STB reauthorization legislation is back on the table

Legislation calling to increase competition in the railroad industry was recently introduced by Senators Jay Rockefeller (D-WV) and Kay Bailey Hutchison (R-TX).

This bill, S. 158 the Surface Transportation Board Reauthorization Act of 2011, is nearly identical to a version rolled out in the previous Congress. It focused on addressing the concerns of rail shippers, regarding rates and service, as well as making the railroad industry more competitive.

If the bill were to be enacted into law, it could have a profound effect on how “business as usual” is currently viewed in the railroad sector. Among the bill’s goals are:
-raising the number of STB board members from three to five;
-establishing the STB as an independent agency and giving the STB investigative authority;
-creating a strong rail customer service advocate to help resolve shippers’ concerns;
-protecting rail shippers and maintaining reasonable rates in non-competitive situations;
-preventing two or more rail carriers from collaborating on interline rates;
-requiring major railroads to quote “bottleneck rates”; and
-improving access to shipper relief.

Rockefeller, whom also serves as chair of the Senate Commerce Committee, said that America is long overdue for a competitive, efficient, and balanced transportation network.

“It is crucial to the health of our economy and the future of our rural communities,” he said in a statement. “That is why I have reintroduced the Surface Transportation Board Reauthorization Act. During this critical period for our economy, it is essential that we act now to effectively meet our country’s transportation needs for the 21st century. I look forward to working with my colleagues to tackle these reforms. The Surface Transportation Board Reauthorization Act of 2011 would comprehensively update and improve the economic oversight of the railroad industry and address longstanding, competitive imbalances for shippers by increasing rail competition, strengthening federal oversight, and improving shippers’ access to regulatory relief.”

On May 3, the STB is holding a hearing to explore the current state of competition in the railroad industry and possible policy initiatives to promote more rail-to-rail competition.

As LM has previously reported, this bill has not been well-received by Class I railroad executives, whom maintain this bill is decidedly pro-shipper, coupled with the potential for railroads to lose a significant amount of pricing power.

At Norfolk Southern’s Annual Meeting of Shareholders in 2010, CEO Wick Moorman said re-regulatory efforts “are attempting to alter the economic regulatory regime which governs us so as to lower their rates, and at the same time seriously damage our ability to earn adequate returns…and invest in the future.” Moorman also said that at the end of the day a bill that is bad for the industry cannot be passed.

And railroad executives have repeatedly stated that that the existing regulatory railroad environment for has produced—for North American railroad shippers—a freight railroad system that is the best in the world. And if the railroad industry lost the ability to earn its cost of capital it could have a negative effect on capital investments to support traffic growth and reverse the strides made post-Staggers Act in the areas of rail safety and service reliability.

From the perspective of rail shippers, many feel this bill is long overdue. Reasons for this range from the multiple barriers to competitive access for captive shippers to improving the rate challenge process at the STB, and get relief from what view as monopoly pricing power held by the railroads.

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