On November 1, 2012 the Surface Transportation Board (STB) proposed to expand its disclosure requirements for rail transactions that contain paper barriers (also known as "interchange commitments"). In most cases, a paper barrier is a contractual term included in a sale or a lease of a rail line that restricts the ability of the purchaser or lessee (usually a short line railroad) to interchange with a second railroad that is neither the seller nor the lessor. The restriction can be either an outright ban or a monetary fee. Paper barriers can reduce or eliminate competition between railroads and, consequently, are of significant concern to many shippers.

The STB’s current disclosure rules require a railroad purchasing or leasing a rail line to notify the STB if the purchase agreement or lease includes a paper barrier. The relevant agreement must also be filed with the STB. The proposed rule change would increase the information that a railroad must file with the STB when a paper barrier is part of a proposed rail line sale or lease.

The additional disclosure requirements would include:

  • Data on shippers that have recently used the relevant rail line
  • Actual notice to affected shippers
  • Revenue projections for the affected rail line
  • An estimate of the difference in the sale or lease price with and without the paper barrier

The additional disclosure and notice requirements would not only enable affected shippers to object to any proposed transaction before the transaction is effective under the STB’s authority, but also facilitate challenges to paper barriers that go into effect under the new rules. Opening comments in this new Notice of Proposed Rulemaking are due December 3, 2012. Reply comments are due January 2, 2013.