Taking the lead on Capitol Hill

Kay Bailey Hutchison's willingness to tackle critical transportation issues has earned the U.S. senator from Texas recognition from the National Industrial Transportation League as professional of the year.

By -- Logistics Management, 11/1/2000

When ocean shipping reform efforts needed a friend on Capitol Hill, Sen. Kay Bailey Hutchison took a leading role in crafting critical legislation. Similarly, as policymakers have struggled to develop public policy for a railroad industry that has changed markedly over the last decade, the Republican from Texas has been a major force in seeking compromise between sometimes sharply conflicting viewpoints.

In recognition of her leadership on transportation issues, the National Industrial Transportation League has awarded Sen. Hutchison the McCullough Logistics Executive of the Year Award. The annual award, sponsored by the league and Logistics Management & Distribution Report, recognizes one person who demonstrates a record of outstanding achievement, devotion, and leadership to the transportation industry. The award was established in memory of John T. McCullough, former chief editor of Distribution magazine, one of Logistics' predecessors.

Hutchison's support of issues critical to shippers goes back several years, reports Gerald Mayer, NITL chairman for the past year and manager of logistics transportation for JCP Logistics in Dallas. She was in the forefront of resolving the undercharge issue, in which trustees for bankrupt carriers attempted to collect millions of dollars in payments for shipments moved at discounted rates, Mayer notes. He also credits her with helping in the fight for intrastate trucking deregulation. And he says that the 1998 Ocean Shipping Reform Act (OSRA), which Hutchison helped craft, "is revolutionizing the industry for both shippers and carriers." In sum, says Mayer, "She has always been an advocate of a stronger and more competitive transportation system."

Hutchison's work on transportation legislation has not slackened in recent months. "In her current role as chairman of the Senate's Surface Transportation Subcommittee, she has been active in addressing the rail industry," Mayer says. "Especially after the mergers and service meltdowns, she wants to look at what the future will mean with a limited number of Class I railroads."

More recently, she has launched an effort to reform the Carriage of Goods at Sea Act (COGSA), a law that limits liability for ocean carriers. Hutchison has said that her goal is to provide a single cargo-liability system that would cover intermodal transportation, increase the per-package liability limit, change burden-of-proof rules for determining damages, eliminate the "error in navigation" defense for ship owners, and clarify dispute-resolution procedures.

Hutchison's work on transportation over the years has earned her many admirers. Says Ed Emmett, president of the league, "She has been a driving force behind a number of issues important to freight transportation. She stepped in and made the Ocean Shipping Reform Act a reality. She has taken on COGSA, even though ocean carrier liability is a complicated and arcane subject. She has tried to be a positive force for rail reform and cut through the rhetoric and craft compromise legislation. She has been willing to step up to the plate on issue after issue involving freight transportation."

Adds Michael Barr, international services manager for Procter & Gamble and a member of the committee that selected Sen. Hutchison for the award, "She has been a long-time proponent of the maritime industry and international business in general. The senator's efforts in campaigning for and promoting the Ocean Shipping Reform Act were key in gaining the bipartisan coalition necessary to move the act into law. Her actions have spoken even louder than her words. She has been a willing audience for shippers' groups, has been forthright and honest with her guidance, and has delivered on all commitments she has made."

Thomas F. Pellington, director of transportation for the David J. Joseph Co. and a vice chairman of the league, cites Sen. Hutchison's ability to craft a compromise on critical issues. "[Her] biggest contribution was that she looked at all the major issues and was a moderating influence in getting the job done," he says. "When the Rockefeller bill [which would have created new rail regulations] came out and the railroads wanted no change, it was Sen. Hutchison who stepped in with a ... compromise that is still taking shape. Her perseverance has made a positive impact on our industry."

Hutchison will receive the award at the league's annual meeting this month in Fort Lauderdale, Fla. She recently shared her thoughts on a variety of transportation topics with Logistics' chief editor, Peter Bradley.

What initially brought you to focus as much attention as you have on transportation issues?

Transportation has always been a high priority for me in public service. When I was in the Texas State Legislature in the 1970s, I sponsored the bill that created Houston METRO and San Antonio VIA, which became the template for the creation of other transit authorities in Texas' major cities. I also co-sponsored the reorganization of the Texas Highway Department and, of course, served two years as vice chairman of the National Transportation Safety Board.

Improving the transportation infrastructure is one of Texas' most important challenges as a high-growth state. Texas has the most lane miles of any state, the most rail trackage, and some of the largest seaport facilities in the country and is in the top three states for the busiest airports. My interest in these issues comes naturally.

Do you have an overarching view of what our national transportation policy should be?

With the largest, most open economy in the world and the increased traffic that free trade agreements have brought, the United States must have a modern, efficient transportation system, and government policies should promote this.

We must also reduce unnecessary regulatory barriers, especially those that disadvantage U.S. shippers and carriers in the global economy. The Ocean Shipping Reform Act that I fostered through Congress is a good example of how we peeled back regulatory requirements to permit shippers and carriers to arrive at their most efficient transportation arrangements. Our legislation harmonized [regulations governing] U.S. ports with those in neighboring Mexico and Canada, ensuring that our ports are not disadvantaged relative to those of our NAFTA partners. I am seeking legislation now to modernize the regulations that govern rail operations to ensure, for example, that competitive forces are considered when mergers take place in that fast-changing industry.

It is also very important that the federal government assume its responsibility to build and maintain our transportation infrastructure. Congress has done so through the enactment of TEA 21 (the Transportation Equity Act for the 21st Century) and Air 21 (the Aviation Investment and Reform Act for the 21st Century). These measures substantially increased the federal investment and kept the "trust" in the transportation trust funds-the assurance that the monies collected will be spent as intended. I am a strong supporter of federal support of rail infrastructure, too, because I believe passenger rail is an overlooked but vital element of a national intermodal system that can work better than it has.

Debate continues over such issues as rail regulation and such safety issues as regulating truckers' and air crews' hours of service or hazardous-materials transportation. In general, what do you believe is the proper role for the federal government in regulating transportation?

It is certainly appropriate for government to ensure that basic standards of safety and reliability are met. We can do so without mandating one-size-fits-all policies that give no flexibility to local or unique conditions.

What changes, if any, would you propose to the scope of authority of the Surface Transportation Board?

Congress has a responsibility to provide federal regulators with sufficient policy guidance to ensure the proper application of their regulations. The growing concentration of the rail industry through mergers could affect competitiveness, and the board should have authority to address these matters. The 15-month moratorium on mergers and the recently announced guidelines by the board are a reflection of the lack of guidance from Congress, and I have pushed legislation that would clarify the board's authority in such cases.

My bill would address competition in the rail industry, the bottleneck issue, and the market dominance standard and revenue adequacy in rate cases, and it would establish a simplified resolution mechanism for rate disputes. Despite the board's recent issuance of revised regulations, these are policy areas more appropriately addressed through legislation.

Should the Congress take more of a watchdog role regarding transportation mergers-i.e., among railroads and airlines?

Congress has tasked regulators with the job of investigating, weighing evidence, and adjudicating whether mergers are in the public interest. When regulators are doing their job and have sufficient policy guidance, Congress does not need to step in. However, it is always Congress' job to exercise oversight of the regulators and revise policy as necessary.

You were very active in formulating the Ocean Shipping Reform Act (OSRA), which has been in effect for about a year and a half. Do you think it is affecting shippers' business the way that Congress intended?

The Ocean Shipping Reform Act is working. Evidence to date shows shippers and carriers are responding to OSRA with creative business relationships and contracts that better take into account the needs of the shipper and the carrier. More goods are moving through U.S. ports. The marketplace is working well, unfettered from the previous rigid system of tariff and contract filing.

Rep. Henry Hyde of Illinois has been pressing for further change to OSRA, particularly in regard to ocean carriers' antitrust immunity. Do you believe that such a change is warranted at this point?

We need to see how the OSRA revisions continue to play out. Since we passed the bill, I haven't heard as much from shippers about the need to eliminate antitrust immunity. It appears that, for the moment, the relationship between shippers and carriers is dynamic and the influence of the carrier conferences is waning. If that trend slows or begins to reverse, we'll have to consider other measures.

You have been working to change the current ocean-cargo liability regime to make it more favorable to shippers. What kind of changes are you proposing and why?

I have worked with others on the Senate Commerce Committee to bring the Carriage of Goods at Sea Act (COGSA) up to date to reflect changes in the industry and technology. In many areas, our 1936 cargo liability law is showing its age. The revolution in container packaging obviously has rendered COGSA's $500-per-package liability limit obsolete, while the resulting emergence of intermodal transportation makes COGSA's "tackle-to-tackle" restriction of coverage less workable. Further, our law has begun to diverge from those of our major trading partners. Almost all of them, for example, have modernized the liability rules for their portion of international commerce.

My goal for this legislation is to craft a bill that provides a single cargo liability system to cover intermodal transportation; offers a reasonable increase in the per-package liability limit; modifies existing burden-of-proof rules for determining damages that reflect comparative fault; eliminates the error in navigation defense for carriage under COGSA; and addresses the question of dispute resolution.

The pressure on petroleum product prices and supply this fall directly affects transportation. Should Congress formulate a new national energy policy, and if so, what do you believe should be its principal elements?

This is a very important issue. For the past eight years, our national energy policy has been to reduce domestic production and rely more heavily on foreign sources. We're doing very little new exploration and our refining capacity is growing obsolete. We are now importing more than half our energy needs, making us more vulnerable to supply and price shocks. A rational energy policy would reverse this trend and encourage greater domestic production, while also supporting the use of alternative fuels and fuel efficiency.

I've introduced legislation that would help create stable prices at a lower level. At the heart of my bill is a tax credit, phased in as oil prices fall from $17 to $14 per barrel, that would help the marginal well operators (those producing fewer than 15 barrels per day). When prices fell to record lows in 1997 and 1998, 150,000 of these small, independent producers went out of business and most have not come back because there is no guarantee of stable prices to make the investment worth the risk. My legislation would dampen those highs and lows and help create a stable risk environment. Although 15 barrels a day doesn't sound like much, if we could bring all these marginal wells back on line we'd produce as much in a day as we import from Saudi Arabia. This would keep our small producers in business through artificially low prices and keep prices from drastic fluctuations.

OSHA wants to toughen ergonomic standards in such areas as warehousing and transportation. Do you support such a push?

I have supported efforts in Congress to prevent OSHA from issuing such standards in the absence of better scientific data to determine what constitutes an ergonomic injury and what is the best way to address [such injuries]. I am concerned that OSHA's draft legislation is vague and perhaps even in conflict with state worker compensation laws and regulations.

What are your primary goals for transportation policy in the next session of Congress?

STB reauthorization, with the policy improvements I've already discussed, is foremost in my mind. I also intend to continue pushing the COGSA update. We got close this year but just couldn't bring everyone together for the final agreement, and I think we can get there next year.

Executive Profile