    [Senate Hearing 115-586]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 115-586

        HOW SMALL BUSINESSES BENEFIT FROM SMART RAIL SHIPPING REGULATION

    =======================================================================

                                 FIELD HEARING

                                   BEFORE THE

                          COMMITTEE ON SMALL BUSINESS
                              AND ENTREPRENEURSHIP
                              UNITED STATES SENATE

                         ONE HUNDRED FIFTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                               NOVEMBER 16, 2018

                                   __________

        Printed for the Committee on Small Business and Entrepreneurship

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

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

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
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                COMMITTEE ON SMALL BUSINESS AND ENTREPRENEURSHIP

                         ONE HUNDRED FIFTEENTH CONGRESS

                                  ----------

                        JAMES E. RISCH, Idaho, Chairman
                  BENJAMIN L. CARDIN, Maryland, Ranking Member
    MARCO RUBIO, Florida                 MARIA CANTWELL, Washington
    RAND PAUL, Kentucky                  JEANNE SHAHEEN, NEW HAMPSHIRE
    TIM SCOTT, South Carolina            HEIDI HEITKAMP, North Dakota
    JONI ERNST, Iowa                     EDWARD J. MARKEY, Massachusetts
    JAMES M. INHOFE, Oklahoma            CORY A. BOOKER, New Jersey
    TODD YOUNG, Indiana                  CHRISTOPHER A. COONS, Delaware
    MICHAEL B. ENZI, Wyoming             MAZIE K. HIRONO, Hawaii
    MIKE ROUNDS, South Dakota            TAMMY DUCKWORTH, Illinois
    JOHN KENNEDY, Louisiana
              Skiffington E. Holderness, Republican Staff Director
                     Sean Moore, Democratic Staff Director

                                C O N T E N T S

                                  ----------

                               Opening Statements

                                                                       Page

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

                                   Witnesses

    Amar, Renee, Director, Small Business, Louisiana Association of
      Business and Industry (LABI), Baton Rouge, LA..................     4
    McIntosh, John, Executive Vice President, Olin Corporation,
      Clayton, MO....................................................    10
    Gulfo, Lyra, Rail Category Manager, Rail Logistics, Solvay
      America, Inc., Houston, TX.....................................    24
    von Dobeneck, Ailsa, Director of External Affairs, New Orleans
      Public Belt Railroad, New Orleans, LA..........................    30
    Roberti, Paul, Chief Counsel, Pipeline and Hazardous Materials
      Safety Administration, U.S. Department of Transportation,
      Washington, DC.................................................    36

                              Alphabetical Listing

    Amar, Renee
        Testimony....................................................     4
        Prepared statement...........................................     7
    Association of American Railroads
        Statement dated November 16, 2018............................    58
    Gulfo, Lyra
        Testimony....................................................    24
        Prepared statement...........................................    26
    Joint Chemical Association
        Testimony dated November 16, 2018............................    69
    Kennedy, Hon. John
        Opening statement............................................     1
    McIntosh, John
        Testimony....................................................    10
        Prepared statement...........................................    15
    Roberti, Paul
        Testimony....................................................    36
        Prepared statement...........................................    38
    von Dobeneck, Ailsa
        Testimony....................................................    30
        Prepared statement...........................................    33

        HOW SMALL BUSINESSES BENEFIT FROM SMART RAIL SHIPPING REGULATION

                                  ----------

                           FRIDAY, NOVEMBER 16, 2018

                          United States Senate,
                            Committee on Small Business
                                          and Entrepreneurship,
                                                       New Orleans, LA.
        The Committee met, pursuant to notice, at 10:00 a.m., at
    the Port of New Orleans Auditorium, 1350 Port of New Orleans
    Place, New Orleans, LA 70130, Hon. John Kennedy, presiding.
        Present: Senator Kennedy.

      OPENING STATEMENT OF HON. JOHN KENNEDY, A U.S. SENATOR FROM
                               LOUISIANA

        Senator Kennedy. Alright, folks, I'm going to call this
    meeting of the--our field hearing of the U.S. Senate Committee
    on Small Business and Entrepreneurship to order.
        We'll start, if you will join me, standing for the pledge.
        [All recite the Pledge of the Allegiance.]
        Thanks everybody for coming. Thanks, in particular, to our
    panelists here.
        I'm looking forward to this. I hope we all learn something
    today.
        I don't want this to be too formal. The way I thought we
    would approach it is I want to have a few remarks. They will be
    limited.
        And then I'm going to introduce our panelists.
        We had originally thought we would do two panels, but that
    didn't make much sense to me. So, we have a reasonable number
    of folks with expertise here that we would want to hear from.
    So, I just said, well, we'll do it all in one panel.
        After I give my opening remarks, we'll start from my right
    and go to the left.
        I have, I thank all of our witnesses, if you will. It
    sounds too formal, our panel members, for submitting their
    written testimony ahead of time. It was very good. I learned a
    lot reading it.
        I want to thank everybody for coming.
        Throughout, and we all know this, throughout American
    history railroads have helped our country grow and have helped
    our economy flourish. We wouldn't have the strongest economy of
    all of human history without our railroads.
        I deeply appreciate Chairman Risch and Ranking Member
    Cardin of the United States Committee on Small Business and
    Entrepreneurship for allowing me to take the Committee on the
    road to talk about these important issues today. I wanted to
    hear directly from our friends in the railroad industry, our
    friends in government, our shippers and our small business
    people about the issues that they're facing as they rely on
    America's railroads for commercial success.
        Before I begin, I want to thank Meredith West, Louisiana
    native, our Committee's Deputy Staff Director. Where's
    Meredith?
        Right there, right in front of them, for all her hard work
    as we prepared for this hearing.
        We all had a little trouble getting out of Washington, DC.
    When it snows there, everybody panics and it unexpectedly
    snowed yesterday and they ran out of fluid to de-ice the planes
    at the airport. So, some of us had a little trouble getting in
    and I want to thank everybody for their perseverance.
        I also want to thank and with us today, we have Louisiana
    native, Kathryn Eden.
        Kathryn, there you are, who works for Chairman Risch.
        Sean Moore. Sean, are you? There's Sean. Sean is the Staff
    Director for Ranking Member Cardin.
        And I want to thank all of them for their hard work in
    putting this together.
        I want to thank my staff: Marcie, Cassie. Raise your hands.
        Preston Robinson, my Chief of Staff is here.
        Ross White. Where's Ross? Ross is here.
        I saw Michelle come in. Michelle is in the back, Michelle
    Millhollon.
        I want to thank them for all their hard work in putting
    this together as well.
        For many small businesses across this country, rail
    transportation is a key ingredient to their success. Railroads
    play a vital role in many industries in Louisiana. I'm thinking
    agriculture, crude oil, chemicals, water infrastructure.
        Our railroads aid in sending and receiving goods and
    supplies.
        Our railroads create high-paying jobs in Louisiana's towns.
        Our railroads generate revenue for the local and the State
    economy and we're grateful for every single penny.
        I think in 2017 alone, rail supported roughly 650 thousand
    jobs in Louisiana, carried 174 billion dollars in freight
    worldwide and those, of course, our job figures are not just
    for Louisiana. They're from America that those are really
    impressive numbers. And I want to thank our friends in the
    railroad industry.
        I called this hearing because I want to have a very frank
    discussion today. I want to encourage, after we're all done,
    this is off script a little bit but people in the audience have
    comments they want to make. I certainly would like to hear
    them.
        I want to talk about some of the issues facing both our
    shippers and our railroads.
        Our witnesses today, for the most part, this isn't their
    exclusive area of expertise, but they certainly know the
    relationship between small businesses and rail shipping, first-
    hand.
        They use railways to grow their businesses. Small
    businesses rely substantially on railroads to create jobs and
    help their communities thrive and I can think of no better way
    for Congress to grab an accurate understanding of the benefits
    and challenges facing Louisiana small businesses than by
    lending these folks an ear.
        Each and every year Louisiana railroads carry about 121
    million tons of freight.
        Let me say that again.
        Every year, Louisiana railroads carry about 121 million
    tons of freight. They're important to our economy.
        Throughout our State, farm servicers, manufacturers, port
    authorities, depend on efficient modes of transportation to get
    their cargo where it needs to go. Products grown and produced
    in Louisiana end up on the shelves of Rouses and other grocery
    stores across America. Small businesses and consumers alike use
    railroads to keep these goods affordable.
        For those same farmers and in some cases, chemical
    producers, as well as other Louisiana businesses, frankly,
    large and small, the issue of regulatory authority is
    critically important. I want to make sure that we spend some
    time today talking about smart regulations that will help our
    businesses thrive and keep our communities safe.
        For example, and we'll be talking about this. I know that
    the latest proposed safety regulations on tank cars that ship
    Toxic Inhalation Hazards or TIH materials as we call them, will
    impact job creators all throughout Louisiana.
        I'm a big fan of our Transportation Secretary. I sent her a
    letter, Secretary Chao, a letter last year asking her to move
    forward with a regulation to determine a phase-out period for
    tank cars that don't meet the latest safety standards.
        She and I worked very well together on this issue, as we
    have on others. She and I worked with the shippers and our
    railroads and I'm pleased to say that an agreement was reached
    on a reasonable phase-out date.
        This new phase-out date will make sure that safety is a top
    priority. That's our first and foremost concern while also
    saving shippers and tank car owners about 130 million dollars.
        The Department of Transportation is working on noticing a
    proposed rule and I'm looking forward today to hearing an
    update on--of where this stands. We need it like, yesterday.
        If small businesses across Louisiana and America are going
    to succeed, they need to be able to transport their materials
    and goods safely, reliably, but also affordably. And that's why
    it's vital to Congress and while I don't speak for her, I think
    it's vital, it would be safe to say, that it's vital to the
    Trump Administration that we continue working together to
    promote competition and grow our economy.
        Our panel today.
        Our panel is made up of representatives from a few of
    Louisiana's many industries. I'm looking forward to hearing
    their testimony.
        Unfortunately, we don't have time today to hear from every
    single business that ships by rail so we tried to pick a
    representative sample, if you will. But our witnesses today are
    key leaders in their communities and industries and I know we
    will all find their testimony to be interesting and
    informative.
        I do plan to take what I hear today back to the rest of the
    Committee and talk to my colleagues to make sure that all the
    concerns expressed today from our panel members and from any of
    you here who express concerns from the audience so we can
    decide what or any legislation we should pursue.
        Alright, witness testimony.
        I'm going to introduce our panel today, in no particular
    order.
        I'm trying to start with Renee.
        Ms. Renee Amar, did I say that right?
        Ms. Amar. Absolutely.
        Senator Kennedy. Renee is Director of Small Business at the
    Louisiana Association of Business and Industry which, of
    course, is no stranger to most of us.
        Renee is the Small Business Council Director and Healthcare
    Council Director for LABI.
        And in the role as Deputy Director of Political Action, she
    fundraises for LABI's four pacs, recruits candidates for office
    and develops endorsements.
        Prior to joining LABI in 2013, Renee spent eight years as
    the Director, the State Director, for the National Federation
    of Independent Businesses.
        She also worked for Louisiana Hospital Association for four
    years in the Governmental Affairs Department.
        She holds a Bachelor's Degree from Southeastern Louisiana
    University and a Master's Degree from Louisiana State
    University.
        She lives in Baton Rouge with her husband and three
    children.
        Renee, we'll start with you and then we'll go next to John
    and I'll introduce John when you've completed your remarks.
        Ms. Amar. Absolutely.
        Senator Kennedy. What I thought we would do is just let
    everybody speak and then I'm going to go back and ask some
    questions and I would welcome the audience, audience questions
    or participation as well. We'll just talk about the issues that
    our esteemed panelists will raise, okay.
        Renee, the floor is yours.

     STATEMENT OF RENEE AMAR, DIRECTOR, SMALL BUSINESS, LOUISIANA
      ASSOCIATION OF BUSINESS AND INDUSTRY (LABI), BATON ROUGE, LA

        Ms. Amar. Thank you. Good morning, everyone. As Senator
    Kennedy said my name is Renee Amar with the Louisiana
    Association of Business and Industry.
        In this beautiful weather I don't understand that I woke up
    this morning with allergies and it's like somebody punched me
    in the face. So, I apologize for my voice and my eyes and
    everything before I even get started.
        Senator Kennedy, on behalf of the Senate Committee on Small
    Business and Entrepreneurship, thank you so much for inviting
    the Louisiana Association of Business and Industry to testify
    today at this hearing, ``How Small Businesses Benefit from
    Smart Rail Shipping Regulation.''
        Hopefully, once this hearing is completed, all the parties
    involved can come to a reasonable and timely solution for this
    smart rail shipping regulation that is safe, reliable and
    affordable for the small business community.
        My name is Renee Amar, as I said, and I am the Director of
    Small Business for LABI. LABI, if you don't know, is the
    State's Chamber of Commerce and manufacturing association. We
    work very closely with the National Association of
    Manufacturers and the U.S. Chamber of Commerce. We are the
    State's largest business organization, and a voice for the
    principles of free enterprise in Louisiana.
        We represent the views and interests of the Louisiana
    business community in the political, legislative, judicial and
    regulatory processes.
        We currently have 2,400 members that represent more than
    320,000 employees. Of those 2,400 members, more than 70 percent
    are small business owners defined as having under 100
    employees.
        We get tagged a lot of time, this is not in my testimony,
    but for being the voice for big business, but obviously, the
    lion's share of our members are small business owners. These
    are your farmers, your retailers, both grocery and clothing, as
    Senator Kennedy said, we obviously have large manufacturers as
    our members, but we also have small manufacturers as our
    members.
        And in full disclosure, we have railroads as our members.
    And so, I'm going to have to kind of thread the needle a little
    bit today, understanding, you know, both sides of this issue.
        Specifically, as the Small Business Council Director, my
    job is to advance ideas that help the free market grow in
    Louisiana which in turn, allows small business owners to
    compete in a healthy environment. We understand the vital role
    that the small business community plays in Louisiana's economy
    and we equally understand that the growth of the economy in
    Louisiana greatly depends on maintaining a healthy and thriving
    industrial base, coupled with a thriving small business
    community. Also, having cost effective shipping options is a
    vitally important piece of the puzzle for running a successful
    small business of any type.
        It's clear then that when rail is healthy, profitable and
    productive, that it's good news for all of us and of course,
    that's good news for the small business community. And, that
    goes for every sector and every small business as they are
    consumers in general and benefit from the savings and improved
    service generated by a competitive, innovative transportation
    sector.
        Looking ahead, it is important that the best policy
    environment be established to incentivize entrepreneurship,
    investment and innovation that drives growth across the entire
    economy, including when it comes to transportation. Any relapse
    into overregulation, in turn, would generate negatives, such as
    higher costs and reduced service, for the small businesses in
    the broader railroad sector, in sectors that serve the
    railroads, and in the many sectors served by railroads and of
    course, for consumers in general.
        Pointing to the issue of rail and regulation, after much
    has been said and done, both sides of rail and industry have
    come together and reached common ground and we believe that is
    the best conclusion to come to as it works for the rail
    companies, it works for industry and ultimately, it works for
    the consumer.
        The consumer benefits from years of railroad deregulation
    and not overregulation to the tune of billions of dollars that
    come from lower priced goods resulting from lower
    transportation costs.
        In conclusion, we always, LABI, myself, have cautioned and
    always will caution that when government does issue regulations
    because there truly is a safety or health concern, it should be
    done with the business owners' input and with the lightest
    touch from government as humanly possible.
        Thank you today for allowing me to come and participate in
    this hearing.
        [The prepared statement of Ms. Amar follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Kennedy. Thanks, Renee.
        Mr. John McIntosh. John is our next panelist.
        John is the Executive Vice President, Chemical Synergies
    and Systems for Olin Corporation.
        In this role, as Executive Vice President, John has the
    overall operational responsibility for chloralkaline products
    and chemical distribution. He also has corporate responsibility
    for information technology.
        John joined Olin in 1977. He's been appointed to several
    roles in manufacturing and operations since then, including
    Vice President of Operations for Specialty Chemicals, Vice
    President of Manufacturing and Engineering, President of a
    Products Division, Senior Vice President of Operations, Senior
    Vice President of Chemicals and Executive Vice President of
    Chemicals and Ammunition.
        Mr. McIntosh is currently Chair of the World Chlorine
    Council which, as you know, is an international consortium of
    trade associations.
        John is a graduate in chemical engineering from the
    University of Missouri, some say Missouri, I know.
        My roommate in law school went to ``Missou,'' as he called
    it and he told me always to say, ``Missoura.'' But Senator
    Blunt, my friend from Missouri, says it's Missouri, but John
    can tell us what's right here. He has a very impressive
    background and ``Missou'' is a great school.

      STATEMENT OF JOHN McINTOSH, EXECUTIVE VICE PRESIDENT, OLIN
                        CORPORATION, CLAYTON, MO

        Mr. McIntosh. Thank you, Senator.
        I was always taught that if you lived south of the Missouri
    River in the Ozarks it was Missouri and if you lived north, it
    was ``Missoura.'' There's no truth to that either, that was
    just----
        [Laughter.]
        Senator, thank you for having this hearing and for inviting
    us to testify.
        As the Senator said, my name is John McIntosh. I am an
    Executive Vice President for Olin Corporation.
        I have worked for many different roles for Olin since I
    started with the company in 1977 and I've been involved in
    transportation policy or transportation operations for much of
    that time.
        I also want to express my gratitude to the Senator for his
    part in the agreement that we ultimately reached on a solution
    to the phase out of tank cars. His part in that was much more
    than his remarks would have indicated and we would not have
    been able to get to the point we got to without his
    intervention and his stewardship of that issue through, you
    know, through the process that we went through.
        All of those efforts, including the things that he's talked
    about, obviously, and the things we'll talk about in this
    hearing, will result in economic benefit for small businesses
    across Louisiana and across the entire country.
        Olin is a chemical company, ships about 45,000 rail cars
    annually, and we take pride in doing that safely. We've been
    awarded the American Association of Railroad's Grand Slam
    safety transportation award for the last three years. Winning
    once is an accomplishment. Winning three years in a row is
    truly an exceptional feat and within our company it's one of
    the demonstrations we have of our commitment, not only to
    distribution safety but to product safety and to the safety of
    our workplaces.
        Olin is the world's largest chlorine producer, the world's
    largest manufacturer of epoxy and as the Senator said, a
    leading ammunition company selling product under the Winchester
    brand.
        We have nearly 700 employees that work, employees and
    contractors that work in our two sites in Louisiana, in
    Plaquemine and St. Gabriel. Louisiana is critical to our
    network of facilities and our portfolio of customers that we
    serve. We have plans to invest in the State because these are
    both viable locations with many advantages and opportunities as
    we look forward.
        We are not a small business, obviously. But if you look at
    our portfolio of customers, you'll find that the majority of
    our customers are, in fact, small businesses and they rely on
    timely and economic delivery of chlorine and chlorine related
    chemistries, products made with chlorine, to do their business.
    And so, that's what's key to this. Chlorine is used everywhere.
    It's ubiquitous. It's involved in things we take for granted
    every day.
        It makes sure our drinking water is safe. It makes sure
    that restaurants, nursing homes, hospitals, anyplace where
    health care is the object that all of the sanitization and
    disinfection chemicals that are necessary to safely operate in
    those facilities, in essence, come from chlorine or a
    derivative of chlorine.
        You all encounter our products every day, breweries, food
    producers, hair salons, dry cleaners, thousands of other
    businesses use our products and derivative products is just a
    raw material supplied for their everyday business.
        Unfortunately, for shippers like Olin that have only access
    to only one serving railroad, in other words, we do not have
    competition for the railroads that we can look to, to move
    product for us, what we encounter is, in essence, a natural
    monopoly that exists because of what we believe are overly
    permissive laws and regulations.
        Our rate increases, if you look historically, for the last
    15 years have far exceeded the rate of inflation on an annual
    basis and our service levels have not matched that kind of rate
    profile. Our surface levels have been in continuous decline
    with periodic catastrophic service emergencies. Unfortunately,
    we have virtually no recourse under current law because the
    checks Congress put in place, historically went all the way
    back to the Stagger's Act, are simply not functional in today's
    environment.
        Olin is one of the few chemical companies who has availed
    itself of the rate review process or rate reasonableness
    process that is under the jurisdiction of the STB, the Surface
    Transportation Board. We spent millions of dollars and many
    years trying under that protocol for rate reasonableness to put
    together, in essence, a case that said we were being
    overcharged from a rate standpoint.
        We, obviously, were not successful or we wouldn't be
    talking about the shortcomings of that protocol.
        To say the process is a disincentive for companies to avail
    themselves of this rate reasonableness process with the STB is
    an understatement.
        At the end of this process, my interpretation, having been
    the one that convinced the company to spend these millions of
    dollars in search of more reasonable rail rates, my
    interpretation of that decision and all that went into it is
    that the current STB process for rate reasonableness will never
    allow a shipper, just because of the protocol and the way that
    it's executed, to win a rate case.
        Until the STB makes serious reforms to their processes, we
    really don't have a recourse for great reasonableness. And as I
    mentioned earlier, if you're served by only one railroad, you
    do not have competition as an economic check and balance on the
    rates that the railroad is charging.
        To make matters worse, in recent years we've also
    experienced serious cuts in services and investment in the rail
    network, not universally, but in some areas, in some
    geographies. And you know, that puts further pressure on our
    ability to rely on and the small business customer at the end
    of the supply chain, to rely on, you know, our ability to serve
    them and consequently, their ability to produce the products
    that are for the markets that they serve.
        In some cases, this can mostly be traced back to a trend
    that began when activist investors installed Hunter Harrison as
    CEO of CSX Railroad. The resulting change in the operating
    practices at CSX created serious service breakdowns, not only
    for us, but for really, anybody else that was using them as a
    primary rail carrier.
        Obviously, as I said earlier, at the other end of this
    supply chain is a customer, whether it's a large company, a
    small company, at the other end of the supply chain and those
    people, ultimately being the customer facing part of the supply
    chain are impacted as well.
        Anecdotally, during the worst of this crisis, we had rail
    cars that took 40 days to go from the southeast U.S. to the
    northeast U.S. We lost track of rail cars. The railroads didn't
    know where rail cars were that we had entrusted them to ship on
    a timely basis to an end point.
        We have installed GPS trackers on our rail cars. We can
    typically always find out where our rail cars are, but that, in
    and of itself, was not enough to counter the fact that we just
    had a slowdown in rail traffic on their system and it was so
    overwhelming that it took a long time to work ourselves out of
    it.
        Most of us have had consumer-related, you know, service
    problems like that, but when it's as extensive as this one was,
    it creates a level of frustration.
        I will acknowledge that the situation with CSX, you know,
    has improved, not back to the baseline we started, but it's
    improved with another change in management, but the damage to
    the economy, the damage to the customers, both primary and
    downstream customers, was significant and the sad part is there
    were no consequences, virtually, for this kind of service slow
    down.
        Most other railroads, because there appears to be a
    potential opportunity and no downside, are migrating towards
    this new operating model which we fear will have similar
    impacts in geographies across the country where these other
    railroads are going to operate.
        When you have a network that's already thinly resourced,
    these kinds of events put a serious strain on that industry's
    ability to react. Service problems are not just inconvenient,
    they are threatening to the entire framework of our customers.
        And anecdotally, there are many examples.
        Our plants run 24/7 and because of that it's a fine balance
    for us between how much we produce which is reliant, almost
    totally, on how much we can ship and ship reliably. And when
    that balance gets disrupted, then even us, as the primary, you
    know, manufacturer in a supply chain process, gets impacted. If
    a customer doesn't receive a product when they expect, then
    they're impacted as well.
        In some cases when you're talking about chemicals that
    aren't chlorine, we can step in with alternate modes of
    transportation. We can, at great expense, move trucks, but
    that's not a long term and sustainable option to the importance
    of rail transportation in our supply chain.
        In this last CSX service issue that I spoke to, we had
    customers all up and down the eastern U.S. which is
    predominately CSX's service territory, that either were shut
    down because they couldn't get product or shut down because,
    you know, the rail car system was just broken. Cars were not
    being returned to be reconditioned and refilled and shipped
    again. These anecdotal incidents, you know, happened in every
    State in the eastern U.S. that we serve customers.
        And so, we believe the STB, and have said this on numerous
    occasions, should look at service requirements as part of the
    railroad's common carrier obligation.
        The Senator mentioned the Tank Car Committee. There have
    been issues with the Tank Car Committee. He mentioned one about
    the Tank Car Committee standards that were unilaterally chosen
    to be changed by the Tank Car Committee which is an industry-
    controlled subcommittee that's part of the American Association
    of Railroads organization.
        We're vested in policies that focus on safe and reliable
    transportation of material by car. We own or lease our entire
    fleet. We have a huge investment tied up in these assets.
        And we believe that the rulemaking authority for what
    standards are appropriate for the assets we use is an authority
    that belongs with DOT, not with an industry-controlled,
    railroad industry-controlled, Tank Car Committee.
        We would ask the Committee's assistance in requesting the
    DOT grant the rail shipper's petition, filed more than two
    years ago, to initiate a rulemaking that would allow for
    discussion on Tank Car Committee reform and on the standard
    setting by that group.
        We also believe that DOT needs to be the standard-setting
    agency and we would like to suggest that legislation should be
    enacted to make that.
        The Tank Car Committee is imposing many new requirements on
    us, not only, not just tank car standards. They're currently
    involved in an activity to update standards around
    certification of tank car facilities, otherwise known as
    Appendix B.
        Appendix B is driven by, well, if these new regulations
    are, in essence, happen, then it's going to change the dynamic
    around how many times rail cars have to go back to shops for
    repairs versus having those repairs done on the site which is
    how it's been handled historically for years and years.
        This new regulation will take rail cars out of service. It
    will impact the nature and the productive use of the fleets of
    the shippers and ultimately it will impact the small business
    customer who relies on this supply chain to work right.
        We believe that the DOT and FRA should issue an
    interpretation that minimizes the regulatory burdens of
    Appendix B without compromising the Department's, you know,
    highest priority standard of safety. We support that, but the
    fact that this has all been done just with informal, non-
    rulemaking activities has led to this review of Appendix B has
    created a potential problem for us.
        Senator, again, I want to thank you for this hearing today.
    You've been an ally of the shipper community and we recognize
    that. I think the small business community in Louisiana
    recognizes that as well.
        We will continue to look forward working with you and your
    staff.
        Thank you, sir.
        [The prepared statement of Mr. McIntosh follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Kennedy. Thank you, John.
        Alright, Ms. Lyra Gulfo. I said that right, yes?
        Ms. Gulfo. That's right.
        Senator Kennedy. Lyra is our next panelist. She is the Rail
    Category Manager with Solvay America. Is that right?
        Ms. Gulfo is responsible for rail freight and rail car
    leasing for Solvay business units in the United States, Canada
    and Mexico.
        She's been in the chemical industry since 1998. She's
    previously held supply chain and logistics management positions
    in a variety of industry sectors and across different modes of
    transportation.
        Ms. Gulfo is based in Houston where Lyra is a member of the
    Greater Houston Partnership Women Business Alliance. She
    recently joined the National Industrial Transportation League
    Board as a member of the rail transportation committee.
        Ms. Gulfo earned her Bachelor's Degree in industrial
    engineering from, help me with this.
        Ms. Gulfo. Universidad del Norte.
        Senator Kennedy. That's right.
        [Laughter.]
        In Columbia.
        She is very experienced and very knowledgeable about the
    issues that face our railroads and their shippers and the
    challenges for small business people.
        I'm looking forward to hearing her testimony and I thank
    her for being here.
        And I was in Colombia about eight months ago. It is a
    beautiful country.

    STATEMENT OF LYRA GULFO, RAIL CATEGORY MANAGER, RAIL LOGISTICS,
                   SOLVAY AMERICA, INC., HOUSTON, TX

        Ms. Gulfo. Thank you, Senator.
        Thank you, Senator, for inviting me to testify here today.
        Like you mentioned, my name is Lyra Gulfo and I am the Rail
    Category Manager for Solvay.
        For those of you who don't know, Solvay is a multi-
    specialty advanced materials and chemical company. We are
    committed to developing chemistry that addresses key societal
    challenges. We partner with our customers to aim the way across
    multiple diverse global markets.
        Currently, our products are using planes, cars, smart and
    medical devices, batteries, oil and mineral extraction, among
    many other applications that promote sustainability.
        Solvay first operated in the U.S. in the early 1890s and we
    currently have 6,400 employees across 44 industrial sites,
    eight Formulation Centers, seven R and I centers, three
    headquarters in North America, Alpharetta, Georgia; Houston,
    Texas; Princeton, New Jersey. And here in Louisiana our
    footprint includes a site in Baton Rouge and a site in
    Shreveport. We have 22 union sites and are a net exporter of
    the U.S.
        Our site in Shreveport is currently investing a million
    dollars in it's rail infrastructure which is why we believe
    that rail transportation, it's a critical component to the U.S.
    development.
        However, the current regulatory environment stifles growth
    by reducing access to transportation, non-competitive pricing
    and regulatory rules that are too taxing on the chemical
    industry.
        Like how was mentioned, I would like to offer a couple of
    examples on how the current environment has impacted businesses
    like mine.
        Solvay used to have a site in Martinsville, Pennsylvania,
    that consumes about 40 million pounds of ethylene oxide, a TIH,
    over the rail with increased regulatory burdens on rail
    transportation and the ever-increasing rail rates, the site
    became non-competitive and closed up two years ago.
        Unfortunately, shippers don't have a viable option like
    John mentioned to challenge these rates. Current rate cases
    take an average three and a half years and over five million
    dollars to complete which is not feasible for small- and
    medium-sized enterprises.
        Even the STB has acknowledged that the current rate review
    process is broken which is why we are calling on Congress to
    continue to press STB for meaningful reform for this process
    today.
        Congress should continue to provide this oversight of this
    issue even after the task force has completed.
        On the service issue I would like to share some of our
    instances that we also suffer from in the south. We have a
    couple of customers whose home is--Georgia where they're
    captive to one Class One railroad. As a result, they don't have
    access to competition. During many changes that took place
    earlier this year, transit times doubled--increased and
    switchings were missed. And as a result of that one of our
    customers was faced with a stuck car situation impacting the
    production lines on two separate occasions.
        Interestingly, there is an interchange station which is
    open to two Class One railroads, five miles away from this
    location. With competitive switching Solvay estimates that we
    could have not only saved our customers competitively, but we
    could have also provided better service and delivery
    performance to them.
        Unfortunately, these examples are too common and we are
    very grateful that Congress has taken an important step to pass
    regulation on how the STB operates and now STB is making much
    needed changes to adopt free market principles and do a better
    job resolving these longstanding rail freight problems.
        We believe that Congress should continue to encourage the
    Board to support common-sense reforms such as competitive
    switching and alternative review methodology.
        The STB is currently considering a proposal that provides
    practical blueprinting for competitive switching. This proposal
    would allow a rail freight shipper to move their freight to
    another major railroad when access is reasonably accessible.
        Alternative Rate Review Methodology is becoming a top
    priority for the Board as current STB Chairman Ann Begeman
    mentioned. One approach, competitive rate benchmarking, offers
    a market-based alternative for STB to review so rail shippers
    that like access to competitive transportation options could
    compare their rates to benchmarks of that of competitive rail
    traffic.
        I am pleased that the Committee took the time today to
    focus on how Congress can help small businesses benefit from
    these smart regulations and I thank you for the opportunity for
    speaking to you today.
        [The prepared statement of Ms. Gulfo follows:]

        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Kennedy. Thank you. Thank you, Lyra, very, very
    much.
        Let's see. Who is next here? Ailsa.
        Ms. Dobeneck. That's right.
        Senator Kennedy. Ailsa von Dobeneck.
        Ms. Dobeneck. Perfect. Okay.
        Senator Kennedy. Alright, alright.
        Ailsa is the Director of External Affairs at the New
    Orleans Public Belt Railroad.
        Let's see. She ascended her role with the New Orleans
    Public Belt Railroad with the transition of the railroad to the
    Port of New Orleans in February 2018, not that long ago, where
    she was serving as a Public Affairs Consultant.
        As Director of External Affairs, also oversees the
    Community and Public Relations part, Government Affairs,
    Corporate Communications.
        She's previously served as Government Relations Manager for
    Norfolk Southern Railway in Washington, DC.
        She began her career in Panama City and Singapore where she
    worked in the maritime industry.
        She has a Master's Degree in International Relation from
    King's College, London, very, very impressive, a Bachelor's
    Degree in International Relations and a Bachelor's Degree in
    German from the University of Georgia.
        The floor is yours.

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

        Ms. von Dobeneck. Don't hold the University of Georgia
    against me. LSU showed us who was boss the other week, so.
        [Laughter.]
        Senator Kennedy. I'm sure it's a great school, great
    school.
        Ms. von Dobeneck. Thank you very much for the opportunity
    to speak today. I wanted to welcome everybody to the Port of
    New Orleans.
        As of February of this year, the New Orleans Public Belt
    transition from the City of New Orleans to the Port of New
    Orleans. So, now we're one big happy family and the synergy
    really provides unparalleled opportunities for growth for New
    Orleans businesses, Louisiana businesses and beyond. So, thank
    you for the opportunity for today.
        I want to tell you a little bit about the New Orleans
    Public Belt Railroad. We have been here for over 110 years.
    We're very unique. By rail car volume, New Orleans is actually
    the Nation's fourth largest rail gateway.
        We're a Class Three switching railroad and our primary
    mission is to serve the Port of New Orleans and local industry.
        We're a neutral carrier. We have 26 miles of mainline track
    and we have direct connections to six Class One Railroads. So,
    it's quite a robust rail competition in New Orleans.
        Our Class One partners have a combined 132,000-mile network
    of track, which tie the port community and local industries
    directly to almost every major North American market. These
    direct connections give shippers in New Orleans and the
    surrounding areas the benefit of more competitive rates, faster
    transit times, and distribution to multiple markets.
        We work really closely with our Class One partners. Just as
    an aside, we have quarterly steering committees where all of
    the Class Ones come together in New Orleans and monthly
    superintendent meetings where all the Class Ones come together
    and it could be, we talk about the fluidity of the New Orleans
    gateway. We talk about joint projects. So, we really work well
    together and invest a lot in our greater New Orleans network.
        I'd like to thank the Committee for its support of the
    short line rail industry and your understanding of the positive
    impact we bring to the local community.
        Now, one of every four rail cars moving on the national
    network is handled by a short line. And we provide the first
    and last mile for a wide variety of goods from energy products,
    to industrial products, to finished consumer goods.
        Our services provide the opportunity for local shippers to
    have efficient and cost-effective access across the national
    rail network.
        At NOPB we have 175 team members and we work together to
    ensure freight is moved efficiently and safely across the city
    every day. We're a 24/7 operation. We live here, work here, and
    we are 100 percent dedicated to the success of New Orleans
    businesses and Louisiana businesses at large.
        Now, for NOPB, safety is our number one priority. We're an
    urban rail network so we're, we, kind of, follow the river and
    we go through the city. The rail industry as a whole has a
    really impressive safety record, with 99.997 percent of hazmat
    carloads moved without release caused by an incident, but we're
    dedicated to becoming even safer.
        We've made a lot of significant technological investments
    and we implemented our own operation standards across the
    industry.
        Our safety record, as an industry, makes us a good choice
    for moving hazardous materials vital to our everyday lives. In
    fact, the Federal Government requires railroads to carry
    hazardous materials under our common carrier obligation. We
    must accept, move, and handle hazmat cars by law.
        We're really pleased that the Association of American
    Railroads and members of the shipping community have found
    common ground and agreed upon an appropriate phase-out time
    period for TIH tank cars, the older ones.
        We're really, really encouraged and enthusiastic about this
    spirit of collaboration and we're confident that the plan will
    increase rail safety standards while ensuring the commodities
    reach where they need to go. And we look forward to a potential
    Notice of Proposed Rulemaking by the DOT.
        As I said, we, at NOPB, we're an urban railroad so we've
    also adopted some special operating practices for hazmat that
    meet and exceed regulatory standards. These protocols were
    recently reviewed and they cover all of our trains on the
    network. So, that includes a low speed restriction, multiple
    inspections a week and increased education programs with our
    emergency responders.
        We are as dedicated to being safe and reliable neighbors as
    we are dedicated to being a safe and reliable transportation
    option.
        I encourage everyone this morning. There was an op ed in
    the Advocate from the Small Business Entrepreneurial Council,
    their head economist there. He talked about the benefits of the
    railroads to small business. It was an interesting piece and
    how government revamp of additional regulations might be
    hurtful to small businesses. So, I encourage everybody to just
    take a look at that. That was in the paper today.
        So, I just want to thank the Committee for your time and
    for your dedication to small business and the short line rail
    industry and the rail industry, in general. And I'm happy to
    address any questions after the panel, Senator.
        [The prepared statement of Ms. Von Dobeneck follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Kennedy. Okay, thank you.
        I'm making notes here. I've got a lot of questions. Now, I
    just remembered we may have some from the audience.
        Our next panelist is the Honorable Paul Roberti. Paul is
    the Chief Counsel, Pipeline and Hazardous Materials Safety
    Administration with the Department of Transportation.
        Our Secretary of the Department of Transportation, the
    Honorable Elaine Chao, she's the best. She just--there are a
    lot of capable people in this world, but if I were going to
    pick one person in the Federal Government to get something done
    that I really needed to be done, it would be Elaine. She's a
    very bright, capable person.
        Paul was sworn in as Chief Counsel in March of 2018. He was
    most recently an Executive Director at Ernest and Young as a
    member of the Advisory Practice. He specialized in Power and
    Utilities.
        Previously, he worked in Rhode Island as a State Public
    Utilities Commissioner for eight years, as Assistant Attorney
    General and the Chief of the Attorney General's Regulatory
    Commission. He was a law clerk for the State Supreme Court and
    in the Energy Committee, Mr. Roberti has served as Chairman of
    the Subcommittee on Pipelines at the National Association of
    Regulatory Utility Commissioners.
        He served on the U.S. Department of Energy's Electricity
    Advisory Committee. He served on the Gas Technology Institute's
    Public Interest Advisory Committee. He has a degree in
    Chemistry from the College of the Holy Cross and he has a Juris
    Doctorate from Suffolk University School of Law.
        I thank him for being here, the Honorable Paul Roberti.

        STATEMENT OF PAUL ROBERTI, CHIEF COUNSEL, PIPELINE AND
     HAZARDOUS MATERIALS SAFETY ADMINISTRATION, U.S. DEPARTMENT OF
                     TRANSPORTATION, WASHINGTON, DC

        Mr. Roberti. Well, thank you, Senator Kennedy, and thank
    you for the opportunity to testify today in the great State of
    Louisiana about the Pipeline and Hazardous Materials Safety
    Administration's efforts to advance the safety of rail tank
    cars transporting hazardous materials.
        On behalf of Secretary Chao and Administrator Skip Elliott,
    I want to thank you for your leadership and personal efforts to
    improve the safety of the Nation's railroad system.
        Safety is the number one priority for Secretary Chao and
    everyone working within the Department of Transportation.
        PHMSA's mission is to protect people and the environment
    from the risk of hazardous materials by all modes of
    transportation. We achieve this mission by creating regulations
    and carrying out a comprehensive safety oversight strategy. We
    advance education and research and development projects focused
    on enhancing safety and accident prevention.
        PHMSA also provides funding and training to prepare first
    responders to mitigate hazards in the unlikely event that an
    incident occurs. Our goal is to reduce risk towards zero
    deaths, zero injuries, prevent property and environmental
    damage and avoid transportation disruptions.
        Tragic train accidents like Lac-Megantic in Quebec in 2013;
    Graniteville, South Carolina, in 2005; Macdona, Texas, in 2004;
    and Minot, North Dakota, in 2002, underscore the need to
    improve the safety of rail tank cars. We remain vigilant while
    working with industry to prevent these types of accidents from
    ever happening again.
        In the interest of time, I refer you to my written
    testimony which describes first, PHMSA's hazardous materials
    safety program and its role in preventing and mitigating
    incidents.
        Second, background about PHMSA's regulatory authority and
    the status of pending rulemakings.
        Third, PHMSA's efforts to build consensus within the
    regulated industry and our work to modernize standards and
    reduce regulatory burdens on small businesses.
        And lastly, PHMSA's efforts to finalize standards for rail
    tank cars that transport hazardous materials classified as
    toxic inhalation hazards, such as anhydrous ammonia and
    chlorine. For this class of hazardous materials, we are
    coordinating with the Federal Railroad Administration to
    resolve a number of issues that will promote their safe
    transportation on the Nation's railroads.
        As you know, Senator Kennedy, these products are essential
    for sustaining our food and water supplies and our health and
    safety depend upon their safe transportation.
        As an example of our collaboration with the Federal
    Railroad Administration and the industry, PHMSA has accepted a
    number of petitions for consideration in upcoming rulemakings
    that address the safe transportation of toxic hazardous
    materials.
        PHMSA appreciates the expertise that both the shippers and
    the rail carriers contribute to the regulatory process, as well
    as their commitment to build consensus on safety standards. A
    great example of consensus was the June 19, 2018, joint
    submission of comments by both the shippers and the rail
    carriers advocating for a mutually agreed upon phase-out date
    of December 31, 2027, for legacy tank cars.
        We are pleased that industry reached consensus regarding
    this proposed date for compliance with the final tank car
    standard.
        Moreover, on September 6, 2018, industry leaders met with
    PHMSA's leadership in Washington, DC, to reaffirm their support
    for this newly achieved consensus. They urged PHMSA to
    accelerate the time frame for completing rules that provide the
    much-needed regulatory certainty to guide the strategic
    investment decisions that are necessary to advance safety.
        In closing, the success of PHMSA's mission relies on
    continued collaboration with industry to build on the existing
    regulatory framework. We need to embrace innovative
    technologies that provide cost-effective solutions for
    improving safety, as well as continue to take steps to increase
    the level of regulatory certainty.
        We recognize that both shippers and carriers are important
    contributors to the success of not only PHMSA's safety
    programs, but also to our national economy, the State of
    Louisiana and the Port of New Orleans.
        Again, Senator, thank you for the opportunity to testify
    and I look forward to answering any questions you may have.
        [The prepared statement of Mr. Roberti follows:]
        [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

        Senator Kennedy. Thank you, Paul and thanks to all of you.
        I have a number of questions. Anybody is welcome to jump
    in, including our audience.
        I want to start with what to me is the most immediate
    issue. We do have consensus on legacy tank cars. I'm pleased
    that everybody could come together and agree on a phase-out
    date. We're in the middle of rulemaking.
        Paul, if you could bring us up to date on where the
    rulemaking is and tell me when it's going to be completed and
    done.
        Mr. Roberti. Okay, thank you. Thank you, Senator, for that
    question.
        Senator Kennedy. I'm kind of result oriented and I know
    you've got to go through the proper procedure, but tell me when
    we can take it to the bank.
        Mr. Roberti. So, as you know, we have a number of petitions
    before us. I call them the three legs of the stool.
        The first is the HM246 compliant tank cars and the
    extension of the service life of 20 years to 50 years.
        I'm pleased to report, Senator, that that rule was
    published at the Federal Register just last week, early last
    week.
        Senator Kennedy. Good.
        Mr. Roberti. So, that is complete and we have some
    certainty on that front.
        The second is the phase out of the legacy tank cars and
    we're well aware that industry came together and has proposed,
    reached consensus on the phase-out date of 2027 for the legacy
    cars.
        That one and also including the question of the interim
    standard that we promulgated in 2009 becoming a final standard
    where we would take the interim tank car standard and make that
    the final tank car standard, those two items are pending.
    They're in notice and public comment.
        We intend, we're working as expeditiously as possible to
    release that rule. It still has to go to OMB. I can't give you
    a date certain, but I can tell you we are working steadfastly
    and I can also tell you that your leadership coupled with the
    consensus that the industry has achieved here will go to great
    lengths to facilitate our rulemaking process.
        We know this rule is important. We know it's necessary to
    bring regulatory certainty and I'm hopeful that we will have
    that rule completed as soon as possible, acknowledging that we
    have to comply with the Administrative Procedures Act, OMB
    requirements and conduct a robust cost-benefit analysis and
    have transparency in the process so that everyone can submit
    their comments.
        But the data and the robust cost-benefit analysis that the
    industry participants have brought to us is very, very helpful
    in that process.
        Senator Kennedy. Well, thank you for that, Paul.
        This is a rule that's going to help. It's going to save a
    lot of money.
        What is it, Marcie, 130 something million bucks?
        It was put together with collaboration of everybody,
    including but not limited to the rail carriers and the
    shippers. And it's important.
        And thank the Secretary for her cooperation through all on
    this.
        My--I probably know, I know that I know less about this
    subject than anybody on this panel but as I've studied it, this
    subject in general, I think everybody can agree that the two
    primary issues, first and foremost, public safety. And I'm not
    just talking about the legacy car rule.
        I'm talking about the larger issues.
        First is public safety.
        Second is cost, cost for the railroads, cost for the
    shippers, cost for the large businesses and cost for the small
    businesses.
        I want to start, I want somebody to help me understand the
    relationship between the Tank Car Committee and PHMSA. Is that
    how you refer to it?
        Mr. Roberti. Yeah.
        Senator Kennedy. What is the Tank Car Committee?
        My understanding, I've read about it, but my understanding
    is that it is comprised of both rail carriers and shippers and
    people who make the cars. I believe I read that it has been
    around longer or at least its parent company, it's a private
    sector, it's in the private sector, longer than the Department
    of Transportation.
        Who can educate me on that? And more specifically, what is
    the relationship between the Tank Car Committee, the private
    sector group and the Federal Government?
        Anybody?
        Mr. Roberti. I'm glad to----
        Senator Kennedy. Jump in.
        Mr. Roberti. To lead it off.
        So, the Tank Car Committee has been around for decades.
        Senator Kennedy. Yeah.
        Mr. Roberti. And we consider the Tank Car Committee to be a
    standard setting of organization.
        Regulations, though, safety regulations are made by the
    Department of Transportation.
        So, the Tank Car Committee functions as, really, an
    organization that covers a wide cross section of the industry,
    meaning the carriers and shippers and they consider and adopt
    technical consensus standards and they're valuable to DOT as
    input into the rulemaking process.
        Over the course of decades, both the Federal Railroad
    Administration and PHMSA have participated. We attend all the
    Tank Car Committee meetings. We maintain close oversight over
    those committee meetings and their discussions.
        That's not to say, for the most part, it's been a very
    successful approach to bringing consensus.
        These are the practitioners who really understand the
    industry. And for an agency like DOT that's setting safety
    regulations, this input is invaluable.
        It's not to say that over the course of time that there
    aren't, every so often, challenging issues that need to be
    addressed. Where there are, we applaud, just like your
    leadership, we applaud consensus. It goes a great distance in
    facilitating the rulemaking process.
        But where consensus cannot be achieved, every stakeholder
    before the TCC reserves the right to file petitions with DOT
    and ultimately, DOT will step in and DOT will be the final
    decision maker, on the setting of safety standards that
    regulate this industry.
        Senator Kennedy. Is there a rule that defines the
    relationship between the Tank Car Committee and DOT?
        Mr. Roberti. There is no set rule. There's no set rule.
    Remember that the DOT sets minimum standards.
        So, there's a lot of things that industry is very dynamic.
        Ailsa, you commented about adopting some standards that go
    above the minimum safety standards. That's good.
        As each carrier and discussions before in the railroad
    industry and the shippers find solutions that may advance
    safety in a cost-effective manner where there's consensus. We
    want to see that happen.
        So, if we look at the TCC as an opportunity to vet those
    issues, vet the technical considerations and ultimately advance
    safety.
        If there's an economic issue, that belongs to the STB, in
    my mind. And I appreciate the discussion about the STB.
        Senator Kennedy. We're going to get to that.
        Mr. Roberti. But if it's a matter of what should be the
    specification for a tank car, that input can come to DOT but it
    is DOT and DOT alone that sets the safety standards governing
    this industry.
        Mr. McIntosh. Senator?
        Senator Kennedy. Yes, certainly, join in.
        Mr. McIntosh. Following along those lines in follow up to--
    --
        Senator Kennedy. You might want to get closer to that.
        Mr. McIntosh. The industry, the chemical industry, as
    others, has something similar to the Tank Car Committee. We
    have organizations that are technically focused, standards
    focused, performance focused, you know. An example for us is
    the Chlorine Institute which does some of those same activities
    the Tank Car Committee does.
        There are some differences though that the Chlorine
    Institute doesn't have the authority to set a standard that
    everybody that belongs to or subscribes to the business of
    chlorine has to follow. And that's one of the differences.
        The Tank Car Committee, in the issue that has been resolved
    that has been mentioned many times, set a standard for which
    there was not a consensus at the Tank Car Committee level. We
    understand that ultimately DOT, if somebody aggrieved in that
    process, we would have the right to appeal to DOT.
        And I guess part of our issue is that we would like the
    authority the DOT has to really be practiced by them. We would
    like the same level of requirement for transparency and cost
    benefit, to be a part of anything that the Tank Car Committee
    looks at and the obligation to have some kind of a consensus of
    view point which is really the only way to make progress when
    you have that many stakeholders represented is important to us
    as well.
        Senator Kennedy. Well, here's what's confusing me.
        I mean, it's clear that the Tank Car Committee has
    influence and that's a good thing because the Tank Car
    Committee is in the private sector and government, DOT, is
    trying to regulate the private sector and you ought to know
    something about what you're regulating. And the people who know
    the most about it would be the people involved in it.
        Who determines the member? If you have the Tank Car
    Committee that is extraordinarily influential, not dispositive,
    but influential, who determines the makeup of the Tank Car
    Committee?
        Anybody?
        Mr. Roberti. Well, my understanding is that the Association
    of American Railroads and their various committees have a
    charter and it sets forth the composition for the committee,
    certainly aware that the majority is with the railroads.
        But I think we need to recognize that the composition is
    important, that bringing the technical experts from across all
    of the industry sectors and having the right technical experts
    at that committee will better drive consensus, will better
    drive the discussion of technical advances in safety versus the
    cost which ultimately is what needs to happen if you are to
    crystalize the best regulatory solutions when DOT is making
    these decisions.
        Senator Kennedy. Well when the Tank Car Committee meets and
    the members do it right, let's suppose it's a safety issue. The
    Committee deliberates. They study it. They bring in experts,
    the Tank Car Committee and they reach a conclusion on a
    standard to recommend to DOT.
        Is there just one report from the Committee or can members,
    is there a majority report from the Committee? Suppose a member
    of the Tank Car Committee disagrees but gets outvoted. Can the
    Tank Car Committee have a minority report?
        How does it work?
        Mr. Roberti. Well, remember FRA and PHMSA are at those
    meetings.
        Senator Kennedy. Right.
        Mr. Roberti. So, we know about it. We have an open door.
        Most recently, we've met with all of the industry sectors,
    the carriers. I was, just a few weeks ago, I met with the
    Fertilizer Institute at their annual conference and spoke to
    them.
        We've met with the Railway Supply Institute most recently.
        We've met with AAR officials and we're going to, I'm going
    to, I talked to, we'll be meeting with the American Chemistry
    Council in coming weeks.
        The way to be successful here is to be fully engaged,
    maintain open dialogue. If push comes to shove and there needs
    to be filed a petition by any one member, then that can happen.
        The better way, I think, is with Secretary Chao's
    leadership and your leadership, Senator, and by full engagement
    by FRA and PHMSA to really see if we can reach, achieve
    consensus on the best way forward if that really facilitates
    the rulemaking process.
        Senator Kennedy. Okay.
        Anybody have anything more to add?
        I want to ask, I want to shift gears to, we'll go back and
    forth.
        Cost, that comes under the jurisdiction or rates, if you
    will, of the surface transportation board. Now, part of the
    problem there is the United States Senate. I think we haven't
    acted on some nominations to the board. Is that right?
        Mr. Roberti. That's correct, Senator.
        Senator Kennedy. I'm going to talk to Senator McConnell
    about that pretty quickly and find out where we are on that.
        Let me just throw this out there and it really is a
    question, not a suggestion.
        Has the Stagger's Rail Act worked? Has the Stagger's Rail
    Act worked?
        Mr. McIntosh. Senator, I can give you a perspective on
    that, granted, it's a shipper's perspective, so.
        Senator Kennedy. Tell everybody what it is but I'm probably
    the only one who needs an answer to that.
        Mr. McIntosh. The Stagger's Act is the act that was put in
    place many years ago when the railroads really went from
    regulated set of companies, a regulated industry to a non-
    regulated industry.
        If you go back to the 1970s, the railroads were really on
    their heels in terms of financial performance, in terms of, you
    know, returning to their shareholders some benefit from being,
    you know, owned.
        Senator Kennedy. Why was that?
        Mr. McIntosh. They were, they, at the time said it was, you
    know, the impact of regulation.
        Senator Kennedy. Okay, I can believe that.
        Mr. McIntosh. And as a result of that, you know, that the
    change in that what was brought on by the Stagger's Act, you
    know, allowed them some latitude and some opportunity to fix
    the economic model that they had operated under for many, many
    years.
        And they've done--and you know, on the face, did a good job
    of helping them right the ship of, you know, their condition at
    the time.
        And that all, if you look at the financial performance of
    the railroads, it's superb. I mean, if you really read their
    filings as public companies to the SEC, you will marvel at how
    much money they're making.
        I'm not against companies making money. That's one of my
    objectives in my organization in my role.
        But I think to get to the core of your question, has the
    Stagger's Act worked? I think it worked for a while, but I
    think now we're in a different environment.
        The railroad industry is consolidated from tens of
    railroads, historically, to four, five or depending upon how
    you count it, major Class One railroads and the consolidation
    and the economic reality of today has changed, you know, the
    fact that the Stagger's Act which a lot of what STB does is
    based on the Act and interpretations of what, you know, what
    the Act required them to do. Those things just don't fit in
    today's regulatory climate and today's economic environment for
    the railroads.
        So, I think there need to be, you know, new approaches made
    and one of the panelists mentioned, you know, a rate
    benchmarking process as an option to the current STB----
        Senator Kennedy. What is that? Who mentioned that?
        Ms. Gulfo. I did.
        Senator Kennedy. I don't mean to cut you off.
        Mr. McIntosh. No, that's fine, that's fine.
        Senator Kennedy. I want to hear more about that.
        Ms. Gulfo. So, basically what it does when a shipper is
    captive you have no way to tell whether or not the rate is--
    it's a good benchmark for that traffic.
        So, what it would do, it would give shippers the
    opportunity to compare what market rate will be when there's
    competition.
        Senator Kennedy. How do you know that?
        Ms. Gulfo. Well, in our experience, I mean, this is our
    experience when we have multiple sites that are multiple served
    by different railroads. When there is competition the rates are
    30 to 50 percent lower than on the captive side.
        Senator Kennedy. Okay.
        So, you have empirical data you can look at in other areas,
    okay.
        And would that be something that the STB would be required
    to consider?
        Ms. Gulfo. Yes.
        Mr. McIntosh. I think it's the hope that it would be a
    replacement model for the current stand-alone rate case.
        Senator Kennedy. Which costs five million bucks.
        Mr. McIntosh. Well, yes, plus.
        Ms. Gulfo. Average.
        Mr. McIntosh. Which is the only opportunity companies now
    have in front of the STB to challenge rates. A rate
    benchmarking model for which there is work being done by
    various entities who have an interest in looking for options
    would afford a different approach.
        Senator Kennedy. But why does it take three and half years
    and five million bucks to challenge a rate? That's absurd.
        Mr. McIntosh. The current stand-alone rate case requirement
    is that if you're filing, if you're the one that's doing the
    filing, trying to convince the STB that the rates you're being
    charged is not competitive.
        You have to hire consultants, in essence, to create your
    own independent railroad that would service the routes that
    you're trying to get some, you know, compensation for being
    overcharged and the methodology and the process required of
    designing your own railroad.
        Everything about it, how many times the grass is mowed, how
    many people work, how many rail yards, what kind of rail yards
    and where they're located, is an onerous process that takes
    that amount of time.
        Senator Kennedy. Whose idea was that?
        Mr. McIntosh. Well, that is an outgrowth of----
        Senator Kennedy. Is that STB?
        Mr. McIntosh. I don't know. I don't know whose idea it was
    but it is their practice today for large company----
        Senator Kennedy. Under the Reform Bill for STB, does STB,
    if it has full membership, does it have the authority to say
    we're going to settle rate disputes a different way?
        Mr. McIntosh. We believe that that would be the case, yes.
    And people in the industry are promoting different
    alternatives, rate benchmarking being one of them, as an option
    to the current process. That's the only recourse an industry
    has.
        Senator Kennedy. Well, in the last ten years I know our
    railroad, our rail carriers have consolidated, but so has
    everybody else. I mean, that's frankly, nothing unusual.
        We have in just about every industry, the pharmaceutical
    industry, the healthcare industries consolidating, you know,
    social media platforms, everybody is merging with everybody
    else. It doesn't have to necessarily lead to price increases.
    Sometimes through economies of scale, it makes it more
    efficient.
        Why would the rail industry be different?
        Mr. McIntosh. Well, I can tell you that and I'll just point
    to the reality of the businesses that I've run over the years.
        Senator Kennedy. Yeah.
        Mr. McIntosh. The two biggest cost components of those
    businesses, historically, have been the cost of electricity
    because we're a big consumer of electricity.
        Senator Kennedy. Right.
        Mr. McIntosh. And the cost of freight.
        Senator Kennedy. Right.
        Mr. McIntosh. Those two remain the two largest costs that
    the businesses I'm familiar with, have today.
        The difference is the order is now reversed. Freight is the
    largest cost we have. Electricity and other raw materials is
    second.
        Senator Kennedy. Because of sales, the subsequent cost that
    it has.
        Mr. McIntosh. The point I make and the reason that I
    subscribe to, you know, the failing of a non-competitive
    environment for rail services is the two largest costs for my
    business I buy without the benefit of competition.
        I'm a single-sourced carrier for rail service so I have no
    competition.
        Senator Kennedy. You've got one choice.
        Mr. McIntosh. One choice.
        Senator Kennedy. Okay.
        Mr. McIntosh. And I'm a single-sourced provider for
    electricity.
        It's a tough world when your two largest costs are single
    sourced just by the reality of the situation.
        I don't have that luxury with my customers. I have to
    compete for their business.
        Ms. von Dobeneck. Senator, if I may?
        Senator Kennedy. Yeah.
        Ms. von Dobeneck. NOPB is obviously in a unique situation
    because we have six Class One partners so there's lots of
    choices there.
        I just wanted to share a statistic that I had heard that
    since partial deregulation in 1981 that occurred, rates
    actually have fallen by 46 percent in today's standards.
        And just as an aside, for the industry in general, we
    maintain in our infrastructure, we're responsible for complete
    infrastructure and it's 30s, well, at least for the NOPB, it's
    33 to 37 percent of our yearly budget.
        So, that's, you know, that's kind of, as an industry, a
    real consideration as we----
        Senator Kennedy. Is that like building new rail or maintain
    maintenance?
        Ms. von Dobeneck. Both.
        And then it can go above that if you have like a big
    capital project that year. Last year we had one on the NOPB so
    it was a couple million dollars more than it normally is. So,
    it just depends on the year.
        But just maintaining the rail as it is, is an enormous
    expense to us.
        Senator Kennedy. NOPB is a Class Three.
        Ms. von Dobeneck. Correct. Yes, sir.
        Senator Kennedy. So, you're, let's assume in this
    particular case, you're the first mile.
        Ms. von Dobeneck. Yes.
        Senator Kennedy. You can hook up with Class Ones.
        Ms. von Dobeneck. Yes, sir.
        Senator Kennedy. More than you get--you can choose more
    than among several?
        Ms. von Dobeneck. We have six in New Orleans which is very
    unique, yeah.
        Senator Kennedy. How do you pick which Class One?
        Ms. von Dobeneck. I guess it depends on whether your route
    is going and then you can, kind of, price out where there are
    different routes you can take.
        Senator Kennedy. Do you make that call or does the shipper
    make it?
        Ms. von Dobeneck. Oh, the shipper would.
        Senator Kennedy. Okay.
        Ms. von Dobeneck. Yes.
        Senator Kennedy. So, the shipper decides which Class Three
    the Class One, is to connect up with?
        Ms. von Dobeneck. Depending on the route.
        Senator Kennedy. Okay.
        Ms. von Dobeneck. They're given----
        Senator Kennedy. Having six different Class One ship rail
    carriers available, is that unusual, is that common?
        Ms. von Dobeneck. It's very unusual. The only other place
    in the country that has that kind of a set up is Chicago. So,
    we're really unique and really fortunate--for local industries
    that folks around here have the benefit of those connections
    and we work well with all of our Class Ones to create the
    gateway, we call it, so, the front belt and the back belt here
    in New Orleans.
        Mr. McIntosh. Senator?
        Senator Kennedy. Yeah.
        Mr. McIntosh. 85 percent of chemical manufacturing
    locations in the U.S. are single-served locations, 85 percent
    of them.
        Senator Kennedy. Wait, say that again.
        85 percent of what?
        Mr. McIntosh. Of the chemical manufacturing locations in
    the U.S. are single-served locations.
        Senator Kennedy. That means they have access to one Class
    One.
        Mr. McIntosh. One and only one. No competition.
        Senator Kennedy. Okay. Alright.
        I have a few other questions.
        I'm still a little confused about, I think you refer to it
    as Appendix B. You know what I'm talking about because I don't.
        [Laughter.]
        Could you explain that to me? Somebody? Anybody?
        Mr. McIntosh. Do you want me to try?
        Mr. Roberti. Sure, if you want to start and I can weigh in.
        Mr. McIntosh. My understanding, Senator, is the DOT issued
    some policy directives on the requirements for locations that
    do maintenance or related maintenance activities on rail cars
    or components thereof.
        Today, typically, a chemical shipper who ships by rail has
    the flexibility to do maintenance for certain kinds of activity
    on the rail cars that they ship their products in.
        Senator Kennedy. Okay.
        Mr. McIntosh. Obviously, for significant maintenance
    activities or required regulatory, you know, time-based
    regulatory requirements, those are typically done by a third-
    party shop that provides the certification that the maintenance
    has been done per DOT standards.
        But the new policy directives which have been issued, to my
    understanding, have been issued by DOT calls into question the
    scope of what chemical manufacturers can do at their location
    and basically removes the opportunity to do a significant
    number of things which are being done now.
        Senator Kennedy. In house.
        Mr. McIntosh. In house.
        Senator Kennedy. You have to hire an outside person to do--
    --
        Mr. McIntosh. Or you have to move the car to a shop to have
    it done at a certified shop. Those exist now but they typically
    do the more significant major work.
        Either way, the standards which, you know, haven't really
    seen the regulatory requirement of cost versus benefit, you
    know, stand to make, you know, an additional cost burden for
    the shipping community because things that used to be done in-
    house, replacing chain on a valve gap because the chain was
    worn. Those are things that you will no longer be able to do as
    a shipper. You will have to require a mobile repair shop to
    come to your site, third-party, to deal with that issue.
        Senator Kennedy. And is this a proposed rule?
        Mr. McIntosh. That's my understanding, yes.
        You know, our issue is we're not adverse to engaging in
    what kind of activities, you know, should require some kind of
    certification that don't today. But, you know, this was, kind
    of, handed down and it's not really consistent with regulatory
    reform or consistent with transparency, addressing this issue
    of transparency.
        Senator Kennedy. Okay.
        Paul, Can you shed some light on this?
        Mr. Roberti. So, okay, yes, Senator.
        So, this is an area where the Tank Car Committee has a role
    in conducting certifications of the--to ensure that a tank car
    or components are consistent with the Federal regulations.
    Within the scope of the certification there's a broad ecosystem
    of what constitutes a tank car and all the components that go
    into it.
        This is an important safety issue because one seal or a
    manhole cover or even these acts that occur within a carrier's
    own maintenance yard could cause, they can cause a catastrophic
    release if not done correctly.
        Now, we know it's a thorny issue. We've been talking to all
    stakeholders about this. We are going to continue to talk. In
    fact, we're going to be meeting about this issue.
        Our message is we're open to solutions. Where we can
    prioritize safety and maximize efficiency and find a consensus
    that really looks at a risk-based approach to addressing this
    issue, we will do so. We will entertain that.
        So, that's our message is that we want to continue, the
    Secretary, this is a matter that has the Secretary's attention.
    It certainly has your attention.
        We have the right leadership with your help and I think
    both FRA and PHMSA will work with the stakeholders like we did
    with the phase-out issue or what the stakeholders did with
    coming to a consensus on the phase-out issue.
        We need to find what's the right balance here and we will
    do so and keep your office and your staff informed as we
    address this issue.
        Senator Kennedy. Now tell me how all this has an impact on
    small business.
        Ms. Amar. Well, I think, as I mentioned in my testimony,
    that you know, small business owners don't only, you know, use
    shipping if I'm a retail grocery or you know, manufacturer
    which we have several members of, but I'm not talking about
    large manufacturers. I'm talking about small manufacturers, you
    know, that have 20, 25 employees that you know, want to see
    their goods shipped across the U.S.
        This all, you know, it's kind of like the trickle down, you
    know, economic theory of, you know, what happens to these guys
    or, you know, Dow Chemical, who is here today. Their products
    have to get shipped out and put into stores and those products
    and prices impact our members, you know, our small business
    owners.
        So, there are consumers on both sides of the issue.
        And we've been involved in many different arenas. This is
    just one example of one.
        I was involved several years ago in an issue with car
    manufacturers, our auto dealers and industry where we were,
    kind of, having like warranty repair issues.
        And so, you know, it's kind of like this particular issue
    is somewhat of a similar issue. We had to have everybody come
    to the table. You've always got to have input from every single
    stakeholder. And I always think that when that's what occurs
    then you're going to have the best possible solution.
        Senator Kennedy. Okay.
        Let me ask one last question then I'm going to see if
    anybody out there wants to say anything.
        This is well, I'm just going to ask it.
        If you're a petrochemical manufacturer or any kind of
    manufacturer and you have access to only one Class One carrier
    and you get a price quote and you don't like it or even if you
    do like it, why don't you just go compare that to trucking?
        Mr. McIntosh. I can answer that from a real-life
    perspective.
        In a lot of cases trucking, especially when you're talking
    about the volumes of chemicals that run, that move by rail,
    trucking costs are prohibitive. And some chemicals like
    chlorine, you know, we just, the industry just does not move
    that by truck.
        Senator Kennedy. Is it a safety issue?
        Mr. McIntosh. It's the nature of to get the same kind of
    safeguards that you have in moving by rail, you would make it
    even more prohibitive from a cost standpoint.
        Senator Kennedy. Well, you probably will interface with
    more people on the road.
        Mr. McIntosh. Yes, and you'd be in higher urban
    concentrations, Senator, as if you're moving product by truck.
        Senator Kennedy. Yeah. Yeah.
        Ms. Gulfo. Senator, if I may, in our case we have multiple
    sites that are captive to just one single rail option and it's
    a matter of volume. For each rail car that we ship we would
    have to ship four trucks.
        So, it's a lot of trucks on the road so it adds condition
    to the roads and like John mentioned, becomes somewhat cost
    prohibitive as well.
        Senator Kennedy. Okay.
        Anybody have anything they want to say?
        Speak now or forever hold.
        Alright, this has been great. And I want to thank all of
    our panelists.
        I've learned a lot from listening to you. I read all of
    your written testimony as well and I know CRS has put out a
    publication, Congressional Research Service. They probably put
    out several but I've got one in my packet. I got about half-way
    through and my plane landed.
        So, I'm going to go back and finish that for that usual,
    thorough job.
        I will go back and look at my notes. I'll take this back to
    the Committee.
        If anybody has anything to offer, I hope you'll contact me
    or Cassie or Marcie or Preston or Michelle or Ross or anybody
    else in my office.
        Well, I'm interested and I think the Committee is
    interested in two things.
        Number one, well, really three things.
        Number one, public safety.
        Number two, public safety.
        And number three, efficiency, a subset of which is cost and
    I know that's DOT's concern. I know that's the rail carrier's
    concern. I know that's the small business and large business
    concern.
        There's got to be a way that we can resolve some of these
    issues.
        I am going to go back and see where we are on appointments
    to the STB. I frankly didn't. I think they've been outstanding
    for three years. Did I read that correctly?
        That's inexcusable.
        I want to thank Meredith again, Meredith West.
        I want to thank Kathryn.
        I want to thank Sean.
        I want to thank Chairman Risch for allowing me to conduct
    this field hearing.
        I want to thank Ranking Member Cardin.
        I want to thank all the members of my staff for working so
    hard.
        Two of my colleagues in my office waited on a plane in
    Washington, DC, for how many hours? Five hours on the plane.
    Seven hours.
        And I was in DC yesterday. They called my office to tell
    Kristen that they were stuck on the plane and Kristen told me
    and I said, my advice is to start drinking.
        [Laughter.]
        And you can have a few cocktails and sober up by the time
    you land but they weren't serving liquor. It makes no sense.
        I want to thank all of you for coming. This has been very
    informative.
        I hope everybody has a wonderful and safe Thanksgiving.
        This meeting is adjourned.
        [Whereupon, at 11:46 a.m., the hearing was adjourned.]

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