Senate committee approves S.T.B. reforms

by Jay Sjerven
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WASHINGTON — The Senate Committee on Commerce, Science and Transportation on Sept. 18 passed the Surface Transportation Board Reauthorization Act of 2014 (S.2777). In addition to reauthorizing the Surface Transportation Board through fiscal year 2019, the bill aimed to reform the S.T.B. to make it more transparent, efficient and responsive to shippers’ concerns. The bill will be considered by the full Senate when the body reconvenes following the mid-term elections.

Senator Jay Rockefeller of West Virginia, chairman of the Commerce, Science and Transportation Committee, and Senator John Thune of South Dakota, the ranking Republican on the committee, jointly introduced S.2777 on Sept. 8. The committee held a hearing on rail transportation issues on Sept. 10 as part of advancing the bill. It was apparent at the hearing that the bill had broad bipartisan support on the committee.

“I am pleased the committee was able to work together to pass these common-sense improvements to the S.T.B.,” Mr. Thune said. “While there is more work to be done to address the concerns that agriculture producers and other shippers face, providing targeted improvements to the S.T.B. ensures that it functions as the regulatory body that Congress envisioned, while not stifling the railroads with additional regulations that can reduce infrastructure investment.”

 The bill would establish the S.T.B. as an independent federal agency separate from the U.S. Department of Transportation. It would increase the size of the S.T.B. to five members from the current three. The bill specified, “Three members should have professional standing and demonstrated knowledge in the fields of transportation, transportation regulation or economic regulation, and at least two members shall be individuals with professional or business experience (including agriculture or other rail customers) in the private sector.”

Importantly, the bill would increase the S.T.B.’s investigative authority so it can launch its own investigations on possible rail carrier and pipeline carrier violations before a complaint is filed. The exception would be rate investigations, which still would require a complaint to be filed before an investigation is launched.

The bill would require the S.T.B. to maintain a simplified and expedited method for determining the reasonableness of challenged rail rates in cases where a full stand-alone cost presentation is too costly, given the value of the case. And it would require the board to maintain procedures to ensure expeditious handling of challenges to the reasonableness of rail rates.

The bill also would prescribe time limits for the board to review of rail rate reasonableness cases.

The S.T.B. would be required to initiate an ex parte proceeding on whether contract proposals for multiple origin-to-destination movements (rate bundling) have adversely affected Congress’s intent that the board’s rate challenge procedures remain available to shippers subject to railroad market dominance as well as how it may prevent such practices in the future.

The bill would require the board to establish a binding arbitration process to resolve rail rate, practice, and common carrier service disputes.

The bill would further require the board to establish a database of rail service complaints it has received and post a quarterly report of such complaints on its web site.

The bill would express the sense of Congress that the board should consider the costs and benefits of the annual determinations of revenue adequacy for Class I railroads; review the methodology employed to define the business cycle in its determinations and consider, if necessary, a rulemaking to define the business cycle; consider if a rulemaking proceeding on mandatory competitive switching is needed to ensure a viable competitive national rail system; and, ensure that if such a rulemaking proceeding is needed that it is completed in a timely manner.

In advance of the committee vote, the National Grain and Feed Association and 36 other agricultural producer and agribusiness organizations sent a letter to committee members applauding the introduction of S.2777.

“Rail service disruptions and other challenges confronted by agricultural producers, shippers and receivers during the past year have brought into sharp focus the constructive role the S.T.B. can play if given the proper authorities and resources,” the groups said. “Your legislation represents an important and necessary step in making it possible for agricultural and other users of freight rail service to secure meaningful, intended safeguards and protections embodied in the Staggers Rail Act of 1980.”

Edward R. Hamberger, president and chief executive officer of the Association of American Railroads, said, “The rail industry believes this legislation will harm the ability of the nation’s railroads to invest in the network and improve service for our shippers.”

Mr. Hamberger noted railroads currently are moving the most freight they have in the last seven years, and volume of commodities, such as grain, is up double digits from a year ago.

“These new restrictive regulations would be imposed on the nation’s railroads at a time when investments in capacity, new equipment and new hires are needed,” he said.

Mr. Hamberger said the bill would direct the S.T.B. to prevent railroads from using the approach used by railroads and shippers in contract negotiations to “bundle” offers, but would allow shippers to continue to do so. Mr. Hamberger said the S.T.B. has no authority over rail contracts and should not be directed to interfere in agreements that are arms-length transactions freely entered into by both parties.

The S.T.B. already has broad regulatory oversight over the railroads; however, the legislation would give the S.T.B. expanded authority to launch investigations of a railroad even where no complaint against the railroad has been lodged, he added.

“On the one hand, everyone wants to see capacity grow and traffic flow unimpeded, and on the other hand, there are those that want to undercut our very ability to get the capital necessary to invest,” Mr. Hamberger asserted. “This is a perfect example of you simply can’t have it both ways. America’s rail industry is urging policymakers not to rush this legislation and instead give all stakeholders the opportunity to have a more productive conversation to try to find common ground.”
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