Transcript Document 7872256

An Introduction to the Surface
Transportation Board
Francis P. Mulvey
Vice Chairman
Surface Transportation Board
Forum on Rail Transportation
Bayer Corporation
Pittsburgh, Pennsylvania
June 17, 2008
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Railroads & the U.S. Economy
• First railroad: B&O in 1829
• Rail network grew rapidly after Civil
War.
• Abuses by railroads and anti-monopoly
sentiment led to demand for regulation.
2
Development of Transportation
Regulation
• The Granger Laws
• The Interstate Commerce Act 1887
– Early Problems with the Act
– Congressional Responses
• Strengthening & Expanding
Transportation Regulation
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The Deregulation Movement
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Air Cargo Deregulation Act of 1977
Airline Deregulation Act of 1978
Motor Carrier Act of 1980
Staggers Rail Act of 1980
Bus Regulatory Reform Act of 1982
Interstate Commerce Commission
Termination Act of 1995
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RR Industry Pre-Staggers
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40 Class I Railroads
9 Railroads bankrupt
Industry-wide low return-on-investment
Railroads unable to raise capital
Railroads faced steadily declining market share
Regulation prevented RRs from any flexibility
in pricing to compete with other modes
• Carriers could not abandon redundant or light
density lines to cut costs
• Rates could not cover inflation due to regulatory
lag in rate adjustments
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Staggers Rail Act of 1980
• Railroads given freedom to set rail rates
based on demand
• Streamlined procedures for the
abandonment and sale of rail lines
• Encouraged Railroad-Shipper contracts
• Expanded ICC power to exempt
categories of traffic
• Rates evaluated by ICC under a
reasonableness test
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Class I Rail Miles 1830 - 2006
300,000
250,000
200,000
150,000
100,000
50,000
05
20
80
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50
19
20
19
90
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60
18
18
30
0
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Railroad ROI
1970 - 2006
12.00
10.00
8.00
6.00
4.00
2.00
06
20
04
20
02
20
00
20
90
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80
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19
70
0.00
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RR Employment
1939-2006
1,800,000
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
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39
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47
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60
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70
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80
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90
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92
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94
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96
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98
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00
20
02
20
04
20
06
0
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RR Capital Expenditures
1955-2006
(Amounts shown in Thousands)
Total
Roadway &
Structures
Equipment
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55
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65
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75
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85
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95
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97
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99
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01
20
03
20
05
$9,000,000
$8,000,000
$7,000,000
$6,000,000
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
$0
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Since Staggers
• Rail industry market share has increased
from 37.5% to 41.7%
• Rail rates down 55% on average (inflation
adjusted)
• Railroads’ ROI increased
• Railroads substantially increased
investment in infrastructure
• Improvement in safety performance
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The Railroad Industry Today
• 7 Class I Railroads
• 525 Class II and Class II railroads
• Much reduced system through
rationalization
• Average length of haul – 900 miles
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The Surface Transportation
Board Today
• Created by ICC Termination Act of 1995
• Three Board Members
• Residual economic regulation of the
railroads
• Reduced scope of regulatory activity-many rail movements deemed competitive
• Smaller staff
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STB Mission
• Exclusive review and approval of rail mergers
• Review rail rates and practices to ensure they are
reasonable and not discriminatory
• Approval, including environmental review, of
(i) construction of any new rail line or
(ii) abandonment of existing lines
• Rates for water carriers in non-contiguous
domestic trade
• Rates for pipelines not carrying energy products
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STB Merger Authority
•Mergers in the post-Staggers Era
•STB merger policy in 1990’s
•Merger moratorium
•Categories of merger transactions (major,
significant and minor)
•Mergers and downstream impacts
•STB merger policy today
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STB Responsibilities Over
Rates and Service
•Oversee and monitor rail practices nationally
•Enforce common carrier obligation
•Ensure rail practices are reasonable
•Ensure that rates charged captive customers are
reasonable
•Policies should allow railroads to earn adequate
revenues
•Determine the railroads’ cost of capital and
whether they are revenue adequate
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Environmental Review
• Approval of new construction
– DM&E
– Yucca Mountain
• Abandonment cases (OFAs)
• Rails to Trails
• Rail transload facilities
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Other STB Powers
• Amtrak - Directed Service Orders
• Emergency service orders
• Operating issues (e.g. car supply,
unreasonable practices)
• Industry specific meetings
• Ongoing monitoring
– Issues of national significance
– Certain local disputes needing STB attention
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Current Issues
• Railroads’ Common Carrier Obligation
– July 16: Transport of Hazmats
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Large vs. Small rate case handling
Rail Fuel Surcharges
Paper Barriers
Rail Cost of Capital
Investment in Rail Industry
Competition Study
Rail Customer & Public Assistance Program
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Thank you. Questions?
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