Taking Measure of STB’s Oberman

What’s the consequence of appointing as chairperson of the Surface Transportation Board (STB) a veteran of rough-and-tumble Chicago politics? Contentment and consternation, it seems.

Although shippers—specifically those with limited transportation alternatives to rail—appear contented with this rail regulator-in-chief, there is consternation among railroads. A Wall Street rail analyst opined, “He is freaking out investors.”

The reference is to now-76-year-old Democrat Martin J. Oberman, a former Chicago alderman who very much remains a folksy and formidable pol ever on the hustings—his smile is as ever-present as his barrister’s bow-tie. Not surprisingly, he prefers to be called “Marty” and eschews his official title of chairperson in favor of, simply, “Board member.” 

Nominated to the STB in 2018 by President Trump, Oberman took office in January 2019 at age 73—the oldest incoming member of the 135-year-old agency once known as the Interstate Commerce Commission (ICC). A House of Representatives Page at age 13—politics having entered his life early—Oberman learned personal discipline at a military academy prior to earning an undergraduate degree in psychology from Yale and a law degree from the University of Wisconsin. 

Termed “a progressive” by the Chicago Tribune, Oberman’s prior professional lives included political appointments as general counsel to the Illinois Racing Board, where he prosecuted race-horse drugging and political payoffs, and as chairman of Chicago Metra, where the Tribune credited him “with helping to repair the commuter railroad’s reputation after years of scandal.” A back-room, deal-making, back-slapping pol Oberman is not.

Since elevation by President Biden to STB chairperson in January 2021—succeeding Republican Ann D. Begeman, who departed the agency in December following expiration of her second Board-member term—Oberman has been an aggressive proponent of more rail competition and an equally ferocious warrior against expansion of carbon footprints. 

As to matters of rail competition, Oberman—who controls the STB docket in his role as chairperson—promised to reopen dormant pro-shipper rulemakings and has used his bully pulpit to lambaste perceived railroad market power, saying at different forums:

• “There’s just not real effective competition among rail carriers.”
• “Except for intermodal and a handful of other areas, generally speaking, I think shippers have very little bargaining power these days.”
• “I have the distinct impression that [the major railroads], despite the game they talk, don’t really want to compete.” 

In December, Oberman displayed—beyond his preference to commute by bicycle, no matter the weather—an aggressive commitment to reducing carbon footprints. He wrote an 11-page dissent to a 4-1 STB decision granting authority to construct a new 85-mile Uinta Basin Railway in western Utah to haul shale-extracted crude oil. Even intended imposition by the STB of environmental mitigation conditions was not sufficient to sway his opposition. 

Open to debate is whether Oberman—in a dissent that read much as a treatise on climate change—exceeded his statutory authority in interpreting the National Environmental Policy Act (NEPA). For sure, there are other federal agencies substantially better qualified—and with more comprehensive and efficient tools—to consider and mitigate the environmental impact of crude oil extraction. Arguably, the STB’s expertise is better directed at considering the environmental impact of train operations, such as locomotive emissions, train noise, the number of grade crossings, and roadbed construction effect on vegetation, water quality and habitat. 

Not taking a similar view as Oberman in deciding the Uinta Basin Railway case in mid-December was his fellow Democrat on the Board, Robert M. Primus. Despite having been schooled in liberal Democratic views on the environment while serving for many years as a congressional aide, Primus chose a more practical analysis of the case in voting to approve construction. Also voting “yes” were the STB’s three Republicans—Begeman, Patrick J. Fuchs and Michelle A. Schultz.

Given his control of the STB docket, Oberman could have allowed the Uinta Basin Railway construction application to gather dust as Begeman, when chairperson, allowed shipper-sought rulemakings to languish. To his credit, Oberman chose not to act as the STB’s ringmaster in favor of a collegial interaction with other Board members. Impressively, he put the matter to a vote, knowing in advance its likely 4-1 outcome based on statutorily permitted informal discussions with fellow board members and STB staff. 

This was not the first instance of Oberman calling for a vote, despite anticipating he would be in the minority. In July, he alone dissented in an unrelated line construction case, and in May he was the lone dissent to a Board decision not to reconsider approval of a line abandonment. 

The practical criticisms to Oberman’s Uinta Basin Railway dissent are many. For example, the maximum 350,000 barrels of new crude oil production projected to be transported daily is relatively minor in comparison to U.S. daily production of some 12 million barrels. Even that 350,000-barrel maximum may not be realized. And all may not be combusted, as there are other productive uses for crude oil.

More significantly, crude oil production is demand-driven. The International Energy Association reports that in 19 of the past 21 years, global petroleum production trailed demand—and the gap may widen notwithstanding promotion of renewable energy sources. Global investment bank Goldman Sachs predicts crude oil prices jumping sharply in coming years because of supply shortfalls. This bodes poorly for economic activity and jobs, which should concern every taxpayer-funded agency. 

Increased crude oil production will protect against economy-dampening energy price increases, while the new railroad’s construction offers positive economic benefits, such as job creation, economic opportunity and introduction of lower-cost rail to a region now wholly dependent on truck.

Also to be considered is that, notwithstanding public policy favoring electric vehicles (EVs), EVs make up just 5% of current new vehicle sales, with the technology in its infancy and risky. General Motors recently shuttered a Michigan Chevrolet factory because of exploding lithium-ion batteries and has recalled all 141,000 EV Chevy Bolts ever manufactured owing to fire danger. 

Internal combustion engines requiring refined crude oil will remain essential to transportation, and private vehicle use may increase as more work is accomplished remotely, encouraging migration from cities with public transportation to auto-dependent suburbs and rural areas where taxes and prices of land and housing are lower. Decision makers cannot ignore that part of being American is to drive super-size pickup trucks and big SUVs.

If Oberman is playing “good Democratic soldier” in the Biden Administration, he might revisit Team Biden’s revised energy agenda. Although Biden early in 2021 revoked a permit for the Keystone XL pipeline, his choice for Energy Secretary, Jennifer Grenholm, in December asked U.S. petroleum firms to boost production. “Hire workers, get your rig count up,” she was quoted. Biden also has continued Trump’s liberal approval of permits for oil drilling on public lands, understanding that approval ratings suffer when gasoline and diesel pump prices rise.

Finally, there is Oberman’s seeming distrust of free markets. This should trouble shippers as well as railroads and investors. Where the Board’s majority followed STB precedent in leaving Uinta Basin Railway financing to the marketplace, Oberman questioned its financial viability, even though the STB’s statutory role is limited to project authorization. This suggests a bothersome Oberman inclination to favor government command-and-control over freedom of production and consumption embodied in the invisible hand of Adam Smith that guides free-market economies. 

Get used to Oberman’s activism. His first term extends two more years—plus there is potential for a one-year holdover period while President Biden is still in office. 

The better takeaway is that Oberman, although an activist with strong shipper-friendly and environmentalist-embracing opinions, has not sought to use his role as chairperson to impede those with contrary viewpoints. That Primus, Oberman’s fellow Democrat, has declined to vote with Oberman in other cases—indeed, written strong dissents of his own—and that just-sworn-in Begeman successor and Democrat Karen J. Hedlund has a reputation as an independent thinker, suggests strongly Oberman does not control other Democratic votes on the Board.

Most refreshing about Oberman is that he leads through an appeal to reason. Most unlike STB chairperson predecessors, he embraces decision-making transparency, having scheduled public hearings on issues he termed as having “potential for significant impact, not only on the involved railroads, but on the shipping community, labor, rail passengers, consumers and the public at large. Discussing these issues in a public forum is an important step for improving participation and accountability for the Board.”

Among the Oberman-scheduled public hearings:

• A revised application by CSX to acquire Pan Am Systems and its short line subsidiaries, scheduled for Jan. 13. Docket No. FD 36472, CSX Merger Application to Acquire Pan Am Systems.
• An application by Amtrak that it be allowed to operate additional passenger trains on CSX and Norfolk Southern track between New Orleans and Mobile, Ala., scheduled for Feb. 15. Docket No. FD 36496, Amtrak Application to Operate Gulf Coast Service.
• Consideration of a shipper request (contained in a previously long-dormant Notice of Proposed Rulemaking) to adopt revised reciprocal switching regulations, scheduled for March 16. Approval would, in part, require railroads with sole physical access to a shipper facility to switch the shipper’s freight cars to a junction point with a competing railroad. Docket No. EP 711 (Sub-No. 1), Reciprocal Switching.

As an aside, Oberman’s 11-page dissent to the 25-page Uinta Basin Railway decision was hardly a record. A 1962 minority dissent written by ICC member William H. Tucker to Chesapeake & Ohio Railway’s approved financial control of Baltimore & Ohio Railroad (both now part of CSX), ran 38 pages—four pages longer than the decision. Chesapeake & Ohio Railway – Control – Baltimore & Ohio Railroad, 317 I.C.C.261.

Frank N. Wilner is Railway Age Capitol Hill Contributing Editor. He is a former White House appointed STB chief of staff, former president of the STB’s bar association and for two decades was assistant vice president for policy at the Association of American Railroads. Publication of his seventh book, “Railroads & Economic Regulation,” is pending publication by Simmons-Boardman Books.