Railroaded III: What is the Surface Transportation Board?

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Both parts I and II of our earlier “Railroaded” examinations of the state of the rail freight industry explained how ending the backlog on shipping cars for everything from steel to coal depends greatly on action by the Surface Transportation Board, the national regulator of railroads in the US, but what, exactly, is the STB and who is on it?

Oil cars

The STB regulates everything in this picture.

A part of the US Department of Transportation, the STB was established in 1996 to assume some of the regulatory functions that had been administered by the Interstate Commerce Commission when that agency was abolished. Other ICC regulatory functions were either eliminated or transferred to the Federal Motor Carrier Safety Administration or to the Bureau of Transportation Statistics within the Department of Transportation.

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The STB has broad economic regulatory oversight of railroads, including rates, service, the construction, acquisition and abandonment of rail lines, carrier mergers and interchange of traffic among carriers. Its official policy goal is to “provide a forum for the resolution of surface-transportation disputes and other matters within its jurisdiction.”

The STB is composed of three members nominated by the President and confirmed by the Senate for five-year terms. The Board’s chairman is designated by the President, as well.

Among the many regulatory duties the board regularly undertakes is deciding the revenue adequacy of class I freight railroads, the major freight shippers we talked about in the earlier stories in this series. A railroad is currently considered “revenue adequate” if it achieves a rate of return on net investment equal to at least the current cost of capital for the railroad industry for 2013, which the Board determined to be 11.32 percent. In this way, the STB can have a huge effect on which railroad companies receive and keep their freight class status.

“But Jeff,” you say, “who EXACTLY are the people on the STB? Quit boring us with academics!”

Vice Chairman Deb Miller was sworn in last April as a member of the board for a term of office expiring in December 2017. Prior to serving as Secretary of the Kansas DOT, Ms. Miller was a consultant at HNTB, a national architecture, engineering, and planning firm. In that position, she provided strategic planning and public-communications assistance to state departments of transportation and municipalities.

Ann D. Begeman joined the STB in May, 2011. A senior aide on Capitol Hill for 21 years, Begeman played a key role in the crafting of major transportation legislation, including the ICC Termination Act, which created the STB. The only republican currently on the bipartisan STB, Begeman was Acting Chief of Staff and Legislative Director for Senator John McCain and a Legislative Assistant to Senator Larry Pressler.

While both Miller and Begeman bring impressive regulatory credentials, the case of its chairman, Daniel R. Elliott III, brought some intrigue to the normally staid and boring nomination process for an agency as little-known outside Washington as the STB. Since 1993, Chairman Elliott served as associate general counsel to the United Transportation Union, the largest operating union of railroad employees in the US. At the UTU, he practiced before the STB, itself. After Elliott was nominated to be Chairman of the STB  by President Obama in 2009, UTU’s then President Malcolm B. Futhey openly gloated on the union’s website that the union’s political clout was the reason for President Obama’s decision.

The bragging did not sit well with Republican lawmakers or Senator John D. Rockefeller (D-WV), chairman of the Senate Committee on Commerce, Science and Transportation, which handled Elliott’s confirmation hearing. To avoid having Elliott’s nomination held up over the remark, Futhey issued a rare public apology to the committee.

 

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