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94–575 PDF 2015

THE 35TH ANNIVERSARY OF THE STAGGERS 

RAIL ACT: RAILROAD DEREGULATION PAST, 

PRESENT, AND FUTURE 

(114–16) 

HEARING 

BEFORE THE

SUBCOMMITTEE ON 

RAILROADS, PIPELINES, AND 

HAZARDOUS MATERIALS 

OF THE

COMMITTEE ON 

TRANSPORTATION AND 

INFRASTRUCTURE 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

MAY 13, 2015 

Printed for the use of the 

Committee on Transportation and Infrastructure 

( 

Available online at: http://www.gpo.gov/fdsys/browse/ 

committee.action?chamber=house&committee=transportation 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE 

BILL SHUSTER, Pennsylvania, Chairman 

DON YOUNG, Alaska 

JOHN J. DUNCAN, JR., Tennessee, 

Vice Chair 

JOHN L. MICA, Florida 

FRANK A. LOBIONDO, New Jersey 

SAM GRAVES, Missouri 

CANDICE S. MILLER, Michigan 

DUNCAN HUNTER, California 

ERIC A. ‘‘RICK’’ CRAWFORD, Arkansas 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

BOB GIBBS, Ohio 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

JEFF DENHAM, California 

REID J. RIBBLE, Wisconsin 

THOMAS MASSIE, Kentucky 

TOM RICE, South Carolina 

MARK MEADOWS, North Carolina 

SCOTT PERRY, Pennsylvania 

RODNEY DAVIS, Illinois 

MARK SANFORD, South Carolina 

ROB WOODALL, Georgia 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

CRESENT HARDY, Nevada 

RYAN A. COSTELLO, Pennsylvania 

GARRET GRAVES, Louisiana 

MIMI WALTERS, California 

BARBARA COMSTOCK, Virginia 

CARLOS CURBELO, Florida 

DAVID ROUZER, North Carolina 

LEE M. ZELDIN, New York 

PETER A. DEFAZIO, Oregon 

ELEANOR HOLMES NORTON, District of 

Columbia 

JERROLD NADLER, New York 

CORRINE BROWN, Florida 

EDDIE BERNICE JOHNSON, Texas 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

MICHAEL E. CAPUANO, Massachusetts 

GRACE F. NAPOLITANO, California 

DANIEL LIPINSKI, Illinois 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

DONNA F. EDWARDS, Maryland 

JOHN GARAMENDI, California 

ANDRE ́ CARSON, Indiana 

JANICE HAHN, California 

RICHARD M. NOLAN, Minnesota 

ANN KIRKPATRICK, Arizona 

DINA TITUS, Nevada 

SEAN PATRICK MALONEY, New York 

ELIZABETH H. ESTY, Connecticut 

LOIS FRANKEL, Florida 

CHERI BUSTOS, Illinois 

JARED HUFFMAN, California 

JULIA BROWNLEY, California 

(II) 

SUBCOMMITTEE ON RAILROADS, PIPELINES, AND HAZARDOUS MATERIALS

JEFF DENHAM, California, Chairman 

JOHN J. DUNCAN, JR., Tennessee 

JOHN L. MICA, Florida 

SAM GRAVES, Missouri 

CANDICE S. MILLER, Michigan 

LOU BARLETTA, Pennsylvania 

BLAKE FARENTHOLD, Texas 

RICHARD L. HANNA, New York 

DANIEL WEBSTER, Florida 

TOM RICE, South Carolina 

SCOTT PERRY, Pennsylvania 

TODD ROKITA, Indiana 

JOHN KATKO, New York 

BRIAN BABIN, Texas 

CRESENT HARDY, Nevada 

MIMI WALTERS, California 

LEE M. ZELDIN, New York 

BILL SHUSTER, Pennsylvania (Ex Officio) 

MICHAEL E. CAPUANO, Massachusetts 

CORRINE BROWN, Florida 

DANIEL LIPINSKI, Illinois 

JERROLD NADLER, New York 

ELIJAH E. CUMMINGS, Maryland 

RICK LARSEN, Washington 

STEVE COHEN, Tennessee 

ALBIO SIRES, New Jersey 

RICHARD M. NOLAN, Minnesota 

ELIZABETH H. ESTY, Connecticut 

GRACE F. NAPOLITANO, California 

JANICE HAHN, California 

PETER A. DEFAZIO, Oregon (Ex Officio) 

(III) 

(V) 

CONTENTS Page 

Summary of Subject Matter .................................................................................... vi 

WITNESSES 

Hon. Deb Miller, Acting Chairwoman, Surface Transportation Board: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 48 

Responses to majority-side questions for the record ..................................... 64 

Hon. Calvin Dooley, President and Chief Executive Officer, American Chemistry Council: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 68 

Responses to majority-side questions for the record ..................................... 77 

Edward R. Hamberger, President and Chief Executive Officer, Association 

of American Railroads: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 82 

Linda Bauer Darr, President, American Short Line and Regional Railroad 

Association: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 107 

John W. Mayo, Professor of Economics, Business, and Public Policy, 

McDonough School of Business, Georgetown University: 

Testimony .......................................................................................................... 4 

Prepared statement .......................................................................................... 113 

PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS 

Hon. Peter A. DeFazio of Oregon ........................................................................... 43 

SUBMISSIONS FOR THE RECORD 

Edward R. Hamberger, President and Chief Executive Officer, Association 

of American Railroads, submission of the following: 

Letter of March 14, 2014, from Chairman Bill Shuster and Ranking 

Member Nick J. Rahall II, Committee on Transportation and Infrastructure, and Chairman Jeff Denham and Ranking Member Corrine 

Brown, Subcommittee on Railroads, Pipelines, and Hazardous Materials, to Chairman Daniel R. Elliot III and Vice Chairman Ann D. 

Begeman, Surface Transportation Board .................................................... 10 

Charts: Average U.S. Freight Rail Rates for Commodities and Chemicals . 28 

Chart: Freight Railroad Spending on Infrastructure and Equipment Since 

1980 ................................................................................................................ 40 

ADDITIONS TO THE RECORD 

Letter of May 13, 2015, from Ginny Sinkel Kremer, Esq., Blatman Bobrowski 

Mead and Talerman, LLC, to Chairman Bill Shuster, Committee on Transportation and Infrastructure ............................................................................... 116 

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(1) 

THE 35TH ANNIVERSARY OF THE STAGGERS 

RAIL ACT: RAILROAD DEREGULATION PAST, 

PRESENT, AND FUTURE 

WEDNESDAY, MAY 13, 2015 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON RAILROADS, PIPELINES, AND

HAZARDOUS MATERIALS, 

COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE, 

Washington, DC. 

The subcommittee met, pursuant to call, at 10:25 a.m., in room 

2167, Rayburn House Office Building, Hon. Jeff Denham (Chairman of the subcommittee) presiding. 

Mr. DENHAM. The subcommittee will come to order. 

This morning’s hearing is on the 35th anniversary of the Staggers Rail Act. But before we get started with the hearing itself, I 

think that it is important to let the American public know that it 

is with a heavy heart we are given the notice of this tragic accident 

in Philadelphia. Last night, we saw something horrific that was 

unimaginable, that we would never expect to see on our passenger 

rail. So, this morning, myself, Ranking Member Capuano, the 

chairman, and ranking member would each like to make a statement. 

First of all, I want to commend the first responders and the fellow travelers that helped out those that were injured in this accident. We have now seen the Federal officials, both from the National Transportation Safety Board and the Federal Railroad Administration, respond quickly. I think the American public is looking for answers on how this can happen, and we have held several 

hearings now on rail safety, and that will be the question that this 

committee continues to follow up on and ask, as well. 

Again, we express our condolences to the loved ones who have 

lost or have someone missing or injured in this accident. 

I now turn it over to the ranking member, Mike Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

I want to join you in everything you just stated, and I would also 

just like to just offer my prayers and, I guess on behalf of everyone, 

to be perfectly honest, to offer the prayers for those who are still 

in the hospital or suffering. May God bring them a speedy recovery 

and bring them back to health as quickly as possible. 

Thank you, Mr. Chairman. 

Mr. DENHAM. The full committee chairman, Mr. Shuster. 

Mr. SHUSTER. Thank you, Chairman Denham. 

2 

Obviously, it is a horrific accident, as the chairman said, something that, you know, we haven’t seen in some time. 

The National Transportation Safety Board is obviously up there 

looking at it. We certainly don’t know why. I have heard some politicians already come out and say, ‘‘If we would have spent more 

money.’’ Maybe that is the case, but it is something, I think, we 

really need to take a serious look at that and, first of all, figure 

out what happened up there. 

The Northeast Corridor is extremely important to the Nation. 

That is why Chairman Denham and myself worked hard with 

Ranking Member Capuano and DeFazio to put out a passenger rail 

reform bill focusing really on the Northeast Corridor, making sure 

those profits for the Northeast Corridor get put back into the 

Northeast Corridor. 

So, again, it is waiting for some action in the Senate. We hope 

that they will take a serious look at it and especially with this accident, because hundreds of millions of people ride the Northeast 

Corridor, not just Amtrak but all those daily commuters from 

SEPTA, to New Jersey, Massachusetts, Connecticut, and all the 

way up that corridor. So it is critical we find out exactly what happened up there and make sure that we take the appropriate response to make sure it doesn’t happen again. 

And, with that, I yield back. 

Mr. DENHAM. With that, we will start with our panel members. 

Let me just first start with opening statements on the hearing this 

morning. 

Railroads have played an important and integral role in this 

country since railroading came onto the transportation scene in the 

early 1800s. In fact, most American cities and towns, especially in 

the Midwest and West, were founded along the railroads. 

Today, they are the backbone of the Nation’s freight system, 

transporting 40 percent of all freight volume—more than any other 

mode. They transport 30 million carloads of freight every year, 

ranging from coal to agriculture products to intermodal shipments. 

In fact, our freight rail system is the envy of the world. And countries—as we travel around, we hear most often that other countries 

are envious and look to emulate our rail system in their countries. 

However, it was not long ago when America’s freight rail system 

was in complete disarray. By the 1970s, battered by competition 

from trucking and airlines and hampered by burdensome regulations, railroads were dying a slow death. Their infrastructure was 

falling apart. Customers were not getting efficient service. Railroad 

bankruptcies were an all-too-common occurrence. 

Congress tried several acts to fix the system, even going as far 

as getting into the business of creating railroads, yet nothing 

seemed to work. It wasn’t until the Staggers Act that Congress was 

able to find the mix of policies to get the system working again. 

First, it allowed railroads to act more like true businesses, by allowing them to charge market-driven rates rather than ones handed down from Washington bureaucrats. Second, the act allowed 

railroads to right-size their networks by focusing on rail lines that 

made economic sense. And, finally, it encouraged the creation of 

the short line railroads to serve those regional markets that the 

larger Class I railroads could not do economically. Thirty-five years 

3 

later, we can see the benefits of these changes in the strong rail 

system that we have today. 

However, while we have had great success with the Staggers Act, 

we need to make sure that the regulatory system still works well. 

The service issues the railroads had last winter was a good reminder of this and of the important role of the STB, the Surface 

Transportation Board, and the role that they play with rail and 

with our customers. 

So today we are going to hear from the STB, the railroads, and 

others about the importance of the Staggers Act reforms. I also 

look forward to hearing the future of how best railroads can serve 

America. 

In closing, I look forward to the hearing and would now like to 

recognize Mr. Capuano for any opening statement he may have. 

Mr. CAPUANO. Thank you, Mr. Chairman. I will keep mine brief. 

Basically, the Staggers Act, as we all know, was a great act. It 

was really an improvement and an advancement in the rail industry. Yet, with all good acts, they require and demand and deserve 

continuous monitoring and attention and updating and amendments if and when they are necessary. 

And, to me, that is what I am hoping to find out from this hearing. Is it working as we hoped? Are there any improvements, are 

there any tweaks we can make to it? Should we completely leave 

it alone? Should we roll it back? I mean, not that I would agree 

with any of those statements, but I want to hear other people’s 

opinions. 

And, with that, I will simply yield back. Thank you, Mr. Chairman. 

Mr. DENHAM. Thank you. 

And the chairman of the full committee, Mr. Shuster. 

Mr. SHUSTER. Well, I want to thank Chairman Denham and 

Ranking Member Capuano for holding this hearing today. 

It has been one of the committee’s priorities to look at the movement of freight across this country, whether it is by rail, whether 

it is by highway, by water. So, again, we look forward to, whether 

we passed WRRDA last year or the surface transportation bill or 

the FAA reauthorization, making sure we are doing the right 

things to strengthen all the modes of transportation. 

The Department of Transportation is projecting that freight volumes will increase significantly over the next few decades, and we 

need to prepare for that growth, again, through all the modes. 

As Chairman Denham noted, the railroads have played a critical 

role in moving large quantities of freight long distances. So we 

need to make sure that we are doing the right things here in Congress to stay out of the way when necessary but to assist where 

necessary with the transportation system. 

After 35 years, it is clear the Staggers Act has been successful, 

and we can learn from it, what it has done to the railroad and, I 

think, across all the modes, in ways to upgrade, change our infrastructure. 

I always like to point out that the railroads reinvest 19 percent 

of their revenues—not their profits, their revenues—back into their 

infrastructure, which in 2015 I believe is projected to be $29 bilVerDate Aug 31 2005 09:01 Oct 26, 2015 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\5-13-1~1\94575.TXT JEAN
4 

lion. Volume is up, productivity has increased, safety has improved, 

and the financial health of the industry is strong. 

We have, though, seen some disruptions because of the winter in 

2013 and 2015. And, again, there is concern with shippers as to the 

STB’s relief procedures, I think. So it is a good time to revisit the 

regulatory environment of the railroads. 

And in response to some of those concerns, I know our counterparts in the Senate have produced an intriguing bill that we need 

to take a careful look at. But I hope that when we look at that bill 

we realize we have a very strong railroad industry. And, over the 

past 35 years, it has gone from being not strong to very strong. 

And I think, again, we need to do what is right here in Congress 

to make sure that we maintain the strength of our railroad industry, which, as Chairman Denham said, is the envy of the world. 

And, with that, I yield back. 

Mr. DENHAM. Thank you. 

I would now like to welcome our panel of witnesses: first, the 

Honorable Deb Miller, Acting Chair of the Surface Transportation 

Board; the Honorable Calvin Dooley, president and CEO of the 

American Chemistry Council; Edward R. Hamberger, president and 

CEO of the Association of American Railroads; Linda Darr, president of American Short Line and Regional Railroad Association; 

and John Mayo, professor of economics at Georgetown University. 

I ask unanimous consent that our witnesses’ full statements be 

included in the record. 

Without objection, so ordered. 

Since your written testimony has been made part of the record, 

the subcommittee would request that you limit your oral testimony 

to 5 minutes. 

Ms. Miller, welcome, and you are recognized. 

TESTIMONY OF HON. DEB MILLER, ACTING CHAIRWOMAN, 

SURFACE TRANSPORTATION BOARD; HON. CALVIN DOOLEY, 

PRESIDENT AND CHIEF EXECUTIVE OFFICER, AMERICAN 

CHEMISTRY COUNCIL; EDWARD R. HAMBERGER, PRESIDENT 

AND CHIEF EXECUTIVE OFFICER, ASSOCIATION OF AMERICAN RAILROADS; LINDA BAUER DARR, PRESIDENT, AMERICAN SHORT LINE AND REGIONAL RAILROAD ASSOCIATION; 

AND JOHN W. MAYO, PROFESSOR OF ECONOMICS, BUSINESS, 

AND PUBLIC POLICY, MCDONOUGH SCHOOL OF BUSINESS, 

GEORGETOWN UNIVERSITY 

Ms. MILLER. Thank you very much. 

Good morning, Chairman Shuster, subcommittee Chairman 

Denham and subcommittee Ranking Member Capuano, and members of the subcommittee. My name is Deb Miller. I am the Acting 

Chair of the Surface Transportation Board. What I would like to 

do this morning is give you a brief look back at the history of the 

ICC and a brief look forward, looking at the priorities today of the 

Surface Transportation Board. 

The Interstate Commerce Commission, the predecessor agency of 

the Surface Transportation Board, was the first Federal regulatory 

agency, created in 1887. Over time, the ICC grew into a massive 

organization, with 2,900 employees at its peak. 

5 

But, by the late 1960s, the railroad industry in the United States 

was in decline. One reason was competition from other modes, but 

another major contributing factor was excessive regulation. Railroads were not given the flexibility needed to manage their business in this new competitive environment. They were governed by 

burdensome and Byzantine regulations. 

By the early 1970s, the situation was so perilous there was even 

talk of nationalizing the rail industry. In response, Congress 

passed a series of laws aimed at deregulating the industry. And, 

in what many considered a last-ditch attempt to save it, the most 

sweeping of these was the Staggers Act, passed in 1980. 

The Staggers Act instituted a number of changes to the regulatory landscape. First, it allowed railroads to more easily abandon 

unprofitable lines. Second, it made it easier for railroads to merge. 

Third, it provided exemption authority to quickly approve transactions that were routine and noncontroversial. Most significantly, 

though, Staggers gave railroads greater pricing freedom. Railroads 

were allowed to engage in differential pricing, meaning they could 

charge different shippers different rates depending on the demand 

for that traffic. 

Since passage of the Staggers Act, the railroad industry has become more efficient, productive, and profitable. 

In 1995, Congress sunsetted the ICC and created the Surface 

Transportation Board. Today, the agency’s mission is still governed 

by many of the principles established by Staggers. 

The Board is charged with promoting an efficient, competitive, 

safe, and cost-effective rail network by enabling railroads to earn 

adequate revenues that foster reinvestment in their networks and 

attract outside capital and provide reliable service. At the same 

time, the Board is mandated with working to ensure that effective 

competition exists between railroads and to maintain reasonable 

rates where there is a lack of effective competition. 

This hearing is particularly timely for me, as the Acting Chair 

of the Surface Transportation Board. The Board is in the process 

of reevaluating many of our economic regulatory practices to determine if they are still appropriate for today’s environment. 

On May 8, we announced that we will conduct two significant 

hearings. First, the Board will hold a hearing on June 10 to examine whether our rate case methodologies are sufficiently accessible 

for grain shippers. Second, the Board announced that on July 22 

and 23 we will explore issues pertaining to the concept of revenue 

adequacy. 

Revenue adequacy is an economic concept that describes whether 

a carrier is earning sufficient revenue to cover its costs and earn 

a reasonable return sufficient to attract capital. The ICC held that 

rates could be challenged if a railroad were revenue-adequate over 

a period of years, but no corresponding methodology was ever 

adopted. 

The Board also has another major proceeding that has been 

pending before us for some time. It involves something called competitive access or reciprocal switching. Reciprocal switching occurs 

when one railroad that exclusively serves a facility agrees to provide switching services for another carrier for a flat switching fee. 

These reciprocal switching agreements create rail-to-rail competiVerDate Aug 31 2005 09:01 Oct 26, 2015 Jkt 000000 PO 00000 Frm 00017 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\5-13-1~1\94575.TXT JEAN
6 

tion by permitting a competing railroad to offer its own single-line 

rate even though it cannot physically serve the shipper. 

The Board was presented with a proposal for the increased use 

of reciprocal switching several years ago. I regret to say that the 

Board has taken no action. I believe the Board owes our stakeholders, who have spent significant resources to develop the record 

in this proceeding, a decision on what it plans to do with the proposal. 

Given the overlap between the issues raised by the competitive 

access proposal and the proposals raised in our grain rate and revenue adequacy proceedings, my goal after these hearings is for the 

Board to issue a package of proposals on many, if not all, of these 

matters. 

The Board is also examining our method for regulating railroad 

rates. It is well known that our current process, known as a standalone cost test, is cumbersome and expensive. 

To address concerns related to rate regulation, the Board initiated two studies. First, the Board engaged an independent firm to 

study rate reasonableness methodologies used in other industries 

and throughout the world. Second, the Board hired a consulting 

firm to examine the Board’s internal processes for deciding rate 

cases. The consultant was tasked with studying our internal process and offering recommendations on how we could streamline and 

improve our case processing so we would be quicker and more accurate. 

The Board is also reviewing how to handle nonrate cases to improve and speed up our decisionmaking. The industry is frustrated 

with our pace, and so am I. It has been one of my priorities since 

my first week at the Board, and I am hopeful that this set of recommendations, including a set of performance metrics that we are 

putting in place, will help move the Board forward more quickly. 

Mr. Chairman, thank you for giving me this opportunity. I will 

welcome questions at the end. 

Mr. DENHAM. Thank you for your testimony. 

Mr. Dooley, you may proceed. 

Mr. DOOLEY. Well, thank you, Chairman Denham and Ranking 

Member Capuano, and it is a pleasure for me to be testifying today 

on the Staggers Act. 

And I represent the American Chemistry Council, and we employ 

about 800,000 men and women throughout this country. We are 

the second-largest shipper of commodities by rail in the country, 

and it is absolutely important for us to have a strong rail industry. 

I want to say at the outset, there is no interest among our membership to see a reregulation of the rail industry and go back 20 

or 30 years ago. But we do feel that when we have seen what has 

transpired over the past since the Staggers Act has been implemented: that we have a changed rail landscape that is resulting in 

a greater consolidation. 

And with this greater consolidation of the rail industry, it is 

changing the marketplace and the competitiveness of the marketplace. Because what we have seen happen in just since—I guess 

you would go back to 2001, when you had the last major consolidation of the rail industry, we now have basically seven Class I rail 

7 

lines out there, of which four are responsible for 90 percent of all 

shipments. 

We think that also can be—you can see a correlation to that increased consolidation to what we have seen is a fairly rapid increase in the shipping rates, which have increased almost 100 percent since about 2000, 2001. 

That has also resulted in—that consolidation—in an increased 

number of shippers that are captive to one rail line. We think now 

that there is almost—the figures you can—you know, close to 75 

percent of all shippers now in our industry are captive to one rail 

line. 

What that is resulting in is a fairly significant increase in rates 

and cost of shipments. We have done an analysis, using AAR data 

and STB data, I should say, that has calculated what is the cost 

of shipments that exceed the 180 percent RVC, recoverable variable 

cost, that the STB uses to consider whether or not a rate could be 

challenged. In the last year, that figure was about $20 billion. 

Now, we are also concerned not by the aggregate amount of that, 

because I am not challenging—all those rates are certainly not unjustified. But what we are also seeing is a very rapid increase in 

the rates that are in excess of that 180 percent. In fact, we have 

seen a 50-percent increase in the rates, an increase of 300 percent 

of the RVC, since 2005. 

So that is what is being experienced not just by our industry but 

by shippers throughout the country. And that has resulted in a coalition that we have helped to organize that includes 47 other 

groups representing manufacturing, agriculture, and energy interests that employ about 4.7 million people and contribute $2.4 trillion in economic output. 

And what we are asking for is some commonsense reforms to the 

Staggers Act and some modifications that Commissioner Miller has 

articulated. We think it is badly in need of reforms. 

So what we are suggesting is that we need to give greater attention to improving the administrative process, reforming rate bundling protections, closing rate review loopholes, allowing competitive switching, updating rate review standards, and providing arbitration as an option to streamline rate reviews. 

There are clearly regulatory and financial impediments to securing rate relief through STB. STB’s own calculations are it costs 

about $5 million to bring a rate case to the STB. It takes close to 

3 years before you get an outcome in that rate dispute case. That 

clearly is not acceptable. 

Now, I think that there is a way forward. And I appreciated Congressman Shuster’s acknowledging the action that the Senate took 

that passed a bill that passed unanimously out of the Senate Commerce Committee. But what we need to do is set aside some of the 

hyperbolic rhetoric. 

And I just want to cite a statement that Ed Hamberger has in 

his written testimony. He said, ‘‘When one looks behind the actions 

that proponents of reregulation are urging upon Congress and the 

STB to ’reform’ freight rail policy, it is clear that ’reform’ is a euphemism for ’force railroads to subsidize us’ and that the needs of 

the railroads and the general public are a distant second to their 

own narrow desires.’’ 

8 

Let me be very clear that the farmers, the manufacturers, the 

energy producers, that are all part of our coalition are not narrow 

interests. They are in every congressional district in this country. 

What we are asking for is commonsense reforms that have been 

articulated by STB Commissioners. What we are asking for is commonsense reforms that have been advanced by the Senate. This 

type of rhetoric does a disservice to shippers that are customers of 

the rail industry, that need a strong rail industry. It is an insult 

to Senator Thune and Senator Nelson, who embraced the objectives 

that are part of the STB reforms that we are trying to advance. 

I hope that we can continue to work with this committee to see 

if we can advance similar legislation that ensures—there is nothing 

mutually exclusive about a strong and a financially robust rail industry and giving equitable, efficient access to a rate resolution 

process through the Surface Transportation Board. 

Thank you. 

Mr. DENHAM. Thank you, Mr. Dooley. 

Mr. Hamberger, you are recognized. 

Mr. HAMBERGER. Thank you, Chairman Denham, Chairman Shuster, Ranking Members DeFazio and Capuano. Thank you for the 

opportunity to be here this morning. 

Before we turn to the issue of the Staggers Act, I would like to 

associate myself with the eloquent statements of the leaders of this 

committee about the horrific accident outside of Philadelphia last 

evening. Everyone in the rail industry was saddened by what occurred last evening. Our thoughts, prayers, sympathies go out to 

the victims, their friends, their family. 

I had occasion to communicate with Joe Boardman, President of 

Amtrak, this morning, and he asked me to express his gratitude to 

the medical personnel, the firefighters, the emergency responders, 

all of whom were there working through the night tirelessly to try 

to mitigate the impact of this accident. 

I understand the NTSB and FRA are on the scene, as is Joe 

Boardman. I hope in the days and weeks to come that we will be 

able to learn a lesson from what happened there last evening, that 

we will be able to take that lesson, as we try to do with every accident, and apply it into the future so that we can make what is already a safe industry even safer. 

If I might turn now to the Staggers Act, it is an interesting juxtaposition to me that we are sitting here in the middle of National 

Infrastructure Week with pundits from across the political spectrum saying we should be spending more private money on our Nation’s infrastructure. On that same side of the ledger, this committee and all of Congress, wrestling with where to find money for 

the Highway Trust Fund. And on the other side, juxtaposed with 

that, thanks to the Staggers Act, the freight rail industry quietly 

goes about its business, spending this year $29 billion, private capital, on the 140,000-mile network that is recognized as the best in 

the world. 

It is the best in the world because of a direct result of a balanced 

economic system at the Surface Transportation Board. It relies on 

competition to establish rate and service standards, with a regulatory safety net available to rail customers who need it. 

9 

This balanced regulation has allowed railroads to improve their 

financial performance from the anemic levels prior to the Staggers 

Act, which Chairwoman Miller talked about, which in turn has allowed the railroads to plow $575 billion, private capital taxpayer 

money, back into the network. Class I railroads, as I mentioned, 

will spend an additional $29 billion this year. 

Millions of Americans work in industries that are more competitive in the tough global economy thanks to the affordability and 

productivity of America’s freight railroads. We know that if America’s future freight transportation demand is to be met railroads 

must have the capacity to handle it. We are preparing for tomorrow 

today all over the country, expanding intermodal terminals, doubletracking hundreds of miles of track, installing millions of new rail 

ties, upgrading signal systems, and building new major rail yards. 

These projects are aimed at maintaining and growing the railroads network so that they are better able to serve our customers 

and provide the safe, efficient freight transportation service our 

Nation’s economy needs. And all of these projects are more likely 

to be undertaken under today’s balanced regulatory system than 

they would have been under a system of excessive, needless regulation. 

This committee knows well that transportation systems are expensive to build and maintain, whether with private or public 

funds. Railroads are no exception. By any of a number of measures, 

the capital intensity of freight railroading is at or near the top of 

all U.S. industries. For example, this year, railroads will spend 19 

percent of revenue on capital investment. The comparable figure 

for U.S. manufacturing is 3 percent. 

Looking ahead, the long-term demand for freight transportation 

will undoubtedly grow. With highway congestion becoming more 

acute and with public pressure growing to reduce emissions, conserve fuel, and promote safety, railroads are likely to be called 

upon to do even more in the years ahead. And as our economy 

evolves, we will be called upon to make additional investments. 

For that to happen, there must be appropriate public policies in 

place. Policymakers should acknowledge that, for reasons of international competitiveness, safety, and economic growth, the United 

States has a critical and growing need for investment in transportation infrastructure. Private rail investment should be encouraged, and regulations and legislation should not adversely affect 

railroads’ ability or willingness to make those investments. 

And I want to thank the committee for its bipartisan letter last 

year to the STB explicitly acknowledging those facts, dated March 

14, 2014, which I would ask be made part of the record. 

[The information follows:] 

10 


Insert offset folio 8 here 94575.008
11 


Insert offset folio 9 here 94575.009
12 

Mr. HAMBERGER. Today our Nation faces a number of serious 

transportation-related problems, many of which this committee, to 

its credit, is working hard to address. I submit to you that it makes 

no sense to add to that list by trying to fix something that is not 

broken. The current rail regulatory system is working well, and, 

because of that, our Nation’s freight rail network is working well 

too. 

I will just add at the end, with respect to the bill that came out 

of committee in March from the Senate Commerce Committee, our 

industry did not object to that bill, and I expect that it will be moving through the Senate and on its way to the House sometime this 

year. 

Thank you for the opportunity. Sorry I went a little over, Mr. 

Chairman. I appreciate your allowing me to do so. 

Mr. DENHAM. Thank you, Mr. Hamberger. 

Ms. Darr, you may proceed. 

Ms. DARR. Thank you, Chairman Denham, Chairman Shuster, 

Ranking Members Capuano and DeFazio, and members of the committee. 

In the wake of last night’s Amtrak accident, I also wanted to contend the condolences of all those in the short line industry to those 

that lost their lives, those that are in the hospital, and the family 

and friends that grieve for them. 

I am Linda Darr. I am president of the American Short Line and 

Regional Railroad Association. We are ‘‘the little association that 

could.’’ ASLRRA is a national trade organization representing the 

Nation’s 550 Class II and Class III railroads. Together, the short 

line railroads operate nearly 38 percent of the national rail network. We handle in origination or destination one out of every four 

railcars moving on the national system. 

The Staggers Act saved the rail industry from collapse, and, in 

many respects, it is the parent of the short line industry. The economic freedoms and the regulatory flexibility embodied in the act 

allowed the railroads to save light-density branch lines rather than 

abandon them. As a result, short lines have grown from 8,000 

miles of track in 1980 to 50,000 miles today. 

We operate in 49 States. In 5 States, short lines operate 100 percent of the State’s total rail network; in 10 States, we operate more 

than 50 percent; and in 30 States, we operate at least one-quarter 

of the rail network. 

In creating the modern-day short line industry, the Staggers Act 

ensured that huge areas of rural and smalltown America would 

stay connected to the national network. For the small businesses 

and the farmers in those areas, our ability to take a 25-car train 

50 miles to the nearest Class I creates the critical link that allows 

rail to be their choice for shipping. 

The Staggers Act jump-started today’s short line industry, but 

short lines took hold of that opportunity, and short lines made it 

work. The industry was formed by entrepreneurs who took large financial risks to purchase and rehabilitate light-density lines. Most 

borrowed heavily from the bank and contributed substantial 

amounts of their personal capital to make these new ventures 

work. They are aggressive marketers that fight as hard for singlecarload business as they do for unit trains. And that fight for busiVerDate Aug 31 2005 09:01 Oct 26, 2015 Jkt 000000 PO 00000 Frm 00024 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\5-13-1~1\94575.TXT JEAN
13 

ness keeps transportation costs as competitive as possible, which is 

good for our customers and, ultimately, for the Nation’s consumers. 

Short lines have worked hard on building relationships with 

their customers. Many of those customers were our partners in 

helping save even the most marginal lines. They did so by helping 

finance rehabilitation through realistic rates and by agreeing to 

meaningful traffic volumes. Today, our customers are the beneficiaries of our success. 

Short lines reinvest, on average, as much as 30 percent of annual 

gross revenues in repairing and upgrading our infrastructure. This 

is a huge percentage of what we earn, and it is evidence of our real 

drive to succeed. That investment has been supplemented by important help from Congress in the form of the 45G rehabilitation 

tax credit, which allows us to invest more of what we earn in improving our infrastructure. 

We are grateful to the members of the Transportation and Infrastructure Committee, who have been enormously helpful in shepherding this legislation. This has been the most consequential piece 

of railroad legislation for the short line industry since the Staggers 

Act, responsible for leveraging over $1.5 billion in short line capital 

investment. 

Capital investment in railroads is not only about economic 

growth and jobs; it is also about safety. Every dollar we invest in 

track rehabilitation makes our tracks safer. The leading cause of 

train derailments are track-related, and the better our track, the 

safer our railroads. 

We also know that improving safety requires building a strong 

safety culture on every short line property. To that end, the Short 

Line Association has partnered with the Congress and the FRA to 

establish a Short Line Rail Safety Institute to assess the safety 

practices and the safety culture of individual short lines and to provide support to improve workplace safety. 

Track rehabilitation and a strong safety culture are what we 

need to take the progress we have made under Staggers and make 

the short line story viable for the long term. 

Let me conclude with an anecdote that tells the short line story 

post-Staggers as concisely as anything I have said here today. 

In 1983, 3 years after Staggers was passed, Dick Webb, the father of Watco’s current CEO, was a unionized car repairman at the 

Kansas City Southern. He took out a $25,000 bank loan to begin 

a rail switching operation in DeRidder, Louisiana, which began 

Watco Companies. Today, Watco operates 4,600 miles of short line 

track, employs 3,600 people, and moves over 1 million carloads annually across track that was surely headed for abandonment. 

Hundreds of short lines across the country can repeat some 

version of that story. It is a great American success story, and it 

was made possible in no small measure by the Staggers Act. 

I appreciate the opportunity to be here today, and I welcome any 

questions. 

Mr. DENHAM. Thank you, Ms. Darr. 

Mr. Mayo, you are recognized. 

Mr. MAYO. Chairman Denham, Ranking Member Capuano, members of the committee, my name is John Mayo. I am a professor of 

14 

1The summary of John Mayo’s publications and experience is attachment A of the addendum 

to his testimony available online at GPO’s Federal Digital System (FDsys) at http:// 

www.gpo.gov/fdsys/pkg/CPRT-114HPRT96276/pdf/CPRT-114HPRT96276.pdf. 

economics, business, and public policy at Georgetown University’s 

McDonough School of Business. 

For 30 years, I have studied the economics of regulation and deregulation in the American economy in a variety of industries, including electricity, telecommunications, cable television, pharmaceuticals, the Internet, as well as the domestic freight rail industry. 

A summary of my publications and relevant experience is included 

as an attachment to my testimony. 1

In 1980, the Staggers Act passed Congress in an overwhelmingly 

bipartisan fashion. It was signed and enthusiastically endorsed by 

President Carter. This act fundamentally altered the governance 

structure of the rail industry, shifting from a highly granular 

model of regulation to a model in which markets, rather than regulators and rate bureaus, are largely responsible for establishing 

prices and investment. 

Importantly, this legislation was not driven by simple ideology. 

It did not embrace deregulation out of a belief that markets are always superior to Government. Neither, at the time of the passage 

of the act, did ideologues argue that steps to free railroads from 

regulatory constraints should be halted out of a fear that railroads 

would necessarily harm the public interest. 

Rather, the deregulatory measures adopted in Staggers were embraced for a simple and profound reason: Deregulatory steps in the 

industry were, as a practical matter, not an ideological matter, but 

a practical matter, being revealed to produce superior economic 

outcomes for the industry and for the economy more generally. 

Legislators from both political parties, economists, and industry 

observers at the time were all very optimistic about the potential 

for improved rail performance under the Staggers Act. Of course, 

optimism on the front end of any legislation is very normal. The 

real question—the real question—is, how have economic outcomes 

evolved for consumers, for producers, and for the American economy as a whole in the wake of Staggers? 

Fortunately, we now have 35 years of experience with Staggers, 

and I can tell you with considerable confidence that the governance 

structure of the act has been significantly and substantially successful. This was recognized in Congress in 1995 when the Senate 

Commerce Committee declared, quote, ‘‘The Staggers Act is considered the most successful rail transportation legislation ever produced, resulting in the restoration of the financial health of the rail 

industry,’’ end quote. 

Consequently, with President Clinton’s support, Congress took 

the additional step of further easing regulatory constraints by 

eliminating the Interstate Commerce Commission, replacing it with 

the current Surface Transportation Board. Importantly, the bill 

transferred authority to the STB, carefully avoiding alteration of 

the fundamental premises of the Staggers Act. 

With the benefits of an additional 25 years now of observation— 

or 20 years since the observation of the 1995 congressional blessing 

of the Staggers Act, it is now possible to look afresh at whether the 

15 

2The study is attachment B (page 15) of the addendum to John Mayo’s testimony available 

online at GPO’s Federal Digital System (FDsys) at http://www.gpo.gov/fdsys/pkg/CPRT114HPRT96276/pdf/CPRT-114HPRT96276.pdf. 

act is succeeding in promoting a safe and efficient rail transportation system as is called for in the act. 

Economic signals of efficiency include increased output, the 

breadth and utility of service offerings, reduced cost, and indications of consumer value. And, of course, as with all transportation 

modes, safety is generally thought of as being measured by or 

gauged by the severity and frequency of casualties. 

While a detailed discussion of these economic metrics is beyond 

the time permitted by my oral testimony, I have taken the liberty 

of attaching a recent study that I coauthored with Professors Jeffrey Macher and Lee Pinkowitz, also of Georgetown University, 

that examines in detail the economic metrics associated with this 

industry. 2

We find, as numerous other scholars have, that the liberalizations introduced by Staggers and their subsequent implementation 

have produced a variety of positive economic indicators and consequences for the industry, for consumers, and for the economy as 

a whole. 

We also identify areas of vulnerability as the future of rail policymaking unfolds. Of particular concern is the prospect that the 

emerging successes in the industry may be co-opted by the imposition of earnings regulation in the industry. These concerns are discussed in detail in the research article that is appended to my testimony. 

Thank you very much for your time and attention this morning. 

I look forward to any questions. 

Mr. DENHAM. Thank you, Mr. Mayo. 

I am going to deviate from this morning’s schedule just slightly 

in light of last night’s horrific accident and recognize Mr. DeFazio 

for any opening statement he may have. 

Mr. DEFAZIO. Thank you for the courtesy, Mr. Chairman. 

And I am going to deviate from my prepared remarks for a few 

moments here in light of the horrific accident last evening, where 

8 people lost their lives and more than 200 were injured. Our 

hearts and prayers go out to the family and friends of those involved, and hope for a speedy recovery of those who were injured. 

We obviously don’t know the cause at this point. We always depend upon the good work of the NTSB to bring that result to us, 

and I look forward to learning and finding out what we can do to 

mitigate or prevent future accidents. 

We do know a little. It was a shared section of track. So that is, 

you know, the beginnings of, you know, understanding where and 

how these things happen. But we don’t know much else at this 

point. 

However, I will observe—and I find it very, very ironic that, as 

we sit here, over there somewhere, wherever the appropriations 

lords sit, they are proposing to cut $290 million from the Amtrak 

capital grants program. 

I would say that that program is already somewhat insufficient 

since Amtrak has a $21 billion state-of-good-repair backlog. And, 

you know, it is deteriorating every year, and at the current level 

16 

of investment, if the appropriators don’t cut it, it will take about 

25 or 30 years to get it up to a state of good repair. And that 

doesn’t deal with some other major projects that would facilitate 

rail movement, let alone make it safer and in a state of good repair. 

So I would hope that our friends on the Appropriations Committee are cognizant of the real world out there, of what happened 

last night, of what the capital needs of Amtrak are, and will not 

engage in a shortsighted budget cutting in an area where we already have a $21 billion backlog. 

There were two issues—and I will submit my full opening statement for the record—that I really wanted to focus on: short line investments and tariffs or the potential for tariffs for transporting 

dangerous products. 

We have heard from the rail industry about the investments they 

are making. And they shouldn’t have to divert from basic investments that they need to be making in capacity and safety, including positive train control, which we mandated, to deal with concerns or problems caused by shipments of hazardous materials and 

others. 

There was one particular case that got my attention, Powder 

River Basin coal, where the company was refusing to put a surfactant on it. The dust was coming out; it was getting into the ballast 

and destabilizing the rail bed. So, since the company was refusing 

to deal with that, you know, they were taken by BNSF to—BNSF 

decided to charge an additional tariff. They lost that judgment, 

even though the STB found that coal dust did propose a danger for 

the ballast and the rail stability, but they couldn’t charge that differential tariff. 

I think we need to reexamine that principle and our directives 

to them in light of current shipments. I mean, if we could send a 

market signal, we would see probably a lot less chlorine being sent 

on rail because there are substitutes for unbelievably toxic chlorine, which would cause much more damage in an urban area, potentially, than oil. There are problems with oil, et cetera. So I hope 

we will look at that. 

And, secondly, short line railroads. We had an FRA report on the 

capital needs, and they found that, although holding companies are 

able to attract some capital, that the total overall investment needs 

are about $6.9 billion that are unmet. And I would hope we can 

find ways to work with the short line railroads to accomplish those 

necessary investments because they are critical to areas like my 

Port of Coos Bay and other areas. 

So, with that, I would yield back the balance of my time. I thank 

the chairman for his courtesy. And I apologize that I am going to 

have to go meet with a bunch of mayors pretty soon and leave. 

Mr. DENHAM. Thank you, Mr. DeFazio. 

The first question I have: Mr. Mayo, given the history of railroads and the Staggers Act, what is the appropriate role of regulation in this marketplace currently? 

Mr. MAYO. Well, from an economic perspective, the role of regulation in general is to correct market failures where the cost of correcting that failure is less than the damage done by the market 

failure itself. 

17 

Now, if we turn to the Staggers Act and to the rail industry 

itself, I think the place that I would start if I were you is right at 

the very outset of Staggers there is a set of congressional findings, 

legislative findings, that, number one, transportation services are, 

generally speaking, provided under conditions of competition, and, 

number two, in light of that competition and the general absence 

of market failures, that unnecessary and inefficient regulations 

should be removed. 

Now, the Staggers Act did that. The Staggers Act peeled away 

a number of regulations that were deemed to be unnecessary and 

inefficient. In your situation now and today at the hearing, what 

you are trying to do is say, how did that work out for us as a Nation? 

And I think the good news for you is that it has worked out quite 

well on the economic metrics. Prices are lower than they were in 

1980. Output is massively higher than it was in 1980. The quality 

of services is higher than it was. Investment has been very robust. 

Innovation has been very high. And safety is generally improved. 

On any number of metrics, it has worked out pretty well. 

So what I would say is that, in terms of regulatory and legislative oversight—let’s call it a light-touch regulatory approach has 

been very, very successful. That doesn’t mean that there can’t occasionally be market failures that warrant intervention. It doesn’t 

mean that we ought not have regulatory oversight when market 

failures do occur. Regulators should be vigilant and move decisively. But, by and large, the light-touch approach has worked very 

well. 

Mr. DENHAM. Thank you, Mr. Mayo. 

Ms. Miller, we have heard from shippers quite often about the 

access to rate cases as well as the cost of rate cases. And, as I understand, the STB has taken a look at several different steps to enhance the accessibility to some of these smaller shippers and medium-size shippers. 

Can you explain some of the actions that STB has taken and 

whether or not that is improving that access? 

Ms. MILLER. Yes, Mr. Chairman. I would be happy to address 

that. 

The Board, over a period of time, has taken a look at ways that 

they can improve access to our processes for smaller shippers. We 

have put in place something that is called the simplified SAC approach. We also have something we call the three benchmark test. 

What we have discovered, though, is that few shippers have 

found those approaches to be beneficial to them, and, while we 

have had a few rate cases filed under our streamlined methodologies, it hasn’t had the impact we had hoped that it would have. 

So I think we need to go back to the drawing board. We have 

gone back to the drawing board. We need to look for additional 

ways that we can make our processes more accessible and easier 

for shippers. 

One example of that would be the hearing that we are going to 

have in June, which is for grain shippers. You know, there has not 

been a grain rate case filed since 1981. Some might conclude that 

is because grain rates are quite appropriate so there is no need for 

a rate case. Certainly, when agricultural groups come in to meet 

18 

with me, that is not their view. They do feel that the processes before the Board simply don’t suit their needs. 

So we need to do some work, see if we can’t find some better approaches to come back and present to our shippers and see if we 

can’t make our processes more accessible and more useful. 

Mr. DENHAM. OK. Thank you. 

And, Mr. Dooley, have you utilized these new provisions that 

have been put in place by STB? Are they working? 

Mr. DOOLEY. In terms of the new provisions, our industry, in 

terms of the simplified SAC or the three benchmark, I don’t think 

there are any of our member companies that have used that, in 

part because the caps on awards that you can secure there doesn’t 

justify the cost of expense. 

I think Commissioner Miller would state, too, that—— 

Mr. DENHAM. Big caps meaning that they are too high and it becomes too expensive for the smaller shippers? 

Mr. DOOLEY. Yes. I mean, it is—yeah. You still, on a SAC, simplified SAC, there still could be a $3 million to $4 million investment. And then you have a limited ability in terms of what you 

could be rewarded if you prevailed, that it doesn’t justify it. 

On the stand-alone cost of SAC is that, you know, we had two 

member companies, Olin and DuPont, that invested, you know, in 

excess of $5 million each and brought cases, which both were 

turned down. And they were turned down, in large part, because 

they are required to develop their own theoretic railroad, a SAR, 

a stand-alone railroad. And that process is so cumbersome and expensive, and, you know, we are not in the business of that. 

And I would just read a statement that Commissioner Begeman 

had in regards to the DuPont case. And she stated, ‘‘I was struck 

by the level of detail that must be considered to design a SAR and 

the high burden it places on both parties, but especially for the 

shipper, who lacks familiarity with constructing and running a railroad. I am concerned that, in some instances, the task of designing 

a winning SAR’’—so the shipper would prevail—‘‘can be so burdensome, and a single error by the shipper in the design of the SAR 

can be fatal.’’ This is a clear example of the regulatory problems 

we face. 

And she also stated in another case, ‘‘The Board has a duty to 

ensure that shippers have a viable means to challenge a rate. I already know that is not the case for grain shippers. And the Board 

should ask whether the SAC process can provide a meaningful 

gauge of rate reasonableness for carload traffic shippers.’’ 

And I think that is consistent with Commissioner Miller’s commitment to continue working on this, and it is also consistent with 

the legislation that passed the Senate Commerce Committee. 

Mr. DENHAM. Thank you, Mr. Dooley. My time has expired. 

Mr. Capuano? 

Mr. Lipinski? 

Mr. LIPINSKI. It will take me a second here. I wasn’t expecting 

to be next. But thank you, Mr. Chairman, for holding this hearing. 

You know, it would be an understatement to say the Staggers 

Act has saved the railroad industry, since it really saved our 

freight system as well as preserving thousands of miles of track for 

goods movement. 

19 

And, as others have said, you know, I have been to Europe, I 

have been to Asia, and they talk about our freight rail system as 

the envy of the world. And I certainly think that the Staggers Act 

has, you know, played a very important role. 

Now, that doesn’t mean, though, that every railroad has been a 

good actor and that there haven’t been some problems for local 

communities and sometimes for shippers. 

In many instances, we have seen freight railroads do the right 

thing and work with local communities beyond Federal regulations, 

obviating the need to expand regulations. I certainly applaud these 

efforts, and I have been pleased to work with Norfolk Southern, 

CSX, BNSF, and Union Pacific on CREATE in northeastern Illinois; also working with the railroads and Metra on commuter rail 

and other issues. 

But I have concerns that not all Class I railroads are holding up 

their ends of the bargain as community members. And I hate to 

raise this publicly, but I feel the need to do that here. 

There is one railroad that I won’t name, but I think people will 

find easy to figure out, I have had a few issues with. This railroad 

refused requests to slow its trains as they passed close to a local 

annual weekend-long festival—so that is just a couple days a 

year—that featured a children’s carnival. I have joined this town 

in asking for cooperation this year and have yet to hear anything 

1 month before the event. 

I have also asked this railroad to work with commuter rail to add 

more service, and nothing has moved forward after many years of 

working on this. I have also heard some complaints from shippers. 

Now, I am not asking for more Federal regulations. I think that 

is the last place that we want to go and only if it is absolutely necessary to do. 

But I am wondering, what can be done—I wanted to ask Chairwoman Miller and Mr. Hamberger, if he has any comments to 

add—what can be done to encourage any bad actors to change their 

behavior? You know, how do we get everyone on the same page? 

You know, are there options for STB? 

Chairwoman Miller? 

Ms. MILLER. Well, I think that is an excellent question. It is certainly one I spend some time thinking about. 

We have a minimal number of regulatory tools available to us at 

the Surface Transportation Board. Truthfully, I don’t think that 

regulatory tools really is what would be useful in the situation. As 

the professor has pointed out, the rolling back of regulation really 

has had a profound effect in terms of allowing the freight transportation industry in the United States to really blossom, and we need 

to be mindful of that. 

I know from my own experience in the year that I have been at 

the Board, fairly aggressively reaching out to both shippers and 

railroads, doing a fair amount of traveling, that there are certainly 

frustrations out there on the part of both shippers and communities at times when they feel that the railroads have not been responsive to their concerns. 

By the same token, I have seen amazing things that are happening on the rail system in terms of the way that they are imVerDate Aug 31 2005 09:01 Oct 26, 2015 Jkt 000000 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\5-13-1~1\94575.TXT JEAN
20 

proving their processes and becoming more and more productive. 

And we want to keep that going, as well. 

I think one thing that the Board can do, I think we need to be 

cognizant of providing opportunities, is to be a sounding board, a 

place where people can come when they have concerns, a place 

where problems can be aired and we can try to find opportunities 

to get both shippers, communities, and the railroads to work together to solve them. 

And I think that the Board’s presence, just the very fact that we 

are present and at times can bring both parties in for discussions, 

has been helpful. And I would like to look for more opportunities 

to do those things. 

Mr. LIPINSKI. Thank you. 

Mr. HAMBERGER. Mr. Lipinski, thank you for that question. I 

would be glad to meet with you offline to get the specifics of this 

particular case. 

I would like to point out, however, that all of my members, all 

of the AAR members have taken voluntary steps to improve safety, 

whether it is speed limits, increased track inspections, reaching out 

to their communities, emergency responders, making sure that they 

are trained for dealing with an incident if a hazardous-material incident does occur. 

So, while I understand your frustration at this particular incident, I guess I would take exception with your saying that one of 

the Class I’s is a, quote, ‘‘bad actor.’’ I think they are all committed 

to working with the communities in which they operate and operating at a safe level. But I will be glad to come by and discuss the 

details of your specific situation. 

Mr. LIPINSKI. Thank you. I appreciate that. 

And I had other questions I won’t be able to get to on reciprocal 

switching. If we don’t have a chance to come back for more questions, I will submit a question for the record. 

I yield back. Thank you. 

Mr. DENHAM. Thank you, Mr. Lipinski. 

Mr. Shuster. 

Mr. SHUSTER. Thank you very much. 

My question concerns, as I mentioned in my opening statement, 

the Senate Commerce’s STB bill. I am very interested in hearing 

your views. And could you be concise as to what you may have concerns in it or what you like about it, but if you could be concise. 

I will start with Ms. Darr. 

Ms. DARR. Thank you, Chairman Shuster. 

We are generally supportive. We especially like the provision 

that allows the board members to talk to one another. We think 

that that is just good common sense. And we also support the idea 

of it being an independent agency. 

Mr. SHUSTER. Any concerns in it that you—in general, you are 

OK with it? 

Ms. DARR. We are OK with it. 

Mr. SHUSTER. Mr. Hamberger said he didn’t object to it. I don’t 

know if he—— 

Mr. HAMBERGER. We did not object to it. 

I think that the bill does provide for voluntary arbitration. I 

would point out that the Board itself set up a voluntary arbitration 

21 

program 1 or 2 years ago, I believe, whereby a shipper or railroad 

would sign up and say, ‘‘I hereby agree that arbitration can be used 

for a case to be brought against me.’’ And, of all the shippers, not 

one has signed up. One Class I railroad has, but—so I just find it 

interesting that that is the case. 

But, with respect to the committee’s action, again, we have no 

objection. 

Mr. SHUSTER. And Mr. Dooley? 

Mr. DOOLEY. Yeah, maybe I will start off with the arbitration 

issue, is that there is an improvement in the arbitration process in 

the Senate bill. 

Ed referred to the existing arbitration that no shipper has utilized, is because there really is no real value to it. It doesn’t specifically allow for the consideration and arbitration of rates. 

Mr. SHUSTER. Do you think this bill addresses that so—— 

Mr. DOOLEY. It does. 

Mr. SHUSTER. You would anticipate some of your members signing up? 

Mr. DOOLEY. And it does have a cap of damages—or a cap on 

awards of $200,000, which, you are talking in the shipper community, is not worth the effort. In the Thune proposal, they increase 

that to $25 million. And so you will see a lot more interest and participation in this. And it will be interesting to see if the rail industry will agree to it. 

The other issue I would say that we are very appreciative is included in the Thune bill—and it gets to Congressman Lipinski—is 

the issue of reciprocal shipping. And we appreciate the work that 

the commission is continuing to do on that. 

But if you look at this and why this is an increasingly important 

issue when you have the consolidation of the rail industry, is that, 

right now, if you were shipping, say, from Chicago to Long Beach, 

the Port of Long Beach, and you have two different rail lines there, 

you have two competitive opportunities, in terms of pricing your 

shipment. But if you are shipping through a short-haul—or 

through a Class I railroad into Chicago, today you can’t get a rate 

from that point A to Chicago and then from Chicago to Long Beach. 

And this doesn’t allow for the marketplace to work and give you 

the access. 

What we are hopeful is that, with the inclusion in the Senate bill 

of consideration of reciprocal shipping, is that we can see a way 

where we can get a rate quoted from point A to Chicago, we would 

be willing to pay the cost of that transfer, and then we would have 

the ability to have a more competitive marketplace from Chicago 

to Los Angeles or Long Beach. 

Mr. HAMBERGER. Mr. Chair, if I might correct Mr. Dooley for the 

record. 

Mr. SHUSTER. Briefly. 

Mr. HAMBERGER. Last year’s bill that was reported in September 

had a specific provision directing the Board to proceed on the NIT 

League proposal. That provision is not part of the bill that was reported out at the end of March. I believe there is a great deal of 

inference that the Board should draw from the fact that this year’s 

bill is not directing them. 

Mr. SHUSTER. OK. I got the point. 

22 

Ms. Miller, what are your thoughts on the Senate Commerce 

STB? 

Ms. MILLER. Well, I think it is a regulator’s—we didn’t necessarily take a position saying we supported it or had problems 

with it. But, generally speaking, we found it to be a very balanced 

bill that I think will provide some advantages to the Board and will 

allow the Board to do its job in a better way. And, generally speaking, we think it is a good bill that will be advantageous. 

Mr. SHUSTER. And, Mr. Dooley, instead of you responding here, 

I would rather the two of you come see me and let’s talk about this 

issue so I fully understand. 

Mr. DOOLEY. This only has—you know, Ed was right—it doesn’t 

have a specific requirement. It has a specific requirement that STB 

concludes their consideration of reciprocal shipping and come to a 

decision. 

Mr. SHUSTER. And you made a comment about Mr. Hamberger 

saying narrow interest. Well, I don’t know about narrow interest, 

but I know about self-interest. And I have seen the railroads, and 

I have seen the different industries, yours also, driven by self-interest. I understand that. That is what keeps us all straight, self-interest up here. The Founding Fathers said that is the critical issue 

that is going to keep us all in line. 

But I just want to make sure that, you know, captive shippers, 

I have had testimony after testimony, I ask the question, who is 

building facilities? You know, mines, of course, are where the 

mines are. And the agriculture industry is kind of where it is. But 

I know that there are manufacturers that actually build facilities 

to be captive shippers along rail lines. And several years ago, 1 

railroad, there were 48 different companies making themselves 

captive shippers. 

So, again, when we are talking about that captive shipper issue, 

that is something I am always focused on to say who does this to 

themselves. And I would also like to add I have a place in western 

Pennsylvania that has connections to three Class I railroads. And 

I have yet to have a big manufacturer come and locate there when 

they talk about captive shipping. So, again, that is something I am 

very interested in. If some of your companies are doing that to 

themselves, well, I mean, they must be there for a reason. It must 

be the railroads are providing something that they want, and so 

again. 

And the final issue, if I could, Mr. Denham, on the issue of natural gas, I think you guys have taken the right position. But some 

of your members don’t want to export natural gas because that will 

possibly drive up their costs. And, once again, I know that is selfinterest. But my self-interest is we have got a tremendous amount 

of gas in Pennsylvania. And we want to share it with the world. 

With that, I yield back. 

Mr. DENHAM. Thank you, Mr. Shuster. 

Mr. Sires. 

Mr. SIRES. Thank you, Mr. Chairman. I enjoy watching the 

Mayweather-Pacquiao fight between you two. Let me just say, first, 

that my heart goes out to the victims of last night. And I hope that 

there is a speedy recovery for the people that are hurt and that 

they determine quickly what happened so we can address it. 

23 

You know, I represent the northern part of New Jersey, which 

is very congested. I represent the ports. And there have been a 

number of investments over the years between the railroads and 

obviously the port authority. But I was wondering what can, you 

know, what policies can the STB and the Congress put in place to 

continue and maximize the investment into the infrastructure of 

the railroads? Because in my district it is very important. What 

policies can we put, can we help out with? Mr. Hamberger? 

Mr. HAMBERGER. Thank you, Congressman Sires. 

As I tried to point out in my written testimony, there is a direct 

correlation between the amount of money that railroads can put 

back into the infrastructure and the amount of money that they 

can make in the private sector, direct correlation, which is why we 

have been able to put $575 billion back in since 1980; $29 billion 

this year; $26 billion last year. As the Congressional Budget Office 

has observed, profits are both the means and the motive for reinvestment. You have to have an ability to have that revenue to reinvest. And you have to have the expectation that that investment 

will pay a return. And that means you have to have a balanced economic regulatory system, which I think the Board currently enjoys. 

I believe that there are process changes that can be made. I commend the Board for the 3–B or the three benchmark approach, the 

Simplified SAC [Stand-Alone Cost]. I believe they have increased 

the amount of money that can be recovered under that. The authority that they are going to get from the Senate Commerce bill, 

should that come into play. So I think there are process changes 

that can be made, but that the underlying basic economic approaches Dr. Mayo has pointed out is working. And I think, going 

forward, it should be continued. 

Mr. SIRES. Thank you. Ms. Miller, I don’t know if you discussed 

this before, but can you just discuss some of the major proceedings 

that are pending before the STB Board, and what challenges does 

the STB face in resolving some of these proceedings in a timely 

fashion? 

Ms. MILLER. Well, let me say a couple of things. One, I was surprised when I got to the Board to discover how many decisions, in 

fact, pass across the Board. So we tend to focus a lot of our attention on the rate cases, which take years, cost millions of dollars. 

But, in fact, day to day, there is so much more work that is going 

on at the Board. So I think, one, it is just good to have that as a 

reference point, that there are other things that are happening or 

happening in a very timely way. 

I would say a couple of issues related to the Board’s ability to 

move more quickly and do its work in what I would consider to be 

a better process. One, I want to take the opportunity—and I am 

most sincere when I say this—to say that one of my biggest surprises when I came to the Board was to discover that we have virtually a Third World computer system which is so arcane and outdated that we just cannot get on top of solving our problems. Our 

Web site regularly goes down. Our practitioners can’t get access to 

our information. We have massive problems with it and have very 

little budget to deal with it. One of my highest priorities is fixing 

our computer system. But it is hard to do it when you don’t have 

a capital budget to fix it. It is a serious issue. 

24 

Secondly, we have process problems that we can and should solve 

ourselves. When I look at what I would consider the process for 

how the Board deals with rate cases, it is not a rigorous enough 

process. We are not creating deadlines. And we are not then being 

disciplined in terms of meeting what deadlines are set. I think that 

is something we can solve ourselves and that we need to do. One 

of my first questions when I came to the Board was to ask, what 

are the performance metrics that we use in order to monitor the 

Board’s own performance, and was met with surprised looks because people didn’t even know what I was talking about so one of 

the things we are doing is to develop a set of metrics. Are we, in 

fact, meeting goals we should be setting for ourselves in terms of 

how we are doing our work? I think those things will be hugely 

beneficial in terms of not just improving how we function as a 

Board but, quite frankly, better serving the shippers who come to 

us and better serving the railroads. And I think they are very important. 

I would want to say one other thing, the Senate 808 gives greater 

authority for the board members to speak with each other. I think 

that would be very helpful. But I also think that the Board has 

been quite conservative in how it has looked at those issues. It has 

been quite conservative in how it deals with ex parte communications. Far too often, the Board is making decisions based simply on 

a written record. And I don’t know about any of you, I just know 

that if all I am doing is reading a record that has been written by 

attorneys, I am not going to fully understand an issue in a way 

which will allow me to make a good, on-the-ground, practical decision. And I think it is extremely important that we open up our 

processes. I feel like many of our Board employees are much too 

isolated from the industries that we are regulating. And so I want 

to open that up as well. And I think we can do that in a responsible way that will in significant ways improve our decisionmaking 

process. 

Mr. SIRES. My time has run out. Thank you very much. 

Mr. DENHAM. Thank you, Mr. Sires. 

Mr. Hanna. 

Mr. HANNA. Mr. Mayo, Mr. Hamberger rightly points out that they invested billions and billions of dollars, $29 billion recently. 

Mr. Dooley would argue that a disproportionate amount of that 

comes out of his pocket because of the captive shipping, the limited 

competition, et cetera. The 180 percent benchmark for the RVC 

ratio would also—Mr. Dooley would argue, that the appeal process 

is difficult, cumbersome, and, frankly, just not worth it. As someone, I assume, is more independent here than others and less vested, what do you think about that, Mr. Mayo? 

Mr. MAYO. Two things: One, the data speak pretty clearly to the 

issue of investment. As I described it, the light touch regulatory approach has been swimmingly successful. A number of $29 billion of 

investment this year was used; that’s just a fact. And that is an 

intense level of investment. And that bodes very well not only for 

current consumers but for future consumers. 

Mr. HANNA. But speak to the issue that Mr. Dooley is talking 

about. I mean, no one is going to argue that it is a wonderful thing 

to invest their money. The argument that I hear and that I am tryVerDate Aug 31 2005 09:01 Oct 26, 2015 Jkt 000000 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 P:\HEARINGS\114\RR\5-13-1~1\94575.TXT JEAN
25 

ing to understand better is the disproportionate because of the lack 

of captive lines and allegations. 

Mr. MAYO. So that brings me to the second issue, which is that 

how is the investment going to play out for consumers? And there 

is a regulatory process in place to ensure that rates at the end of 

the day are reasonable. The STB oversees that regulatory process. 

If rates aren’t reasonable, then the STB can and should step in. 

But, by and large, what you have seen over the last 30 years is 

that prices have fallen. As I mentioned in my opening remarks, 

prices are lower now than they were even in—— 

Mr. HANNA. That still doesn’t speak to the 180 percent RVC 

benchmark—what you’re saying right now—because that hasn’t 

changed. 

Mr. MAYO. That benchmark has not changed. And I am not advocating that it should change. That change was part of Staggers. 

Some rates are below that 180 benchmark. Some are above the 180 

benchmark. And the STB has a process, now a three-part process, 

for allowing consumers, shippers, to come to the STB and make a 

case that those rates, if they lie above 180, are unreasonable. In 

the event that the firm is, that there is a captive shipper and that 

the rates are judged to be unreasonable, there is a mechanism in 

place—— 

Mr. HANNA. But I also hear you saying that on a weighted-average basis, it sort of works out. 

Mr. MAYO. It has more than worked out. Prices, as I mentioned, 

on average are considerably below where they were in—— 

Mr. HANNA. Mr. Dooley, would you like to comment? 

Mr. DOOLEY. I guess, you know, first off, you know, I think the 

47 associations representing, again, the farmers, manufacturers, 

energy producers, we don’t want to go back. I mean, the Staggers 

Act made a major improvement in terms of creating a robust rail 

industry. And we want that to continue. What we are asking for 

is something—it is not like we are paying a disproportionate share. 

I wouldn’t even go as far as to say that is our complaint. Our complaint as shippers is, is that we do not have access to an efficient 

and an equitable rate resolution process. 

Mr. HANNA. Are you all right with the Senate bill then? 

Mr. DOOLEY. We think the Senate bill takes the step in the right 

direction. It doesn’t prescribe any specific outcomes. It really drives 

the STB to conclude some of their issues that they currently have 

under review that we think, whether it is, you know, the standalone cost methodology that they are—— 

Mr. HANNA. Mr. Hamberger, I have got about a minute here. 

Mr. HAMBERGER. I would like to associate myself with Chairwoman Miller when she opened, in her opening statement, I wrote 

it down: quicker and more accurate. That is what we need at the 

Board. We need quicker. But that needs to be balanced with more 

accurate. Some of these rate cases have $200 million, $300 million 

in the balance. So you don’t want that done on a coin flip. You 

want it down quickly, but it has to be accurate. And that is why 

it takes some time. 

Mr. HANNA. Thank you very much. I yield back. 

Mr. SHUSTER [presiding]. Thank the gentleman. 

With that, Mrs. Napolitano is recognized for 5 minutes. 

26 

Mrs. NAPOLITANO. Thank you, Mr. Chairman. 

And I do have a couple of interesting observations. Ms. Miller, 

you indicate your computer, that goes to the issue of being able to 

have enough adequate staffing to investigate complaints, do you 

have them? 

Ms. MILLER. One of the things that the Senate bill does is provide the Board with investigatory authority. Currently, we are a 

complaint-driven Board. So we don’t initiate any complaints or any 

investigations. We just respond to the complaints that have been 

brought to us. In the Senate 808, one of the things it would do is 

provide us with investigatory authority. And so we certainly would 

need additional—— 

Mrs. NAPOLITANO. How about funding for the computer change? 

Ms. MILLER. Pardon me? 

Mrs. NAPOLITANO. Computers. You say you have outdated computers. 

Ms. MILLER. Right. And you are asking if we have the staffing 

resources to improve our computer systems? 

Mrs. NAPOLITANO. And to do a new system of computers. 

Ms. MILLER. I think that we have the staff to do it. What we 

really need still is hardware and software updating. So it is not a 

staffing problem as much as it is a hardware, software problem 

that needs to be updated. 

Mrs. NAPOLITANO. Which leads me to the other question. My understanding is the Board is supposed to have three members; only 

two were appointed. 

Ms. MILLER. That is correct. 

Mrs. NAPOLITANO. They are asking for an increase to five. Would 

that have an impact? 

Ms. MILLER. Mr. Dooley and others could perhaps address this 

better. Some of our practitioners have felt that the Board is handicapped by having three members because no two members can 

have a conversation on any topic before the Board. And if we had 

five members, then at least two members would have the ability to 

talk with each other. I think that would be extremely helpful—— 

Mrs. NAPOLITANO. Anybody else? 

Ms. MILLER [continuing]. But I think we can also improve it by 

opening up our ex parte communications. 

Mrs. NAPOLITANO. Agree? 

Mr. DOOLEY. Yes, I would agree. We think that STB needs to be 

a more efficiently operating organization. We think the expansion 

of the number of Commissioners would be a partial solution to 

that. But also I think we are seeing the evolution of the focus of 

the STB, is that they did help to get the rail industry back on 

track. But now we are moving into an area where there is increased consolidation, their focus needs to increasingly shift to ensuring that there is competition in the marketplace. 

Mrs. NAPOLITANO. OK. Mr. Dooley, you hit on another point that 

some of my shippers have brought to my attention, and that is 

overcharging. Do you want to address that? 

Mr. DOOLEY. Well, that gets back to the fundamental issue, I 

think, that shippers are most interested in, is that having access 

to or eliminating some of the regulatory and financial impediments 

27 

to having access to a rate resolution process. It is, it is not acceptable that a shipper has to commit to paying $5 million—— 

Mrs. NAPOLITANO. And 3 to 4 years for resolution. 

Mr. DOOLEY [continuing]. And 3 or 4 years. So let’s find a way 

that we can fix that which—— 

Mrs. NAPOLITANO. What will be, what is your recommendation? 

What would help? 

Mr. DOOLEY. I think that, you know, part of it is, you know, reevaluating some of the policies that were put in place 35 years ago. 

I mean, the whole issue of revenue adequacy, that was a relevant 

issue, I mean, a very relevant issue back 35 years ago. But I attest 

that Warren Buffett doesn’t make investments in companies that 

are not revenue adequate—— 

Mrs. NAPOLITANO. Correct. 

Mr. DOOLEY [continuing]. And we need to be evaluating how that 

is used and calculated in resolving rate disputes. 

Mrs. NAPOLITANO. Another area of great concern, as we have 

gone through and talked to is public safety, railroad safety, safety 

of our grade separation. As you know, I am key on grade separations because the Alameda Corridor-East. 

Mr. HAMBERGER. Absolutely. 

Mrs. NAPOLITANO. And the safety of anything that comes out of 

the ports for ontime delivery to the eastern seaboard. So I am just 

wondering how much of that is going to be continued to be able to 

address the different aspects of the infrastructure change, whether 

it is the ties, whether it is the rails, whether it is your locomotives, 

greener, what is it that is going to affect us? 

Mr. HAMBERGER. Well, of course, all of that is where the $29 billion I keep referring to goes, to millions of new ties, new rail, 

stronger gauge rail, Tier 4 locomotives that are the newest, cleanest locomotives out there that are now being bought. But if I could 

go back to your previous question for just a quick second, where 

you talked about overcharging, I would just like to put in the 

record, I think it may be in my written statement but I would like 

to draw your attention to it, that the average inflation-adjusted 

freight rail rates for all commodities are about where they were in 

1991. And for Mr. Dooley’s members, it is where they were in 1988. 

So where there is, quote, ‘‘overcharging,’’ that is what the Board is 

there for. And I have expressed our support for quicker but more 

accurate processes. But I would like to get on the record that the 

rates being charged today are where they were in 1991, 1988 for 

the chemical company. 

[The information follows:] 

28 


Insert offset folio 10 here 94575.010
29 

Mrs. NAPOLITANO. Is there a way to be able to, and I will leave 

this for the record, to be able to ensure that the complaints received will be resolved in a faster, more expedient manner? The 

complaints? 

Ms. MILLER. Yes. I think there is. And I think we are working 

on that to improve our processes so that we can ensure that happens. I would want to say, as I said before, we get very focused on 

these rate cases because, as Mr. Hamberger pointed out, sometimes 

we are talking about hundreds of millions of dollars that are at 

stake. So they are very important. They take a lot of our staff time. 

But every day, every month, decisions are going through our agency that are handled very quickly and are allowing businesses to get 

back to doing what they need to do. 

Mrs. NAPOLITANO. Thank you to the witnesses. 

And thank you for your indulgence, Mr. Chairman. 

Mr. SHUSTER. Thank you, Mrs. Napolitano. 

With that, Congressman Rokita is recognized for 5 minutes. 

Mr. ROKITA. I thank the chairman. Good morning, gang. I appreciate you being here. And I appreciate the passion I see in each one 

of you for the industries that you regulate or are in. I do think you 

are part of America’s 21st-century future. So, again, thanks for 

being here. Ms. Darr, we have a lot of short-range railroads in Indiana or a lot for us. We seem to like them. General question for you, 

what is the overall economic outlook for the U.S. short line railroad 

industry and the future demand for rail transportation? And, in 

your view, what role should Ms. Miller’s agency play to ensure that 

the U.S. freight rail system can continue to grow, especially with 

regard to the short lines? 

Ms. DARR. Thank you, Congressman Rokita. I would say, first of 

all, short lines love Indiana. So I think it is a reciprocal relationship. 

Mr. ROKITA. We love you. Don’t tell CSX. 

Ms. DARR. In regard to your question about the economic outlook, 

I believe it is strong. But that doesn’t mean that we can just go 

along a path and not interject along the way and assume that it 

is going to remain strong. We have invested in our infrastructure. 

We have been able to do that through the 45G program. And as 

I indicated in my testimony, that is not just about economic development. That is also about safety. Making sure that our infrastructure is safe is critical for our growth. Staggers got us this far. 

Going forward, 45G is going to be absolutely essential to our ability 

to rehabilitate our track. 

And I also think we have done an excellent job of attracting new 

customers. Short lines have developed a reputation within the industry as being very customer friendly. You have not seen me get 

into any negative discussion with Mr. Dooley. And I can assure you 

that all of his, all of his members would be thrilled with the short 

line performance that they have received to date. And I won’t let 

Mr. Dooley take on any conversation about that, except outside of 

the room. And then I think also an important part of our growth 

is the good partnership that we have established with the Class I’s. 

I think that is demonstrated by the work that we are doing with 

AAR and Mr. Hamberger here. That is going to be very critical. We 

30 

rely on them for a lot of our business. And they rely on us to bring 

the customer to them as well. It is an important relationship. 

In regard to what Chairwoman Miller can do in regard to 

changes in the STB to help us out, it is speed and expedited rulings. And, as Ed said, the speed can’t happen without accuracy. 

Both of those things are absolutely critical. In relation to what we 

are talking about today, don’t roll back Staggers. Anything else 

that rolls back the Staggers Act is going to put us in a position, 

as Chairman Denham had said earlier, of being hammered by burdensome regulations. And, as in the past, that was putting us in 

a position where we were dying a slow death. And we can’t go 

there again. 

Mr. ROKITA. Thank you. 

And, on that, Mr. Hamberger and Mr. Dooley, would agree, correct? You are all in line on that, with that last statement? 

Mr. HAMBERGER. I do certainly would, yes. 

Mr. ROKITA. OK. Let the record reflect they are answering in the 

affirmative. And Mr. Dooley has a footnote. 

Mr. DOOLEY. We certainly do not want to see the Staggers Act 

eliminated. But we think there could be some modifications that, 

again, give us more equitable access to a rate resolution process. 

Mr. ROKITA. OK. At the risk of not getting to you, Mr. Mayo, I 

need to go to the chairwoman. And I want to, first, thank you for 

sitting in the chair as you do and actually articulating the fact that 

you have a strategic plan with goals and rates set to them and that 

kind of thing inside your office. I think that goes without saying, 

quite frankly, when you have agencies as big as yours and others 

that are much bigger. Yet many who sit in that chair don’t bring 

any of that information to us. I am puzzled that your testimony 

seems to focus on the fact that you don’t have a computer system 

or your technology is behind and this and that. And are you trying 

to tell me that the appropriations has that much control in micromanaging your budget that well that you couldn’t fire a nonperforming employee or 2 or 10 or 20 or 100 and get the computer 

money you need so that you can expedite these cases with a bit 

more accuracy? 

Ms. MILLER. Well, in terms, overall, just very quickly, we are actually quite a small agency, about 140 people. And the way that 

we have created any of the funding necessary to try to make improvements to it is by holding positions open and not filling them. 

Otherwise, we just don’t have any kind of a capital budget at all. 

So we have got nothing to turn to absent that. 

I think one of the things that you are saying is that, while I am 

a firm believer you don’t start by saying we need more people to 

accomplish your job; you start by saying what can we be doing differently to get our jobs done. I have been at the Board for a year. 

I could not say that we are overstaffed. I would not draw that conclusion at all. And, in fact, there are some real gaps, I think, in 

skill sets at the Board that we need to be better able to serve both 

the railroads—— 

Mr. ROKITA. You don’t have one nonperforming worker that you 

wish you could under the law fire? 

Ms. MILLER. I sure do. 

Mr. ROKITA. OK. 

31 

Ms. MILLER. And I have to say, I come from State government. 

It is where I worked my whole life. 

Mr. ROKITA. Can you tell I came from State government? 

Ms. MILLER. And I would tell you that I have found many more 

ways at the State system to take care of nonperforming employees 

than I have been able to uncover—— 

Mr. ROKITA. Maybe we should work together and find a way to 

get those ideas here. 

Ms. MILLER. But I do want to go back to say quickly, because I 

don’t want to give anybody a false impression, we are working very 

hard to solve our own problems. But I have to say, we have very 

few tools to do it. And I use this as an opportunity today because 

I feel so strongly about it. We want to do a better job for these 

guys, but we need some tools. And you just can’t do that, you can’t 

create it out of nothing. And we really don’t have the resources necessary. 

Mr. ROKITA. My time is up, Mr. Chairman. 

I will yield back. We can carry on later hopefully. 

Ms. MILLER. Sure. Happy to. 

Mr. DENHAM [presiding]. Thank you, Mr. Rokita. 

Ms. Hahn, you are recognized for 5 minutes. 

Ms. HAHN. Thank you, Mr. Chairman. And thank you for holding 

this hearing. 

I do want to add my voice to those who are expressing, first, 

shock and then, of course, sympathy for the horrible train accident 

last night. And I will say, I am one of those politicians that Chairman Shuster was maligning earlier. Even though we have not 

found out what the cause is—and I am sure we will—this is National Infrastructure Week. And I do know for sure that the funding for our infrastructure in this country is woefully inadequate. I 

think everybody needs to be investing more in our country’s infrastructure. And even sometimes when we find out that the cause of 

a train accident was human error or something else, it seems that 

we move away from focusing on, did infrastructure play a role or 

are we just another bad infrastructure design away from another 

accident? Folks on the morning news shows this morning were 

talking about our design, our outdated design of our rails and 

curves that maybe shouldn’t be there and shared tracks. 

I think if we really want a rail system and an infrastructure that 

is the envy of the world, I think we are far from having the perfect 

infrastructure. And other countries are investing billions more in 

their rail infrastructure than we are. I still think that is a huge 

problem. And I think our Highway Trust Fund is running out in 

a few days. Maybe we will have a short-term fix. But that is no 

way to run a country. And it is no way to run rail lines. 

And no matter what fees we are paying and no matter what disputes we are arbitrating, at the end of the day, I am embarrassed 

about the infrastructure we have. And we just haven’t put the time 

or effort or money into it. 

I do have a bill that I have introduced. It is a freight network 

bill because I don’t think our freight network ought to be competing with our Highway Trust Fund. So I have got a way to take 

what the shippers are paying in import fees, they pay about $40 

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32 

work guaranteed revenue stream that we can fund a lot of the 

things that we are talking about. So I hope we take a good look, 

unfortunately, in light of this accident, at what, if any, role our infrastructure played or will play in future accidents in this country. 

And I just wanted to follow up on something my colleague, Pete 

DeFazio, was talking about with the short line railroads. And I am 

a big fan of short lines. A lot of them service our ports, which is 

a huge role and also a hugely needed infusion of infrastructure 

funding in and around our ports, the last mile into our ports. I 

think that keeps us from being globally competitive like we should 

be. But of the 560 short line railroads currently operating, 27 holding companies control almost one-half of these railroads. And I am 

concerned that these holding companies, these investment firms, 

are looking at turning a profit for shareholders more than maybe 

investing in railroad improvements and safety. And the FRA published a report on the capital needs of short line railroads and 

found that while holding companies reduce the risk associated with 

lending capital, funding that is available must be thinly spread 

among all carriers under their control in order to meet current and 

ongoing needs. And we know there is about a $6.9 billion need for 

short line and regional railroads. I would like to hear your comment on that funding mechanism for short rails. And is that a positive thing that we are seeing? Can we do better? 

Ms. Darr, I would love to hear from you. I didn’t know if, Mr. 

Hamberger, and, Ms. Miller, if you would like to comment on that 

as well, the economic structure of who is owning our short line railroads. 

Ms. DARR. Certainly we have seen a lot of consolidation, especially in the last few years, particularly one of our largest members. But, altogether, there is really only one and maybe two publicly held companies in the short line business. So I don’t know 

that that would be an accurate representation of our industry. Although certainly there are constraints for publicly held companies 

that independents don’t have, I am not sure that that is, altogether, a bad thing because, obviously, we have seen some tremendous growth as a result of those arrangements. 

As to what is needed to allow our independents to grow—and the 

bulk of my members are independent railroads—45G is absolutely 

critical to that. And 45G is a tax credit that allows us to take our 

earnings and reinvest them back into tracking. You made some excellent points about this being National Infrastructure Week and 

the challenge that we are facing. If the short lines don’t have access to that capital, we are not going to be able to do our part of 

the job for the industry. So, again, I would like to thank everyone 

on the T&I [Transportation and Infrastructure] Committee for 

their overwhelming support. We have had great luck with that. But 

if we don’t continue to follow through with 45G and make it permanent, rather than have to fight for it every year and deal with that 

vulnerability, we are not going to be able to engage in the longterm planning that is necessary. 

Ms. HAHN. Thank you. I can hear you tap, tap, tapping back 

there. 

Mr. DENHAM. The time was definitely expired. 

Mr. Capuano. 

33 

Ms. HAHN. I will yield back. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

First of all, I want to thank the Board. This has been just as informative as I had hoped it would be. To some extent, this is kind 

of ending up like a lovefest, which is good. It sounds like we all 

want to do some minor improvements to the STB to make everybody work a little bit better and make this country better. So I 

want to thank you all for your input. 

But I do want to pick at a couple little things that bother me. 

Mr. Hamberger, do any of your member companies haul wheat? 

Mr. HAMBERGER. Yes, sir. 

Mr. CAPUANO. Do they haul coal? 

Mr. HAMBERGER. Yes, sir. 

Mr. CAPUANO. OK. 

Ms. Darr, do yours haul wheat? 

Ms. DARR. Yes. They do. 

Mr. CAPUANO. And coal? 

Ms. DARR. Yes. 

Mr. CAPUANO. Do you know if they haul casino chips, poker 

chips, or slot machines? You may not know that, but I thought I 

would ask. 

Ms. DARR. Should they? 

Mr. CAPUANO. I don’t know. If some were to ask, they would? 

Ms. DARR. Yes. 

Mr. CAPUANO. Mr. Hamberger, do you—— 

Mr. HAMBERGER. If some were to ask, we have a common carrier 

obligation, so absolutely. 

Mr. CAPUANO. That is what I thought. 

Ms. Miller, if a railroad came to and you said, ‘‘We haul wheat 

and so, therefore, we want to build a bread factory on our land in 

the middle of a residential area and we want to be exempted from 

all health regulations, we want to be able to make that bread any 

way we please, not subject to local zoning, not subject to local environmental issues, not subject to local health issues,’’ would the STB 

approve that as a related activity? 

Ms. MILLER. I don’t know. In that specific example, I think you 

are referring to the preemption—— 

Mr. CAPUANO. You don’t know? So you think there is a possibility 

that the STB would approve a railroad making bread to sell to the 

general public that is not subject to local health requirements? The 

problem is your hesitation. The problem is that that is a possibility. 

Would you approve them if they haul coal? Would you approve the 

railroad saying, ‘‘By the way, we want to process coal, we want to 

mine coal, we want to dig oil because we haul oil, we want to frack 

in my backyard, not subject to State or local requirements because 

Federal law preempts them’’? Is there a possibility the STB would 

say yes? 

Ms. MILLER. Well, Mr. Capuano, I think perhaps my hesitation 

has less to do with not knowing for sure how the STB would act 

but reflecting on what I do or don’t know about any authority we 

would have if a railroad—— 

Mr. CAPUANO. Fair enough. 

Ms. MILLER [continuing]. Was wanting to build a factory that 

had nothing to do with transporting or rail transportation. 

34 

Mr. CAPUANO. Fair enough. Well, then why in the world would 

you approve a railroad getting into the hazardous waste business? 

Why in the world would you approve a railroad getting into the 

propane business not subject to State or local regulations? Why on 

earth would you say that anyone would be exempted from local 

safety requirements, local zoning requirements, when it is not an 

issue that is directly related to a railroad? Yet you have done that. 

Why should I have faith that the STB is not just a tool of the railroad industry, and it is truly an independent agency that understands, yes, when it comes to rail, we all want successful railroads. 

But let’s be honest, trash handling is not a core item in any railroad. 

Now, I am not saying they shouldn’t do it. If the railroad wants 

to get into the trash business, good luck. But your business, your 

entity, not necessarily you, I don’t know if you were on the Board 

at the time, said that they were no longer subject to local zoning 

requirements. Just last year, the STB said they are not subject to 

local zoning requirements on a propane facility in the middle of my 

State. I have to tell you, that shakes my trust in the system. 

I want the STB to work. And all of the issues that we talk about 

today, they sound fine; we are heading in the right direction. That 

is the wrong direction. I would like to know what the STB might 

ever do about it, except to say: We are sorry. We are going to turn 

this issue backwards. We are going to do the right thing moving 

forward and stop this nonsense. Is that possible that that might 

happen? 

Ms. MILLER. I think one of the—I think the issue that is frustrating you—which I appreciate the frustration, I felt it myself— 

is the way the preemption rules play out. Under the Federal laws, 

State and local laws are preempted as to having to do with rail 

transportation. And the frustration I think you are expressing is 

whether or not we have properly determined whether an activity 

is a part of rail transportation, or if, in fact, it is something else. 

I can say that since I have been at the Board, I have a strong sense 

of importance of the preemption requirements. One of the reasons 

we, in fact, do have such a strong rail network in the United States 

is because of preemption. I think it is extremely important that 

preemption—— 

Mr. CAPUANO. I am not arguing when it comes to the core business of railroads. 

Ms. MILLER. But I would also say, I have seen situations that 

have come before the Board since I have been there that I have 

personally found repugnant but that I also believe fall under the 

preemption requirement. So, even though I personally have not 

been supportive of what I have seen an entity doing, we have also 

found that they do, in fact, meet the requirements of preemption. 

Mr. CAPUANO. I know what you have found, but you earlier touted your background in State government. I also have a background 

in State and local government, and I understand there are certain 

things that are conducive to Federal preemption, which I support 

in many instances, but I don’t think that applies to zoning. I don’t 

think it applies to health. I don’t think it applies to the environmental issues. Those are State and local matters, and the Federal 

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35 

tion was inappropriate, wrong, and should be changed. And I guess 

you have left me with no choice but to now advocate for legislative 

change, which I actually think is always the last option. 

I think you have made a big mistake. I think you have opened 

the door to basically sticking your Federal thumb in the eye of 

every State and every city and town in this country. And I wish 

that that weren’t the case. And I would like to find a way to get 

the STB to correct that action, but I guess we will have to do it 

legislatively. 

Thank you, Ms. Miller. 

Mr. DENHAM. Thank you, Mr. Capuano. 

Mr. Mayo, if a wheat farmer and a coal miner opened a bakery— 

I think we have covered that topic long enough. 

I actually have—— 

Mr. MAYO. I would have gone mute at this point. I would not 

have answered that. Thank you, though. 

Mr. DENHAM. Actually, I have one final question, and that is, you 

know, a misconception of revenue adequacy. We continue to hear 

how the railroads are doing so well on Wall Street, but that misconception of revenue adequacy is always out there. Can you explain in a little detail the challenge there? 

Mr. MAYO. Sure, and I will try to be concise. The details are in 

the study that is appended to my written testimony. But what the 

study does, is to look at the notion of revenue adequacy and to really understand the purpose of revenue adequacy, you need to go 

back to the time that it was introduced. It was introduced in the 

1970s. There was a period when the rail industry was in dire financial and physical conditions. It was literally falling apart. In the 4R 

Act of 1976, the language first appeared. And it created a benchmark. It said to regulators—then the ICC, now the STB—that the 

regulators should calculate a number, should calculate whether 

railroads were earning back their cost plus a cost of capital. So it 

provided an informational benchmark and a set of guideposts that 

helped legislators and regulators in assessing whether the industry 

was coming back and how far it had come back. So that was the 

legislative intent. It was a purpose. The purpose, I believe, at the 

time was informational, to create a set of guideposts and benchmarks. 

In 1985, the then-ICC introduced a bit of an interpretational 

change, interpreting revenue adequacy not as an informational 

benchmark but as a constraint. It was at that time that the word 

revenue adequacy ‘‘constraint’’ first appeared in the regulatory documents. And, at that time, the ICC indicated that in the rail industry, that railroads should not be entitled to any more revenue than 

what would exactly cover their cost of capital. 

Now, at that time, what happened is, in theory anyway, that regulatory determination would reintroduce back into the rail industry 

earnings regulations which we had just stepped out of with the 

Staggers Act. Now, I said in theory it did that because, at that 

time, the railroads were, largely speaking, and completely revenue 

inadequate. So it was a theoretical constraint, not a practical one. 

Now, if you move forward 20—30 years now, the rail industry, as 

we all know, is doing better financially. They are now being judged 

36 

increasingly to be revenue adequate. That is to say they are covering their cost of capital. 

Now, to the extent—and this is where the concerns come in in 

my study—to the extent that the revenue adequacy constraint is 

then imposed and we reimpose earnings regulations in this industry, that is a risk of some significant backsliding, I think. And so 

what I would appeal to you, and to the regulatory community is to 

reestablish the original legislative intent of the revenue adequacy 

language, and that is as an informational benchmark, which is 

really a good thing, but to avoid using revenue adequacy as a regulatory hammer. 

Mr. DENHAM. Thank you, Mr. Mayo. 

Our final question today is from Mr. Babin. 

Dr. BABIN. Thank you, Mr. Speaker, I appreciate it. 

Mr. Chairman, thank you very much. I had a couple of questions 

that I would like to ask of Mr. Dooley, if you don’t mind. What role 

can the STB play to ensure that the rail system supports manufacturing, investment, and growth? 

Mr. DOOLEY. Yeah, you know, again, Congressman Babin, is I 

think that, you know, consistent with the Senate legislation, there 

is a directive there for STB to conclude some considerations of a 

host of issues that range from the rate resolution issues that are 

associated with the stand-alone costs, the requirements that, in 

order to bring a rate case, you have to have required that company 

to design a rail line and operating, assess the cost of that in order 

to make a determination of whether or not if you made these new 

investments, had an appropriate return on capital, whether or not 

that would result in a rate lower than what was being provided. 

But it provides—it is such a complicated process that even the 

STB Commissioner said they question whether or not that is an equitable and effective way. 

What the legislation also does is it asks for STB to conclude their 

consideration of the issue in terms of reciprocal switching, which 

again is, you know, with the increased consolidation, with fewer 

rail lines, Class I’s that are providing service, is that there is not 

as much competition in the marketplace, and so what we think is 

important is, is that you ought to have a mechanism that can give 

a shipper the ability to ship from point A to point C through point 

B, but if there is only one shipper to get you to point B and you 

have got two shippers there, that there ought to be a way to get 

a quote from that rate from A to B and then have the opportunity 

to get a competitive quote from B to C from two rail issues and 

have the opportunity to pay for the cost of that switch. So we think 

that there is progress that STB can be making on that front, too, 

that again will ensure. 

We also have some other issues related to rate bundling that is 

a little more complicated that also could ensure, again, more competition or a more competitive marketplace. And that is what we 

are asking for. Two things is, when you have increased consolidation, you basically have a duopoly in the rail industry in many regions of the country, and that doesn’t necessarily result in quite as 

a robust marketplace of forces as we think is appropriate. And how 

do we adjust for that? It is where the equitable rate resolution 

37 

process as well as some of these other provisions that could be addressed through STB. 

Dr. BABIN. OK, thank you very much. 

One other question, I am already—no, I have still got a little 

time. 

Ms. Miller, if I could ask you, the Staggers Act established numerous objectives for U.S. freight rail policy which wanted to minimize the need for Federal regulatory control over the railroads and 

would allow railroads to earn adequate revenues, providing expedition resolution or proceedings, ensuring effective competition, and 

maintaining reasonable rates where effective competition does not 

exist. How well has the STB succeeded in achieving these objectives, and what areas need the greatest attention in the future? 

Ms. MILLER. I think if you look back over the last 35 years since 

Staggers has passed, you would have to say that the STB has done 

an outstanding job. When you look at the issue of rate regulation 

to the extent the Surface Transportation Board has any involvement at all, it is only 10 percent, really, of any of the traffic or rate 

regulation that we even have any oversight over. Anything that is 

done by contract we are not involved in. That is, the vast majority 

of what is moving on the freight system today is done under contract. And other situations, even though there may not be a contract, they might be using tariff, there is clearly competition. We 

are not involved there. So our role really is a pretty small role but 

in an area that I think becomes very important. 

I think that in a year of serving on the Board, my observation 

is, is that to the extent we are, in fact, to be an arbitrator of whether or not rates are reasonable where competition doesn’t exist, if 

there is a criticism that I would have of the Board, it is that I can 

understand why shippers feel so frustrated and say to us: You 

know, we don’t really feel like we have an opportunity to bring 

cases before you. 

We can say that we are available. We can say that you can file 

a rate case, but what we know is that it is going to take 3, 4, 5 

years. It is going to cost millions of dollars, and the reality of actually doing that has quite a chilling effect, I think, on a number of 

shippers. 

So Mr. Hamberger made the comment—and he is absolutely 

right—we are talking oftentimes about hundreds of millions of dollars. There is no way to take that sort of a rate process and turn 

it into a 6-month activity. The issues are much too complicated. 

They are much too important. So I am not saying that our goal at 

the Board should be to rush to judgment on any of these things. 

Some of these questions are simply going to take some time to get 

at. But by the same token, I don’t think there is any question that 

there are people who feel they have an issue that they would like 

to have addressed, who simply don’t bring it before us because they 

think it is hopeless. 

Dr. BABIN. Thank you, Mr. Chairman. 

I would like to thank all of the witnesses, too. 

Mr. DENHAM. Thank you, Mr. Babin. 

Ms. Brown, you are recognized for 5 minutes. 

Ms. BROWN. Thank you, Mr. Chairman. 

38 

First of all, I want to say that last night I started getting calls 

about the accident that occurred in Philadelphia. And I want everybody to know that my heart goes out to the families and the community at this time. 

I mean, I am—rail is so important, and reauthorization of the 

Staggers Act and investment in rail is crucial. It is absolutely crucial that we work to keep rail, freight rail, and passenger rail separated. And, you know, other countries have figured it out. And we 

as a people of—in the United States need to get with it. I tell people all the time in Florida: Our competition is not Georgia and Alabama. It is people in other countries that have figured out how to 

move goods and services. 

And when I travel around the world, they ask me: How do you 

all have such a great freight system? And I want to know from 

them: How do you have such a great passenger system? And we in 

the United States need to figure out and we need to invest in making sure that we can move people, goods, and services. 

So I want to thank you all for your testimony. 

And do any of the members, I know Ms. Miller, he was tapping. 

Do you want to make any closing statements? And Mr. Hamberger, 

anybody want to make any closing statements? 

You know, I am now on the Committee on Veterans’ Affairs, and 

I appreciate the fact that over 30 to 40 percent of the people in rail 

are veterans. And I thank you all for continuing to reach out to 

them because they are ready for employment. 

And Ms. Miller, do you want to add anything? 

Ms. MILLER. No. I really appreciate your comments and would 

echo your statements. I have always been amazed by the U.S. 

transportation system. I think it is extraordinarily important, and 

I am struck all the time, as you said, you know, our competition— 

I came from the State of Kansas. I felt the same way. Our competition wasn’t the States next door. It is other countries around the 

world. And I think we need to continue to think that way. And one 

of our advantages economically is our freight transportation system. It is extremely important that we maintain that advantage. 

Ms. BROWN. My colleague, Mr. Dooley? 

Mr. DOOLEY. No, I have no other statement, but I, again, thank 

the committee for the opportunity to testify today. 

Ms. BROWN. Thank you. 

Mr. Hamberger. 

Mr. HAMBERGER. I would just like to on a personal note say I 

know that you had a Committee on Veterans’ Affairs meeting this 

morning, and the fact that you made it here just underscores your 

dedication and support for the rail industry, and I just want to 

thank you for that. 

Ms. BROWN. Thank you. 

Ms. DARR. Congresswoman Brown, I just wanted to echo on your 

thoughts about the Amtrak accident last night. And I think, you 

know, it is appropriate that we talk about safety today. And from 

the short line perspective there are two critical aspects of safety 

that we can help out with. One is raising up the safety culture in 

our industry, which we are able to do through the Short Line Safety Institute, thanks to support from Congress. 

39 

And then, finally, focusing on our rail infrastructure. By improving the track, we improve safety, and we are able to do that 

through programs like 45G. So I think it is a good partnership and 

appreciate your support for both of those programs. 

Ms. BROWN. Thank you. The last comment? 

Mr. MAYO. So I, too, would echo your reflections about the need 

to look abroad for benchmarking and identifying that our real area 

of competitiveness is best benchmarked around the world, not necessarily here in the States. I would say, in the context of this hearing, that it is really sort of important, once in a while—I mean, we 

are pretty good at pounding our chests and chanting we are number one in the world, even if we are not necessarily that way. In 

this particular area, in the area of freight rail policy, I think we 

have a lot to be proud of. The economic data are very clear. It is 

rather remarkable as an economist to see an alignment of positive 

economic indicators in prices, output, innovation, employment, and 

so on, that have worked so well. So I am just glad to be here and 

to speak about this bill or this act. 

Ms. BROWN. Well, thank you very much. 

And like I said, I don’t care whether I am in Russia, no matter 

where I am around the world, they always ask me about our 

freight rail. And, depending on where I am, whether I am in Europe, or someplace, I am asking them about their passenger rail. 

So thank you again all for your testimony. 

And Mr. Chairman, I yield back the balance of my time. 

Mr. DENHAM. Thank you. 

Mr. Cummings, you are recognized for 5 minutes. 

Mr. CUMMINGS. Thank you very much, Mr. Chairman. I apologize 

for getting here so late. I was in another hearing where I am ranking. 

I wanted to express my condolences to those who were injured 

in last night’s terrible accident, to the families of the victims who 

died. 

I also want to express my strong support for Amtrak. Tens of 

millions of passengers ride the Northeast Corridor every year, including me, as we pass through Penn Station in my district in Baltimore. Amtrak is an essential component of our Nation’s transportation infrastructure. Sadly, Republicans on the House Appropriations Committee have proposed cutting capital funding for this 

service by 25 percent in fiscal year 2016. 

While we cannot speculate on the causes of last night’s accident, 

the media reports indicate that it occurred in a sharp curve. And 

there are many such curves and tight turns along this very old corridor. We would never find it acceptable to operate the Congress 

using 19th-century technology, and yet we continue to operate in 

many stretches of the Northeast Corridor under 19th-century infrastructure. Rather than cutting our investments, we should be expanding them and taking all steps necessary to bring the Northeast Corridor into a state of good repair. 

Now, Mr. Hamberger, can you discuss the trends you have seen 

in the rail industry’s investment in infrastructure both during and 

after the financial crisis, and have railroad investment trends 

changed in these years? 

40 

Mr. HAMBERGER. Thank you, Mr. Cummings, and you were not 

here earlier, but I do want to associate myself with your remarks 

about—as I did earlier, the tragedy last evening. The very interesting chart, which I can provide for the record, what we saw in 

2008, 2009, and 2010, was a very minor drop off in the amount of 

capex that the industry put into the network. 

[The information follows:] 


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41 

If you go back to 2002, the previous recession, 2001 and 2002, 

we saw a dramatic dropoff. When the economy came roaring back, 

we were not ready for it, and I think what our members individually decided was why there was some decline, about a 10 percent 

perhaps, if memory serves, that there was a need to continue to invest. Many of our members kept the employees that they furloughed on part-time status so that they continued to be qualified 

to be called back and continued to receive their benefits so that 

those investments continued to be made. 

Now, the service disruptions of 2013 and 2014 would undercut 

my argument that we were ready, but there were a lot of factors 

that went into that service challenge. But we were—we took the 

money that we were earning and put it back into the network the 

same as we are doing now at record amounts. 

Mr. CUMMINGS. Now, Ms. Miller, you wrote in your testimony in 

July, the Surface Transportation Board will hold a hearing to explore issues pertaining to the concept of revenue adequacy. You 

also wrote that revenue adequacy is an economic concept that describes whether a carrier is earning sufficient revenue to cover its 

cost and earning reasonable return. And so you indicated that the 

Board makes the determination about revenue adequacy annually, 

is that right? 

Ms. MILLER. That is correct. 

Mr. CUMMINGS. You also wrote that the Board is beginning to see 

that some of the Class I railroads are becoming revenue adequate 

across consecutive years. Can you explain how revenue adequacy is 

calculated and is that threshold of investment and profit that—— 

Ms. MILLER. No, I think you meant to direct that to the professor 

at the end of the table. 

Mr. CUMMINGS. Oh, I am sorry, Professor. 

Ms. MILLER. No, no, I am sorry. I am just teasing you because—— 

Mr. CUMMINGS. OK. 

Ms. MILLER [continuing]. This complicated exercise—— 

Mr. CUMMINGS. I am tired, so don’t confuse me. 

Ms. MILLER. I am sorry. 

Mr. CUMMINGS. It has been a long day already. Go ahead. 

Ms. MILLER. No, I have my cheat sheet—— 

Mr. CUMMINGS. OK. 

Ms. MILLER [continuing]. On how it is calculated. I don’t know 

that we need to go into, you know, the—— 

Mr. CUMMINGS. But you see what I am getting at? I am trying 

to figure out, you know, when we talk about the adequacy, I am 

trying to figure out what the threshold is, and how do we measure 

that? Do you follow me? 

Ms. MILLER. Yes, I do follow you, and so I hope the professor 

won’t be totally offended by the way I am going to no doubt make 

a mess of his economics. But when we are looking at revenue adequacy, we are not looking at the question of, are railroads profitable? It is a different question. The question is, can they attract 

adequate capital? Because we want them to be able to attract the 

capital to continue to expand as they have been. So what we are 

looking at is a little different question. What the Board does now 

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tween what the railroads—what their revenue is against that cost 

of capital. And if it is greater than the cost of capital, we would 

say, for that year, they are revenue adequate. 

What we are also trying to determine, and one of the reasons we 

are going to have the hearing is if you wanted to declare a railroad 

revenue adequate, should they be revenue adequate for 1 year? 

Should it be 5 years? Should it be over some period of time? What 

is that period of time? And so how do we make those determinations? And then, more importantly still, I think the question on the 

table is, if we concluded there is a railroad that is revenue adequate, does that say anything about how they should be economically regulated? Should it change because they are now in a 

changed circumstance of revenue adequacy? And those are the 

questions we are going to be exploring in our hearing in July. 

Mr. CUMMINGS. I see my time is expired. 

Thank you, Mr. Chairman. 

Mr. DENHAM. Thank you, Mr. Cummings. 

And thank you to each of you that came to testify today. If there 

are no other questions, I would ask unanimous consent that the 

record of today’s hearing remain open. 

Mr. HAMBERGER. Mr. Chairman, could I possibly, at the risk of 

offending you, end today’s hearing on an upbeat note, perhaps a 

kumbaya moment between Mr. Dooley and myself? You may not 

have noticed in this morning’s Washington Post, page 11, that the 

plastics industry is pumping out jobs. A report coming out of the 

ACC today, $130 billion of investment over the next 5 years in the 

U.S. That is good news for our jobs. It is good news for the American economy, and I trust it is good news for the railroad because 

we will get more business from Mr. Dooley. But congratulations to 

you and your members. It is a very upbeat note and I appreciate 

you allowing me to put it into the record. 

Mr. DENHAM. Thank you. We would ask that each of our witnesses be provided questions—unanimous consent that the record 

remain open for 15 days for any additional comments and information submitted by Members and witnesses to be included in today’s 

record. 

Without objection, so ordered. I would like to thank, again, each 

of you for being here to testify today. If no Members have anything 

to add, this subcommittee stands adjourned. 

[Whereupon, at 12:27 p.m., the subcommittee was adjourned.] 

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Æ 


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