January 13, 2017

Rail Issues Before the New Administration

Holland & Knight Alert
Michael K. Friedberg

There was a plenty of rail-related activity during the 114th Congress and the last two years of the Obama Administration. Amtrak and the Surface Transportation Board (STB) were reauthorized with major changes to Amtrak's funding structure and an increase of two board members (to five) for the STB. There also were major safety regulations promulgated, including a major rule regarding the shipment of crude oil by rail. Also, the positive train control (PTC) mandate was extended by three years to December 2018. Some might say that the next two to four years should be a little slower because the major reauthorizations will not expire until 2020. However, many issues remain unresolved.

Because of the unknown of what could change under the new Trump Administration, the industry is readying for a busy 115th Congress. There are five major issues that will be heavily discussed with a possibility of regulatory or legislative action. These topics are:

  • Foreign-owned (state-supported) rail manufacturing: There has been an increase in Chinese involvement in the U.S. passenger- and freight-rail market. This development has the potential to change the entire dynamic of a multibillion-dollar industry. Current U.S. manufacturers are concerned that more Chinese involvement could lead to price dumping and a reduction in American jobs. This issue could be a high priority for the incoming administration following President-Elect Donald Trump's campaign rhetoric and his most recent selection for U.S. Trade Representative (a vocal critic of China trade practices, in particular).
  • Filling the two empty slots for the Surface Transportation Board: The Surface Transportation Board Reauthorization Act of 2015 created two new STB seats, and President Obama did not make nominations. The selections now fall to Trump. Currently, there are two Democrats and one Republican on the board. The two new members are expected to be Republican picks, which will change the board's dynamic. These selections will receive heavy scrutiny from a large swath of the American economy. Shippers and railroads are among the nation's largest corporations, and both have large financial incentives for sympathetic board members. The new members will have a huge impact on rail transportation issues that arise over the next two years.
  • STB discretionary rules: Some issues of railroad importance to be addressed are: the proposal to revoke existing class exemptions from railroad transportation regulations for certain commodities, reciprocal or competitive switching, whether to revise the stand-alone-cost (SAC) test for rate reasonableness and the formula for determining revenue adequacy.
  • Federal Railroad Administration review of Obama promulgated or proposed rules: On the top of the new administration's list to revisit, revise or change will be a mandate requiring electronically controlled pneumatic brakes, a proposed rule requiring two people in the cab and potential further action on crude oil volatility. These actions had many detractors during the last administration and the industry is revving up for these issues.
  • Passenger Rail issues: When it comes to passenger rail, the issue usually involves funding, or the lack thereof. The Trump Administration will have a chance to address this if there is a large infrastructure bill. The top priority for Amtrak, as well as many business and passenger advocates, is finding resources to fund the Gateway Program's tunnel between Newark, N.J., and Manhattan. It is in dire need to be replaced but has a $20 billion price tag. Also, the new administration will have a chance to propose funding for new infrastructure grant programs authorized in the Fixing America's Surface Transportation (FAST) Act but subject to appropriations. Finally, there is the upcoming PTC deadline coming in December 2018. Some commuter railroads already are starting to mention the difficulty of meeting that deadline. The administration has the authority to grant extensions, but PTC involves the entire rail network. Thus, we will be watching closely how the new administration will handle this sensitive safety issue.


Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.

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