Senate panel approves most significant rail reform since Staggers Act

by Jay Sjerven
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WASHINGTON — The National Grain and Feed Association (N.G.F.A.) and 15 other national agricultural producer and agribusiness organizations on Dec. 18 commended the Senate Committee on Commerce, Science and Transportation for recommending the full Senate pass the Surface Transportation Board Reauthorization Act of 2009 (S. 2889), which the organizations lauded as the most significant freight rail legislation since the Staggers Rail Act of 1980.

The bill was approved by the Senate committee on Dec. 17. It represents the first comprehensive reauthorization of the S.T.B. since it was established under the Interstate Commerce Commission Termination Act of 1995 and the first significant reform of rail competition policy in 30 years.

The bill had bipartisan support on the committee being introduced by Senator John D. Rockefeller IV of West Virginia, the committee’s chairman, Senator Kay Bailey Hutchison of Texas, the committee’s ranking minority member, as well as Senators Frank Lautenberg of New Jersey, John Thune of South Dakota and Byron Dorgan of North Dakota.

The S.T.B. has economic oversight of the railroad industry and is responsible for implementing the Staggers Act, which was enacted at a time when railroads were on the verge of bankruptcy and included many policies intended to help them return to economic health. The committee noted since that time, major railroads have consolidated, returned to profitability and regained market share lost to other modes. At the same time, the committee indicated, economic rail oversight has not kept pace with those changes, and captive shippers face fewer competitive choices and regulatory protections.

Under the bill, the S.T.B. would be increased to five members from its current three with a requirement the two new members have private sector professional or business experience. The larger board would be empowered to investigate rail practices on its own initiative rather than only in reaction to receiving a formal complaint. The agency’s office of public assistance, governmental affairs and compliance would be authorized to mediate rail disputes, monitor rail carrier operations, ensure legal compliance and facilitate communication among stakeholders.

The bill would require the S.T.B. to create a new position — rail customer advocate — to assist in investigating and resolving shipper complaints on service and rate issues as well as to review rail cost and efficiency data.

The S.T.B. would be removed from the U.S. Department of Transportation and become an independent federal agency like its predecessor, the I.C.C.

Reprioritization of national rail transportation policy to place more emphasis on rail competition by prohibiting predatory pricing and ensuring freight rates are reasonable if competition is lacking would be another feature of the bill. Rail carriers would be required to publish reasonable service expectations for every common carrier rate, including cycle times, transit times and switching frequency.

The S.T.B. would be required within one year of the bill’s enactment to establish a binding arbitration process to resolve rail rate, rail practice and common-carrier service complaints arising in circumstances where the carrier involved has market dominance.

The bill would make it easier for shippers to challenge so-called “paper barriers,” under which a Class I carrier, through interchange commitments, can restrict or preclude the ability of a purchaser or tenant railroad to interchange traffic with railroads other than the seller or landlord railroad. The bill would allow shippers to challenge interchange commitments at the S.T.B. and would set up a framework for eliminating existing paper barriers to the extent they conflict with current law.

The damages shippers may collect from carriers under the S.T.B.’s expedited, simplified guidelines for resolving small and medium-size rail disputes also would increase under the bill.

Carriers would be required to quote a freight rate for each segment of a so-called “bottleneck” shipment in which a single carrier serves an origin or destination facility but another carrier has the ability to serve a portion of the movement from a nearby interchange point. The S.T.B. would establish a new rate-reasonableness process for bottleneck rates based on an efficient component pricing methodology and other factors. This methodology would be designed to provide shippers with the right to “reasonable” rate quotes over the bottleneck portion of the movement and provide a method for shippers to challenge what they believe to be unreasonable rates.

The S.T.B. would be authorized to require a railroad to make its terminals available to a competing carrier in “exceptional circumstances” to provide access for captive traffic. To demonstrate the existence of “exceptional circumstances,” shippers would be required to show access would not impede the efficient operation of the terminal or the owning carrier’s overall rail network, would not adversely affect service to any other customers and would be in the public interest.

In addition, the bill would require mergers and acquisitions between Class I and Class II rail carriers receive the same scrutiny by the S.T.B. as transactions between Class I carriers currently receive.

Kendell W. Keith, N.G.F.A. president, noted while the Senate bill does not contain all the changes to U.S. rail policy advocated by the N.G.F.A., it does provide some meaningful corrections to current law and may set the stage for a “more balanced regulatory environment.”

Mr. Keith also said there will be opportunities to seek further enhancements to the bill once the legislative process shifts to the Senate floor and to the House of Representatives.

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