(The following story by Ian Swanson appeared on TheHill.com on September 28.)
WASHINGTON, D.C. — House Transportation and Infrastructure Committee Chairman Jim Oberstar (D-Minn.) on Thursday insisted it is reasonable to think his bill overhauling U.S. railroads can pass despite intense opposition from the railroad lobby.
“It is realistic to think that this can become law, and if not in the context of the present administration, in a subsequent administration,” Oberstar said at a breakfast sponsored by The Hill, Dittus Communications and the American Chemistry Council.
“We’re going to do a bill, it will be reported by this committee and it will reach the House floor,” said Oberstar, who has introduced legislation supported by a coalition of associations and companies that depend on railroads to transport their products.
Oberstar said it could be difficult to move the bill on the House floor this year given the target adjournment date of Nov. 16. “That would restrict the floor time for us to get a bill to the floor,” he said.
However, if the bill doesn’t move on the floor this year, Oberstar said he would seek to move it “very early” in the next session.
The bill is one of several measures that targets the railroad industry, suggesting a furious lobbying battle may only intensify in coming years. Other bills seek to strip railroads of their federal antitrust exemption.
Prospects for those seeking to overhaul existing railroad regulations seem to have brightened since Oberstar, who for years has sought to overhaul regulations, took control of the Transportation Committee.
Oberstar joked that the railroads have spent a lot of time coming up with clever ways to oppose him. “The first one was to have a Republican Congress so we would never have a hearing,” he quipped. The first hearing on Oberstar’s bill — the Railroad Competition and Service Improvement Act of 2007 — was held this week.
However, Association of American Railroads (AAR) Spokesman Tom White said legislation similar to Oberstar’s has been around almost since the ink dried on the 1980 Staggers Rail Act, which deregulated the industry. He also noted that that bill was passed by a Democratic Congress and signed by a Democratic president.
Oberstar described the issue as “nonpartisan.” His bill is co-sponsored by GOP Rep. Richard Baker (La.), and in the Senate, GOP co-sponsors of identical legislation introduced by Sen. Jay Rockefeller (D-W.Va.) include Sens. Mike Crapo (Ind.), John Thune (S.D.) and David Vitter (La.).
Oberstar sees his bill as eliminating regulatory impediments to competition in the railroad industry that drive up costs for users of the railroads, which he argues is controlled by two regional duopolies.
His bill would force the Surface Transportation Board, which regulates the railroads, to terminate restrictions known as “paper barriers” that prevent short-line railroads from crossing major rail systems. His legislation also would eliminate “bottlenecks” so that a carrier would have to establish a rate and provide service for any two points on the railroad’s system where traffic originates, terminates or can be interchanged.
AAR, however, argues that Oberstar’s bill would “re-regulate” railroads, which could have a devastating effect by returning a profitable industry that it says does not receive subsidies from taxpayers to bankruptcy. “If we pass re-regulation now, in five or 10 years we will be arguing over a railroad bailout plan, just like we did in the 1970s,” Rep. Bill Shuster (R-Pa.) warned in a statement this week.
Oberstar’s bill is backed by Consumers United for Rail Equity, a coalition of freight rail customers that includes dozens of power cooperatives, energy groups and utility companies.
It also includes the American Chemistry Council (ACC), whose members include chemical industry giants such as DuPont, Dow Corning Corporation and BASF Corporation. ACC members account for about 8 percent of all freight rail business, according to the ACC.
ACC President and Chief Executive Jack Gerard said the combination of Oberstar’s elevation to committee chairmanship and the increasing stress rail rates are imposing on companies dependent on rail transportation are elevating the issue’s importance.
ACC members, he said, ship about 170 million tons of chemicals a year, resulting in about $5 billion in business for the railroad industry. Two-thirds of ACC’s members, he said, depend on railroads enjoying record profits to move their goods.
Gerard also paints the issue as one of international competition. He said rail costs can lead to decisions to build chemical plants in China and other countries instead of the U.S. “We’ve lost 110,000 jobs in six years,” he said.
AAR, however, insists that railroad costs in the U.S. are much less expensive than in other countries. In testimony before Oberstar’s committee this week, William J. Rennicke, a director at Oliver Wyman, a firm that provides consultation to private and state-owned freight and passenger railroads, said American shippers pay less than anywhere else in the world.
White said ACC members are in better economic health than the railroads, pointing to rates of returns on equity. ACC members have an average rate of nearly 21 percent, he said, while the railroad average is 15 percent, which he said was its best year since World War II.
“I’m not sure who’s injured here. It’s not the chemistry members,” White said.