Commentary
STB nominee reflects a shipper tilt
Written by Frank N. Wilner, Capitol Hill Contributing EditorPaint former Surface Transportation Board (STB) Chairman Dan Elliott a darling of the National Industrial Transportation League (NITL), a shipper organization asking the STB to require—through so-called open access—that two Class I railroads be available to compete for freight carloads even if the tracks of only one railroad serve a shipper’s facility.
Seeking Senate confirmation to a second term on the three-member STB, and his second term as chairman, Elliott promised expedited consideration of the NITL request, saying its consideration will be “one of the top things for me to do” if he returns to his former post.
Elliott departed the STB Dec. 31 upon expiration of his first term, which included a 12-month holdover period permitted by statute. Democrat Deb Miller has since been acting chairman. The lone Republican is Ann Begeman. Neither has expressed themselves on this issue—fiercely opposed by railroads and investors—as did Elliott at his May 6 confirmation hearing before the Senate Commerce Committee. There is no requirement that the STB consider the NITL request, but the STB’s regulatory agenda is controlled by its chairman.
Few issues before the STB are as controversial as open access—also known as mandated reciprocal switching. If the agency considers and then approves the NITL request for open access—Elliott stopped short of indicating his preference, saying only he favors consideration by the STB of the request—the STB would dictate terms by which railroads deal with each other without shippers having to demonstrate that there is any competitive need for such interference in railroad business dealings. The intent of the NITL request is to lower freight rates through regulatory fiat absent a showing of anti-competitive conduct by railroads.
An ally of the NITL, the American Chemistry Council, estimates that STB approval of open access will reduce railroad revenue by $1.2 billion annually—a result investors warn will threaten long-term railroad revenue adequacy and choke off future investment in railroad infrastructure as investors flee to other, non-railroad opportunities.
Although President Obama nominated Democrat Elliott in 2014 for a second term, the then-Democratic controlled Commerce Committee failed to give him a hearing. President Obama renominated Elliott upon seating of the Republican controlled Senate in January, but his confirmation hearing was not scheduled until May 6. Even if the Commerce Committee acts favorably—and that decision may not occur until June—the entire Senate then must vote on Elliott’s confirmation.
Elliott additionally told the Commerce Committee that he views the job of chairman as “a regulatory backstop” when market forces “are not necessarily working while, at the same time, allowing railroads the ability to make adequate revenues” that encourage new capital investment.
Observing that a “rail renaissance” has occurred since Congress in 1980 partially deregulated a then financially moribund industry, with numerous bankrupt railroads, Elliott said that now is the “right time” for a “thorough examination of rail regulatory policy” including consideration of a competitive access mandate. Yet by the STB’s own determinations, the “renaissance” cited by Elliott still has not produced, through an entire business cycle, a revenue adequate railroad industry.
Although now-retired Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) advocated aggressive reregulation of railroads, his successor, John Thune (R-S.D.), has taken a less strident approach. Elliott appeared to have prepped for a Rockefeller hearing rather than one before Thune.
Rather than advocate restoration of assertive railroad regulation, Thune is sponsoring—along with the committee’s senior Democrat, Bill Nelson of Florida—legislation (S. 808, the Surface Transportation Board Reauthorization Act of 2015) to correct what they term “wasteful and unnecessary delays” in adjudicating shipper grievances. S. 808 would establish deadlines for STB decision-making, increase the agency’s size from three to five members, and strengthen the STB’s independence by allowing it to deal directly with Congress rather than through the Department of Transportation. Nelson told Elliott he wants an STB whose policies do not choke off private sector investment.
Thune’s first question to Elliott was why Elliott’s fiscal year 2016 budget request to Congress—formulated by Elliott before he departed the agency, and which drew a dissent from Begeman—seeks to double the STB’s travel budget at the expense of resources that could instead be devoted to simplifying and speeding agency handling and deciding of shipper complaints. Thune said “a significant portion” of the STB’s resources already is consumed by complex rate cases that are expected to increase in number, and that Elliott’s budget request failed to dedicate enough attention and resources to improve the STB adjudication process.
Although Elliott engaged in significant travel while chairman—to hold hearings and/or visit shipper and railroad facilities—he termed the travel budget “not a big number,” and stressed his intent to spend budget dollars on outside consultants who would assist the board in finding “new ways” for the STB to become more efficient and decide cases more speedily. Among them are Federal Energy Regulatory Commission procedures affecting electric utilities that many would like to see adopted by the STB. Elliott promised “a careful look at how rate cases are handled at other agencies and around the world.” It has been noted that a lower travel budget could translate into additional hiring, allowing internal studies rather than the use of outside consultants.
Elliott also took credit for imposing new reporting requirements on railroads that he said, without explanation, would allow the board to “better understand” shipper and railroad service delays.
For additional information on Elliott and his quest to be confirmed to a second term, click on the following link:
As a side note, a wide gulf remains between Democrats and Republicans on the Senate floor—and that could delay or scuttle an Elliott confirmation vote on the Senate floor as well as passage of S. 808, notwithstanding its bipartisan support within the Commerce Committee.
Sen. Thune fired back earlier this week at Senate Minority Leader Harry Reid (D-Nev.), after Reid asserted on the Senate floor that the Thune-led Commerce Committee had “held not a single hearing” on reauthorization of surface transportation legislation.
Said Reid: “Transportation would be the first easy place to find agreement in Congress. But, Mr. President, it’s hard to comprehend, but the Republican majority has not held a single hearing on this most important piece of legislation. Not a single hearing. Nothing.”
Thune’s staff advised that the Commerce Committee “has in fact held seven hearings [including the Elliott confirmation hearing] directly on, or related to, reauthorization. Five of these hearings were chaired by Sen. Deb Fisher (R-Neb.) at the subcommittee level and two by Sen. Thune at the full committee.”
