Senate signs off on STB reauthorization bill

Late last week, the United States Senate unanimously approved S. 808, the Surface Transportation Board Reauthorization Act of 2015.

This bill was approved by a voice vote by the United States Senate Commerce, Science, and Transportation Committee in March.

In S. 808, railroad service issues and rates remain front and center, as has been the case in previous incarnations. 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.

“Nearly 20 years ago, Congress established the Surface Transportation Board to oversee our nation’s freight railroad system. Passage of my bipartisan legislation will make the STB more accountable and effective in addressing rail rate and service disputes,” said Sen. John Thune (R-S.D.), committee chairman and the bill’s lead sponsor. “The severe rail backlogs and service delays that began at the end of 2013 and extended through 2014 are a reminder of just how vital our nation’s rail system is for agricultural producers in South Dakota as well as many other sectors of the U.S. economy. This legislation was the result of working with a host of stakeholders across the country to find agreement on reforms that will benefit shippers and railroads alike.

Some of the highlights of S. 808 include:
-improving the STB’s current dispute resolution process by setting timelines for rate reviews and expanding voluntary arbitration procedures to address both rate and service disputes;
-ensuring the STB has the authority to proactively resolve problems before they escalate into larger disputes by providing the STB with the ability to initiate investigations on matters other than rate cases; and
-improving the STB’s structure and decision making processes by expanding the board membership from three to five and, with proper disclosure, allowing 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 STB is the federal regulatory body responsible for economic oversight of the nation’s freight rail system, as outlined by a statement from Thune’s office. It is overseen by a three-member bipartisan board and has regulatory jurisdiction over railroad rates, mergers, line acquisitions, new rail-line construction, line abandonment, and other rail issues. The STB was created by Congress in 1996 as the successor to the Interstate Commerce Commission, and since that time, the STB has not been reauthorized or substantively reformed.

News of this bill being passed by the Senate was warmly received by various industry stakeholders.

“This bill would enact a series of meaningful reforms, including streamlining the STB’s overly burdensome rate review process, providing reasonable arbitration procedures to resolve rate disputes, and allowing the STB to be more proactive in resolving freight rail issues,” said American Chemical Council President and CEO Cal Dooley. “Furthermore, in light of the recent service breakdowns impacting rail customers nationwide, this legislation also emphasizes the existing responsibility of the railroad industry to dedicate revenue appropriately to meet current and future service needs.”

And Association of American Railroads President and CEO Ed Hamberger said that the freight railroad sector is encouraged that the Senate has acted on this legislation and commended the Senator Thune, as well as Senators Bill Nelson (D-FL), Deb Fischer (R-NE), and Cory Booker (R-NJ), on striking the right balance of preserving a market-based structure for shippers and railroads through this bill.

“This bill provides commonsense process improvements that will allow the STB to work more efficiently and, at the same time, recognizes the 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,” said Hamberger.

As previously reported, even with Class I railroads doling out record capex funds, its shipper customers are calling for various forms of rate relief or “re-regulation.”

While the reasons vary, the familiar rail shipper refrain is based on the thesis that there are multiple barriers to competitive access for captive shippers such as improving the rate challenge process at the STB, getting relief from what shippers view as monopoly pricing power held by the railroads, among other things.

But railroads don’t exactly see things through that lens.

“The existing regulatory railroad environment has produced—for North American railroad shippers—a freight railroad system that is the envy of the world,” said a Class I industry executive. “It is not perfect but to deprive the industry of our ability to earn our cost of capital could have a chilling effect on capital investments to support traffic growth and it could begin to reverse the great strides we have made after Staggers in the areas of rail safety and service reliability.”