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Why Is the Government Still Regulating the Railroads?


Donald Trump recently nominated two new members for Republican seats on the Surface Transportation Board (STB): Patrick Fuchs of Wisconsin and Michelle A. Schultz of Pennsylvania.

Fuchs is a senior Senate Commerce Committee staffer who "has participated in the drafting and passage of five bills directly affecting freight and passenger railroads." He was previously "a policy analyst with the White House Office of Management and Budget, a State Department Presidential Management Fellow serving in The Hague, Netherlands, and a research assistant at the National Center for Freight and Infrastructure Research and Education."

Schultz has been the deputy general counsel for the Southeastern Pennsylvania Transportation Authority (SEPTA) since 2014. There she focuses primarily on "procurement, major capital projects and commuter-rail regulation." She was previously "an associate with the Philadelphia-based law firm of White and Williams, dealing with bankruptcy and commercial litigation, and a law clerk with the U.S. Bankruptcy Court for the Eastern District of Pennsylvania."

The Board is authorized to have five members, but there can be no more than three members from a single political party. The party in control of the White House earns the right to have a majority of STB members. Board members are appointed by the president and confirmed by the Senate, each with a five-year term of office. A person can serve only two terms on the STB. The president designates a chairman from among the board members. The Surface Transportation Board Reauthorization Act of 2015 expanded the board from three to five members, but the two additional seats have never been filled. There is also an unfilled Democratic seat that has been vacant since September 2017. That means that there are at this time only two members of the STB: Democrat Deb Miller, the vice chairman, and Republican Ann Begeman, who was recently designated chairman by Trump after having served as acting chairman since January 2017.

Outside of those who work in the railroad industry and those of us who write about government inefficiency, regulation, and corruption, few Americans have ever heard of the STB, and even fewer of the agency's board members.

The STB "is an independent adjudicatory and economic-regulatory agency charged by Congress with resolving railroad rate and service disputes and reviewing proposed railroad mergers." The agency

has jurisdiction over railroad rate and service issues and rail restructuring transactions (mergers, line sales, line construction, and line abandonments); certain trucking company, moving van, and non-contiguous ocean shipping company rate matters; certain intercity passenger bus company structure, financial, and operational matters; and rates and services of certain pipelines not regulated by the Federal Energy Regulatory Commission. The agency has authority to investigate rail service matters of regional and national significance.

The STB is the successor to the Interstate Commerce Commission (ICC), which operated from 1887 to 1995. It began operation on January 1, 1996, after being created by the Interstate Commerce Commission Termination Act of 1995. The STB was administratively aligned with the U.S. Department of Transportation from 1996 to December 2015. It became an independent federal agency (like the EPA, FCC, and FTC) with the passage of the STB Reauthorization Act of 2015. According to the STB's annual report for fiscal year 2017, its congressional appropriation was $35,750,000 and it employed an average of about 130 people.

The Interstate Commerce Act of 1887 created the ICC to regulate the railroads. It established the right of Congress to regulate private corporations engaged in interstate commerce. The ICC was the first independent federal agency and the railroads were the first industry subject to federal regulation. The ICC later regulated most other forms of surface transportation involved in interstate commerce, including trucking, bus lines, and even pipelines.

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