[Congressional Record Volume 143, Number 155 (Friday, November 7, 1997)]
[Senate]
[Pages S12018-S12020]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROCKEFELLER (for himself, Mr. Burns, and Mr. Dorgan):
  S. 1429. A bill to enhance rail competition and to ensure reasonable 
rail rates in any case in which there is an absence of effective 
competition; to the Committee on Commerce, Science, and Transportation.


              the railroad shipper protection act of 1997

  Mr. ROCKEFELLER. Mr. President, I am pleased and proud to be joined 
by two of my distinguished colleagues, Senator Conrad Burns and Senator 
Byron Dorgan, in introducing today the Railroad Shipper Protection Act 
of 1997. This legislation is the result of many months of effort to 
develop constructive and pragmatic proposals for addressing the 
increasingly serious problems faced by shippers in need of affordable 
access to railroad service in every region of the country. As a 
bipartisan team committed to achieving urgently needed results in the 
coming year, we offer this bill with the hope that it will generate the 
interest, input, and support needed to help shippers obtain fair 
treatment and true competitive access from railroads across the 
country. I commend both Senators Burns and Dorgan for their leadership 
and constant attention to these issues, which can be complex and yet 
affect numerous communities, key industries, and workers nationwide.
  This legislation deals with issues of longstanding concern to me. 
Because of the importance of the relationship between the Nation's 
railroads and the shippers and communities that they serve, especially 
in my State of West Virginia, I have made a special effort throughout 
my tenure in the Senate to promote a rail transportation system that is 
fair and economically sound for all parties. Of all of the things that 
have troubled me about that system over the years, none is more 
troubling than the plight of captive rail shippers--businesses and 
communities that are dependent on a single railroad for freight 
transportation service.
  West Virginia has more than its fair share of captive shippers. Many 
of our coal fields, most of our chemical manufacturers, and one of our 
finest steel manufacturing facilities--and the largest single employer 
in our State--all are captive to a single railroad for shipments to 
domestic and foreign markets. The result is that West Virginia 
businesses too often suffer from unreasonable freight rates and 
inadequate transportation service.
  Today, two events are conspiring to create additional captive rail 
shippers--and worsen the competitive position of existing captive rail 
shippers--in West Virginia and across the Nation.
  First, our national freight rail system continues to concentrate into 
fewer and fewer major railroads. Since Congress deregulated the 
railroads in 1980, the number of major Class I railroads has declined 
from 43 to 5--and will drop to 4 if the division of Conrail is 
approved. For a long time the fears expressed by shippers, and by those 
of us in Congress who are dedicated to protecting shippers, have fallen 
on deaf ears. In the past several months, however, the entire Nation 
has witnessed the far-reaching economic impact of a merger gone awry. 
The 1996 merger of Union Pacific and Southern Pacific has made dramatic 
headlines as service is disrupted, trains pile up, shipments are lost, 
and ultimately facilities and jobs are put in jeopardy. The chemical 
industry alone has had to grapple with service disruptions costing an 
average of $35 to $60 million per month through the summer and into the 
fall.

  The UP-SP service crisis has caught my attention in part because the 
effects are so far-reaching that a number of West Virginia shippers 
have asked for my help, and in part because I now face a major merger 
in my own backyard with the proposal to divide Conrail between CSX and 
Norfolk Southern. The UP-SP situation is expected to improve in the 
coming months, following implementation of a comprehensive service 
recovery plan and unprecedented intervention by the Surface 
Transportation Board, but the UP-SP story has only reinforced my belief 
that concentration of the Nation's railroads is an ominous development 
for many shippers and for States like West Virginia. Railroad 
concentration is reducing transportation options and worsening the 
competitive position of captive shippers.
  Second, the Surface Transportation Board, established in 1995 to 
succeed the Interstate Commerce Commission, is understaffed and 
underfunded, and is not adequately promoting rail competition and 
protecting captive shippers. As I feared at the time it was passed, the 
effect of the ICC Termination Act has been to reduce our national 
commitment to a strong and effective regulatory body to protect rail 
shippers. Rather than being vigilant in protecting captive shippers 
from railroad abuses, the STB has instead been consumed with reviewing 
major railroad mergers, conducting annual revenue adequacy 
determinations which serve no purpose, and making matters worse for 
shippers by deciding in December 1996 that railroads may render captive 
a shipper that is otherwise positioned to enjoy competitive service by 
refusing to quote a rate on a bottleneck segment.
  Mr. President, just as the railroad industry has become more and more 
concentrated, the regulatory agency charged with protecting captive 
railroad customers has become less and less able to do its job.
  Some may wonder how the STB, which is directly charged with 
protecting against unreasonable rates and promoting competition, came 
to make such an anticompetitive and antishipper decision as that set 
forth in the 1996 bottleneck cases, and I think the answer illustrates 
well the need for Congress to correct the current imbalance between 
railroads and their customers.

  The answer lies in the confusing instructions that were given to the 
STB in the ICC Termination Act, and previously in the Staggers Rail Act 
of 1980 and the Railroad Revitalization and Regulatory Reform Act of 
1976. In these statutes Congress directed the STB and its predecessor, 
the ICC, to promote our national rail transportation system ``by 
allowing rail carriers to earn adequate revenues'' (49 U.S.C. 10101(3)) 
and by making ``an adequate and continuing effort to assist those 
carriers in attaining revenue levels'' that allow them ``to attract and 
retain capital in amounts adequate to provide a sound transportation 
system in the United States'' (49 U.S.C. 10704(a)(2)). Congress has 
further directed the STB to make an annual determination of each 
railroad's revenue adequacy--a determination that finds most class I 
railroads to be revenue inadequate, contrary to the view of Wall Street 
and industry observers about the financial strength of individual 
railroads and the industry as a whole.
  As is evident in reading the Board's bottleneck decision, the 
perceived revenue inadequacy of the major railroads, and the belief 
that protecting revenue adequacy is the preeminent responsibility of 
the agency, formed the basis of the STB's agreement with the railroads 
that they should have the right to prevent rail-to-rail competition 
even where competition is physically possible. At this point in the 
evolution of the railroad industry, such an approach is not only 
inequitable, it is harmful to our national economy.

[[Page S12019]]

  Today, I join with my colleagues in proposing legislation to clarify 
the policy of the U.S. Government with regard to railroad competition 
and to restore the intended balance between railroads and shippers in 
the laws governing their relationship and the oversight role of the 
STB. This bill would accomplish five major objectives: First, making 
clear that it is the policy of the U.S. Government to promote rail 
competition and protect captive shippers; second, reducing the 
regulatory burden on captive shippers by simplifying the market 
dominance test; third, overturning the bottleneck decision by requiring 
railroads to quote a rate on any available segment of service; fourth, 
eliminating the ``revenue adequacy'' test, which serves no practical 
purpose and perpetuates the erroneous view that railroads are in dire 
financial straits; and fifth, requiring the STB to open its process 
more widely in order to meet the needs of small shippers.
  It is our intention to pursue this legislation in the context of the 
STB's reauthorization next year. I am firmly committed to ensuring that 
the Board is reauthorized in a timely way and is provided with the 
funds it needs to perform its mission as the primary oversight agency 
for the Nation's railroads, but I want to make clear that I will not 
support continuation of the status quo in the relationship between 
railroads and shippers.
  The legislation I introduce today will begin to afford rail-to-rail 
competition and captive shipper protection the priority they deserve in 
our national transportation policy. It is an important first-step, and 
I look forward to working with Senator Burns, Senator Dorgan, and 
others over the course of the next several months to expand upon the 
shipper protections we propose today. I invite our colleagues to join 
us in this effort, and genuinely seek constructive input and assistance 
to achieve needed solutions.
  Mr. President, I ask unanimous consent that a copy of the bill be 
printed in its entirety in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1429

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Railroad Shipper Protection 
     Act of 1997''.

     SEC. 2. FINDINGS.

       The Congress finds that--
       (1) the railroad industry has consolidated dramatically 
     since passage of the Staggers Rail Act of 1980 (94 Stat. 1895 
     et seq.), leaving the railroad industry with only a few major 
     carriers and providing shippers with limited competitive 
     options;
       (2) the financial health of the railroad industry has 
     improved substantially since the passage of the Staggers Rail 
     Act of 1980;
       (3) due partly to the continued consolidation of the 
     railroad industry, captive rail shippers--
       (A) continue to exist; and
       (B) are increasing in number; and
       (4) rail shippers, including captive rail shippers, will 
     benefit from increased competition among railroads and a 
     streamlined process under which the Surface Transportation 
     Board determines the reasonableness of captive rail shipper 
     rates.

     SEC. 3. DEFINITIONS.

       In this Act:
       (1) Secretary.--The term ``Secretary'' means the Secretary 
     of Transportation.
       (2) Surface transportation board.--The term ``Surface 
     Transportation Board'' or ``Board'' means the Surface 
     Transportation Board established under section 701 of title 
     49, United States Code.

     SEC. 4. PURPOSES.

       The purposes of this Act are--
       (1) to clarify the rail transportation policy of the United 
     States;
       (2) to ensure rail competition for shippers in geographic 
     areas in which rail competition is physically available;
       (3) to ensure reasonable rates for captive rail shippers; 
     and
       (4) to remove unnecessary regulatory burdens from the rate 
     reasonableness process of the Surface Transportation Board.

     SEC. 5. CLARIFICATION OF RAIL TRANSPORTATION POLICY.

       Section 10101 of title 49, United States Code, is amended--
       (1) by inserting ``(a) In General.--'' before ``In 
     regulating''; and
       (2) by adding at the end the following:
       ``(b) Primary Objectives.--The primary objectives of the 
     rail transportation policy of the United States shall be--
       ``(1) to ensure effective competition among rail carriers 
     at origin and destination; and
       ``(2) to maintain reasonable rates in the absence of 
     effective competition.''.

     SEC. 6. REQUIREMENT OF RAILROADS TO ESTABLISH RATES TO 
                   FACILITATE RAIL TO RAIL COMPETITION.

       (a) Establishment of Rate.--Section 11101(a) of title 49, 
     United States Code, is amended by inserting after the first 
     sentence the following: ``Upon the request of a shipper, a 
     rail carrier shall establish a rate for transportation 
     requested by the shipper between any 2 points on the system 
     of that rail carrier where traffic originates, terminates, or 
     may be interchanged. A rate established under the preceding 
     sentence shall apply to the shipper that makes the request 
     for the rate without regard to whether the rate established 
     is for part of a through transportation route between an 
     origin and a destination or whether the shipper has made 
     arrangements for transportation over any other part of that 
     through route.''.
       (b) Review of Reasonableness of Rate.--Section 10701(d) of 
     title 49, United States Code, is amended--
       (1) by redesignating paragraph (3) as paragraph (4); and
       (2) by inserting after paragraph (2) the following:
       ``(3) If a rail carrier establishes a rate for 
     transportation between any 2 points on the system of that 
     rail carrier where rail traffic originates, terminates, or 
     may be interchanged, the shipper may challenge the 
     reasonableness of--
       ``(A) that rate; or
       ``(B) the aggregate rate between origin and destination (if 
     the rate established is for part of a through route).''.

     SEC. 7. SIMPLIFIED STANDARD FOR MARKET DOMINANCE.

       Section 10707(d) of title 49, United States Code, is 
     amended--
       (1) by striking paragraph (2);
       (2) by striking ``(1)(A)'' and inserting ``(3)'';
       (3) by striking ``(B) For purposes'' and inserting ``(4) 
     For purposes''; and
       (4) by inserting before paragraph (3), as redesignated, the 
     following:
       ``(1) In making a determination under this section, the 
     Board shall find that the rail carrier establishing the 
     challenged rate referred to in subsection (b) has market 
     dominance over the transportation to which the rate applies 
     if that rail carrier--
       ``(A) is the only rail carrier serving the origin, 
     destination, or intermediate portion of the route involved; 
     and
       ``(B) does not prove to the Board that the rate charged 
     results in a revenue-variable cost percentage for that 
     transportation that is less than 180 percent.
       ``(2) In making a market dominance determination under this 
     section in any case in which 2 or more rail carriers provide 
     service at an origin or destination, the Board shall consider 
     only transportation competition at that origin or 
     destination.''.

     SEC. 8. REVENUE ADEQUACY DETERMINATIONS.

       (a) Rail Transportation Policy.--Section 10101(3) of title 
     49, United States Code, is amended by striking ``, as 
     determined by the Board;''.
       (b) Authority for Revenue Adequacy Determination.--Section 
     10704(a) of title 49, United States Code, is amended--
       (1) by striking ``(a)(1)'' and inserting ``(a)''; and
       (2) by striking paragraphs (2) and (3).

     SEC. 9. REDUCTION OF PROCEDURAL BARRIERS FACED BY SMALL 
                   SHIPPERS.

       (a) Administrative Relief.--Not later than 180 days after 
     the date of enactment of this Act, the Surface Transportation 
     Board shall--
       (1) review the rules and procedures applicable to rate 
     complaints and other complaints filed with the Board by small 
     shippers;
       (2) identify any such rules or procedures that are unduly 
     burdensome to small shippers; and
       (3) take such action, including rulemaking, as is 
     appropriate to reduce or eliminate the aspects of the rules 
     and procedures that the Board determines under paragraph (2) 
     to be unduly burdensome to small shippers.
       (b) Legislative Relief.--The Board shall notify the 
     Committee on Commerce, Science, and Transportation of the 
     Senate and the Committee on Transportation and Infrastructure 
     of the House of Representatives if the Board determines that 
     additional changes in the rules and procedures described in 
     subsection (a) are appropriate and require commensurate 
     changes in statutory law. In making that notification, the 
     Board shall make recommendations concerning those changes.

  Mr. DORGAN. Mr. President, today I am joining Senator Rockefeller and 
others in introducing legislation that is designed to address some 
chronic problems facing rail shippers, especially small, captive 
shippers such as the small grain elevators in agricultural States like 
North Dakota. As this bill is introduced in the Senate today, thousands 
of bushels of grain are lying on the ground in North Dakota because 
there are no cars available to small elevators to take wheat and barley 
to market. The frustration of North Dakota farmers and grain shippers 
is focused not only on the availability of grain cars to take their 
products to market this time of year, but also on what they have to pay 
when they have only one railroad serving them. The rates captive 
shippers pay to get their products to market reflect the basic 
principles of economics: where there is competition there are lower 
rates and where there is not, the captive shipper pays significantly 
more.

[[Page S12020]]

  While the legislation we are introducing today will not create more 
grain cars this year and it will not solve full the myriad of concerns 
that many captive shippers have with respect to rail service in this 
country, this bill will take a step towards addressing some issues that 
will help improve the situation of captive shippers.
  The inspiration of this bill is the fact that 20 years ago there were 
more than 40 Class I railroads and today there are eight, of which 5 of 
these ``mega carriers'' generate 94 percent of the Class I rail 
industry's gross income and own over 90 percent of the track miles, and 
produce nearly 95 percent of the gross ton miles. Today, the western 
two-thirds of the country is divided up between two mega carriers that 
own approximately 85 percent of the track, generate over 90 percent of 
the gross ton miles, and earn about 90 percent of the total net 
railroad operating income west of the Mississippi River.
  As the railroad industry has consolidated over the past 20 years, 
more and more shippers have become captive to one carrier, replacing 
competitive service with monopoly service. At the same time, small 
captive shippers face insurmountable obstacles to seek relief on 
unreasonable rates before the Surface Transportation Board [STB]. It 
seems to me that the Congress needs to begin a serious debate on issues 
effecting captive shippers. The STB still operates under outdated 
regulatory structures and too many hurdles and red tape stand between 
the small shipper and relief on unreasonable rates. This legislation 
takes a modest step at addressing a few specific issues in these areas.
  This legislation addresses the broader issues of promoting rail 
competition and protecting captive shippers where competition does not 
exist by identifying these issues as priorities for the STB. The also 
makes a couple of changes in specific policies of the STB. First, this 
bill overturns the STB's decision on the so-called ``bottleneck'' case 
where the STB concluded that carriers have no obligation to quote a 
rate for a segment of line. The essence of the bottleneck case was that 
some shippers believe that in areas where their products were being 
shipped where rail competition exists, they want to take advantage of 
the lower rates for that particular segment of line. This legislation 
would require a carrier to quote a rate for a specific segment at the 
request of the shipper. If the carrier did not quote a rate, then the 
STB would have to set a rate. This circumstance will permit captive 
shippers to take advantage of the little competition that does exist in 
the rail industry.

  This legislation also repeals the outdated revenue adequacy test. The 
Vice Chairman of the STB, Gus Owen, has appropriately questioned the 
appropriateness and the relevance of the STB conducting this outdated 
exercise of determining the revenue adequacy of railroads. This test is 
so out of date that the two largest railroads in the Nation failed the 
last revenue adequacy test by the STB. However, these and other major 
railroads have no problem leveraging capital and their own financial 
reports indicate record profits. It is a ridiculous test and it serves 
no useful purpose for STB procedures.
  In addition, the legislation attempts to streamline the bureaucratic 
hurdles facing small shippers in seeking rate relief before the STB. 
One provision streamlines the requirements imposed on the shipper to 
demonstrate that the rail carrier serving them meets the STB's 
definition of ``market dominance.'' Under current law, market dominance 
is defined as ``the absence of effective competition from other rail 
carriers or modes of transportation'' and the STB cannot find market 
dominance unless the revenue to variable cost percentage exceeds 180 
percent. Under the STB's interpretation of this requirement, the STB 
requires shippers to demonstrate that there is no product nor 
geographic competition under he what constitutes transportation 
competition. This legislation makes the market dominance test simple 
and easier to understand. Under this bill, a shipper need only 
demonstrate that they are served by only one rail carrier and that 
their rates exceed 180 percent revenue to variable cost to determine 
market dominance.
  This legislation would also require the STB to review its regulations 
and rules with respect to barriers that impede a small shippers' 
ability to file rate and other complaints against railroads before the 
STB. The STB would be required to minimize their red tape and barriers 
for shippers and also to report to Congress on barriers that require 
legislative action to remedy.
  Mr. President, this legislation is modest, but it will make a 
difference for small shippers in this country. The premise of the bill 
is that the STB ought to emphasize competition and where competition 
does not exist, the STB needs to make it easier for captive shippers to 
seek relief from unreasonable rates.
  Next year, the Senate Committee on Commerce, Science, and 
Transportation will be debating reauthorization legislation on the STB. 
That will be a very important debate. Senator Rockefeller, I and others 
intend to make sure that one element of that debate will focus on the 
problems facing small, captive shippers and we consider this 
legislation as a building block for next year's debate. I hope my 
colleagues will support this legislation.
                                 ______