Rail legislation could come soon

Rail legislation could come soon    The most significant piece of railroad legislation in nearly 30 years could be introduced into Congress as soon as next week, potentially subjecting the industry to additional antitrust regulation and changing the way the Surface Transportation Board regulates the industry.
   A research report from Morgan Stanley this week said the bill being developed by Sen. Jay Rockefeller, D-W.V., to reform rail regulation could be introduced next week.
   On Wednesday, the House Judiciary Committee approved HR233, the Railroad Antitrust Enforcement Act of 2009, a bill that would lift antitrust exemptions for freight railroad companies and not require federal trial judges to defer to the STB, which many critics see as being too sympathetic to the railroads.

Rockefeller

   An antitrust bill was approved by the Senate Judiciary Committee earlier this year, but in June, Antitrust Subcommittee Chairman Herb Kohl, D-Wis., and Rockefeller said that, instead of having railroad antitrust and STB reform go down separate tracks, they would 'work together on comprehensive rail competition legislation.'
   The Morgan Stanley report quoted Linda Morgan, a Washington-based attorney and former STB chairman, as saying she expects a draft version of Rockefeller’s bill to be introduced “very soon.”

Morgan

   Rockefeller and House Transportation and Infrastructure Chairman James L. Oberstar, D-Minn., 'have both wanted to change way the STB undertakes regulation and so they both want to reauthorize the board as well as change some of its processes,' said Frank J. Mulvey, an STB board member. Speaking at a transportation conference sponsored by the Royal Bank of Canada last week, he said, 'They are looking at pretty much everything.”
   Included are perennial issues in rail regulation such as bottleneck rates, reciprocal switching agreements, and so-called 'paper barriers' that some shippers say prevent them from gaining access to competitive rail services and rates. Also, the standalone cost process that STB uses to determine whether a rate a railroad is charging is appropriate, and which critics think allows railroads to charge inflated and unfair rates.
   Mulvey, a Capitol Hill veteran who once served as staff director for the House railroad subcommittee, noted it was unclear 'with everything going on in Washington right now that regulatory change is going to happen.'

Oberstar

   Thomas Hund, executive vice president and chief financial officer of Burlington Northern Santa Fe Railroad, said at the same Toronto conference 'it is possible it would happen this year but it could easily flow into next year.'
   Morgan Stanley said Rockefeller is looking to 'fast-track' the legislation and estimated the odds of passage of some form of the bill by the end of year to be 50 percent to 60 percent.
   'The need to focus on larger issues (health care, climate bill, etc.), the unwillingness to introduce controversial legislation in an election year, and the uncertainty of the composition of Congress post-2010 suggest 2009 may be the best opportunity for passage,' the report said. 'If a rail bill is going to pass by year-end, the end of September is likely a critical deadline for introducing draft legislation.
   Robert G. Szabo, executive director of Consumers for Rail Equity (CURE), a group that represents rail shippers and has long been critical of the STB, said the board is looking at increasing the size of the board from three to five members so it is not paralyzed by government 'sunshine laws' if there are only two members and they effectively form a quorum every time they have a conversation about an issue. It is also looking at reforms like allowing administrative law judges to hear disputes.
   'I also think they intend to beef up its financial resources. Today it's about a $26 million entity. Clearly that's not a lot of money to run an agency that is supposed to keep an eye on the railroads,' Szabo said.
   Morgan also said that in addition to broadening STB powers and resources, the bill is also expected to seek to increase shipper access to the rail rate relief process and customer access to rail networks.
   Radical overhaul of rail regulation is likely to face strong opposition from railroads.
   The Staggers Rail Act of 1980 largely deregulated the rail industry, and it has been hailed by the Association of American Railroads as a success story. AAR says average inflation-adjusted rail rates as measured in revenue per ton mile are down 49 percent and that railroads have reinvested $440 billion from 1980 to 2008.
   'Since the Staggers Rail Act reforms in 1980 adopted national policy that railroads must be allowed to earn their cost of capital, railroads and their investors have delivered a revitalized rail network,' said J. Michael Hemmer, a senior vice president and general counsel of Union Pacific Railroad, in testimony to the House on a railroad antitrust bill earlier this year.
   Of course, critics see if very differently. Mark Cooper, director of research at the Consumer Federation of America, at the same hearing said, “as implemented by the ICC and STB, the Staggers Act is among the first and worst examples of the irrational exuberance for deregulation that has brought our economy to the brink of disaster. We must reaffirm our commitment to competition and the prevention of the abuse of market power if we are to rebuild our economy. Railroads have accumulated billion of dollars of excess profits and cross subsidies on massive quantities of traffic that they carry at non-compensatory rates.
   In Toronto last week, Hund said, 'Ultimately the devil will be in the details in whatever bill comes out. The good news is there has been active dialogue. Like most things this is not going to be a complete win for anybody and yet everybody will receive something they thought was important out of it.' ' Eric Johnson and Chris Dupin