Rail shippers call on House to pass STB Reauthorization legislation

A letter written this week by more than 100 railroad shipper and transportation trade groups to House of Representatives Speaker Paul Ryan and House Minority Leader Nancy Pelosi calling for the passage of S. 808, the Surface Transportation Board (STB) Reauthorization Act.

The organizations penning the letter are part of the Rail Customer Coalition, which is a large coalition of trade associations representing the manufacturing, energy, and agricultural industries reliant on railroads. In the letter, they said that the freight rail industry is critically important to U.S. economic competitiveness and adoption of the reasonable, commonsense and non-controversial reforms in S. 808 will help ensure a more appropriate balance between the rail industry and their customers.

As reported by LM, S. 808 passed the Senate by unanimous consent in June and is currently pending in the House. The RCC stressed in the letter that it is time to finalize the bill’s reforms and sign it into law.

Railroad service issues and rates remain front and center, as has been the case in previous incarnations of this legislation. The bill is focused on addressing inefficiencies within the STB, which serves as the federal regulatory body responsible for economic oversight of the U.S. rail system, with regulatory jurisdiction over railroad rate reasonableness, mergers, line acquisitions, new rail-line construction, line abandonment, and other issues.

Some of the highlights of S. 808 include:
-setting timelines for rate reviews and expanding voluntary arbitration procedures when railroads and rail shippers want a quick and efficient resolution;
-grant the STB authority to proactively resolve problems before they can escalate into expensive disputes;
-grant the STB new authority to avoid lengthy and expensive disputes and enhance transparency to benefit shippers and consumers in the U.S.; and
-expand board membership from three members to five, and, with proper disclosure, allow board members to talk with one another without a prior public hearing notice as long as it complies with certain scope and participation limitations

If signed into law, S. 808 would authorize the STB through Fiscal Year 2020.

While similar attempts to improve the STB have been proposed in recent years, this effort is different in that rail service, going back to the winter of 2013-2014, saw major delays in various parts of the country even while Class I railroad carriers continue to make record capital expenditure investments, with much of that capital allocated for infrastructure improvements.

The RCC added in the letter that the STB has not been reauthorized since it was established in 1995 and that S. 808 would represent the most comprehensive rail economic legislation since 1980, which happens to be when the Staggers Rail Act, which effectively deregulated the industry, was enacted.

And it also cited a July report from the National Research Council’s Transportation Research Board (TRB), entitled “Modernizing Freight Rail Regulation,” that takes the freight railroad sector to task, stating that current federal railroad regulations have not “kept pace with the industry’s transformation” and need to be replaced with a system that better matches what is needed today.

The report’s focus areas included: the performance of the railroads’ service levels, quality, and rates; the projected demand for freight transportation over the next two decades and the constraints limiting the railroads; ability to meet that demand; the effectiveness of public policy in balancing the need for railroads to earn adequate returns with those of shippers for reasonable rates and adequate service; and the future role of the Surface Transportation Board in regulating railroad rates, service levels, and railroads’ common carrier obligations as railroads may become revenue adequate.

At last month’s RailTrends conference in New York, STB Chairman Dan Elliott said that the report presents many thought-provoking ideas with respect to the future of freight rail economic regulation.

“I am excited to see what changes may develop from the recommendations,” he noted. “As a board, we are looking into how we might be able to take some of these ideas…. and make our own regulatory improvements, as well at the same time internally work on best practices and improving the board’s case management, not just for rate cases but for all cases.”

When S. 808 passed the Senate in July, Association of American Railroads President and CEO Ed Hamberger said that it takes into account the vital need for freight railroads to earn revenues that allow for billions of dollars in private spending each year to build, maintain and grow the nationwide rail network, so taxpayers don’t have to.

The AAR’s top executive has said repeatedly that the record private investments that the rail industry makes every year in the nation’s rail network have well positioned today’s continued economic recovery, adding that the industry invests the revenue it earns, not government funding, to grow and modernize the rail network, meeting the needs of customers, large and small.

Class I railroad executives have said many times over the years that the existing regulatory railroad environment has produced—for North American railroad shippers—a freight railroad system that is the envy of the world.  And while it not perfect, depriving the industry of its ability to earn its cost of capital could have a chilling effect on capital investments to support traffic growth and it could begin to reverse the great strides the rail freight sector has made.