Friday, December 07, 2012

DeMint departure resets reregulation game

Written by 
The late British Prime Minister Harold Wilson observed, "A week is a long time in politics." And what a week it was on Capitol Hill.

U.S. CapitolJust as rail and rail-shipper lobbyists commenced mapping strategy to deal with the Senate Commerce Committee's incoming ranking Republican Jim DeMint of South Carolina—a/k/a the combative Tea Party turbocharger—DeMint stunned them Dec. 6, announcing he is resigning to lead the arch-conservative Heritage Foundation.

The Commerce Committee is Senate ground zero for railroad economic policy issues. Its Democratic chairman, Jay Rockefeller of West Virginia, has led the attack on Staggers Act changes.

On the minority Republican side, DeMint was to succeed consensus-building Kay Bailey Hutchison (R-Tex.), who is retiring. Hutchison, whose former chief of staff, Amy Hawkins, is now a BNSF lobbyist, was viewed as having a commanding understanding of railroad policy concerns, and was celebrated for defusing what railroads regarded as more radical provisions in the original Rockefeller bill that had been advanced by captive shippers. The bill, which exited the committee, failed to reach the Senate floor.

DeMint, by contrast, frustrated carriers by ignoring invitations to discuss, informally, rail issues. Still, his October comment, "The warrior role is going to be the governing role ... we don't have shared goals with Democrats," was seen as putting in limbo a renewed Rockefeller assault on the Staggers Act.

For sure, Rockefeller will renew his attack on railroad deregulation in the new Congress, with South Dakota's John Thune now likely to become the Commerce Committee's ranking Republican. Note his advancement is not a certainty, as he would have to relinquish his chairmanship of the Senate Republican Conference— the No. 3 spot in the Senate Republican leadership. But insiders predict Thune will choose the top Republican spot on the Commerce Committee.

Thune has a better understanding of railroads than most in Congress. A former House member, Thune served as South Dakota's state railroad director and as a lobbyist for Dakota, Minnesota & Eastern Railroad before his election to the Senate.

But Thune carries troublesome baggage. His constituency teems with grain shippers, ethanol producers and coal-using electric utilities seeking to roll back Staggers Act reforms—and Thune does not have a deaf political ear.

Thune wrote the Surface Transportation Board, complaining the premium paid by Berkshire Hathaway to acquire BNSF should not qualify for a return on investment financed by higher freight rates. He has complained about shipper captivity and railroad market dominance, and sought to move the Rockefeller bill – as moderated by Hutchison—to the Senate floor for a vote, saying, "We've got to provide an expedited way for shippers to have their grievances heard and settled, and hopefully a less expensive way [with] an empowered, more robust STB."

It takes two chambers to pass legislation, and even captive shippers acknowledge the Republican-controlled House is in no mood to tinker with the Staggers Act. So all's well that ends well?

Not quite. Recall that retiring Senate Antitrust Subcommittee Chairman Herb Kohl (D-Wis.) led a failed effort to subject railroads to increased antitrust penalties. Kohl may be leaving, but his co-sponsors remain—and remain energized. Chief among them is Sen. Amy Klobuchar, a member of both the Antitrust Subcommittee and the Commerce Committee. Another co-sponsor remaining on the Antitrust Subcommittee is Al Franken (D-Minn.). And new to the Senate will be Tammy Baldwin (D-Wis.) who, when in the House, sponsored a bill similar to Kohl's.

Again, railroads will look to the Republican controlled House to block Senate attempts at exposing railroads to increased antitrust penalties. The new House Judiciary Committee chairman will be Bob Goodlatte (R-Va.), viewed as "largely unknown" in his position on rail antitrust changes. Goodlatte's predecessor as chairman, Lamar Smith (R-Tex.), was viewed as "solid" by rail lobbyists.

And while incoming Transportation & Infrastructure Committee Chairman Bill Shuster (R-Pa.) will be a strong bulwark against captive shipper attacks on the Staggers Act —Shuster's Dickinson college roommate was Union Pacific lobbyist Mike Rock—ranking Democrat Nick Rahall (D-W.Va.), who previously sided with Republicans in support of railroad market freedoms, has inherited a new captive shipper problem via redistricting in the name of M&G Polymers, which produces plastic pellets.

For three years, M&G has been embroiled in a rate challenge against CSX, which M&G says is costing it $3.5 million annually in higher tariff charges and millions more in attorney fees while awaiting an outcome. Among the objectives of captive shippers is legislation to streamline and speed the rate challenge process through the STB—especially as it relates to non-coal customers whose shipping patterns are more complex.

Were Harold Wilson alive today, he might add, "And the more things change, the more they stay the same."

Frank N. Wilner

Frank N. Wilner is author of six books, including, Amtrak: Past, Present, Future; Understanding the Railway Labor Act; and, Railroad Mergers: History, Analysis, Insight. He earned undergraduate and graduate degrees in economics and labor relations from Virginia Tech. He has been assistant vice president, policy, for the Association of American Railroads; a White House appointed chief of staff at the Surface Transportation Board; and director of public relations for the United Transportation Union. He is a past president of the Association of Transportation Law Professionals.