Friday, October 15, 1999 (Washington, DC ) U.S. Secretary of Transportation Rodney E. Slater today announced and transmitted to Congress the administration’s Surface Transportation Board (STB) reauthorization proposal that would allow for more competitive service, restore important protections for rail workers and provide meaningful relief for small shippers.

"The proposed legislation reauthorizing the Surface Transportation Board provides a strong platform for its important work with the railroads and shippers in the 21st century," said Secretary Slater. "Just as important, it removes the STB from the labor-management negotiations process."

The proposed bill builds on the Staggers Act and addresses recent developments in the rapidly evolving railroad industry. The bill provides for labor reform, defines small shippers that can access expedited procedures for rate cases, increases competition by providing for reciprocal switching in railroad terminal areas and addresses anti-trust issues by giving the Department of Justice primary responsibility for railroad mergers.

"Under President Clinton’s and Vice President Gore’s leadership we have the longest peacetime expansion in history,"said Federal Railroad Administrator Jolene Molitoris. "Railroads and shippers are key contributors to our robust economy, and they must have the ability and incentive to continue to invest thereby increasing productivity, expanding capacity and further fueling our prosperity."

Copies of the bill can be obtained by calling 202-493-6024 or on the Internet at www.fra.dot.gov.

MAJOR PRINCIPLES:

• Builds on the Staggers Act. Provides a fairer and more expeditious process for affording relief to shippers by increasing reliance on competition to regulate rates. Preserves the railroads’ ability to price differentially, providing sufficient railroad revenues to maintain and expand the infrastructure to safely support national economic growth. Discontinues STB’s role in rail collective bargaining agreements.

LABOR REFORM

• Six-year Protective Period. In December 1997, the Amtrak Reform Act repealed the Amtrak protective provisions, arguably weakening the statutory basis for merger labor protection. The bill makes clear that the protective period for employees adversely affected by STB approved mergers, involving a Class I or two Class II carriers, is to remain at six years, the standard protective period required by statute since the 1970's.

• Cram-down or Override of Collective Bargaining Agreements. Currently, one party, almost always management, can request arbitration whenever there is a disagreement over how existing collective bargaining agreements are to be modified to support the operating plans of the merged railroad. The bill removes the STB’s authority to intervene in the process of negotiating implementing agreements related to all mergers and directs the parties to bargain under the Railway Labor Act.

COMPETITIVE ACCESS

• Reciprocal Switching. Allows more competitive service to shippers by requiring railroads to provide reciprocal switching in terminal areas.

• Mandates reciprocal switching, where railroads switch cars to nearby competing railroads in terminal areas. This allows solely-served shippers access, for a reasonable fee, to other railroads. Reciprocal switching is now required only when it is "in the public interest," which has been interpreted to mean a compelling necessity, usually related to inadequate service or competitive abuse.

• Emergency Service Orders. Extends the allowable term of emergency service orders from 270 days to one year. Used in cases where a railroad is unable to provide adequate service, usually on a temporary basis.

• Additional Competitive Access Study. U.S. Department of Transportation will conduct a study of financial and service impacts which might result from statutory changes that would impose mandatory competitive access beyond that proposed in this bill.

STREAMLINE PROCESS

• Small Shipments. Provides meaningful relief for small shippers or those who ship only small amounts under a specific rate who either cannot afford conventional procedures or for whom the amount at stake does not justify the expense of a full rate case.

• Establishes that rates representing shipping cost of $500,000 over a 12 month period can be challenged under a simplified rate appeals process, assuming shipper is captive. STB, at its option, may choose to allow other shipments to qualify, as well.

• Revenue Adequacy. Removes the requirement to calculate "revenue adequacy" annually, but retains requirement to consider railroad financial health.

ANTITRUST ISSUES

• Merger Authority. Removes the STB’s authority to grant antitrust immunity for mergers and pooling agreements.

• Railroad mergers would be subject to the same antitrust review as other industries under the provisions of Sections 1 and 2 of the Sherman Act, Section 7 of the Clayton Act, Section 5 of the Federal Trade Commission Act, and the Hart-Scott-Rodino Act. This approach would provide a review of the competitive impacts of proposed mergers by the Department of Justice. The STB would retain jurisdiction over non-competitive public interest aspects of mergers.

• Pooling/Rate Agreements. Eliminates authority to provide anti-trust immunity for railroad and motor carrier pooling and rate agreements.

• STB approval of an agreement under current law provides indefinite immunity from antitrust laws. The proposal would remove the STB’s authority to grant antitrust immunity to pooling agreements. There are currently three railroad car pooling agreements that permit railroads to pool and share available rail cars and fix prices for their use. Antitrust immunity for these agreements would end two years after enactment of the legislation. This would be consistent with other industries and air carriers which do not enjoy antitrust immunity.

• Motor carrier agreements relating to rate bureaus and a freight classification system would no longer have immunity.

OTHER

• User Fees. Requires the STB to assess user fees to cover all its costs.