMISSION TO ACT. THERE NEED BE NO SUBMISSION FROM AMTRAK. WHEN A SUBMISSION IS MADE, HOWEVER, THE COMMISSION MUST ACT WITHIN THE PRESCRIBED TIME.

QUESTION 7: MAY AMTRAK, CONRAIL AND/OR THE STATES' PASSENGER AUTHORITIES IGNORE OR BYPASS THE ICC AND/OR THE RSPO AND INSTEAD GO TO A HIGHER LEVEL (SUCH AS CONGRESS) FOR A RESOLUTION OF THE COST ALLOCATION DISPUTE?

ANSWER: SINCE THE LAW HAS ESTABLISHED A MECHANISM FOR SETTLING DISPUTES, IT SHOULD BE FOLLOWED BEFORE RESORTING TO OTHER MEANS TO RESOLVE A DISPUTE. ALTHOUGH THERE IS NOTHING TO PROHIBIT A PARTY FROM GOING TO CONGRESS TO RESOLVE THE DISPUTE, IT MAKES LITTLE SENSE TO IGNORE OR BYPASS THE MECHANISM ESTABLISHED BY CONGRESS.