I
106TH CONGRESS
1ST SESSION
H. R. 3398
To ensure that a national railroad system is maintained or created which
is adequate to provide the transportation services needed for the United
States economy, and for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 16, 1999
Mr. NADLER introduced the following bill; which was referred to the
Committee on Transportation and Infrastructure
A BILL
To ensure that a national railroad system is maintained
or created which is adequate to provide the transpor-
tation services needed for the United States economy,
and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Surface Transpor-
tation Board Modernization Act’’.
SEC. 2. FINDINGS; PURPOSE.
(a) FINDINGS.—The Congress makes the following
findings:
(1) The goal of the body of Federal laws regu-
lating the provision of transportation services is, and
always has been, to foster an efficient and com-
prehensive national transportation system. Competi-
tion has historically been viewed by the Interstate
Commerce Commission and the Surface Transpor-
tation Board as a principal means of obtaining effi-
ciency.
(2) Before enactment of the Staggers Rail Act
of 1980, railroads were hindered by excessive regula-
tion. With that Act, the railway industry returned to
profitability and the financial community began to
re-invest in the industry.
(3) The Interstate Commerce Commission and
its successor agency, the Surface Transportation
Board, have long held that truck competition is an
adequate force to keep the rail industry under con-
trol and to substitute for lost rail service. However,
with any mode of transportation, competition from
another mode does not regulate the entire spectrum
of a carrier’s activities.
(4) Trucks provide intense competition to the
rail industry for a large majority of the Nation’s
freight traffic, particularly with respect to short-haul
and high-value traffic, because of access to a high-
way infrastructure that is consistently maintained
and modernized by the Federal and local govern-
ments. By contrast, no major effort has been made
to modernize the routes of the Nation’s railway sys-
tem so as to provide less circuitous routes than those
necessitated by the limitations of 19th century civil
engineering, thereby reducing the distance between
markets.
(5) In response to the presence of the trucking
industry, railway management has followed a policy
of reducing railway track mileage and car fleet size,
to focus on traffic sectors deemed sufficiently profit-
able by the financial markets to justify continued
capital investment.
(6) Almost all the main lines in the Nation are
now operated by only four major operators that
dominate vast areas of the Nation. They have all
abandoned vast stretches of track. Competition alone
is an inadequate method of attaining the goals of
the Nation’s railway system, since it does not ad-
dress the problems resulting from inadequate track
capacity.
(b) PURPOSE.—It is the purpose of this Act to ensure
that a national railway system is maintained that is ade-
quate to provide the transportation services needed by the
Nation’s economy in the 21st century. To serve this pur-
pose, this Act seeks to ensure that—
(1) the national railroad system serves all re-
gions on equitable terms and is fully adequate to
serve the national interest under all circumstances;
(2) the national railroad system is environ-
mentally efficient, maximizes the competitiveness of
the Nation’s economy in world markets, and allows
a reasonable distribution of freight traffic between
transportation modes based on their inherent effi-
ciency; and
(3) these purposes are achieved by the industry
with as little oversight or regulation as possible, but,
where oversight is required, that the Surface Trans-
portation Board have and exercise jurisdiction.
SEC. 3. AUTHORIZATION OF APPROPRIATIONS.
Section 705 of title 49, United States Code, is
amended by striking paragraphs (1) through (3) and in-
serting the following:
‘‘(1) $17,000,000 for fiscal year 2000;
‘‘(2) $23,000,000 for fiscal year 2001; and
‘‘(3) $28,000,000 for fiscal year 2002.’’.
SEC. 4. SCOPE OF AUTHORITY.
Section 11321 of title 49, United States Code, is
amended—
(1) in subsection (a), by striking ‘‘all other law’’
and all that follows through ‘‘acquired through the
transaction’’ and inserting ‘‘State and local laws to
the extent they regulate combinations, mergers, and
acquisitions of control of rail carriers, as necessary
to let that rail carrier, corporation, or person carry
out the transaction’’; and
(2) by adding at the end the following new sub-
section:
‘‘(c) After a transaction approved or exempted by the
Board under this subchapter (or by the Interstate Com-
merce Commission under this subchapter or any prede-
cessor statute) is completed, the activities of a rail carrier
participating in or resulting from such transaction shall
be subject to State and Federal law to the same extent
as those of any other similarly situated rail carrier that
has not participated in or resulted from such a trans-
action. Completion of a transaction for purposes of this
section shall be deemed to occur when the acquiring rail
carrier assumes responsibility for the property trans-
ferred.’’.
SEC. 5. CIRCUITOUS ROUTING.
Section 10741 of title 49, United States Code, is
amended by adding at the end the following new sub-
section:
‘‘(d) Notwithstanding subsection (b), a rail carrier
providing transportation or service subject to the jurisdic-
tion of the Board under this part may not offer terms
and conditions of carriage which discriminate against the
most direct routing of traffic between points and impose
circuitous routing of traffic (as defined in section
11324(c)(4)).’’.
SEC. 6. CONDITIONS OF APPROVAL.
(a) AMENDMENT.—Section 11324(c) of title 49,
United States Code, is amended to read as follows:
‘‘(c)(1) The Board shall approve and authorize a
transaction under this section when it finds the trans-
action is consistent with the public interest. The Board
may impose conditions governing the transaction. The
Board shall impose such conditions as are feasible, con-
sistent with the public interest, to promote the goal of pro-
viding the Nation, and each major population center, with
comprehensive, competitive rail freight services, to the ex-
tent that the imposition of such conditions does not sub-
stantially impair the viability of a rail carrier. When the
transaction contemplates a guaranty or assumption of
payment of dividends or of fixed charges or other actions
that will result in an increase of total fixed charges, the
Board may approve and authorize the transaction only if
it finds that the guaranty, assumption, or increase is con-
sistent with the public interest. In imposing conditions
under this subsection, the Board shall consider the impact
of those conditions on local communities, and shall con-
sider the public interest in the enforcement of Federal,
State, and local safety and environmental laws. Conditions
imposed by the Board under this subsection may
include—
‘‘(A) transfers of tracks or trackage rights, or
requirements of access to facilities;
‘‘(B) the inclusion of rail carriers, or the trans-
fer or inclusion of assets, not a subject of the origi-
nal application, to the extent consistent with the
public interest, after due notice to the owners of
such nonapplicant rail carriers or assets and after
hearing;
‘‘(C) provision, wherever practicable, for com-
petitive rail services between major market centers
to ensure that such services are available to the
greatest extent possible within all areas of all major
markets, and that the capacity and redundancy of
the Nation’s railway system is preserved and en-
hanced, with parallel lines between major markets,
to the extent practicable, not operated by the same
rail carrier;
‘‘(D) elimination of rail monopolies in major
markets, or parts thereof, to the extent practicable,
considering the physical assets available within the
market area; and
‘‘(E) wherever practicable, provisions to avoid
inefficient or circuitous routing of traffic, with serv-
ice of major population centers by connecting high-
way services from remote locations, requiring truck
haulage through urban areas, permitted only where
such haulage cannot be practically eliminated or re-
duced, and only if conditioned upon modifications to
be made, or to be made within a reasonable time,
that will minimize highway carriage and the adverse
environmental effects thereof.
‘‘(2) The Board shall ensure that fair compensation
is paid for all property transferred under a transaction
approved and authorized under this section, and that all
assets transferred are preserved for a period adequate to
ensure that any associated operating plan is successful
and can be modified to ensure that service to the public
is not jeopardized.
‘‘(3) The Board shall review operations resulting
from a transaction approved and authorized under this
section at 6-month intervals to ensure that the public in-
terest is being served. The Board may modify or revoke
a transaction, on terms that are just and reasonable, if
the public interest so requires.
‘‘(4) For purposes of this subsection, the term ‘circui-
tous routing’ means the routing of rail traffic in a manner,
through closing of interchanges, discriminatory pricing, or
otherwise, that adds 25 percent or more to the mileage
traveled for any carriage over 400 miles, or that adds 1
full day to any carriage time.
‘‘(5) Judicial review of any determination by the
Board under this section shall include review of the issues
by the court de novo.’’.
(b) EFFECTIVE DATE.—The amendment made by
subsection (a) shall apply to all transactions before the
Surface Transportation Board as of January 1, 1998, and
thereafter, including transactions over which the Board
had retained jurisdiction as of that date.
SEC. 7. PRESERVATION AND RESTORATION OF SERVICE.
(a) RAILROAD DEVELOPMENT.—Section 10907 of
title 49, United States Code, is amended—
(1) by amending subsection (a) to read as fol-
lows:
‘‘(a) In this section—
‘‘(1) the term ‘eligible applicant’ means a per-
son or a governmental authority or representative
group who, or which, is able to assure that adequate
transportation will be provided over such line for a
period of not less than 3 years; and
‘‘(2) the term ‘railroad line’ includes a line,
right-of-way, track, terminal, or other facility,
whether or not currently operational.’’;
(2) in subsection (b)(1)—
(A) by inserting ‘‘, pursuant to application
by an eligible applicant or on its own initia-
tive,’’ after ‘‘When the Board’’;
(B) by striking subparagraph (B);
(C) in subparagraph (A)—
(i) by striking ‘‘(i)’’;
(ii) by inserting ‘‘, including a pre-
viously abandoned railroad line,’’ after
‘‘particular railroad line’’;
(iii) by striking ‘‘(ii)’’ and inserting
‘‘(B)’’; and
(iv) by striking ‘‘; and’’ at the end
and inserting a comma; and
(D) by striking ‘‘to sell such line to such
financially responsible person at a price not less
than the constitutional minimum value’’ and in-
serting ‘‘to restore service or facilities on the
line or to transfer such line to an eligible appli-
cant, a person designated by an eligible appli-
cant, or a person designated by the Board. A
person to whom a railroad line is required to be
transferred under this subsection shall be a per-
son who can most effectively provide rail service
to shippers which are or could be served by the
railroad line. Transfers required under this sub-
section shall be made for not less than the con-
stitutional minimum value’’;
(3) in subsection (c)—
(A) by striking ‘‘to shippers who transport
traffic over such line’’ in paragraph (1)(A);
(B) by striking ‘‘for the majority of ship-
pers who transport traffic over such line’’ in
paragraph (1)(B) and inserting ‘‘to serve the
public interest’’;
(C) by striking ‘‘a significantly adverse fi-
nancial effect on the rail carrier operating such
line;’’ in paragraph (1)(C) and inserting ‘‘an
adverse impact on the public interest; and’’;
(D) by striking paragraph (1)(D);
(E) by redesignating subparagraph (E) of
paragraph (1) as subparagraph (D);
(F) in paragraph (1)(D), as so redesig-
nated by subparagraph (E) of this paragraph,
by striking ‘‘for shippers that transport traffic
over such line’’; and
(G) in paragraph (2), by striking ‘‘the per-
son filing the application’’ and inserting ‘‘a per-
son filing an application’’; and
(4) in subsection (g)(1)—
(A) by striking ‘‘Any person’’ and inserting
‘‘Any Class II or Class III rail carrier’’; and
(B) by inserting ‘‘or of subsections (a) and
(c) of this section’’ after ‘‘107 of this title’’.
(b) SITUATIONS REQUIRING IMMEDIATE ACTION TO
SERVE THE PUBLIC.—Section 11123 of title 49, United
States Code, is amended—
(1) in subsection (a), by inserting ‘‘, on its own
initiative or pursuant to complaint by a govern-
mental authority or other person,’’ after ‘‘When the
Board’’;
(2) in subsection (a), by striking ‘‘creates an
emergency situation of such magnitude as to have’’
and inserting ‘‘has’’; and
(3) in subsection (c)(1), by striking ‘‘transpor-
tation emergency’’ and inserting ‘‘situation’’.
SEC. 8. SALE OF CERTAIN CONNECTING RAILROAD LINES.
(a) AMENDMENT.—Chapter 109 of title 49, United
States Code, is amended by adding at the end the fol-
lowing new section:
‘‘§ 10908. Sale of certain connecting railroad lines
‘‘(a) Whenever a railroad line owned by a Class I or
Class II railroad carrier that connects with one or more
railroad lines owned or operated by Class III railroad car-
riers is offered for sale, the Class I or II carrier shall no-
tify the Board within 10 days after such offer.
Whenever—
‘‘(1) the Board is notified of such an offer for
sale; or
‘‘(2) such a line is the subject of an effort by
the Board under section 10907 to find a designated
operator therefor,
the owners and operators of such connecting Class III rail-
road lines shall be notified by the Board. Such owners and
operators may, within 30 days after such notice, file with
the offering Class I or Class II railroad carrier or with
the Board a written notice of intention to bid on the pur-
chase of the railroad line. Such a filing shall entitle the
filer to a right of first refusal to match any offer to pur-
chase the railroad line, subject to this section.
‘‘(b) If more than one person files a notice of inten-
tion to bid under subsection (a) and seeks to exercise the
right of first refusal, the Board shall select the purchaser,
giving preference to a bid representing—
‘‘(1) a greater number of connecting Class III
railroad lines; or
‘‘(2) a greater amount of traffic using the line
to be transferred, averaged over the preceding 3
years,
whichever the Board determines will better represent the
interests of all of the connecting Class III railroad carriers
and their shippers. The Board may deny a person filing
under subsection (a) the right of first refusal if the Board
finds that the public convenience and necessity do not per-
mit the purchase of the railroad line by that person.
‘‘(c) If no person exercises a right of first refusal
under this section on a bid, the Board shall impose condi-
tions on the sale of the railroad line to protect service
needed in the region that is provided by the connecting
Class III railroad carriers, including conditions that elimi-
nate any restrictions on the routing or interchange of traf-
fic proposed or required by the selling rail carrier.
‘‘(d) If a notice of intention to bid has been filed
under subsection (a) with respect thereto, the Board shall
not approve any sale of a railroad line to a party not filing
such a notice if the sale would impose a capital cost on
the purchaser which cannot be supported by the traffic
on the line or by any increase in such traffic as may rea-
sonably be expected.’’.
(b) TABLE OF SECTIONS.—The table of sections of
chapter 109 of title 49, United States Code, is amended
by adding at the end the following new item:
‘‘10908. Sale of certain connecting railroad lines.’’.
SEC. 9. RAILROAD IMPROVEMENT PROPERTY TAX STA-
BILIZATION.
Section 11501 of title 49, United States Code, is
amended—
(1) by striking ‘‘commercial and’’ each place it
appears;
(2) in subsection (a)(4), by striking ‘‘a commer-
cial or’’ and inserting ‘‘an’’; and
(3) by adding after subsection (b)(4) the fol-
lowing new paragraph:
‘‘(5) Increase an assessment on rail transpor-
tation property on the basis of improvements di-
rectly related to the provision of railroad transpor-
tation.’’.
SEC. 10. PROVISION OF RATES ON REQUEST.
Section 11101(b) of title 49, United States Code, is
amended by inserting ‘‘for a movement between any 2
points on its system or for an entire movement between
a point on its system and any other point, according to
the request made’’ after ‘‘other service terms’’ in the first
sentence.
SEC. 11. DISCRIMINATORY RATES.
Section 10701 of title 49, United States Code, is
amended—
(1) in subsection (b) by inserting ‘‘A rate dis-
criminates unreasonably against a connecting line
for purposes of this subsection if the rate is designed
to divert traffic from or to that connecting line to
a less direct route or if it excludes traffic from or
to that connecting line.’’ after ‘‘specifically by the
shipper.’’; and
(2) by adding at the end the following new sub-
section:
‘‘(e) A rail carrier may not establish a rate which dis-
criminates against the interchange of traffic as between
carriers on any basis except actual cost based on mileage
traveled and services rendered.’’.
SEC. 12. USE OF TERMINAL FACILITIES.
Section 11102 of title 49, United States Code, is
amended—
(1) in subsection (a)—
(A) by striking ‘‘may require’’ and insert-
ing ‘‘shall require’’;
(B) by striking ‘‘in the public interest’’
and inserting ‘‘to enable that other rail carrier
to provide more efficient or lower cost railroad
transportation service’’;
(C) by inserting after ‘‘handle its own
business’’ the following: ‘‘and to maintain serv-
ice for shippers. A rail carrier requesting the
Board to order another rail carrier to allow it
to use terminal facilities or trackage rights
under this subsection shall not be required to
show anticompetitive activities on the part of
the owner of the terminal facilities’’; and
(D) by striking ‘‘, the Board may estab-
lish’’ and all that follows through ‘‘condemna-
tion proceedings’’ and inserting ‘‘on such condi-
tions and compensation within 30 days after an
order of the Board under this subsection, the
Board shall establish conditions and compensa-
tion for the use of the facilities. Compensation
established by the Board under this subsection
shall be based on usage of the facilities and
sharing of the total costs incurred, with provi-
sion for a reasonable profit for the owning rail
carrier above expenses and investment (with in-
vestment in facilities acquired through mergers
and acquisitions calculated on the basis of book
value). The Board shall not require the use by
a Class I rail carrier of facilities owned by a
Class II or III rail carrier under this subsection
unless the owning carrier is not serving or per-
mitting service for, and is unable or unwilling
to serve or permit service for, a customer or
customers through such facilities’’; and
(2) in subsection (c)(1)—
(A) by striking ‘‘may require’’ and insert-
ing ‘‘shall require’’;
(B) by inserting ‘‘if such agreements will
not substantially impair the ability of the rail
carrier providing the switching service to handle
its own business. A rail carrier requesting the
Board to order another rail carrier to enter into
reciprocal switching agreements under this sub-
section shall not be required to show anti-
competitive activities on the part of the other
railroad carrier’’ after ‘‘competitive rail serv-
ice’’; and
(C) by striking ‘‘, but, if the’’ and all that
follows through the period at the end and in-
serting ‘‘. If the carriers fail to agree on such
conditions and compensation within 30 days
after an order of the Board under this sub-
section, the Board shall establish such condi-
tions and compensation. Compensation estab-
lished by the Board under this subsection shall
be based on the operating and roadway mainte-
nance expenses incurred, with provision for a
reasonable profit for the switching rail carrier
above expenses and investment in the facilities
used in performing the switching (with invest-
ment in facilities acquired through mergers and
acquisitions calculated on the basis of book
value).’’.
SEC. 13. SIDE TRACKS.
Section 10906 of title 49, United States Code, and
the item relating thereto in the table of sections of chapter
109 of that title, are repealed.
SEC. 14. FEES.
Section 721 of title 49, United States Code, is
amended by adding at the end the following new sub-
section:
‘‘(f) LIMITATION ON FEES.—The Board shall not
charge a fee for the filing of a complaint, protest, or other
request for relief in an amount greater than fees charged
by Federal district courts for comparable filings.’’.
SEC. 15. EMPLOYEE PROTECTION.
Section 11326(a) of title 49, United States Code, is
amended to read as follows:
‘‘(a) Except as otherwise provided in this section,
when approval is sought for a transaction under sections
11324 and 11325 of this title, the Board shall require the
rail carrier to provide a fair arrangement at least as pro-
tective of the interests of employees who are affected by
the transaction as the terms imposed under section 11347
of this title as in effect before December 29, 1995. The
arrangement and the order approving the transaction
must require that—
‘‘(1) the employees of the affected rail carrier
will not be in a worse position related to their em-
ployment as a result of the transaction during the
6 years following the date on which the employee is
affected by the action taken by the affected rail car-
rier as a result of the transaction (or if an employee
was employed for a lesser period of time by the rail
carrier before the transaction became final, for that
lesser period); and
‘‘(2) the rail carrier and the authorized rep-
resentatives of the rail carrier’s employees shall ne-
gotiate under the Railway Labor Act any arrange-
ment regarding the selection of forces or assignment
of employees caused by the Board’s order of ap-
proval under section 11324 or 11325.
Notwithstanding paragraph (2), arbitration of a proposed
arrangement may occur only if both parties agree to that
process. The Board shall not, under any circumstances,
have the authority under this title to break, modify, alter,
override, or abrogate, in whole or in part, any provision
in any collective bargaining agreement or implementing
agreement made between a rail carrier and the authorized
representatives of its employees under the Railway Labor
Act, or to provide such authority to any other person.’’.
SEC. 16. MARKET DOMINANCE.
Section 10707(d)(1)(A) of title 49, United States
Code, is amended by adding at the end the following: ‘‘The
Board shall not consider evidence of product or geographic
competition in making a market dominance determination
under this section.’’.
SEC. 17. ADVISORY COMMITTEE.
(a) ESTABLISHMENT.—There shall be established a
Federal Railroad Advisory Committee (in this section re-
ferred to as the ‘‘Committee’’) to make recommendations
to the Congress and the President on the issues described
in subsection (c).
(b) MEMBERSHIP.—The Committee shall consist of
15 members, each of whom shall be an individual from
industry, the professions, labor, or academia who has
knowledge of the transportation industry. The President
shall appoint 9 members including 1 representative of rail-
road employees and 1 each with special expertise in—
(1) port operation and design;
(2) rail operations;
(3) electrification;
(4) coal and bulk movement;
(5) agricultural movement;
(6) hazardous materials movement;
(7) passenger operations; and
(8) intermodal operations.
The Speaker of the House of Representatives shall appoint
2 members, the Majority Leader of the Senate shall ap-
point 2 members, the Minority Leader of the House of
Representatives shall appoint 1 member, and the Minority
Leader of the Senate shall appoint 1 member.
(c) FUNCTIONS.—The Committee shall investigate,
analyze, and make recommendations on the condition and
capacity of the present physical plant of the Nation’s rail-
way system and the adequacy of that plant to meet the
needs of the 21st century. The Committee shall make spe-
cific recommendations concerning needed legislation or
regulatory authority and national investment to—
(1) preserve or increase the capacity of the rail-
way system to provide environmentally sound, com-
prehensive, cost-effective transportation services
throughout the Nation;
(2) modernize the railway system to eliminate
circuitry, inadequate bridges, avoidable curvature,
grade crossings, and heavy grades, and to allocate
the costs of such improvements equitably, in propor-
tion to the benefit afforded and the origin of the
need to incur the cost, as between the railway indus-
try and any other benefited class or industry, includ-
ing the general public;
(3) provide for sufficient redundancy to reduce
regional dependence on single railroad carriers or
lines for access to the national system and to render
the national system less vulnerable to disruption by
natural or manmade disasters and incidents;
(4) provide, maintain, and manage the equip-
ment and labor pool required to handle the projected
needs of commerce, agriculture, and defense;
(5) electrify and maintain electrification on
principal high-capacity rail routes and all trunk lines
in urban areas while preserving load capacity and
clearances suitable to double stack and other effi-
cient, high-volume freight and passenger carrying
equipment;
(6) provide connectivity between the highway,
air, maritime, and railway systems in such manner
as to maximize financial and environmental effi-
ciency;
(7) correct present railroad merger policy or
patterns to restore or preserve effective competition
and to serve the public convenience and necessity;
(8) maintain or increase needed rail freight
services while facilitating expansion of and mod-
ernization of rail passenger services; and
(9) connect the Alaskan Railroad to the conti-
nental rail system, if the Committee considers such
connection advisable.
With respect to the issues described in each of paragraphs
(1) through (9), the Committee shall assess present condi-
tions, the cost of modifications, the expected financial ben-
efits to the rail or other industry, the financial and envi-
ronmental benefits, and the benefits to the public of im-
proved connectivity, more balanced development, reduced
energy consumption, better regional equity, and improved
global competitiveness. The Committee shall also review
the ability and the will of the current owners of the railway
infrastructure to carry forward a program of improve-
ments determined by the Committee to be necessary, and
shall recommend programs needed to encourage or compel
needed action, without unduly burdening the resources of
private companies, to provide public benefits. The Com-
mittee shall recommend financial programs and devices to
facilitate the early achievement of national goals.
(d) INFORMATION.—
(1) PROTECTION.—The rules relating to the
disclosure of information applicable under section
1114 of title 49, United States Code, shall apply to
any information provided to the Committee.
(2) AVAILABILITY.—The Committee shall be
provided with access to any information maintained
by an agency of the Federal Government, as the
Committee considers necessary to carry out its func-
tions under this section.
(e) ADMINISTRATIVE SUPPORT.—The Secretary of
Transportation shall provide necessary administrative sup-
port to enable the Committee to carry out its functions
under this section.
(f) REPORT.—Not later than 2 years after the date
of the enactment of this Act, the Committee shall transmit
to the President and the Congress a final report con-
taining the recommendations required under subsection
(c).
(g) AUTHORIZATION
OF APPROPRIATIONS.—There
are authorized to be appropriated to the Secretary of
Transportation $4,000,000 for carrying out this section.
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