Senate Commerce Committee Chair Tune and Ranking Member Nelson Introduce STB Reauthorization Bill
Mar 20 2015
U.S. Sen. John Thune (R-S.D.) and U.S. Sen. Bill Nelson (D-Fla.), who respectively serve as the chairman and ranking member of the Senate Committee on Commerce, Science, and Transportation, today announced the introduction of S. 808, the Surface Transportation Board (STB) Reauthorization Act of 2015. The STB is the federal regulatory body responsible for economic oversight of the nation’s freight rail system. Run by a three-member, bipartisan board, the agency has regulatory jurisdiction over railroad rate reasonableness, 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. Since that time, the STB has not been reauthorized or substantively reformed.
“After nearly twenty 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. Oversight efforts have identified causes of wasteful and unnecessary delays in adjudicating cases that harm rail shippers, freight operators, and ultimately consumers who pay higher costs,” said Thune on introducing the legislation. “These reforms will help make the STB a more efficient, effective, and accountable agency for the benefit of shippers and railroads alike.”
Highlights of the Surface Transportation Board (STB) Reauthorization Act of 2015:
Problem: Inefficient and costly dispute resolution process.
Multiple government reports state that the STB rate review process, including the “stand-alone cost test” that relies on complex economic modeling, is often burdensome and inefficient. A case before the STB can often cost over $3 million to litigate and take over three years to resolve.
The “stand-alone cost test” is used in situations where a railroad has market dominance for a given customer and uses 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.”
What the bill does: S. 808 sets timelines for rate reviews and expands voluntary arbitration procedures when both parties want a quick and efficient resolution.
S. 808 expands successful voluntary arbitration procedures between rail carriers and their customers to resolve rate cases faster and at less cost. The bill sets timelines for stand-alone cost test evaluations to avoid overly lengthy delays and also requires STB to study more efficient and simplified rate review methodologies to further alternatives to the stand alone cost test.
Problem: The STB lacks authority to proactively resolve problems before they escalate into expensive disputes.
In January 2015, the USDA reported that surging demand and winter weather conditions in 2014 created major issues with grain car backlogs, storage constraints, and rail car premiums, and these issues raised transportation and commodity costs. The STB, however, did not have the authority to proactively investigate rail delay issues and does not have a systemized, publicly available database of complaints.
What the bill does: Grants STB new authority to avoid lengthy and expensive disputes and enhances transparency to benefit shippers, businesses and consumers across the country.
S. 808 provides the STB with the authority to initiate investigations on matters other than rate cases and, for the first time, requires the STB to establish a database of complaints and quarterly reports on them to provide more public accountability for ongoing problems.
Problem: Board discussion and initiatives are hampered because of the structure of the three-member board itself.
Because the STB has only three appointed members, board members cannot have nonpublic collaborative discussions—which automatically form a majority—without a public hearing notice. For example, one board member reported staff-level budget briefings are conducted separately for each member.
What the bill does: Structural reform of the board allows for direct discussion to improve efficiency of operations.
S. 808 expands board membership from three to five members and, with proper disclosure, allows board members to talk with one another without a prior public hearing notice so long as it complies with certain scope and participation limitations.
Click here to read S. 808 that would authorize the Surface Transportation Board through FY2020. The Surface Transportation Board Reauthorization Act of 2015 is scheduled for consideration by the Commerce Committee on Wednesday, March 25, 2015.