Majority Statement

• Chairman John D. Rockefeller IV
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  Majority Statement

  Chairman John D. Rockefeller IV

  Before I begin, I would like to commend Ranking Member Thune for his leadership on rail service issues. I know these past several months have been especially hard for your constituents and I look forward to continuing to work with you on this incredibly important matter.    

  I initially took an interest in rail policy after hearing from West Virginia shippers who expressed frustration with high rates and poor service. What you probably don’t know however, is that I started to receive those complaints over 30 years ago, and yet here we are today, trying to confront the same issues that have plagued shippers for several decades.

  The rail industry looks far different than it did 30 years ago. Competition in the industry has decreased. Before enactment of the Staggers Act in 1980, there were approximately 40 large railroad companies. Today, there are seven.

  In passing the Staggers Act, Congress recognized the need for a robust freight rail system. That law made sweeping regulatory changes, which gave the railroad industry an opportunity to improve its finances and the ability to compete against other transportation modes. 

  The Staggers Act also sought to provide, and I quote, “the opportunity for railroads to obtain adequate earnings to restore, maintain and improve their physical facilities while achieving the financial stability of the national rail system.” Well make no mistake – in that regard – the Staggers Act has worked.

  In 2010, I released a Commerce Committee majority staff report which found the four Class I railroads that dominate the U.S. rail shipping market are achieving returns on revenue and recognizing operating ratios that rank them among the most profitable businesses in the U.S. economy. 

  I released a follow-up majority staff report last November which corroborated the 2010 findings. The freight railroads continue to set new financial records quarterly, and these companies continue to raise their dividends and buy back record amounts of stock. 

  But not everyone is doing so well.  Many of the witnesses here today have struggled to remain competitive as rail service declines and rates increase.  And the situation continues to get worse.  

  For several months now, the agricultural, coal, chemical, and automotive industries, among others, have been experiencing serious rail service delays, sometimes on the order of months. 

  And it’s not just industry – passengers are also feeling the effects. Amtrak’s long distance trains around the country are being severely delayed.   

  Whether it’s been extreme winter weather, a surge in Bakken crude oil production, a recovering economy, or a combination of factors, we must do more to move our grain to market, coal to power plants, automobiles to consumers, and passengers to their destinations. 

  For many shippers, this is their livelihood, and it is too important to not do anything. Therefore, I look forward to hearing from the railroads on what is being done to alleviate these freight logjams as soon as possible. 

  And I want to hear something more than we are investing a record amount this year back into our infrastructure. Don’t get me wrong, that is incredibly important for our nation’s long-term economic prosperity, but we need all hands on deck to address this problem now. 

  The Surface Transportation Board has taken some steps to address these issues, especially the service hardships faced by many shippers in the last year.  Having talked to constituents in my home state and Ranking Member Thune, I know it’s been truly appreciated.

  However, despite these efforts, I believe the STB needs to change its fundamental perspective. We know that the railroads are financially strong. It is time for the STB to re-focus its mission on providing regulatory balance to support the businesses and people who use the rail network.

  That is why earlier this week, I introduced, along with Ranking Member Thune, a bill aimed at increasing the efficiency and effectiveness of the Board. I look forward to working with interested stakeholders as we move forward on this legislation. 

  It is going to take a collaborative effort by Congress, the STB, the railroads, and the shippers to achieve a meaningful solution. If the railroads or anyone refuses to work collaboratively to solve these real world delays that are damaging lives and businesses, then they are going to get a stronger reaction than they expect.  Everyone needs to step up to meet this challenge.

  Finally, I would like to thank all of you for being here today and I look forward to hearing your testimony. And again to Senator Thune, thank you for your leadership on this issue. 

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Minority Statement

• Ranking Member John R Thune
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  Minority Statement

  Ranking Member John R Thune

  I appreciate the chairman agreeing to hold this hearing to elevate the profile of various rail service challenges that shippers, and agriculture producers in particular, continue to face.

  I also would like to thank all of the witnesses for testifying today, especially Jerry Cope, from Dakota Mill and Grain in Rapid City, South Dakota, who will be testifying on behalf of the National and South Dakota Grain and Feed Associations.

  Since the beginning of this year, South Dakota and many other states have been particularly challenged by rail service delays, network congestion, and locomotive and railcar shortages, which have affected a wide range of shippers, including the agricultural community.

  From farmers and grain elevators, to auto manufacturers, energy providers, and retailers of all kinds, rail transportation challenges have affected the economy nationwide. Higher transportation costs can also increase the cost of products at market and at the point of export, decreasing our global competitiveness.

  As the former South Dakota rail director under the late governor George S. Mickelson in the early 1990s, I know first-hand the importance of effective rail access for not only agriculture producers but other shippers. In all my years of working on rail matters, I have never seen producers more concerned than they are now regarding their restricted capability to move grain to market. It is my hope that this hearing will continue to bring attention to the rail service backlogs that South Dakota shippers, and shippers nationwide, are currently facing, and encourage continued discussion about both short-term and long-term solutions to address these issues. I also want to note that not all of the blame should be placed on the rail carriers because some events have been outside of their control. That being said, these issues did not arise overnight and some railroads have been better than others at addressing the challenge head-on.

  In South Dakota alone, this year’s harvest and what remains of last year’s is expected to exceed the statewide grain storage capacity by as much as eighteen percent. Grain has already been stored on the ground, posing a significant risk of spoilage and loss.

  Projections from the U.S. Department of Agriculture estimate South Dakota’s 2014 wheat harvest at 108 million bushels, a 14 percent increase over the three-year average, and soybean and corn crops are also expected to be unusually large and potentially record-setting. Even with these high yields, the increased negative basis due to inadequate transportation and the inability to timely move these crops from grain handlers could result in more than $300 million in lost value to South Dakota corn, wheat, and soybean producers.

  As winter approaches, ethanol plants will also become vulnerable to rail delays. Because of the nature of ethanol production, plants cannot simply be shut down during winter months. South Dakota ethanol producers like Glacial Lakes and Redfield rely upon adequate service to prevent pipes from freezing, and major structural damage to their operations.

  In addition, South Dakota’s Big Stone Power plant has indicated that they’re running below capacity because they simply can’t get enough coal to fuel the most efficient operation. Coal stockpiles are alarmingly low, and rail service simply hasn’t provided adequate coal supplies.

  The Surface Transportation Board (STB) has taken several steps to address these rail service challenges, including issuing a number of orders designed to increase transparency. On June 20th, the board issued a grain order to provide additional transparency and ensure both Canadian Pacific and Burlington Northern Santa Fe railroads had plans for reducing their grain car backlogs.

  While the STB has been working to address the current rail service issues facing South Dakota, and other states in the northern tier of the U.S., this crisis has highlighted some of the inefficiencies that currently exist at the STB.

  On Monday, Chairman Rockefeller and I introduced S.2777, The Surface Transportation Board Reauthorization Act, which is a first step in addressing these inefficiencies so that the STB can better assist shippers and railroads when problems arise.

  This hearing marks a continuation of my ongoing efforts to work not only with the STB but also with railroads and shippers directly to address the challenges that agricultural producers and other businesses have experienced beginning last winter – when the harsh cold snarled the movement of trains and caused the significant delays that shippers and railroads are still working to remedy. 

  Again, thank you to the witnesses for testifying and to the chairman for agreeing to hold this important hearing.

Testimony

• Mr. Arthur Neal

  Deputy Administrator of the Transportation and Marketing Program at the Agricultural Marketing Service

  U.S. Department of Agriculture
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• Mr. Jerry Cope

  Vice President of Marketing,

  Dakota Mill & Grain, Inc. on behalf of the National Grain and Feed Association
  Download Testimony (597.66 KB)

• Mr. Calvin (Cal) Dooley

  President and Chief Executive Officer

  American Chemistry Council
  Download Testimony (405.24 KB)

• Mr. Shane Karr

  Vice President of Federal Government Affairs

  Alliance of Automobile Manufacturers
  Download Testimony (1.27 MB)

• Mr. Ed Hamberger

  President and Chief Executive Officer

  Association of American Railroads
  Download Testimony (188.05 KB)