U.S. GOVERNMENT PUBLISHING OFFICE

33–865 PDF WASHINGTON : 2019

S. HRG. 115–586 

HOW SMALL BUSINESSES BENEFIT FROM SMART 

RAIL SHIPPING REGULATION 

FIELD HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

NOVEMBER 16, 2018 

Printed for the Committee on Small Business and Entrepreneurship 

( 

Available via the World Wide Web: http://www.govinfo.gov 

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COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

ONE HUNDRED FIFTEENTH CONGRESS 

JAMES E. RISCH, Idaho, Chairman 

BENJAMIN L. CARDIN, Maryland, Ranking Member 

MARCO RUBIO, Florida 

RAND PAUL, Kentucky 

TIM SCOTT, South Carolina 

JONI ERNST, Iowa 

JAMES M. INHOFE, Oklahoma 

TODD YOUNG, Indiana 

MICHAEL B. ENZI, Wyoming 

MIKE ROUNDS, South Dakota 

JOHN KENNEDY, Louisiana 

MARIA CANTWELL, Washington 

JEANNE SHAHEEN, NEW HAMPSHIRE 

HEIDI HEITKAMP, North Dakota 

EDWARD J. MARKEY, Massachusetts 

CORY A. BOOKER, New Jersey 

CHRISTOPHER A. COONS, Delaware 

MAZIE K. HIRONO, Hawaii 

TAMMY DUCKWORTH, Illinois 

SKIFFINGTON E. HOLDERNESS, Republican Staff Director 

SEAN MOORE, Democratic Staff Director 

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C O N T E N T S 

OPENING STATEMENTS

Page 

Kennedy, Hon. John, a U.S. Senator from Louisiana ........................................... 1 

WITNESSES

Amar, Renee, Director, Small Business, Louisiana Association of Business 

and Industry (LABI), Baton Rouge, LA ............................................................. 4 

McIntosh, John, Executive Vice President, Olin Corporation, Clayton, MO ...... 10 

Gulfo, Lyra, Rail Category Manager, Rail Logistics, Solvay America, Inc., 

Houston, TX .......................................................................................................... 24 

von Dobeneck, Ailsa, Director of External Affairs, New Orleans Public Belt 

Railroad, New Orleans, LA ................................................................................. 30 

Roberti, Paul, Chief Counsel, Pipeline and Hazardous Materials Safety Administration, U.S. Department of Transportation, Washington, DC ............... 36 

ALPHABETICAL LISTING

Amar, Renee 

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

Prepared statement .......................................................................................... 7 

Association of American Railroads 

Statement dated November 16, 2018 .............................................................. 58 

Gulfo, Lyra 

Testimony .......................................................................................................... 24 

Prepared statement .......................................................................................... 26 

Joint Chemical Association 

Testimony dated November 16, 2018 .............................................................. 69 

Kennedy, Hon. John 

Opening statement ........................................................................................... 1 

McIntosh, John 

Testimony .......................................................................................................... 10 

Prepared statement .......................................................................................... 15 

Roberti, Paul 

Testimony .......................................................................................................... 36 

Prepared statement .......................................................................................... 38 

von Dobeneck, Ailsa 

Testimony .......................................................................................................... 30 

Prepared statement .......................................................................................... 33 

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HOW SMALL BUSINESSES BENEFIT FROM 

SMART RAIL SHIPPING REGULATION 

FRIDAY, NOVEMBER 16, 2018 

UNITED STATES SENATE, COMMITTEE ON SMALL BUSINESS

AND ENTREPRENEURSHIP, New Orleans, LA. 

The Committee met, pursuant to notice, at 10:00 a.m., at the 

Port of New Orleans Auditorium, 1350 Port of New Orleans Place, 

New Orleans, LA 70130, Hon. John Kennedy, presiding. 

Present: Senator Kennedy. 

OPENING STATEMENT OF HON. JOHN KENNEDY, A U.S. 

SENATOR FROM LOUISIANA 

Senator KENNEDY. Alright, folks, I’m going to call this meeting 

of the—our field hearing of the U.S. Senate Committee on Small 

Business and Entrepreneurship to order. 

We’ll start, if you will join me, standing for the pledge. 

[All recite the Pledge of the Allegiance.] 

Thanks everybody for coming. Thanks, in particular, to our panelists here. 

I’m looking forward to this. I hope we all learn something today. 

I don’t want this to be too formal. The way I thought we would 

approach it is I want to have a few remarks. They will be limited. 

And then I’m going to introduce our panelists. 

We had originally thought we would do two panels, but that 

didn’t make much sense to me. So, we have a reasonable number 

of folks with expertise here that we would want to hear from. So, 

I just said, well, we’ll do it all in one panel. 

After I give my opening remarks, we’ll start from my right and 

go to the left. 

I have, I thank all of our witnesses, if you will. It sounds too formal, our panel members, for submitting their written testimony 

ahead of time. It was very good. I learned a lot reading it. 

I want to thank everybody for coming. 

Throughout, and we all know this, throughout American history 

railroads have helped our country grow and have helped our economy flourish. We wouldn’t have the strongest economy of all of 

human history without our railroads. 

I deeply appreciate Chairman Risch and Ranking Member 

Cardin of the United States Committee on Small Business and Entrepreneurship for allowing me to take the Committee on the road 

to talk about these important issues today. I wanted to hear directly from our friends in the railroad industry, our friends in govLAP51NQ082 with DISTILLER

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ernment, our shippers and our small business people about the 

issues that they’re facing as they rely on America’s railroads for 

commercial success. 

Before I begin, I want to thank Meredith West, Louisiana native, 

our Committee’s Deputy Staff Director. Where’s Meredith? 

Right there, right in front of them, for all her hard work as we 

prepared for this hearing. 

We all had a little trouble getting out of Washington, DC. When 

it snows there, everybody panics and it unexpectedly snowed yesterday and they ran out of fluid to de-ice the planes at the airport. 

So, some of us had a little trouble getting in and I want to thank 

everybody for their perseverance. 

I also want to thank and with us today, we have Louisiana native, Kathryn Eden. 

Kathryn, there you are, who works for Chairman Risch. 

Sean Moore. Sean, are you? There’s Sean. Sean is the Staff Director for Ranking Member Cardin. 

And I want to thank all of them for their hard work in putting 

this together. 

I want to thank my staff: Marcie, Cassie. Raise your hands. 

Preston Robinson, my Chief of Staff is here. 

Ross White. Where’s Ross? Ross is here. 

I saw Michelle come in. Michelle is in the back, Michelle 

Millhollon. 

I want to thank them for all their hard work in putting this together as well. 

For many small businesses across this country, rail transportation is a key ingredient to their success. Railroads play a vital 

role in many industries in Louisiana. I’m thinking agriculture, 

crude oil, chemicals, water infrastructure. 

Our railroads aid in sending and receiving goods and supplies. 

Our railroads create high-paying jobs in Louisiana’s towns. 

Our railroads generate revenue for the local and the State economy and we’re grateful for every single penny. 

I think in 2017 alone, rail supported roughly 650 thousand jobs 

in Louisiana, carried 174 billion dollars in freight worldwide and 

those, of course, our job figures are not just for Louisiana. They’re 

from America that those are really impressive numbers. And I 

want to thank our friends in the railroad industry. 

I called this hearing because I want to have a very frank discussion today. I want to encourage, after we’re all done, this is off 

script a little bit but people in the audience have comments they 

want to make. I certainly would like to hear them. 

I want to talk about some of the issues facing both our shippers 

and our railroads. 

Our witnesses today, for the most part, this isn’t their exclusive 

area of expertise, but they certainly know the relationship between 

small businesses and rail shipping, first-hand. 

They use railways to grow their businesses. Small businesses 

rely substantially on railroads to create jobs and help their communities thrive and I can think of no better way for Congress to grab 

an accurate understanding of the benefits and challenges facing 

Louisiana small businesses than by lending these folks an ear. 

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Each and every year Louisiana railroads carry about 121 million 

tons of freight. 

Let me say that again. 

Every year, Louisiana railroads carry about 121 million tons of 

freight. They’re important to our economy. 

Throughout our State, farm servicers, manufacturers, port authorities, depend on efficient modes of transportation to get their 

cargo where it needs to go. Products grown and produced in Louisiana end up on the shelves of Rouses and other grocery stores 

across America. Small businesses and consumers alike use railroads to keep these goods affordable. 

For those same farmers and in some cases, chemical producers, 

as well as other Louisiana businesses, frankly, large and small, the 

issue of regulatory authority is critically important. I want to make 

sure that we spend some time today talking about smart regulations that will help our businesses thrive and keep our communities safe. 

For example, and we’ll be talking about this. I know that the latest proposed safety regulations on tank cars that ship Toxic Inhalation Hazards or TIH materials as we call them, will impact job creators all throughout Louisiana. 

I’m a big fan of our Transportation Secretary. I sent her a letter, 

Secretary Chao, a letter last year asking her to move forward with 

a regulation to determine a phase-out period for tank cars that 

don’t meet the latest safety standards. 

She and I worked very well together on this issue, as we have 

on others. She and I worked with the shippers and our railroads 

and I’m pleased to say that an agreement was reached on a reasonable phase-out date. 

This new phase-out date will make sure that safety is a top priority. That’s our first and foremost concern while also saving shippers and tank car owners about 130 million dollars. 

The Department of Transportation is working on noticing a proposed rule and I’m looking forward today to hearing an update 

on—of where this stands. We need it like, yesterday. 

If small businesses across Louisiana and America are going to 

succeed, they need to be able to transport their materials and goods 

safely, reliably, but also affordably. And that’s why it’s vital to Congress and while I don’t speak for her, I think it’s vital, it would be 

safe to say, that it’s vital to the Trump Administration that we continue working together to promote competition and grow our economy. 

Our panel today. 

Our panel is made up of representatives from a few of Louisiana’s many industries. I’m looking forward to hearing their testimony. 

Unfortunately, we don’t have time today to hear from every single business that ships by rail so we tried to pick a representative 

sample, if you will. But our witnesses today are key leaders in 

their communities and industries and I know we will all find their 

testimony to be interesting and informative. 

I do plan to take what I hear today back to the rest of the Committee and talk to my colleagues to make sure that all the concerns 

expressed today from our panel members and from any of you here 

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who express concerns from the audience so we can decide what or 

any legislation we should pursue. 

Alright, witness testimony. 

I’m going to introduce our panel today, in no particular order. 

I’m trying to start with Renee. 

Ms. Renee Amar, did I say that right? 

Ms. AMAR. Absolutely. 

Senator KENNEDY. Renee is Director of Small Business at the 

Louisiana Association of Business and Industry which, of course, is 

no stranger to most of us. 

Renee is the Small Business Council Director and Healthcare 

Council Director for LABI. 

And in the role as Deputy Director of Political Action, she 

fundraises for LABI’s four pacs, recruits candidates for office and 

develops endorsements. 

Prior to joining LABI in 2013, Renee spent eight years as the Director, the State Director, for the National Federation of Independent Businesses. 

She also worked for Louisiana Hospital Association for four years 

in the Governmental Affairs Department. 

She holds a Bachelor’s Degree from Southeastern Louisiana University and a Master’s Degree from Louisiana State University. 

She lives in Baton Rouge with her husband and three children. 

Renee, we’ll start with you and then we’ll go next to John and 

I’ll introduce John when you’ve completed your remarks. 

Ms. AMAR. Absolutely. 

Senator KENNEDY. What I thought we would do is just let everybody speak and then I’m going to go back and ask some questions 

and I would welcome the audience, audience questions or participation as well. We’ll just talk about the issues that our esteemed panelists will raise, okay. 

Renee, the floor is yours. 

STATEMENT OF RENEE AMAR, DIRECTOR, SMALL BUSINESS, 

LOUISIANA ASSOCIATION OF BUSINESS AND INDUSTRY 

(LABI), BATON ROUGE, LA 

Ms. AMAR. Thank you. Good morning, everyone. As Senator Kennedy said my name is Renee Amar with the Louisiana Association 

of Business and Industry. 

In this beautiful weather I don’t understand that I woke up this 

morning with allergies and it’s like somebody punched me in the 

face. So, I apologize for my voice and my eyes and everything before I even get started. 

Senator Kennedy, on behalf of the Senate Committee on Small 

Business and Entrepreneurship, thank you so much for inviting the 

Louisiana Association of Business and Industry to testify today at 

this hearing, ‘‘How Small Businesses Benefit from Smart Rail Shipping Regulation.’’ 

Hopefully, once this hearing is completed, all the parties involved 

can come to a reasonable and timely solution for this smart rail 

shipping regulation that is safe, reliable and affordable for the 

small business community. 

My name is Renee Amar, as I said, and I am the Director of 

Small Business for LABI. LABI, if you don’t know, is the State’s 

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Chamber of Commerce and manufacturing association. We work 

very closely with the National Association of Manufacturers and 

the U.S. Chamber of Commerce. We are the State’s largest business organization, and a voice for the principles of free enterprise 

in Louisiana. 

We represent the views and interests of the Louisiana business 

community in the political, legislative, judicial and regulatory processes. 

We currently have 2,400 members that represent more than 

320,000 employees. Of those 2,400 members, more than 70 percent 

are small business owners defined as having under 100 employees. 

We get tagged a lot of time, this is not in my testimony, but for 

being the voice for big business, but obviously, the lion’s share of 

our members are small business owners. These are your farmers, 

your retailers, both grocery and clothing, as Senator Kennedy said, 

we obviously have large manufacturers as our members, but we 

also have small manufacturers as our members. 

And in full disclosure, we have railroads as our members. And 

so, I’m going to have to kind of thread the needle a little bit today, 

understanding, you know, both sides of this issue. 

Specifically, as the Small Business Council Director, my job is to 

advance ideas that help the free market grow in Louisiana which 

in turn, allows small business owners to compete in a healthy environment. We understand the vital role that the small business 

community plays in Louisiana’s economy and we equally understand that the growth of the economy in Louisiana greatly depends 

on maintaining a healthy and thriving industrial base, coupled 

with a thriving small business community. Also, having cost effective shipping options is a vitally important piece of the puzzle for 

running a successful small business of any type. 

It’s clear then that when rail is healthy, profitable and productive, that it’s good news for all of us and of course, that’s good news 

for the small business community. And, that goes for every sector 

and every small business as they are consumers in general and 

benefit from the savings and improved service generated by a competitive, innovative transportation sector. 

Looking ahead, it is important that the best policy environment 

be established to incentivize entrepreneurship, investment and innovation that drives growth across the entire economy, including 

when it comes to transportation. Any relapse into overregulation, 

in turn, would generate negatives, such as higher costs and reduced service, for the small businesses in the broader railroad sector, in sectors that serve the railroads, and in the many sectors 

served by railroads and of course, for consumers in general. 

Pointing to the issue of rail and regulation, after much has been 

said and done, both sides of rail and industry have come together 

and reached common ground and we believe that is the best conclusion to come to as it works for the rail companies, it works for industry and ultimately, it works for the consumer. 

The consumer benefits from years of railroad deregulation and 

not overregulation to the tune of billions of dollars that come from 

lower priced goods resulting from lower transportation costs. 

In conclusion, we always, LABI, myself, have cautioned and always will caution that when government does issue regulations beLAP51NQ082 with DISTILLER

6 

cause there truly is a safety or health concern, it should be done 

with the business owners’ input and with the lightest touch from 

government as humanly possible. 

Thank you today for allowing me to come and participate in this 

hearing. 

[The prepared statement of Ms. Amar follows:] 

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ReneeAmar 

Director, Small Business 

louisiana Association of Business and Industry 

November 16, 2018 

Port of New Orleans 

TESTIMONY SENATOR JOHN KENNEDY 

Senator Kennedy on behalf of the Senate Committee on Small Business and Entrepreneurship, 

thank you for inviting the louisiana Association of Business and Industry to testify today at this 

hearing, "How Small Businesses Benefit from Smart Rail Shipping Regulation." Hopefully, once 

this hearing is completed, all the parties involved can come to a reasonable and timely solution 

for this smart rail shipping regulation that is safe, reliable and affordable for the small business 

community. 

My name is Renee Amar, I am the Director of Small Business for the louisiana Association of 

Business and Industry, also known as LABI. LABI is the state's Chamber of Commerce and state's 

manufacturing association. We work very closely with the National Association of 

Manufacturers and the United States Chamber of Commerce. LABI is the state's largest 

business organization, and a voice for the principles of free enterprise in louisiana. We 

represent the views and interests of the louisiana business community in the political, 

legislative, judicial and regulatory processes. 

LAB I currently has 2,400 members representing more than 320,000 employees and of those 

2,400 members, more than 70% are small business owners and that is defined as having under 

100 employees. These are your farmers, retailers both grocery and clothing, and small 

manufacturers that all rely on rail as a form of shipping for them. 

Specifically, as the Small Business Council Director, my job is to advance ideas that help the free 

market grow in louisiana which in turn, allows small business owners to compete in a healthy 
8 

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ReneeAmar 

Director, Small Business 

louisiana Association of Business and Industry 

November 16, 2018 

Port of New Orleans 

environment. We understand the vital role that the small business community plays in 

louisiana's economy and equally understand that the growth of the economy in louisiana will 

greatly depend on maintaining a healthy industrial base, coupled with a thriving small business 

community. Also, having cost effective shipping options is a vitally important piece of the puzzle 

for running a successful small business of any type. 

It is clear then that when rail is healthy, profitable and productive, that's good news for all of us 

-and of course- that's good news for small businesses. And, that goes for every sector and 

every small business as they are consumers in general and benefit from the savings and 

improved service generated by a competitive, innovative transportation sector. 

looking ahead, it is important that the best policy environment be established to incentivize 

the entrepreneurship, investment and innovation that drive growth across the economy, 

including when it comes to transportation. Any relapse into over-regulation, in turn, would 

generate negatives, such as higher costs and reduced service, for the small businesses in the 

broader railroad sector, in sectors serving railroads, and in the many sectors served by railroads 

-and of course, for consumers in general. 

Pointing to the issue of rail and regulation, after much has been said and done, both sides of rail 

and industry have come together and reached common ground and we believe that this is the 

best conclusion to come to as it works for the rail companies, works for industry and ultimately, 

the consumer. The consumer benefits from years of railroad deregulation and not over-
9 

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ReneeAmar 

Director, Small Business 

louisiana Association of Business and Industry 

November 16, 2018 

Port of New Orleans 

regulation to the tune of billions of dollars that came from lower priced goods resulting from 

lower transportation costs. 

In conclusion, we always have cautioned and always will caution that when government does 

issue regulation because there truly is a safety or health concern, it should be done with the 

business owners input and with the lightest touch from government as humanly possible. 

Thank you for your time and the opportunity to testify today. 
10 

Senator KENNEDY. Thanks, Renee. 

Mr. John McIntosh. John is our next panelist. 

John is the Executive Vice President, Chemical Synergies and 

Systems for Olin Corporation. 

In this role, as Executive Vice President, John has the overall 

operational responsibility for chloralkaline products and chemical 

distribution. He also has corporate responsibility for information 

technology. 

John joined Olin in 1977. He’s been appointed to several roles in 

manufacturing and operations since then, including Vice President 

of Operations for Specialty Chemicals, Vice President of Manufacturing and Engineering, President of a Products Division, Senior 

Vice President of Operations, Senior Vice President of Chemicals 

and Executive Vice President of Chemicals and Ammunition. 

Mr. McIntosh is currently Chair of the World Chlorine Council 

which, as you know, is an international consortium of trade associations. 

John is a graduate in chemical engineering from the University 

of Missouri, some say Missouri, I know. 

My roommate in law school went to ‘‘Missou,’’ as he called it and 

he told me always to say, ‘‘Missoura.’’ But Senator Blunt, my friend 

from Missouri, says it’s Missouri, but John can tell us what’s right 

here. He has a very impressive background and ‘‘Missou’’ is a great 

school. 

STATEMENT OF JOHN McINTOSH, EXECUTIVE VICE 

PRESIDENT, OLIN CORPORATION, CLAYTON, MO 

Mr. MCINTOSH. Thank you, Senator. 

I was always taught that if you lived south of the Missouri River 

in the Ozarks it was Missouri and if you lived north, it was 

‘‘Missoura.’’ There’s no truth to that either, that was just—— 

[Laughter.] 

Senator, thank you for having this hearing and for inviting us to 

testify. 

As the Senator said, my name is John McIntosh. I am an Executive Vice President for Olin Corporation. 

I have worked for many different roles for Olin since I started 

with the company in 1977 and I’ve been involved in transportation 

policy or transportation operations for much of that time. 

I also want to express my gratitude to the Senator for his part 

in the agreement that we ultimately reached on a solution to the 

phase out of tank cars. His part in that was much more than his 

remarks would have indicated and we would not have been able to 

get to the point we got to without his intervention and his stewardship of that issue through, you know, through the process that we 

went through. 

All of those efforts, including the things that he’s talked about, 

obviously, and the things we’ll talk about in this hearing, will result in economic benefit for small businesses across Louisiana and 

across the entire country. 

Olin is a chemical company, ships about 45,000 rail cars annually, and we take pride in doing that safely. We’ve been awarded 

the American Association of Railroad’s Grand Slam safety transportation award for the last three years. Winning once is an accomLAP51NQ082 with DISTILLER

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plishment. Winning three years in a row is truly an exceptional 

feat and within our company it’s one of the demonstrations we 

have of our commitment, not only to distribution safety but to product safety and to the safety of our workplaces. 

Olin is the world’s largest chlorine producer, the world’s largest 

manufacturer of epoxy and as the Senator said, a leading ammunition company selling product under the Winchester brand. 

We have nearly 700 employees that work, employees and contractors that work in our two sites in Louisiana, in Plaquemine and 

St. Gabriel. Louisiana is critical to our network of facilities and our 

portfolio of customers that we serve. We have plans to invest in the 

State because these are both viable locations with many advantages and opportunities as we look forward. 

We are not a small business, obviously. But if you look at our 

portfolio of customers, you’ll find that the majority of our customers 

are, in fact, small businesses and they rely on timely and economic 

delivery of chlorine and chlorine related chemistries, products 

made with chlorine, to do their business. And so, that’s what’s key 

to this. Chlorine is used everywhere. It’s ubiquitous. It’s involved 

in things we take for granted every day. 

It makes sure our drinking water is safe. It makes sure that restaurants, nursing homes, hospitals, anyplace where health care is 

the object that all of the sanitization and disinfection chemicals 

that are necessary to safely operate in those facilities, in essence, 

come from chlorine or a derivative of chlorine. 

You all encounter our products every day, breweries, food producers, hair salons, dry cleaners, thousands of other businesses use 

our products and derivative products is just a raw material supplied for their everyday business. 

Unfortunately, for shippers like Olin that have only access to 

only one serving railroad, in other words, we do not have competition for the railroads that we can look to, to move product for us, 

what we encounter is, in essence, a natural monopoly that exists 

because of what we believe are overly permissive laws and regulations. 

Our rate increases, if you look historically, for the last 15 years 

have far exceeded the rate of inflation on an annual basis and our 

service levels have not matched that kind of rate profile. Our surface levels have been in continuous decline with periodic catastrophic service emergencies. Unfortunately, we have virtually no 

recourse under current law because the checks Congress put in 

place, historically went all the way back to the Stagger’s Act, are 

simply not functional in today’s environment. 

Olin is one of the few chemical companies who has availed itself 

of the rate review process or rate reasonableness process that is 

under the jurisdiction of the STB, the Surface Transportation 

Board. We spent millions of dollars and many years trying under 

that protocol for rate reasonableness to put together, in essence, a 

case that said we were being overcharged from a rate standpoint. 

We, obviously, were not successful or we wouldn’t be talking 

about the shortcomings of that protocol. 

To say the process is a disincentive for companies to avail themselves of this rate reasonableness process with the STB is an understatement. 

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At the end of this process, my interpretation, having been the 

one that convinced the company to spend these millions of dollars 

in search of more reasonable rail rates, my interpretation of that 

decision and all that went into it is that the current STB process 

for rate reasonableness will never allow a shipper, just because of 

the protocol and the way that it’s executed, to win a rate case. 

Until the STB makes serious reforms to their processes, we really don’t have a recourse for great reasonableness. And as I mentioned earlier, if you’re served by only one railroad, you do not have 

competition as an economic check and balance on the rates that the 

railroad is charging. 

To make matters worse, in recent years we’ve also experienced 

serious cuts in services and investment in the rail network, not 

universally, but in some areas, in some geographies. And you 

know, that puts further pressure on our ability to rely on and the 

small business customer at the end of the supply chain, to rely on, 

you know, our ability to serve them and consequently, their ability 

to produce the products that are for the markets that they serve. 

In some cases, this can mostly be traced back to a trend that 

began when activist investors installed Hunter Harrison as CEO of 

CSX Railroad. The resulting change in the operating practices at 

CSX created serious service breakdowns, not only for us, but for 

really, anybody else that was using them as a primary rail carrier. 

Obviously, as I said earlier, at the other end of this supply chain 

is a customer, whether it’s a large company, a small company, at 

the other end of the supply chain and those people, ultimately 

being the customer facing part of the supply chain are impacted as 

well. 

Anecdotally, during the worst of this crisis, we had rail cars that 

took 40 days to go from the southeast U.S. to the northeast U.S. 

We lost track of rail cars. The railroads didn’t know where rail cars 

were that we had entrusted them to ship on a timely basis to an 

end point. 

We have installed GPS trackers on our rail cars. We can typically always find out where our rail cars are, but that, in and of 

itself, was not enough to counter the fact that we just had a slowdown in rail traffic on their system and it was so overwhelming 

that it took a long time to work ourselves out of it. 

Most of us have had consumer-related, you know, service problems like that, but when it’s as extensive as this one was, it creates 

a level of frustration. 

I will acknowledge that the situation with CSX, you know, has 

improved, not back to the baseline we started, but it’s improved 

with another change in management, but the damage to the economy, the damage to the customers, both primary and downstream 

customers, was significant and the sad part is there were no consequences, virtually, for this kind of service slow down. 

Most other railroads, because there appears to be a potential opportunity and no downside, are migrating towards this new operating model which we fear will have similar impacts in geographies 

across the country where these other railroads are going to operate. 

When you have a network that’s already thinly resourced, these 

kinds of events put a serious strain on that industry’s ability to 

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react. Service problems are not just inconvenient, they are threatening to the entire framework of our customers. 

And anecdotally, there are many examples. 

Our plants run 24/7 and because of that it’s a fine balance for 

us between how much we produce which is reliant, almost totally, 

on how much we can ship and ship reliably. And when that balance 

gets disrupted, then even us, as the primary, you know, manufacturer in a supply chain process, gets impacted. If a customer 

doesn’t receive a product when they expect, then they’re impacted 

as well. 

In some cases when you’re talking about chemicals that aren’t 

chlorine, we can step in with alternate modes of transportation. We 

can, at great expense, move trucks, but that’s not a long term and 

sustainable option to the importance of rail transportation in our 

supply chain. 

In this last CSX service issue that I spoke to, we had customers 

all up and down the eastern U.S. which is predominately CSX’s 

service territory, that either were shut down because they couldn’t 

get product or shut down because, you know, the rail car system 

was just broken. Cars were not being returned to be reconditioned 

and refilled and shipped again. These anecdotal incidents, you 

know, happened in every State in the eastern U.S. that we serve 

customers. 

And so, we believe the STB, and have said this on numerous occasions, should look at service requirements as part of the railroad’s common carrier obligation. 

The Senator mentioned the Tank Car Committee. There have 

been issues with the Tank Car Committee. He mentioned one 

about the Tank Car Committee standards that were unilaterally 

chosen to be changed by the Tank Car Committee which is an industry-controlled subcommittee that’s part of the American Association of Railroads organization. 

We’re vested in policies that focus on safe and reliable transportation of material by car. We own or lease our entire fleet. We have 

a huge investment tied up in these assets. 

And we believe that the rulemaking authority for what standards 

are appropriate for the assets we use is an authority that belongs 

with DOT, not with an industry-controlled, railroad industry-controlled, Tank Car Committee. 

We would ask the Committee’s assistance in requesting the DOT 

grant the rail shipper’s petition, filed more than two years ago, to 

initiate a rulemaking that would allow for discussion on Tank Car 

Committee reform and on the standard setting by that group. 

We also believe that DOT needs to be the standard-setting agency and we would like to suggest that legislation should be enacted 

to make that. 

The Tank Car Committee is imposing many new requirements on 

us, not only, not just tank car standards. They’re currently involved 

in an activity to update standards around certification of tank car 

facilities, otherwise known as Appendix B. 

Appendix B is driven by, well, if these new regulations are, in 

essence, happen, then it’s going to change the dynamic around how 

many times rail cars have to go back to shops for repairs versus 

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having those repairs done on the site which is how it’s been handled historically for years and years. 

This new regulation will take rail cars out of service. It will impact the nature and the productive use of the fleets of the shippers 

and ultimately it will impact the small business customer who relies on this supply chain to work right. 

We believe that the DOT and FRA should issue an interpretation 

that minimizes the regulatory burdens of Appendix B without compromising the Department’s, you know, highest priority standard of 

safety. We support that, but the fact that this has all been done 

just with informal, non-rulemaking activities has led to this review 

of Appendix B has created a potential problem for us. 

Senator, again, I want to thank you for this hearing today. 

You’ve been an ally of the shipper community and we recognize 

that. I think the small business community in Louisiana recognizes 

that as well. 

We will continue to look forward working with you and your 

staff. 

Thank you, sir. 

[The prepared statement of Mr. McIntosh follows:] 

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Olirr 

Testimony of: 

John Mcintosh 

Executive Vice President 

Olin Corporation 

Before the 

United States Senate 

Committee on Small Business & Entrepreneurship 

Field Hearing on 

"How Small Businesses Benefit from Smart Shipping Regulation" 

Port of New Orleans 

November 16, 1018 
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John Mcintosh 

Executive Vice President 

Olin Corporation 

Senator Kennedy and members of the Committee, thank you for inviting me to 

provide testimony today. 

My name is John Mcintosh, and I am the Executive Vice President for Olin 

Corporation. 

I have worked in many different roles within Olin since I joined the company in 

1977, and have been closely involved with transportation policy for much of that 

time. 

Before I begin, let me express our gratitude to you, Sen. Kennedy for your 

leadership that led to a solution on the unjustified phasing out of DOT authorized 

TIH tank cars. We would not have been able to achieve the negotiated solution 

that we did without your effort. Those efforts, including this hearing, will result in 

more economic shipping and lower costs for small business in Louisiana and 

across the country. 

Olin ship's more than 45,000 rail cars annually, and we have been awarded AAR's 

Grand Slam safety award for three years in a row. Winning once is exceptional, 

and three years in a row is just extraordinary, and it reflects Olin's commitment to 

safety. 

The rail industry's Grand Slam award is presented to companies with spotless 

safety records, meaning zero non-accident releases, and is a significant 

accomplishment in rail hazmat transportation. 

I am also the Chairman of the American Chemistry Council's Board level 

Committee on Rail Transportation, and the concerns that I will elaborate on today 

are shared by many similarly situated chemical companies. 

Olin is an active participant in the Rail Customer Coalition 

www.freighrailreform.com, which is made up of about 80 trade associations 

representing virtually all commodities shipped by rail. While our specific problems 

vary across the customer base, the underlying issues around high and escalating 

rail rates and poor service are consistent. 

Following Olin's transformative acquisition of Dow's chlor-alkali assets in 2015, 

we are the world's largest chlorine company, the world's largest epoxy 

manufacturer, and a leading ammunition company under the Winchester brand. 

Our company recently celebrated 100 years on the New York Stock Exchange, and 

we have over 6,400 employees at 70 locations worldwide. 

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John Mcintosh 

Executive Vice President 

Olin Corporation 

We also have nearly 700 employees and contractors in the State of louisiana at 

our Plaquemine and St. Gabriel sites. louisiana is a critical state for Olin and we 

have plans to invest significantly in this great state. 

Surely, we are not a small business. However, thousands of small business rely on 

the timely and economic delivery of chlorine chemistry products to do business. 

Chlorine ensures that our drinking water is safe, and that restaurants, nursing 

homes and all types of medical facilities have the sanitizers and disinfectants 

needed to help prevent the spread of infectious diseases. 

The rail challenges we face affect our entire supply chain with all of the costs and 

service problems ultimately impacting everyone who relies on our products. 

You encounter our products every day-whether you know it or not. Chlorine, 

caustic soda and their derivative products are used for water purification, 

pharmaceutical and paper manufacturing, durable infrastructure products, and 

thousands of other industrial processes and applications. 

Breweries and food producers rely on hydrochloric acid, a derivative product of 

chlorine. Methyl Chloroacetate and Choroacetic Acid are used in hair care salons. 

Metallic Chloride is used in our fireworks every July. There are simply limitless 

small business applications for these products-- including dental sealants and 

cements, paints and varnishes of all types, even the wetsuits used in diving, down 

to the soles of our shoes. 

Rail Economic Regulatory Environment 

let me first say that we need rail in order to survive and compete in a global 

marketplace. Railroads are critically important to our business, and we need the 

industry to continue to be economically viable. 

Unfortunately, for shippers like Olin that have access to only one railroad, what 

we encounter is a monopoly service provider that exerts market power because 

of overly permissive laws and regulations. 

The rail industry was on its heels in the 1970's, and Congress created a very loose 

legislative scheme that allowed the rails to return to health in the 1980's-- called 

the Staggers Rail Act. Since then, the rail industry consolidated from more than 

two dozen Class I railroads in 1980 to only four major railroads today. 

The Interstate Commerce Commission, and later the Surface Transportation 

Board (STB), effectively nullified the protections Congress included in the Staggers 

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John Mcintosh 

Executive Vice President 

Olin Corporation 

Rail Act through poor regulatory implementation. Congress sent the STB a 

message to get more aggressive in 2015 with the passage of STB reform 

legislation, but we have made little progress since, as we have been awaiting 

Senate confirmation for STB Board Members for almost three years. 

Rail to rail competition in this industry is rare, and unless your facility is blessed by 

geography, the results are entirely predictable. About two-thirds to threequarters of chemical facilities are captive to a single railroad, and all of Olin's sites 

are captive. 

Rail rates across the industry continue to spiral up, more than tripling the rate of 

inflation according to ACC data, and our service levels have been in a near 

continuous decline with periodic catastrophic service emergencies. Unfortunately, 

we have virtually no recourse under current law because the checks Congress put 

in place are simply not functional. 

Olin is one of the few chemical companies to bring a rate case before the STB. We 

spent many millions of dollars on lawyers and consultants to construct a 

hypothetical railroad, which is necessary to bring a case under STB procedures. 

Shippers are required to litigate issues such as how many bathrooms a 

hypothetical railroad company needs, and how often the grass needs to be cut. To 

say this process is a disincentive for companies to avail themselves of STB 

processes is an understatement. 

At the end of this arduous process, my interpretation of the decision from the STB 

was that they do not have a process whereby a chemical shipper could ever win a 

rate case. 

This is the key quote from the current Chairman Ann Begeman from our decision, 

and her conclusion was echoed by other Board Members: 

"While I had been skeptical about the Stand Alone Cost (SAC} test prior to 

my service at the Board, my concerns have only grown as I have seen the 

SAC process in action." 

"The Board has a duty to ensure that shippers have a viable means to 

challenge a rate ... Now, the Board should ask whether the SAC process can 

provide a meaningful gauge of rate reasonableness for carload traffic 

shippers. I stand ready to work with my colleagues and Board stakeholders 

to improve our rate processes." 

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John Mcintosh 

Executive Vice President 

Olin Corporation 

Until the STB makes serious reforms to their processes, we have no real 

recourse-which of course creates a further imbalance in the relationship 

between railroads and their customers. 

Unlike the rail sector, the chemical industry is fiercely competitive, and rail rates 

and service have a significant impact on our ability to compete globally as an 

industry. 

Olin and our chemical company peers are focused on retaining our existing 

customers, and competing for new customers-- by providing the lowest price and 

highest quality products possible. We invest appropriate levels of capital 

anticipating market demand, we innovate, and we compete fiercely with our 

peers. My experience with the railroad industry is that they extract the highest 

possible rate from customers that have no alternative, while providing the 

minimal level of service to those customers. This is not a free or competitive 

market. 

The STB has been understaffed for years and unable or unwilling to move forward 

with necessary reforms. We appreciate the attention Sen. Kennedy is giving to 

these critical issues, and ask for your continued engagement to help push the STB 

to move forward with reforms. 

Rail Service 

To make matters worse, in recent years we have also experienced additional cuts 

in service and investment in the rail network. This trend took hold when activist 

investors installed Hunter Harrison as CEO of CSX railroad, and we have seen this 

movement spread across the entire rail industry. These cuts and resulting service 

breakdowns have had serious business consequences for Olin and many of our 

peers and small business customers. 

During the worst of the CSX service crisis, we experienced lost railcars that were 

carrying toxic by inhalation material, we observed rail cars "ping ponging" across 

the network via our GPS devices that we have installed on our cars, and we spent 

countless hours trying to communicate these problems to CSX, which was 

virtually completely unresponsive. 

Imagine your frustration calling your cable provider with a problem, and amplify 

that by lOOOx and you can begin to understand our level of frustration. I'll 

acknowledge that the situation with CSX has improved with another change in 

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John Mcintosh 

Executive Vice President 

Olin Corporation 

management, but this episode caused tremendous damage throughout the 

economy, and CSX faced virtually no consequences. 

Given the lack of consequences, most of the other railroads are moving forward 

to implement new operations strategies modeled after CSX. We fear this will lead 

to stripping out employees and reducing investment in the network in order to 

drive down operating ratios. We also fear that the slightest strain on a network 

this thinly resourced will lead to many more service problems in the future. 

Operating ratios reflect the businesses' operating expenses as a percentage of 

revenue, and are common in capital-intensive industries like rail. A low operating 

ratio indicates high profitability, i.e. increasing revenue and decreasing expenses 

and investments. We are seeing operating ratios in the rail sector fall below 60%, 

which is an astonishing level of profitability. Rail operating ratios were in the 

70%'s and 80%'s just a few years ago. This appears to be an indication of reduced 

investment in the network and increased pricing, and provides further evidence 

of our observation of reduced service at higher rates. 

The primary beneficiaries of this practice are investors-not the customers that 

rely on the railroads to do business. Nobody is saying profitability is a bad thing; 

to the contrary, we want railroads to be prosperous and invest in their network 

and service. But you can't consider these radically lower operating ratios without 

also considering that railroads are essentially a utility industry with an 

insurmountable barrier to entry, and one that is allowed to have total market 

power over the customers that need them in many places. It is just another piece 

of evidence that this industry deserves a closer examination from Congress and 

the STB. 

Service problems are not merely inconvenient-they cause serious disruption to 

our customers and to our ability to operate. Chlorine plants run 24/7 and we 

carefully balance our production and our ability to move product offsite. 

Likewise, a customer that does not receive their shipment may be forced to shut 

down, and we have many customers that experienced severe disruptions during 

the CSX crisis. In some cases not involving chlorine, we were able to provide 

trucking service at great expense, but for chlorine shipments this is simply not an 

option. Impacts to small businesses from these disruptions can be devastating. 

I'll offer two representative examples to consider. We have a small business 

customer in Williamsport, PA that is currently losing $100,000 a day due to no 

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John Mcintosh 

Executive Vice President 

Olin Corporation 

chlorine being delivered despite on time orders and on time shipments by Olin. 

These are lost sales to a small company that is struggling financially. We've also 

seen a railcar take 40 days to travel from Charleston, TN to New York, with several 

days of no movement at all. This customer was forced to put their facility in 

shutdown status as a result. 

I believe the STB should look at establishing minimum service requirements as a 

part of the railroads' common carrier obligation. 

AAR Tank Car Committee Problems 

I want to discuss two more technical issues where we could use the Committee's 

assistance and engagement. 

1) Tank Car Committee 

As a large shipper of tank cars, Olin is deeply vested in policies that impact our 

ability to maintain a safe and cost effective fleet. Olin owns or leases our entire 

fleet of tank cars, and while Congress has given sole rulemaking authority to the 

Department of Transportation (DOT) to establish tank car standards, our 

experience is that the railroad industry-controlled Tank Car Committee (TCC) has 

assumed inappropriate control over this function. 

The TCC is organized under the control of the Association of American Railroads 

(AAR), who controls a majority of votes on the Committee. The TCC has asserted 

that it has authority to prohibit the use of tank cars that meet all applicable DOT 

requirements, requiring owners to replace these cars long before the end of their 

useful service life, imposing hundreds of millions of dollars in unwarranted 

burdens on U.S. manufacturers. 

AAR is functioning as the regulator in this space without the requirements typical 

for a normal rulemaking-- such as cost benefit analysis, safety reviews and public 

comment. The result is the rail industry exerts their will without the appropriate 

level of government scrutiny, at the expense of their customers. Olin and other 

rail shippers make significant long-term capital investments in tank cars, and need 

confirmation that DOT and not the railroads will be the ultimate authority on 

what cars we can and cannot use. 

I would ask the Committee's assistance in requesting that DOT grant the rail 

shippers' petition, filed more than two years ago, to initiate a rulemaking that 

would allow for an open and transparent discussion on TCC reform. I would also 

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John Mcintosh 

Executive Vice President 

Olin Corporation 

ask you to consider introducing legislation that would clarify to DOT that they 

have the responsibility to set tank car standards for the United States, not a selfinterested industry group. 

2) Appendix B 

Unfortunately, the TCC is also imposing new requirements that inappropriately 

expand the scope of regulation for routine functions performed at rail shipper 

facilities. The TCC recently updated its standards for the Certification of Tank Car 

Facilities- otherwise known as "Appendix B"- in response to unpublished DOT 

regulatory interpretations that have not been appropriately considered through 

the rulemaking process. 

In documents presented at a public meeting of the Tank Car Committee, the 

Federal Railroad Administration has taken the position that the replacement of 

virtually any tank car component is a maintenance function and therefore must 

be performed only by a certified tank car facility. This interpretation will require 

facility certification for operations normally conducted at a shipper's loading 

facility, including the replacement of plugs, caps, or even a manway bolt. This 

position is inconsistent with DOT's longstanding acknowledgement that both 

inspection and replacement of parts may be part of a shipper's pre-trip 

examination of a tank car. 

If carried forward, these new and unwarranted "interpretations" will impose 

significant new regulatory burdens, forcing us to send tank cars to a certified 

repair shop more frequently. This will take cars out of service for months at a time 

and further reduce the productivity of our rail car fleet. 

Consistent with the Administration's regulatory reform agenda, DOT/FRA should 

issue an interpretation that minimizes regulatory burdens without compromising 

the Department's highest priority of safety. 

Conclusion 

Sen. Kennedy, again, thank you for holding this hearing today. You have been a 

great ally and representative for rail shippers and our small business customers 

that experience a myriad of challenges with the rail sector. We look forward to 

continuing to work with you and your staff to find solutions that will improve this 

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John Mcintosh 

Executive Vice President 

Olin Corporation 

situation for rail shippers-and solutions that will ultimately help the economy 

and the rail industry itself. 

9 
24 

Senator KENNEDY. Thank you, John. 

Alright, Ms. Lyra Gulfo. I said that right, yes? 

Ms. GULFO. That’s right. 

Senator KENNEDY. Lyra is our next panelist. She is the Rail Category Manager with Solvay America. Is that right? 

Ms. Gulfo is responsible for rail freight and rail car leasing for 

Solvay business units in the United States, Canada and Mexico. 

She’s been in the chemical industry since 1998. She’s previously 

held supply chain and logistics management positions in a variety 

of industry sectors and across different modes of transportation. 

Ms. Gulfo is based in Houston where Lyra is a member of the 

Greater Houston Partnership Women Business Alliance. She recently joined the National Industrial Transportation League Board 

as a member of the rail transportation committee. 

Ms. Gulfo earned her Bachelor’s Degree in industrial engineering 

from, help me with this. 

Ms. GULFO. Universidad del Norte. 

Senator KENNEDY. That’s right. 

[Laughter.] 

In Columbia. 

She is very experienced and very knowledgeable about the issues 

that face our railroads and their shippers and the challenges for 

small business people. 

I’m looking forward to hearing her testimony and I thank her for 

being here. 

And I was in Colombia about eight months ago. It is a beautiful 

country. 

STATEMENT OF LYRA GULFO, RAIL CATEGORY MANAGER, 

RAIL LOGISTICS, SOLVAY AMERICA, INC., HOUSTON, TX 

Ms. GULFO. Thank you, Senator. 

Thank you, Senator, for inviting me to testify here today. 

Like you mentioned, my name is Lyra Gulfo and I am the Rail 

Category Manager for Solvay. 

For those of you who don’t know, Solvay is a multi-specialty advanced materials and chemical company. We are committed to developing chemistry that addresses key societal challenges. We partner with our customers to aim the way across multiple diverse 

global markets. 

Currently, our products are using planes, cars, smart and medical devices, batteries, oil and mineral extraction, among many 

other applications that promote sustainability. 

Solvay first operated in the U.S. in the early 1890s and we currently have 6,400 employees across 44 industrial sites, eight Formulation Centers, seven R and I centers, three headquarters in 

North America, Alpharetta, Georgia; Houston, Texas; Princeton, 

New Jersey. And here in Louisiana our footprint includes a site in 

Baton Rouge and a site in Shreveport. We have 22 union sites and 

are a net exporter of the U.S. 

Our site in Shreveport is currently investing a million dollars in 

it’s rail infrastructure which is why we believe that rail transportation, it’s a critical component to the U.S. development. 

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25 

However, the current regulatory environment stifles growth by 

reducing access to transportation, non-competitive pricing and regulatory rules that are too taxing on the chemical industry. 

Like how was mentioned, I would like to offer a couple of examples on how the current environment has impacted businesses like 

mine. 

Solvay used to have a site in Martinsville, Pennsylvania, that 

consumes about 40 million pounds of ethylene oxide, a TIH, over 

the rail with increased regulatory burdens on rail transportation 

and the ever-increasing rail rates, the site became non-competitive 

and closed up two years ago. 

Unfortunately, shippers don’t have a viable option like John 

mentioned to challenge these rates. Current rate cases take an average three and a half years and over five million dollars to complete which is not feasible for small- and medium-sized enterprises. 

Even the STB has acknowledged that the current rate review 

process is broken which is why we are calling on Congress to continue to press STB for meaningful reform for this process today. 

Congress should continue to provide this oversight of this issue 

even after the task force has completed. 

On the service issue I would like to share some of our instances 

that we also suffer from in the south. We have a couple of customers whose home is—Georgia where they’re captive to one Class 

One railroad. As a result, they don’t have access to competition. 

During many changes that took place earlier this year, transit 

times doubled—increased and switchings were missed. And as a result of that one of our customers was faced with a stuck car situation impacting the production lines on two separate occasions. 

Interestingly, there is an interchange station which is open to 

two Class One railroads, five miles away from this location. With 

competitive switching Solvay estimates that we could have not only 

saved our customers competitively, but we could have also provided 

better service and delivery performance to them. 

Unfortunately, these examples are too common and we are very 

grateful that Congress has taken an important step to pass regulation on how the STB operates and now STB is making much needed changes to adopt free market principles and do a better job resolving these longstanding rail freight problems. 

We believe that Congress should continue to encourage the Board 

to support common-sense reforms such as competitive switching 

and alternative review methodology. 

The STB is currently considering a proposal that provides practical blueprinting for competitive switching. This proposal would 

allow a rail freight shipper to move their freight to another major 

railroad when access is reasonably accessible. 

Alternative Rate Review Methodology is becoming a top priority 

for the Board as current STB Chairman Ann Begeman mentioned. 

One approach, competitive rate benchmarking, offers a marketbased alternative for STB to review so rail shippers that like access 

to competitive transportation options could compare their rates to 

benchmarks of that of competitive rail traffic. 

I am pleased that the Committee took the time today to focus on 

how Congress can help small businesses benefit from these smart 

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regulations and I thank you for the opportunity for speaking to you 

today. 

[The prepared statement of Ms. Gulfo follows:] 

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Testimony of Lyra Gulfo, Rail Category Manager 

On behalf of Solvay America Inc. 

November 16,2018 

Page2 

Senator Kennedy, and members of the Committee, thank you for inviting me to testif'y today. My name is 

Lyra Gulfo. I am the Rail Category Manager for Transportation at Solvay America, Inc. and we are a 

member and immediate past chair of the National Industrial Transportation League (NITL) Rail 

Transportation Committee. I have worked in logistics and supply chain for 20 years. 

Solvay is a multi-specialty advanced materials and chemical company, committed to developing chemistry 

that addresses key societal challenges. We were started by 2 entrepreneurs in 1863 and first operated in the 

U.S. in the early 1890's. Solvay innovates and partners with customers in diverse global end markets. Its 

products and solutions are used in planes, cars, smart and medical devices, batteries, in mineral and oil 

extraction, among many other applications promoting sustainability. Its lightweighting materials enhance 

cleaner mobility, its formulations optimize the use of resources and its performance chemicals improve air 

and water quality. In the United States, Solvay employs 6,400 people in over 44 major industrial sites, eight 

Formulation Centers, seven Research and Innovation Centers (R&I) and three North American headquarters 

in Alpharetta, Georgia; Houston, Texas; and Princeton, New Jersey. We have 22 union sites and are a net 

exporter in the U.S. Here in Louisiana our footprint includes two facilities; one in Shreveport and one in 

Baton Rouge with a total of 144 employees. 

For many years, the U.S. chemicals industry was challenged by high cost inputs. The availability of, and 

inexpensive price for, U.S. shale gas since 2010, has created a renaissance for the U.S. chemical industry. 

In fact, the U.S. is currently the most attractive place in the world to invest in chemical manufacturing, 

transforming the U.S. economy into a stronger growth market and new jobs. To put some numbers to this333 chemical industry projects cumulatively valued at $202.4 billion have been announced, with 53% of 

the investment completed/under construction, and 41% in the planning phase. Fully 68% of the total is 

direct foreign investment or includes a foreign partner, the American Chemistry Council (ACC) reported. 

Project types include new facilities and capacity expansions, which are long-term investments that we seek 

in the U.S. ACC analysis shows $202.4 billion in capital spending could lead to $292 billion annually in 

new chemical and plastics industry output and support 786,000 jobs across the economy by 2025. 

While this is a very positive story, companies such as Solvay face increasingly high rail transport costs. Rail 

transportation is a critical component of U.S. industrial competitiveness. However, the current regulatory 

enviromnent stifles this growth by reducing access to transport, non-competitive pricing, and technical rules 

that disproportionately affect the chemical industry. 

For small and medium sized enterprises, this has direct impacts. High transport costs and inconsistent 

availability of raw materials due to lack of capacity in the American rail network make it very hard to 

manage supply chains and product costs. Since chemicals serve as key components to consumer products 

including electronics, home cleaning products, personal care and automobiles, the impacts of these 

challenges trickle through the U.S. economy and are ultimately felt in our wallets. 

That is why I believe smart shipping regulation is needed to enable the continued growth of this dynamic 

and sustainable industry. 

Massive consolidation within the rail industry has left just four railroads in control of 90 percent of the rail 

traffic in the U.S. As a result, freight rail rates have doubled- more than three times the rate of inflation 

over the past decade --even though the volume of freight carried by the railroads has barely increased. 

Shippers currently do not have a viable option for challenging these rates. Currently, rate cases take an 

average of three and half years and cost more than $5 million to complete. That is not viable for small and 

medium sized enterprises. Even the STB has acknowledged that the Board's rate review process is broken 

and has established a Rate Review Task Force to address this important issue by streamlining and improving 
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Testimony of Lyra Gulfo, Rail Category Manager 

On behalf of Solvay America Inc. 

November 16,2018 

Page 3 

the rate review methodology for large and small rate cases. Congress should continue to provide oversight 

of this issue and press the STB to make meaningful reforms after the Task Force has concluded. 

Congress took an important step by passing legislation to help improve how the STB operates, and now the 

STB is pursuing much needed changes to adopt free market principles and do a better job resolving longstanding freight rail problems. Congress must prioritize confirmation of the three pending STB nominees 

and encourage the Board to keep moving forward on these common sense reforms that will get freight rail 

polices back on track and back to work for the entire U.S. economy. 

Shippers further face bureaucratic barriers in the form of the reliance on the American Association of 

Railroads (AAR) Tank Car Committee (TCC) in technical rulemaking in which railroads have a 

disproportionate impact on regulatory development to the exclusion of the shippers that have to ultimately 

implement these directives. 

We would urge your Committee's leadership in quickly addressing the following areas of concern: 

Press STB for modernized regulatory frameworks that emphasize competition: Federal regulations 

shield railroads from competing with each other and from transparent pricing mechanisms. Many shippers 

are left with no effective competition for rail service and no meaningful process to challenge unreasonable 

rail rates. 

As part of the Staggers Rail Act, Congress envisioned a process that would allow shippers served by a 

single railroad to have their cargo switched to another nearby carrier as a way to promote rail competition. 

But due to antiquated rules adopted by the STB, no shipper has been able to successfully request the transfer 

of their cargo from one railroad to another. When shippers lack access to rail competition, there must be a 

meaningful path to challenge unreasonable rates. However, under the STB's Stand-Alone-Cost (SAC) 

standard, to successfully challenge a rate, a shipper must design, on paper, an entire railroad business, and 

prove that it could serve the same traffic at a lower cost than the rates charged by the existing railroad. This 

process is widely recognized as too complex, too costly, and too time consuming. 

Congress should press for two specific regulatory updates that would address these underlying noncompetitive approaches: 

1. Competitive switching: The STB is considering a proposal that provides a practical blueprint for 

competitive switching. The proposal would simply allow certain rail customers to request that their 

freight be moved to another major railroad only if another rail line is reasonably accessible. If the 

switch is shown to be unsafe or harmful to other customers, the railroad can block it. And there is 

no "free lunch" for the shipper-they would have to pay an appropriate "access" fee to cover the 

railroad's costs. 

2. Alternative Rate Review Methodologies: STB Chairman Ann Begeman has stated that finding 

an alternative to the SAC process must be a top Board priority. One approach, competitive rate 

benchmarking, offers a market-based alternative for STB rate reviews. This would bring more 

transparency and likely reasonable costs to captive shippers. 

Mandate that DOT establish rulemakings through transparent and public process: The AAR's Tank 

Car Committee (TCC), which is comprised of railroads, tank car builders, and tank car owners/shippers, 

oversees the industry standards for those assets. The rail shippers who own or lease these transportation 

assets comprise only a small portion of the TCC' s voting members while railroad members of the TCC 

constitute a voting majority. This has given the rail industry a disproportionate voice and influence 
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Testimony of Lyra Gulfo, Rail Category Manager 

On behalf of Solvay America Inc. 

November 16,2018 

Page4 

regarding issues impacting all stakeholders. More than two years ago, a group of trade associations 

representing rail shippers petitioned the Pipeline and Hazardous Materials Safety Administration (PHMSA) 

to initiate a rulemaking to more clearly define the role of TCC in development of tank car standards. This 

petition remains pending before DOT. 

The Department of Transportation continually cedes delegation of authority to the rail industry, via the 

TCC, giving the industry a central role in the implementation of rail tank car standards and regulations. This 

regulatory authority comes without the requirements of federal rulemaking procedures such as cost benefit 

analysis, safety reviews, public comment, etc. Because of the lack of due process, the voting majority of 

the rail industry is able to push through their desired outcome, many times to the detriment of the tank car 

owners and builders who bear the consequences of those outcomes. As a result, the TCC can unilaterally 

prohibit the use of tank cars that meet all applicable DOT requirements, requiring owners to replace tank 

cars long before the end of their useful service life and imposing hundreds of millions of dollars in 

unwarranted burdens on U.S. manufacturers. 

DOT must clarify that the TCC's delegated authority does not include the power to impose new 

requirements unilaterally while disregarding stakeholder input and dismissing DOT authority. DOT should 

grant the rail shippers' petition to initiate a rulemaking that would allow for an open and transparent 

discussion on TCC reform. We are strongly committed to safety and believe that a more transparent 

approach will create an environment that develops both safe and economic regulatory frameworks for our 

industry. 

As the Agency with sole authority to impose tank car requirements, DOT must also finalize pending rules 

related to cars used to transport toxic-inhalation-hazard (TIH) materials. The Association of American 

Railroads, the American Chemistry Council, the Chlorine Institute, and the Fertilizer Institute have jointly 

asked DOT to establish a phase-out date of December 31,2027 for tank cars not meeting PHMSA's HM246 specification for the transportation of TIH materials. All stakeholders agree that the HM-246 design 

provides the most feasible means to achieve increased safety and accident survivability. 

It is important to all parties for DOT to establish an appropriate phase out deadline through federal 

regulation. A timely final DOT rule will give car owners and lessees the regulatory certainty needed to 

facilitate long-term capital planning. Compared to the July 2023 phase out deadline previously established 

unilaterally through AAR' s interchange standards, the 2027 deadline reduces the cost to shippers and tank 

car owners by $92 million to $133 million. DOT should also move forward as quickly as possible to finalize 

related rules to designate the HM-246 specifications as a "final" standard for TIH tank cars. This would 

bolster fleet modernization and provide continued safety improvement in hazardous materials 

transportation. 

I am pleased the committee has been able to take the time focus on small businesses benefitting from smart 

regulations. Thank you for the opportunity to speak to you today and I welcome any questions you may 

have. 
30 

Senator KENNEDY. Thank you. Thank you, Lyra, very, very 

much. 

Let’s see. Who is next here? Ailsa. 

Ms. DOBENECK. That’s right. 

Senator KENNEDY. Ailsa von Dobeneck. 

Ms. DOBENECK. Perfect. Okay. 

Senator KENNEDY. Alright, alright. 

Ailsa is the Director of External Affairs at the New Orleans Public Belt Railroad. 

Let’s see. She ascended her role with the New Orleans Public 

Belt Railroad with the transition of the railroad to the Port of New 

Orleans in February 2018, not that long ago, where she was serving as a Public Affairs Consultant. 

As Director of External Affairs, also oversees the Community and 

Public Relations part, Government Affairs, Corporate Communications. 

She’s previously served as Government Relations Manager for 

Norfolk Southern Railway in Washington, DC. 

She began her career in Panama City and Singapore where she 

worked in the maritime industry. 

She has a Master’s Degree in International Relation from King’s 

College, London, very, very impressive, a Bachelor’s Degree in 

International Relations and a Bachelor’s Degree in German from 

the University of Georgia. 

The floor is yours. 

STATEMENT OF AILSA von DOBENECK, DIRECTOR OF EXTERNAL AFFAIRS, NEW ORLEANS PUBLIC BELT RAILROAD, NEW 

ORLEANS, LA 

Ms. VON DOBENECK. Don’t hold the University of Georgia against 

me. LSU showed us who was boss the other week, so. 

[Laughter.] 

Senator KENNEDY. I’m sure it’s a great school, great school. 

Ms. VON DOBENECK. Thank you very much for the opportunity to 

speak today. I wanted to welcome everybody to the Port of New Orleans. 

As of February of this year, the New Orleans Public Belt transition from the City of New Orleans to the Port of New Orleans. So, 

now we’re one big happy family and the synergy really provides unparalleled opportunities for growth for New Orleans businesses, 

Louisiana businesses and beyond. So, thank you for the opportunity for today. 

I want to tell you a little bit about the New Orleans Public Belt 

Railroad. We have been here for over 110 years. We’re very unique. 

By rail car volume, New Orleans is actually the Nation’s fourth 

largest rail gateway. 

We’re a Class Three switching railroad and our primary mission 

is to serve the Port of New Orleans and local industry. 

We’re a neutral carrier. We have 26 miles of mainline track and 

we have direct connections to six Class One Railroads. So, it’s quite 

a robust rail competition in New Orleans. 

Our Class One partners have a combined 132,000-mile network 

of track, which tie the port community and local industries directly 

to almost every major North American market. These direct conLAP51NQ082 with DISTILLER

31 

nections give shippers in New Orleans and the surrounding areas 

the benefit of more competitive rates, faster transit times, and distribution to multiple markets. 

We work really closely with our Class One partners. Just as an 

aside, we have quarterly steering committees where all of the Class 

Ones come together in New Orleans and monthly superintendent 

meetings where all the Class Ones come together and it could be, 

we talk about the fluidity of the New Orleans gateway. We talk 

about joint projects. So, we really work well together and invest a 

lot in our greater New Orleans network. 

I’d like to thank the Committee for its support of the short line 

rail industry and your understanding of the positive impact we 

bring to the local community. 

Now, one of every four rail cars moving on the national network 

is handled by a short line. And we provide the first and last mile 

for a wide variety of goods from energy products, to industrial products, to finished consumer goods. 

Our services provide the opportunity for local shippers to have efficient and cost-effective access across the national rail network. 

At NOPB we have 175 team members and we work together to 

ensure freight is moved efficiently and safely across the city every 

day. We’re a 24/7 operation. We live here, work here, and we are 

100 percent dedicated to the success of New Orleans businesses 

and Louisiana businesses at large. 

Now, for NOPB, safety is our number one priority. We’re an 

urban rail network so we’re, we, kind of, follow the river and we 

go through the city. The rail industry as a whole has a really impressive safety record, with 99.997 percent of hazmat carloads 

moved without release caused by an incident, but we’re dedicated 

to becoming even safer. 

We’ve made a lot of significant technological investments and we 

implemented our own operation standards across the industry. 

Our safety record, as an industry, makes us a good choice for 

moving hazardous materials vital to our everyday lives. In fact, the 

Federal Government requires railroads to carry hazardous materials under our common carrier obligation. We must accept, move, 

and handle hazmat cars by law. 

We’re really pleased that the Association of American Railroads 

and members of the shipping community have found common 

ground and agreed upon an appropriate phase-out time period for 

TIH tank cars, the older ones. 

We’re really, really encouraged and enthusiastic about this spirit 

of collaboration and we’re confident that the plan will increase rail 

safety standards while ensuring the commodities reach where they 

need to go. And we look forward to a potential Notice of Proposed 

Rulemaking by the DOT. 

As I said, we, at NOPB, we’re an urban railroad so we’ve also 

adopted some special operating practices for hazmat that meet and 

exceed regulatory standards. These protocols were recently reviewed and they cover all of our trains on the network. So, that includes a low speed restriction, multiple inspections a week and increased education programs with our emergency responders. 

We are as dedicated to being safe and reliable neighbors as we 

are dedicated to being a safe and reliable transportation option. 

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32 

I encourage everyone this morning. There was an op ed in the 

Advocate from the Small Business Entrepreneurial Council, their 

head economist there. He talked about the benefits of the railroads 

to small business. It was an interesting piece and how government 

revamp of additional regulations might be hurtful to small businesses. So, I encourage everybody to just take a look at that. That 

was in the paper today. 

So, I just want to thank the Committee for your time and for 

your dedication to small business and the short line rail industry 

and the rail industry, in general. And I’m happy to address any 

questions after the panel, Senator. 

[The prepared statement of Ms. Von Dobeneck follows:] 

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WRITIEN STATEMENT 

OF 

AILSA VON DOBENECK 

DIRECTOR OF EXTERNAL AFFAIRS 

NEW ORLEANS PUBLIC BELT RAILROAD CORPORATION 

BEFORE THE 

COMMITIEE ON SMAll BUSINESS & ENTREPRENEURSHIP 

FIELD HEARING 

NEW ORLEANS, LOUISIANA 

HOW SMAll BUSINESSES BENEFIT FROM SMART RAIL SHIPPING REGULATION 

NOVEMBER 16, 2018 

Good morning Mr. Chairman, Ranking Member, and Members of the Committee. My name is Ailsa 

"Elsa" von Dobeneck and I serve as the Director of External Affairs for the New Orleans Public Belt 

Railroad (NOPB). Thank you for the opportunity to appear today to discuss the benefits of rail to the 

local, state, and national economies. I would also like to thank you for your leadership and for your 

efforts to advance rail safety standards, while ensuring competition and growth. 

New Orleans Public Belt Railroad has served a vital role in the region's transportation network for over 

110 years. By railcar volume, New Orleans is the nation's 4th largest rail Gateway. NOPB is a Class Ill 

switching railroad with the primary mission of serving the Port of New Orleans and local industries. We 

are a neutral carrier, with 26 miles of mainline track and direct connections to six (6) Class I Railroads. 

Our Class 1 partners have a combined 132,000 plus mile network of track, which tie the port community 

and local industries directly to every major North American market. These direct connections give 

shippers in New Orleans and surrounding areas the benefit of more competitive rates, faster transit 

times, and distribution to multiple markets. In February of this year, NOPB transitioned from City of New 

Orleans to Port of New Orleans leadership. This synergy provides unparalleled opportunities for growth 

with a shared vision. 
34 

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1 would also like to thank the committee for its support of the shortline rail industry and your 

understanding of the positive impact we bring to the local economy. One of every four rail cars moving 

on the national network is handled by a short line, providing the first and last mile for a wide variety of 

goods from energy products, to industrial products, to finished consumer goods. Our services provide 

the opportunity for local shippers to have efficient and cost effective access to the national rail network. 

At NOPB we are a team of 175 strong, working together to ensure freight is moved efficiently and safely 

across the city. We live here, work here, and are dedicated to the success of New Orleans businesses. 

As NOPB continues to grow, safety remains our number one priority. The rail industry has an impressive 

safety record, with 99.997% of hazmat carloads moved without a release caused by an incident and we 

are dedicated to becoming even safer. This impressive record is the result of significant technological 

investments and implementation of operations standards across the industry. Rail's safety record 

makes it a good choice for moving the hazardous materials vital to our everyday lives. In fact, the federal 

government requires railroads to carry hazardous materials under our common carrier obligation. We 

must accept, move, and handle hazmat cars by law. 

It is our understanding that the Association of American Railroads and members of the shipping industry 

{including the American Chemistry Council, Fertilizer Institute, and Chlorine Trade Association) have 

found common ground and agreed upon an appropriate phase-out time period for older TIH tank cars. 

We are enthusiastic about this spirit of collaboration and are confident the plan will increase rail safety 

standards while ensuring the commodities vital to our everyday lives are accessible. We look forward to 

a potential Notice of Proposed Rulemaking by the Department ofTransportation {DOT) and support 

balanced and safety-oriented progress. 
35 

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As NOPB is an urban railroad, we have also adopted special operating practices for hazmat transport 

that meet and exceed regulatory requirements to help ensure these sensitive commodities are shipped 

safely and securely. These protocols were recently reviewed and expanded to cover all trains carrying a 

single carload of certain hazmat or 20 carloads of any combination of hazmat, such as crude oil and 

ethanol. These protocols include: a low speed restriction across our entire network, inspections multiple 

times a week, and increased education programs with emergency responders. We are as dedicated to 

being safe and reliable neighbors, as we are to being a safe and reliable transportation option. 

Thank you for your time and for your dedication to small business, shortline rail, and safety. I am happy 

to address any questions you may have. 
36 

Senator KENNEDY. Okay, thank you. 

I’m making notes here. I’ve got a lot of questions. Now, I just remembered we may have some from the audience. 

Our next panelist is the Honorable Paul Roberti. Paul is the 

Chief Counsel, Pipeline and Hazardous Materials Safety Administration with the Department of Transportation. 

Our Secretary of the Department of Transportation, the Honorable Elaine Chao, she’s the best. She just—there are a lot of capable people in this world, but if I were going to pick one person in 

the Federal Government to get something done that I really needed 

to be done, it would be Elaine. She’s a very bright, capable person. 

Paul was sworn in as Chief Counsel in March of 2018. He was 

most recently an Executive Director at Ernest and Young as a 

member of the Advisory Practice. He specialized in Power and Utilities. 

Previously, he worked in Rhode Island as a State Public Utilities 

Commissioner for eight years, as Assistant Attorney General and 

the Chief of the Attorney General’s Regulatory Commission. He 

was a law clerk for the State Supreme Court and in the Energy 

Committee, Mr. Roberti has served as Chairman of the Subcommittee on Pipelines at the National Association of Regulatory 

Utility Commissioners. 

He served on the U.S. Department of Energy’s Electricity Advisory Committee. He served on the Gas Technology Institute’s Public Interest Advisory Committee. He has a degree in Chemistry 

from the College of the Holy Cross and he has a Juris Doctorate 

from Suffolk University School of Law. 

I thank him for being here, the Honorable Paul Roberti. 

STATEMENT OF PAUL ROBERTI, CHIEF COUNSEL, PIPELINE 

AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION, 

U.S. DEPARTMENT OF TRANSPORTATION, WASHINGTON, DC 

Mr. ROBERTI. Well, thank you, Senator Kennedy, and thank you 

for the opportunity to testify today in the great State of Louisiana 

about the Pipeline and Hazardous Materials Safety Administration’s efforts to advance the safety of rail tank cars transporting 

hazardous materials. 

On behalf of Secretary Chao and Administrator Skip Elliott, I 

want to thank you for your leadership and personal efforts to improve the safety of the Nation’s railroad system. 

Safety is the number one priority for Secretary Chao and everyone working within the Department of Transportation. 

PHMSA’s mission is to protect people and the environment from 

the risk of hazardous materials by all modes of transportation. We 

achieve this mission by creating regulations and carrying out a 

comprehensive safety oversight strategy. We advance education 

and research and development projects focused on enhancing safety 

and accident prevention. 

PHMSA also provides funding and training to prepare first responders to mitigate hazards in the unlikely event that an incident 

occurs. Our goal is to reduce risk towards zero deaths, zero injuries, prevent property and environmental damage and avoid transportation disruptions. 

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37 

Tragic train accidents like Lac-Me ́gantic in Quebec in 2013; 

Graniteville, South Carolina, in 2005; Macdona, Texas, in 2004; 

and Minot, North Dakota, in 2002, underscore the need to improve 

the safety of rail tank cars. We remain vigilant while working with 

industry to prevent these types of accidents from ever happening 

again. 

In the interest of time, I refer you to my written testimony which 

describes first, PHMSA’s hazardous materials safety program and 

its role in preventing and mitigating incidents. 

Second, background about PHMSA’s regulatory authority and the 

status of pending rulemakings. 

Third, PHMSA’s efforts to build consensus within the regulated 

industry and our work to modernize standards and reduce regulatory burdens on small businesses. 

And lastly, PHMSA’s efforts to finalize standards for rail tank 

cars that transport hazardous materials classified as toxic inhalation hazards, such as anhydrous ammonia and chlorine. For this 

class of hazardous materials, we are coordinating with the Federal 

Railroad Administration to resolve a number of issues that will 

promote their safe transportation on the Nation’s railroads. 

As you know, Senator Kennedy, these products are essential for 

sustaining our food and water supplies and our health and safety 

depend upon their safe transportation. 

As an example of our collaboration with the Federal Railroad Administration and the industry, PHMSA has accepted a number of 

petitions for consideration in upcoming rulemakings that address 

the safe transportation of toxic hazardous materials. 

PHMSA appreciates the expertise that both the shippers and the 

rail carriers contribute to the regulatory process, as well as their 

commitment to build consensus on safety standards. A great example of consensus was the June 19, 2018, joint submission of comments by both the shippers and the rail carriers advocating for a 

mutually agreed upon phase-out date of December 31, 2027, for legacy tank cars. 

We are pleased that industry reached consensus regarding this 

proposed date for compliance with the final tank car standard. 

Moreover, on September 6, 2018, industry leaders met with 

PHMSA’s leadership in Washington, DC, to reaffirm their support 

for this newly achieved consensus. They urged PHMSA to accelerate the time frame for completing rules that provide the muchneeded regulatory certainty to guide the strategic investment decisions that are necessary to advance safety. 

In closing, the success of PHMSA’s mission relies on continued 

collaboration with industry to build on the existing regulatory 

framework. We need to embrace innovative technologies that provide cost-effective solutions for improving safety, as well as continue to take steps to increase the level of regulatory certainty. 

We recognize that both shippers and carriers are important contributors to the success of not only PHMSA’s safety programs, but 

also to our national economy, the State of Louisiana and the Port 

of New Orleans. 

Again, Senator, thank you for the opportunity to testify and I 

look forward to answering any questions you may have. 

[The prepared statement of Mr. Roberti follows:] 

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WRITTEN STATEMENT OF 

PAUL ROBERTI 

CHIEF COUNSEL 

PIPELINE AND HAZARDOUS MATERIALS SAFETY 

ADMINISTRATION 

BEFORE THE 

COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP 

UNITED STATES SENATE 

HOW SMALL BUSINESSES BENEFIT FROM SMART RAIL SHIPPING 

REGULATIONS 

NEW ORLEANS, LA 

November 16, 2018 

Senator Kennedy, thank you for the opportunity to testify today on the Pipeline and 

Hazardous Materials Safety Administration's (PHMSA) efforts to advance the safety of rail 

tank cars carrying hazardous materials. I would also like to thank you for your leadership 

in bringing attention to the need to advance the nation's rail safety efforts. As you know, 

tragic high-profile train accidents involving hazardous materials, such as those that occurred 

in Lac-Megantic, Quebec, Canada (2013); Graniteville, South Carolina (2005); and Minot, 

North Dakota (2002), underscore how important it is to be ever vigilant in protecting local 

communities and the environment as it relates to the safety of our nation's railroad system. 

The U.S. Department of Transportation (DOT) and PHMSA work thoroughly to bolster 

compliance with federal hazardous materials laws and regulations to minimize accidents 

and impacts to people, communities, and the environment. 

Safety is the number one priority for U.S. Secretary of Transportation Elaine L. Chao, 

PHMSA Administrator "Skip" Elliott and our modal partners across the Department. In 

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particular, PHMSA's mission is to work to protect the American people and the environment 

from the risks of hazardous materials transportation by all modes, including rail, highway, 

waterways, air, and pipeline. 

PHMSA achieves its safety mission by establishing a national policy of setting forth 

standards and a comprehensive enforcement regime. PHMSA also advances education, as 

well as research and development efforts, all with aim to prevent incidents and enhance 

safety. Additionally, PHMSA provides funding and training to prepare first responders to 

reduce consequences in the event that an incident does occur. PHMSA's ultimate goal is to 

pursue all avenues to reduce risk toward zero deaths, zero injuries, and to minimize 

environmental and property damage, and transportation disruptions. 

This testimony will provide a summary ofPHMSA's hazardous materials safety program and its 

role in advancing rail safety. It will also discuss ways in which PHMSA is attempting to 

modernize standards and reduce regulatory burdens on small businesses. And finally, it will 

provide an update on PHMSA's efforts to finalize standards for rail cars that carry hazardous 

materials with toxic inhalation hazards and share with you how PHMSA is working to build 

consensus among stakeholders in the regulated industry. 

I. STATUTORY AUTHORITY AND PHMSA'S RESPONSIBILITIES IN 

DEVELOPING HAZARDOUS MATERIALS REGULATIONS 

Federal hazardous materials transportation law authorizes the Secretary of Transportation to 

"prescribe regulations for the safe transportation, including security, of hazardous material in 

intrastate, interstate, and foreign commerce." The Secretary has delegated this authority to 

PHMSA, which is responsible for administering a safety and enforcement program that 

minimizes the inherent transportation risks to life, property, and the environment inherent in 

transportation in commerce. Each year, the collective efforts ofPHMSA and other DOT modal 

administrations facilitate the safe and secure transit of more than 2.5 billion tons of hazardous 

materials, valued at more than $2 trillion. 

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II. COMPREHENSIVE APPROACH TO PREVENT AND MITIGATE RAIL 

HAZARDOUS MATERIALS ACCIDENTS AND INCIDENTS 

Regulations governing the transport of hazardous materials include operational requirements that 

are applicable to each mode of transportation. To achieve safety, PHMSA sets standards to 

ensure that hazardous materials are properly classified, appropriately packaged or safely 

contained in vessels, such as rail tank cars, and finally, that the risks are properly communicated 

to transportation workers and emergency responders through markings, labels, placards, and 

shipping documents. This approach is designed to prevent hazardous materials releases in the 

course of rail transportation, and to mitigate damages in the unlikely event of a release. With 

specific regard to rail safety, PHMSA and the Federal Railroad Administration (FRA) take a 

system-wide, comprehensive approach for addressing the risks posed by the hulk transport of 

hazardous materials by rail. This includes working closely together when considering regulatory 

changes. 

III. PHMSA CONSIDERS IMPACTS ON BUSINESSES WHEN DETERMINING 

REGULATIONS 

When considering rules and regulations, PHMSA carefully weighs safety benefits against the 

economic impact to businesses and consumers. PHMSA discharges its responsibilities in 

accordance with principles of good government by embracing a regulatory philosophy that 

promotes transparency, stakeholder engagement, and regulatory restraint. The Department's 

Regulatory Reform Task Force plays a significant role in helping PHMSA to assess the efficacy 

of existing regulations, guided by three principles: (I) to reduce the regulatory burden on the 

public without compromising safety; (2) to streamline permitting; and lastly (3) to enable 

innovation. 

Consistent with existing law and the Administration's priorities, the agency seeks to tailor its 

regulations to impose the least burden on society while achieving its regulatory objectives. 

PHMSA's economic assessments follow the best practices as outlined by the Office of 

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Management and Budget. Each regulation is also accompanied by a regulatory flexibility 

assessment, which considers the rule's impact on small businesses and explores ways regulatory 

burdens could be reduced, as required by the Regulatory Flexibility Act. PHMSA provides the 

American public, including small businesses, the opportunity to review and comment on rules 

through notice-and-comment procedures, and works closely with the Small Business 

Administration's Office of Advocacy to address disproportionate impacts on small entities in an 

effort to reduce their regulatory burden. Additionally, PHMSA's Hazardous Materials Safety 

Assistance Team (HMSAT) conducts face-to-face outreach throughout the country to ensure 

accessibility and transparency to small businesses and other stakeholders. 

IV. CURRENT EFFORTS TO FINALIZE STANDARDS ON TIH 

PHMSA works closely with multiple DOT operating administrations to ensure consistency in 

administering hazardous materials transportation safety programs across all modes. We are 

currently actively working with our counterparts at FRA to address many issues relevant to the 

safe transportation of hazmat by rail, including the transportation of materials that pose a toxic 

inhalation hazard (TIH). These TIH materials, which include essential products, such as 

anhydrous ammonia and chlorine, are vital not only to our nation's infrastructure, but also to our 

health and safety since our water and food supplies depend on their safe movement. PHMSA 

recognizes its critical role as an agency that must ensure the safety of a vast transportation 

network that supports our economy and our national way of life. 

As an example of our close collaboration with FRA and our industry stakeholders, PHMSA has 

reviewed, analyzed, and accepted several petitions for consideration in upcoming rulemakings 

that address the safe transportation of materials that are toxic when inhaled. These petitions 

cover a range of issues, including: finalizing specifications codified in 2009 to provide certainty 

to industry regarding tank car design and construction standards; extending the authorized 

service life for tank cars that meet improved standards from 20 to 50 years; and determining an 

appropriate timeline for phasing out rail tank cars that do not meet the final standard. PHMSA 

appreciates the wealth of expertise that the shippers and carriers provide to the regulatory 

process, as well as their continued commitment to build consensus on necessary safety standards. 

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We are pleased to note that the Association of American Railroads (AAR) and several 

associations representing TIH shippers, including the American Chemistry Council (ACC), the 

Chlorine Institute (CI), and the Fertilizer Institute (TFI), have reached a general consensus with 

respect to one of the more challenging determinations proposing to develop a time line for 

compliance with the final TIH tank car standard. On June 19,2018, AAR, ACC, CI, and TFI, 

submitted joint comments to PHMSA advocating for a mutually agreed-upon phase out date of 

December 31, 2027. On September 6, 2018, leadership of each of these organizations came 

together to meet with PHMSA' s senior leadership team to affirm their support for this new 

approach. These organizations jointly urged PHMSA to accelerate the time frame for completing 

rules to provide certainty for the strategic investment decisions that stakeholders must make to 

advance safety. This collaborative effort by our industry partners has greatly facilitated our 

efforts to finalize a draft rule that can be issued for public notice and comment and finalized as 

expeditiously as possible. 

Looking ahead, we know that additional challenges remain as we work together with all 

stakeholders to build on our existing safety framework. In addition, we must work together to 

facilitate the adoption of innovative technologies and solutions to advance safe transportation for 

the benefit of the public. We remain confident that our shared goals of safely delivering vital 

commodities throughout our nation will help overcome these challenges and we look forward to 

working with all concerned. 

V. CLOSING REMARKS 

In closing, DOT and PHMSA are committed to improving the safety of the transportation of 

hazardous materials across all modes. It is important that DOT provide certainty to the regulated 

community to facilitate the transportation of hazardous materials, which are vital to our national 

economy and to the local economies of the State of Louisiana and the Port of New Orleans. 

Furthermore, hazardous materials shippers and carriers are integral partners for improving 

transportation safety and their collaboration with PHMSA is essential if we are to meet our 

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shared goal of zero incidents. With strong commitment, leadership, and robust stakeholder 

collaboration, we can ultimately achieve this goal. 

We look forward to continuing to work with Congress to strengthen hazardous materials rail 

safety policy. Together, we can protect America's people and its environment by advancing the 

safe transportation of hazardous materials. The hardworking staff ofPHMSA is dedicated and 

committed to fulfilling our safety responsibility to the American people. Thank you again for the 

opportunity to testifY today. I would be pleased to answer any questions you may have. 

6 
44 

Senator KENNEDY. Thank you, Paul and thanks to all of you. 

I have a number of questions. Anybody is welcome to jump in, 

including our audience. 

I want to start with what to me is the most immediate issue. We 

do have consensus on legacy tank cars. I’m pleased that everybody 

could come together and agree on a phase-out date. We’re in the 

middle of rulemaking. 

Paul, if you could bring us up to date on where the rulemaking 

is and tell me when it’s going to be completed and done. 

Mr. ROBERTI. Okay, thank you. Thank you, Senator, for that 

question. 

Senator KENNEDY. I’m kind of result oriented and I know you’ve 

got to go through the proper procedure, but tell me when we can 

take it to the bank. 

Mr. ROBERTI. So, as you know, we have a number of petitions before us. I call them the three legs of the stool. 

The first is the HM246 compliant tank cars and the extension of 

the service life of 20 years to 50 years. 

I’m pleased to report, Senator, that that rule was published at 

the Federal Register just last week, early last week. 

Senator KENNEDY. Good. 

Mr. ROBERTI. So, that is complete and we have some certainty 

on that front. 

The second is the phase out of the legacy tank cars and we’re 

well aware that industry came together and has proposed, reached 

consensus on the phase-out date of 2027 for the legacy cars. 

That one and also including the question of the interim standard 

that we promulgated in 2009 becoming a final standard where we 

would take the interim tank car standard and make that the final 

tank car standard, those two items are pending. They’re in notice 

and public comment. 

We intend, we’re working as expeditiously as possible to release 

that rule. It still has to go to OMB. I can’t give you a date certain, 

but I can tell you we are working steadfastly and I can also tell 

you that your leadership coupled with the consensus that the industry has achieved here will go to great lengths to facilitate our 

rulemaking process. 

We know this rule is important. We know it’s necessary to bring 

regulatory certainty and I’m hopeful that we will have that rule 

completed as soon as possible, acknowledging that we have to comply with the Administrative Procedures Act, OMB requirements 

and conduct a robust cost-benefit analysis and have transparency 

in the process so that everyone can submit their comments. 

But the data and the robust cost-benefit analysis that the industry participants have brought to us is very, very helpful in that 

process. 

Senator KENNEDY. Well, thank you for that, Paul. 

This is a rule that’s going to help. It’s going to save a lot of 

money. 

What is it, Marcie, 130 something million bucks? 

It was put together with collaboration of everybody, including but 

not limited to the rail carriers and the shippers. And it’s important. 

And thank the Secretary for her cooperation through all on this. 

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My—I probably know, I know that I know less about this subject 

than anybody on this panel but as I’ve studied it, this subject in 

general, I think everybody can agree that the two primary issues, 

first and foremost, public safety. And I’m not just talking about the 

legacy car rule. 

I’m talking about the larger issues. 

First is public safety. 

Second is cost, cost for the railroads, cost for the shippers, cost 

for the large businesses and cost for the small businesses. 

I want to start, I want somebody to help me understand the relationship between the Tank Car Committee and PHMSA. Is that 

how you refer to it? 

Mr. ROBERTI. Yeah. 

Senator KENNEDY. What is the Tank Car Committee? 

My understanding, I’ve read about it, but my understanding is 

that it is comprised of both rail carriers and shippers and people 

who make the cars. I believe I read that it has been around longer 

or at least its parent company, it’s a private sector, it’s in the private sector, longer than the Department of Transportation. 

Who can educate me on that? And more specifically, what is the 

relationship between the Tank Car Committee, the private sector 

group and the Federal Government? 

Anybody? 

Mr. ROBERTI. I’m glad to—— 

Senator KENNEDY. Jump in. 

Mr. ROBERTI. To lead it off. 

So, the Tank Car Committee has been around for decades. 

Senator KENNEDY. Yeah. 

Mr. ROBERTI. And we consider the Tank Car Committee to be a 

standard setting of organization. 

Regulations, though, safety regulations are made by the Department of Transportation. 

So, the Tank Car Committee functions as, really, an organization 

that covers a wide cross section of the industry, meaning the carriers and shippers and they consider and adopt technical consensus 

standards and they’re valuable to DOT as input into the rulemaking process. 

Over the course of decades, both the Federal Railroad Administration and PHMSA have participated. We attend all the Tank Car 

Committee meetings. We maintain close oversight over those committee meetings and their discussions. 

That’s not to say, for the most part, it’s been a very successful 

approach to bringing consensus. 

These are the practitioners who really understand the industry. 

And for an agency like DOT that’s setting safety regulations, this 

input is invaluable. 

It’s not to say that over the course of time that there aren’t, 

every so often, challenging issues that need to be addressed. Where 

there are, we applaud, just like your leadership, we applaud consensus. It goes a great distance in facilitating the rulemaking process. 

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46 

mately, DOT will step in and DOT will be the final decision maker, 

on the setting of safety standards that regulate this industry. 

Senator KENNEDY. Is there a rule that defines the relationship 

between the Tank Car Committee and DOT? 

Mr. ROBERTI. There is no set rule. There’s no set rule. Remember 

that the DOT sets minimum standards. 

So, there’s a lot of things that industry is very dynamic. 

Ailsa, you commented about adopting some standards that go 

above the minimum safety standards. That’s good. 

As each carrier and discussions before in the railroad industry 

and the shippers find solutions that may advance safety in a costeffective manner where there’s consensus. We want to see that 

happen. 

So, if we look at the TCC as an opportunity to vet those issues, 

vet the technical considerations and ultimately advance safety. 

If there’s an economic issue, that belongs to the STB, in my 

mind. And I appreciate the discussion about the STB. 

Senator KENNEDY. We’re going to get to that. 

Mr. ROBERTI. But if it’s a matter of what should be the specification for a tank car, that input can come to DOT but it is DOT and 

DOT alone that sets the safety standards governing this industry. 

Mr. MCINTOSH. Senator? 

Senator KENNEDY. Yes, certainly, join in. 

Mr. MCINTOSH. Following along those lines in follow up to—— 

Senator KENNEDY. You might want to get closer to that. 

Mr. MCINTOSH. The industry, the chemical industry, as others, 

has something similar to the Tank Car Committee. We have organizations that are technically focused, standards focused, performance focused, you know. An example for us is the Chlorine Institute 

which does some of those same activities the Tank Car Committee 

does. 

There are some differences though that the Chlorine Institute 

doesn’t have the authority to set a standard that everybody that 

belongs to or subscribes to the business of chlorine has to follow. 

And that’s one of the differences. 

The Tank Car Committee, in the issue that has been resolved 

that has been mentioned many times, set a standard for which 

there was not a consensus at the Tank Car Committee level. We 

understand that ultimately DOT, if somebody aggrieved in that 

process, we would have the right to appeal to DOT. 

And I guess part of our issue is that we would like the authority 

the DOT has to really be practiced by them. We would like the 

same level of requirement for transparency and cost benefit, to be 

a part of anything that the Tank Car Committee looks at and the 

obligation to have some kind of a consensus of view point which is 

really the only way to make progress when you have that many 

stakeholders represented is important to us as well. 

Senator KENNEDY. Well, here’s what’s confusing me. 

I mean, it’s clear that the Tank Car Committee has influence and 

that’s a good thing because the Tank Car Committee is in the private sector and government, DOT, is trying to regulate the private 

sector and you ought to know something about what you’re regulating. And the people who know the most about it would be the 

people involved in it. 

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Who determines the member? If you have the Tank Car Committee that is extraordinarily influential, not dispositive, but influential, who determines the makeup of the Tank Car Committee? 

Anybody? 

Mr. ROBERTI. Well, my understanding is that the Association of 

American Railroads and their various committees have a charter 

and it sets forth the composition for the committee, certainly aware 

that the majority is with the railroads. 

But I think we need to recognize that the composition is important, that bringing the technical experts from across all of the industry sectors and having the right technical experts at that committee will better drive consensus, will better drive the discussion 

of technical advances in safety versus the cost which ultimately is 

what needs to happen if you are to crystalize the best regulatory 

solutions when DOT is making these decisions. 

Senator KENNEDY. Well when the Tank Car Committee meets 

and the members do it right, let’s suppose it’s a safety issue. The 

Committee deliberates. They study it. They bring in experts, the 

Tank Car Committee and they reach a conclusion on a standard to 

recommend to DOT. 

Is there just one report from the Committee or can members, is 

there a majority report from the Committee? Suppose a member of 

the Tank Car Committee disagrees but gets outvoted. Can the 

Tank Car Committee have a minority report? 

How does it work? 

Mr. ROBERTI. Well, remember FRA and PHMSA are at those 

meetings. 

Senator KENNEDY. Right. 

Mr. ROBERTI. So, we know about it. We have an open door. 

Most recently, we’ve met with all of the industry sectors, the carriers. I was, just a few weeks ago, I met with the Fertilizer Institute at their annual conference and spoke to them. 

We’ve met with the Railway Supply Institute most recently. 

We’ve met with AAR officials and we’re going to, I’m going to, I 

talked to, we’ll be meeting with the American Chemistry Council 

in coming weeks. 

The way to be successful here is to be fully engaged, maintain 

open dialogue. If push comes to shove and there needs to be filed 

a petition by any one member, then that can happen. 

The better way, I think, is with Secretary Chao’s leadership and 

your leadership, Senator, and by full engagement by FRA and 

PHMSA to really see if we can reach, achieve consensus on the best 

way forward if that really facilitates the rulemaking process. 

Senator KENNEDY. Okay. 

Anybody have anything more to add? 

I want to ask, I want to shift gears to, we’ll go back and forth. 

Cost, that comes under the jurisdiction or rates, if you will, of the 

surface transportation board. Now, part of the problem there is the 

United States Senate. I think we haven’t acted on some nominations to the board. Is that right? 

Mr. ROBERTI. That’s correct, Senator. 

Senator KENNEDY. I’m going to talk to Senator McConnell about 

that pretty quickly and find out where we are on that. 

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Let me just throw this out there and it really is a question, not 

a suggestion. 

Has the Stagger’s Rail Act worked? Has the Stagger’s Rail Act 

worked? 

Mr. MCINTOSH. Senator, I can give you a perspective on that, 

granted, it’s a shipper’s perspective, so. 

Senator KENNEDY. Tell everybody what it is but I’m probably the 

only one who needs an answer to that. 

Mr. MCINTOSH. The Stagger’s Act is the act that was put in place 

many years ago when the railroads really went from regulated set 

of companies, a regulated industry to a non-regulated industry. 

If you go back to the 1970s, the railroads were really on their 

heels in terms of financial performance, in terms of, you know, returning to their shareholders some benefit from being, you know, 

owned. 

Senator KENNEDY. Why was that? 

Mr. MCINTOSH. They were, they, at the time said it was, you 

know, the impact of regulation. 

Senator KENNEDY. Okay, I can believe that. 

Mr. MCINTOSH. And as a result of that, you know, that the 

change in that what was brought on by the Stagger’s Act, you 

know, allowed them some latitude and some opportunity to fix the 

economic model that they had operated under for many, many 

years. 

And they’ve done—and you know, on the face, did a good job of 

helping them right the ship of, you know, their condition at the 

time. 

And that all, if you look at the financial performance of the railroads, it’s superb. I mean, if you really read their filings as public 

companies to the SEC, you will marvel at how much money they’re 

making. 

I’m not against companies making money. That’s one of my objectives in my organization in my role. 

But I think to get to the core of your question, has the Stagger’s 

Act worked? I think it worked for a while, but I think now we’re 

in a different environment. 

The railroad industry is consolidated from tens of railroads, historically, to four, five or depending upon how you count it, major 

Class One railroads and the consolidation and the economic reality 

of today has changed, you know, the fact that the Stagger’s Act 

which a lot of what STB does is based on the Act and interpretations of what, you know, what the Act required them to do. Those 

things just don’t fit in today’s regulatory climate and today’s economic environment for the railroads. 

So, I think there need to be, you know, new approaches made 

and one of the panelists mentioned, you know, a rate 

benchmarking process as an option to the current STB—— 

Senator KENNEDY. What is that? Who mentioned that? 

Ms. GULFO. I did. 

Senator KENNEDY. I don’t mean to cut you off. 

Mr. MCINTOSH. No, that’s fine, that’s fine. 

Senator KENNEDY. I want to hear more about that. 

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Ms. GULFO. So, basically what it does when a shipper is captive 

you have no way to tell whether or not the rate is—it’s a good 

benchmark for that traffic. 

So, what it would do, it would give shippers the opportunity to 

compare what market rate will be when there’s competition. 

Senator KENNEDY. How do you know that? 

Ms. GULFO. Well, in our experience, I mean, this is our experience when we have multiple sites that are multiple served by different railroads. When there is competition the rates are 30 to 50 

percent lower than on the captive side. 

Senator KENNEDY. Okay. 

So, you have empirical data you can look at in other areas, okay. 

And would that be something that the STB would be required to 

consider? 

Ms. GULFO. Yes. 

Mr. MCINTOSH. I think it’s the hope that it would be a replacement model for the current stand-alone rate case. 

Senator KENNEDY. Which costs five million bucks. 

Mr. MCINTOSH. Well, yes, plus. 

Ms. GULFO. Average. 

Mr. MCINTOSH. Which is the only opportunity companies now 

have in front of the STB to challenge rates. A rate benchmarking 

model for which there is work being done by various entities who 

have an interest in looking for options would afford a different approach. 

Senator KENNEDY. But why does it take three and half years and 

five million bucks to challenge a rate? That’s absurd. 

Mr. MCINTOSH. The current stand-alone rate case requirement is 

that if you’re filing, if you’re the one that’s doing the filing, trying 

to convince the STB that the rates you’re being charged is not competitive. 

You have to hire consultants, in essence, to create your own independent railroad that would service the routes that you’re trying 

to get some, you know, compensation for being overcharged and the 

methodology and the process required of designing your own railroad. 

Everything about it, how many times the grass is mowed, how 

many people work, how many rail yards, what kind of rail yards 

and where they’re located, is an onerous process that takes that 

amount of time. 

Senator KENNEDY. Whose idea was that? 

Mr. MCINTOSH. Well, that is an outgrowth of—— 

Senator KENNEDY. Is that STB? 

Mr. MCINTOSH. I don’t know. I don’t know whose idea it was but 

it is their practice today for large company—— 

Senator KENNEDY. Under the Reform Bill for STB, does STB, if 

it has full membership, does it have the authority to say we’re 

going to settle rate disputes a different way? 

Mr. MCINTOSH. We believe that that would be the case, yes. And 

people in the industry are promoting different alternatives, rate 

benchmarking being one of them, as an option to the current process. That’s the only recourse an industry has. 

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Senator KENNEDY. Well, in the last ten years I know our railroad, our rail carriers have consolidated, but so has everybody else. 

I mean, that’s frankly, nothing unusual. 

We have in just about every industry, the pharmaceutical industry, the healthcare industries consolidating, you know, social media 

platforms, everybody is merging with everybody else. It doesn’t 

have to necessarily lead to price increases. Sometimes through 

economies of scale, it makes it more efficient. 

Why would the rail industry be different? 

Mr. MCINTOSH. Well, I can tell you that and I’ll just point to the 

reality of the businesses that I’ve run over the years. 

Senator KENNEDY. Yeah. 

Mr. MCINTOSH. The two biggest cost components of those businesses, historically, have been the cost of electricity because we’re 

a big consumer of electricity. 

Senator KENNEDY. Right. 

Mr. MCINTOSH. And the cost of freight. 

Senator KENNEDY. Right. 

Mr. MCINTOSH. Those two remain the two largest costs that the 

businesses I’m familiar with, have today. 

The difference is the order is now reversed. Freight is the largest 

cost we have. Electricity and other raw materials is second. 

Senator KENNEDY. Because of sales, the subsequent cost that it 

has. 

Mr. MCINTOSH. The point I make and the reason that I subscribe 

to, you know, the failing of a non-competitive environment for rail 

services is the two largest costs for my business I buy without the 

benefit of competition. 

I’m a single-sourced carrier for rail service so I have no competition. 

Senator KENNEDY. You’ve got one choice. 

Mr. MCINTOSH. One choice. 

Senator KENNEDY. Okay. 

Mr. MCINTOSH. And I’m a single-sourced provider for electricity. 

It’s a tough world when your two largest costs are single sourced 

just by the reality of the situation. 

I don’t have that luxury with my customers. I have to compete 

for their business. 

Ms. VON DOBENECK. Senator, if I may? 

Senator KENNEDY. Yeah. 

Ms. VON DOBENECK. NOPB is obviously in a unique situation because we have six Class One partners so there’s lots of choices 

there. 

I just wanted to share a statistic that I had heard that since partial deregulation in 1981 that occurred, rates actually have fallen 

by 46 percent in today’s standards. 

And just as an aside, for the industry in general, we maintain 

in our infrastructure, we’re responsible for complete infrastructure 

and it’s 30s, well, at least for the NOPB, it’s 33 to 37 percent of 

our yearly budget. 

So, that’s, you know, that’s kind of, as an industry, a real consideration as we—— 

Senator KENNEDY. Is that like building new rail or maintain 

maintenance? 

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51 

Ms. VON DOBENECK. Both. 

And then it can go above that if you have like a big capital 

project that year. Last year we had one on the NOPB so it was a 

couple million dollars more than it normally is. So, it just depends 

on the year. 

But just maintaining the rail as it is, is an enormous expense to 

us. 

Senator KENNEDY. NOPB is a Class Three. 

Ms. VON DOBENECK. Correct. Yes, sir. 

Senator KENNEDY. So, you’re, let’s assume in this particular case, 

you’re the first mile. 

Ms. VON DOBENECK. Yes. 

Senator KENNEDY. You can hook up with Class Ones. 

Ms. VON DOBENECK. Yes, sir. 

Senator KENNEDY. More than you get—you can choose more than 

among several? 

Ms. VON DOBENECK. We have six in New Orleans which is very 

unique, yeah. 

Senator KENNEDY. How do you pick which Class One? 

Ms. VON DOBENECK. I guess it depends on whether your route is 

going and then you can, kind of, price out where there are different 

routes you can take. 

Senator KENNEDY. Do you make that call or does the shipper 

make it? 

Ms. VON DOBENECK. Oh, the shipper would. 

Senator KENNEDY. Okay. 

Ms. VON DOBENECK. Yes. 

Senator KENNEDY. So, the shipper decides which Class Three the 

Class One, is to connect up with? 

Ms. VON DOBENECK. Depending on the route. 

Senator KENNEDY. Okay. 

Ms. VON DOBENECK. They’re given—— 

Senator KENNEDY. Having six different Class One ship rail carriers available, is that unusual, is that common? 

Ms. VON DOBENECK. It’s very unusual. The only other place in 

the country that has that kind of a set up is Chicago. So, we’re 

really unique and really fortunate—for local industries that folks 

around here have the benefit of those connections and we work 

well with all of our Class Ones to create the gateway, we call it, 

so, the front belt and the back belt here in New Orleans. 

Mr. MCINTOSH. Senator? 

Senator KENNEDY. Yeah. 

Mr. MCINTOSH. 85 percent of chemical manufacturing locations 

in the U.S. are single-served locations, 85 percent of them. 

Senator KENNEDY. Wait, say that again. 

85 percent of what? 

Mr. MCINTOSH. Of the chemical manufacturing locations in the 

U.S. are single-served locations. 

Senator KENNEDY. That means they have access to one Class 

One. 

Mr. MCINTOSH. One and only one. No competition. 

Senator KENNEDY. Okay. Alright. 

I have a few other questions. 

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I’m still a little confused about, I think you refer to it as Appendix B. You know what I’m talking about because I don’t. 

[Laughter.] 

Could you explain that to me? Somebody? Anybody? 

Mr. MCINTOSH. Do you want me to try? 

Mr. ROBERTI. Sure, if you want to start and I can weigh in. 

Mr. MCINTOSH. My understanding, Senator, is the DOT issued 

some policy directives on the requirements for locations that do 

maintenance or related maintenance activities on rail cars or components thereof. 

Today, typically, a chemical shipper who ships by rail has the 

flexibility to do maintenance for certain kinds of activity on the rail 

cars that they ship their products in. 

Senator KENNEDY. Okay. 

Mr. MCINTOSH. Obviously, for significant maintenance activities 

or required regulatory, you know, time-based regulatory requirements, those are typically done by a third-party shop that provides 

the certification that the maintenance has been done per DOT 

standards. 

But the new policy directives which have been issued, to my understanding, have been issued by DOT calls into question the scope 

of what chemical manufacturers can do at their location and basically removes the opportunity to do a significant number of things 

which are being done now. 

Senator KENNEDY. In house. 

Mr. MCINTOSH. In house. 

Senator KENNEDY. You have to hire an outside person to do—— 

Mr. MCINTOSH. Or you have to move the car to a shop to have 

it done at a certified shop. Those exist now but they typically do 

the more significant major work. 

Either way, the standards which, you know, haven’t really seen 

the regulatory requirement of cost versus benefit, you know, stand 

to make, you know, an additional cost burden for the shipping community because things that used to be done in-house, replacing 

chain on a valve gap because the chain was worn. Those are things 

that you will no longer be able to do as a shipper. You will have 

to require a mobile repair shop to come to your site, third-party, 

to deal with that issue. 

Senator KENNEDY. And is this a proposed rule? 

Mr. MCINTOSH. That’s my understanding, yes. 

You know, our issue is we’re not adverse to engaging in what 

kind of activities, you know, should require some kind of certification that don’t today. But, you know, this was, kind of, handed 

down and it’s not really consistent with regulatory reform or consistent with transparency, addressing this issue of transparency. 

Senator KENNEDY. Okay. 

Paul, Can you shed some light on this? 

Mr. ROBERTI. So, okay, yes, Senator. 

So, this is an area where the Tank Car Committee has a role in 

conducting certifications of the—to ensure that a tank car or components are consistent with the Federal regulations. Within the 

scope of the certification there’s a broad ecosystem of what constitutes a tank car and all the components that go into it. 

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53 

This is an important safety issue because one seal or a manhole 

cover or even these acts that occur within a carrier’s own maintenance yard could cause, they can cause a catastrophic release if not 

done correctly. 

Now, we know it’s a thorny issue. We’ve been talking to all 

stakeholders about this. We are going to continue to talk. In fact, 

we’re going to be meeting about this issue. 

Our message is we’re open to solutions. Where we can prioritize 

safety and maximize efficiency and find a consensus that really 

looks at a risk-based approach to addressing this issue, we will do 

so. We will entertain that. 

So, that’s our message is that we want to continue, the Secretary, this is a matter that has the Secretary’s attention. It certainly has your attention. 

We have the right leadership with your help and I think both 

FRA and PHMSA will work with the stakeholders like we did with 

the phase-out issue or what the stakeholders did with coming to a 

consensus on the phase-out issue. 

We need to find what’s the right balance here and we will do so 

and keep your office and your staff informed as we address this 

issue. 

Senator KENNEDY. Now tell me how all this has an impact on 

small business. 

Ms. AMAR. Well, I think, as I mentioned in my testimony, that 

you know, small business owners don’t only, you know, use shipping if I’m a retail grocery or you know, manufacturer which we 

have several members of, but I’m not talking about large manufacturers. I’m talking about small manufacturers, you know, that have 

20, 25 employees that you know, want to see their goods shipped 

across the U.S. 

This all, you know, it’s kind of like the trickle down, you know, 

economic theory of, you know, what happens to these guys or, you 

know, Dow Chemical, who is here today. Their products have to get 

shipped out and put into stores and those products and prices impact our members, you know, our small business owners. 

So, there are consumers on both sides of the issue. 

And we’ve been involved in many different arenas. This is just 

one example of one. 

I was involved several years ago in an issue with car manufacturers, our auto dealers and industry where we were, kind of, having like warranty repair issues. 

And so, you know, it’s kind of like this particular issue is somewhat of a similar issue. We had to have everybody come to the 

table. You’ve always got to have input from every single stakeholder. And I always think that when that’s what occurs then 

you’re going to have the best possible solution. 

Senator KENNEDY. Okay. 

Let me ask one last question then I’m going to see if anybody out 

there wants to say anything. 

This is well, I’m just going to ask it. 

If you’re a petrochemical manufacturer or any kind of manufacturer and you have access to only one Class One carrier and you 

get a price quote and you don’t like it or even if you do like it, why 

don’t you just go compare that to trucking? 

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Mr. MCINTOSH. I can answer that from a real-life perspective. 

In a lot of cases trucking, especially when you’re talking about 

the volumes of chemicals that run, that move by rail, trucking costs 

are prohibitive. And some chemicals like chlorine, you know, we 

just, the industry just does not move that by truck. 

Senator KENNEDY. Is it a safety issue? 

Mr. MCINTOSH. It’s the nature of to get the same kind of safeguards that you have in moving by rail, you would make it even 

more prohibitive from a cost standpoint. 

Senator KENNEDY. Well, you probably will interface with more 

people on the road. 

Mr. MCINTOSH. Yes, and you’d be in higher urban concentrations, 

Senator, as if you’re moving product by truck. 

Senator KENNEDY. Yeah. Yeah. 

Ms. GULFO. Senator, if I may, in our case we have multiple sites 

that are captive to just one single rail option and it’s a matter of 

volume. For each rail car that we ship we would have to ship four 

trucks. 

So, it’s a lot of trucks on the road so it adds condition to the 

roads and like John mentioned, becomes somewhat cost prohibitive 

as well. 

Senator KENNEDY. Okay. 

Anybody have anything they want to say? 

Speak now or forever hold. 

Alright, this has been great. And I want to thank all of our panelists. 

I’ve learned a lot from listening to you. I read all of your written 

testimony as well and I know CRS has put out a publication, Congressional Research Service. They probably put out several but I’ve 

got one in my packet. I got about half-way through and my plane 

landed. 

So, I’m going to go back and finish that for that usual, thorough 

job. 

I will go back and look at my notes. I’ll take this back to the 

Committee. 

If anybody has anything to offer, I hope you’ll contact me or 

Cassie or Marcie or Preston or Michelle or Ross or anybody else in 

my office. 

Well, I’m interested and I think the Committee is interested in 

two things. 

Number one, well, really three things. 

Number one, public safety. 

Number two, public safety. 

And number three, efficiency, a subset of which is cost and I 

know that’s DOT’s concern. I know that’s the rail carrier’s concern. 

I know that’s the small business and large business concern. 

There’s got to be a way that we can resolve some of these issues. 

I am going to go back and see where we are on appointments to 

the STB. I frankly didn’t. I think they’ve been outstanding for 

three years. Did I read that correctly? 

That’s inexcusable. 

I want to thank Meredith again, Meredith West. 

I want to thank Kathryn. 

I want to thank Sean. 

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I want to thank Chairman Risch for allowing me to conduct this 

field hearing. 

I want to thank Ranking Member Cardin. 

I want to thank all the members of my staff for working so hard. 

Two of my colleagues in my office waited on a plane in Washington, DC, for how many hours? Five hours on the plane. Seven 

hours. 

And I was in DC yesterday. They called my office to tell Kristen 

that they were stuck on the plane and Kristen told me and I said, 

my advice is to start drinking. 

[Laughter.] 

And you can have a few cocktails and sober up by the time you 

land but they weren’t serving liquor. It makes no sense. 

I want to thank all of you for coming. This has been very informative. 

I hope everybody has a wonderful and safe Thanksgiving. 

This meeting is adjourned. 

[Whereupon, at 11:46 a.m., the hearing was adjourned.] 

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APPENDIX MATERIAL SUBMITTED 

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STATEMENT FOR THE RECORD OF 

EDWARD R. HAMBERGER 

PRESIDENT & CHIEF EXECUTIVE OFFICER 

ASSOCIATION OF AMERICAN RAILROADS 

BEFORE THE U.S. SENATE 

COMMITTEE ON SMALL BUSINESS & ENTREPRENEURSHIP 

FIELD HEARING ON HOW SMALL BUSINESSES BENEFIT FROM 

SMART RAIL SHIPPING REGULATION 

NOVEMBER 16, 2018 

ASSOCIATION OF AMERICAN RAILROADS 

425 THIRD STREET SW 

WASHINGTON, DC 20024 

202-639-2100 
59 

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Introduction 

Thank you for the opportunity to provide a statement for the record regarding the 

November 16, 2018, field hearing on how small businesses benefit from smart rail shipping 

regulation. Specifically, the field hearing included a discussion of the appropriate level of 

railroad rate and service regulation, as well as a discussion of railroad hazardous material and 

tank car issues. This statement will touch on both of these areas. 

Small businesses, like all businesses and 

consumers in the United States, benefit from the nation's 

safe and efficient freight rail network. America's freight 

railroads form an integrated, nearly 140,000-mile 

nationwide system that serves nearly every industrial, 

wholesale, retail, and resource-based sector of our 

economy. In a very real sense, railroads are the 

circulatory system of the U.S. economy. Almost entirely 

privately owned, railroads operating in the United States 

provide the world's safest, most productive, and lowestcost freight rail service. They are indispensable to our 

nation's economic growth. 

Unlike trucks, barges, and airlines, America's 

---,------, 

freight railroads operate almost exclusively on infrastructure that they own, build, maintain, 

and pay for themselves. That means they must be able to earn enough to pay for the upkeep 

and expansion of their networks. 

They have not always been able to do this. In the 1970s, the U.S. freight rail industry 

was on the brink of ruin, largely because of decades of excessive regulation that failed to 

recognize that railroads operate in dynamic, competitive transportation markets. Bankruptcies 

were common, and tens of thousands of rail miles had to be operated at reduced speeds 

because of unsafe conditions railroads could not afford to fix. The economy suffered greatly 

because railroads could not provide quality service. 

Recognizing the status quo was untenable, Congress passed the Staggers Rail Act of 

1980, which put in place a more balanced regulatory system under which railroads could plan 

efficient, market-based routes, services, and prices, rather than have Washington dictate 

operations. 

Importantly, the Staggers Act kept in place effective regulatory safeguards to protect 

rail customers against abusive or anticompetitive railroad behavior. Those safeguards are still 

in place today under the auspices of the Surface Transportation Board (STB), the independent 

federal agency responsible for regulating rail rates and service. 

It is clear that the Staggers Act reforms have done exactly what they were supposed to 

do. Railroads today are moving more freight and are far more affordable, safer, reliable, and 

financially secure than they were prior to Staggers. The benefits they provide our nation have 

grown sharply too: 

• Since 1980, railroads have poured more than $660 billion- their own funds, not 

taxpayer money - back into their networks, creating a rail system that is the envy of 

the world. In recent years, rail spending has averaged more than $500 million per 

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week, more than ever before. Thanks to this spending, U.S. freight rail infrastructure 

today is in better overall condition than ever before. Indeed, the term "crumbling 

infrastructure" applies to many of our highways, waterways, and transit systems, but 

with few exceptions it does not apply to our nation's freight railroads. Prior to the 

Staggers Act, it did. 

• According to a study by Towson University's Regional Economic Studies Institute, in 

2017 alone, America's major freight railroads supported 1.1 million jobs, $219 billion 

in economic output, and $71 billion in wages. Railroads also generated nearly $26 

billion in tax revenues in 2017. 

• 

• 

• 

• 

Rail service has become far more costeffective for rail customers. Average rail 

rates in 2017 were 46 percent lower than 

in 1981, thanks mainly to huge 

productivity gains that have largely been 

passed through to rail customers. 

Millions of Americans work at firms that 

are more competitive in the tough global 

marketplace thanks to the affordability of 

freight railroad transportation. 

Railroads have become much safer. In 

fact, recent years have been the safest in 

o~~~~~~~~~~~~~~~ 

'64 '69 '72 '75 '78 '81 '84 '87 '90 '93 '96 '99 '02 '05 '08 '11 '14 '17 

"Rates"islnllatiorrall}ustedr~venu~perto,..!llle. 'VI>klme"ittorl-lriltl$. "Productiy;l)l'i$rewfl1Jelon· 

lilies per comtantdot;u operating expense. "Revenue"is operating revenue in 2(117 $. Sl.lurl:e:AAR 

rail history, including for the transport of hazardous materials. 

Around one-third of U.S. exports move by rail. Without rail, U.S. firms and 

consumers would be unable to participate fully in the global economy. 

Compensation per employee in the freight rail industry is more than 60 percent higher 

than the U.S. average. 

• Since one train can carry the freight of several hundred trucks and railroads on average 

are four times more fuel efficient than trucks, freight rail is better for the environment. 

The Continued Need for Balanced Regulation 

The global superiority of U.S. freight railroads is no accident. Rather, it is a direct 

result of a balanced regulatory system, embodied in the Staggers Act, that relies on the 

marketplace to establish most rate and service standards. The level of government control 

over railroads has a tremendous impact on how reliably, efficiently, and cost-effectively 

railroads are able to meet the economy's freight transportation needs. 

When the Staggers Act was passed in 1980, a move to a system of balanced regulation 

was necessary for railroads' very survival. Today, railroads' survival is not in doubtrailroads are financially healthy. But that does not mean the need for balanced regulation has 

gone away. America's ability to compete in a tough global economy requires vibrant, 

effective freight railroads. That is why it is crucial that the balanced railroad regulatory 

framework that has worked so well for nearly 40 years be retained. 

Unfortunately, some firms and special interest groups are trying to tilt today's 

regulatory and legislative scales in their favor. These groups claim to have only the best 

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intentions. They only want "common sense reforms" based on "free market principles" that 

will lead to more "competition" that will "ultimately help the economy and the rail industry 

itself." They insist they "want railroads to be prosperous and invest in their network and 

service." They just want to "get freight rail policies back on track" through a "closer 

examination from Congress and the STB."1 

These innocuous-sounding claims are belied by the fact that when one looks at the 

actual policy changes that rail industry critics are urging upon the STB and Congress, it is 

clear that "reform" is a euphemism for government intervention in the marketplace. 

At their most basic level, proponents of railroad "refom1" think railroads charge too 

much; that the use of differential pricing by railroads is unfair; and that the government 

should step in and institute price controls of one kind or another on railroads. In doing so, 

proponents of"reform" seem to discount the notion that a railroad must balance the desires of 

each customer to pay the lowest possible rate with the need to earn a sufficient return to keep 

the rail network functioning now and into the future. Rhetoric about "competition" cannot 

change the fact that railroads must be able to cover their costs or they will not be able to 

maintain or expand their infrastructure and provide the services upon which their customers 

and our nation depend. 

Rail industry critics, including two who testified at the November 16 field hearing, 

also often claim that service to a rail customer by a single railroad is equivalent to monopoly 

power. The implication is that all rail customers therefore have a right to service by more 

than one railroad. That is wrong. Claiming every market can sustain two railroads just 

because some markets can is like saying every city can support two major league baseball 

teams just because New York and Chicago can. 

Moreover, customers that decide to build facilities at locations served by one railroad 

still benefit from competition in a variety of ways. The majority of freight shipped by rail can 

also be shipped by another mode of transportation such as truck or barge. And freight often 

can and is transloaded from one of those other modes to a second or third railroad option. 

Shippers can also avail themselves of substitute products or buy and sell products into and 

from different geographic regions, which increase their transportation options and constrain 

what freight moves by rail. To illustrate this point, the huge increase in electricity generation 

from natural gas (which is not carried by railroads) instead of coal (which is) is an example of 

product competition that has led to the loss of millions of rail carloads of coal in recent years. 

All of these forces put competitive constraints on railroad pricing and service. 

Railroads know their customers are not always completely satisfied with the prices 

they are able to negotiate with railroads. Virtually every purchaser of goods or services, 

including railroads, would like to pay less to their suppliers. But there is no question that the 

vast majority of rail customers- including those served by only one railroad- do not need 

STB regulatory protection because market forces ensure competitive rates and service. When 

that is not the case, the STB can set maximum rates or take other actions if a railroad is found 

to have acted improperly. 

1 The phrases in quotes in this paragraph are from statements from the two chemical companies at the November 

16 field hearing. 

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Mandated Switching Should Be Opposed 

Some rail industry critics have been calling for the reregulation of U.S. freight 

railroads, in one way or another, since the Staggers Act was passed. Most recently, many of 

them have proposed something called mandated terminal switching. 

A terminal area is a location where railcars are transferred, collected, or delivered, 

often in so-called "first-mile" or "last-mile" movements. Terminal areas are usually owned 

and operated by a single railroad. "Switching" is when one railroad moves freight into or out 

of a terminal area on behalf of another railroad. 

Today, if a railcar must be moved by two or more railroads to get from its origin to its 

final destination, the railroads must cooperate to do so. But longstanding law and STB policy 

says that unless a railroad is extremely inefficient or has engaged in anti-competitive conduct, 

it does not have to switch traffic with another railroad if it can deliver the freight from origin 

to destination all by itself. 

Mandated switching is when a railroad that can carry freight all the way from origin to 

destination by itself (the "incumbent railroad") is ordered by the STB to switch traffic with 

another railroad that has replaced the incumbent for part of the move. 

To state it more simply, mandated switching entails government regulators forcing one 

railroad to use its own tracks, locomotives, and other assets so that a competing railroad can 

take the first railroad's customers away. In essence, it is analogous to the government forcing 

UPS to use its local delivery trucks to deliver packages for FedEx. 

Mandated switching is more accurately called "forced access," because the incumbent 

railroad would be forced by the government to give another railroad access to the incumbent's 

facilities, even if the incumbent had done nothing wrong - that is, even if it had not even 

been accused, much less found guilty, of engaging in anti-competitive conduct or charging 

excessive rates. 

Why is mandated switching a problem? First, railroad efficiency and the quality of 

rail service would be sharply reduced. If UPS had to use its trucks to deliver FedEx packages, 

UPS's operations would clearly be disrupted. In the rail case, the disruptions would be orders 

of magnitude greater because of the time and complexity inherent in switching rail traffic. (A 

single mandated switch could involve dozens of distinct railroad movements over several 

days). 

Second, under mandated switching, railroads that invested in infrastructure and 

equipment to serve their customers would be forced to use those same assets for the benefit of 

other railroads. No private company would invest in new assets if it had to let a competitor 

reap the benefits of those investments. Pepsi would not build a new bottling plant if it might 

be ordered by the government to use the plant to bottle Coke. 

Third, highways may become even more crowded as delays caused by the 

inefficiencies of mandated switching could cause many rail customers to switch to trucks. 

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Imagine the billions of dollars in new highway spending that would be needed to handle 

increased truck traffic. 2 

Minimum Service Reguirements 

Railroads have what is called a "common carrier" obligation. In essence, this means 

that if a rail customer asks a railroad to haul freight for it, the railroad (unlike a trucker or 

barge operator) generally cannot say no. 

However, a witness at the November 16 field hearing implied that railroads' existing 

common carrier obligation should be expanded to include what the witness called a 

"minimum service requirement." This might include legislative or regulatory mandates 

regarding railroad service levels, presumably including some sort of punishment for railroads 

that failed to meet those requirements. 

First of all, there are existing statutory and regulatory protections for shippers who 

receive unreasonable service. Service issues have long been regulated in appropriate 

circumstances under the existing common carrier obligation and other provisions of the 

Interstate Commerce Act. The STB may decide complaints that railroads have violated their 

statutory obligations or caused unreasonable delay. In extraordinary circumstances, the Board 

has authority to issue emergency service orders when it finds that a "failure of traffic 

movement exists which creates an emergency situation of such magnitude as to have a 

substantial adverse effects on shippers, or on rail service in a region of the United States." 49 

U.S.C. § 11123(a). Moreover, the STB has recently been given authority to launch 

investigations on its own motion regarding issues of national or regional significance. 

That existing set of legal protections aside, railroads know that, over the past couple of 

years, rail service for some customers in some locations has not been of the quality they have 

come to expect, or that railroads themselves expect. Railroads regret this. However, railroads 

are constantly striving to improve the strength and resiliency of the national rail network, 

making it better able to provide the efficient, reliable, and cost -effective freight transportation 

service that rail customers, and our nation, need. 

Additional laws, in the form of mandated service standards, though, are not the way to 

go, especially if they were imposed with no obligation on rail customers to pay for the assets 

railroads would need to meet those standards. 

Every day, a huge variety of factors influence rail service levels. For example, 

railroads and their customers do their best to forecast future demand to help ensure that railroads have enough assets to handle the traffic tendered to them. At times, though, demand for 

rail service exceeds railroad and shipper expectations. 

Unforeseen events also hinder railroads, just as they hinder other firms. The U.S. rail 

network is, in effect, a 140,000-mile outdoor assembly line. Events over which railroads have 

little or no control- such as bad weather, accidents, mine shutdowns, port congestion, 

strikes, and much more- can impede rail operations for days, weeks, or, in the worst cases, 

even months at a time. Seasonal factors can also play a role- e.g., grain harvests can 

2 Already, the taxes and fees that heavy trucks pay are far less than the cost of the damage they cause to our 

nation's highways. This multi-billion-dollar annual underpayment would rise if freight that otherwise would 

move by rail moved by truck instead. 

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quickly fill a rail network to capacity, much like a church might fill to overflowing on Easter 

Sunday. 

When railroads experience an unexpected surge in traffic or unexpected problems, 

they may be temporarily unable to meet their customers' requests as quickly as they or their 

customers might like. Firms in every industry periodically find themselves in similar 

situations, but some rail critics would make this a violation of law if it happened to railroads. 

Even more problematic, many of the same entities that want to impose service 

obligations on railroads also support changes in rail regulation that would sharply curtail rail 

revenue, making reliable and efficient service even more difficult to achieve. 

Misperceptions Regarding Freight Rail 

It is an unfortunate reality that, when trying to make their case, rail industry critics 

sometimes resort to misleading claims. For example, at the field hearing, the claim was made 

that rail rates have risen "more than three times the rate of inflation" over the past decade. 

No one disputes that rail rates have risen on average in recent years. But as noted 

above, America's privately-owned freight railroads operate almost exclusively on 

infrastructure that they own, build, maintain, and pay for themselves. Higher rail earnings, 

made possible in part by those higher rail rates, have enabled railroads to plow back record 

amounts to keep the U.S. freight rail network in world-best condition. 

This becomes especially important when railroad markets are undergoing fundamental 

shifts, like they are now. Demand for rail service is a function of demand elsewhere in the 

economy for the products railroads haul. Demand changes on a micro scale all the time as 

individual firms rise and fall. It also occasionally changes on a grander scale. The rail 

industry is in the midst of one of those macro-scale changes now, with coal in the midst of a 

steep decline and intermodal volumes at record levels and expected to continue growing in the 

years to come. If the commodities with rail traffic declines traveled on the same routes as 

commodities with traffic increases, the challenges these changes presented to railroads' 

operating plans and investment needs would have less impact. However, when traffic 

changes occur in different areas - as is the case today - the challenges are magnified. The 

ability of railroads to make the investments needed to respond effectively to those challenges 

would be threatened if railroads' ability to price their services based on market demand were 

unreasonably curtailed. 

It should also be noted that railroads set their prices based on the value they provide to 

their customers, not on their input costs. Firms in virtually every industry do the same thing. 

Notably, some of the rail customer groups who complain about railroad rate increases 

in recent years have seen the prices they charge increase just as fast, if not faster. For 

example, according to data from the Bureau of Labor Statistics, average prices for chemicals, 

as measured by the producer price index for chemicals, rose 85 percent from 2001 to 2017 

(see the top chart on the next page). Meanwhile, average railroad revenue per ton-mile, 

unadjusted for inflation, rose 79 percent over the same period. Average rail revenue per tonmile for chemicals rose 57 percent from 2001 to 2016, much less than the comparable 

increase in the producer price index for chemicals over the same period. In other words, the 

rail rate increases appear to be less than the chemical industry's own price increases over the 

same period. 

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Rail industry critics are also misleading 

when they claim, as they did at the field hearing, 

that railroad consolidation has led to 

skyrocketing rates and substantially increased 

rail market power. Freight railroads have 

consolidated over the past 3 5 years like most 

Producer Price Indexes for Chemicals 

vs. Avg. RR Revenue Per Ton--Mile 

200 I 1801-----

(2001 = 100) 

U.S. industries. Rail mergers have not, however, 14o f---------=~v-c'=~ 

reduced intra-railroad competition. Because of 

conditions placed on every major post-1980 rail 100 ,...:;.,.....=---------------~-- _

1 

merger, shippers that had multiple railroads 

serving them prior to the merger still had 

multiple-railroad service following the merger. 

The precedent that rail customers should not go 

80 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 

"BLS Code WPU06 Source: AAR, STB, Bureau of labor Statistics 

from two-railroad service to one via a rail merger is so well established that in the most recent 

major rail mergers, the merging railroads addressed such situations even before applying to 

the STB for approval. It is simply wrong to claim that rail shippers would be better off today 

if the fractured, inefficient freight rail system that existed in the past still existed. 

Rail industry critics also imply that rail profits are now excessive. It is true that freight 

railroad financial performance in recent years has been much improved compared to earlier 

years. But statements about railroads' recent profitability often ignore the fact that, until 

relatively recently, rail profitability was generally poor. Thus, an improvement from earlier 

years may be substantial, yet may still yield profitability levels that are only about average 

compared with other industries against which 

railroads compete for capital. 

One example that illustrates this point is 

return on equity (ROE), a well-known measure 

of profitability. ROE reveals how much profit a 

company generates with the money shareholders 

have invested. The nearby chart shows that the 

ROE for the rail industry reached parity with the 

Fortune 500 average for several years, but more 

recently has again fallen behind the Fortune 500 

median. 

Return on Equity: Railroads vs. the Fortune 500 

18% r-----------------, 

16% 

14% 1--------,-j 

12%-

10% II 8% 

4% ·% Hl!lliOl1tll:llfl!m HHII--.-!11-IIHIHIHIHII oMedianFortuneSOO ,.~tlllll~ •MedianClassiRRs 2% 

O%WL~~~~L~IIILI~IIILI~I·~~~ '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 

Any discussion of railroad profitability ;:::~V~s~tsi::~J::~u;2~~~taS:':~~~~~u~s:~.~::::~~ 

relative to other industries has to take into 

account the extremely capital-intensive nature of the railroad industry. (The average U.S. 

manufacturer historically spends about 3 percent of revenue on capital expenditures. The 

comparable figure for U.S. freight railroads in recent years has been around 19 percent, or six 

times higher.) One measure of profitability that does take into account railroads' capital 

intensiveness is return on invested capital (ROIC). It shows that railroad returns are not 

excessive and still lag behind those other industries. 

Make no mistake, the rail industry is encouraged by the improvements in its financial 

condition in recent years, and they will work to see that those improvements continue. Recent 

improvements in rail earnings should not be seen as a reason to cap rail earnings through price 

controls, artificial competitive constraints, or by other means. This would encourage capital 

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to flee the industry, threatening railroads' ability to reinvest in their networks. Indeed, if the 

U.S. freight railroad industry is to fully deliver its potential benefits to the economy, its 

current financial performance should be regarded as one step along the path toward 

sustainability, not as a final destination. 

It is important to note that major freight railroads are either publicly traded or are 

subsidiaries of publicly traded companies. As such, they must provide their shareholders a 

return commensurate with what those shareholders could obtain in other markets with 

comparable risk. No law or STB regulation can force investors to provide resources to an 

industry whose returns are lower than what the investors can obtain elsewhere. Capping rail 

rates in any fashion would send an unambiguous signal to capital providers that railroads are a 

risky bet. If railroads are viewed as returning less to shareholders, for whatever reason, than 

comparable alternatives, then capital will flee the rail industry or will only be available at 

much higher costs than we see today. 

Finally, some critics claim that the STB rate review process is broken. The STB has 

recognized, and railroads agree, that the procedures it uses in large rate cases - when 

hundreds of millions of dollars might be on the line- are not appropriate in all cases, 

especially when the amount at issue is relatively small. In response, the STB has instituted 

alternatives for smaller cases that are far less expensive and time consuming. In addition, the 

AAR has recently advocated that the STB make specific improvements to expedite and 

streamline even its largest cases as the agency considers ways to improve its processes. 

Railroads support making the STB rate and service adjudication processes accessible to all 

shippers, but the procedures used must be based on sound economic principles. 

Moving Hazardous Materials Safely 

U.S. railroads transport approximately 2.3 million carloads of hazardous materials 

annually, including approximately 70,000 carloads of"toxic inhalation hazard" (TIH) 

materials.3 Railroads are the safest mode for transporting hazardous materials. In 2017, more 

than 99.999 percent of rail hazmat shipments reached their destination without a release 

caused by a train accident. Thanks to the combined efforts of government and industry, rail 

hazmat accident rates in 2017 were down approximately 64 percent from 2000. 

Federal law authorizes the Secretary of Transportation to "prescribe regulations for the 

safe transportation, including security, of hazardous material in intrastate, interstate, and 

foreign commerce." The Secretary has delegated this authority to the Pipeline and Hazardous 

Materials Safety Administration (PHMSA), which issues the hazardous materials regulations 

governing the transportation of hazardous materials by all modes, including rail. 

PHMSA and the Federal Railroad Administration (FRA) work together to develop 

regulations addressing the risks posed by the transport of hazardous materials by rail. AAR's 

member railroads are committed to following PHMSA's hazardous materials regulations. At 

the same time, though, DOT itself has recognized that PHMSA's hazardous materials 

regulations establish minimum standards which industry may exceed in the interest of safety. 

3 TIH materials are gases or liquids, such as chlorine and anhydrous ammonia that are especially hazardous if 

released into the atmosphere. 

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In this regard, the AAR's Tank Car Committee brings together industry experts to 

support and improve the safety of tank cars, which transport the hazmat railroads are required 

by the common carrier obligation to carry. The committee is comprised of railroads, rail car 

owners, rail car manufacturers and repair facilities, and rail hazmat customers, with active 

participation from the U.S. DOT, Transport Canada, and the National Transportation Safety 

Board (NTSB). In other words, all the key tank car stakeholders are represented. It is worth 

nothing that during the field hearing, the PHMSA witness described the tank car committee as 

"useful and important." 

The rail industry takes very seriously its responsibility to transport hazardous materials 

posing toxic inhalation hazards as safely as possible. That is the main reason why, when the 

safety of the rail network demands it, the tank car committee has promulgated standards 

associated with tank cars that are above and beyond federal standards. This has only 

happened following extensive consultations with all relevant stakeholders, including relevant 

government agencies and tank car owners. 

In August 2016, a group of tank car owners and others filed a petition with DOT 

regarding the tank car committee. At the November 16 field hearing, one witness 

mischaracterized this petition, arguing it "would allow for an open and transparent discussion 

on TCC reform." To clarify, the petition asks DOT to promulgate a rule prohibiting private 

parties from agreeing to voluntarily exceed regulatory requirements when it comes to 

enhanced hazardous materials safety measures. Railroads oppose the petition because it is 

contrary to PHMSA's safety mission and exceeds PHMSA's statutory authority. 

The development and implementation of standards for tank cars carrying TIH 

materials show the rail industry's commitment to working with shippers to enhance safety 

using the DOT regulatory process. Several years ago, the tank car committee promulgated 

rules designed to encourage the replacement, over time, of less safe TIH cars with new cars 

that had enhancements designed to limit releases during an accident. A key point of 

contention was how long the phase-out period should be for the older cars. Working with 

government officials, tank car builders, chemical firms, and others, interested parties agreed 

in early 2018 to a phase-out schedule. Contrary to the impression given by some at the field 

hearing, this was not a case of railroads unilaterally forcing their will on chemical firms. 

Rather, it was a collaborative process with the active participation of relevant government 

regulators at PHMSA and DOT, fully consistent with DOT regulations. 

The New Orleans field hearing also touched on DOT's definition of tank car facilities 

as it impacts the AAR tank car facility certification program. 

Federal regulations require that facilities engaged in the manufacture, repair, 

inspection, testing, qualification, and maintenance of rail tank cars used to transport hazardous 

materials must implement a quality assurance (QA) program that is approved by the AAR. 

The AAR has a robust audit program to confirm that tank car facilities have implemented the 

QA program as required by DOT. AAR's audits also address a tank car facility's ability to 

perform its technical functions in compliance with federal hazardous materials safety 

regulations and other standards. 

Recently, DOT clarified the scope of its tank car facility definition, which in turn 

dictates the scope of AAR' s delegated responsibilities regarding tank car quality assurance. 

This DOT clarification coincided with an AAR initiative to revise the process for tank car 

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technical audits. This audit procedure is addressed in the AAR Manual of Standards and 

Recommended Practices, Section C-III, M-1 002, Appendix B. The new version of Appendix 

B reflects DOT's guidance regarding which tank car facilities require AAR certification. 

At the field hearing, one witness erroneously claimed that the AAR's Tank Car 

Committee is "imposing new requirements that inappropriately expand the scope of regulation 

for routine functions performed at rail shipper facilities." Rather, the AAR works closely 

with DOT on the scope of AAR's tank car facility certification program, and the Appendix B 

revision reflects that coordination and DOT's guidance. More specifically, on September 4, 

2018, PHMSA issued Interpretation Letter 18-0029, which provides a formal confirmation of 

DOT's assessment of the scope of entities defined as tank car facilities. The revisions to 

Appendix B are fully consistent with that guidance. 

Conclusion 

The AAR appreciates the opportunity to provide the perspective of America's freight 

railroads on the important topics raised in this hearing. 

America's freight railroads are the envy of the world, delivering economic growth, 

supporting job creation, and providing crucial environmental benefits such as reduced 

highway gridlock and cleaner air. America's economy cannot function well without reliable, 

financially healthy freight railroads. Having financially healthy railroads, though, requires a 

regulatory system that relies as much as possible on the free market instead of heavy-handed 

government oversight. It is crucial that there be an appropriate regulatory balance between 

protecting rail customers against improper railroad behavior, on the one hand, and allowing 

railroads to use their assets and price their services in ways that will enable them to earn 

enough to pay for all the things a world-class rail network requires. 

Safety, though, is most important of all: nothing is more important to railroads than 

the safety of their employees, their customers, and the communities they serve. Railroads will 

continue to aggressively seek ways to enhance railroad safety, especially as it pertains to the 

transport of hazardous materials. Railroads believe that all participants in the hazmat 

logistical chain, working in conjunction with the appropriate government agencies, must 

accept responsibility to take a comprehensive, holistic approach to hazmat safety. 

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Testimony of: 

The American Chemistry Council 

The American Fuel & Petrochemical Manufacturers 

The American Petroleum Institute 

The Chlorine Institute 

The Fertilizer Institute 

The National Industrial Transportation League 

Before the 

United States Senate 

Committee on Small Business & Entrepreneurship 

Field Hearing on 

"How Small Businesses Benefit from Smart Shipping Regulation" 

Port of New Orleans 

November 16, 2018 

The American Chemistry Council (ACC), the American Fuel & Petrochemical Manufacturers 

(AFPM), the American Petroleum Institute (API), the Chlorine Institute (CI), The Fertilizer 

Institute (TFI), and the National Industrial Transportation League (NITL) are pleased to provide 

testimony for the Senate Small Business Committee's Field Hearing on "How Small Businesses 

Benefit from Smart Shipping Regulation." We thank Senator Kennedy and members of the 

Committee for holding this hearing and for your consideration of written testimony from 

impacted stakeholders. 

ACC, AFPM, API, CI, TFI, and NITL are national trade associations representing chemical and 

energy producers and agricultural input and production industries. 1 Our industries are among the 

largest freight rail shippers. Thousands of small businesses and farmers rely on the timely and 

economic delivery of essential goods such as fertilizer, petroleum products, chlorine and other 

chemicals produced by our member companies. We need smart policies to help ensure a strong, 

safe, and competitive rail network. 

The following testimony addresses a number of key challenges faced by our member companies 

and other freight rail shippers. The Committee has an important oversight role in looking at the 

impact of freight rail policies on small business. We look forward to working with you to address 

these challenges. 

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Tank Car Standards Must Be Established through DOT Rulemaking 

We are committed to the safe transportation of hazardous materials by rail. Our member 

companies lease, own, and maintain tens of thousands of rail tank cars in what constitutes the 

vast majority of rail tank cars in North America. We look to the Department of Transportation 

(DOT) to establish uniform national standards for hazmat transportation safety, including tank 

car requirements. 

);.. DOT should clarifY its sole authority to impose tank car requirements. 

While Congress has given rulemaking authority to the DOT to establish tank car standards, we 

are concerned that DOT has allowed the Association of American Railroads (AAR) to usurp this 

role. Railroads have acted unilaterally through the AAR's Tank Car Committee (TCC) to impose 

requirements on other stakeholders, even moving to prohibit the use of tank cars that meet all 

applicable DOT safety standards. These de facto regulatory requirements are adopted without 

cost-benefit analysis and without the due process assurances of a Federal rulemaking process. 

AAR's delegation of authority from DOT is premised on bringing together expertise from rail 

carriers, tank car builders, tank car lessors and tank car shippers. The appropriate role for the 

TCC is to review proposed changes to specifications and then make recommendations to DOT 

for consideration. Instead, AAR acts without a consensus ofTCC members to impose 

requirements on other industries. Such actions seriously undermine the ability of the TCC to 

continue its essential, collaborative work and call into question the legitimacy of the current 

TCC. 

The TCC is dominated by railroad interests. In fact, 13 of the 23 voting seats are held by 

individual railroads and their trade associations. According to the Committee's charter, no vote 

can even occur unless a railroad majority is present. This lack of balance has given the rail 

industry the ability to unilaterally impose tank car requirements over the objections of other 

affected stakeholders. This situation is even more troubling given the fact that railroads to not 

own a significant number of tank cars and therefore do not bear the costs associated with 

modifying the fleet. 

In August of 2016, a broad coalition of shipper organizations petitioned DOT to adopt clear rules 

protecting the Department's exclusive authority to set uniform national standards for the 

transportation of hazardous materials. The petition asks DOT to adopt new rules that explicitly 

prohibit any party from imposing tank car requirements that are different from DOT rules. The 

proposed changes would clarify what is already inherent in the law, that DOT has the sole 

authority to establish tank car standards. 

We urge DOT to respond to the rail shippers' petition and initiate a rulemaking that would allow 

for an open and transparent discussion on TCC reform. Rules for hazmat transportation, 

including uniform national tank car standards, should be developed through DOT rulemaking. 

The federal rulemaking process allows for a full consideration of relevant data and stakeholder 

perspectives to help ensure that new requirements are achievable, will provide meaningful safety 

improvements, and are in the public interest. 

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~ DOT should ensure that its requirements for tank car facility certification minimize 

unwarranted regulatory burdens. 

Under DOT's Hazardous Materials Regulations, maintenance, repair, and qualification of a 

DOT -specification tank car must be performed by a tank car facility with a quality assurance 

program approved by the AAR. To comply with this requirement, tank car facilities maintain 

AAR certification for specific tank car activities. 

DOT previously clarified that the definition of a "tank car facility" does not include a shipper 

facility where pre-trip inspections are performed. Specifically, a 1995 rulemaking states: 

Several commenters asked RSPA to clarifY whether or not a tank car facility includes a 

shipper's loading facility where items such as gaskets and manway bolts are normally 

inspected and replaced as part of a "pre-trip" inspection. It is not the intention of 

RSPA to include within the definition of a tank car facility a shipper'sfacility where 

pre-trip inspections are performed. Generally, a tank car facility evaluates the tank 

structure to ensure that, if serious fatigue, corrosion, or accidental damage occurs within 

the inspection and test interval, the remaining structure can withstand reasonable loads 

without failure or excessive structural deformation. A shipper, on the other hand, ensures 

by inspection that the tank is in proper condition for transportation from point of origin 

to destination. ... A shipper that inspects a tank car solely to ensure that the tank car is 

safe for transportation is not performing a periodic qualification function. On the other 

hand, a shipper who continues the qualification of a tank car, by performing a function 

described in Parts 179 or 180, meets the definition of a tank car facility. [60 Fed. Reg. 

49064] 

This language appropriately distinguishes between maintenance activities that must be performed 

by tank car facilities, and activities performed at a shipper facility as part of a pre-trip inspection. 

It clearly recognizes that pre-trip inspections can include the replacement of certain items, 

including, but not limited to, gaskets and manway bolts. 

The Federal Railroad Administration has recently stated its position that the replacement of lillY 

tank car component covered by the DOT's hazardous materials regulations, including a manway 

bolt, is a maintenance function and therefore must be performed by a certified tank car facility. 

This interpretation conflicts with the regulatory language on pre-trip inspections cited above. If 

adopted, it will impose significant new regulatory burdens on tank car shippers without 

providing any additional safety benefit. Shippers would need to send their tank cars to a certified 

repair shop more frequently, which could hold the tank cars for several months and result in 

service delays. These service delays have significant implications for our members and their 

customers. 

DOT should ensure that its regulatory interpretations remain consistent regarding pre-trip 

inspections. Clearly, pre-trip inspections can include the replacement ofmanway bolts. 

Similarly, other fasteners as well as secondary closures (e.g., plugs and caps) are also inspected 

and replaced as part of pre-trip inspections. These activities should not be considered tank car 

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maintenance and should not require facility certification. DOT should ensure that its regulatory 

interpretations on tank car maintenance minimize regulatory burdens without compromising the 

Department's highest priority of safety. 

~ DOT should complete work on key rules for TIH tank cars. 

Critically important products, including anhydrous ammonia fertilizer and chlorine, are classified 

as toxic inhalation hazard (TIH) materials and shipped in specially designed rail cars. In March 

of2009, DOT issued updated design requirements for all newly built TIH cars. These design 

specifications, known as HM-246, were designated as an "interim" standard in light of a wide 

range of ongoing tank car research projects sponsored both by DOT and industry. Since then, the 

results of that research have supported the HM-246 standard as the most feasible means to 

achieve increased safety and accident survivability for TIH tank cars. 

We are pleased that DOT recently issued a Final Rule (HM-219A) that extends the allowable 

service life of the "interim" TIH tank cars to the full service-life of all other tank cars. DOT 

previously limited the service life of these cars to 20 years. Extending the service life provides an 

economic incentive for further investment in tank cars with improved crashworthiness. 

DOT must now address other pending rulemakings on TIH tank cars. On December 16, 2016, 

ACC, CI and TFI joined with AAR and the Railway Supply Institute on a petition asking DOT to 

make the HM-246 tank car specifications a "final" standard. In addition, ACC, TFI, and CI 

joined with AAR to file comments asking DOT to establish a phase-out date of December 31, 

2027, for legacy TIH tank cars built prior to the HM-246 standards. Unlike an earlier deadline 

imposed unilaterally by the AAR's Tank Car Committee, the proposed December 31,2027, 

deadline is supported by all stakeholders. 

To provide greater certainty to all stakeholders, we strongly urge DOT to move forward as 

quickly as possible to complete these rules. 

We Need Smart Policies to Promote Freight Rail Competition and to Resolve Disputes 

between Railroads and Shippers 

Congress created the Surface Transportation Board (STB) to help foster a healthy and 

competitive freight rail system. Critical STB responsibilities include ensuring efficient rail 

service, reasonable rates, and when necessary, a timely and equitable way to resolve disputes 

between freight rail companies and shippers. Unfortunately, many of the Board's procedures are 

too slow, too burdensome and too unworkable to meet these responsibilities. 

More recently, Congress passed the STB Reauthorization Act of2015 with broad bipartisan 

support. This legislation provides the Board with additional tools and authority to address 

challenges of the modern freight rail system. Additional action is needed now by both Congress 

and the STB to achieve this vision. 

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);> The Senate should confirm pending STB nominations. 

The STB currently has three of its five seats vacant. Until these vacancies are filled, meaningful 

policy reforms remain on-hold. President Trump has nominated three well-qualified candidates 

to fill these critical positions. The nominees passed through their confirmation hearings with 

unanimous, bipartisan support. We urge the full Senate to move quickly to confirm these 

nominees and give us a fully staffed STB. 

);> The STB should adopt long-awaited reforms that reduce bureaucratic red tape and increase 

the efficiency and effectiveness of Board procedures. 

Once new Board members are confirmed, the STB should move forward as quickly as possible 

to address critically needed reforms. Existing Board procedures are overly-burdensome and fail 

to provide a meaningful path for a shipper that lacks transportation options to challenge an 

unreasonable rail rate or to request access to competitive rail service. 

Reciprocal Switching: Reciprocal switching, also known as competitive switching, 

would allow, under certain circumstances, a shipper that is served by a single major 

railroad to request to have its freight "switched" to another major railroad at a nearby 

interchange. Access to switching empowers rail customers to choose a freight rail carrier 

that provides the most competitive rates and best service. Such market-based competition 

can lead to innovation and increased efficiencies-just as it does throughout all sectors of 

the U.S. economy. Moreover, reciprocal switching has been utilized in Canada since 

1904 to the benefit of Canadian shippers and carriers. 

While Congress expressly authorized reciprocal switching as a tool to advance 

competitive rail markets, the STB's existing rules are so burdensome and unworkable, 

that no shipper has ever successfully gained access to switching. As stated by the Board 

itself, these rules have "effectively operated as a bar" rather than as "a standard under 

which [switching] could be granted." 

We urge STB to complete work on its 2016 proposal that provides a practical blueprint 

for shippers to request reciprocal switching. Adopting this policy will provide businesses 

with more shipping options and will support a strong and competitive freight rail system. 

Rate Review Procedures: STB Chairman Ann Begeman perfectly encapsulated shipper 

concerns when she stated that the Board's rate review process "is too costly, too time 

consuming, and too unpredictable." The heart of the problem is the Board's arcane StandAlone-Cost (SAC) rate standard. To successfully challenge a rate, a shipper must design, 

on paper, an entire railroad business, and prove that this make-believe railroad could 

serve the same traffic at a lower cost than the rates charged by the existing railroad. 

Because of the incredible complexity involved, SAC has been characterized as 'a full 

employment bill for economists.' Recent SAC cases for chemical shippers have taken an 

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average of 5 years to complete and cost each shipper well over $5 million. No chemical 

shipper has won a SAC case, even when challenged rates were nearly nine times as high 

as the railroad's cost for those shipments. 

We support the STB's ongoing efforts to streamline and improve its existing rate case 

procedures. However, the STB should prioritize efforts to develop alternatives to SAC 

that are more economically sound and not so inherently complex, costly and time 

consuming. We strongly urge the Board to consider an alternative rate review standard 

that would employ Competitive Rate Benchmarking. Under this approach, the STB 

would judge the reasonableness of rates using real world data on rates charged in 

competitive markets. 

Emergency Service Orders: Rail service is an ongoing challenge. Shippers need effective 

remedies, especially when a serious disruption in service threatens a facility's operations. 

Railroad service problems during the winter of2014-2015 and the more recent problems 

on CSX and other railroads highlight what is at stake. Numerous rail customer facilities 

were forced to cut production and even shut down operations. As a result, large and small 

businesses suffered millions of dollars in economic harm. 

The STB has the power to grant a shipper access to an alternative rail carrier during a 

service emergency. Unfortunately, despite these dire situations, no shipper has asked STB 

for relief. Many have simply concluded that the Board's regulations are unworkable. A 

months-long process is too long when a facility faces a production cut or an immediate 

shutdown. 

We urge the Board to establish a significantly expedited process to address immediate 

service emergencies. The primary focus would be to prioritize delivery of railcars needed 

to prevent a plant shutdown. The STB should also signal its willingness to award 

damages to shippers harmed by service failures that are within the railroad's reasonable 

control. This would provide greater weight to customer needs for railroads that face few, 

if any, consequences for their service failures. 

Again, we thank Senator Kennedy and members of the Committee for holding this important 

hearing. We look forward to continuing to work with you to find solutions that will improve the 

situation for rail shippers and their large and small business customers. 

1 ACC represents the leading companies engaged in the business of chemistry. ACC members apply the science of 

chemistry to make innovative products and services that make people's lives better, healthier and safer. ACC is 

committed to improved environmental, health and safety performance through Responsible Care®, and pursues 

safety enhancements through a risk-based framework for every aspect ofhazmat transportation. The business of 

chemistry is a $526 billion enterprise and a key element of the nation's economy. It is one of the nation's largest 

exporters, accounting for fifteen percent of all U.S. exports. 

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AFPM is a national trade association representing approximately 400 companies that comprise virtually all U.S. 

refining and petrochemical manufacturing capacity. AFPM's members supply consumers with a wide variety of 

products that are used daily in homes and businesses. They rely on a secure, uninterrupted, and plentiful supply of 

raw materials to produce products that are consumed both here and abroad. 

API is the only national trade association representing all facets of the natural gas and oil industry, which supports 

10.3 million U.S.jobs and nearly 8 percent of the U.S. economy. API's more than 600 members include large 

integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, 

and service and supply firms. They provide most of the nation's energy and are backed by a growing grassroots 

movement of more than 47 million Americans. 

Cl is a 190-member, not-for-profit trade association of chlor-alkali producers worldwide, as well as packagers, 

distributors, users, and suppliers. The Institute's North American Producer members account for more than 93 

percent of the total chlorine production capacity ofthe U.S., Canada, and Mexico. Chlorine and related chlor-alkali 

chemicals are used throughout the U.S. economy and are key to the protection of public health. Cl's long term 

transportation goal is to maintain the ability to transport chlorine and other mission chemicals in a safe and secure 

manner while seeking areas for cost justified risk-based safety enhancements. 

TFI represents the nation's fertilizer industry, which includes companies that are engaged in all aspects of the 

fertilizer supply chain. Fertilizer is a key ingredient in feeding a growing global population, which is expected to 

surpass 9.5 billion people by 2050. Half of all food grown around the world today is made possible through the use 

of fertilizer. The U.S. fertilizer industry generates more than $154 billion in economic benefit each year and 

provides approximately 89,000 direct jobs and 406,000 indirect jobs for a total of 495,000 U.S. jobs. TFI's full-time 

staff, based in Washington, D.C., serves its members through legislative, educational, technical, economic 

information and public communication programs. 

NITL is the nation's oldest association of shippers using all modes of transportation in both domestic and 

international commerce. Founded in 1907, the League is known as The Shipper's Voice. As an advocacy 

organization its mission is to advance the views of shippers on freight transportation issues and enhance their 

professional development. 

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