RAIL: Freight rates spark hearing clash between industry, customers

Jeremy P. Jacobs, E&E reporter
Published: Thursday, May 14, 2015
This story was updated at 9:51 a.m.
Representatives of the freight rail industry yesterday clashed sharply with its customers on whether the sector needs more regulation to ensure fair shipping rates.

At issue: the 1980 Staggers Rail Act, the law that virtually saved the rail industry from complete collapse by deregulating it and allowing it to set rates based on market forces.

Thirty-five years later, many in Congress are asking whether the law needs updating because freight rail companies have been consolidated through mergers — leaving four giants that set rates for most shipping.

Concerns spiked after widespread rail car shortages in the winter of 2013 to 2014 led to shipping backlogs in the Upper Midwest.

Cal Dooley, a former California Democratic congressman and president of the American Chemistry Council, told the House Transportation and Infrastructure Subcommittee on Railroads, Pipelines and Hazardous Materials that shipping rates have risen 100 percent since 2001.

ACC’s members are the second largest class of shippers by rail in the country.

“We’re asking for some common-sense reforms to the Staggers Act,” Dooley said. “It is in bad need of reforms.”

Dooley’s remarks were countered by Edward Hamberger of the Association of American Railroads. Tinkering with the Staggers Act, he said, would be “trying to fix something that is not broken.”

In particular, he said his industry “quietly goes about its business” while spending $575 billion in private capital on improving its tracks and infrastructure.

The hearing came the morning after Amtrak train 188 derailed in Philadelphia, killing at least seven passengers and injuring about 200 more.

That led some Democrats on the panel to criticize a Republican appropriations bill that would cut $260 million from Amtrak’s capital grants program (Greenwire, May 13).
All subcommittee members offered their condolences to the victims of the accident before turning to whether, and how, the Staggers Act should be updated.

Dooley in particular criticized the Surface Transportation Board’s process for challenging potentially unfair rates. That process can cost $5 million and take three years to resolve, he said.

“That clearly is not acceptable,” he said.

Debra Miller, the STB’s acting chairwoman, didn’t disagree.

“Industry is frustrated with our pace, and so am I,” she said.

But Miller also said the STB faces other challenges. Lawmakers noted that only two of the three leadership positions on the board are filled, and Miller said the agency is using a “third world” computer system and lacks funds to update it.

“We really don’t have the resources necessary,” she said.

Lawmakers failed to provide insight into how they might seek to reform the process. Transportation and Infrastructure Chairman Bill Shuster (R-Pa.) asked witnesses mostly about a bill that recently passed out of the Senate Commerce, Science and Transportation Committee.

S. 808 is an STB reauthorization from Sens. John Thune (R-S.D.) and Bill Nelson (D-Fla.). It would expand the board’s leadership from three to five and allow voluntary arbitration to resolve rate disputes.
Most of the witnesses struck a generally positive note about the bill.

Frustration at STB

The generally low-key hearing was infused with energy near its conclusion by Massachusetts Rep. Michael Capuano, the top Democrat on the subcommittee.

Capuano expressed frustration at the STB’s approval of projects that seemingly are unrelated to rail service.

He cited the approval of propane and hazardous waste facilities that allowed rail companies to sidestep local health and safety controls because the board’s authority pre-empted local ordinances like zoning.

“Why should I have faith that the STB is not simply a tool of the railroad industry?” he asked Miller, noting that the propane facility was in his home state.

Miller said her board needs to take a closer look at “whether or not an activity … is part” of normal rail operations.