11

Transportation Regulation in America—Past, Present, and Future

Francis P. MulveyFrancis P. Mulvey

CommissionerCommissioner

Surface Transportation Surface Transportation BoardBoard

George Mason UniversityGeorge Mason University

Arlington, VA Arlington, VA

April 25, 2011April 25, 2011

22

Transportation Regulation Transportation Regulation

Regulation and its Historical BasesLegal Bases for RegulationCommon Law

Commerce Clause of the Constitution

Police Powers of the State

Statutory Law

33

Railroad RegulationRailroad Regulation

• Modern U.S. railroad industry history can be Modern U.S. railroad industry history can be divided into pre- & post- Staggers Actdivided into pre- & post- Staggers Act

• In the 19In the 19thth Century railroads expanded Century railroads expanded rapidly especially after the Civil War rapidly especially after the Civil War

• However, much abuse of monopoly power However, much abuse of monopoly power led to the passage of the Interstate led to the passage of the Interstate Commerce Act and other federal regulationsCommerce Act and other federal regulations

• Federal regulation ultimately extended to Federal regulation ultimately extended to all modes, but proved particularly harmful all modes, but proved particularly harmful to railroadsto railroads

44

Early Railroad RegulationEarly Railroad Regulation

• The Granger LawsThe Granger Laws

• Primarily in Upper MidWestPrimarily in Upper MidWest

• Maximum Rate LegislationMaximum Rate Legislation

• Pro Rata Clauses Pro Rata Clauses

• Prohibitions against bribes/kickbacksProhibitions against bribes/kickbacks

55

Early Railroad RegulationEarly Railroad Regulation

Problems with the Granger Laws

Munn vs. Illinois

Windom and Cullom Reports

Act to Regulate Commerce 1887

66

Railroad RegulationRailroad Regulation

Gibbons vs. Ogden

Provisions of the Act of 1887

Rate reasonablenessDiscrimination and Undue Preferences

Long Haul/Short Haul Clause

Pooling Restrictions

Created ICC

Early Problems with the Act

Supreme Court Cases (Councilman vs. Hitchcock, et al.

77

Railroad RegulationRailroad Regulation

• Strengthening the ActStrengthening the Act– Carmack ActCarmack Act

– Hepburn ActHepburn Act

– Other Legislative ResponsesOther Legislative Responses

• Nationalization of the RailroadsNationalization of the Railroads

88

Railroad RegulationRailroad Regulation

Transport Act of 1920

Problems with Prior Regulation

IncompletenessCapitalizationService AdequacyLabor Disputes

Defects in Regulatory System

Policy of Enforced CompetitionRestrictive Regulation

99

Railroad Regulation Railroad Regulation

Principal Provisions of the Act of 1920

Rule of Rate MakingRecapture ClauseDivision of Joint RatesMinimum Rate RegulationPoolingConsolidation and AcquisitionsFinancial RegulationIntrastate Rates Abandonments Joint TerminalsLabor Disputes

1010

Railroad RegulationRailroad Regulation

Hoch-Smith Resolution of 1925

Railway Labor Act of 1926

Emergency Transport Act of 1933

1111

Early Road DevelopmentEarly Road Development

• Packhorsemen and Tote RoadsPackhorsemen and Tote Roads

• Early TurnpikesEarly Turnpikes

• Federal Involvement – The Cumberland RoadFederal Involvement – The Cumberland Road

• Plank RoadsPlank Roads

• The Good Roads MovementThe Good Roads Movement

1212

Development of Highway Development of Highway SystemSystem

• Federal Aid Road Act of 1916Federal Aid Road Act of 1916

• Highway Act of 1921Highway Act of 1921

• Eisenhower’s Cross Country ConvoyEisenhower’s Cross Country Convoy

• Highway Act of 1956 and the Interstate SystemHighway Act of 1956 and the Interstate System

• The Highway Trust FundThe Highway Trust Fund

1313

Interstate Highway SystemInterstate Highway System

1414

Motor Carrier Regulation Motor Carrier Regulation

Three Principal Areas of Motor Carrier Regulation

Highway ProtectionSafetyTraditional Economic Regulation

Motor Carrier Act of 1935Exempt Areas

Incidental Movements by other Modes

Local Transport

Agricultural Commodities

1515

Motor Carrier RegulationMotor Carrier Regulation

Differences Between Railroad and Motor Carrier Regulation

Motor Carrier Regulation More Complicated

Many Exempt Carriers

Large Number of Motor CarriersInsurance RequirementsNo Abandonment Restrictions

No Joint or Through Rate Requirements

No Long Haul/Short haul Clause

ICC had No Power over Intrastate Rates

1616

Motor Carrier RegulationMotor Carrier Regulation

Problems Faced by Regulators

Distinguishing Between Private and “For-hire” Trucking

Distinguishing Between Contract and Common Carriers

Agricultural ExemptionsEntry Considerations

Common Carriers – PCN Test (Public Convenience and Necessity)

Contract Carriers – Consistent with the Public Interest

1717

Motor Carrier RegulationMotor Carrier Regulation

Rate Regulation - Operating Ratio Standard

Operating Expenses/Operating Revenue

Trucks and Ruinous Competition

Empty Back Haul Problem

1818

Transportation Law and Transportation Law and RegulationRegulationTransportation Act of 1940

-Fair and Impartial Transportation

-Preserve Modal Inherent Advantages -Eliminate Destructive Competition

-Promote Safe Adequate and Efficient Service

-Foster Sound Econ Conditions in Transport -Encourage Reasonable Rates

-Encourage Just Wages and Good Working Conditions

1919

Transportation Law and Transportation Law and RegulationRegulation

• Other Provisions of the Act of 1940Other Provisions of the Act of 1940

--Railroad ConsolidationRailroad Consolidation

-Rule of Ratemaking-Rule of Ratemaking

-Burden of Proof in Railroad Rate Cases-Burden of Proof in Railroad Rate Cases

-Water Carrier Regulation-Water Carrier Regulation

2020

Water Carrier Regulation Water Carrier Regulation

Included in Transport Act of 1940

Included Because They Were in Distress

Made Subject to Long Haul/Short Haul Clause

Made Subject to Rules Governing Consolidation

Many Exemptions - 90 percent Exempt

Bulk Commodities When Less Than 3 in TowBulk LiquidsContract Carriage

2121

Navigable Waterways Navigable Waterways

2222

Air Transport RegulationAir Transport Regulation

Earliest Government Involvement – Mail Contracts

Immediate Rationale for Economic Regulation

SafetyFinancial Crisis

Civil Aeronautics Act of 1938

Public Convenience and Necessity Must be Shown for Entry

Rates and Fares Must be Published

Rates Can be Prescribed When Existing Found UnlawfulAuthority over MergersCreated Civil Aeronautics Board

2323

Public Promotion of Air Public Promotion of Air TransportTransport

• Post War Development of the AirlinesPost War Development of the Airlines

• Air Traffic ControlAir Traffic Control

• Airport Improvement ProgramAirport Improvement Program

• Essential Air Service ProgramEssential Air Service Program

• CRAF ProgramCRAF Program

• Aviation Trust FundAviation Trust Fund

• State and Local Support for TerminalsState and Local Support for Terminals

2424

US Transportation Under US Transportation Under RegulationRegulation

• Restricted EntryRestricted Entry

• Low Rates of Returns for some modesLow Rates of Returns for some modes

• Relatively Rigid RatesRelatively Rigid Rates

• Regulatory LagRegulatory Lag

• Regulatory MentalityRegulatory Mentality

• Restrictions on InnovationsRestrictions on Innovations

2525

Motor Carrier Motor Carrier Deregulation Deregulation

• Condition of Motor Carriers under RegulationCondition of Motor Carriers under Regulation

– Wasteful – empty backhaulsWasteful – empty backhauls

– Uneconomic – excess capacityUneconomic – excess capacity

– Inefficient carriersInefficient carriers

– Protected –entry limitsProtected –entry limits

2626

Motor Carrier Motor Carrier DeregulationDeregulation

• Opposition to Regulatory ReformOpposition to Regulatory Reform

– Organized LaborOrganized Labor

– Trucking CompaniesTrucking Companies

– Shippers happy with service qualityShippers happy with service quality

• Triumph of the EconomistsTriumph of the Economists

2727

Motor Carrier Motor Carrier DeregulationDeregulation

Motor Carrier Act of 1980

On Entry– Burden of Proof on ProtestorFit Willing and Able Test

Elimination of Operating RestrictionsGreater Pricing FreedomContract Carriers get Common CarrierCertificates Rates must still be filed with ICC

2828

Motor Carrier Motor Carrier DeregulationDeregulation

Intercity Bus Industry

Condition Under Regulation

Low ROI

Losing Traffic to Air and Auto andto AmtrakUneconomic Traffic

2929

Motor Carrier Motor Carrier DeregulationDeregulation

Bus Regulatory Reform Act of 1982

Eliminated Rate and Entry Regulation

Eliminated Requirement to offerRegular Route Service to Gain Charter Authority

Preempted State Regulation

..

3030

Motor Carrier Deregulation-Motor Carrier Deregulation-AftermathAftermath

Undercharge Issue

Effect on Trucking Labor Organization

Rise of Independent Owner-Operators

Bus Industry Performed Poorer than Other Modes Following Deregulation

Bus Focus on Charter and Tourism Traffic

3131

Airline DeregulationAirline Deregulation

Condition of the Industry Under Regulation

Low Profits

High Costs

High Fares

Stagnant Growth

Wasteful Service Competition

3232

Airline DeregulationAirline Deregulation

Experience in Intrastate Markets

Theory of Contestable Markets

Air Cargo Deregulation in 1977

Opposition of Labor, Some Large Carriers

3333

Airline Deregulation Airline Deregulation

Airline Deregulation Act of 1978

Provided for Phasing in of New Entryand Rate Freedom

Eased exit restrictions

Abolished CAB by 1985

Alfred Kahn Accelerated the Process

3434

Airline Deregulation Airline Deregulation

Immediate Aftermath of DeregulationNew Entrants

Falling Market Share of Legacy Carriers

Bankruptcies and Mergers

Falling Fares External Events—Oil Embargo, Patco Strike, Inflationary Pressures

3535

Aftermath of Airline Aftermath of Airline DeregulationDeregulation

Response of the Legacy CarriersCompetitive Strategies and Barriers to Entry

--Physical Barriers—Hubs, Slots, Gates and Noise Restrictions--Marketing Barriers—Frequent Flyer

Programs, CRS’s, Travel Agent Commissions, Code Sharing

3636

Scheduled Air Transportation

Domestic Operations Revenue passenger miles flown

1930 85 million

1935 316 million

1940 1 billion

1945 3.3 billion

1950 8 billion

1955 19.8 billion

1960 30.5 billion

1965 51.8 billion

1970 104.1 billion

1975 131.7 billion

1980 200.8 billion

1985 270.6 billion

1990 340.2 billion

1995 540.7 billion

2000 692.8 billion

2005 773 billion

2010 800.1 billion

3737

Airlines TodayAirlines Today

• Re-emergence of Some Legacy AirlinesRe-emergence of Some Legacy Airlines

• Success of Some Low Cost CarriersSuccess of Some Low Cost Carriers

• Decline in Role of Travel AgentsDecline in Role of Travel Agents

• Recurring Financial CrisesRecurring Financial Crises

• Aftermath of 9/11Aftermath of 9/11

• Global AlliancesGlobal Alliances

3838

Railroad DeregulationRailroad Deregulation

• Condition of the Railroad IndustryCondition of the Railroad Industry– ROIROI

– Market Share TrendsMarket Share Trends

– Deferred MaintenanceDeferred Maintenance

– BankruptciesBankruptcies

– Subsidized Competition and Uneven RegulationSubsidized Competition and Uneven Regulation

– Low Labor Productivity and Work RulesLow Labor Productivity and Work Rules

3939

Railroad DeregulationRailroad Deregulation

• Three R Act of 1973Three R Act of 1973

• Four R Act of 1976Four R Act of 1976– Reduced ICC Regulation to cases of market Reduced ICC Regulation to cases of market

dominancedominance– Exempt from regulation if not in public interestExempt from regulation if not in public interest– ICC develop standards of Revenue AdequacyICC develop standards of Revenue Adequacy

Freedom from Obligation to carry Passengers--Freedom from Obligation to carry Passengers--AMTRAKAMTRAK

4040

Amtrak System Map Amtrak System Map

4141

Railroad Industry Pre-Railroad Industry Pre-Staggers Staggers • 40 Class I Railroads40 Class I Railroads

• 9 Railroads bankrupt 9 Railroads bankrupt • Industry-wide low return-on-investmentIndustry-wide low return-on-investment• Railroads unable to raise capitalRailroads unable to raise capital• Railroads faced steadily declining market Railroads faced steadily declining market

shareshare• Regulation prevented RRs from any Regulation prevented RRs from any

flexibility in pricing to compete with other flexibility in pricing to compete with other modesmodes

• Carriers could not abandon redundant or Carriers could not abandon redundant or light density lines to cut costslight density lines to cut costs

• Rates could not cover inflation due to Rates could not cover inflation due to regulatory lag in rate adjustmentsregulatory lag in rate adjustments

4242

Railroad Deregulation Railroad Deregulation

• StaggersStaggers Rail Act of 1980Rail Act of 1980– Maximum Rates only in Absence of Comp.Maximum Rates only in Absence of Comp.

– Threshold Revenue/Variable Cost RatioThreshold Revenue/Variable Cost Ratio

– 180 percent180 percent

– Revenue Adequacy a Factor in Rate Revenue Adequacy a Factor in Rate ReasonablenessReasonableness

– ICC can’t consider impacts on otherICC can’t consider impacts on other modes from a modes from a rate changerate change

4343

Railroad Deregulation Railroad Deregulation

Interstate Commerce Commission Termination Act of 1995

Creation of Surface Transportation Board

STB’s Limited Regulatory Role

Rationalization of the Rail Network

4444

Railroad DeregulationRailroad Deregulation

• Staggers Act of 1980 (cont’d)Staggers Act of 1980 (cont’d)

• Allowed RR’s to enter into contract ratesAllowed RR’s to enter into contract rates

• Allowed surcharges on light density Allowed surcharges on light density lines when revenues are inadequatelines when revenues are inadequate

• Time limits of ICC proceedingsTime limits of ICC proceedings

• Expanded ICC power to exempt Expanded ICC power to exempt categoies of traffic from regulationcategoies of traffic from regulation

4545

Growth & Decline of Class I RR Growth & Decline of Class I RR MilesMiles

Mileage1830 221840 28181850 90211860 306261870 529221880 932621890 1635971900 1933461910 2402931920 2528451930 2490521940 2336701950 2237791960 2175521970 2070001980 2000001990 1750002004 1000002005 958302006 949422007 941122008 942092009 940480

50,000

100,000

150,000

200,000

250,000

300,000

464646

1975 1.21980 4.221985 4.581990 8.111995 7.042000 6.482001 6.852002 7.042003 6.332004 6.122006 10.22007 9.872008 10.72009 7.9

0.00

2.00

4.00

6.00

8.00

10.00

12.00

Railroad ROIRailroad ROI 1970-2009 1970-2009

474747

Railroad Employment Railroad Employment 1939-2009 1939-2009

1,151,000

1,670,000

4848

Railroad Industry Cost of Railroad Industry Cost of Capital and ROI 1996-2009Capital and ROI 1996-2009

COC BNSF CSXT NS UP KCS SOO GT1996 11.9% 8.6% 8.9% 13.0% 9.3% 7.2% 23.5% 0.0%1997 11.8% 8.4% 9.8% 13.1% 5.2% 3.6% 12.3% 5.2%1998 10.7% 9.7% 8.1% 10.5% 2.9% 9.1% 4.9% 3.0%1999 10.8% 9.5% 3.8% 5.2% 6.8% 6.4% 2.5% 25.4%2000 11.0% 8.8% 3.6% 5.5% 6.9% 6.3% 5.6% 5.9%2001 10.2% 7.1% 4.6% 8.3% 7.6% 7.0% 5.9% 4.9%2002 9.8% 6.4% 5.2% 9.1% 8.6% 6.5% 5.7% 3.1%2003 9.4% 6.2% 4.0% 9.1% 7.3% 3.7% 0.01% 4.5%2004 10.1% 5.8% 4.4% 11.6% 4.5% 8.3% 3.3% 6.0%2005 12.2% 10.3% 6.2% 13.2% 6.3% 5.9% 8.9% 8.1%2006 9.9% 11.4% 8.2% 14.4% 8.2% 9.3% 11.6% 9.5%2007 11.3% 10.0% 7.6% 13.6% 8.9% 9.4% 15.3% 10.1%2008 11.6% 10.5% 9.3% 13.8% 10.5% 7.7% 9.3% 9.9%2009 10.4% 8.7% 7.3% 7.7% 8.6% 6.5% 6.3% 6.0%

4949

Total Roadway & Structures Equipment1994 $4.885 $3.151 $1.7331995 $5.994 $3.651 $2.3421996 $6.100 $3.899 $2.2011997 $6.266 $4.120 $2.1451998 $7.195 $4.875 $2.3201999 $6.628 $4.445 $2.1832000 $6.056 $4.549 $1.5072001 $5.434 $4.421 $1.0122002 $5.666 $4.645 $1.0212003 $5.860 $4.561 $1.2992004 $6.242 $4.561 $1.2992005 $6.400 $5.400 $1.3012006 $8.500 $6.400 $1.0002007 $9.200 $6.900 $2.2002008 $10.200 $7.900 $2.3002009 $9.900 $7.300 $2.5002010 $10.700

$0

$2

$4

$6

$8

$10

$12

Class I Capital ExpendituresClass I Capital Expenditures 1994 - 2010 1994 - 2010

Roadway & Structures

Equipment

Total

Billions

5050

Since StaggersSince Staggers

• Rail industry freight traffic ton-mile market shareRail industry freight traffic ton-mile market share has increased from 30.3% in 1980 to 43% in 2010has increased from 30.3% in 1980 to 43% in 2010• Rail rates down 55% on average (inflationRail rates down 55% on average (inflation adjusted)adjusted)

-Some year-to-year increases in last decade -Some year-to-year increases in last decade (2000-(2000- 2006 up 3.5%, 2008 up 14.5%) 2006 up 3.5%, 2008 up 14.5%)

• Railroads’ ROI increased Railroads’ ROI increased • Railroads substantially increased investment in Railroads substantially increased investment in

infrastructureinfrastructure• Improvement in safety performance Improvement in safety performance

5151

Modal Markets SharesModal Markets Shares

5252

The The RailroadRailroad Industry Today Industry Today

• 7 Class I Railroads7 Class I Railroads

• 525 Class II and Class III railroads525 Class II and Class III railroads

• Much reduced system through Much reduced system through rationalization rationalization

• Average length of haul – 919 milesAverage length of haul – 919 miles (2009) (2009)

5353

Intermodal Shipments 1965-Intermodal Shipments 1965-20102010

Trailers & Containers Trailers Containers1965 16649291970 23632001975 22381171980 30594021985 45909521990 6206782 3451953 27548291991 6246134 3201560 30445741992 6627841 3264597 33632441993 7156628 3464126 36925021994 8128228 3752502 43757261995 7936172 3492463 44437091996 8143258 3302128 48411301997 8698308 3453907 52444011998 8772663 3353032 54196311999 8907626 3207407 57002192000 9176890 2888630 62882602001 8935444 2603423 63320212002 9312360 2531338 67810222003 9955605 2625837 73297682004 10993662 2928123 80655392005 11693512 2979906 87136062006 12282221 2882699 93995222007 12030000 2600000 94300002009 9880000 1640000 82400002010 11300000

0

2,000,000

4,000,000

6,000,000

8,000,000

10,000,000

12,000,000

14,000,000

1965

1975

1985

1991

1993

1995

1997

1999

2001

2003

2005

2007

2010

Total

Containers

Trailers

5454

New Regulatory RegimeNew Regulatory Regime • STB replaces ICC in 1995STB replaces ICC in 1995

• Three member board—non-partisan Three member board—non-partisan

• Railroad rate and service disputesRailroad rate and service disputes

• Railroad restructuring (M&A)Railroad restructuring (M&A)

• Limited jurisdiction over other modesLimited jurisdiction over other modes

• Much railroad traffic exempt from STB Much railroad traffic exempt from STB regulationregulation

• STB regulates where market STB regulates where market dominance exists--180% r/vc dominance exists--180% r/vc thresholdthreshold

5555

Early Experience at the STBEarly Experience at the STB

• Board tries to balance shipper desire for Board tries to balance shipper desire for low rates and railroads’ need to earn low rates and railroads’ need to earn profitsprofits

• Early on, Board looked favorably on Early on, Board looked favorably on railroad mergersrailroad mergers

• Perception among shippers that STB was Perception among shippers that STB was too pro-railroadtoo pro-railroad

5656

Changes in STB Practices and Changes in STB Practices and ProceduresProcedures

• New Approaches to Handling Rate CasesNew Approaches to Handling Rate Cases

• Review of Carrier Operating PracticesReview of Carrier Operating Practices

• Railroad RestructuringRailroad Restructuring

• Environmental ReviewsEnvironmental Reviews

• Potential Legislative Changes Affecting the Potential Legislative Changes Affecting the STB and/or the Railroad Industry STB and/or the Railroad Industry

5757

New Approaches to Rate CasesNew Approaches to Rate Cases• Streamlined procedures to reduce time Streamlined procedures to reduce time

and cost for adjudicating large rate and cost for adjudicating large rate casescases

• First large rate cases handled under First large rate cases handled under new guidelinesnew guidelines

• Guidelines for situations where value of Guidelines for situations where value of case is too small to justify full blown case is too small to justify full blown STB litigation STB litigation

• Simplified stand alone cost and three Simplified stand alone cost and three benchmark approachesbenchmark approaches

• First cases brought under new small First cases brought under new small rate guidelinesrate guidelines

5858

Rail Rate Cases at the Rail Rate Cases at the STBSTB• Much railroad traffic exempt from STB rate Much railroad traffic exempt from STB rate

regulationregulation

• Shippers often claimed rate cases took too Shippers often claimed rate cases took too long and cost too much to bringlong and cost too much to bring

• Many shippers felt they had no access to Many shippers felt they had no access to STB’s processes for rate reliefSTB’s processes for rate relief

• Congress directed the Board to develop Congress directed the Board to develop procedures for small rate casesprocedures for small rate cases

5959

Recent Activities at the STBRecent Activities at the STB

• Streamlined procedures to reduce Streamlined procedures to reduce time and cost for adjudicating large time and cost for adjudicating large rate cases—Court of Appeals upheldrate cases—Court of Appeals upheld

• First large rate cases handled under First large rate cases handled under new guidelines—AEP North Texas, new guidelines—AEP North Texas, Western Fuels, KCPLWestern Fuels, KCPL

• Major shipper “win” in Western Major shipper “win” in Western FuelsFuels

• Major case involving DuPont and Major case involving DuPont and CSX resolved through STB CSX resolved through STB facilitated mediationfacilitated mediation

6060

Simplified Standards for “Small” Rail Simplified Standards for “Small” Rail Rate CasesRate Cases

• STB Decision – September 5, 2007STB Decision – September 5, 2007

• Provides access to the rate Provides access to the rate reasonableness process for all sizes of rail reasonableness process for all sizes of rail rate disputes, and in particular, to the rate disputes, and in particular, to the estimated 73% of challengeable rail traffic estimated 73% of challengeable rail traffic for which the large rate case process for which the large rate case process would be financially impracticablewould be financially impracticable

• Requires, for all rail rate disputes, Requires, for all rail rate disputes, mandatory, nonbinding mediation—a mandatory, nonbinding mediation—a mechanism that has been used mechanism that has been used successfully in previous cases to arrive at successfully in previous cases to arrive at negotiated settlementsnegotiated settlements

6161

Simplified Standards for Rail Rate Simplified Standards for Rail Rate CasesCases

• Allows rail customers to choose the Allows rail customers to choose the methodology that is most appropriate for methodology that is most appropriate for consideration for their complaint:consideration for their complaint:

– A rail customer choosing the simplest approach, A rail customer choosing the simplest approach, the “Three-Benchmark” methodology, is eligible the “Three-Benchmark” methodology, is eligible to recover up to $1 million over a 5-year period.to recover up to $1 million over a 5-year period.

– A rail customer choosing the “Simplified Stand-A rail customer choosing the “Simplified Stand-Alone Cost” methodology is eligible to recover up Alone Cost” methodology is eligible to recover up to $5 million over a 5-year periodto $5 million over a 5-year period

– Court upheld shipper challenge to maximum Court upheld shipper challenge to maximum recovery levelsrecovery levels

6262

Experience with Small Rate Experience with Small Rate Case GuidelinesCase Guidelines

• First Cases brought by DuPontFirst Cases brought by DuPont• Six lines of traffic found market Six lines of traffic found market

dominantdominant• DuPont eventually won lower rates DuPont eventually won lower rates

for 3 lines of trafficfor 3 lines of traffic• Cases were appealed, then settledCases were appealed, then settled

6363

Review of Carrier Operating Review of Carrier Operating PracticesPractices

• STB and the railroads’ common carrier STB and the railroads’ common carrier obligationobligation

• Changes on “paper barriers”Changes on “paper barriers”

• STB’s fuel surcharge decisionSTB’s fuel surcharge decision

• STB-sponsored studies of RR STB-sponsored studies of RR competition and capacitycompetition and capacity

• STB response to Clean Railroads ActSTB response to Clean Railroads Act

• New responsibilities in passenger rail New responsibilities in passenger rail areasareas

6464

Railroad RestructuringRailroad Restructuring

• STB’s Revised Merger GuidelinesSTB’s Revised Merger Guidelines

• The Board’s Classification of Railroad The Board’s Classification of Railroad Mergers Mergers

• Canadian Pacific’s Acquisition of the Canadian Pacific’s Acquisition of the DM&E--Significant DM&E--Significant

• Canadian National’s Acquisition of the Canadian National’s Acquisition of the EJ&E—Highly ControversialEJ&E—Highly Controversial

6565

Environmental ReviewsEnvironmental Reviews

• Overall responsibility for environmental reviewOverall responsibility for environmental review

of new railroad construction or abandonments of new railroad construction or abandonments

• DM&E Powder River Basin expansion projectDM&E Powder River Basin expansion project

and the IC&E and the IC&E

• Yucca Mountain spent nuclear materialYucca Mountain spent nuclear material

storage sitestorage site

• Environmental review of the CN acquisition ofEnvironmental review of the CN acquisition of

the EJ&Ethe EJ&E

6666

• Rail cost of capital methodology revisionRail cost of capital methodology revision

and examination of multi-stage and examination of multi-stage discounted cash flow model discounted cash flow model

• Rail Energy Transportation Advisory Rail Energy Transportation Advisory Council (RETAC)Council (RETAC)

• Reorganization of Consumer Protection Reorganization of Consumer Protection and Enforcement and Public Affairs and Enforcement and Public Affairs Sections Sections

• Reforming the Uniform Rail Costing Reforming the Uniform Rail Costing SystemSystem

Changes in the STB’s Practices and Changes in the STB’s Practices and ProceduresProcedures

6767

Pending Legislation Involving Pending Legislation Involving the STBthe STB

• Senate legislation proposes toSenate legislation proposes to– Reauthorize the STBReauthorize the STB– Change how the railroad industry is Change how the railroad industry is

regulated regulated • Proposed Removal of Railroad Antitrust Proposed Removal of Railroad Antitrust

ExemptionsExemptions• Rail Investment tax creditsRail Investment tax credits

6868

Thank you, any Thank you, any questionsquestions