John D. Boyd | Apr 22, 2009 5:13PM EDT
A former regulator at the Surface Transportation Board, W. Douglas Buttrey, says federal courts should say whether the STB can decide a rail merger request solely on the basis of how it might affect the environment and area communities.
“I think that needs to be litigated,” he told The Journal of Commerce, “the issue of whether or not we (the STB) can deny approval of a case based on environmental impact.”
That is a key issue for the regulators and Congress. Right now, the STB appears to take the view that its governing statute would only allow it to reject a proposed rail acquisition if it hurts competition. That leaves the regulators with just the power to impose mitigating conditions on the buyer for the impact the deal brings to communities.
Key lawmakers are currently negotiating with railroads, shippers and rail labor on a new competition bill that might overhaul the STB and change its mission. Meanwhile, both Canadian National Railway and some Chicago-area suburbs are for different reasons challenging the STB’s December decision that approved CN’s controversial purchase of a short line there but imposed unusual mitigation terms on CN.
All three board members OK’d the purchase: then-Chairman Charles D. Nottingham, Vice Chairman Francis P. Mulvey and Buttrey as a commissioner. But Mulvey and Buttrey both filed statements saying they would have also imposed tougher conditions on the railroad.
None of the commissioners will discuss the case itself, beyond pointing to what was in their written decision, since it has gone to an appeals court for review.
Buttrey joined the board in 2004, and was chairman during most of 2006 until he reverted to a commissioner’s position. He left the board March 13, when Mulvey became acting chairman and Nottingham moved into a regular board member’s role.
President Obama has not yet named a replacement for Buttrey, and pending legislation that would reauthorize and alter the agency directions could also expand the board’s size.
After he left office, Buttrey told JOC that the power of the STB to decide merger cases over environmental impact needs to be established through the courts.
“Otherwise you emasculate environmental laws,” he said, by requiring the agency to rule on controversial cases like CN’s purchase of Elgin, Joliet and Eastern Railway around Chicago on rail competition issues alone, despite what impact they might have.
In that case, CN proposed to buy the short line to shift some of its large volume of cross-country trains onto little-used EJ&E tracks that ring Chicago to the west, and out of congested central-Chicago tracks. Shippers and other railroads supported it, but many suburbs along EJ&E tracks fought it fiercely and some have since continued the fight.
Buttrey said publicly at one point he did not see how the impact could be sufficiently mitigated. While he signed onto the approval, he said he would also have favored conditions to formalize CN’s planned tradeoffs of fewer downtown shipments in return for increased traffic in the suburbs, to make sure part of that broader community gets the benefits CN had advertised.
The case triggered expressions of concern by members of Congress, including Sen. Richard Durbin, D-Ill., and the state’s then-junior Sen. Barack Obama. Durbin has continued to complain about the STB ruling.
Buttrey describes himself as “a de-regulator by nature,” despite thinking litigation could establish an STB power to regulate based on environmental issues as well as rail service. “The thought of regulating something,” he said, “is like wearing my shoes on the wrong feet; it’s very uncomfortable.”
He also favors having the STB assert its authority over the common carrier obligation of railroads that forces them to price any type of legal cargoes, including toxic inhalation hazard chemicals that could release poison clouds in a train wreck or attack.
Buttrey says the STB has the power to set liability limits for railroads, and should do so and then let the court settle the question of the agency’s authority. That issue was still pending as a regulatory issue when he left the board, but shippers and railroads are moving it along in cases and perhaps in the legislative talks, and the board is taking testimony for a new hearing on rail obligations.
“It was in the board’s jurisdiction to address this issue,” Buttrey said. Lawmakers “have had the opportunity to address the issue and they have not,” he said, “which tells me as a regulator that if it’s going to get addressed it’s going to have to get addressed at the regulatory level.”
He said he did not think the appeals court would overrule the board in setting TIH risk limits, but if it did “that would set up a situation where the Congress, then, is the only place where that can be remedied.”
Contact John D. Boyd at jboyd@joc.com.
