Chairman Rockefeller Says It's Time to Update Rail Policies for the 21st Century & Correct Imbalances in the Industry

June 22, 2011

Chairman Rockefeller asks Sec. Locke questions about strengthening manufacturing in America.WASHINGTON, D.C.—Chairman John D. (Jay) Rockefeller today testified before the Surface Transportation Board (STB) hearing on rail competition. At the hearing, Rockefeller urged the STB to take action in correcting imbalances in the rail industry. 

Chairman Rockefeller’s remarks follow: 

Chairman Elliott, Vice Chairman Begeman, and Commissioner Mulvey, thank you for the opportunity to testify at this rail competition proceeding today.

For over a quarter century I’ve been working to make sure that businesses that ship their goods by American railroads get a fair deal and that railroads serve their essential role in getting goods and commodities to their destinations efficiently for the benefit of the consumer and the U.S. economy. 

The Surface Transportation Board—and its predecessor, the Interstate Commerce Commission—were created to oversee and regulate the railroad industry to enforce the law and guarantee fairness. Frankly, in the past, the Board has let us down.

What it has meant for West Virginia is near-bankruptcy of steel mills, chemical companies being bullied on prices and service to the point that they consider relocating their facilities overseas, and consumers who have to pay more for their electric rates. 

While there are many specific examples, I’ll mention PPG Industries, who you will hear from tomorrow. PPG has a captive facility in Natrium, West Virginia that last year paid 85 percent higher rates than its own facility in Louisiana. Pure and simple, this is not competition at work, and it is prejudicing businesses against my state.

So, I am here to urge you to be scrupulous in your review of competition in the rail industry. After this review, I encourage you to act boldly where you can. At a minimum, I need to see progress even if it is incremental. But doing nothing is not an option. You must regulate for the future of the industry—not continue to solve the rail industry problems of the past that have already been remedied.

Last fall, I held a hearing about the future of our rail policy—at which you testified, Mr. Chairman—to look at the projected needs for both the passenger and freight rail network. At this hearing, I released a report on the profitability of the railroads. The report shows the Staggers Act’s goal of restoring financial stability to the U.S. rail system has been achieved and that significant consolidation has occurred so that four Class I railroads dominate the industry.

In fact, last year these railroads ranked among the most profitable businesses in the U.S. economy. Unlike other transportation modes, they maintained their high profit margins even during the recent economic downturn. With the freight railroad industry entering this new chapter of financial strength, it is time to revisit our national rail policy.

I believe that when this proceeding is over and you evaluate the voluminous facts presented by all sides, you will find that one-sided policies whose sole focus is protecting the health of the railroads is outdated. 

I firmly believe that you will find that we need to restore balance to protect the shippers against the virtual monopoly of the railroads and modernize the STB’s rules to reflect the railroads’ profitability and new industry structure. 

In that light, my three priorities for this agency and the industry are: 

  • Increasing competition. Fixing current laws, rules, and policies to give captive shippers competitive options as a method to control rates and improve service.
  • Improving the regulatory process. Making the Board accessible to more shippers—even those that are not captive—so that disputes are resolved timely and cost effectively.
  • Making the STB more robust. Giving the Board the authority to proactively address industry-wide problems and the resources it needs to accomplish its mission. 

With these changes, the Board will be primed to oversee the rail industry’s future. And I believe it’s a bright one. I am fully supportive of a healthy, vibrant rail system. 

Railroads are critical to the success of our nation’s economy, support our transportation network and encourage domestic production of goods. But the American economy doesn’t work if all industries aren’t thriving. It’s a symbiotic relationship. Our nation’s manufacturing sector needs the railroads and the railroads would be out of business without their shippers. 

But for this relationship to work, it must be fair. Shippers, railroads, industry stakeholders—and most importantly, American consumers—must believe that the system is functioning properly and that rules are not being blatantly broken or ignored. Now, more than ever, the STB’s decisions have a clear effect on our competitiveness and how businesses make their decisions about whether to invest in the United States or overseas.

I have long-believed that legislative reform would be necessary to exact the required fairness from the Board and the rail industry. Senator Hutchison and I had hoped to give the STB clear new policy direction in the bipartisan legislation we had introduced, but the legislative gridlock that has overcome Congress makes that unlikely in the near term. But, I remind you that the STB also has the responsibility, regardless of legislative process or momentum, to make changes to correct any imbalances in the rail industry. 

As Commissioners, each of you play a critical role in making this system work and if you take your responsibility seriously—and I believe you do—the current law permits you to make significant change to inject competition in the industry and give the shippers rate and service relief that they deserve.

Without ignoring history and now that the railroads have been brought back to robust financial health, you must update our rail policies for the 21st century and correct the imbalances in the industry.

Thank you again for your consideration.