LEGISLATIVE REPORT, APRIL 2019 - Knock, knock. Who’s there? If at the door are those laboring in official Washington, the answer is, “many new faces”—new congressional committee chairs, regulators, association chiefs, lobbyists and labor negotiators. Does not danger dwell where unfamiliarity and uncertainty lurk?
History may provide solace. “When you’re fighting the railroads, they’re very strong and they seldom lose,” says one of the railroads’ most resolute adversaries, attorney Robert G. Szabo, whose Consumers United for Rail Equity coalition once came within a single Commerce Committee vote of sending to the Senate floor a referendum on whether to retain for railroads partial economic deregulation.
Indeed, it is difficult finding evidence of railroads making a hash of things in the legislative or regulatory arenas.
Enter now an assemblage of new advocates and decision-makers as railroads again sally forth to defend against those urging a tilt in their direction of the competitive playing field. Railroads also must avoid stumbling service-wise in implementing Precision Scheduled Railroading that is pounding operating ratio down to unmapped depths, and in finalizing installation of Positive Train Control (PTC).
Also fraught with risk of unwanted new regulation and legislation is rail transport of crude oil, which has bounded from 55 million barrels in 2012 to more than 130 million barrels, and now represents some 40% of domestic crude oil moving to refineries. A misstep could chill efforts to replace prescriptive safety regulation with more efficient performance-based safety standards, where the Federal Railroad Administration (FRA) establishes a desired safety outcome and carriers innovate to reach the goal.
To be preserved and advanced are policies and programs assuring continued viability of smaller freight and all manner of passenger railroads.
The New Faces
As for the new arrivals, there are Association of American Railroads (AAR) President Ian Jefferies, American Short Line and Regional Railroad Association (ASLRRA) President Chuck Baker and American Public Transportation Association (APTA) President Paul Skoutelas.
On the lobbying front, new AAR arrival Adrian Arnakis is collaborating with newbie Jefferies in pursing the industry’s lobbying agenda. Arnakis arrived from the Republican side of the Senate Commerce Committee; Jefferies from the Democratic side—both having been senior advisors to senators on transportation, economic and safety issues. Other new lobbyists are CSX’s John Patelli, Norfolk Southern’s Marque Ledoux and Union Pacific’s Printz Bolin.
Among challenges is that of 535 lawmakers, only six remain who were present in 1980 when Congress concluded the necessity of rolling back stultifying economic regulation (the Staggers Rail Act, largely now unknown in name on Capitol Hill)—provisions of which many rail shippers are aggressively seeking to dilute through regulatory fiat or new legislation. Those remaining—some since moved from the House to Senate—are Sen. Chuck Grassley (R-Iowa), Sen. Patrick Leahy (D-Vt.), Rep. Ed Markey (D-Mass.), Rep. James Sensenbrenner (R-Wisc.), Sen. Richard Shelby (R-Ala.) and Rep. Don Young (R-Alaska).
As for the new 116th Congress, the most railroad-important committees have leadership changes.
Peter DeFazio (D-Ore.)—robust in his support of short lines, but thought “swayable” by captive shippers—chairs the House T&I Committee; while Sam Graves (R-Mo.), previously a “no” vote on liberalizing truck size and weight, and said to be “no fan of economic regulation,” is ranking (senior minority party) member. DeFazio succeeds now-retired Bill Shuster (R-Pa.), who, with his father, Bud—a previous T&I Committee chairman—were among the freight railroads’ best congressional friends.
T&I’s Railroad Subcommittee is chaired by Daniel Lipinski (D-Ill.), said “not a plus” for passenger rail, but a proponent of funding the Chicago Region Environmental and Transportation Efficiency (CREATE) Program, a public-private partnership to reduce train and truck congestion. Lipinski’s father, Bill, a former T&I Committee member, now lobbies for BNSF.
The Railroad Subcommittee’s ranking member is Rick Crawford (R-Ark.), a perennial supporter of the short line and regional railroad investment tax credit, but otherwise a back-bencher on rail issues.
On the Senate Commerce Committee, Roger Wicker (R-Miss.), who voted to open Amtrak long-distance routes to competitive bidding, favors economic deregulation and opposes longer-combination trucks, is chairman, succeeding John R. Thune (R-S.Dak.), now Senate Majority Whip. Maria Cantwell (D-Wash.) succeeds election-defeated Bill Nelson (D-Fla.) as ranking member. While said “not very friendly” toward Class I’s, she is a proponent of passenger rail.
On the Senate Surface Transportation Subcommittee, Deb Fisher (R-Neb.) remains chairman. She advocates safety regulators be bound by “sound science, relevant data and data modeling” in decision-making, and supports giving railroads greater flexibility to apply innovation in meeting safety goals (performance-based safety standards). The subcommittee’s ranking member is Tammy Duckworth (D-Ill.), with minor past involvement in rail issues.
At the Surface Transportation Board (STB), former Senate Commerce Committee senior legislative aide Patrick J. Fuchs, a Republican, joins attorney, former Chicago alderman and Chicago Metra Chairman Martin J. Oberman, a Democrat, as new members. Republican Ann D. Begeman remains chairman, with two STB seats vacant. (See Watching Washington, p. 10, for more on these members and STB issues.)
For the first time since 2009, the three-member National Mediation Board (NMB) is under Republican control, with new GOP arrivals Gerald W. (Trey) Fauth III and Kyle Fortson. Should productive rail collective bargaining stall, the NMB determines if and when to declare an impasse, leading to appointment of a fact-finding Presidential Emergency Board that recommends a non-binding settlement. The NMB’s new tilt was seen in the first significant action of Fauth and Fortson—a rulemaking to weaken impediments for workers seeking to decertify their union.
The Federal Railroad Administration (FRA) and Federal Transit Administration (FTA) have relatively new leaders—Ronald L. Batory at FRA; and Acting Administrator K. Jane Williams at FTA, pending Senate confirmation of Thelma Drake.
Don’t call the newbies rookies, however, as each has MVP credentials. The crucial unknown, of course, is a difficult-to-quantify human chemistry—the principal determinant of effective engagement. It was no coincidence that in 1998, when Bud Shuster chaired the T&I Committee, and STB reauthorization, hard-coupled to a shipper reregulation agenda, was before Congress, the AAR hired Ed Hamberger as its president. Early in his career, Hamberger was employed by the elder Shuster, with whom he built a lasting bond, which served railroads demonstrably well.
A New Era Now Begins
Although railroads are targeting lawmakers and regulators with advertising, advertorials and third-party-induced commentary defending partial economic deregulation, the more immediate challenge is competitive equity—assuring that heavy trucks pay user charges commensurate with the pavement and highway-bridge damage they cause.
Railroads also oppose congressional loosening of maximum truck length and weight limits, which would accelerate user-charge under-payments, as weight is a primary cause of pavement and bridge deterioration.
A coalition, including the National Industrial Transportation League (NITL), Amazon, FedEx and UPS, is asking Congress to allow double 33-foot trailers nationwide—up from twin-28-foot trailers; and even to allow maximum truck weight to increase from 80,000 pounds to 91,000. While railroads grasp it’s a sticky wicket fighting their customers, “it doesn’t preclude us from remaining firm on the need for truckers to fully cover their costs,” says the AAR.
Although heavy trucks pay a per-gallon motor fuels tax directed to the Highway Trust Fund (HTF), the tax hasn’t increased since 1993, while purchasing power has decreased by almost 65%, and nominal costs of highway and bridge construction and repair has risen substantially.
The HTF, created in 1956 to finance the Interstate Highway System and other federal-aid highways—and now with a separate account for mass transit—has required bailouts from the General Treasury of more than $143 billion since 2008. The HTF remains underfunded, meaning rail-competitive heavy trucks enjoy an unjust competitive advantage over railroads that own, operate, maintain and even police their track network.
To restore HTF solvency, lawmakers are considering either an increase in the per-gallon motor fuels tax; a vehicle-miles traveled (VMT) fee; a weight-distance charge; or removal of a legislative prohibition on tolling Interstate Highways constructed since 1956—supported by President Trump. The 2015 Transportation Equity Act for the 21st Century (TEA-21) authorized a pilot project allowing 18 states to toll Interstate Highways, with some 3,000 miles of the 46,000-mile Interstate Highway System now tolled.
While the House T&I Committee has jurisdiction over truck size and weight, the Senate gives jurisdiction over truck length to its Commerce Committee, and truck weight to the Environment and Public Works Committee. Whether user charges are called a tax or fee, the congressional tax- writing committees (House Ways & Means and Senate Finance) may seek jurisdiction. Semantics is at play here, as Republicans en masse have signed a “no new taxes” pledge.
Notable is that the Senate Finance Committee’s ranking Democrat Ron Wyden, the Ways & Means Committee’s Democratic Chairman Earl Blumenauer and the T&I Committee’s Democratic Chairman DeFazio all are from Oregon, where a state “weight-mile tax” has been in effect for decades.
Although the AAR told Congress in February it supports a 20-cents-per-gallon increase in the fuels tax, Arnakis says “railroads are largely agnostic as to the means for keeping the Highway Trust Fund solvent,” as long as it is paid for by users.
APTA, meanwhile, is seeking creation of a Passenger Rail Trust Fund—separate from the HTF—to increase existing investment in intercity rail. It would have a yet-to-be-determined dedicated revenue source, with grants directed by regional and state transportation authorities.
Aside from the Fixing America’s Surface Transportation (FAST) Act, which expires in 2020 and already serves to authorize highway, mass transit and highway-rail grade crossing projects, Congress is crafting a more comprehensive 10-year infrastructure bill to include telecommunications, the electrical grid, and water and waste water systems, with a price tag exceeding $1 trillion and no identifiable revenue source.
Strong political divisions already are evident. Senate Minority Leader Chuck Schumer (D-N.Y.) says such an infrastructure bill must transition America to a “clean energy economy,” with DeFazio calling for a “less fossil [fuel] dependent” nation; but the Trump Administration [and, by extension, most congressional Republicans] rejects the Democrats’ New Green Deal. The Administration advocates greater use of coal, and has relaxed emissions caps for coal-fired generating plants.
Equally problematic is that while projects and spending are being identified for a bold infrastructure bill, there has been little discussion as to who will pay, and how. The nation’s debt has increased by more than $2 trillion since 2017, standing now at $22 trillion, and on track to reach $33 trillion by 2029. Even absent new spending legislation, Congress faces having to increase the national debt ceiling before Oct. 1. In 2015, Presidential candidate Donald Trump said that if the debt topped the then-$21 trillion mark, “Obama will have effectively bankrupted our country.”
Perhaps no greater truth has been spoken than by T&I Committee ranking member Graves: “We’re going to have to spend a lot of political capital to do whatever it is we’re going to do.”
Short Lines and Regionals
For short line and regional railroads, no issue is of greater importance than restoration of a 50% investment tax credit (45-G, for its designated section in the Internal Revenue Code)—and making it permanent, as opposed to the six renewals it has received since being created in 2005. That tax credit has encouraged capital investment of more than $4 billion by regional and short line railroads, benefitting some 10,000 shippers in mostly rural areas.
Bills to extend 45-G are moving in Congress. Among sponsors of the House-introduced Building Rail Access for Customers and the Economy (BRACE) Act (H.R. 510) are Blumenauer, DeFazio and Graves; while a similarly named and written S. 203 has support from Schumer, Thune and Wicker. Both include provisions making the 45-G tax credit permanent, and retroactive to Jan. 1, 2018, as the previous 45-G provision expired in 2017.
Expected is that these bills will be incorporated with tax credit bills benefitting other industries—collectively moving in a single omnibus bill. For example, the Tax Extender and Disaster Relief Act (S. 610) incorporates the small-railroad 45-G tax credit with those of other industries, the rub being that S. 610 has no provision for permanence.
Amtrak and Transit
The immediate challenge for Amtrak and public transit is avoiding President Trump’s heavy-on-the-skinny fiscal year 2020 budget request that seeks to slash Amtrak funding by 23% and transit by 31%.
There already is a $90 billion backlog in project funding to bring transit systems to a state of good repair, says APTA. Millennials increasingly are looking to substitute public transportation for the automobile, and transit is a lifeline for many, especially in rural areas.
As for Amtrak, the Trump budget proposal cuts in half funding for the Northeast Corridor (NEC), and zeroes out Amtrak’s NEC Gateway project, which includes a new cross-Hudson River tunnel linking New Jersey with New York City. It is suspected that the Federal Transit Administration’s “medium-low rating” of the tunnel project, which disqualifies it for federal funding, is in furtherance of the President’s intention to shift more cost responsibility for Amtrak to the states and localities.
The Trump budget request also would cut funding for long-distance trains, break many into shorter routes and, in many places, substitute connecting buses for rail.
Where the President’s budget proposal provides for capital improvement grants for new transit projects, they are intended as incentives for regions, states and localities to provide most of the financing. The Trump Administration says that while highways are of national concern, transit and intercity corridor trains are of local concern.
Amtrak’s dismal on-time performance (OTP), where its trains are hosted on freight railroad tracks, could be ripe for new legislative attention. This could occur if the Supreme Court agrees with an AAR petition to scrap a requirement in the 2008 Passenger Rail Improvement and Investment Act (PRIIA) allowing Amtrak to collaborate with the FRA in establishing metrics and standards for OTP.
Senate Commerce Committee Chairman Wicker takes special interest in freight railroad dispatching of Amtrak trains. In 2018, only one of Amtrak’s long-distance routes had an OTP of more than 70%. Ten of those routes had OTP of less than 50%, with Norfolk Southern the caboose, delivering on time only 24% of Amtrak trains it dispatched.
Additionally, the Association for Independent Rail Passenger Operators (AIPRO) seeks a new “rail title” in the FAST Act, to include creation of an Office of Rail Expansion within the FRA and FTA to encourage additional intercity rail passenger corridors, with pilot projects allowing competitive bidding by private-sector operators on Amtrak routes. Where private-sector competitors were allowed to bid on commuter routes, Amtrak often lost the contracts.
Topping the congressional wants of rail suppliers is a “Buy America” provision, where federal dollars fund capital investment. This request is taking on a national security aspect as PTC and other advanced electronics, with billions of lines of computer code, are becoming fused into all aspects of railroading, making them targets for foreign-government cyber espionage and cyberwarfare.