[Senate Report 108-129]
[From the U.S. Government Publishing Office]



108th Congress 
 1st Session                     SENATE                          Report
                                                                108-129
_______________________________________________________________________

                                     

                                                       Calendar No. 253

        SURFACE TRANSPORTATION BOARD REAUTHORIZATION ACT OF 2003

                               __________

                              R E P O R T

                                 OF THE

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                S. 1389



                                     

                August 26, 2003.--Ordered to be printed

   Filed, under the authority of the order of the Senate of July 29 
                    (legislative day, July 21), 2003
       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
                      one hundred eighth congress
                             first session

                     JOHN McCAIN, Arizona, Chairman
TED STEVENS, Alaska                  ERNEST F. HOLLINGS, South Carolina
CONRAD BURNS, Montana                DANIEL K. INOUYE, Hawaii
TRENT LOTT, Mississippi              JOHN D. ROCKEFELLER IV, West 
KAY BAILEY HUTCHISON, Texas              Virginia
OLYMPIA J. SNOWE, Maine              JOHN F. KERRY, Massachusetts
SAM BROWNBACK, Kansas                JOHN B. BREAUX, Louisiana
GORDON SMITH, Oregon                 BYRON L. DORGAN, North Dakota
PETER G. FITZGERALD, Illinois        RON WYDEN, Oregon
JOHN ENSIGN, Nevada                  BARBARA BOXER, California
GEORGE ALLEN, Virginia               BILL NELSON, Florida
JOHN E. SUNUNU, New Hampshire        MARIA CANTWELL, Washington
                                     FRANK LAUTENBERG, New Jersey
           Jeanne Bumpus, Staff Director and General Counsel
                   Ann Begeman, Deputy Staff Director
                  Robert W. Chamberlin, Chief Counsel
      Kevin D. Kayes, Democratic Staff Director and Chief Counsel
                Gregg Elias, Democratic General Counsel
                                                       Calendar No. 253
108th Congress                                                   Report
                                 SENATE
 1st Session                                                    108-129

======================================================================
 
        SURFACE TRANSPORTATION BOARD REAUTHORIZATION ACT OF 2003

                                _______
                                

                August 26, 2003.--Ordered to be printed

     Filed, under authority of the order of the Senate of July 29 
                    (legislative day, July 21), 2003

                                _______
                                

       Mr. McCain, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 1389]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 1389) ``A Bill To authorize 
appropriations for the Surface Transportation Board for fiscal 
years 2004 through 2008, and for other purposes'', having 
considered the same, reports favorably thereon with amendment 
and recommends that the bill (as amended) do pass.

                          Purpose of the Bill

  The primary purpose of S. 1389 is to authorize funds for the 
Surface Transportation Board (STB) for fiscal years (FYs) 2004 
through 2008.

                          Background and Needs

  The STB was established on January 1, 1996, by the ICC 
Termination Act of 1995 (ICCTA), as an independent agency 
within the Department of Transportation (DOT). The STB's 
primary function is to oversee the economic regulation of the 
nation's freight railroads. The Board has jurisdiction over 
railroad rate and service matters, railroad restructuring 
transactions (mergers, line sales, line construction, and 
abandonments), and related labor issues. In addition to these 
responsibilities, the STB oversees certain trucking company, 
moving van, and non-contiguous ocean shipping company rate 
matters; certain intercity passenger bus company structure, 
financial, and operational matters; and certain pipeline 
matters, including rate-related matters, not regulated by the 
Federal Energy Regulatory Commission.
  The STB is comprised of three members appointed by the 
President and confirmed by the Senate. Not more than two 
members of the STB may belong to the same political party. The 
Board's Chairman is designated by the President. The term of 
each member is for five years and no individual may serve as a 
member of the Board for more than two terms. Upon the 
expiration of a term, the law permits a member to continue to 
serve until a successor is appointed, but not for more than a 
one-year period.
  The Board has approximately 145 employees and its FY 2003 
appropriation was $19.5 million. The agency has remained 
unauthorized since the end of fiscal year 1998.

                         Summary of Provisions

  S. 1389 would authorize funding for the activities of the STB 
for FYs 2004 through 2008. It would also amend current law to 
provide that the designation by the President of one STB member 
to serve as Chairman is subject to Senate confirmation.
  During consideration of the bill, the Senate Committee on 
Commerce, Science, and Transportation (the Committee) adopted 
an amendment offered by Senators McCain and Hollings to address 
a long-standing concern about the ability of small shippers to 
challenge railroad rates at the STB. The amendment would direct 
the Board, within 180 days following enactment, to supplement 
its existing guidelines for handling challenges to the 
reasonableness of rail rates in those cases in which a full 
stand-alone cost presentation is too costly.
  A rulemaking proceeding to develop simplified rate guidelines 
was first initiated in 1986 by the Interstate Commerce 
Commission (ICC), the STB's predecessor. In 1995, because 
little had been accomplished, Congress, in the ICCTA, directed 
the newly-created STB to complete the rulemaking proceeding 
within one year following enactment \1\ and established that 
the guidelines were to apply to ``. . . cases in which a full 
stand-alone cost presentation is too costly, given the value of 
the case.'' Those guidelines were adopted in Rate Guidelines -- 
Non-Coal Proceedings, 1 S.T.B. 1004 (1996).
---------------------------------------------------------------------------
    \1\ The ICCTA became effective December 29, 1995. The following 
October, Congress approved legislation to codify transportation laws 
(P.L. 104-287) that, among other provisions, modified the due date for 
the expedited procedures to January 1, 1997.
---------------------------------------------------------------------------
  Not a single case has been filed under the simplified 
guidelines. Shippers charge that the guidelines are unclear as 
to who may be eligible to use them and how the simplified rate 
criteria would be applied. They also have expressed concern 
about the potential cost and duration of the regulatory 
process. At the same time, the Association of American 
Railroads, the trade association for the freight rail industry, 
has challenged the new guidelines in Federal court, contending 
that the guidelines did not fulfill Congress's directive to 
establish a simple and expedited method to determine whether 
rates in small cases are reasonable.
  The Committee is concerned that these uncertainties have had 
the effect of deterring small shippers with low-value cases and 
little negotiating leverage from seeking regulatory relief. 
Accordingly, the amendment would direct the Board to provide 
clarity in both the eligibility criteria and the tests for rate 
reasonableness. The amendment also would set a time limit for 
the Board to decide such cases and caps the filing fee that may 
apply to these cases. The Committee will take further steps if 
the STB fails to meet the requirements of S. 1389 or the 
supplemental guidelines are not utilized in small rate cases 
because they are difficult to use or conducive to dilatory 
tactics by litigants.
  The amendment would direct the STB to consider the size of 
the shipper, the value of the case, and other relevant factors 
in determining the types of rate challenges that will be 
eligible for the expedited procedures. The Committee expects 
the Board to have the flexibility to consider any and all 
factors it considers relevant in defining eligibility. However, 
the Committee believes that the expedited procedures should 
apply to small rate cases and not be limited to small shippers. 
Whether a rate is reasonable or unreasonable is unrelated to a 
shipper's size, revenues, or ability to pay, and the same rate 
standards should apply to any shipper who brings a small rate 
case.
  Reflecting the need for expedited handling of these cases, 
the amendment directs the Board to streamline the evidentiary 
requirements in these cases. The amendment also would permit an 
initial decision in expedited rate cases to be made by an 
administrative law judge (ALJ). This authority is intended to 
further accelerate the timetable for adjudicating small rate 
cases. ALJ's would be bound by the legal standards for 
determining rate reasonableness established by the Staggers 
Rail Act of 1980 and subsequent legislation. The Committee 
intends that the parties will retain the ability to obtain a 
review by the full Board of the initial decision by an ALJ.
  The amendment also would limit the filing fee in small rate 
cases to the fee charged to bring a civil action in United 
States District Court. The filing fee for District Court cases 
is currently $150. STB filing fees have been a topic of debate 
and concern for some time. In 1984, the ICC adopted a fee of 
$500 for all rate cases. The fee was subsequently raised to 
$550 in 1990, to $600 in 1991, and to $1,000 in 1992. In 1996, 
the Board proposed increasing fees dramatically for all rate 
cases, suggesting a fee of $23,100 for smaller complaints not 
filed under the Board's coal rate guidelines. Ultimately, the 
Board maintained the $1,000 fee for small rate cases (the 
filing fee for large rate cases was raised and is now a maximum 
of $64,000) and in August 2002, proposed a filing fee at the 
level charged to file a case in United States District Court, 
based on legislation introduced by Senator Rockefeller. The 
Committee believes this is a reasonable fee for small rate 
cases. However, the filing fees for all rate cases, both large 
and small, do not nearly cover the STB's actual costs for 
handling such rate cases. In the event that the supplemental 
small rate case procedures are widely used, it may be necessary 
to supplement the STB's annual appropriation.
  The Committee also approved an amendment offered by Senators 
Smith and Wyden that would codify the voluntary agreement 
reached by 11 railroad labor unions and 6 Class I railroads in 
March 2001 with respect to the implementation of collective 
bargaining agreements in the event of new mergers. In past 
mergers, decisions by arbitrators about the terms of collective 
bargaining agreements that will apply after a merger have 
usually been decided in favor of the carrier. These new 
agreements are not reached through the collective bargaining 
process. While the Railway Labor Act normally protects unions 
from a railroad's unilateral changes to collective bargaining 
agreements, this protection is lost during the merger process.
  The labor/management agreement will provide that when newly 
consolidated rail operations involving signatories to the 
agreement are subject to multiple collective bargaining 
agreements, the labor union parties, rather than the rail 
management parties, may choose which collective bargaining 
agreement will govern the new operations. Codifying this 
agreement would ensure that it will not be set aside by STB 
appointed arbitrators.
  The Committee's adoption of the amendment in no way indicates 
the Committee's support of additional railroad mergers. There 
are now only 7 Class I carriers, including 2 based in Canada. 
Any further consolidation would require close scrutiny by the 
STB and the Congress.

                          Legislative History

  S. 1389, the Surface Transportation Board Reauthorization Act 
of 2003, was introduced by Senators McCain and Hollings on July 
10, 2003, and was referred to the Committee on Commerce, 
Science, and Transportation.
  On July 17, 2003, the Committee ordered S. 1389 to be 
favorably reported to the Senate with two amendments.
  By voice vote, the Committee adopted an amendment offered by 
Senators McCain and Hollings to require the STB to issue new 
rules to address small rate challenges within 180 days 
following enactment. The amendment also would lower the filing 
fee in small rate cases and allow an initial decision in small 
rate cases to be made by an ALJ with an opportunity for appeal 
to the Board.
  Also by voice vote, the Committee adopted an amendment 
offered by Senators Smith and Wyden to adopt the terms of an 
agreement negotiated between all of the railroads and labor 
organizations that participate in national collective 
bargaining. The agreement provides that in any future merger or 
consolidation involving the signatories, rail labor 
organizations will choose the collective bargaining agreements 
that will apply upon consummation.

                            Estimated Costs

  In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

                                     U.S. Congress,
                               Congressional Budget Office,
                                     Washington, DC, July 29, 2003.
Hon. John McCain,
Chairman, Committee on Commerce, Science, and Transportation,
U.S. Senate, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for S. 1389, the Surface 
Transportation Board Reauthorization Act of 2003.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contact is Rachel 
Milberg.
            Sincerely,
                                         Robert A. Sunshine
                               (For Douglas Holtz-Eakin, Director).
    Enclosure.

S. 1389--Surface Transportation Board Reauthorization Act of 2003

    Summary: The Surface Transportation Board (STB) regulates 
rates, services, and company structures for firms involved in 
interstate transportation, including railroads, truckers, ocean 
shippers, and intercity buses. The STB also provides a forum 
for resolving disputes among firms in these industries. S. 1389 
would authorize the appropriation of about $112 million for the 
STB's operations over the 2004-2008 period.
    Assuming appropriation of the authorized amounts, CBO 
estimates that implementing S. 1389 would cost $109 million 
over the 2004-2008 period. enacting S. 1389 would not affect 
direct spending or revenues.
    S. 1389 contains no intergovernmental or private-sector 
mandates as defined in the Unfunded Mandates Reform Act (UMRA) 
and would impose no costs on state, local, or tribal 
governments.
    Estimated Cost to the Federal Government: The estimated 
budgetary impact of S. 1389 is shown in the following table. 
The costs of this legislation fall within budget function 400 
(transportation). For this estimate, CBO assumes that S. 1389 
will be enacted near the start of fiscal year 2004, and that 
the authorized amounts will be appropriated for each year. 
Estimates of outlays are based on information from the Surface 
Transportation Board and historical spending patterns for its 
operations.

----------------------------------------------------------------------------------------------------------------
                                                                  By fiscal year, in millions of dollars--
                                                           -----------------------------------------------------
                                                              2003     2004     2005     2006     2007     2008
----------------------------------------------------------------------------------------------------------------
                                        SPENDING SUBJECT TO APPROPRIATION

STB spending under current law:
    Budget authority......................................       18        0        0        0        0        0
    Estimated outlays.....................................       18        2        0        0        0        0
Proposed changes:
    Authorization level...................................        0       21       21       24       23       23
    Estimated outlays.....................................        0       18       21       24       23       23
STB spending under S. 1389:
    Authorization level...................................       18       21       21       24       23       23
    Estimated outlays.....................................       18       20       21       24       23      23
----------------------------------------------------------------------------------------------------------------
\1\ The 2003 level is the amount appropriated for that year.

    Intergovernmental and Private-Sector Impact: S. 1389 
contains no intergovernmental or private-sector mandates as 
defined in UMRA and would impose no costs on state, local, or 
tribal governments.
    Estimate Prepared by: Federal Costs: Rachel Milberg. Impact 
on State, Local, and Tribal Governments: Gregory Waring. Impact 
on the Private Sector: Jean Talarico.
    Estimate Approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

                      Regulatory Impact Statement

  In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       NUMBER OF PERSONS COVERED

  The legislation reauthorizes existing programs. Therefore, 
the number of persons covered should be consistent with current 
levels.

                            ECONOMIC IMPACT

  S. 1389 would authorize appropriations of $20.5 million for 
fiscal year 2004, rising to $23.5 million by fiscal year 2008. 
These funding levels are modest and are not expected to have an 
inflationary impact on the nation's economy.

                                PRIVACY

  This legislation will not have any adverse impact on the 
personal privacy of the individuals affected.

                               PAPERWORK

  An amendment to the bill adopted by the Committee would 
require the STB to issue new rules to address small rate 
challenges, defined in existing law as ``. . . cases in which a 
full stand-alone cost presentation is too costly, given the 
value of the case'' (49 U.S.C. Sec. 10701(d)(3)). The new rules 
may create additional paperwork for shippers involved in 
challenging small rate cases, as that term is defined by the 
STB as part of the new rules, and for railroads affected by 
such rate challenges. However, new paperwork requirements will 
only arise because the new rules provide an effective means of 
challenging rates before the STB. Similar paperwork 
requirements exist today, but no cases have been filed under 
the STB's existing rules for small shippers.

                      Section-by-Section Analysis


Sec. 1. Short Title

  This Act may be cited as the ``Surface Transportation Board 
Reauthorization Act of 2003''.

Sec. 2. Authorization of Appropriations

  Section 2 would authorize the following sums to be 
appropriated to the STB: $20,516,000 for FY 2004; $21,215,000 
for FY 2005; $23,770,000 for FY 2006; $22,564,000 for FY 2007; 
and $23,488,000 for FY 2008. The somewhat higher authorization 
for FY 2006 includes $2.2 million for relocating the Board's 
offices.

Sec. 3. Chairman Designated with Senate Confirmation

  Section 3 would make the President's designation of one of 
the STB members to serve as Chairman subject to Senate 
confirmation.

Sec. 4. Expedited Procedure for Small Rate Challenges

  Section 4 would require the STB to issue new regulations to 
address small rate challenges within 180 days following 
enactment. The rules would establish standards for determining 
what rate cases will be eligible to use expedited procedures 
taking into account the size of the shipper, the value of the 
case and other relevant factors, and establish the specific 
test or tests for determining whether the challenged rate is 
reasonable. Filing fees in small rate cases would not exceed 
the fee charged to bring a civil action in United States 
District Court. An initial decision could be made by an ALJ, 
with an opportunity to appeal the ALJ's decision to the Board. 
Finally, the amendment would require the STB to make 
recommendations to Congress for any additional legislative 
changes the Board determines are necessary to address the 
handling of small rate cases.

Sec. 5. Application of Certain Agreements

  This section would codify the voluntary agreement reached by 
railroad labor and railroad management in March 2001 with 
respect to the implementation of collective bargaining 
agreements in the event of additional mergers. It provides that 
when newly consolidated rail operations involving the 
signatories to the agreement are subject to multiple collective 
bargaining agreements, the labor union parties, rather than the 
rail management parties, may choose which collective bargaining 
agreement will govern the new operations. Codifying this 
agreement would ensure that it will not be set aside by STB-
appointed arbitrators in the event of another round of mergers.

                        Changes in Existing Law

  In compliance with paragraph 12 of rule XXVI of the Standing 
Rules of the Senate, changes in existing law made by the bill, 
as reported, are shown as follows (existing law proposed to be 
omitted is enclosed in black brackets, new material is printed 
in italic, existing law in which no change is proposed is shown 
in roman):

                      TITLE 49, UNITED STATES CODE

                SUBTITLE I--DEPARTMENT OF TRANSPORTATION

                CHAPTER 7. SURFACE TRANSPORTATION BOARD

                      SUBCHAPTER I. ESTABLISHMENT

Sec. 701. Establishment of Board

  (a) Establishment.--There is hereby established within the 
Department of Transportation the Surface Transportation Board.
  (b) Membership.--
          (1) The Board shall consist of 3 members, to be 
        appointed by the President, by and with the advice and 
        consent of the Senate. Not more than 2 members may be 
        appointed from the same political party.
          (2) At any given time, at least 2 members of the 
        Board shall be individuals with professional standing 
        and demonstrated knowledge in the fields of 
        transportation or transportation regulation, and at 
        least one member shall be an individual with 
        professional or business experience (including 
        agriculture) in the private sector.
          (3) The term of each member of the Board shall be 5 
        years and shall begin when the term of the predecessor 
        of that member ends. An individual appointed to fill a 
        vacancy occurring before the expiration of the term for 
        which the predecessor of that individual was appointed, 
        shall be appointed for the remainder of that term. When 
        the term of office of a member ends, the member may 
        continue to serve until a successor is appointed and 
        qualified, but for a period not to exceed one year. The 
        President may remove a member for inefficiency, neglect 
        of duty, or malfeasance in office.
          (4) On January 1, 1996, the members of the Interstate 
        Commerce Commission serving unexpired terms on December 
        29, 1995, shall become members of the Board, to serve 
        for a period of time equal to the remainder of the term 
        for which they were originally appointed to the 
        Interstate Commerce Commission. Any member of the 
        Interstate Commerce Commission whose term expires on 
        December 31, 1995, shall become a member of the Board, 
        subject to paragraph (3).
          (5) No individual may serve as a member of the Board 
        for more than 2 terms. In the case of an individual who 
        becomes a member of the Board pursuant to paragraph 
        (4), or an individual appointed to fill a vacancy 
        occurring before the expiration of the term for which 
        the predecessor of that individual was appointed, such 
        individual may not be appointed for more than one 
        additional term.
          (6) A member of the Board may not have a pecuniary 
        interest in, hold an official relation to, or own stock 
        in or bonds of, a carrier providing transportation by 
        any mode and may not engage in another business, 
        vocation, or employment.
          (7) A vacancy in the membership of the Board does not 
        impair the right of the remaining members to exercise 
        all of the powers of the Board. The Board may designate 
        a member to act as Chairman during any period in which 
        there is no Chairman designated by the President.
  (c) Chairman.--
          (1) There shall be at the head of the Board a 
        Chairman, who shall be designated by the [President] 
        President, by and with the advice and consent of the 
        Senate, from among the members of the Board. The 
        Chairman shall receive compensation at the rate 
        prescribed for level III of the Executive Schedule 
        under section 5314 of title 5.
          (2) Subject to the general policies, decisions, 
        findings, and determinations of the Board, the Chairman 
        shall be responsible for administering the Board. The 
        Chairman may delegate the powers granted under this 
        paragraph to an officer, employee, or office of the 
        Board. The Chairman shall--
                  (A) appoint and supervise, other than regular 
                and full-time employees in the immediate 
                offices of another member, the officers and 
                employees of the Board, including attorneys to 
                provide legal aid and service to the Board and 
                its members, and to represent the Board in any 
                case in court;
                  (B) appoint the heads of offices with the 
                approval of the Board;
                  (C) distribute Board business among officers 
                and employees and offices of the Board;
                  (D) prepare requests for appropriations for 
                the Board and submit those requests to the 
                President and Congress with the prior approval 
                of the Board; and
                  (E) supervise the expenditure of funds 
                allocated by the Board for major programs and 
                purposes.

Sec. 11326. Employee protective arrangements in transactions involving 
                    rail carriers

  (a) Except as otherwise provided in this section, when 
approval is sought for a transaction under sections 11324 and 
11325 of this title, the Board shall require the rail carrier 
to provide a fair arrangement at least as protective of the 
interests of employees who are affected by the transaction as 
the terms imposed under section 5(2)(f) of the Interstate 
Commerce Act before February 5, 1976, and the terms established 
under section 24706(c) of this title. Notwithstanding this 
part, the arrangement may be made by the rail carrier and the 
authorized representative of its employees. The arrangement and 
the order approving the transaction must require that the 
employees of the affected rail carrier will not be in a worse 
position related to their employment as a result of the 
transaction during the 4 years following the effective date of 
the final action of the Board (or if an employee was employed 
for a lesser period of time by the rail carrier before the 
action became effective, for that lesser period).
  (b) When approval is sought under sections 11324 and 11325 
for a transaction involving one Class II and one or more Class 
III rail carriers, there shall be an arrangement as required 
under subsection (a) of this section, except that such 
arrangement shall be limited to one year of severance pay, 
which shall not exceed the amount of earnings from the railroad 
employment of that employee during the 12-month period 
immediately preceding the date on which the application for 
approval of such transaction is filed with the Board. The 
amount of such severance pay shall be reduced by the amount of 
earnings from railroad employment of that employee with the 
acquiring carrier during the 12-month period immediately 
following the effective date of the transaction. The parties 
may agree to terms other than as provided in this subsection.
  (c) When approval is sought under sections 11324 and 11325 
for a transaction involving only Class III rail carriers, this 
section shall not apply.
  (d) Certain Agreements.--The terms of the agreement entitled 
``Revised Standards for Preemption of Collective Bargaining 
Agreements for Transactions Initiated Pursuant to Section 11323 
of the Interstate Commerce Act'' dated March 21, 2001, by and 
between 6 Class I railroads and 11 labor organizations, and the 
terms of the agreement entitled ``Revised Standards for 
Preemption of Collective Bargaining Agreements for Transactions 
Initiated Pursuant to Section 11323 of the Interstate Commerce 
Act'' dated February 11, 2000, by and between 5 Class I 
railroads, the National Carriers' Conference Committee, and the 
United Transportation Union (except for the provisions in both 
agreements stating ``The terms of this agreement will become 
null and void when enacted into law''), shall apply to the 
signatories to such agreements in connection with transactions 
that are approved under sections 11324 and 11325 and that are 
covered by such agreements, unless the affected rail carriers 
and the applicable labor organization or organizations agree on 
alternative terms. The terms of such agreements shall not be 
subject to the exemption provisions of section 11321(a) or any 
future exemption provisions.

                                
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