Freight Railroads: Focus of 2008 Legislation

1. Freight Railroads: Focus of 2008 Legislation

2. Freight Railroads – Class One • The Public Generally Supports Railroad Transportation • Congressional legislation very active in 2008 • Neighbor & Community Views increasingly high profile

3. Consumers United for Rail Equity – “CURE” • Members include key groups of industries who rely on railroad transportation • Cite fundamental problems with railroads 25 years after Staggers Act partial de-regulation • Call for Congressional action to modify railroad regulation and business structure

4. CURE has Three Main Constituent Groups • Grain transport – western states/ legislators; rates and service • Coal transport – rural electric cooperatives/mid-west legislators; rates and service, track access • Chemical transport – big U.S. chemical companies; rates, track access and safety

5. Competition, not re-regulation? • CURE claim poor service AND high rates • Equate post-1980 mergers with a loss of competition (back to the future?) • Claim STB not effective enough to foster railroad transportation competition • Seek reduced transportation costs through legislation • Wedge issues for railroads and their unions

6. 2006 Midterm Elections Democrats Take House Two Dozen Seats Gained in House Wednesday, November 8, 2006; Page A01

7. Committee control changes Hearings scheduled, legislation moves • Fuel surcharge hearing • Rail labor injuries and intimidation hearing • Railroad competition legislation • Railroad Anti-trust legislation • Railroad safety reauthorization: “Christmas Tree” of work rules, Fed Preemption, PTC, and more

8. Rail Safety H.R. 2095/S. 1889 • Passed by the House 10/17/07 (377-38) • Phase down use of Limbo Time – 40/30/10 hrs./month • PTC – Installed by 2014 • Open Switch Detectors • Compelling indicator to crews • DOT rule must be complete in 1-year • Banned the use of camp cars

9. Senate Bill – railroad safety • Passed by the Senate 8/1/08 by UC Hours of Service 276 hour monthly limit including limbo 10 hours undisturbed rest 6 consecutive days on/48 hrs. off 7 days on/3 off if provide by CBA Camp cars - FRA regulation tightens

10. Catalyst in closing days of Session • CA commuter train/freight train collision Sept 22 • Senator Feinstein calls for action • PTC front and center

11. Congress: PTC is the solution • High cost to protection ratio: look at some other U.S. fatality trends • Pressure to implement regardless of cost benefits • Legislation does not get into many important details • Funded how?

12. Final Railroad Safety Bill • Rail industry negotiated with rail labor • More like the Senate bill: • Phase down limbo time 40/30 hours/month • 6&2 and 7&3 • 276 hours monthly limit including limbo time • PTC 2015 – passenger & TIH mainlines with traffic greater than 5 million gross ton miles • Open switch detector provision dropped • Camp cars – retrofit/replace by end of 2009 • Signed into law 10/16/08

13. Re-regulation S.953/H.R. 2125 • Potentially degrades the reforms of the 1980 Staggers Act • H.R. 2125 (Oberstar) ended up with 56 co-sponsors • S. 953 (Rockefeller) ended up with 11 co-sponsors • Hearings held in House/Senate committees; no further action taken

14. Anti-Trust H.R. 1650/S.722 • Repeal limited anti-trust exemptions currently subject to STB regulatory jurisdiction • Seen as a stalking horse for more comprehensive re-regulation • S.722 (Kohl) reported from Senate Judiciary • Senate CST objects to S.722 • H.R.1650 (Baldwin) approved by House Judiciary; T&I and Energy Committees waive jurisdiction • Chairman Conyers presses for House floor consideration, but tight legislative schedule stymied effort

15. The FRA, the STB and Justice? • Legislation would broaden railroad regulation • A dual regulatory scheme?

16. STB responsive to issues • Reduces rate case filing fees • Targets reduction in time to resolve filings • DuPont wins a case as a “small shipper” • H.R. 6707 – “TRACS” – the STB cites existing authority but lack of resources

17. Other Legislative Battles • Defeated H.R.6707 (Oberstar-Bean) requiring STB to give greater consideration to the public interest in evaluating mergers involving Class I and Class II/Class III railroads; targets the CN/EJE transaction; NIMBY-ism • Defeated chemical & utility industry efforts to advance re-regulation goals through NCSL, CSG, NAM, and COC.

18. Investment Tax Credit (ITC) H.R.2116/S.1125 • 25% tax credit for the cost of new qualified freight rail infrastructure property & qualified locomotive property • H.R. 2116 (Meek) has 79 co-sponsors; S.1125 (Conrad) has 18 co-sponsors. • Obtained substantial congressional support despite best efforts of shippers & building trades to stop us • Go-21 helped secure co-sponsors • Expanded coalition includes National Retail Federation, COC, NCSL, Council of State Governments, AASHTO, and ARTBA

19. 2008 Elections Obama Administration • Secretary of Transportation = ? Increased Democratic majorities • House: before 236-199/after 256-175-4? • Senate: before 50-49-1/after 58+? • Reshuffling of committee chairs • Appropriations Chair Byrd steps down • Rockefeller replaces Inouye as Senate Commerce Committee Chairman?

20. In the State Houses • Labor legislation on agreement issues • Labor driven safety and security hearings • Community and neighbor legislation • Eminent domain legislation • State DEP action against solid waste transfer on railroad property

21. 2009 Legislative Challenges • Railroad Competition “Oberstar bill” • Railroad Anti-trust bill • Investment Tax Credit (ITC) • “TEA” reauthorization • Public-Private Partnerships – the scramble • CREATE • Heartland Corridor • Crescent Corridor • Climate change legislation

22. Hearings spur Federal research and reports • GAO 2007 report on rates & competition • Follow up study on railroad competition delivered by STB consultants Christensen, November 2008 • Both sides claim victory – “we were right” • Important points for consideration by all

23. The STB/Christensen Study – We ARE right! • Revenue adequacy must be long term • Railroads use differential pricing to cover their total costs • Guard against debilitating changes to the industry structure in the name of creating competition • Start practicing your elevator speeches

24. Take away • Differential pricing pays the costs • The system is safe and healthy and it attracts investors • But it’s not enough to point out a lack of capacity – railroads must increase investment

25. On Our Side • The AAR • Go-21 Growth Options for the 21st Century • ASLRRA • You

26. Thank you New England Railroad Club November 20, 2008 Scott Muir Norfolk Southern