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12/18/2009


Rail News: Rail Industry Trends
Rockefeller introduces STB reauthorization bill in Senate



The long-anticipated “balanced competition” bill is in the Senate. Yesterday, Sen. John Rockefeller (D-W.Va.) introduced the Surface Transportation Board Reauthorization Act of 2009 (S. 2889) after the Senate Committee on Commerce, Science and Transportation held an executive session and favorably “reported out” the bill. Rockefeller released a draft version of the legislation on Dec. 9.

Co-sponsored by Sens. Kay Bailey Hutchison (R-Texas), Frank Lautenberg (D-N.J.), John Thune (R-S.D.) and Byron Dorgan (D-N.D.), the bill aims to increase rail competition, strengthen federal oversight of railroads and improve rail shippers’ access to regulatory relief. S. 2889 would require major railroads to quote “bottleneck” rates; set standards for reciprocal switching and terminal access rates; create a process for parties to challenge paper barriers; and increase STB scrutiny of future railroad mergers for competitive, service and environmental effects.

In addition, the bill proposes to strengthen the STB’s oversight of the rail industry by updating rail transportation policy, providing the board independent investigative authority and creating a rail customer advocate to help resolve shippers’ concerns. The legislation also would improve rate complaint processes, require railroads to provide service standards to shippers, mandate that the STB review current class exemptions for unregulated railroad traffic and set lower fees for filing complaints with the board.

Crafted after “extensive bipartisan work with all stakeholders” the past few months,” S. 2889 represents the first comprehensive reauthorization of the STB since it was established under the ICC Termination Act of 1995, and the first significant rail competition reform policy in 30 years, according to Rockefeller, who chairs the Senate committee.

“For a quarter of a century, I have worked to enact needed rail legislation that would provide real reform and address shippers’ problems,” he said in a prepared statement. “The bill would fix these problems and prepare our rail regulatory structure to encourage a vital, robust rail industry. I will continue to work with Sen. Kohl and other members to add antitrust reforms to our bill as it moves to the floor.”

Kohl believes that that when the bill is considered by the full Senate sometime early next year, it will include a repeal of railroads' antitrust exemption.

“The railroads' antitrust exemption is wholly undeserved, shared by virtually no other industry, and clearly anti-competitive,” he said in a prepared statement.

The potential antitrust provision concerns Association of American Railroads (AAR) officials. They acknowledge the committee’s efforts to work with all freight stakeholders over the past several months to develop the legislation, but claim the bill would require Class Is to “open their privately owned and maintained rail networks, and face vastly expanded government involvement in railroad operations,” according to a prepared statement.

“We will remain engaged with the commerce committee, Congress and the Administration to craft final legislation that ensures railroads can continue to make the investments that sustain a healthy national rail network,” said AAR President and Chief Executive Officer Edward Hamberger.

American Chemistry Council (ACC) officials believe the bill — albeit “an important step toward creating a more competitive and viable freight-rail system” — must include antitrust measures, they said in a prepared statement.

“We are also troubled by provisions that require captive shippers to pay an unwarranted rate contribution for partial access to another railroad's services, thus reducing the likelihood of truly competitive rail service,” they said. “We will continue to seek improvements in this legislation so that our members, other shippers and the nation can enjoy the benefits of a healthy and competitive rail system.”

Consumers United for Rail Equity (CURE) officials — who long have advocated more rail competition — agree that “there is still much work to be done to see the consumer-oriented reforms included in this bill, as well as others advocated by freight-rail shippers, are enacted into law and implemented,” they said in a prepared statement.

“This is the first bill since 1980 to move out of the Senate Commerce Committee with customer-advocated improvements in the freight-rail regulatory program, although a number of implementation issues would still be left in the hands of an expanded and strengthened STB,” said CURE Chairman Glenn English. “The current freight-rail system lacks competition and effective oversight, resulting in excessive shipping rates that hurt the U.S. economy and cost American jobs.”

Two Robert W. Baird & Co. Inc. analysts believe ambiguity surrounds the bill, both in terms of the timing of its passage and the ultimate impact to the rail industry, that needs to be addressed. S. 2889 contains a number of rail operating practice studies that could drag 12 to 24 months beyond the bill’s passage, which isn’t expected until mid-2010, resulting in “uncertainty for the industry that could linger for multiple years,” wrote Jon Lagenfeld and Benjamin Hartford in a legislation analysis released this morning.

“As currently constructed, the bill is less balanced than expected and could represent an incremental negative to the rails if passed as is,” they wrote. “We expect the rails to work vigorously with legislators to make this bill more balanced.”

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