Bill to Expand STB Authority Approved; Measure Backed by Railroads, Shippers

This story appears in the March 30 print edition of Transport Topics.

For the first time in almost two decades, a Senate bill to expand the powers and structure of the Surface Transportation Board could move forward with shipper support and a new rail industry stance on changes at the regulatory agency.

The Senate Commerce, Science and Transportation Committee last week approved the Surface Transportation Board Reauthorization Act of 2015, which was introduced just five days before by Sens. John Thune (R-S.D.) and Bill Nelson (D-Fla.). The measure directs the STB to find new and more efficient rate evaluation approaches.

“These reforms will help make the STB a more efficient, effective and accountable agency for the benefit of shippers and railroads alike,” said Thune.

The bill drew support from the American Chemistry Council, the National Industrial Transportation League, Consumers United for Rail Equity and the Association of American Railroads.

Since 1996, AAR has opposed STB bills championed by the committee’s former chairman, Jay Rockefeller, a West Virginia Democrat.

AAR President Edward Hamberger outlined the railroads’ past opposition at multiple hearings of Rockefeller’s committee. Last year, STB reform failed to reach the Senate floor despite support from both Thune and Rockefeller, who retired in January.

“After nearly 20 years of regulating freight railroads and adjudicating shipper disputes at the Surface Transportation Board, it’s time for Congress to address some inefficiencies in the agency,” said Thune, the committee’s current chairman. The Midwest Republican joined colleagues in December in blasting railroads for chronic delays of grain, meat, vehicles and other shipments.

The measure would give the agency new power to initiate investigations into rail service difficulties, such as last year’s rail delays and congestion. Today, STB can’t initiate such investigations on its own.

“The bill, as introduced, should not be opposed,” AAR spokesman Ed Greenberg told Transport Topics. “Balanced economic regulation of the freight rail industry is vital to ensuring that freight railroads can provide the reliable, safe and efficient rail system our customers rely on and expect.”

“The STB Reauthorization Act would improve how the STB works by making it a more timely, efficient and equitable regulatory agency,” said David Sauer, president of Consumers United for Rail Equity.

The bill “would provide needed protections to rail freight shippers without any negative impact on the U.S. railroad industry,” said Sauer, who is chief operating officer at Dakota Gasification Co., a subsidiary of Basin Electric Power Cooperative, based in Bismarck, North Dakota.

One feature of the bill introduced March 12 would be an accelerated rate case review process.

Thune identified what he termed “wasteful and unnecessary delays in adjudicating cases that harm rail shippers, freight operators and, ultimately, consumers who pay higher costs.”

His statement noted that some rate cases can cost shippers about $3 million to pursue, while also inflating defense costs for railroads.

A Basin Electric action against BNSF Railway is one of those long-running cases.

More than a decade ago, Basin Electric and another company began a rate case before STB, resulting in a $345 million overcharge ruling against the railroad in 2009. Last year, an appeals court sided with the railroad, which returned the case to STB for further review and is still pending.

Thune singled out the STB rate-evaluation process known as the “stand-alone cost test,” which is used in cases such as the Basin Electric-BNSF proceeding. That approach used what Thune termed “complex economic modeling to examine how hypothetical competition from another railroad might affect prices in order to determine whether or not current rates fall within the legal definition of ‘reasonable.’ ”

The bill, which has no House companion at this time, also expands voluntary arbitration procedures and increases the board’s size to five from three members.

STB currently has two members. Former Chairman Daniel Elliott, who has been nominated twice by President Obama for another term, hasn’t yet been confirmed by the Senate.

Wisconsin Sen. Tammy Baldwin, a Democrat, last week added to the STB-Senate mix by offering the Rail Shipper Fairness Act, which would expand competition by giving some shippers served by just one railroad access to a second carrier. Her bill also seeks to speed up STB rulings and extend its oversight power.

NITL has been trying without success since 2011 to get an STB ruling on the trade group’s proposal to adopt the competitive approach in Baldwin’s bill to lower rates and improve service. The railroads oppose NITL’s proposal.

Thune joined Rockefeller in presenting the 2014 version of STB reauthorization efforts, which was approved by their committee but never taken up by the full Senate. Nelson is the committee’s ranking member.

ACC’s statement said Thune’s bill “will promote a more competitive environment for freight rail service and improve how the STB operates.”

NITL President Bruce Carlton told TT that Thune’s bill “would give the STB the tools it needs to operate more effectively and efficiently. The proposed reforms are sensible and moderate.”