[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

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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:]

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    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:]
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    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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