255 F.3d 816 (D.C. Cir. 2001)
CF Industries, Inc., Petitionerv.Surface Transportation Board and United States of America, RespondentsFarmland Industries, Inc. and  Koch Pipeline Company, L.P., Intervenors
No. 00-1209, 00-1213 and 00-1248
United States Court of Appeals  FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 7, 2001Decided July 27, 2001

On Petitions for Review of an Order of the Surface Transportation Board
Mitchell F. Hertz argued the cause for petitioners CF  Industries, Inc. and Farmland Industries.  With him on the  briefs were Frederic L. Wood, Jeffrey O. Moreno, Scott A.  Harvey, Jeffrey A. Rosen, Daryl Joseffer and Daniel T.  Donovan.  James D. Senger entered an appearance.
John G. Roberts, Jr. argued the cause for petitioner Koch  Pipeline Company, L.P.  With him on the briefs were Samuel  M. Sipe, Jr., F. Michael Kail and Jonathan S. Franklin.
Theodore K. Kalick, Attorney, Surface Transportation  Board, argued the cause for respondents.  With him on the  brief were Ellen D. Hanson, General Counsel, and John M.  Nannes, Acting Assistant Attorney General, Robert P. Nicholson, Attorney, and John P. Fonte, Attorney, U.S. Department of Justice.
Frederic L .Wood, Jeffrey O. Moreno, Scott A. Harvey,  Jeffrey A. Rosen, Mitchell F. Hertz, Daryl Joseffer and  Daniel T. Donovan were on the brief for intervenors CF  Industries, Inc. and Farmland Industries, Inc.  James D.  Senger entered an appearance.
Samuel M. Sipe, Jr., F. Michael Kail, John G. Roberts, Jr.  and Jonathan S. Franklin were on the brief for intervenor  Koch Pipeline Company L.P.
Before:  Edwards, Randolph, and Garland, Circuit Judges.
Opinion for the Court filed by Circuit Judge Garland.
Garland, Circuit Judge:


1
In 1996, Koch Pipeline Company,  L.P. raised shipping rates on its anhydrous ammonia pipeline. Pipeline customers CF Industries, Inc. and Farmland Industries, Inc. challenged the rate increase before the Surface  Transportation Board (STB).  The Board found the new rates  unreasonable.  In these consolidated petitions for review,  Koch disputes the STB's decision to lower the rates, while CF  and Farmland attack the Board's decision not to lower them  still further.  We affirm both decisions and deny the petitions  for review.


2
* Anhydrous ammonia is a hazardous compound of nitrogen  and hydrogen that is used both to manufacture fertilizers and  as a direct fertilizer application.  A significant amount of the  compound is produced in Louisiana, Oklahoma, and Texas,  and shipped to users in the Midwest.  Demand is seasonal,  increasing sharply during the spring planting season and to a  lesser extent in the fall.  During the year, shippers fill large  storage terminals throughout the Midwest to ensure availability when needed.  When the spring comes, the terminals are  rapidly emptied through deliveries to local retailers, who in  turn distribute the anhydrous ammonia to farmers for immediate application.  CF Indus., Inc., No. 41685 at 2-3 (S.T.B.  May 9, 2000) (Final Order).


3
The STB inherited the Interstate Commerce Commission's  (ICC's) jurisdiction over interstate "transportation by pipeline  ... when transporting a commodity other than water, gas, or  oil."  49 U.S.C. 15301;  ICC Termination Act of 1995, Pub.  L. No. 104-88, 106(a), 109 Stat. 803, 922.  This jurisdiction  includes anhydrous ammonia pipelines.  See CF Indus., Inc.  v. FERC, 925 F.2d 476, 478 (D.C. Cir. 1991) (affirming ICC  jurisdiction over anhydrous ammonia pipelines).  A pipeline  carrier's rates must be "reasonable" and non-discriminatory,  49 U.S.C. 15501, and if the Board determines that they are  not, it "may prescribe the rate ... to be followed," id.  15503(a), and direct the repayment of overcharges, id.  15904(b)(1), (c)(2).  The Board must consider, "among other  factors[,] ... the need for revenues that are sufficient, under  honest, economical, and efficient management, to let the  carrier provide that transportation," as well as "the availability of other economic transportation alternatives."  Id.  15503(b)(2), (3).


4
Koch owns one of two pipelines that transport anhydrous  ammonia to the Midwest in pressurized, liquid form.  Koch's  pipeline originates in Louisiana and connects that state's  producers to numerous Midwestern terminals.  The other  pipeline, owned by the Mid-American Pipeline Company  (MAPCO), originates in Texas and Oklahoma.  Koch purchased its pipeline from Gulf Central Pipeline Company in  1988 as part of a $200 million package that also included the  Gulf Central Storage and Terminal Company and a natural  gas company.  Koch continued to charge Gulf Central's shipping rates until 1996, when Koch raised its rates.  For the  locations relevant here, the increases averaged almost 20%.


5
CF Industries and Farmland Industries are farmer-owned  cooperatives that produce anhydrous ammonia in Louisiana  and ship it to the Midwest via Koch's pipeline.  Both producers also occasionally ship by rail, and CF ships a significant  amount of ammonia by barge.  Farmland's production facilities are not located near a river and thus have no barge  access.  On March 27, 1996, CF Industries filed a complaint  with the Board, alleging that Koch's rate increases were  unreasonable.1  Four months later, the STB granted Farmland's petition to intervene as a complainant.


6
In May 1997, the STB issued an initial order to govern the  proceedings.  See CF Indus., Inc., No. 41685 (S.T.B. May 14,  1997) (Initial Order).  Two parts of that order are important  here.  First, the Board decided that it would only prescribe  rates at locations where it determined Koch to be "market  dominant," finding no justification for the agency "to inject  itself into the pricing of services" where competitive alternatives act "as an effective constraint on a pipeline's rates."  Id.  at 5.  In assessing the existence of effective competitive  alternatives, the Board said it would be guided by the railroad  market dominance guidelines issued by its predecessor agency, the ICC, and by the precedent developed under those  guidelines.  Id. at 5 (citing Market Dominance Determinations & Consideration of Prod. Competition, 365 I.C.C. 118,  129 (1981), aff'd sub nom. Western Coal Traffic League v.  United States, 719 F.2d 772 (5th Cir. 1983) (en banc), modi fied, Product & Geographic Competition, 2 I.C.C.2d 1  (1985)).2


7
Second, the Board stated that for locations where it found  Koch to be market dominant, it would evaluate Koch's rates  using the Constrained Market Pricing (CMP) principles articulated in the ICC's Coal Rate Guidelines.  Id. at 6 (citing  Coal Rate Guidelines, Nationwide, 1 I.C.C.2d 520 (1985),  aff'd sub nom. Consolidated Rail Corp. v. United States, 812  F.2d 1444 (3d Cir. 1987)).3  Under CMP, the Board said, a  complainant may choose among several rate constraints, including the "stand-alone cost" and "revenue adequacy" constraints.  Id. at 6.


8
In January 1998, CF moved to amend its complaint to add  a challenge to the rates Koch had charged prior to its 1996  increase.  CF argued that its amendment merely clarified the  relief requested in its initial complaint, where it had asked for  refunds of the rate increases as well as "such other relief as  the Board deems just and proper."  Compl. p 53.  Koch  opposed the amendment.


9
On May 9, 2000, the STB issued its final decision.  At the  outset, the STB denied CF's motion to amend its complaint as  untimely--"having been filed almost 2 years after the initial  complaint and 4 months after the close of discovery."  Final  Order at 2 n.4.  It also held that CF was estopped from  challenging pre-increase rates based on a settlement agreement CF had signed with Koch's predecessor, Gulf Central. Id.


10
The Board then turned to Koch's 1996 rate increases,  addressing first the question of Koch's market dominance. In analyzing this issue, the STB considered several possible  competitive alternatives to Koch's pipeline, only one of which  is at issue here:  "intermodal" competition from river barges.4 The STB concluded--and Koch does not dispute in this  proceeding--that barge shipping does not compete with the  pipeline for Farmland's business because Farmland lacks  access to barge transportation.  Id. at 11.  However, the  Board also concluded--and this Koch does dispute--that  barges do not effectively compete with the pipeline for CF's  transportation to numerous pipeline destination points.  Id. at  13-17.5


11
Having found Koch to be market dominant at a number of  terminals, the Board went on to ask whether Koch's rate  increases for service to those terminals were reasonable.  To  make that determination, the Board applied the revenue  adequacy test of CMP, which asks whether rates generate  revenues sufficient to "cover all costs and provide a rate of  return on investment equal to the current cost of capital." Id. at 21 (citing Coal Rate Guidelines, 1 I.C.C.2d at 535).  It  found that, even without the rate increases, Koch would more  than recover its total investment in the pipeline by the end of  2000, and that, with the exception of its first year of owner ship, Koch's return-on-investment (ROI) "has exceeded its  cost of capital in all years and by increasingly larger margins  so that by 1996 its ROI (21.52%) was almost twice the cost of  capital (11.80%)."  Id. at 26.  The Board concluded that,  "based on all reliable measures, it is clear that the pipeline is  earning adequate revenues and that Koch's 1996 rate increases are not warranted."  Id.


12
Koch challenges the STB's determinations regarding both  market dominance and rate reasonableness.  We consider  those challenges in Parts II and III below.  In a separate  petition for review, which we briefly address in Part IV, CF  and Farmland challenge the Board's denial of CF's motion to  amend its complaint to include an attack on Koch's preincrease rates.

II

13
The STB's market dominance guidelines define "market  dominance" as "an absence of effective competition, from  other carriers or modes of transportation, for the traffic or  movement to which a rate applies."  See Market Dominance,  365 I.C.C. at 128 (applying the statutory standard for the  regulation of railroad rates, 49 U.S.C. 10707(a));  see also 49  U.S.C. § 15503(b)(3) (requiring STB, when prescribing pipeline rates, to consider, inter alia, "the availability of other  economic transportation alternatives").  " '[E]ffective competition['] ... means that, if a carrier raises the rate for such  traffic, then some or all of that traffic will be lost to other  carriers or modes."  Market Dominance, 365 I.C.C. at 129. Such competition, the guidelines state, "serves as a constraint  on the ability of [the] carrier to raise rates."  Id.  To evaluate  market dominance, the guidelines employ a "flexible" approach that rests on "case-by-case" analysis of competitive  alternatives to a carrier's facility.  Id. at 119.


14
In evaluating the effectiveness of barge transport as a  competitive alternative, the Board first reviewed CF's claim  that barge transport has qualitative disadvantages compared  to pipeline transport.  The Board noted that barge companies  lack sufficient hauling and storage capacity to handle a significant shift of anhydrous ammonia traffic from pipeline to  barge;  that barge transport involves higher costs than pipeline transport, which could make a shift prohibitively expensive;  that barges, unlike pipelines, are hindered by floods, low  water, and icing;  and that barge trips take from days to  weeks, while pipeline injection and withdrawal is essentially  instantaneous.  See Final Order at 11.  The Board also noted  CF's evidence that pipelines are a safer mode for transporting a hazardous product like anhydrous ammonia.  Id. at 8.


15
Next, the Board considered an "Alternative Inbound  Study" developed by CF, which indicated that, because of  insufficient storage capacity at CF's barge destination points,  it would have to make prohibitively large expenditures or  investments to shift from pipeline to barge.6  Although Koch  criticized CF's claim of inadequate storage capacity, the  Board accepted Koch's criticism only in part, finding that  Koch's own restatement of CF's study ignored storage costs. The Board also considered a "matching" study prepared by  Koch to demonstrate the effectiveness of barge competition,  but found Koch's study unreliable.  Id. at 13-14.  The Board  then consolidated data from both parties and recalculated  where necessary to account for the problems it had identified. Id. at 15.


16
Finally, "[a]s a measure of the effectiveness of barge  competition," the Board "compared Koch's revenues ... under the old rate structure to its revenues under the new rate  structure, assuming all cost-competitive traffic would be diverted."  Id. at 15.  That comparison showed that "Koch's  revenues for the CF traffic that it would retain--based on its  increased rates--would exceed pre-increase revenues" at a  number of terminal points.  Id. As a result, the Board  concluded that Koch does not face effective barge competition  at those locations.  Id. at 15 & n.43 (citing Market Dominance, 365 I.C.C. at 128-29, 131;  Aluminum Ass'n Inc., 367  I.C.C. 475, 489, aff'd sub nom. Aluminum Co. of Am. v. ICC,  761 F.2d 746 (D.C. Cir. 1985);  Salt River Project Agric.  Improvement, 1 I.C.C.2d 684, 691 (1985), aff'd, Salt River  Project Agric. Improvement & Power Dist. v. United States,  762 F.2d 1053 (D.C. Cir. 1985)).7


17
Koch attacks the STB's market dominance determination  on two grounds.  First, it contends that the Board's comparison of its pre-and post-increase revenues was an inappropriate test for market dominance.  Second, it contends that the  Board disregarded record evidence of effective competition,  particularly Koch's own "matching" study.


18
We consider these two challenges below.  We do so with  the understanding that "since decisions concerning market  dominance are peculiarly within the expertise of the [Board],  our review of such decisions must be particularly deferential." Aluminum Co., 761 F.2d at 750 (Scalia, J.).  We may vacate  the Board's market dominance determination only if it is  "arbitrary, capricious, an abuse of discretion, or otherwise not  in accordance with law ... [, or if it is] unsupported by  substantial evidence."  Arizona Pub. Serv. Co. v. United  States, 742 F.2d 644, 649 (D.C. Cir. 1984) (quoting 5 U.S.C.  706(2)(A), (E)).


19
* Koch contends that the Board resolved the issue of market  dominance based on a single, unprecedented, and irrational  standard:  whether Koch could raise its rates and still increase its net revenues.  We conclude that none of those  three adjectives appropriately characterizes the standard employed by the Board.


20
First, although the STB's comparison of revenues before  and after the rate increase was important to its analysis, it  was not the only factor the STB examined.  Rather, that  comparison came last in the STB's analysis.  It was employed  only after the Board had reviewed a host of qualitative  considerations that it found to limit the effectiveness of barge  competition--including capacity, reliability, speed, and safety--and after it had reviewed the studies proffered by both  Koch and the complainants.8  While the Board's market  dominance guidelines contemplate the use of such qualitative  considerations, they do not exclude the application of quantitative analysis as well.  See Market Dominance, 365 I.C.C. at  119 n.5.9


21
Second, the revenue comparison methodology is hardly  unprecedented.  To the contrary, it is well in accord with  both the market dominance guidelines and the agency precedent cited by the Board.  See 365 I.C.C. at 131 ("If the loss in  future revenues exceeds the gains from exercising market  power in the short term, then a rail carrier will be deterred  from charging excessive rates.");  id. at 129 (stating that  "effective competition ... means that, if a carrier raises the  rate for such traffic, then some or all of that traffic will be  lost to other carriers or modes");  Aluminum Ass'n Inc., 367  I.C.C. at 489 ("A potential loss in future revenues which  merely exceeds any gain from exercising market power in the  short term will deter a rail carrier from charging excessive  rates.");  Salt River, 1 I.C.C.2d at 691 ("[T]he potential loss of  future revenues, provided that the loss exceeds any gains  from the exercise of market power, will deter rail carriers  from charging excessive rates."), aff'd, Salt River, 762 F.2d at  1053;  see also Burlington N. Inc., Finance Docket No. 32549,  1995 WL 528184, at *44 n.72 (I.C.C. Aug. 23, 1995) (noting  that market power is defined as "the ability profitably to  sustain higher prices or lower service quality" (internal quotation omitted)).  It is also in accord with judicial precedent. See Burlington N. R.R. v. STB, 114 F.3d 206, 212 (D.C. Cir.  1997) (upholding STB market dominance determination  where carrier "could recoup profits on lost incremental coal  traffic by charging higher rates" on shipments that complainant could not avoid);  Arizona Pub. Serv. Co., 742 F.2d at 654  (noting that effectiveness of competition "would depend (at  least) on ... the extent of the monopolist's profit that the  railroads could reap by raising their prices, and ... the  amount of traffic [they] would lose by raising prices").10


22
Finally, Koch contends that the Board's methodology-testing whether a firm is market dominant by asking whether  it can increase its net revenues by raising its prices--is  irrational.  Given that this methodology is consistent with the market dominance guidelines, which are not themselves questioned by Koch, a challenge to its rationality is misplaced.11 In any event, we do not find the methodology irrational.  To  the contrary, it represents an accepted method of measuring  market power, based on the recognition that although a firm  in a competitive market cannot raise its prices without a net  loss of revenue, a firm with market power can.12  See IIA  Phillip E. Areeda & Herbert Hovenkamp, Antitrust Law:  An  Analysis of Antitrust Principles and Their Application p 501,  at 85 (1995) ("A defendant firm has market power if it can  raise price without a total loss of sales.  Market power ... is  large when a firm can profit by raising prices substantially  without losing too many sales.");  id. p 503a, at 93;  see also  Landes & Posner, 94 Harv. L. Rev. at 937;  Richard A. Posner  & Frank H. Easterbrook, Antitrust:  Cases, Economic Notes  & Other Materials 348-49 (2d ed. 1981).13  Of course, pre cisely how high a firm can raise its prices without reducing  net revenues is an important consideration.  But the amount  by which Koch increased its rates here--an average of 20%-is well above the standard usually employed to signal a  substantial degree of market power.  See IIA Areeda p 552a,  at 223 (suggesting use of 5% or 10% differential);  cf. Merger  Guidelines 1.11 (utilizing 5% price-increase test).


23
Koch correctly points out that the ability to increase revenues by raising prices is not always indicative of market  power.  As Koch notes, "a firm in a fully competitive market  that is pricing below market levels would expect to earn  greater revenues by raising its prices to meet its competitors."  Br. for Pet'r Koch ("Koch Br.") at 16.  But the normal  assumption in examining assertions of market power is that  the current price is at least the competitive price.  See IIA  Areeda p 537b, at 200.  Koch questions the validity of that  assumption in this case, pointing to the fact that it had not  raised its prices in eight years prior to 1996.  But Koch is a  for-profit institution, not an eleemosynary one, and it has  provided no reason to believe that it priced below market for  eight years, rather than calculated that those prices were the  most the market would bear.  See IIA  Areeda p 501, at 85  (noting that rational profit-maximizing firm has no reason to  sell for less than market price).14

B

24
Koch also contends that the STB, in making its market  dominance finding, improperly rejected certain studies Koch  submitted.  Koch first takes issue with the Board's rejection  of its "matching" study.  In that study, Koch identified  retailers that had received anhydrous ammonia shipped by  both barge and pipeline during the same year.  Koch argued  that those retailers could meet all of their ammonia needs  from barges, and thus that the tonnage needed to serve those  retailers would be diverted from pipeline to barge.  Such a  diversion, Koch argued, would constrain the pipeline's rates. The Board rejected Koch's matching study as unreliable  because Koch included retailers whose costs for shipping by  barge were greater than for pipeline when the total costs of  barge shipping--including the cost of trucking the anhydrous  ammonia from the barge river terminals to the areas served  by inland pipeline terminals--were included in the calculation. Final Order at 13-14 & n.36.  The cost differential indicated to the Board that barges were not serving as a competitive  alternative to pipeline transport for those retailers, but instead were meeting different needs--such as providing additional anhydrous ammonia when sufficient supplies were unavailable by pipeline.  Id.;  see IIA Areeda p 534b at 180  ("The absence of close price relationships among products  presumptively indicates that they are in separate markets.").


25
Koch claims that the STB improperly rejected its matching  study because the Board arbitrarily viewed as noncompetitive  any barge shipping that was more costly than Koch's pipeline. It is, of course, well-accepted that a significant cost differential may render one product an ineffective restraint on the  pricing of another, even if the two could otherwise serve as  substitutes for one another.  Market Dominance, 365 I.C.C.  at 134 (stating that evidence of product competition should  show that shipper can obtain feasible substitutes "without  substantially greater cost, transportation or otherwise").15 As Koch itself notes, "the Board's market dominance analysis  ask[s] whether complaining shippers ha[ve] feasible competitive alternatives such that they could switch a sufficient  amount of traffic to protect themselves from an unreasonable  price increase if they wished."  Koch Br. at 24 (emphasis  added).  If barge costs were significantly above those of  pipeline, switching to barge would not protect the shippers from Koch's "unreasonable price increase."  Accordingly,  Koch concedes that "at some point an alternative will be so  costly or impracticable that it is simply not feasible."  Id. at  26.


26
The trouble with the STB's analysis, Koch contends, is that  the Board regarded barge shipping as noncompetitive if it  cost even one cent more than pipeline.  Id. at 10, 24.  Koch  bases this contention on a single sentence in the STB's  opinion, in which the Board stated that Koch's matching  study had improperly indicated matches "where total barge  costs were higher than total pipeline costs."  Final Order at  13.  By "higher," Koch contends, the Board must have meant  higher by as little as one cent.


27
But the footnote to the cited sentence makes clear that  Koch has misread the STB's test.  See Final Order at 13 n.36. In that footnote, the Board provides an example to explain  what it regarded as the flaw in Koch's study:  a case in which  Koch claimed a "match" notwithstanding that the total bargedelivered costs were $43.41 per ton, while pipeline-delivered  costs were only $36.80--a difference of approximately 18%. Although a small difference in the price charged by an  alternative carrier would not prevent it from constraining  Koch's prices, a difference of 18% is well-recognized as having  that effect.  Cf. IIA Areeda p 537b, at 200, p 552a, at 223  (suggesting 5% or 10% difference as significant).


28
Koch also attacks the STB for rejecting its "restatement"  of CF's Alternative Inbound Study.  In that restatement,  Koch identified 137,000 tons of anhydrous ammonia that it  said could be diverted from pipeline to barge.  See Final  Order at 12.  The Board rejected Koch's figures, in part  because they failed to account for storage costs CF would  have to pay at terminals it did not own.  Id. at 14 & n.38. Koch argues that in so doing, the Board "ignored unrefuted  evidence" that shifting the anhydrous ammonia to the nextclosest CF storage terminals would still be less costly than  pipeline.  Koch Br. at 27.  But Koch's evidence was not  unrefuted;  rather, it was vigorously disputed by CF's witnesses.  Compare Verified Reply and Rebuttal Statements of C. Phillip Baumel on Behalf of Koch Pipeline Co., J.A. at 23842, 370-74, with Verified Opening and Rebuttal Statements of  Fred Mugica on Behalf of CF Industries, Inc., J.A. at 216-18,  494-95.  Although Koch may regard CF's responses as constituting ineffective refutation, the Board acts within its authority when it chooses between contending accounts of the  evidence, see Burlington N. R.R., 114 F.3d at 213, and this  court has no power "to substitute its judgment for that of the  agency," id. at 210-11 (quoting Citizens to Preserve Overton  Park, Inc. v. Volpe, 401 U.S. 402, 416 (1971)).

III

29
We next turn to the STB's conclusion that Koch's 1996 rate  increases were unreasonable.  Although the Board announced  in its initial order that it would apply Constrained Market  Pricing (CMP) principles, Koch contends that it failed to do  so.  While the components of Koch's argument are interrelated, it is most convenient to consider them in three parts:  (1)  that the Board should have determined rate reasonableness  using a standard consistent with the stand-alone cost (SAC)  constraint of CMP;  (2) that instead, the Board used original  cost ratemaking (OCR), a discredited methodology;  and (3)  that in so doing, the Board failed to account for the expenditures Koch would eventually have to make to replace the  pipeline.


30
In reviewing the STB's determination of rate reasonableness issues, we again apply the deferential standards of the  Administrative Procedure Act, 5 U.S.C. 706(2)(A), (E), and  uphold Board decisions as long as they are supported by  substantial evidence and are not arbitrary or capricious.  See  McCarty Farms, Inc. v. STB, 158 F.3d 1294, 1300 (D.C. Cir.  1998).  "Because Congress has expressly delegated to the  Board responsibility for determining whether a [carrier's] ...  rate is reasonable, the Board is at the zenith of its powers  when it exercises that authority, and [is] therefore entitled to  particular deference."  Burlington N. R.R., 114 F.3d at 210  (internal quotations omitted).  Moreover, as with the market dominance guidelines, we note Koch's declaration that it does  not challenge the rate guidelines themselves, but only their  asserted misapplication in this case.


31
* The purpose of CMP is "to ensure that a carrier does not  use its market dominance to charge its captive ... shippers more than they should have to pay for efficient ... service." Coal Rate Guidelines, 1 I.C.C.2d at 524;  see Consolidated  Rail, 812 F.2d at 1457 (affirming Coal Rate Guidelines).  To  accomplish this, CMP imposes four separate constraints on  rates, two of which are relevant here:  "revenue adequacy"  and SAC.  Coal Rate Guidelines, 1 I.C.C.2d at 521.16  The  first constraint, revenue adequacy, examines the existing  carrier on a system-wide basis to determine the revenues it  needs to "provide a rate of return on net investment equal to  the current cost of capital (i.e., the level of return available on  alternative investments)."  Id. at 535.  The SAC constraint,  by contrast, limits a carrier's rates to those necessary to  generate "the revenue that a hypothetical new, optimally  efficient carrier would need to meet in order to serve the  complaining shippers" alone.  Final Order at 7;  see Coal Rate  Guidelines, 1 I.C.C.2d at 542;  McCarty Farms, 158 F.3d at  1301.  SAC is intended to ensure that a shipper "not bear the  costs of any facilities or services from which it derives no[ ]  benefit."  Coal Rate Guidelines, 1 I.C.C.2d at 528.17


32
In this case, CF and Farmland elected to rely on the  revenue adequacy constraint. Holding that revenue adequacy  and SAC provide "alternative methodologies for examining  the reasonableness of a carrier's rates," and that "complainants may use any methodology that is consistent with CMP,"  Final Order at 7, the Board employed the revenue adequacy  approach and found Koch's 1996 rate increases unnecessary  to ensure adequate revenues, id. at 27.  In so doing, the STB  rejected the relevance of Koch's SAC evidence, which purportedly would have justified the company's rate increases. Id. at 22.


33
Koch contends that the STB should have accepted its SAC  model, or at least refused to employ a revenue adequacy  methodology that yielded different results.  The Board's conclusion to the contrary, however, is consistent with the agency's rate guidelines.  Those guidelines state that SAC and  revenue adequacy are "separate constraining factors" on the  maximum rates a carrier may charge, Coal Rate Guidelines,  1 I.C.C.2d at 521, and that "[c]arriers do not need ... and  ... are not entitled to any higher revenues" than the revenue  adequacy standard permits, id. at 535.  Moreover, the guidelines expressly contemplate that "the rate to an individual  shipper may vary depending upon which of the two CMP  approaches is used," and that it is the complaining shipper  who may "decid[e] which approach to pursue."  Id. at 534  n.35.  See Consolidated Rail, 812 F.2d at 1451 (noting that  the guidelines provide that the constraints "may be used  individually or in combination to analyze whether the rate  [increase] is unreasonably high" (quoting Coal Rate Guidelines, 1 I.C.C.2d at 548)).18


34
In sum, the Board's determination that Koch could not  charge rates higher than those permitted by the revenue  adequacy constraint, and therefore that Koch's SAC evidence  was not relevant even if it would have yielded a different  result, was a reasonable reading of the agency's rate guidelines and is not subject to reversal by this court.  See Auer v.  Robbins, 519 U.S. 452, 461 (1997).

B

35
Koch also attacks the Board's rate-reasonableness analysis  on the ground that it assertedly employed OCR principles,  which limit the carrier to a return based on the depreciated  cost paid by the original owner of the capital assets.  See  generally Ashley Creek Phosphate Co., No. 40131, 1992 WL  52672, at *1 n.4, *8 (I.C.C. Mar. 12, 1992) ("OCR uses original  cost as of the actual installation date of the assets as the basis  for computing the capital costs.").19  Koch devotes a considerable part of its argument to pointing out the flaws in the OCR  approach, but we need not consider those flaws because the  STB did not use original cost in the analysis it undertook in  this case.  The Board relied, instead, on "[a]quisition-cost  valuation--the amount [Koch] paid in an arm's-length transaction" to acquire the pipeline.  Final Order at 24.


36
Although it may appear that Koch and the STB are talking  past one another, a footnote to Koch's brief discloses the  source of the disconnect.  Koch Br. at 36 n.9.  There, Koch  asserts that the $77.2 million figure the STB used as Koch's  initial investment in the pipeline was not Koch's true acquisition cost, but rather the previous owner's depreciated original  cost as of the date Koch bought the pipeline.  Koch argues  that by using that figure to determine revenue adequacy, the  STB effectively employed an OCR analysis.  Id. at 36.


37
This argument cannot prevail.  As the STB explains, the  $77.2 million figure was the figure Koch itself assigned to its  pipeline assets on a form Koch filed with the Federal Energy  Regulatory Commission (FERC) shortly after the acquisition. See Final Order at 23 n.61;  1988 FERC Form 6 (reproduced  in Br. for CF Before STB, Ex. 1 at 111).  The form's  instructions required the use of acquisition cost.20  Moreover,  Koch submitted no other figure for its investment base to the  STB, notwithstanding the Board's direction in its initial order  that the parties' evidence "should include ... pipeline investment."  Initial Order at 7.21  Nor has Koch suggested an  alternative figure on this appeal.  Accordingly, the STB  reasonably concluded that it could "properly use Koch's own $77.2 million valuation as a reliable estimate of its cost of  acquiring--and the value of its initial investment in--the  pipeline."  Final Order at 25.

C

38
Finally, Koch argues that the Board should have used  replacement cost, rather than either acquisition or original  cost, as the baseline for its revenue adequacy constraint. Koch defines replacement cost as "the current cost of replacing assets (or constructing them anew)."  Koch Br. at 30.


39
Much of Koch's argument in favor of replacement cost  relies on the fact that (a variant of) replacement cost is  utilized in SAC analysis.  SAC uses replacement cost, however, because "the theory of SAC ... assumes that a new  entrant can potentially enter the market today[;  thus,] asset  value must be based on the cost of acquiring assets today (at  their current value)."  Coal Rate Guidelines, 1 I.C.C.2d at  544-45 (emphasis added).  Revenue adequacy analysis, by  contrast, is intended to determine whether the revenues of an  existing company are sufficient to "provide a rate of return  on [that company's] net investment equal to the current cost  of capital."  Id. at 535.  Hence, the considerations that compel the use of replacement cost in the SAC constraint do not  apply to the independent constraint of revenue adequacy.


40
Koch also contends that the STB should have used replacement cost because it best simulates competitive pricing.  If  rates of return are not calculated based on the cost of  replacing the pipeline, Koch asserts, it will not be able to  compete equally with other firms for available financing in  order to replace its current facilities.  The Board, however,  believes that as long as a carrier is permitted revenues  adequate to "cover all costs and provide a rate of return on  investment equal to the current cost of capital," it will be able  to "compete equally with other firms for available financing in  order to maintain, replace and, if necessary, expand its facilities and services."  Final Order at 21.  In the Board's view,  the use of acquisition cost as the investment base ensures  such revenue, and it is therefore unnecessary also to "requir[e] captive pipeline shippers to provide in advance a  revenue stream to pay for investments not yet made and  assets that are not in place."  Id. at 27-28.22


41
Our role is not to choose the optimal method of pipeline  ratemaking, but only to ensure that the STB's choice is a  rational one.  We cannot say that the Board has acted  irrationally here.23  Moreover, Koch's attack on the economic  implications of eschewing reliance on replacement cost methodology is largely beside the point.  As Koch has stressed, it  does not challenge the regulations that govern the Board's  approach to ratemaking, but instead contends that they were  not followed. This circumscribes our role even further, as we  must uphold the Board's interpretation of its regulations as  long as that interpretation is reasonable.  See Auer, 519 U.S.  at 461;  Thomas Jefferson Univ. v. Shalala, 512 U.S. 504, 512  (1994).


42
Koch correctly notes that during the 1980s, the ICC actively "consider[ed] using a replacement cost methodology in  valuing assets in future revenue adequacy determinations." Standards for Railroad Revenue Adequacy, 364 I.C.C. 803,  818 (1981).  But while the Commission regarded replacement  cost as "conceptually the best method available," id. at 820, in  the end it concluded that replacement cost methodology  "cannot be practically implemented in a manner that we can  be confident would produce accurate and reliable results." Standards for Railroad Revenue Adequacy, 3 I.C.C.2d 261,  277 (1986).


43
In promulgating the 1990 guidelines cited by the STB in  this case, the ICC again considered the appropriate investment base for analysis of revenue adequacy.  See Railroad  Revenue Adequacy, 6 I.C.C.2d at 940.  After notice and  comment, the Commission rejected the railroads' argument  that "the soundest valuation of assets from an economic  perspective is current replacement cost," id. at 937, and their  further argument that original "predecessor costs are closer  to that measure than are acquisition costs," id. Responding to  the same concerns Koch raises here, the ICC concluded "that  railroad assets would be replaced as long as competitive  returns are allowed on new and existing investments, [and  that]....  if investors can reasonably expect competitive  returns, capital can be attracted when it is needed, making  advance funds accumulation unnecessary."  Id. at 939 (adopting view of Railroad Accounting Principles Board).  Accordingly, the Commission announced that it would "use acquisition costs in valuing railroad investment bases in this and  subsequent revenue adequacy determinations."  Id. at 939.24 This court affirmed that decision in Association of American  Railroads v. ICC, 978 F.2d 737, 741 (D.C. Cir. 1992).  It is  therefore clear that the Board reasonably interpreted its rate  guidelines as using acquisition rather than replacement cost  as the investment base upon which to determine revenue  adequacy.  See Final Order at 24 (citing Railroad Revenue  Adequacy, 6 I.C.C.2d at 940).


44
We conclude that, in assessing the legality of Koch's rate  increase, the STB employed a reasonable ratemaking methodology consistent with the Board's guidelines and precedents. That being the case, Koch's challenge to the reversal of its  rate increase must fail.

IV

45
We now briefly address CF and Farmland's charge that the  STB improperly denied CF's motion to amend its complaint  to include a challenge to Koch's pre-increase rates.  "Leave  to amend any document is a matter of the Board's discretion,"  and we find no abuse of that discretion here.  49 C.F.R.  1104.11.


46
The STB denied CF's motion on the ground that it was  "untimely--having been filed almost 2 years after the initial  complaint and 4 months after the close of discovery."  Final  Order at 2 n.4.25  The Board had warned in its initial order  that, "[b]ecause 49 U.S.C. 15901(c) requires that this investigation be concluded within three years after its initiation," it  was "critical that th[e] investigation be conducted in an  orderly and timely fashion."  Initial Order at 4.  Under those  circumstances, it was reasonable for the Board to reject an  amendment that would have substantially expanded the scope  of the proceedings.


47
CF contends that no such expansion was required here-indeed, that no amendment was formally required--because  its original complaint encompassed a request for relief from pre-increase rates.  That complaint, however, stated that CF  had filed "in order to seek a directive from the Board  requiring Koch Pipeline to maintain its rates at current  levels" and to recover damages "in an amount equal to any  rate increase."  Compl. p 6.  Although CF notes that the  complaint also "requested all 'just and proper' relief," Br. for  Pet'rs CF & Farmland at 22 (quoting Compl. at 21), that kind  of boilerplate request was insufficient to put the Board or the  defendant on notice that a pre-increase reduction was also on  the table.26


48
CF further contends that the denial of leave to intervene  was inconsistent with STB precedent.  But the Board has  frequently expressed concern with the timing and extent of  amendments, see, e.g., Grain Land Coop, No. 41687, 1999 WL  1117130, at *4 (S.T.B. Dec. 8, 1999) (permitting second  amendment because it was "simply a clarification" of first); Seapac Servs. Inc., No. 40534, 1992 WL 88109, at *1 (I.C.C.  May 4, 1992) (noting that amendment would not "unduly  broaden" or "unduly delay" proceeding), and has denied  amendment in circumstances similar to those here, see SouthWest R.R. Car Parts Co., No. 40073, 1988 WL 225131 (I.C.C.  Dec. 1, 1988) (denying amended complaint's untimely claims). Accordingly, we conclude that the Board did not abuse its  discretion in denying CF's motion to amend its complaint.

V

49
Koch's challenge to the final decision of the Board is  essentially a narrow one, questioning not the STB's regula tions but rather their application in a single ratemaking.  We  conclude that the STB's finding that Koch was market dominant was a reasonable application of the Board's market dominance guidelines, and that the Board's rollback of Koch's  1996 rate increase was a reasonable application of its ratemaking guidelines.  At the same time, we hold that the Board  did not abuse its discretion in denying CF's request to amend  its complaint to seek still further rate reductions.

The petitions for review are therefore

50
Denied.



Notes:


1
  The complaint also charged that Koch's rates discriminated  against CF in favor of a Koch affiliate, a charge the STB found  moot for most of the terminals and rejected on the merits for two. Final Order at 28.  CF does not appeal the Board's disposition of  the discrimination claim.


2
  See ICC Termination Act 204(a), 109 Stat. at 941 (providing  that all ICC orders and regulations shall continue in effect until  modified or revoked by the STB), reprinted in 49 U.S.C. 701  note.


3
  "Notwithstanding the title..., those guidelines are not limited  to any one commodity.  Coal cases, which typify captive, highvolume, repetitive rail traffic, were the springboard for our analysis  because of the prevalence of coal rate challenges."  Rate Guidelines--Non-Coal Proceedings, Ex Parte No. 347 (Sub.-No. 2), 1995  WL 705171 (I.C.C. Dec. 1, 1995).


4
  In parts of its opinion not challenged in this court, the STB  found that Koch does not face effective:  (1) "intramodal" competition from the MAPCO pipeline, because that pipeline originates in  Texas and Oklahoma rather than Louisiana where complainants are  located, Final Order at 8;  (2) "geographic" competition from anhydrous ammonia produced at other locations, except at the one point  at which the MAPCO and Koch pipelines cross and share a common  storage terminal, id. at 17-19;  (3) "product" competition, i.e., the  ability of farmers to substitute other fertilizer products for anhydrous ammonia, id. at 20-21;  or (4) "intermodal" competition from  trucks or railroads, id. at 8-11.


5
  The STB found that barge shipping does constrain Koch's  prices to CF at one pipeline destination, which is located on the  Missouri River at Palmyra, Missouri.  Final Order at 12.  CF does  not appeal that finding.


6
  According to CF's study, Koch could raise its rates an additional 20-50% without facing effective barge competition.  Final  Order at 11 (citing CF exhibits and verified statements).


7
  There were four points at which Koch would not increase net  revenue if all cost-competitive tonnage were diverted to barge. Final Order at 16.  As to these points, however, the Board found  that the tonnage that could actually be diverted, given capacity  constraints at the storage terminals, was "too small an amount ...  to constrain Koch's rates," and that Koch would "still earn greater  revenues on its retained traffic (with the rate increases) at each of  these pipeline points than what it earned for all of the traffic at each  of those points under the prior rates."  Id. at 17.


8
  Koch points out that, in a footnote, the STB stated:  "While  we do not rely on" quantitative measures like the revenue comparison methodology "as a substitute for a thorough qualitative examination of all possible competitive alternatives ... , we are not  restricted from using any valid tool ... where, as here, the other  evidence leaves the question [of effective competitive alternatives]  unresolved."  Final Order at 15-16 n.43.  But rather than read this  footnote, as Koch does, as indicating that the Board's ultimate  conclusion rested solely on the outcome of the revenue comparison,  we read it, in accord with the text of the STB opinion, as confirming  that the Board undertook a "thorough qualitative examination of all  possible competitive alternatives" before reaching its conclusion.


9
  Koch correctly notes that the market dominance guidelines  did reject the use of certain quantitative presumptions:  e.g., high  price/cost ratios, observed market share percentages, and substantial shipper-related investments.  365 I.C.C. at 120-26.  None of  those presumptions was employed in this case.


10
  Our opinion in Salt River is not to the contrary.  Although  we affirmed an ICC finding of lack of market dominance even  though the alternatives "may not [have] exert[ed] effective market  pressure" on the defendant railroad's rates, we did so because the  complainant shipper used the railroad "only under exceptional and  unpredictable circumstances."  762 F.2d at 1064 & n.14.  We concluded that in enacting the market dominance inquiry of 49 U.S.C.  10707, Congress did not intend to include a situation in which a  carrier had only "transitory market power" over a shipper.  Id. at  1062.  Here, CF is not merely an occasional user of Koch's pipeline,  and the latter's exertion of market power cannot be characterized  as "transitory."


11
  See Aluminum Co., 761 F.2d at 751 ("It is not possible for  petitioners in this proceeding to challenge the validity of [the ICC's  market dominance guidelines].  The time for direct review of the  Commission's guidelines has long passed." (citing 28 U.S.C.  2344)).


12
  Although techniques exist for measuring market power more  directly, they involve data not typically available to courts or  regulators, and data which the parties agree are not part of the  record in this case.  See William M. Landes & Richard A. Posner,  Market Power in Antitrust Cases, 94 Harv. L. Rev. 937, 939-43  (1981) (noting that market power can be measured directly with  knowledge of firm marginal cost or elasticity of demand).


13
  In the closely related area of merger analysis, the Department of Justice defines the scope of the relevant product market by  asking whether a hypothetical profit-maximizing firm that is the  only seller of the product could profitably impose a "small but  significant and nontransitory increase in price."  See U.S. Dep't of  Justice, Horizontal Merger Guidelines 1.11 (1992);  see also IIA  Areeda p 536, at 195-96 (noting that a product is a market of its  own if a firm controlling all of its output could profit from a  significant price increase).
Koch cites antitrust cases that it regards as inconsistent with the  proposition discussed in the text, but those cases are inapposite. Blue Cross holds that high prices or high profits alone do not  necessarily evidence monopoly power, see Blue Cross & Blue Shield  United of Wisc. v. Marshfield Clinic, 65 F.3d 1406, 1411-12 (7th  Cir. 1995), but the STB used neither as an index of market  dominance here.  Brooke Group held that industry-wide price increases do not necessarily evidence conscious parallelism in an  oligopolistic market, Brooke Group Ltd. v. Brown & Williamson  Tobacco Corp., 509 U.S. 209, 237 (1993), a point not at issue in this  case.


14
  Although it is true that during 1988-95 Koch's prices were  potentially subject to rate regulation by the ICC, the Commission  never imposed regulation and Koch never tried to raise its rates. Koch asserts that its pre-increase rates were substantially below  those of "its competitor pipeline [MAPCO] and barge competitors." Koch Br. at 16-17.  But the Board rejected that contention because  "[s]uch comparisons, especially to carriers that largely serve different markets or bear different transportation characteristics and  operating costs, are not particularly instructive."  Final Order at 16  n.43.  Indeed, Koch's contention assumes the answer to the question at issue:  Are the MAPCO pipeline and barge carriers really  Koch's competitors?  The Board found, and Koch has not challenged here, that the MAPCO pipeline is not an intramodal competitor because it does not serve complainants' Louisiana production  facilities, and that it does not pose geographic competition except at  one terminal.  As for the barges, the STB concluded that the fact  that their rates were substantially above those of Koch showed not  that Koch's rates were sub-market, but rather that barge transport  is an ineffective competitive alternative to pipeline.  As explained in  Part II.B infra, we find that conclusion to be a reasonable one.


15
  See Arizona Pub. Serv. Co., 742 F.2d at 650-51 (holding that  in light of significant cost difference, fact that complainant received  oil by both trucks and railroad did not make trucks an effective  competitive alternative);  Atchison, Topeka & Santa Fe Ry. v. ICC,  580 F.2d 623, 636 (D.C. Cir. 1978) ("Shippers must be able to make  the choice to use an alternative service without absorbing substantial economic loss.");  see also Salt River, 762 F.2d at 1059 (noting  that market dominance guidelines require findings on the relative  costs of potential alternatives, and that without evidence of relative  costs, the "mere possibility" that shipper "could" use alternative  carrier does not render alternative an effective competitor);  IIA  Areeda p 534b, at 180 (noting that "substantial differences in production, transportation, or other costs among ... products prevent  one from operating as an effective competitive check on the prices  of the other").


16
  The other two are market efficiency and phasing.  1 I.C.C.2d  at 521;  see Consolidated Rail, 812 F.2d at 1450-51.


17
  The governing statute directs that, when prescribing a rate,  "the Board shall consider, among other factors
(1) the effect of the prescribed rate ... on the movement of traffic by that carrier;
(2) the need for revenues that are sufficient ... to let the carrier provide that transportation or service;  and
(3) the availability of other economic transportation alternatives.
49 U.S.C. 15503(b).  It also states that "[i]n prescribing [a] rate  ... the Board may utilize rate reasonableness procedures that  provide an effective simulation of a market-based price for a stand  alone pipeline."  Id. 15503(a) (emphasis added).


18
  The Board's position is not inconsistent with our decisions in  Burlington and PEPCO.  In Burlington, we remanded a ratemaking because the ICC had returned to a pre-CMP standard without  explanation.  See Burlington N. R.R. v. ICC, 985 F.2d 589, 599  (D.C. Cir. 1993).  In PEPCO, we upheld the ICC's use of SAC in  determining the reasonableness of the rates of a railroad with  inadequate revenues, but noted that where the other CMP constraints are applicable (they were not applicable in PEPCO),  "stand-alone cost is not the only ceiling on rates."  Potomac Electric Power Co. v. ICC, 744 F.2d 185, 193-94 (D.C. Cir. 1984).


19
  See also Railroad Revenue Adequacy--1988 Determination,  6 I.C.C.2d 933, 935 n.3 (1990) (stating that "original" or "predecessor" cost "represents the cost of the asset when it was first  dedicated to public service, plus any subsequent improvements, less  depreciation and retirements").


20
  The instructions define the entry for "carrier property" as  "[t]he cost of property owned that is devoted to transportation  service," and define cost as "the amount of money actually paid for  property or services."  See 18 C.F.R. Pt. 352, def. 11, instr. 2-3. The instructions further state that, "[i]n accounting for a 'purchase,' " i.e. an acquisition of a "distinct operating system" involving  a price over $250,000, "the assets shall be recorded on the books of  the acquiring carrier at cost as of the date of acquisition."  Id.,  instr. 3-11 (emphasis added).


21
  Indeed, the same order advised Koch that CF anticipated  that revenue adequacy would be "an important and relevant reasonableness cap in this case," Initial Order at 6, and as we discuss in  the next section, the revenue adequacy constraint uses acquisition  cost as the measure of a carrier's pipeline investment.


22
  Koch quotes the Board's decision in CSX Corp. for the  proposition that "carriers cannot attract and retain capital unless  they are given the opportunity to be compensated for the real value  of the property, not just the book value."  Koch Br. at 30 (quoting  CSX Corp., No. 33388, 1998 WL 456510 at *40 (S.T.B. July 23,  1998)).  But the "book value" rejected by the STB in CSX was the  "predecessor book value," 1998 WL 456510 at *40, not the railroad's  own acquisition cost--which, in fact, the Board ultimately relied  upon in that case.  Id. at *38.


23
  Our decision in City of Los Angeles v. United States Dep't of  Transp., 103 F.3d 1027, 1032-33 (D.C. Cir. 1997), is not to the  contrary.  In that case, we vacated a DOT decision to set fees in  reliance on original cost rather than fair market value, because the  Department mistakenly thought it was statutorily required to use  original cost.  The STB had no such misconception in this case.


24
  Koch contends that the Board's Railroad Revenue Adequacy  standards were intended to apply only to the annual revenue  adequacy calculations the STB performs for railroads, and not to  "the ratemaking context."  Koch Br. at 32 n.7.  But the Board's  interpretation to the contrary is a reasonable reading of the regulations.  See Coal Rate Guidelines, 1 I.C.C.2d at 535 (using Railroad  Revenue Adequacy standards to define the revenue adequacy constraint of the CMP methodology).  Nor, as the STB explained, does  Arkansas & Missouri Railroad, 6 I.C.C.2d 619, 627 (1990), aff'd sub  nom. Missouri Pac. R.R. v. ICC, 23 F.3d 531 (D.C. Cir. 1994),  compel the use of replacement cost in revenue adequacy determinations.  Final Order at 25 n.64.  In that case, the ICC used replacement cost because "an arm's length purchase price" cost could not  be determined as a consequence of the way in which the purchase  agreement had been structured.  6 I.C.C.2d at 626;  see 23 F.3d at  534.


25
  The Board also denied permission to amend on the ground  that CF was estopped from challenging the rates in effect prior to  1996 by a settlement agreement with Koch's predecessor.  In light  of our affirmance of the Board's determination with respect to  untimeliness, we do not address the STB's alternative rationale.


26
  Farmland suggests that its petition to intervene should be  treated differently, but that petition likewise sought to bar Koch  from "charging any increase in rates established on or about April  1, 1996," Pet. p 34, and sought as damages the difference between a  reasonable rate "and the rate paid by Farmland ... during the  period beginning on April 1, 1996," Id. p 29.  Moreover, in granting  Farmland's petition, the Board relied on the fact that "Koch did not  oppose Farmland's intervention because the subject matter of  Farmland's complaint is substantially similar to that of the complaint brought by CF."  CF Indus., Inc., No. 41685, slip. op. at 1  (S.T.B. July 25, 1996).


