[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE 35TH ANNIVERSARY OF THE STAGGERS
RAIL ACT: RAILROAD DEREGULATION PAST,
PRESENT, AND FUTURE
=======================================================================
(114-16)
HEARING
BEFORE THE
SUBCOMMITTEE ON
RAILROADS, PIPELINES, AND
HAZARDOUS MATERIALS
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
MAY 13, 2015
__________
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COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
BILL SHUSTER, Pennsylvania, Chairman
DON YOUNG, Alaska PETER A. DeFAZIO, Oregon
JOHN J. DUNCAN, Jr., Tennessee, ELEANOR HOLMES NORTON, District of
Vice Chair Columbia
JOHN L. MICA, Florida JERROLD NADLER, New York
FRANK A. LoBIONDO, New Jersey CORRINE BROWN, Florida
SAM GRAVES, Missouri EDDIE BERNICE JOHNSON, Texas
CANDICE S. MILLER, Michigan ELIJAH E. CUMMINGS, Maryland
DUNCAN HUNTER, California RICK LARSEN, Washington
ERIC A. ``RICK'' CRAWFORD, Arkansas MICHAEL E. CAPUANO, Massachusetts
LOU BARLETTA, Pennsylvania GRACE F. NAPOLITANO, California
BLAKE FARENTHOLD, Texas DANIEL LIPINSKI, Illinois
BOB GIBBS, Ohio STEVE COHEN, Tennessee
RICHARD L. HANNA, New York ALBIO SIRES, New Jersey
DANIEL WEBSTER, Florida DONNA F. EDWARDS, Maryland
JEFF DENHAM, California JOHN GARAMENDI, California
REID J. RIBBLE, Wisconsin ANDRE CARSON, Indiana
THOMAS MASSIE, Kentucky JANICE HAHN, California
TOM RICE, South Carolina RICHARD M. NOLAN, Minnesota
MARK MEADOWS, North Carolina ANN KIRKPATRICK, Arizona
SCOTT PERRY, Pennsylvania DINA TITUS, Nevada
RODNEY DAVIS, Illinois SEAN PATRICK MALONEY, New York
MARK SANFORD, South Carolina ELIZABETH H. ESTY, Connecticut
ROB WOODALL, Georgia LOIS FRANKEL, Florida
TODD ROKITA, Indiana CHERI BUSTOS, Illinois
JOHN KATKO, New York JARED HUFFMAN, California
BRIAN BABIN, Texas JULIA BROWNLEY, California
CRESENT HARDY, Nevada
RYAN A. COSTELLO, Pennsylvania
GARRET GRAVES, Louisiana
MIMI WALTERS, California
BARBARA COMSTOCK, Virginia
CARLOS CURBELO, Florida
DAVID ROUZER, North Carolina
LEE M. ZELDIN, New York
(ii)
Subcommittee on Railroads, Pipelines, and Hazardous Materials
JEFF DENHAM, California, Chairman
JOHN J. DUNCAN, Jr., Tennessee MICHAEL E. CAPUANO, Massachusetts
JOHN L. MICA, Florida CORRINE BROWN, Florida
SAM GRAVES, Missouri DANIEL LIPINSKI, Illinois
CANDICE S. MILLER, Michigan JERROLD NADLER, New York
LOU BARLETTA, Pennsylvania ELIJAH E. CUMMINGS, Maryland
BLAKE FARENTHOLD, Texas RICK LARSEN, Washington
RICHARD L. HANNA, New York STEVE COHEN, Tennessee
DANIEL WEBSTER, Florida ALBIO SIRES, New Jersey
TOM RICE, South Carolina RICHARD M. NOLAN, Minnesota
SCOTT PERRY, Pennsylvania ELIZABETH H. ESTY, Connecticut
TODD ROKITA, Indiana GRACE F. NAPOLITANO, California
JOHN KATKO, New York JANICE HAHN, California
BRIAN BABIN, Texas PETER A. DeFAZIO, Oregon (Ex
CRESENT HARDY, Nevada Officio)
MIMI WALTERS, California
LEE M. ZELDIN, New York
BILL SHUSTER, Pennsylvania (Ex
Officio)
(iii)
CONTENTS
Page
Summary of Subject Matter........................................ vi
WITNESSES
Hon. Deb Miller, Acting Chairwoman, Surface Transportation Board:
Testimony.................................................... 4
Prepared statement........................................... 48
Responses to majority-side questions for the record.......... 64
Hon. Calvin Dooley, President and Chief Executive Officer,
American Chemistry Council:
Testimony.................................................... 4
Prepared statement........................................... 68
Responses to majority-side questions for the record.......... 77
Edward R. Hamberger, President and Chief Executive Officer,
Association of American Railroads:
Testimony.................................................... 4
Prepared statement........................................... 82
Linda Bauer Darr, President, American Short Line and Regional
Railroad Association:
Testimony.................................................... 4
Prepared statement........................................... 107
John W. Mayo, Professor of Economics, Business, and Public
Policy, McDonough School of Business, Georgetown University:
Testimony.................................................... 4
Prepared statement........................................... 113
PREPARED STATEMENTS SUBMITTED BY MEMBERS OF CONGRESS
Hon. Peter A. DeFazio of Oregon.................................. 43
SUBMISSIONS FOR THE RECORD
Edward R. Hamberger, President and Chief Executive Officer,
Association of American Railroads, submission of the following:
Letter of March 14, 2014, from Chairman Bill Shuster and
Ranking Member Nick J. Rahall II, Committee on
Transportation and Infrastructure, and Chairman Jeff Denham
and Ranking Member Corrine Brown, Subcommittee on
Railroads, Pipelines, and Hazardous Materials, to Chairman
Daniel R. Elliot III and Vice Chairman Ann D. Begeman,
Surface Transportation Board............................... 10
Charts: Average U.S. Freight Rail Rates for Commodities and
Chemicals.................................................. 28
Chart: Freight Railroad Spending on Infrastructure and
Equipment Since 1980....................................... 40
ADDITIONS TO THE RECORD
Letter of May 13, 2015, from Ginny Sinkel Kremer, Esq., Blatman
Bobrowski Mead and Talerman, LLC, to Chairman Bill Shuster,
Committee on Transportation and Infrastructure................. 116
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
THE 35TH ANNIVERSARY OF THE STAGGERS RAIL ACT: RAILROAD DEREGULATION
PAST, PRESENT, AND FUTURE
----------
WEDNESDAY, MAY 13, 2015
House of Representatives,
Subcommittee on Railroads, Pipelines, and
Hazardous Materials,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 10:25 a.m., in
room 2167, Rayburn House Office Building, Hon. Jeff Denham
(Chairman of the subcommittee) presiding.
Mr. Denham. The subcommittee will come to order.
This morning's hearing is on the 35th anniversary of the
Staggers Rail Act. But before we get started with the hearing
itself, I think that it is important to let the American public
know that it is with a heavy heart we are given the notice of
this tragic accident in Philadelphia. Last night, we saw
something horrific that was unimaginable, that we would never
expect to see on our passenger rail. So, this morning, myself,
Ranking Member Capuano, the chairman, and ranking member would
each like to make a statement.
First of all, I want to commend the first responders and
the fellow travelers that helped out those that were injured in
this accident. We have now seen the Federal officials, both
from the National Transportation Safety Board and the Federal
Railroad Administration, respond quickly. I think the American
public is looking for answers on how this can happen, and we
have held several hearings now on rail safety, and that will be
the question that this committee continues to follow up on and
ask, as well.
Again, we express our condolences to the loved ones who
have lost or have someone missing or injured in this accident.
I now turn it over to the ranking member, Mike Capuano.
Mr. Capuano. Thank you, Mr. Chairman.
I want to join you in everything you just stated, and I
would also just like to just offer my prayers and, I guess on
behalf of everyone, to be perfectly honest, to offer the
prayers for those who are still in the hospital or suffering.
May God bring them a speedy recovery and bring them back to
health as quickly as possible.
Thank you, Mr. Chairman.
Mr. Denham. The full committee chairman, Mr. Shuster.
Mr. Shuster. Thank you, Chairman Denham.
Obviously, it is a horrific accident, as the chairman said,
something that, you know, we haven't seen in some time.
The National Transportation Safety Board is obviously up
there looking at it. We certainly don't know why. I have heard
some politicians already come out and say, ``If we would have
spent more money.'' Maybe that is the case, but it is
something, I think, we really need to take a serious look at
that and, first of all, figure out what happened up there.
The Northeast Corridor is extremely important to the
Nation. That is why Chairman Denham and myself worked hard with
Ranking Member Capuano and DeFazio to put out a passenger rail
reform bill focusing really on the Northeast Corridor, making
sure those profits for the Northeast Corridor get put back into
the Northeast Corridor.
So, again, it is waiting for some action in the Senate. We
hope that they will take a serious look at it and especially
with this accident, because hundreds of millions of people ride
the Northeast Corridor, not just Amtrak but all those daily
commuters from SEPTA, to New Jersey, Massachusetts,
Connecticut, and all the way up that corridor. So it is
critical we find out exactly what happened up there and make
sure that we take the appropriate response to make sure it
doesn't happen again.
And, with that, I yield back.
Mr. Denham. With that, we will start with our panel
members. Let me just first start with opening statements on the
hearing this morning.
Railroads have played an important and integral role in
this country since railroading came onto the transportation
scene in the early 1800s. In fact, most American cities and
towns, especially in the Midwest and West, were founded along
the railroads.
Today, they are the backbone of the Nation's freight
system, transporting 40 percent of all freight volume--more
than any other mode. They transport 30 million carloads of
freight every year, ranging from coal to agriculture products
to intermodal shipments. In fact, our freight rail system is
the envy of the world. And countries--as we travel around, we
hear most often that other countries are envious and look to
emulate our rail system in their countries.
However, it was not long ago when America's freight rail
system was in complete disarray. By the 1970s, battered by
competition from trucking and airlines and hampered by
burdensome regulations, railroads were dying a slow death.
Their infrastructure was falling apart. Customers were not
getting efficient service. Railroad bankruptcies were an all-
too-common occurrence.
Congress tried several acts to fix the system, even going
as far as getting into the business of creating railroads, yet
nothing seemed to work. It wasn't until the Staggers Act that
Congress was able to find the mix of policies to get the system
working again. First, it allowed railroads to act more like
true businesses, by allowing them to charge market-driven rates
rather than ones handed down from Washington bureaucrats.
Second, the act allowed railroads to right-size their networks
by focusing on rail lines that made economic sense. And,
finally, it encouraged the creation of the short line railroads
to serve those regional markets that the larger Class I
railroads could not do economically. Thirty-five years later,
we can see the benefits of these changes in the strong rail
system that we have today.
However, while we have had great success with the Staggers
Act, we need to make sure that the regulatory system still
works well. The service issues the railroads had last winter
was a good reminder of this and of the important role of the
STB, the Surface Transportation Board, and the role that they
play with rail and with our customers.
So today we are going to hear from the STB, the railroads,
and others about the importance of the Staggers Act reforms. I
also look forward to hearing the future of how best railroads
can serve America.
In closing, I look forward to the hearing and would now
like to recognize Mr. Capuano for any opening statement he may
have.
Mr. Capuano. Thank you, Mr. Chairman. I will keep mine
brief.
Basically, the Staggers Act, as we all know, was a great
act. It was really an improvement and an advancement in the
rail industry. Yet, with all good acts, they require and demand
and deserve continuous monitoring and attention and updating
and amendments if and when they are necessary.
And, to me, that is what I am hoping to find out from this
hearing. Is it working as we hoped? Are there any improvements,
are there any tweaks we can make to it? Should we completely
leave it alone? Should we roll it back? I mean, not that I
would agree with any of those statements, but I want to hear
other people's opinions.
And, with that, I will simply yield back. Thank you, Mr.
Chairman.
Mr. Denham. Thank you.
And the chairman of the full committee, Mr. Shuster.
Mr. Shuster. Well, I want to thank Chairman Denham and
Ranking Member Capuano for holding this hearing today.
It has been one of the committee's priorities to look at
the movement of freight across this country, whether it is by
rail, whether it is by highway, by water. So, again, we look
forward to, whether we passed WRRDA last year or the surface
transportation bill or the FAA reauthorization, making sure we
are doing the right things to strengthen all the modes of
transportation.
The Department of Transportation is projecting that freight
volumes will increase significantly over the next few decades,
and we need to prepare for that growth, again, through all the
modes.
As Chairman Denham noted, the railroads have played a
critical role in moving large quantities of freight long
distances. So we need to make sure that we are doing the right
things here in Congress to stay out of the way when necessary
but to assist where necessary with the transportation system.
After 35 years, it is clear the Staggers Act has been
successful, and we can learn from it, what it has done to the
railroad and, I think, across all the modes, in ways to
upgrade, change our infrastructure.
I always like to point out that the railroads reinvest 19
percent of their revenues--not their profits, their revenues--
back into their infrastructure, which in 2015 I believe is
projected to be $29 billion. Volume is up, productivity has
increased, safety has improved, and the financial health of the
industry is strong.
We have, though, seen some disruptions because of the
winter in 2013 and 2015. And, again, there is concern with
shippers as to the STB's relief procedures, I think. So it is a
good time to revisit the regulatory environment of the
railroads.
And in response to some of those concerns, I know our
counterparts in the Senate have produced an intriguing bill
that we need to take a careful look at. But I hope that when we
look at that bill we realize we have a very strong railroad
industry. And, over the past 35 years, it has gone from being
not strong to very strong. And I think, again, we need to do
what is right here in Congress to make sure that we maintain
the strength of our railroad industry, which, as Chairman
Denham said, is the envy of the world.
And, with that, I yield back.
Mr. Denham. Thank you.
I would now like to welcome our panel of witnesses: first,
the Honorable Deb Miller, Acting Chair of the Surface
Transportation Board; the Honorable Calvin Dooley, president
and CEO of the American Chemistry Council; Edward R. Hamberger,
president and CEO of the Association of American Railroads;
Linda Darr, president of American Short Line and Regional
Railroad Association; and John Mayo, professor of economics at
Georgetown University.
I ask unanimous consent that our witnesses' full statements
be included in the record.
Without objection, so ordered.
Since your written testimony has been made part of the
record, the subcommittee would request that you limit your oral
testimony to 5 minutes.
Ms. Miller, welcome, and you are recognized.
TESTIMONY OF HON. DEB MILLER, ACTING CHAIRWOMAN, SURFACE
TRANSPORTATION BOARD; HON. CALVIN DOOLEY, PRESIDENT AND CHIEF
EXECUTIVE OFFICER, AMERICAN CHEMISTRY COUNCIL; EDWARD R.
HAMBERGER, PRESIDENT AND CHIEF EXECUTIVE OFFICER, ASSOCIATION
OF AMERICAN RAILROADS; LINDA BAUER DARR, PRESIDENT, AMERICAN
SHORT LINE AND REGIONAL RAILROAD ASSOCIATION; AND JOHN W. MAYO,
PROFESSOR OF ECONOMICS, BUSINESS, AND PUBLIC POLICY, MCDONOUGH
SCHOOL OF BUSINESS, GEORGETOWN UNIVERSITY
Ms. Miller. Thank you very much.
Good morning, Chairman Shuster, subcommittee Chairman
Denham and subcommittee Ranking Member Capuano, and members of
the subcommittee. My name is Deb Miller. I am the Acting Chair
of the Surface Transportation Board. What I would like to do
this morning is give you a brief look back at the history of
the ICC and a brief look forward, looking at the priorities
today of the Surface Transportation Board.
The Interstate Commerce Commission, the predecessor agency
of the Surface Transportation Board, was the first Federal
regulatory agency, created in 1887. Over time, the ICC grew
into a massive organization, with 2,900 employees at its peak.
But, by the late 1960s, the railroad industry in the United
States was in decline. One reason was competition from other
modes, but another major contributing factor was excessive
regulation. Railroads were not given the flexibility needed to
manage their business in this new competitive environment. They
were governed by burdensome and Byzantine regulations.
By the early 1970s, the situation was so perilous there was
even talk of nationalizing the rail industry. In response,
Congress passed a series of laws aimed at deregulating the
industry. And, in what many considered a last-ditch attempt to
save it, the most sweeping of these was the Staggers Act,
passed in 1980.
The Staggers Act instituted a number of changes to the
regulatory landscape. First, it allowed railroads to more
easily abandon unprofitable lines. Second, it made it easier
for railroads to merge. Third, it provided exemption authority
to quickly approve transactions that were routine and
noncontroversial. Most significantly, though, Staggers gave
railroads greater pricing freedom. Railroads were allowed to
engage in differential pricing, meaning they could charge
different shippers different rates depending on the demand for
that traffic.
Since passage of the Staggers Act, the railroad industry
has become more efficient, productive, and profitable.
In 1995, Congress sunsetted the ICC and created the Surface
Transportation Board. Today, the agency's mission is still
governed by many of the principles established by Staggers.
The Board is charged with promoting an efficient,
competitive, safe, and cost-effective rail network by enabling
railroads to earn adequate revenues that foster reinvestment in
their networks and attract outside capital and provide reliable
service. At the same time, the Board is mandated with working
to ensure that effective competition exists between railroads
and to maintain reasonable rates where there is a lack of
effective competition.
This hearing is particularly timely for me, as the Acting
Chair of the Surface Transportation Board. The Board is in the
process of reevaluating many of our economic regulatory
practices to determine if they are still appropriate for
today's environment.
On May 8, we announced that we will conduct two significant
hearings. First, the Board will hold a hearing on June 10 to
examine whether our rate case methodologies are sufficiently
accessible for grain shippers. Second, the Board announced that
on July 22 and 23 we will explore issues pertaining to the
concept of revenue adequacy.
Revenue adequacy is an economic concept that describes
whether a carrier is earning sufficient revenue to cover its
costs and earn a reasonable return sufficient to attract
capital. The ICC held that rates could be challenged if a
railroad were revenue-adequate over a period of years, but no
corresponding methodology was ever adopted.
The Board also has another major proceeding that has been
pending before us for some time. It involves something called
competitive access or reciprocal switching. Reciprocal
switching occurs when one railroad that exclusively serves a
facility agrees to provide switching services for another
carrier for a flat switching fee. These reciprocal switching
agreements create rail-to-rail competition by permitting a
competing railroad to offer its own single-line rate even
though it cannot physically serve the shipper.
The Board was presented with a proposal for the increased
use of reciprocal switching several years ago. I regret to say
that the Board has taken no action. I believe the Board owes
our stakeholders, who have spent significant resources to
develop the record in this proceeding, a decision on what it
plans to do with the proposal.
Given the overlap between the issues raised by the
competitive access proposal and the proposals raised in our
grain rate and revenue adequacy proceedings, my goal after
these hearings is for the Board to issue a package of proposals
on many, if not all, of these matters.
The Board is also examining our method for regulating
railroad rates. It is well known that our current process,
known as a stand-alone cost test, is cumbersome and expensive.
To address concerns related to rate regulation, the Board
initiated two studies. First, the Board engaged an independent
firm to study rate reasonableness methodologies used in other
industries and throughout the world. Second, the Board hired a
consulting firm to examine the Board's internal processes for
deciding rate cases. The consultant was tasked with studying
our internal process and offering recommendations on how we
could streamline and improve our case processing so we would be
quicker and more accurate.
The Board is also reviewing how to handle nonrate cases to
improve and speed up our decisionmaking. The industry is
frustrated with our pace, and so am I. It has been one of my
priorities since my first week at the Board, and I am hopeful
that this set of recommendations, including a set of
performance metrics that we are putting in place, will help
move the Board forward more quickly.
Mr. Chairman, thank you for giving me this opportunity. I
will welcome questions at the end.
Mr. Denham. Thank you for your testimony.
Mr. Dooley, you may proceed.
Mr. Dooley. Well, thank you, Chairman Denham and Ranking
Member Capuano, and it is a pleasure for me to be testifying
today on the Staggers Act.
And I represent the American Chemistry Council, and we
employ about 800,000 men and women throughout this country. We
are the second-largest shipper of commodities by rail in the
country, and it is absolutely important for us to have a strong
rail industry.
I want to say at the outset, there is no interest among our
membership to see a reregulation of the rail industry and go
back 20 or 30 years ago. But we do feel that when we have seen
what has transpired over the past since the Staggers Act has
been implemented: that we have a changed rail landscape that is
resulting in a greater consolidation.
And with this greater consolidation of the rail industry,
it is changing the marketplace and the competitiveness of the
marketplace. Because what we have seen happen in just since--I
guess you would go back to 2001, when you had the last major
consolidation of the rail industry, we now have basically seven
Class I rail lines out there, of which four are responsible for
90 percent of all shipments.
We think that also can be--you can see a correlation to
that increased consolidation to what we have seen is a fairly
rapid increase in the shipping rates, which have increased
almost 100 percent since about 2000, 2001.
That has also resulted in--that consolidation--in an
increased number of shippers that are captive to one rail line.
We think now that there is almost--the figures you can--you
know, close to 75 percent of all shippers now in our industry
are captive to one rail line.
What that is resulting in is a fairly significant increase
in rates and cost of shipments. We have done an analysis, using
AAR data and STB data, I should say, that has calculated what
is the cost of shipments that exceed the 180 percent RVC,
recoverable variable cost, that the STB uses to consider
whether or not a rate could be challenged. In the last year,
that figure was about $20 billion.
Now, we are also concerned not by the aggregate amount of
that, because I am not challenging--all those rates are
certainly not unjustified. But what we are also seeing is a
very rapid increase in the rates that are in excess of that 180
percent. In fact, we have seen a 50-percent increase in the
rates, an increase of 300 percent of the RVC, since 2005.
So that is what is being experienced not just by our
industry but by shippers throughout the country. And that has
resulted in a coalition that we have helped to organize that
includes 47 other groups representing manufacturing,
agriculture, and energy interests that employ about 4.7 million
people and contribute $2.4 trillion in economic output.
And what we are asking for is some commonsense reforms to
the Staggers Act and some modifications that Commissioner
Miller has articulated. We think it is badly in need of
reforms.
So what we are suggesting is that we need to give greater
attention to improving the administrative process, reforming
rate bundling protections, closing rate review loopholes,
allowing competitive switching, updating rate review standards,
and providing arbitration as an option to streamline rate
reviews.
There are clearly regulatory and financial impediments to
securing rate relief through STB. STB's own calculations are it
costs about $5 million to bring a rate case to the STB. It
takes close to 3 years before you get an outcome in that rate
dispute case. That clearly is not acceptable.
Now, I think that there is a way forward. And I appreciated
Congressman Shuster's acknowledging the action that the Senate
took that passed a bill that passed unanimously out of the
Senate Commerce Committee. But what we need to do is set aside
some of the hyperbolic rhetoric.
And I just want to cite a statement that Ed Hamberger has
in his written testimony. He said, ``When one looks behind the
actions that proponents of reregulation are urging upon
Congress and the STB to 'reform' freight rail policy, it is
clear that 'reform' is a euphemism for 'force railroads to
subsidize us' and that the needs of the railroads and the
general public are a distant second to their own narrow
desires.''
Let me be very clear that the farmers, the manufacturers,
the energy producers, that are all part of our coalition are
not narrow interests. They are in every congressional district
in this country.
What we are asking for is commonsense reforms that have
been articulated by STB Commissioners. What we are asking for
is commonsense reforms that have been advanced by the Senate.
This type of rhetoric does a disservice to shippers that are
customers of the rail industry, that need a strong rail
industry. It is an insult to Senator Thune and Senator Nelson,
who embraced the objectives that are part of the STB reforms
that we are trying to advance.
I hope that we can continue to work with this committee to
see if we can advance similar legislation that ensures--there
is nothing mutually exclusive about a strong and a financially
robust rail industry and giving equitable, efficient access to
a rate resolution process through the Surface Transportation
Board.
Thank you.
Mr. Denham. Thank you, Mr. Dooley.
Mr. Hamberger, you are recognized.
Mr. Hamberger. Thank you, Chairman Denham, Chairman
Shuster, Ranking Members DeFazio and Capuano. Thank you for the
opportunity to be here this morning.
Before we turn to the issue of the Staggers Act, I would
like to associate myself with the eloquent statements of the
leaders of this committee about the horrific accident outside
of Philadelphia last evening. Everyone in the rail industry was
saddened by what occurred last evening. Our thoughts, prayers,
sympathies go out to the victims, their friends, their family.
I had occasion to communicate with Joe Boardman, President
of Amtrak, this morning, and he asked me to express his
gratitude to the medical personnel, the firefighters, the
emergency responders, all of whom were there working through
the night tirelessly to try to mitigate the impact of this
accident.
I understand the NTSB and FRA are on the scene, as is Joe
Boardman. I hope in the days and weeks to come that we will be
able to learn a lesson from what happened there last evening,
that we will be able to take that lesson, as we try to do with
every accident, and apply it into the future so that we can
make what is already a safe industry even safer.
If I might turn now to the Staggers Act, it is an
interesting juxtaposition to me that we are sitting here in the
middle of National Infrastructure Week with pundits from across
the political spectrum saying we should be spending more
private money on our Nation's infrastructure. On that same side
of the ledger, this committee and all of Congress, wrestling
with where to find money for the Highway Trust Fund. And on the
other side, juxtaposed with that, thanks to the Staggers Act,
the freight rail industry quietly goes about its business,
spending this year $29 billion, private capital, on the
140,000-mile network that is recognized as the best in the
world.
It is the best in the world because of a direct result of a
balanced economic system at the Surface Transportation Board.
It relies on competition to establish rate and service
standards, with a regulatory safety net available to rail
customers who need it.
This balanced regulation has allowed railroads to improve
their financial performance from the anemic levels prior to the
Staggers Act, which Chairwoman Miller talked about, which in
turn has allowed the railroads to plow $575 billion, private
capital taxpayer money, back into the network. Class I
railroads, as I mentioned, will spend an additional $29 billion
this year.
Millions of Americans work in industries that are more
competitive in the tough global economy thanks to the
affordability and productivity of America's freight railroads.
We know that if America's future freight transportation demand
is to be met railroads must have the capacity to handle it. We
are preparing for tomorrow today all over the country,
expanding intermodal terminals, double-tracking hundreds of
miles of track, installing millions of new rail ties, upgrading
signal systems, and building new major rail yards.
These projects are aimed at maintaining and growing the
railroads network so that they are better able to serve our
customers and provide the safe, efficient freight
transportation service our Nation's economy needs. And all of
these projects are more likely to be undertaken under today's
balanced regulatory system than they would have been under a
system of excessive, needless regulation.
This committee knows well that transportation systems are
expensive to build and maintain, whether with private or public
funds. Railroads are no exception. By any of a number of
measures, the capital intensity of freight railroading is at or
near the top of all U.S. industries. For example, this year,
railroads will spend 19 percent of revenue on capital
investment. The comparable figure for U.S. manufacturing is 3
percent.
Looking ahead, the long-term demand for freight
transportation will undoubtedly grow. With highway congestion
becoming more acute and with public pressure growing to reduce
emissions, conserve fuel, and promote safety, railroads are
likely to be called upon to do even more in the years ahead.
And as our economy evolves, we will be called upon to make
additional investments.
For that to happen, there must be appropriate public
policies in place. Policymakers should acknowledge that, for
reasons of international competitiveness, safety, and economic
growth, the United States has a critical and growing need for
investment in transportation infrastructure. Private rail
investment should be encouraged, and regulations and
legislation should not adversely affect railroads' ability or
willingness to make those investments.
And I want to thank the committee for its bipartisan letter
last year to the STB explicitly acknowledging those facts,
dated March 14, 2014, which I would ask be made part of the
record.
[The information follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Hamberger. Today our Nation faces a number of serious
transportation-related problems, many of which this committee,
to its credit, is working hard to address. I submit to you that
it makes no sense to add to that list by trying to fix
something that is not broken. The current rail regulatory
system is working well, and, because of that, our Nation's
freight rail network is working well too.
I will just add at the end, with respect to the bill that
came out of committee in March from the Senate Commerce
Committee, our industry did not object to that bill, and I
expect that it will be moving through the Senate and on its way
to the House sometime this year.
Thank you for the opportunity. Sorry I went a little over,
Mr. Chairman. I appreciate your allowing me to do so.
Mr. Denham. Thank you, Mr. Hamberger.
Ms. Darr, you may proceed.
Ms. Darr. Thank you, Chairman Denham, Chairman Shuster,
Ranking Members Capuano and DeFazio, and members of the
committee.
In the wake of last night's Amtrak accident, I also wanted
to contend the condolences of all those in the short line
industry to those that lost their lives, those that are in the
hospital, and the family and friends that grieve for them.
I am Linda Darr. I am president of the American Short Line
and Regional Railroad Association. We are ``the little
association that could.'' ASLRRA is a national trade
organization representing the Nation's 550 Class II and Class
III railroads. Together, the short line railroads operate
nearly 38 percent of the national rail network. We handle in
origination or destination one out of every four railcars
moving on the national system.
The Staggers Act saved the rail industry from collapse,
and, in many respects, it is the parent of the short line
industry. The economic freedoms and the regulatory flexibility
embodied in the act allowed the railroads to save light-density
branch lines rather than abandon them. As a result, short lines
have grown from 8,000 miles of track in 1980 to 50,000 miles
today.
We operate in 49 States. In 5 States, short lines operate
100 percent of the State's total rail network; in 10 States, we
operate more than 50 percent; and in 30 States, we operate at
least one-quarter of the rail network.
In creating the modern-day short line industry, the
Staggers Act ensured that huge areas of rural and smalltown
America would stay connected to the national network. For the
small businesses and the farmers in those areas, our ability to
take a 25-car train 50 miles to the nearest Class I creates the
critical link that allows rail to be their choice for shipping.
The Staggers Act jump-started today's short line industry,
but short lines took hold of that opportunity, and short lines
made it work. The industry was formed by entrepreneurs who took
large financial risks to purchase and rehabilitate light-
density lines. Most borrowed heavily from the bank and
contributed substantial amounts of their personal capital to
make these new ventures work. They are aggressive marketers
that fight as hard for single-carload business as they do for
unit trains. And that fight for business keeps transportation
costs as competitive as possible, which is good for our
customers and, ultimately, for the Nation's consumers.
Short lines have worked hard on building relationships with
their customers. Many of those customers were our partners in
helping save even the most marginal lines. They did so by
helping finance rehabilitation through realistic rates and by
agreeing to meaningful traffic volumes. Today, our customers
are the beneficiaries of our success.
Short lines reinvest, on average, as much as 30 percent of
annual gross revenues in repairing and upgrading our
infrastructure. This is a huge percentage of what we earn, and
it is evidence of our real drive to succeed. That investment
has been supplemented by important help from Congress in the
form of the 45G rehabilitation tax credit, which allows us to
invest more of what we earn in improving our infrastructure.
We are grateful to the members of the Transportation and
Infrastructure Committee, who have been enormously helpful in
shepherding this legislation. This has been the most
consequential piece of railroad legislation for the short line
industry since the Staggers Act, responsible for leveraging
over $1.5 billion in short line capital investment.
Capital investment in railroads is not only about economic
growth and jobs; it is also about safety. Every dollar we
invest in track rehabilitation makes our tracks safer. The
leading cause of train derailments are track-related, and the
better our track, the safer our railroads.
We also know that improving safety requires building a
strong safety culture on every short line property. To that
end, the Short Line Association has partnered with the Congress
and the FRA to establish a Short Line Rail Safety Institute to
assess the safety practices and the safety culture of
individual short lines and to provide support to improve
workplace safety.
Track rehabilitation and a strong safety culture are what
we need to take the progress we have made under Staggers and
make the short line story viable for the long term.
Let me conclude with an anecdote that tells the short line
story post-Staggers as concisely as anything I have said here
today.
In 1983, 3 years after Staggers was passed, Dick Webb, the
father of Watco's current CEO, was a unionized car repairman at
the Kansas City Southern. He took out a $25,000 bank loan to
begin a rail switching operation in DeRidder, Louisiana, which
began Watco Companies. Today, Watco operates 4,600 miles of
short line track, employs 3,600 people, and moves over 1
million carloads annually across track that was surely headed
for abandonment.
Hundreds of short lines across the country can repeat some
version of that story. It is a great American success story,
and it was made possible in no small measure by the Staggers
Act.
I appreciate the opportunity to be here today, and I
welcome any questions.
Mr. Denham. Thank you, Ms. Darr.
Mr. Mayo, you are recognized.
Mr. Mayo. Chairman Denham, Ranking Member Capuano, members
of the committee, my name is John Mayo. I am a professor of
economics, business, and public policy at Georgetown
University's McDonough School of Business.
For 30 years, I have studied the economics of regulation
and deregulation in the American economy in a variety of
industries, including electricity, telecommunications, cable
television, pharmaceuticals, the Internet, as well as the
domestic freight rail industry. A summary of my publications
and relevant experience is included as an attachment to my
testimony. \1\
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\1\ The summary of John Mayo's publications and experience is
attachment A of the addendum to his testimony available online at GPO's
Federal Digital System (FDsys) at http://www.gpo.gov/fdsys/pkg/CPRT-
114HPRT96276/pdf/CPRT-114HPRT96276.pdf.
---------------------------------------------------------------------------
In 1980, the Staggers Act passed Congress in an
overwhelmingly bipartisan fashion. It was signed and
enthusiastically endorsed by President Carter. This act
fundamentally altered the governance structure of the rail
industry, shifting from a highly granular model of regulation
to a model in which markets, rather than regulators and rate
bureaus, are largely responsible for establishing prices and
investment.
Importantly, this legislation was not driven by simple
ideology. It did not embrace deregulation out of a belief that
markets are always superior to Government. Neither, at the time
of the passage of the act, did ideologues argue that steps to
free railroads from regulatory constraints should be halted out
of a fear that railroads would necessarily harm the public
interest.
Rather, the deregulatory measures adopted in Staggers were
embraced for a simple and profound reason: Deregulatory steps
in the industry were, as a practical matter, not an ideological
matter, but a practical matter, being revealed to produce
superior economic outcomes for the industry and for the economy
more generally.
Legislators from both political parties, economists, and
industry observers at the time were all very optimistic about
the potential for improved rail performance under the Staggers
Act. Of course, optimism on the front end of any legislation is
very normal. The real question--the real question--is, how have
economic outcomes evolved for consumers, for producers, and for
the American economy as a whole in the wake of Staggers?
Fortunately, we now have 35 years of experience with
Staggers, and I can tell you with considerable confidence that
the governance structure of the act has been significantly and
substantially successful. This was recognized in Congress in
1995 when the Senate Commerce Committee declared, quote, ``The
Staggers Act is considered the most successful rail
transportation legislation ever produced, resulting in the
restoration of the financial health of the rail industry,'' end
quote.
Consequently, with President Clinton's support, Congress
took the additional step of further easing regulatory
constraints by eliminating the Interstate Commerce Commission,
replacing it with the current Surface Transportation Board.
Importantly, the bill transferred authority to the STB,
carefully avoiding alteration of the fundamental premises of
the Staggers Act.
With the benefits of an additional 25 years now of
observation--or 20 years since the observation of the 1995
congressional blessing of the Staggers Act, it is now possible
to look afresh at whether the act is succeeding in promoting a
safe and efficient rail transportation system as is called for
in the act.
Economic signals of efficiency include increased output,
the breadth and utility of service offerings, reduced cost, and
indications of consumer value. And, of course, as with all
transportation modes, safety is generally thought of as being
measured by or gauged by the severity and frequency of
casualties.
While a detailed discussion of these economic metrics is
beyond the time permitted by my oral testimony, I have taken
the liberty of attaching a recent study that I coauthored with
Professors Jeffrey Macher and Lee Pinkowitz, also of Georgetown
University, that examines in detail the economic metrics
associated with this industry. \2\
---------------------------------------------------------------------------
\2\ The study is attachment B (page 15) of the addendum to John
Mayo's testimony available online at GPO's Federal Digital System
(FDsys) at http://www.gpo.gov/fdsys/pkg/CPRT-114HPRT96276/pdf/CPRT-
114HPRT96276.pdf.
---------------------------------------------------------------------------
We find, as numerous other scholars have, that the
liberalizations introduced by Staggers and their subsequent
implementation have produced a variety of positive economic
indicators and consequences for the industry, for consumers,
and for the economy as a whole.
We also identify areas of vulnerability as the future of
rail policymaking unfolds. Of particular concern is the
prospect that the emerging successes in the industry may be co-
opted by the imposition of earnings regulation in the industry.
These concerns are discussed in detail in the research article
that is appended to my testimony.
Thank you very much for your time and attention this
morning. I look forward to any questions.
Mr. Denham. Thank you, Mr. Mayo.
I am going to deviate from this morning's schedule just
slightly in light of last night's horrific accident and
recognize Mr. DeFazio for any opening statement he may have.
Mr. DeFazio. Thank you for the courtesy, Mr. Chairman.
And I am going to deviate from my prepared remarks for a
few moments here in light of the horrific accident last
evening, where 8 people lost their lives and more than 200 were
injured. Our hearts and prayers go out to the family and
friends of those involved, and hope for a speedy recovery of
those who were injured.
We obviously don't know the cause at this point. We always
depend upon the good work of the NTSB to bring that result to
us, and I look forward to learning and finding out what we can
do to mitigate or prevent future accidents.
We do know a little. It was a shared section of track. So
that is, you know, the beginnings of, you know, understanding
where and how these things happen. But we don't know much else
at this point.
However, I will observe--and I find it very, very ironic
that, as we sit here, over there somewhere, wherever the
appropriations lords sit, they are proposing to cut $290
million from the Amtrak capital grants program.
I would say that that program is already somewhat
insufficient since Amtrak has a $21 billion state-of-good-
repair backlog. And, you know, it is deteriorating every year,
and at the current level of investment, if the appropriators
don't cut it, it will take about 25 or 30 years to get it up to
a state of good repair. And that doesn't deal with some other
major projects that would facilitate rail movement, let alone
make it safer and in a state of good repair.
So I would hope that our friends on the Appropriations
Committee are cognizant of the real world out there, of what
happened last night, of what the capital needs of Amtrak are,
and will not engage in a shortsighted budget cutting in an area
where we already have a $21 billion backlog.
There were two issues--and I will submit my full opening
statement for the record--that I really wanted to focus on:
short line investments and tariffs or the potential for tariffs
for transporting dangerous products.
We have heard from the rail industry about the investments
they are making. And they shouldn't have to divert from basic
investments that they need to be making in capacity and safety,
including positive train control, which we mandated, to deal
with concerns or problems caused by shipments of hazardous
materials and others.
There was one particular case that got my attention, Powder
River Basin coal, where the company was refusing to put a
surfactant on it. The dust was coming out; it was getting into
the ballast and destabilizing the rail bed. So, since the
company was refusing to deal with that, you know, they were
taken by BNSF to--BNSF decided to charge an additional tariff.
They lost that judgment, even though the STB found that coal
dust did propose a danger for the ballast and the rail
stability, but they couldn't charge that differential tariff.
I think we need to reexamine that principle and our
directives to them in light of current shipments. I mean, if we
could send a market signal, we would see probably a lot less
chlorine being sent on rail because there are substitutes for
unbelievably toxic chlorine, which would cause much more damage
in an urban area, potentially, than oil. There are problems
with oil, et cetera. So I hope we will look at that.
And, secondly, short line railroads. We had an FRA report
on the capital needs, and they found that, although holding
companies are able to attract some capital, that the total
overall investment needs are about $6.9 billion that are unmet.
And I would hope we can find ways to work with the short line
railroads to accomplish those necessary investments because
they are critical to areas like my Port of Coos Bay and other
areas.
So, with that, I would yield back the balance of my time. I
thank the chairman for his courtesy. And I apologize that I am
going to have to go meet with a bunch of mayors pretty soon and
leave.
Mr. Denham. Thank you, Mr. DeFazio.
The first question I have: Mr. Mayo, given the history of
railroads and the Staggers Act, what is the appropriate role of
regulation in this marketplace currently?
Mr. Mayo. Well, from an economic perspective, the role of
regulation in general is to correct market failures where the
cost of correcting that failure is less than the damage done by
the market failure itself.
Now, if we turn to the Staggers Act and to the rail
industry itself, I think the place that I would start if I were
you is right at the very outset of Staggers there is a set of
congressional findings, legislative findings, that, number one,
transportation services are, generally speaking, provided under
conditions of competition, and, number two, in light of that
competition and the general absence of market failures, that
unnecessary and inefficient regulations should be removed.
Now, the Staggers Act did that. The Staggers Act peeled
away a number of regulations that were deemed to be unnecessary
and inefficient. In your situation now and today at the
hearing, what you are trying to do is say, how did that work
out for us as a Nation?
And I think the good news for you is that it has worked out
quite well on the economic metrics. Prices are lower than they
were in 1980. Output is massively higher than it was in 1980.
The quality of services is higher than it was. Investment has
been very robust. Innovation has been very high. And safety is
generally improved. On any number of metrics, it has worked out
pretty well.
So what I would say is that, in terms of regulatory and
legislative oversight--let's call it a light-touch regulatory
approach has been very, very successful. That doesn't mean that
there can't occasionally be market failures that warrant
intervention. It doesn't mean that we ought not have regulatory
oversight when market failures do occur. Regulators should be
vigilant and move decisively. But, by and large, the light-
touch approach has worked very well.
Mr. Denham. Thank you, Mr. Mayo.
Ms. Miller, we have heard from shippers quite often about
the access to rate cases as well as the cost of rate cases.
And, as I understand, the STB has taken a look at several
different steps to enhance the accessibility to some of these
smaller shippers and medium-size shippers.
Can you explain some of the actions that STB has taken and
whether or not that is improving that access?
Ms. Miller. Yes, Mr. Chairman. I would be happy to address
that.
The Board, over a period of time, has taken a look at ways
that they can improve access to our processes for smaller
shippers. We have put in place something that is called the
simplified SAC approach. We also have something we call the
three benchmark test.
What we have discovered, though, is that few shippers have
found those approaches to be beneficial to them, and, while we
have had a few rate cases filed under our streamlined
methodologies, it hasn't had the impact we had hoped that it
would have.
So I think we need to go back to the drawing board. We have
gone back to the drawing board. We need to look for additional
ways that we can make our processes more accessible and easier
for shippers.
One example of that would be the hearing that we are going
to have in June, which is for grain shippers. You know, there
has not been a grain rate case filed since 1981. Some might
conclude that is because grain rates are quite appropriate so
there is no need for a rate case. Certainly, when agricultural
groups come in to meet with me, that is not their view. They do
feel that the processes before the Board simply don't suit
their needs.
So we need to do some work, see if we can't find some
better approaches to come back and present to our shippers and
see if we can't make our processes more accessible and more
useful.
Mr. Denham. OK. Thank you.
And, Mr. Dooley, have you utilized these new provisions
that have been put in place by STB? Are they working?
Mr. Dooley. In terms of the new provisions, our industry,
in terms of the simplified SAC or the three benchmark, I don't
think there are any of our member companies that have used
that, in part because the caps on awards that you can secure
there doesn't justify the cost of expense.
I think Commissioner Miller would state, too, that----
Mr. Denham. Big caps meaning that they are too high and it
becomes too expensive for the smaller shippers?
Mr. Dooley. Yes. I mean, it is--yeah. You still, on a SAC,
simplified SAC, there still could be a $3 million to $4 million
investment. And then you have a limited ability in terms of
what you could be rewarded if you prevailed, that it doesn't
justify it.
On the stand-alone cost of SAC is that, you know, we had
two member companies, Olin and DuPont, that invested, you know,
in excess of $5 million each and brought cases, which both were
turned down. And they were turned down, in large part, because
they are required to develop their own theoretic railroad, a
SAR, a stand-alone railroad. And that process is so cumbersome
and expensive, and, you know, we are not in the business of
that.
And I would just read a statement that Commissioner Begeman
had in regards to the DuPont case. And she stated, ``I was
struck by the level of detail that must be considered to design
a SAR and the high burden it places on both parties, but
especially for the shipper, who lacks familiarity with
constructing and running a railroad. I am concerned that, in
some instances, the task of designing a winning SAR''--so the
shipper would prevail--``can be so burdensome, and a single
error by the shipper in the design of the SAR can be fatal.''
This is a clear example of the regulatory problems we face.
And she also stated in another case, ``The Board has a duty
to ensure that shippers have a viable means to challenge a
rate. I already know that is not the case for grain shippers.
And the Board should ask whether the SAC process can provide a
meaningful gauge of rate reasonableness for carload traffic
shippers.''
And I think that is consistent with Commissioner Miller's
commitment to continue working on this, and it is also
consistent with the legislation that passed the Senate Commerce
Committee.
Mr. Denham. Thank you, Mr. Dooley. My time has expired.
Mr. Capuano?
Mr. Lipinski?
Mr. Lipinski. It will take me a second here. I wasn't
expecting to be next. But thank you, Mr. Chairman, for holding
this hearing.
You know, it would be an understatement to say the Staggers
Act has saved the railroad industry, since it really saved our
freight system as well as preserving thousands of miles of
track for goods movement.
And, as others have said, you know, I have been to Europe,
I have been to Asia, and they talk about our freight rail
system as the envy of the world. And I certainly think that the
Staggers Act has, you know, played a very important role.
Now, that doesn't mean, though, that every railroad has
been a good actor and that there haven't been some problems for
local communities and sometimes for shippers.
In many instances, we have seen freight railroads do the
right thing and work with local communities beyond Federal
regulations, obviating the need to expand regulations. I
certainly applaud these efforts, and I have been pleased to
work with Norfolk Southern, CSX, BNSF, and Union Pacific on
CREATE in northeastern Illinois; also working with the
railroads and Metra on commuter rail and other issues.
But I have concerns that not all Class I railroads are
holding up their ends of the bargain as community members. And
I hate to raise this publicly, but I feel the need to do that
here.
There is one railroad that I won't name, but I think people
will find easy to figure out, I have had a few issues with.
This railroad refused requests to slow its trains as they
passed close to a local annual weekend-long festival--so that
is just a couple days a year--that featured a children's
carnival. I have joined this town in asking for cooperation
this year and have yet to hear anything 1 month before the
event.
I have also asked this railroad to work with commuter rail
to add more service, and nothing has moved forward after many
years of working on this. I have also heard some complaints
from shippers.
Now, I am not asking for more Federal regulations. I think
that is the last place that we want to go and only if it is
absolutely necessary to do.
But I am wondering, what can be done--I wanted to ask
Chairwoman Miller and Mr. Hamberger, if he has any comments to
add--what can be done to encourage any bad actors to change
their behavior? You know, how do we get everyone on the same
page? You know, are there options for STB?
Chairwoman Miller?
Ms. Miller. Well, I think that is an excellent question. It
is certainly one I spend some time thinking about.
We have a minimal number of regulatory tools available to
us at the Surface Transportation Board. Truthfully, I don't
think that regulatory tools really is what would be useful in
the situation. As the professor has pointed out, the rolling
back of regulation really has had a profound effect in terms of
allowing the freight transportation industry in the United
States to really blossom, and we need to be mindful of that.
I know from my own experience in the year that I have been
at the Board, fairly aggressively reaching out to both shippers
and railroads, doing a fair amount of traveling, that there are
certainly frustrations out there on the part of both shippers
and communities at times when they feel that the railroads have
not been responsive to their concerns.
By the same token, I have seen amazing things that are
happening on the rail system in terms of the way that they are
improving their processes and becoming more and more
productive. And we want to keep that going, as well.
I think one thing that the Board can do, I think we need to
be cognizant of providing opportunities, is to be a sounding
board, a place where people can come when they have concerns, a
place where problems can be aired and we can try to find
opportunities to get both shippers, communities, and the
railroads to work together to solve them.
And I think that the Board's presence, just the very fact
that we are present and at times can bring both parties in for
discussions, has been helpful. And I would like to look for
more opportunities to do those things.
Mr. Lipinski. Thank you.
Mr. Hamberger. Mr. Lipinski, thank you for that question. I
would be glad to meet with you offline to get the specifics of
this particular case.
I would like to point out, however, that all of my members,
all of the AAR members have taken voluntary steps to improve
safety, whether it is speed limits, increased track
inspections, reaching out to their communities, emergency
responders, making sure that they are trained for dealing with
an incident if a hazardous-material incident does occur.
So, while I understand your frustration at this particular
incident, I guess I would take exception with your saying that
one of the Class I's is a, quote, ``bad actor.'' I think they
are all committed to working with the communities in which they
operate and operating at a safe level. But I will be glad to
come by and discuss the details of your specific situation.
Mr. Lipinski. Thank you. I appreciate that.
And I had other questions I won't be able to get to on
reciprocal switching. If we don't have a chance to come back
for more questions, I will submit a question for the record.
I yield back. Thank you.
Mr. Denham. Thank you, Mr. Lipinski.
Mr. Shuster.
Mr. Shuster. Thank you very much.
My question concerns, as I mentioned in my opening
statement, the Senate Commerce's STB bill. I am very interested
in hearing your views. And could you be concise as to what you
may have concerns in it or what you like about it, but if you
could be concise.
I will start with Ms. Darr.
Ms. Darr. Thank you, Chairman Shuster.
We are generally supportive. We especially like the
provision that allows the board members to talk to one another.
We think that that is just good common sense. And we also
support the idea of it being an independent agency.
Mr. Shuster. Any concerns in it that you--in general, you
are OK with it?
Ms. Darr. We are OK with it.
Mr. Shuster. Mr. Hamberger said he didn't object to it. I
don't know if he----
Mr. Hamberger. We did not object to it.
I think that the bill does provide for voluntary
arbitration. I would point out that the Board itself set up a
voluntary arbitration program 1 or 2 years ago, I believe,
whereby a shipper or railroad would sign up and say, ``I hereby
agree that arbitration can be used for a case to be brought
against me.'' And, of all the shippers, not one has signed up.
One Class I railroad has, but--so I just find it interesting
that that is the case.
But, with respect to the committee's action, again, we have
no objection.
Mr. Shuster. And Mr. Dooley?
Mr. Dooley. Yeah, maybe I will start off with the
arbitration issue, is that there is an improvement in the
arbitration process in the Senate bill.
Ed referred to the existing arbitration that no shipper has
utilized, is because there really is no real value to it. It
doesn't specifically allow for the consideration and
arbitration of rates.
Mr. Shuster. Do you think this bill addresses that so----
Mr. Dooley. It does.
Mr. Shuster. You would anticipate some of your members
signing up?
Mr. Dooley. And it does have a cap of damages--or a cap on
awards of $200,000, which, you are talking in the shipper
community, is not worth the effort. In the Thune proposal, they
increase that to $25 million. And so you will see a lot more
interest and participation in this. And it will be interesting
to see if the rail industry will agree to it.
The other issue I would say that we are very appreciative
is included in the Thune bill--and it gets to Congressman
Lipinski--is the issue of reciprocal shipping. And we
appreciate the work that the commission is continuing to do on
that.
But if you look at this and why this is an increasingly
important issue when you have the consolidation of the rail
industry, is that, right now, if you were shipping, say, from
Chicago to Long Beach, the Port of Long Beach, and you have two
different rail lines there, you have two competitive
opportunities, in terms of pricing your shipment. But if you
are shipping through a short-haul--or through a Class I
railroad into Chicago, today you can't get a rate from that
point A to Chicago and then from Chicago to Long Beach. And
this doesn't allow for the marketplace to work and give you the
access.
What we are hopeful is that, with the inclusion in the
Senate bill of consideration of reciprocal shipping, is that we
can see a way where we can get a rate quoted from point A to
Chicago, we would be willing to pay the cost of that transfer,
and then we would have the ability to have a more competitive
marketplace from Chicago to Los Angeles or Long Beach.
Mr. Hamberger. Mr. Chair, if I might correct Mr. Dooley for
the record.
Mr. Shuster. Briefly.
Mr. Hamberger. Last year's bill that was reported in
September had a specific provision directing the Board to
proceed on the NIT League proposal. That provision is not part
of the bill that was reported out at the end of March. I
believe there is a great deal of inference that the Board
should draw from the fact that this year's bill is not
directing them.
Mr. Shuster. OK. I got the point.
Ms. Miller, what are your thoughts on the Senate Commerce
STB?
Ms. Miller. Well, I think it is a regulator's--we didn't
necessarily take a position saying we supported it or had
problems with it. But, generally speaking, we found it to be a
very balanced bill that I think will provide some advantages to
the Board and will allow the Board to do its job in a better
way. And, generally speaking, we think it is a good bill that
will be advantageous.
Mr. Shuster. And, Mr. Dooley, instead of you responding
here, I would rather the two of you come see me and let's talk
about this issue so I fully understand.
Mr. Dooley. This only has--you know, Ed was right--it
doesn't have a specific requirement. It has a specific
requirement that STB concludes their consideration of
reciprocal shipping and come to a decision.
Mr. Shuster. And you made a comment about Mr. Hamberger
saying narrow interest. Well, I don't know about narrow
interest, but I know about self-interest. And I have seen the
railroads, and I have seen the different industries, yours
also, driven by self-interest. I understand that. That is what
keeps us all straight, self-interest up here. The Founding
Fathers said that is the critical issue that is going to keep
us all in line.
But I just want to make sure that, you know, captive
shippers, I have had testimony after testimony, I ask the
question, who is building facilities? You know, mines, of
course, are where the mines are. And the agriculture industry
is kind of where it is. But I know that there are manufacturers
that actually build facilities to be captive shippers along
rail lines. And several years ago, 1 railroad, there were 48
different companies making themselves captive shippers.
So, again, when we are talking about that captive shipper
issue, that is something I am always focused on to say who does
this to themselves. And I would also like to add I have a place
in western Pennsylvania that has connections to three Class I
railroads. And I have yet to have a big manufacturer come and
locate there when they talk about captive shipping. So, again,
that is something I am very interested in. If some of your
companies are doing that to themselves, well, I mean, they must
be there for a reason. It must be the railroads are providing
something that they want, and so again.
And the final issue, if I could, Mr. Denham, on the issue
of natural gas, I think you guys have taken the right position.
But some of your members don't want to export natural gas
because that will possibly drive up their costs. And, once
again, I know that is self-interest. But my self-interest is we
have got a tremendous amount of gas in Pennsylvania. And we
want to share it with the world.
With that, I yield back.
Mr. Denham. Thank you, Mr. Shuster.
Mr. Sires.
Mr. Sires. Thank you, Mr. Chairman. I enjoy watching the
Mayweather-Pacquiao fight between you two. Let me just say,
first, that my heart goes out to the victims of last night. And
I hope that there is a speedy recovery for the people that are
hurt and that they determine quickly what happened so we can
address it.
You know, I represent the northern part of New Jersey,
which is very congested. I represent the ports. And there have
been a number of investments over the years between the
railroads and obviously the port authority. But I was wondering
what can, you know, what policies can the STB and the Congress
put in place to continue and maximize the investment into the
infrastructure of the railroads? Because in my district it is
very important. What policies can we put, can we help out with?
Mr. Hamberger?
Mr. Hamberger. Thank you, Congressman Sires.
As I tried to point out in my written testimony, there is a
direct correlation between the amount of money that railroads
can put back into the infrastructure and the amount of money
that they can make in the private sector, direct correlation,
which is why we have been able to put $575 billion back in
since 1980; $29 billion this year; $26 billion last year. As
the Congressional Budget Office has observed, profits are both
the means and the motive for reinvestment. You have to have an
ability to have that revenue to reinvest. And you have to have
the expectation that that investment will pay a return. And
that means you have to have a balanced economic regulatory
system, which I think the Board currently enjoys. I believe
that there are process changes that can be made. I commend the
Board for the 3-B or the three benchmark approach, the
Simplified SAC [Stand-Alone Cost]. I believe they have
increased the amount of money that can be recovered under that.
The authority that they are going to get from the Senate
Commerce bill, should that come into play. So I think there are
process changes that can be made, but that the underlying basic
economic approaches Dr. Mayo has pointed out is working. And I
think, going forward, it should be continued.
Mr. Sires. Thank you. Ms. Miller, I don't know if you
discussed this before, but can you just discuss some of the
major proceedings that are pending before the STB Board, and
what challenges does the STB face in resolving some of these
proceedings in a timely fashion?
Ms. Miller. Well, let me say a couple of things. One, I was
surprised when I got to the Board to discover how many
decisions, in fact, pass across the Board. So we tend to focus
a lot of our attention on the rate cases, which take years,
cost millions of dollars. But, in fact, day to day, there is so
much more work that is going on at the Board. So I think, one,
it is just good to have that as a reference point, that there
are other things that are happening or happening in a very
timely way.
I would say a couple of issues related to the Board's
ability to move more quickly and do its work in what I would
consider to be a better process. One, I want to take the
opportunity--and I am most sincere when I say this--to say that
one of my biggest surprises when I came to the Board was to
discover that we have virtually a Third World computer system
which is so arcane and outdated that we just cannot get on top
of solving our problems. Our Web site regularly goes down. Our
practitioners can't get access to our information. We have
massive problems with it and have very little budget to deal
with it. One of my highest priorities is fixing our computer
system. But it is hard to do it when you don't have a capital
budget to fix it. It is a serious issue.
Secondly, we have process problems that we can and should
solve ourselves. When I look at what I would consider the
process for how the Board deals with rate cases, it is not a
rigorous enough process. We are not creating deadlines. And we
are not then being disciplined in terms of meeting what
deadlines are set. I think that is something we can solve
ourselves and that we need to do. One of my first questions
when I came to the Board was to ask, what are the performance
metrics that we use in order to monitor the Board's own
performance, and was met with surprised looks because people
didn't even know what I was talking about so one of the things
we are doing is to develop a set of metrics. Are we, in fact,
meeting goals we should be setting for ourselves in terms of
how we are doing our work? I think those things will be hugely
beneficial in terms of not just improving how we function as a
Board but, quite frankly, better serving the shippers who come
to us and better serving the railroads. And I think they are
very important.
I would want to say one other thing, the Senate 808 gives
greater authority for the board members to speak with each
other. I think that would be very helpful. But I also think
that the Board has been quite conservative in how it has looked
at those issues. It has been quite conservative in how it deals
with ex parte communications. Far too often, the Board is
making decisions based simply on a written record. And I don't
know about any of you, I just know that if all I am doing is
reading a record that has been written by attorneys, I am not
going to fully understand an issue in a way which will allow me
to make a good, on-the-ground, practical decision. And I think
it is extremely important that we open up our processes. I feel
like many of our Board employees are much too isolated from the
industries that we are regulating. And so I want to open that
up as well. And I think we can do that in a responsible way
that will in significant ways improve our decisionmaking
process.
Mr. Sires. My time has run out. Thank you very much.
Mr. Denham. Thank you, Mr. Sires.
Mr. Hanna.
Mr. Hanna. Mr. Mayo, Mr. Hamberger rightly points out that
they invested billions and billions of dollars, $29 billion
recently. Mr. Dooley would argue that a disproportionate amount
of that comes out of his pocket because of the captive
shipping, the limited competition, et cetera. The 180 percent
benchmark for the RVC ratio would also--Mr. Dooley would argue,
that the appeal process is difficult, cumbersome, and, frankly,
just not worth it. As someone, I assume, is more independent
here than others and less vested, what do you think about that,
Mr. Mayo?
Mr. Mayo. Two things: One, the data speak pretty clearly to
the issue of investment. As I described it, the light touch
regulatory approach has been swimmingly successful. A number of
$29 billion of investment this year was used; that's just a
fact. And that is an intense level of investment. And that
bodes very well not only for current consumers but for future
consumers.
Mr. Hanna. But speak to the issue that Mr. Dooley is
talking about. I mean, no one is going to argue that it is a
wonderful thing to invest their money. The argument that I hear
and that I am trying to understand better is the
disproportionate because of the lack of captive lines and
allegations.
Mr. Mayo. So that brings me to the second issue, which is
that how is the investment going to play out for consumers? And
there is a regulatory process in place to ensure that rates at
the end of the day are reasonable. The STB oversees that
regulatory process. If rates aren't reasonable, then the STB
can and should step in. But, by and large, what you have seen
over the last 30 years is that prices have fallen. As I
mentioned in my opening remarks, prices are lower now than they
were even in----
Mr. Hanna. That still doesn't speak to the 180 percent RVC
benchmark--what you're saying right now--because that hasn't
changed.
Mr. Mayo. That benchmark has not changed. And I am not
advocating that it should change. That change was part of
Staggers. Some rates are below that 180 benchmark. Some are
above the 180 benchmark. And the STB has a process, now a
three-part process, for allowing consumers, shippers, to come
to the STB and make a case that those rates, if they lie above
180, are unreasonable. In the event that the firm is, that
there is a captive shipper and that the rates are judged to be
unreasonable, there is a mechanism in place----
Mr. Hanna. But I also hear you saying that on a weighted-
average basis, it sort of works out.
Mr. Mayo. It has more than worked out. Prices, as I
mentioned, on average are considerably below where they were
in----
Mr. Hanna. Mr. Dooley, would you like to comment?
Mr. Dooley. I guess, you know, first off, you know, I think
the 47 associations representing, again, the farmers,
manufacturers, energy producers, we don't want to go back. I
mean, the Staggers Act made a major improvement in terms of
creating a robust rail industry. And we want that to continue.
What we are asking for is something--it is not like we are
paying a disproportionate share. I wouldn't even go as far as
to say that is our complaint. Our complaint as shippers is, is
that we do not have access to an efficient and an equitable
rate resolution process.
Mr. Hanna. Are you all right with the Senate bill then?
Mr. Dooley. We think the Senate bill takes the step in the
right direction. It doesn't prescribe any specific outcomes. It
really drives the STB to conclude some of their issues that
they currently have under review that we think, whether it is,
you know, the stand-alone cost methodology that they are----
Mr. Hanna. Mr. Hamberger, I have got about a minute here.
Mr. Hamberger. I would like to associate myself with
Chairwoman Miller when she opened, in her opening statement, I
wrote it down: quicker and more accurate. That is what we need
at the Board. We need quicker. But that needs to be balanced
with more accurate. Some of these rate cases have $200 million,
$300 million in the balance. So you don't want that done on a
coin flip. You want it down quickly, but it has to be accurate.
And that is why it takes some time.
Mr. Hanna. Thank you very much. I yield back.
Mr. Shuster [presiding]. Thank the gentleman.
With that, Mrs. Napolitano is recognized for 5 minutes.
Mrs. Napolitano. Thank you, Mr. Chairman.
And I do have a couple of interesting observations. Ms.
Miller, you indicate your computer, that goes to the issue of
being able to have enough adequate staffing to investigate
complaints, do you have them?
Ms. Miller. One of the things that the Senate bill does is
provide the Board with investigatory authority. Currently, we
are a complaint-driven Board. So we don't initiate any
complaints or any investigations. We just respond to the
complaints that have been brought to us. In the Senate 808, one
of the things it would do is provide us with investigatory
authority. And so we certainly would need additional----
Mrs. Napolitano. How about funding for the computer change?
Ms. Miller. Pardon me?
Mrs. Napolitano. Computers. You say you have outdated
computers.
Ms. Miller. Right. And you are asking if we have the
staffing resources to improve our computer systems?
Mrs. Napolitano. And to do a new system of computers.
Ms. Miller. I think that we have the staff to do it. What
we really need still is hardware and software updating. So it
is not a staffing problem as much as it is a hardware, software
problem that needs to be updated.
Mrs. Napolitano. Which leads me to the other question. My
understanding is the Board is supposed to have three members;
only two were appointed.
Ms. Miller. That is correct.
Mrs. Napolitano. They are asking for an increase to five.
Would that have an impact?
Ms. Miller. Mr. Dooley and others could perhaps address
this better. Some of our practitioners have felt that the Board
is handicapped by having three members because no two members
can have a conversation on any topic before the Board. And if
we had five members, then at least two members would have the
ability to talk with each other. I think that would be
extremely helpful----
Mrs. Napolitano. Anybody else?
Ms. Miller [continuing]. But I think we can also improve it
by opening up our ex parte communications.
Mrs. Napolitano. Agree?
Mr. Dooley. Yes, I would agree. We think that STB needs to
be a more efficiently operating organization. We think the
expansion of the number of Commissioners would be a partial
solution to that. But also I think we are seeing the evolution
of the focus of the STB, is that they did help to get the rail
industry back on track. But now we are moving into an area
where there is increased consolidation, their focus needs to
increasingly shift to ensuring that there is competition in the
marketplace.
Mrs. Napolitano. OK. Mr. Dooley, you hit on another point
that some of my shippers have brought to my attention, and that
is overcharging. Do you want to address that?
Mr. Dooley. Well, that gets back to the fundamental issue,
I think, that shippers are most interested in, is that having
access to or eliminating some of the regulatory and financial
impediments to having access to a rate resolution process. It
is, it is not acceptable that a shipper has to commit to paying
$5 million----
Mrs. Napolitano. And 3 to 4 years for resolution.
Mr. Dooley [continuing]. And 3 or 4 years. So let's find a
way that we can fix that which----
Mrs. Napolitano. What will be, what is your recommendation?
What would help?
Mr. Dooley. I think that, you know, part of it is, you
know, reevaluating some of the policies that were put in place
35 years ago. I mean, the whole issue of revenue adequacy, that
was a relevant issue, I mean, a very relevant issue back 35
years ago. But I attest that Warren Buffett doesn't make
investments in companies that are not revenue adequate----
Mrs. Napolitano. Correct.
Mr. Dooley [continuing]. And we need to be evaluating how
that is used and calculated in resolving rate disputes.
Mrs. Napolitano. Another area of great concern, as we have
gone through and talked to is public safety, railroad safety,
safety of our grade separation. As you know, I am key on grade
separations because the Alameda Corridor-East.
Mr. Hamberger. Absolutely.
Mrs. Napolitano. And the safety of anything that comes out
of the ports for ontime delivery to the eastern seaboard. So I
am just wondering how much of that is going to be continued to
be able to address the different aspects of the infrastructure
change, whether it is the ties, whether it is the rails,
whether it is your locomotives, greener, what is it that is
going to affect us?
Mr. Hamberger. Well, of course, all of that is where the
$29 billion I keep referring to goes, to millions of new ties,
new rail, stronger gauge rail, Tier 4 locomotives that are the
newest, cleanest locomotives out there that are now being
bought. But if I could go back to your previous question for
just a quick second, where you talked about overcharging, I
would just like to put in the record, I think it may be in my
written statement but I would like to draw your attention to
it, that the average inflation-adjusted freight rail rates for
all commodities are about where they were in 1991. And for Mr.
Dooley's members, it is where they were in 1988. So where there
is, quote, ``overcharging,'' that is what the Board is there
for. And I have expressed our support for quicker but more
accurate processes. But I would like to get on the record that
the rates being charged today are where they were in 1991, 1988
for the chemical company.
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Mrs. Napolitano. Is there a way to be able to, and I will
leave this for the record, to be able to ensure that the
complaints received will be resolved in a faster, more
expedient manner? The complaints?
Ms. Miller. Yes. I think there is. And I think we are
working on that to improve our processes so that we can ensure
that happens. I would want to say, as I said before, we get
very focused on these rate cases because, as Mr. Hamberger
pointed out, sometimes we are talking about hundreds of
millions of dollars that are at stake. So they are very
important. They take a lot of our staff time. But every day,
every month, decisions are going through our agency that are
handled very quickly and are allowing businesses to get back to
doing what they need to do.
Mrs. Napolitano. Thank you to the witnesses.
And thank you for your indulgence, Mr. Chairman.
Mr. Shuster. Thank you, Mrs. Napolitano.
With that, Congressman Rokita is recognized for 5 minutes.
Mr. Rokita. I thank the chairman. Good morning, gang. I
appreciate you being here. And I appreciate the passion I see
in each one of you for the industries that you regulate or are
in. I do think you are part of America's 21st-century future.
So, again, thanks for being here. Ms. Darr, we have a lot of
short-range railroads in Indiana or a lot for us. We seem to
like them. General question for you, what is the overall
economic outlook for the U.S. short line railroad industry and
the future demand for rail transportation? And, in your view,
what role should Ms. Miller's agency play to ensure that the
U.S. freight rail system can continue to grow, especially with
regard to the short lines?
Ms. Darr. Thank you, Congressman Rokita. I would say, first
of all, short lines love Indiana. So I think it is a reciprocal
relationship.
Mr. Rokita. We love you. Don't tell CSX.
Ms. Darr. In regard to your question about the economic
outlook, I believe it is strong. But that doesn't mean that we
can just go along a path and not interject along the way and
assume that it is going to remain strong. We have invested in
our infrastructure. We have been able to do that through the
45G program. And as I indicated in my testimony, that is not
just about economic development. That is also about safety.
Making sure that our infrastructure is safe is critical for our
growth. Staggers got us this far. Going forward, 45G is going
to be absolutely essential to our ability to rehabilitate our
track.
And I also think we have done an excellent job of
attracting new customers. Short lines have developed a
reputation within the industry as being very customer friendly.
You have not seen me get into any negative discussion with Mr.
Dooley. And I can assure you that all of his, all of his
members would be thrilled with the short line performance that
they have received to date. And I won't let Mr. Dooley take on
any conversation about that, except outside of the room. And
then I think also an important part of our growth is the good
partnership that we have established with the Class I's. I
think that is demonstrated by the work that we are doing with
AAR and Mr. Hamberger here. That is going to be very critical.
We rely on them for a lot of our business. And they rely on us
to bring the customer to them as well. It is an important
relationship.
In regard to what Chairwoman Miller can do in regard to
changes in the STB to help us out, it is speed and expedited
rulings. And, as Ed said, the speed can't happen without
accuracy. Both of those things are absolutely critical. In
relation to what we are talking about today, don't roll back
Staggers. Anything else that rolls back the Staggers Act is
going to put us in a position, as Chairman Denham had said
earlier, of being hammered by burdensome regulations. And, as
in the past, that was putting us in a position where we were
dying a slow death. And we can't go there again.
Mr. Rokita. Thank you.
And, on that, Mr. Hamberger and Mr. Dooley, would agree,
correct? You are all in line on that, with that last statement?
Mr. Hamberger. I do certainly would, yes.
Mr. Rokita. OK. Let the record reflect they are answering
in the affirmative. And Mr. Dooley has a footnote.
Mr. Dooley. We certainly do not want to see the Staggers
Act eliminated. But we think there could be some modifications
that, again, give us more equitable access to a rate resolution
process.
Mr. Rokita. OK. At the risk of not getting to you, Mr.
Mayo, I need to go to the chairwoman. And I want to, first,
thank you for sitting in the chair as you do and actually
articulating the fact that you have a strategic plan with goals
and rates set to them and that kind of thing inside your
office. I think that goes without saying, quite frankly, when
you have agencies as big as yours and others that are much
bigger. Yet many who sit in that chair don't bring any of that
information to us. I am puzzled that your testimony seems to
focus on the fact that you don't have a computer system or your
technology is behind and this and that. And are you trying to
tell me that the appropriations has that much control in
micromanaging your budget that well that you couldn't fire a
nonperforming employee or 2 or 10 or 20 or 100 and get the
computer money you need so that you can expedite these cases
with a bit more accuracy?
Ms. Miller. Well, in terms, overall, just very quickly, we
are actually quite a small agency, about 140 people. And the
way that we have created any of the funding necessary to try to
make improvements to it is by holding positions open and not
filling them. Otherwise, we just don't have any kind of a
capital budget at all. So we have got nothing to turn to absent
that.
I think one of the things that you are saying is that,
while I am a firm believer you don't start by saying we need
more people to accomplish your job; you start by saying what
can we be doing differently to get our jobs done. I have been
at the Board for a year. I could not say that we are
overstaffed. I would not draw that conclusion at all. And, in
fact, there are some real gaps, I think, in skill sets at the
Board that we need to be better able to serve both the
railroads----
Mr. Rokita. You don't have one nonperforming worker that
you wish you could under the law fire?
Ms. Miller. I sure do.
Mr. Rokita. OK.
Ms. Miller. And I have to say, I come from State
government. It is where I worked my whole life.
Mr. Rokita. Can you tell I came from State government?
Ms. Miller. And I would tell you that I have found many
more ways at the State system to take care of nonperforming
employees than I have been able to uncover----
Mr. Rokita. Maybe we should work together and find a way to
get those ideas here.
Ms. Miller. But I do want to go back to say quickly,
because I don't want to give anybody a false impression, we are
working very hard to solve our own problems. But I have to say,
we have very few tools to do it. And I use this as an
opportunity today because I feel so strongly about it. We want
to do a better job for these guys, but we need some tools. And
you just can't do that, you can't create it out of nothing. And
we really don't have the resources necessary.
Mr. Rokita. My time is up, Mr. Chairman.
I will yield back. We can carry on later hopefully.
Ms. Miller. Sure. Happy to.
Mr. Denham [presiding]. Thank you, Mr. Rokita.
Ms. Hahn, you are recognized for 5 minutes.
Ms. Hahn. Thank you, Mr. Chairman. And thank you for
holding this hearing.
I do want to add my voice to those who are expressing,
first, shock and then, of course, sympathy for the horrible
train accident last night. And I will say, I am one of those
politicians that Chairman Shuster was maligning earlier. Even
though we have not found out what the cause is--and I am sure
we will--this is National Infrastructure Week. And I do know
for sure that the funding for our infrastructure in this
country is woefully inadequate. I think everybody needs to be
investing more in our country's infrastructure. And even
sometimes when we find out that the cause of a train accident
was human error or something else, it seems that we move away
from focusing on, did infrastructure play a role or are we just
another bad infrastructure design away from another accident?
Folks on the morning news shows this morning were talking about
our design, our outdated design of our rails and curves that
maybe shouldn't be there and shared tracks.
I think if we really want a rail system and an
infrastructure that is the envy of the world, I think we are
far from having the perfect infrastructure. And other countries
are investing billions more in their rail infrastructure than
we are. I still think that is a huge problem. And I think our
Highway Trust Fund is running out in a few days. Maybe we will
have a short-term fix. But that is no way to run a country. And
it is no way to run rail lines.
And no matter what fees we are paying and no matter what
disputes we are arbitrating, at the end of the day, I am
embarrassed about the infrastructure we have. And we just
haven't put the time or effort or money into it.
I do have a bill that I have introduced. It is a freight
network bill because I don't think our freight network ought to
be competing with our Highway Trust Fund. So I have got a way
to take what the shippers are paying in import fees, they pay
about $40 billion in import fees, and diverting some of that to
a freight network guaranteed revenue stream that we can fund a
lot of the things that we are talking about. So I hope we take
a good look, unfortunately, in light of this accident, at what,
if any, role our infrastructure played or will play in future
accidents in this country.
And I just wanted to follow up on something my colleague,
Pete DeFazio, was talking about with the short line railroads.
And I am a big fan of short lines. A lot of them service our
ports, which is a huge role and also a hugely needed infusion
of infrastructure funding in and around our ports, the last
mile into our ports. I think that keeps us from being globally
competitive like we should be. But of the 560 short line
railroads currently operating, 27 holding companies control
almost one-half of these railroads. And I am concerned that
these holding companies, these investment firms, are looking at
turning a profit for shareholders more than maybe investing in
railroad improvements and safety. And the FRA published a
report on the capital needs of short line railroads and found
that while holding companies reduce the risk associated with
lending capital, funding that is available must be thinly
spread among all carriers under their control in order to meet
current and ongoing needs. And we know there is about a $6.9
billion need for short line and regional railroads. I would
like to hear your comment on that funding mechanism for short
rails. And is that a positive thing that we are seeing? Can we
do better?
Ms. Darr, I would love to hear from you. I didn't know if,
Mr. Hamberger, and, Ms. Miller, if you would like to comment on
that as well, the economic structure of who is owning our short
line railroads.
Ms. Darr. Certainly we have seen a lot of consolidation,
especially in the last few years, particularly one of our
largest members. But, altogether, there is really only one and
maybe two publicly held companies in the short line business.
So I don't know that that would be an accurate representation
of our industry. Although certainly there are constraints for
publicly held companies that independents don't have, I am not
sure that that is, altogether, a bad thing because, obviously,
we have seen some tremendous growth as a result of those
arrangements.
As to what is needed to allow our independents to grow--and
the bulk of my members are independent railroads--45G is
absolutely critical to that. And 45G is a tax credit that
allows us to take our earnings and reinvest them back into
tracking. You made some excellent points about this being
National Infrastructure Week and the challenge that we are
facing. If the short lines don't have access to that capital,
we are not going to be able to do our part of the job for the
industry. So, again, I would like to thank everyone on the T&I
[Transportation and Infrastructure] Committee for their
overwhelming support. We have had great luck with that. But if
we don't continue to follow through with 45G and make it
permanent, rather than have to fight for it every year and deal
with that vulnerability, we are not going to be able to engage
in the long-term planning that is necessary.
Ms. Hahn. Thank you. I can hear you tap, tap, tapping back
there.
Mr. Denham. The time was definitely expired.
Mr. Capuano.
Ms. Hahn. I will yield back.
Mr. Capuano. Thank you, Mr. Chairman.
First of all, I want to thank the Board. This has been just
as informative as I had hoped it would be. To some extent, this
is kind of ending up like a lovefest, which is good. It sounds
like we all want to do some minor improvements to the STB to
make everybody work a little bit better and make this country
better. So I want to thank you all for your input.
But I do want to pick at a couple little things that bother
me.
Mr. Hamberger, do any of your member companies haul wheat?
Mr. Hamberger. Yes, sir.
Mr. Capuano. Do they haul coal?
Mr. Hamberger. Yes, sir.
Mr. Capuano. OK.
Ms. Darr, do yours haul wheat?
Ms. Darr. Yes. They do.
Mr. Capuano. And coal?
Ms. Darr. Yes.
Mr. Capuano. Do you know if they haul casino chips, poker
chips, or slot machines? You may not know that, but I thought I
would ask.
Ms. Darr. Should they?
Mr. Capuano. I don't know. If some were to ask, they would?
Ms. Darr. Yes.
Mr. Capuano. Mr. Hamberger, do you----
Mr. Hamberger. If some were to ask, we have a common
carrier obligation, so absolutely.
Mr. Capuano. That is what I thought.
Ms. Miller, if a railroad came to and you said, ``We haul
wheat and so, therefore, we want to build a bread factory on
our land in the middle of a residential area and we want to be
exempted from all health regulations, we want to be able to
make that bread any way we please, not subject to local zoning,
not subject to local environmental issues, not subject to local
health issues,'' would the STB approve that as a related
activity?
Ms. Miller. I don't know. In that specific example, I think
you are referring to the preemption----
Mr. Capuano. You don't know? So you think there is a
possibility that the STB would approve a railroad making bread
to sell to the general public that is not subject to local
health requirements? The problem is your hesitation. The
problem is that that is a possibility. Would you approve them
if they haul coal? Would you approve the railroad saying, ``By
the way, we want to process coal, we want to mine coal, we want
to dig oil because we haul oil, we want to frack in my
backyard, not subject to State or local requirements because
Federal law preempts them''? Is there a possibility the STB
would say yes?
Ms. Miller. Well, Mr. Capuano, I think perhaps my
hesitation has less to do with not knowing for sure how the STB
would act but reflecting on what I do or don't know about any
authority we would have if a railroad----
Mr. Capuano. Fair enough.
Ms. Miller [continuing]. Was wanting to build a factory
that had nothing to do with transporting or rail
transportation.
Mr. Capuano. Fair enough. Well, then why in the world would
you approve a railroad getting into the hazardous waste
business? Why in the world would you approve a railroad getting
into the propane business not subject to State or local
regulations? Why on earth would you say that anyone would be
exempted from local safety requirements, local zoning
requirements, when it is not an issue that is directly related
to a railroad? Yet you have done that. Why should I have faith
that the STB is not just a tool of the railroad industry, and
it is truly an independent agency that understands, yes, when
it comes to rail, we all want successful railroads. But let's
be honest, trash handling is not a core item in any railroad.
Now, I am not saying they shouldn't do it. If the railroad
wants to get into the trash business, good luck. But your
business, your entity, not necessarily you, I don't know if you
were on the Board at the time, said that they were no longer
subject to local zoning requirements. Just last year, the STB
said they are not subject to local zoning requirements on a
propane facility in the middle of my State. I have to tell you,
that shakes my trust in the system.
I want the STB to work. And all of the issues that we talk
about today, they sound fine; we are heading in the right
direction. That is the wrong direction. I would like to know
what the STB might ever do about it, except to say: We are
sorry. We are going to turn this issue backwards. We are going
to do the right thing moving forward and stop this nonsense. Is
that possible that that might happen?
Ms. Miller. I think one of the--I think the issue that is
frustrating you--which I appreciate the frustration, I felt it
myself--is the way the preemption rules play out. Under the
Federal laws, State and local laws are preempted as to having
to do with rail transportation. And the frustration I think you
are expressing is whether or not we have properly determined
whether an activity is a part of rail transportation, or if, in
fact, it is something else. I can say that since I have been at
the Board, I have a strong sense of importance of the
preemption requirements. One of the reasons we, in fact, do
have such a strong rail network in the United States is because
of preemption. I think it is extremely important that
preemption----
Mr. Capuano. I am not arguing when it comes to the core
business of railroads.
Ms. Miller. But I would also say, I have seen situations
that have come before the Board since I have been there that I
have personally found repugnant but that I also believe fall
under the preemption requirement. So, even though I personally
have not been supportive of what I have seen an entity doing,
we have also found that they do, in fact, meet the requirements
of preemption.
Mr. Capuano. I know what you have found, but you earlier
touted your background in State government. I also have a
background in State and local government, and I understand
there are certain things that are conducive to Federal
preemption, which I support in many instances, but I don't
think that applies to zoning. I don't think it applies to
health. I don't think it applies to the environmental issues.
Those are State and local matters, and the Federal Government
should stay out of them. And I believe that preemption was
inappropriate, wrong, and should be changed. And I guess you
have left me with no choice but to now advocate for legislative
change, which I actually think is always the last option.
I think you have made a big mistake. I think you have
opened the door to basically sticking your Federal thumb in the
eye of every State and every city and town in this country. And
I wish that that weren't the case. And I would like to find a
way to get the STB to correct that action, but I guess we will
have to do it legislatively.
Thank you, Ms. Miller.
Mr. Denham. Thank you, Mr. Capuano.
Mr. Mayo, if a wheat farmer and a coal miner opened a
bakery--I think we have covered that topic long enough.
I actually have----
Mr. Mayo. I would have gone mute at this point. I would not
have answered that. Thank you, though.
Mr. Denham. Actually, I have one final question, and that
is, you know, a misconception of revenue adequacy. We continue
to hear how the railroads are doing so well on Wall Street, but
that misconception of revenue adequacy is always out there. Can
you explain in a little detail the challenge there?
Mr. Mayo. Sure, and I will try to be concise. The details
are in the study that is appended to my written testimony. But
what the study does, is to look at the notion of revenue
adequacy and to really understand the purpose of revenue
adequacy, you need to go back to the time that it was
introduced. It was introduced in the 1970s. There was a period
when the rail industry was in dire financial and physical
conditions. It was literally falling apart. In the 4R Act of
1976, the language first appeared. And it created a benchmark.
It said to regulators--then the ICC, now the STB--that the
regulators should calculate a number, should calculate whether
railroads were earning back their cost plus a cost of capital.
So it provided an informational benchmark and a set of
guideposts that helped legislators and regulators in assessing
whether the industry was coming back and how far it had come
back. So that was the legislative intent. It was a purpose. The
purpose, I believe, at the time was informational, to create a
set of guideposts and benchmarks.
In 1985, the then-ICC introduced a bit of an
interpretational change, interpreting revenue adequacy not as
an informational benchmark but as a constraint. It was at that
time that the word revenue adequacy ``constraint'' first
appeared in the regulatory documents. And, at that time, the
ICC indicated that in the rail industry, that railroads should
not be entitled to any more revenue than what would exactly
cover their cost of capital.
Now, at that time, what happened is, in theory anyway, that
regulatory determination would reintroduce back into the rail
industry earnings regulations which we had just stepped out of
with the Staggers Act. Now, I said in theory it did that
because, at that time, the railroads were, largely speaking,
and completely revenue inadequate. So it was a theoretical
constraint, not a practical one. Now, if you move forward 20--
30 years now, the rail industry, as we all know, is doing
better financially. They are now being judged increasingly to
be revenue adequate. That is to say they are covering their
cost of capital.
Now, to the extent--and this is where the concerns come in
in my study--to the extent that the revenue adequacy constraint
is then imposed and we reimpose earnings regulations in this
industry, that is a risk of some significant backsliding, I
think. And so what I would appeal to you, and to the regulatory
community is to reestablish the original legislative intent of
the revenue adequacy language, and that is as an informational
benchmark, which is really a good thing, but to avoid using
revenue adequacy as a regulatory hammer.
Mr. Denham. Thank you, Mr. Mayo.
Our final question today is from Mr. Babin.
Dr. Babin. Thank you, Mr. Speaker, I appreciate it.
Mr. Chairman, thank you very much. I had a couple of
questions that I would like to ask of Mr. Dooley, if you don't
mind. What role can the STB play to ensure that the rail system
supports manufacturing, investment, and growth?
Mr. Dooley. Yeah, you know, again, Congressman Babin, is I
think that, you know, consistent with the Senate legislation,
there is a directive there for STB to conclude some
considerations of a host of issues that range from the rate
resolution issues that are associated with the stand-alone
costs, the requirements that, in order to bring a rate case,
you have to have required that company to design a rail line
and operating, assess the cost of that in order to make a
determination of whether or not if you made these new
investments, had an appropriate return on capital, whether or
not that would result in a rate lower than what was being
provided.
But it provides--it is such a complicated process that even
the STB Commissioner said they question whether or not that is
an equitable and effective way.
What the legislation also does is it asks for STB to
conclude their consideration of the issue in terms of
reciprocal switching, which again is, you know, with the
increased consolidation, with fewer rail lines, Class I's that
are providing service, is that there is not as much competition
in the marketplace, and so what we think is important is, is
that you ought to have a mechanism that can give a shipper the
ability to ship from point A to point C through point B, but if
there is only one shipper to get you to point B and you have
got two shippers there, that there ought to be a way to get a
quote from that rate from A to B and then have the opportunity
to get a competitive quote from B to C from two rail issues and
have the opportunity to pay for the cost of that switch. So we
think that there is progress that STB can be making on that
front, too, that again will ensure.
We also have some other issues related to rate bundling
that is a little more complicated that also could ensure,
again, more competition or a more competitive marketplace. And
that is what we are asking for. Two things is, when you have
increased consolidation, you basically have a duopoly in the
rail industry in many regions of the country, and that doesn't
necessarily result in quite as a robust marketplace of forces
as we think is appropriate. And how do we adjust for that? It
is where the equitable rate resolution process as well as some
of these other provisions that could be addressed through STB.
Dr. Babin. OK, thank you very much.
One other question, I am already--no, I have still got a
little time.
Ms. Miller, if I could ask you, the Staggers Act
established numerous objectives for U.S. freight rail policy
which wanted to minimize the need for Federal regulatory
control over the railroads and would allow railroads to earn
adequate revenues, providing expedition resolution or
proceedings, ensuring effective competition, and maintaining
reasonable rates where effective competition does not exist.
How well has the STB succeeded in achieving these objectives,
and what areas need the greatest attention in the future?
Ms. Miller. I think if you look back over the last 35 years
since Staggers has passed, you would have to say that the STB
has done an outstanding job. When you look at the issue of rate
regulation to the extent the Surface Transportation Board has
any involvement at all, it is only 10 percent, really, of any
of the traffic or rate regulation that we even have any
oversight over. Anything that is done by contract we are not
involved in. That is, the vast majority of what is moving on
the freight system today is done under contract. And other
situations, even though there may not be a contract, they might
be using tariff, there is clearly competition. We are not
involved there. So our role really is a pretty small role but
in an area that I think becomes very important.
I think that in a year of serving on the Board, my
observation is, is that to the extent we are, in fact, to be an
arbitrator of whether or not rates are reasonable where
competition doesn't exist, if there is a criticism that I would
have of the Board, it is that I can understand why shippers
feel so frustrated and say to us: You know, we don't really
feel like we have an opportunity to bring cases before you.
We can say that we are available. We can say that you can
file a rate case, but what we know is that it is going to take
3, 4, 5 years. It is going to cost millions of dollars, and the
reality of actually doing that has quite a chilling effect, I
think, on a number of shippers.
So Mr. Hamberger made the comment--and he is absolutely
right--we are talking oftentimes about hundreds of millions of
dollars. There is no way to take that sort of a rate process
and turn it into a 6-month activity. The issues are much too
complicated. They are much too important. So I am not saying
that our goal at the Board should be to rush to judgment on any
of these things. Some of these questions are simply going to
take some time to get at. But by the same token, I don't think
there is any question that there are people who feel they have
an issue that they would like to have addressed, who simply
don't bring it before us because they think it is hopeless.
Dr. Babin. Thank you, Mr. Chairman.
I would like to thank all of the witnesses, too.
Mr. Denham. Thank you, Mr. Babin.
Ms. Brown, you are recognized for 5 minutes.
Ms. Brown. Thank you, Mr. Chairman.
First of all, I want to say that last night I started
getting calls about the accident that occurred in Philadelphia.
And I want everybody to know that my heart goes out to the
families and the community at this time.
I mean, I am--rail is so important, and reauthorization of
the Staggers Act and investment in rail is crucial. It is
absolutely crucial that we work to keep rail, freight rail, and
passenger rail separated. And, you know, other countries have
figured it out. And we as a people of--in the United States
need to get with it. I tell people all the time in Florida: Our
competition is not Georgia and Alabama. It is people in other
countries that have figured out how to move goods and services.
And when I travel around the world, they ask me: How do you
all have such a great freight system? And I want to know from
them: How do you have such a great passenger system? And we in
the United States need to figure out and we need to invest in
making sure that we can move people, goods, and services.
So I want to thank you all for your testimony.
And do any of the members, I know Ms. Miller, he was
tapping. Do you want to make any closing statements? And Mr.
Hamberger, anybody want to make any closing statements?
You know, I am now on the Committee on Veterans' Affairs,
and I appreciate the fact that over 30 to 40 percent of the
people in rail are veterans. And I thank you all for continuing
to reach out to them because they are ready for employment.
And Ms. Miller, do you want to add anything?
Ms. Miller. No. I really appreciate your comments and would
echo your statements. I have always been amazed by the U.S.
transportation system. I think it is extraordinarily important,
and I am struck all the time, as you said, you know, our
competition--I came from the State of Kansas. I felt the same
way. Our competition wasn't the States next door. It is other
countries around the world. And I think we need to continue to
think that way. And one of our advantages economically is our
freight transportation system. It is extremely important that
we maintain that advantage.
Ms. Brown. My colleague, Mr. Dooley?
Mr. Dooley. No, I have no other statement, but I, again,
thank the committee for the opportunity to testify today.
Ms. Brown. Thank you.
Mr. Hamberger.
Mr. Hamberger. I would just like to on a personal note say
I know that you had a Committee on Veterans' Affairs meeting
this morning, and the fact that you made it here just
underscores your dedication and support for the rail industry,
and I just want to thank you for that.
Ms. Brown. Thank you.
Ms. Darr. Congresswoman Brown, I just wanted to echo on
your thoughts about the Amtrak accident last night. And I
think, you know, it is appropriate that we talk about safety
today. And from the short line perspective there are two
critical aspects of safety that we can help out with. One is
raising up the safety culture in our industry, which we are
able to do through the Short Line Safety Institute, thanks to
support from Congress.
And then, finally, focusing on our rail infrastructure. By
improving the track, we improve safety, and we are able to do
that through programs like 45G. So I think it is a good
partnership and appreciate your support for both of those
programs.
Ms. Brown. Thank you. The last comment?
Mr. Mayo. So I, too, would echo your reflections about the
need to look abroad for benchmarking and identifying that our
real area of competitiveness is best benchmarked around the
world, not necessarily here in the States. I would say, in the
context of this hearing, that it is really sort of important,
once in a while--I mean, we are pretty good at pounding our
chests and chanting we are number one in the world, even if we
are not necessarily that way. In this particular area, in the
area of freight rail policy, I think we have a lot to be proud
of. The economic data are very clear. It is rather remarkable
as an economist to see an alignment of positive economic
indicators in prices, output, innovation, employment, and so
on, that have worked so well. So I am just glad to be here and
to speak about this bill or this act.
Ms. Brown. Well, thank you very much.
And like I said, I don't care whether I am in Russia, no
matter where I am around the world, they always ask me about
our freight rail. And, depending on where I am, whether I am in
Europe, or someplace, I am asking them about their passenger
rail.
So thank you again all for your testimony.
And Mr. Chairman, I yield back the balance of my time.
Mr. Denham. Thank you.
Mr. Cummings, you are recognized for 5 minutes.
Mr. Cummings. Thank you very much, Mr. Chairman. I
apologize for getting here so late. I was in another hearing
where I am ranking.
I wanted to express my condolences to those who were
injured in last night's terrible accident, to the families of
the victims who died.
I also want to express my strong support for Amtrak. Tens
of millions of passengers ride the Northeast Corridor every
year, including me, as we pass through Penn Station in my
district in Baltimore. Amtrak is an essential component of our
Nation's transportation infrastructure. Sadly, Republicans on
the House Appropriations Committee have proposed cutting
capital funding for this service by 25 percent in fiscal year
2016.
While we cannot speculate on the causes of last night's
accident, the media reports indicate that it occurred in a
sharp curve. And there are many such curves and tight turns
along this very old corridor. We would never find it acceptable
to operate the Congress using 19th-century technology, and yet
we continue to operate in many stretches of the Northeast
Corridor under 19th-century infrastructure. Rather than cutting
our investments, we should be expanding them and taking all
steps necessary to bring the Northeast Corridor into a state of
good repair.
Now, Mr. Hamberger, can you discuss the trends you have
seen in the rail industry's investment in infrastructure both
during and after the financial crisis, and have railroad
investment trends changed in these years?
Mr. Hamberger. Thank you, Mr. Cummings, and you were not
here earlier, but I do want to associate myself with your
remarks about--as I did earlier, the tragedy last evening. The
very interesting chart, which I can provide for the record,
what we saw in 2008, 2009, and 2010, was a very minor drop off
in the amount of capex that the industry put into the network.
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If you go back to 2002, the previous recession, 2001 and
2002, we saw a dramatic dropoff. When the economy came roaring
back, we were not ready for it, and I think what our members
individually decided was why there was some decline, about a 10
percent perhaps, if memory serves, that there was a need to
continue to invest. Many of our members kept the employees that
they furloughed on part-time status so that they continued to
be qualified to be called back and continued to receive their
benefits so that those investments continued to be made.
Now, the service disruptions of 2013 and 2014 would
undercut my argument that we were ready, but there were a lot
of factors that went into that service challenge. But we were--
we took the money that we were earning and put it back into the
network the same as we are doing now at record amounts.
Mr. Cummings. Now, Ms. Miller, you wrote in your testimony
in July, the Surface Transportation Board will hold a hearing
to explore issues pertaining to the concept of revenue
adequacy. You also wrote that revenue adequacy is an economic
concept that describes whether a carrier is earning sufficient
revenue to cover its cost and earning reasonable return. And so
you indicated that the Board makes the determination about
revenue adequacy annually, is that right?
Ms. Miller. That is correct.
Mr. Cummings. You also wrote that the Board is beginning to
see that some of the Class I railroads are becoming revenue
adequate across consecutive years. Can you explain how revenue
adequacy is calculated and is that threshold of investment and
profit that----
Ms. Miller. No, I think you meant to direct that to the
professor at the end of the table.
Mr. Cummings. Oh, I am sorry, Professor.
Ms. Miller. No, no, I am sorry. I am just teasing you
because----
Mr. Cummings. OK.
Ms. Miller [continuing]. This complicated exercise----
Mr. Cummings. I am tired, so don't confuse me.
Ms. Miller. I am sorry.
Mr. Cummings. It has been a long day already. Go ahead.
Ms. Miller. No, I have my cheat sheet----
Mr. Cummings. OK.
Ms. Miller [continuing]. On how it is calculated. I don't
know that we need to go into, you know, the----
Mr. Cummings. But you see what I am getting at? I am trying
to figure out, you know, when we talk about the adequacy, I am
trying to figure out what the threshold is, and how do we
measure that? Do you follow me?
Ms. Miller. Yes, I do follow you, and so I hope the
professor won't be totally offended by the way I am going to no
doubt make a mess of his economics. But when we are looking at
revenue adequacy, we are not looking at the question of, are
railroads profitable? It is a different question. The question
is, can they attract adequate capital? Because we want them to
be able to attract the capital to continue to expand as they
have been. So what we are looking at is a little different
question. What the Board does now is it calculates a cost of
capital and then does a comparison between what the railroads--
what their revenue is against that cost of capital. And if it
is greater than the cost of capital, we would say, for that
year, they are revenue adequate.
What we are also trying to determine, and one of the
reasons we are going to have the hearing is if you wanted to
declare a railroad revenue adequate, should they be revenue
adequate for 1 year? Should it be 5 years? Should it be over
some period of time? What is that period of time? And so how do
we make those determinations? And then, more importantly still,
I think the question on the table is, if we concluded there is
a railroad that is revenue adequate, does that say anything
about how they should be economically regulated? Should it
change because they are now in a changed circumstance of
revenue adequacy? And those are the questions we are going to
be exploring in our hearing in July.
Mr. Cummings. I see my time is expired.
Thank you, Mr. Chairman.
Mr. Denham. Thank you, Mr. Cummings.
And thank you to each of you that came to testify today. If
there are no other questions, I would ask unanimous consent
that the record of today's hearing remain open.
Mr. Hamberger. Mr. Chairman, could I possibly, at the risk
of offending you, end today's hearing on an upbeat note,
perhaps a kumbaya moment between Mr. Dooley and myself? You may
not have noticed in this morning's Washington Post, page 11,
that the plastics industry is pumping out jobs. A report coming
out of the ACC today, $130 billion of investment over the next
5 years in the U.S. That is good news for our jobs. It is good
news for the American economy, and I trust it is good news for
the railroad because we will get more business from Mr. Dooley.
But congratulations to you and your members. It is a very
upbeat note and I appreciate you allowing me to put it into the
record.
Mr. Denham. Thank you. We would ask that each of our
witnesses be provided questions--unanimous consent that the
record remain open for 15 days for any additional comments and
information submitted by Members and witnesses to be included
in today's record.
Without objection, so ordered. I would like to thank,
again, each of you for being here to testify today. If no
Members have anything to add, this subcommittee stands
adjourned.
[Whereupon, at 12:27 p.m., the subcommittee was adjourned.]
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