2023 Washington Outlook: More Building, More Oversight

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RAILWAY AGE, FEBRUARY 2023 ISSUE: 2023 Washington dynamics will challenge rail stakeholders to navigate policy course changes and build on pivotal funding opportunities.

“More building, more oversight” will drive rail policy in Washington in 2023. With the enactment of the $1.2 trillion Infrastructure Investment and Jobs Act in 2021, the first tranche of $66 billion in new IIJA rail investment has started flowing through the U.S. Department of Transportation to rail projects. A new Congress with a House Republican majority will oversee the Biden Administration across all dimensions including transportation. U.S. Transportation Secretary Pete Buttigieg faces scrutiny over recent aviation service failures, and the Federal Railroad Administration and Amtrak can expect Congressional crosshairs too. Meanwhile, the independent Surface Transportation Board will continue to review freight railroad service performance, signaling new regulatory postures that may rebalance customer and railroad interests. Altogether, rapidly evolving 2023 Washington dynamics will challenge rail stakeholders to navigate policy course changes and build on pivotal funding opportunities.

More Building

In December 2022, the USDOT announced nearly $9 billion in IIJA funding to modernize the Northeast Corridor, aimed at revitalizing a “major backlog” of century-old rail assets that The Washington Post said “reads like a history of American infrastructure greatness frozen in amber.” FRA Administrator Amit Bose declared, “These projects have been waiting, waiting to get going—for the next hundred years.”

But why did this rail investment make big news? Highway and transit interests with dedicated federal funding routinely implement multibillion-dollar projects. The $9 billion in IIJA funding for the NEC in FY 2022, out of $66 billion for rail in total from the IIJA over five years, reflects a necessary and more equitable federal attention to rail investment.

Devon Barnhart, Director of the OneRail Coalition, notes that diverse rail projects across the country seeking to capitalize on this new funding must forge multi-layered state and local relationships. “We’ve seen successful projects advance around the country when states, advocates and communities work hand in hand with rail partners to bring projects to fruition,” said Barnhart. “There is an opportunity to benefit tremendously from the infrastructure pipeline we’re building.”

Chuck Baker, President of the American Short Line and Regional Railroad Association, underscored the urgency of making the Consolidated Rail Infrastructure and Safety Improvements funding in the IIJA count. “Congress approved $1 billion guaranteed annually for CRISI, plus the ability to get up to $1 billion more annually through the discretionary appropriations process,” said Baker. “But the IIJA only lasts for five years—and short lines and other eligible applicants for CRISI and other IIJA programs need to show the public benefits derived from sustained investment in our rail system to ensure these programs continue well into the future.” ASLRRA will also look to the “Farm Bill” to consider providing funding for improved rail access for agricultural shippers. On the tax policy side, modernizing the 45G rail infrastructure tax credit to account for inflation since the credit was first enacted in 2005 is another legislative goal.

Rail advocates know the urgency of ensuring that the historic IIJA funding represents the start of dedicated and sustained federal appropriations for rail, not just a one-time boost. Infrastructure investment still draws bipartisan support, showcased in early January when President Joe Biden joined with Senate Minority Leader Mitch McConnell and senators and governors of both parties to celebrate $1.63 billion in federal funds for upgrades to an aging Ohio River bridge. Now, the 118th Congress will test whether dedicated federal infrastructure investment including for rail can remain “purple” in a red vs. blue world—an early indicator of whether such spending will continue or expire when the IIJA ends in 2026.

More Oversight

With thousands of Southwest Airlines flights cancelled over the holidays and the FAA’s NOTAM pilot advisory system failing two weeks later, aviation will be a 2023 priority for Congress. The Biden Administration’s nominee for FAA Administrator remains unconfirmed. FAA reauthorization will draw razor attention, but rail and other modes will come under Congressional scrutiny as well.

Deployment of automated track inspection (ATI) technology may lead rail issues for review. Rep. Rick Crawford (R-Ariz.), formerly lead Republican on the House Transportation and Infrastructure Subcommittee on Railroads, Pipelines, and Hazardous Materials and as late January set to be a senior T&I subcommittee chair, wrote in June 2022 to FRA Administrator Bose to “express deep concerns about recent policy changes by the FRA that likely limit the use of ATI technology.” Bose’s response in December that “[r]ailroads can utilize ATI technology while complying with the visual track inspection frequency” regulations without further FRA approval, and that FRA has “tasked the Railroad Safety Advisory Committee (RSAC) to consider alternative track inspection methodologies and to examine if they meet or exceed the minimum levels of safety currently established . . .” is unlikely to resolve the matter.

“Responsible bipartisan action that enhances safety and empowers efficient, reliable transportation solutions should be a top priority for House T&I leadership,” said Adrian Arnakis, Senior Vice President of Government Affairs at the Association of American Railroads. “Congress need look no further than automated track inspections, where the FRA has dug in against the broad deployment of an effective, proven safety innovation without any reasonable defense of its actions.”

With Rep. Sam Graves (R-Mo.) now chairing the House T&I Committee, expect Congressional hearings on ATI, FRA’s train crew staffing notice of proposed rulemaking, and other issues where Congressional Republican authorizers (and separately appropriators) will question FRA’s regulatory direction, performance, and expenditures.

At the same time, in 2023 the STB will continue its oversight of freight rail service. STB Chairman Martin J. Oberman has made clear his view that Class I pandemic-related workforce reductions correlate with freight rail service declines. In 2022, the STB centered on Class I service impacts with a major hearing in April on “Urgent Issues in Freight Rail Service,” heard testimony on Union Pacific embargoes in December, and twice compelled rail service to shipper Foster Farms.

These and other actions amidst a full regulatory agenda—including completing review of the Canadian Pacific-Kansas City Southern merger—herald the STB’s heightened focus on rail service to shippers. Chairman Oberman expressed his core philosophy this past November:

“The obvious reason for why the public interest requires the existence of the railroads is that, unlike many other parts of the private sector, the country’s economy cannot thrive without the railroads functioning at a robust level, functioning in my view at what ought to be their optimal potential …

“And the obvious reason that the STB exists is that these railroads have become effective monopolies, or at best duopolies, under the present legal structure.

“[A]s the railroads have proven to us, monopolists cannot be expected to serve the best interests of the economy and therefore the public—as distinguished from serving solely the profit interests of their owners—without oversight by a public agency whose job it is to ensure that the public interest is protected.”

Railway Age Capitol Contributing Editor Frank Wilner’s excellent overview in the December 2022 issue documents the STB’s pursuit of this public interest goal. In 2023, the STB will continue its assessment of how and under what circumstances, if any, service embargoes should be implemented, further evaluate a proposed reciprocal switching rule that would establish a process for shippers to secure dual rail access at single-served sites, address appeals of the adoption in 2022 of an arbitration rule and final offer rate regulation providing greater opportunities for more access to rate relief, and weigh a host of other regulatory policy questions that Chairman Oberman’s public interest framing presents.

These and other pending STB initiatives go to what may be ahead this year: an exploration of what exactly are the common-carrier responsibilities of U.S. freight railroads. In other words, what do “provide the transportation or service” and “reasonable” mean pursuant to 49 USC § 11101(a): “A rail carrier providing transportation or service subject to the jurisdiction of the Board under this part shall provide the transportation or service on reasonable request. . . .”

Chairman Oberman told the Midwest Association of Rail Shippers in January that there are matters pending before the STB that implicate a railroad’s common-carrier obligation. As Oberman pointed out, the vast increase in the use of “congestion” embargoes and two pending shipper complaints, for example, could involve the STB assessing the application of the common-carrier doctrine in these contexts.

Looking Forward

Segmenting Washington rail policy themes into two buckets of course overlooks unforeseen developments, uncertain economic headwinds, and obscures other currents. As just one question, what are the implications for railroads of an increasing emphasis on transportation electrification (e.g., the  2022 DOT Climate Action Plan for Resilience), if this policy accelerates deployment of electrified and ultimately autonomous trucks? And if trucks become electric, will heavier trucks with heavier batteries be permitted? Going one step further, at what point will the environmental advantage of railroads erode, if locomotives generate greenhouse gases and other pollutants at the source while trucks draw their energy from a grid increasingly powered by sustainable fuels?

Effectively addressing these and other policy challenges underscores the universal application of the Hippocratic Oath: “First do no harm.” That means a constant and aggressive pursuit of zero incidents and zero casualties in railroad operations, making good on projects funded with taxpayer dollars, and exceeding customer expectations. As Gentry Locke partner John Scheib, formerly Executive Vice President and Chief Strategy Officer for Norfolk Southern and earlier a chief of staff to an STB chair observed in this space a year ago, railroad performance “will affect how actively regulators and other government actors are involved in the supply chain.”

Good thoughts for all in the rail sector to consider in 2023.

Don Itzkoff serves as Chief Policy Officer for Patriot Rail Company.