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Rail News Home Federal Legislation & Regulation

August 2009

Rail News: Federal Legislation & Regulation

Tony Hatch: Byzantium-On-The-Potomac or a Town Called Hope?

Although it might surprise some, a lot of hard work is being done on the regulatory front to fashion a (true) “anti-trust” compromise bill, albeit not in as coordinated a manner as you might think. The work’s also being conducted under a not-so-typical-for-D.C. strict code of silence. I believe the “STB Reauthorization Bill” — not insignificantly, it’s no longer called the “Competition Bill,” as it was last year — if introduced this summer, will be a true compromise. If not, as Norfolk Southern Corp. CEO Wick Moorman told his top shareholders on June 3, the rail industry has the votes to defeat a bad bill.

In addition, the House and Senate are not on the same transportation page, and the Obama Administration has yet to weigh in on transport issues beyond high-speed rail (HSR), but it will … and I expect it to be a positive development for the industry.

So, while the word “Byzantine” readily applies to the machinations of the Capitol with respect to the rail industry’s regulatory fate and the interaction among the Administration, legislative bodies, and regulatory agencies, I left D.C. following a recent visit feeling more optimistic than when I arrived.

The heart of the matter: the STB Reauthorization Bill. The Senate Committee on Commerce, Science and Transportation is where the action is. Sen. Jay Rockefeller’s committee is holding the secret negotiations with the stakeholders, including the rail contingent — which, so far, has cooperated fully. Rockefeller, in turn, has acted like a true committee chairman rather than an outside agitator. His most recent public hearing was telling — it included Maersk, Target and two port interests, including the Port Authority of New York & New Jersey. Intermodal, some say, stands to benefit from the differential pricing that punishes so-called captive shippers, so it’s instructive to hear from shipping interests that benefit from the status quo, as well as those who’ve long complained about it. Naturally, the Senate Commerce Committee staff were tight lipped about the bill, but I believe that the final product, coming perhaps this summer, will be less intrusive than many fear. It also may come with some form of replacement cost consideration, the Holy Grail for many rail investors.

Tony Hatch  
I believe the Obama Administration is
a net positive for the rails. My visit to
the U.S. DOT only reinforced this view.
For their part, railroads have demonstrated a willingness to compromise and negotiate with the staff (carrot) as well as their vote power, and that of the rail labor unions (stick) in the shutdown of both the Senate and (so far) House versions of the anti-trust bill, which will resurface in less harmful parts in the STB bill. Meanwhile, the Senate committee seems to be aware of the unintended consequences of rash action on rail reinvestment and the long-term value of rail to shippers. Witness bills such as S. 1036 on boosting rails’ role, and modal share, over the longer haul.

All quiet in the House. The House has been focused on The Surface Transportation Authorization Act of 2009; its predecessor, SAFETEA-LU, expires on Sept. 30. Given the political realities (banks, autos, health care, wars), few observers think reaching that deadline is feasible. For now, the House Transportation & Infrastructure Committee is dedicating all of its efforts to it; T&I isn’t working at all on rail regulation. In fact, both the Administration and Senate have come out for an 18-month extension, much to T&I Committee Chairman Jim Oberstar’s chagrin. Interestingly, if the rails, shippers and Rockefeller get together on a compromise bill, something Rockefeller says is a priority, “SAFETEA-LU 2” might include such progressive elements as investment tax credits.

The Obama Administration has yet to weigh in … but it might surprise a few folks when it does. Although the emissions focus likely will be a problem for the coal baseload that rails carry, that same focus has benefits, as well. Clearly, Obama likes rail — be it transit, Amtrak, HSR, even freight — given the carbon footprint issue and the inherently cost-effective infrastructure.

I continue to believe the Obama Administration is a net positive for the rails, and my visit to the U.S. Department of Transportation only reinforced this view. The policy folks get it, and it’s clear this Administration will not be afraid to make modal judgments — and that’s very good news for intermodal. Some believe there’ll be a full-fledged Office of Intermodalism, as the Surface Transportation Authorization Act proposes. As they get up to speed, I think they’ll shape a sensible transportation policy that includes increased opportunities for passenger and freight rail.

Tony Hatch is an independent transportation industry analyst and consultant.


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