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Trump & the Supply Chain
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Trump Nominates Two Surface Transportation Board Members

One nominee to the STB has experience only with mass transit passenger service, not freight.

Long the neglected stepchild of the Obama and Trump administrations, the weakened Surface Transportation Board was bolstered finally by two nominees expected to lend a hand to the remaining two members of what is supposed to be a five-member body.

The nominees to fill Republican seats on the board include Patrick Fuchs, a senior staff member of the Senate Commerce Committee under its chairman John Thune (R-S.D.), and who worked on railroad legislation. He also served earlier in the White House Office of Management and Budget, working on rail and maritime regulatory issues.

The other nominee is Michelle Schultz, who since 2006 has been associate general counsel for the Southeastern Pennsylvania Transportation Authority (SEPTA), the light rail mass transit service for Philadelphia and its environs. Before that, she worked for a Philadelphia law firm specializing in bankruptcy law. She has no evident experience in freight transportation, and the STB regulates Amtrak only to the extent of its interactions with freight lines.

Both will require review and confirmation by the Senate before they can take their seats, where they will join acting chairman Ann Begeman, who also is a Republican, and vice chairman Deb Miller, who is a Democrat and whose five-year term expired on Dec. 31, 2017. Under law she is permitted to continue to serve. Another Democrat designated seat remains unfilled.

Normally a sleepy little agency few Americans have heard of, the STB is responsible for what remains of economic regulation of the freight railroad and pipeline industries that formerly came under the authority of the old Interstate Commerce Commission, which was abolished by Congress in 1996.

In recent years the STB gained some prominence because of the meltdown of rail service during the fall and winter of 2014-15, and the rapid deterioration of service on the CSX railroad that began in the middle of last year after new corporate leadership fired thousands of employees and mothballed rail equipment in a quest for greater operating efficiencies intended to boost the company’s share price.

Mergers Create Rail Monoliths

One of the origins of these rail service issues arose when the major railroads operating in the U.S. underwent a series of mergers which created a handful of giant regional carriers who now face little or no competition from each other. That took place in the mid-1990s, around the same time the ICC was eliminated.

Combined with the loosening of the regulatory reins by Congress in the 1980s, this situation has regularly devolved into disasters for the shippers who make up these remaining railroads’ customers. It has been especially bad for those who have no rail or trucking alternatives available to them, which in a telling term are called “captive shippers.”

Shippers’ outrage over the 2014-15 service meltdown—where crops were left to rot along side rail lines—spurred legislative action in 2015. Congress passed a law (which nominee Patrick Fuchs worked on as a congressional staffer) which was intended to strengthen the STB’s ability to regulate railroads.

It was that legislation which also expanded the board’s size from three to five board members. However, neither President Obama nor President Trump bothered to nominate new members until the White House announcement last week.

In January, U.S. Reps. Peter DeFazio (D-OR), the ranking member of the House Transportation and Infrastructure Committee, and Michael Capuano (D-MA), the ranking member of the Subcommittee on Railroads, Pipelines and Hazardous Materials, wrote to Trump urging that he send STB nominations to the Senate.

Shipper groups have been steadily calling for the STB appointments since the legislation was enacted, most recently at the end of January when the Rail Customer Coalition wrote to President Trump, urging that he take action. The apparent inability of the current two-member board to address the CSX service crisis fueled their indignation.

“In order to regain momentum and support U.S. businesses, we must be sure that the STB is fully staffed and comprised of members that will make decisions based on current economic realities and founded on free market solutions,” the coalition told the President.

“In addition, it is imperative both for railroads and for their customers to have confidence that the STB is a fair and unbiased arbiter of disputes. Therefore, we strongly discourage naming rail industry veterans to the board, especially as chair.”

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