AAR calls on STB to stop major rulemakings for the time being

Pending the United States Senate confirming a “full slate” of board members appointed by President-elect Donald Trump to the United States Surface Transportation Board (STB), the Association of American Railroads (AAR) said last week that the STB should take a pause on its various planned regulatory proposals.

“The policy landscape in Washington, D.C. dramatically shifted on Election Day, and as such, the freight rail industry believes the STB should suspend its misguided quest to reregulate freight rail,” said Edward R. Hamberger, AAR president and CEO at last week’s RailTrends conference hosted by Progressive Railroading magazine and independent railroad analyst Tony Hatch. “Now is not the time for midnight regulations, let alone the enactment of the unfounded proposals currently arising from the STB that will surely fail to meet the rigorous examination promised by future leaders.”

Hamberger explained that the AAR’s request is akin to actions taken by Jay Rockefeller, former Senator from West Virginia and Chair of the Senate Committee on Commerce Science and Transportation and frequent AAR adversary, when Rockefeller and House counterpart Henry Waxman called on the Federal Communications Commission in 2008 to halt any complex and controversial items until then President-elect Barack Obama took office.

Perhaps the biggest regulation the AAR is focused on is competitive access, also referred to as competitive switching, which is a situation in which a railroad that has physical access to a specific shipper facility switches rail traffic to the facility for another railroad that does not have physical access. And the second railroad compensates that railroad that has physical access in the form of a per car switching charge, with the shipper facility gaining access to an additional railroad.

The AAR is steadfastly against it, saying new regulations like this are a step backward from the deregulatory path that has allowed railroads to make the capacity investments required to meet customer demand and further modernize a nationwide rail network that benefits shippers and consumers. And it has said that forced access is an ill-conceived approach that compromises the efficiency of the entire network by gumming up the system through added interchange movements, more time and increased operational complexity. 

In 2015, Congress decided the STB should have five members to ensure there were different viewpoints as it considered various issues, but at the moment there are three board members and that number will be down to two in January, with those two finding themselves in the minority at some point in 2017.

“I think it would be prudent for two members of a five-member board to hit the pause button,” said Hamberger. “I hope they will take a little bit of time to allow a new Congress and administration to weigh in on these issues.”

What’s more, Hamberger noted that a pause is needed as the regulations addressed by the STB are not run of the mill proceedings, explaining they are very substantial and significant and could very much change the underlying economic structure of the industry.

As for the STB’s stance on the AAR’s request, STB Chairman Daniel Elliott said at RailTrends that the STB looks forward to welcoming its new board members when they are added and will work to make the new transition as smooth as possible.

Addressing the switching mandate, the STB head said that it is an attempt to breathe life to a statutory remedy that was enacted by Congress and has remained virtually dormant to precedents established by the STB’s predecessor, the Interstate Commerce Commission, with the proposed rules mirroring the language of the statute to grant reciprocal switching only when it is possible and in the public interest or necessary for competitive rail service.

Stifel analyst John Larkin commented in a research note that Elliot’s comments seemed to suggest that the “natural progression of hot issues, such as the controversial proposed reciprocal switching rule, would likely result in the AAR getting their wish.”