Tuesday, December 09, 2014

Old threats from a new Congress

Written by  Frank N. Wilner, Contributing Editor
Old threats from a new Congress
In a twist to 18th century satirist Jonathan Swift’s “Modest Proposal,” National Industrial Transportation League (NITL) President Bruce Carlton suggests shippers consume (as in “eat”) their railroads.

Before the Surface Transportation Board (STB), Carlton termed his petition—that shippers served by only one railroad be granted access to a second through mandatory reciprocal switching—a “modest proposal.” Really?

Railroads assert it would chop revenue by some $7 billion annually, discourage investment in asset renewal and expansion, require more switch engines, increase dwell time and sap productivity—in short, eat through assets. As if performing in a theater of the absurd, these same shippers demand of railroads greater capital investment—the source of which is sufficient revenue and profits—to improve fluidity of the rail network.

Carlton, shifting from literature scholar to Soviet historian, then invoked before the STB Josef Stalin’s “salami-slicing” strategy, terming his modest proposal “a wonderful beginning … a step in the right direction.” Good grief, Carlton advocates expanding mandated access to turn the nation’s privately owned rail network into a public escalator with a freight-rate direction of downward only.

Shippers also are urging lawmakers pursue reregulation, eventually restoring a pre-Staggers Act (1980 partial deregulation) environment even the NITL decried as villainous and requiring reform. For many, the lessons of economic history—the millstone of rigging railroad pricing to subsidize more politically favored shippers or commodities—have too soon been forgotten.

Such are the traps facing railroads before the new Congress in January. Separately, the STB—which has sided with shippers about half the time in deciding rate-reasonableness complaints—will consider the NITL petition plus new measures of revenue adequacy and revisions to its stand-alone cost methodology.

Railroad baiter-in-chief Sen. Jay Rockefeller (D-W.Va.)—long a voice for disgruntled coal shippers while chairman of the Senate Commerce Committee—is retiring. His successor as Commerce Committee chairman in the Republican controlled Senate come January is John Thune (R-S.D.), who joined earlier this year with Rockefeller in introducing shipper inspired legislation that stalled. Expect Thune, energized by his native South Dakota agriculture interests, to reintroduce that bill (S. 2777) in concert with the committee’s ranking Democrat, Florida’s Bill Nelson.

While provisions such as increasing the number of STB members from three to five aren’t draconian, an arbitration requirement would treat individual shippers and commodities in a vacuum, encouraging indiscriminate choosing of winners and losers.

Thune, who once headed South Dakota’s rail planning division, understands the horrors of under-investment in rail assets that follow too-aggressive profit-choking economic regulation; Nelson is on record that senators not make a rush to judgment, but rather encourage private-sector solutions. What exits the Commerce Committee is subject to more radical amendment on the Senate floor. The House is less inclined to reregulate.

The proven stratagem in defending Staggers Act freedoms is to assure network fluidity, provide no-quibbles customer service, and deliver a concise, comprehensible message to Capitol Hill why public policy must preserve and expand the railroads’ current annual capital investment of $26 billion. Policies advancing free lunches to the politically favored, oft-complaining only inflict financial anemia on the victim.

While shippers contend current railroad profits are sufficient to justify lower rates and encourage capital investment, Wall Street analysts differ; and no railroad has transited a complete business cycle consistently meeting minimum requirements for a revenue adequacy determination.

The new Congress must also address highway policy. Per-gallon fuel taxes are insufficient and inefficient. Weight-distance user charges better match pavement and bridge damage with responsibility. Anticipate efforts to increase allowable truck lengths and weights that threaten rail intermodal.

A Federal Communications Commission delay linked to authorizing placement of poles and towers makes compliance with the Dec. 31, 2015 implementation of Positive Train Control impossible. Congress likely will extend the deadline.

Sen. Commerce Committee member Richard Blumenthal (D-Conn.) will seek support for his effort to slow trains carrying high-hazard flammables, require electronically controlled pneumatic brakes, and fines as high $1 million for violations.

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