H. Rept. 110-893 - 110th Congress (2007-2008)
September 26, 2008, As Reported by the Transportation and Infrastructure Committee

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House Report 110-893 - TAKING RESPONSIBLE ACTION FOR COMMUNITY SAFETY ACT




[House Report 110-893]
[From the U.S. Government Printing Office]



110th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     110-893

======================================================================



 
           TAKING RESPONSIBLE ACTION FOR COMMUNITY SAFETY ACT

                                _______
                                

 September 26, 2008.--Committed to the Committee of the Whole House on 
            the State of the Union and ordered to be printed

                                _______
                                

Mr. Oberstar, from the Committee on Transportation and Infrastructure, 
                        submitted the following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 6707]

    The Committee on Transportation and Infrastructure, to whom 
was referred the bill (H.R. 6707) to require Surface 
Transportation Board consideration of the impacts of certain 
railroad transactions on local communities, and for other 
purposes, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.
    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE.

  This Act may be cited as the ``Taking Responsible Action for 
Community Safety Act''.

SEC. 2. EFFECT OF MERGERS ON LOCAL COMMUNITIES AND RAIL PASSENGER 
                    TRANSPORTATION.

  Section 11324 of title 49, United States Code, is amended--
          (1) in subsection (a)--
                  (A) by striking the last sentence and inserting ``The 
                Board shall hold public hearings on the proposed 
                transaction, including public hearings in the affected 
                communities, unless the Board determines that public 
                hearings are not necessary in the public interest.'';
          (2) in subsection (b)--
                  (A) by striking ``which involves the merger or 
                control of at least two Class I railroads,'' and 
                inserting ``with respect to a transaction that involves 
                at least one Class I railroad,'';
                  (B) by inserting ``the effect on the public interest, 
                including'' after ``the Board shall consider'';
                  (C) in paragraph (2), by striking ``on the public 
                interest'';
                  (D) by striking ``and'' at the end of paragraph (4);
                  (E) by striking the period at the end of paragraph 
                (5) and inserting a semicolon; and
                  (F) by adding at the end the following new 
                paragraphs:
          ``(6) the safety and environmental effects of the proposed 
        transaction, including the effects on local communities, such 
        as public safety, grade crossing safety, hazardous materials 
        transportation safety, emergency response time, noise, and 
        socioeconomic impacts; and
          ``(7) the effect of the proposed transaction on intercity 
        rail passenger transportation and commuter rail passenger 
        transportation, as defined by section 24102 of this title.'';
          (3) by redesignating subsections (c), (d), (e), and (f) as 
        subsections (d), (e), (f), and (g) and inserting a new 
        subsection (c) as follows:
  ``(c) The Board shall approve and authorize a transaction under this 
section when it finds the transaction is consistent with the public 
interest. The Board shall not approve a transaction described in 
subsection (b) if it finds that the transaction's impacts on safety and 
on all affected communities, as defined under subsection (b), outweigh 
the transportation benefits of the transaction. The Board may impose 
conditions governing a transaction under this section, including 
conditions to mitigate the effects of the transaction on local 
communities.'';
          (4) in subsection (d), as redesignated, by striking ``The 
        Board shall approve'' and all that follows through ``the 
        transaction, including'' and inserting ``The conditions the 
        Board may impose under this section include''; and
          (5) in subsection (e), as redesignated, by striking ``the 
        merger or control of at least two Class I railroads, as defined 
        by the Board'' and inserting ``a transaction described in 
        subsection (b)''.

SEC. 3. EFFECTIVE DATE.

  The amendments made in this Act shall be applied to all transactions 
that have not been approved by the Board as of August 1, 2008.

                       Purpose of the Legislation

    H.R. 6707, as amended, the ``Taking Responsible Action for 
Community Safety Act'', requires the Surface Transportation 
Board (``STB'') to consider the impacts of certain railroad 
transactions on local communities.

                  Background and Need for Legislation

    The main purpose of H.R. 6707 is to establish that when the 
Surface Transportation Board (``STB'' or ``Board'') considers a 
merger involving a Class I railroad and a Class II or III 
railroad\1\ the Board has the power to disapprove the merger if 
the Board finds that the adverse environmental effects of the 
merger outweigh its transportation or other benefits. Under 
current law, the Board has the authority to disapprove a merger 
involving at least two Class I carriers if the transaction is 
not consistent with the public interest, but has never 
disapproved a Class I merger on environmental grounds. Some STB 
staff believe that under existing law the Board also has 
authority to disapprove a merger involving a Class II or Class 
III rail carrier on environmental grounds. However, there is a 
provision in existing law indicating that in a merger involving 
a Class II or Class III rail carrier, the Board can only 
disapprove the merger if it would have adverse competitive 
effects. Additionally, it is not clear whether the Board 
Members share the staff's view that they have authority under 
existing law to disapprove a merger involving a Class II or 
Class III rail carrier on environmental grounds. If the Board 
did take this position, there is a substantial possibility that 
a reviewing Court would not accept their interpretation of 
existing law, for reasons discussed below.
---------------------------------------------------------------------------
    \1\Rail carriers are grouped into three classes to determine their 
accounting and reporting obligations. A Class I railroad has annual 
operating revenues of more than $250 million, a Class II railroad has 
annual operating revenues of between $20 million and $250 million, and 
a Class III railroad has annual operating revenues of less than $20 
million. These operating revenues are fixed on 1991 dollars and are 
adjusted for inflation. (49 C.F.R. Part 1201, Subpart A, General 
Instructions).
---------------------------------------------------------------------------
    On September 26, 2007, the Canadian National Railway 
(``CN''), which is a Class I railroad, and the U.S. Steel 
Corporation (``U.S. Steel'') announced an agreement where CN 
would acquire most of the Elgin, Joliet & Eastern Railway 
Company (``EJ&E''), which is a Class II railroad that is a 
wholly owned indirect subsidiary of U.S. Steel, for $300 
million, subject to the regulatory approval of the STB. The 
EJ&E's main line, known as ``Chicago's Outer Belt'', runs 198 
miles and encircles the City of Chicago, from Waukegan, 
Illinois, through Joliet, Illinois, to Gary, Indiana. This 
acquisition will allow CN to bypass Chicago, Illinois, which CN 
believes will allow it to significantly improve the efficiency 
of CN's rail operations in the Chicago region. CN currently has 
three lines that run into Chicago, and it plans to divert 
traffic from these lines onto the EJ&E line, which would 
increase the number of trains operating through the communities 
along the EJ&E by approximately 15 to 24 trains per day.
    Opponents of the transaction maintain that the CN 
acquisition would impose a number of adverse impacts on the 
people living in the 50 communities along the EJ&E line. The 
STB's Section of Environmental Analysis (``SEA''), which is 
responsible for undertaking environmental reviews of certain 
STB actions, found that if CN increases train volumes on the 
EJ&E rail line as proposed in its Operating Plan, the 
acquisition would result in a projected 28 percent increase in 
rail accidents on the EJ&E line; an increase in grade crossing 
accidents on the EJ&E rail line of anywhere from 1.57 to 6.04 
accidents annually; an increase in the number of ``major key 
routes'' (rail segments where the volume of hazardous materials 
transported would exceed 20,000 carloads annually) from 2 to 14 
on the EJ&E rail line, with subsequent increases in reportable 
hazardous material releases; an increase in air pollution; and 
a substantial increase in noise and vibration in communities 
and on public lands adjacent to the line, affecting 17 forest 
preserves, natural areas and preserves, resource-rich areas, 
and land and water reserves, 14 adjacent trails and scenic 
corridors, 16 adjacent local parks, and 4 adjacent land and 
water conservation fund properties. In addition, 15 grade 
crossings on the EJ&E line would be ``substantially affected'' 
(meaning that train queue length would block a roadway that is 
not blocked currently, the roadway would be at or over-
capacity, or delay for all delayed vehicles would be more than 
40 hours per day), resulting in total traffic delays from about 
one hour in West Chicago to about 165 hours in Joliet; and 11 
fire and emergency medical service providers near the EJ&E rail 
line could have substantial difficulties in coping with 
emergencies as a result of the proposed transaction.
    Proponents of the transaction maintain that the CN 
acquisition would be beneficial to the region and help mitigate 
freight rail congestion in the nation's freight rail 
bottleneck. They also maintain that the transaction would 
benefit communities along CN's current lines to and from 
Chicago through decreased accidents, noise, congestion, and 
delay as a result of a reduction in train traffic. The SEA 
found that the transaction would reduce CN traffic in some 
minority and low-income communities by eight trains per day. 
The SEA also found that the transaction would not affect 
existing Metra commuter rail service or Amtrak service on rail 
lines in the area in which CN now operates, and it would not 
preclude implementation of the proposed STAR line and Southeast 
Service, but could introduce potential operating complexities. 
In addition, the SEA found that while the total number of train 
accidents on the EJ&E rail line is likely to increase by 28 
percent, the likely number of rail accidents on the existing CN 
rail lines would decline 77 percent, a change directly related 
to the decrease in train-miles on CN's existing rail lines. The 
SEA also found that the consequences of increased train traffic 
on the EJ&E rail line would increase the risk for pedestrians 
and bicycles at 21 train/rail crossings and decrease the risk 
at 36 trail/rail crossings along existing CN lines.
    The application for the CN to acquire the EJ&E is now 
pending before the STB. Under current law, a rail carrier or 
other entity may not consolidate, merge, or acquire control of 
another rail carrier without authorization and approval from 
the Board.
    Existing law sets forth two different standards--depending 
on the class of the rail carrier--that the STB must use in 
considering applications for consolidation, merger, or 
acquisition of control: the law gives the STB considerable 
discretion to disapprove a transaction involving at least two 
Class I rail carriers, and much less discretion to disapprove 
transactions not involving at least two Class I rail carriers, 
such as the CN acquisition of the EJ&E.
    Prior to the Staggers Act of 1980, the criteria for 
considering an application for a merger or control between 
Class I rail carriers and Class II or Class III rail carriers 
were identical. For all mergers and consolidations, the 
Interstate Commerce Commission (``ICC'' or ``Commission'') was 
required to consider: (1) The effect of the proposed 
transaction on the adequacy of transportation to the public; 
(2) the effect on the public interest of including, or failing 
to include, other rail carriers in the area involved in the 
proposed transaction; (3) the total fixed charges that result 
from the proposed transaction; and (4) the interest of carrier 
employees affected by the proposed transaction.The Commission 
was required to approve and authorize such a transaction only when it 
found that the transaction was consistent with the public interest. The 
Commission was also authorized to impose conditions governing the 
transaction.
    However, Section 228 of the Staggers Act altered 
considerably the standards for rail carrier consolidation 
applications involving at least two Class I rail carriers filed 
after October 1, 1980. A fifth factor was added to the list of 
criteria that the Commission must consider: whether the 
proposed transaction would have an adverse effect on 
competition among rail carriers in the affected region. 
However, the requirement that the five factors (outlined in the 
above paragraph) be considered was limited to cases involving 
at least two Class I railroads.
    The Staggers Act added a new section to govern rail 
consolidations not involving the merger or control of two or 
more Class I railroads (such as CN-EJ&E). This section, now 
found in section 11324(d) of Title 49, United States Code, 
provides that the Board ``shall approve'' this type of 
consolidation ``unless'' the Board finds that: (1) as a result 
of the transaction, there is likely to be substantial lessening 
of competition, creation of a monopoly, or restraint of trade 
in freight surface transportation in any region of the United 
States; and (2) the anticompetitive effects of the transaction 
outweigh the public interest in meeting significant 
transportation needs.
    On its face, the new section would appear to take away the 
Board's authority to disapprove mergers or consolidations of a 
Class I rail carrier with a Class II or a Class III rail 
carrier on general public interest grounds, such as adverse 
effects on safety or the environment.
    Some STB staff, however, maintain that the Board does have 
the authority to disapprove transactions involving Class II or 
Class III rail carriers because of adverse environmental 
effects. The STB staff did not have any cases or legal memos to 
support this interpretation. As Committee staff understands it, 
STB staff's rationale is that although there is a specific 
provision in the law requiring approval of mergers with Class 
II or Class III rail carriers if they are not anti-competitive, 
if we interpret the law ``as a whole'', the Board has authority 
to disapprove a merger involving Class II or Class III rail 
carriers on environmental grounds. In the view of STB staff, 
the Board has authority to disapprove a merger involving two 
Class I rail carriers on environmental grounds and it would not 
make sense for the Board not to have the same power to 
disapprove a merger between a Class I rail carrier and a Class 
II rail carrier on environmental grounds. This type of merger 
could be just as harmful to the environment as a merger 
involving two Class I rail carriers.
    STB staff further points to the fact that the draft 
Environmental Impact Statement (``EIS''), prepared by staff, 
for the proposed CN acquisition of the EJ&E states that the 
Board ``will decide whether to approve the proposed 
acquisition, deny it, or approve it with mitigating conditions, 
including environmental conditions.'' The draft EIS also states 
that Council on Environmental Quality regulations implementing 
the National Environmental Policy Act require consideration of 
a No-Action Alternative. Under the No-Action Alternative, CN 
would not acquire control of the EJ&E land, rail line, and 
related assets. Thus, by implication the draft EIS asserts the 
Board's power to deny approval on environmental grounds.
    It is not clear if the Board did disapprove a transaction 
involving a Class I rail carrier and Class II rail carrier on 
environmental grounds that the decision would survive a 
judicial challenge. A U.S. Court of Appeals case dealing with 
the Board's power over mergers with Class II and Class III rail 
carriers points in the direction of not giving the Board power 
to deny a merger on environmental grounds. However, this case 
is not completely dispositive since it involved public interest 
factors other than the environment. Moreover, the decision is 
not binding on other Federal Courts of Appeal.
    The case in point is People of the State of Illinois, 
Illinois Commerce Commission and Patrick W. Simmons v. 
Interstate Commerce Commission and United States of America 
(687 F.2d 1047; 1982 U.S. App.), of the United States Court of 
Appeals for the Seventh Circuit. The court affirmed a decision 
of the ICC (predecessor of the STB) refusing to consider public 
interest factors involving effects on employment of a Class I/
Class II merger which was not anticompetitive. The court ruled 
that if there were not anti-competitive effects, the ICC was 
required to approve the merger. The court found the Staggers 
Act separated rail consolidation proposals into two distinct 
groups: major rail consolidations, which involve the merger or 
control of two or more Class I rail carriers, and minor rail 
consolidations, which do not involve the consolidation of two 
or more Class I rail carriers. The court concluded that a 
careful reading of the law in its entirety ``discloses that the 
broad public interest standard of [section 11324(c)] applies 
only to consolidations of two or more Class I railroads whereas 
the more limited criteria of (d) apply to all other rail 
consolidations.''
    The court also found ``the mandatory language `shall 
approve' of [section 11324(d)] taken in context, denotes that 
if the Commission finds no substantial anticompetitive effects 
flowing from the proposed transaction, its analysis is at an 
end. At that point, the Commission must approve the 
transaction, and any finding about consistency with the public 
interest would be superfluous. In other words . . . the words 
`shall approve' in this context should be construed to require 
approval of transactions where no substantial anticompetitive 
effects are found.''
    The court added, ``Although subsection (d) requires the 
Commission to review public interest factors if it finds 
substantial anticompetitive effects, that provision does not 
require the agency to determine whether the transportation is 
`consistent with the public interest'. Rather, if 
anticompetitive effects are substantial, the Commission must 
balance against those effects `the public interest in meeting 
significant transportation needs.'''
    The court's findings are echoed in the remarks included by 
current STB Commissioner Buttrey in a July 25, 2008 decision 
setting forth a schedule for completion of the environmental 
review process in the proposed CN acquisition of the EJ&E. He 
states, ``For a transaction like this that does not involve the 
merger or control of at least two Class I railroads, the 
statute provides that the Board shall approve the application 
unless it finds serious anticompetitive effects that outweigh 
the public interest.''
    CN, the applicant in the CN/EJ&E case, appears to also 
believe that the Board cannot disapprove the merger on 
environmental grounds. Accordingly, CN would be likely to seek 
judicial review of any STB decision disapproving the merger on 
environmental grounds.
    In a petition filed before the Board on August 14, 2008, 
for expedited approval of the transaction, CN stated: ``ICCTA 
requires the Board to approve any transaction not involving two 
Class I railroads unless the Board finds both that (1) as a 
result of the transaction, there is likely to be substantial 
lessening of competition, creation of a monopoly, or restraint 
of trade in freight surface transportation in any region of the 
United States, and (2) the anticompetitive effects of the 
transaction outweigh the public interest in meeting significant 
transportation needs. Under thisstandard, if the Board is 
unable to make either of these findings, approval of the proposed 
transaction is mandatory.''
    It is worth noting that, in People of the State of Illinois 
v. Interstate Commerce Commission and United States of America, 
the court stated that the law ``could benefit from more artful 
draftsmanship'' on the question of public interest 
considerations. In addition, on November 10, 1981, a little 
more than one year after the Staggers Act was enacted, ICC 
Chairman Reese H. Taylor, Jr. testified before the Surface 
Transportation Subcommittee of the Senate Committee on 
Commerce, Science, and Transportation that the interplay 
between the two different sets of standards for considering 
rail mergers and consolidations and the requirement for 
considering the public interest was ``a problem area in the 
legislation possibly in need of redrafting.''
    Further, at the Committee on Transportation and 
Infrastructure's September 9, 2008 hearing on H.R. 6707, the 
``Taking Responsible Action for Community Safety Act'', STB 
Chairman Nottingham acknowledged that the Board's authority to 
disapprove a transaction on general public interest grounds was 
``a legal issue of first impression that has not been addressed 
by the Board or any court.''

                       Summary of the Legislation


Section 1. Short title

    This section designates the title of the Act as the 
``Taking Responsible Action for Community Safety Act''.

Section 2. Effect of mergers on local communities and rail passenger 
        transportation

    This section makes a number of amendments to section 
11324(a) of title 49, which governs the Board's consideration 
of a proposed consolidation, merger, and acquisition of control 
of a railroad. It amends subsection (a) to require the Board to 
hold public hearings in the affected communities of a proposed 
transaction, unless the Board determines that public hearings 
are not necessary to the public interest.
    It amends section 11324 that governs the Board's 
consideration of a merger, consolidation, or acquisition of 
control for a transaction involving at least two Class I 
railroads to apply to any proposed transaction that involves at 
least one Class I railroad.
    This section adds two new factors to the current list of 
five factors that the Board must consider in reviewing a 
proposed transaction that involves at least one Class I 
railroad. These new factors are: (1) The safety and 
environmental effects of the proposed transaction, including 
the effects on local communities, such as public safety, grade 
crossing safety, hazardous materials transportation safety, 
emergency response time, noise, and socioeconomic impacts; and 
(2) the effect of the proposed transaction on intercity rail 
passenger transportation and commuter rail passenger 
transportation. The Board shall consider the effect on the 
public interest that includes at least these seven factors.
    Finally, this section requires the Board to approve and 
authorize a transaction involving at least one Class I railroad 
when the Board finds the transaction is consistent with the 
public interest. This section prohibits the Board from 
approving a transaction if it finds that the transaction's 
impacts on safety and on the affected communities outweigh the 
transportation benefits of the transaction. This section also 
authorizes the Board to impose conditions governing the 
transaction, including conditions to mitigate the effects of 
the transaction on local communities.

Section 3. Effective date

    The amendments made by H.R. 6707 are to be applied to all 
transactions that have not been approved by the Board as of 
August 1, 2008.

            Legislative History and Committee Consideration

    On July 31, 2008, Chairman James L. Oberstar introduced 
H.R. 6707, the `Taking Responsible Action for Community Safety 
Act''. This bill had not been introduced in previous 
Congresses.
    On September 9, 2008, the Committee on Transportation and 
Infrastructure held a hearing entitled ``H.R. 6707, the Taking 
Responsible Action for Community Safety Act.'''
    On September 24, 2008, the Committee on Transportation and 
Infrastructure met in open session to consider H.R. 6707. The 
Committee adopted by voice vote a manager's amendment to the 
bill. The manager's amendment clarified that the Board's 
finding of public interest in a transaction involving at least 
one Class I railroad must include consideration of safety and 
environmental impacts of the proposed transaction and any 
impacts on intercity passenger or commuter rail transportation. 
The manager's amendment also clarified that the Board must 
consider all of the impacts--both positive and negative--to 
safety on all the affected communities when determining whether 
the transaction's impacts outweigh the transportation benefits. 
The Committee ordered the bill, as amended, reported favorably 
to the House by voice vote with a quorum present.

                             Recorded Votes

    Clause 3(b) of rule XIII of the Rules of the House of 
Representatives requires each committee report to include the 
total number of votes cast for and against on each record vote 
on a motion to report and on any amendment offered to the 
measure or matter, and the names of those members voting for 
and against. There were no recorded votes taken in connection 
with consideration of H.R. 6707 or ordering the bill reported. 
A motion to order H.R. 6707, as amended, reported favorably to 
the House was agreed to by voice vote with a quorum present.

                      Committee Oversight Findings

    With respect to the requirements of clause 3(c)(1) of rule 
XIII of the Rules of the House of Representatives, the 
Committee's oversight findings and recommendations are 
reflected in this report.

                          Cost of Legislation

    Clause 3(c)(2) is satisfied when a cost estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974 has been timely submitted prior to the filing of the 
report and is included in the report. The Committee has not yet 
received a cost estimate for H.R. 6707 from the Director of the 
Congressional Budget Office. The Committee references the 
Committee Cost Estimate, included below.

                    Compliance With House Rule XIII

    1. With respect to the requirement of clause 3(c)(2) of 
rule XIII of the Rules of the House of Representatives, and 
308(a) of the Congressional Budget Act of 1974, the Committee 
references the Committee Cost Estimate, included below.
    2. With respect to the requirement of clause 3(c)(4) of 
rule XIII of the Rules of the House of Representatives, the 
performance goals and objectives of this legislation are to 
require the Surface Transportation Board to consider the 
impacts of certain railroad transactions on local communities.
    3. With respect to the requirement of clause 3(c)(3) of 
rule XIII of the Rules of the House of Representatives and 
section 402 of the Congressional Budget Act of 1974, a cost 
estimate from the Director of the Congressional Budget Office 
is not available.

                        Committee Cost Estimate

    H.R. 6707 clarifies the factors that must be considered by 
the Surface Transportation Board when approving or disapproving 
a merger involving at least one Class I rail carrier. It does 
not authorize or make available any new budget authority, nor 
does it cause any increase in direct spending or decrease in 
revenues. Therefore, the Committee estimates that enacting H.R. 
6707 would have no significant impact on the Federal budget.
    The Committee will file a supplemental report containing a 
cost estimate prepared by the Congressional Budget Office 
pursuant to section 402 of the Congressional Budget Act when it 
becomes available.

                     Compliance With House Rule XXI

    Pursuant to clause 9 of rule XXI of the Rules of the House 
of Representatives, H.R. 6707, as amended, does not contain any 
congressional earmarks, limited tax benefits, or limited tariff 
benefits as defined in clause 9(d), 9(e), or 9(f) of rule XXI 
of the Rules of the House of Representatives.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, committee reports on a bill or joint 
resolution of a public character shall include a statement 
citing the specific powers granted to the Congress in the 
Constitution to enact the measure. The Committee on 
Transportation and Infrastructure finds that Congress has the 
authority to enact this measure pursuant to its powers granted 
under article I, section 8 of the Constitution.

                       Federal Mandates Statement

    The Committee adopts as its own the estimate of Federal 
mandates prepared by the Director of the Congressional Budget 
Office pursuant to section 423 of the Unfunded Mandates Reform 
Act (Public Law 104-4).

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any Committee on a bill or joint 
resolution to include a statement on the extent to which the 
bill or joint resolution is intended to preempt State, local, 
or tribal law. The Committee states that H.R. 6707 does not 
preempt any State, local, or tribal law.

                      Advisory Committee Statement

    No advisory committees within the meaning of section 5(b) 
of the Federal Advisory Committee Act are created by this 
legislation.

                Applicability to the Legislative Branch

    The Committee finds that the legislation does not relate to 
the terms and conditions of employment or access to public 
services or accommodations within the meaning of section 
102(b)(3) of the Congressional Accountability Act (Public Law 
104-1).

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

TITLE 49, UNITED STATES CODE

           *       *       *       *       *       *       *


SUBTITLE IV--INTERSTATE TRANSPORTATION

           *       *       *       *       *       *       *


PART A--RAIL

           *       *       *       *       *       *       *


CHAPTER 113--FINANCE

           *       *       *       *       *       *       *


SUBCHAPTER II--COMBINATIONS

           *       *       *       *       *       *       *


Sec. 11324. Consolidation, merger, and acquisition of control: 
                    conditions of approval

  (a) The Board may begin a proceeding to approve and authorize 
a transaction referred to in section 11323 of this title on 
application of the person seeking that authority. When an 
application is filed with the Board, the Board shall notify the 
chief executive officer of each State in which property of the 
rail carriers involved in the proposed transaction is located 
and shall notify those rail carriers. [The Board shall hold a 
public hearing unless the Board determines that a public 
hearing is not necessary in the public interest.] The Board 
shall hold public hearings on the proposed transaction, 
including public hearings in the affected communities, unless 
the Board determines that public hearings are not necessary in 
the public interest.
  (b) In a proceeding under this section [which involves the 
merger or control of at least two Class I railroads,] with 
respect to a transaction that involves at least one Class I 
railroad, as defined by the Board, the Board shall consider the 
effect on the public interest, including at least--
          (1) * * *
          (2) the effect [on the public interest] of including, 
        or failing to include, other rail carriers in the area 
        involved in the proposed transaction;

           *       *       *       *       *       *       *

          (4) the interest of rail carrier employees affected 
        by the proposed transaction; [and]
          (5) whether the proposed transaction would have an 
        adverse effect on competition among rail carriers in 
        the affected region or in the national rail system[.];
          (6) the safety and environmental effects of the 
        proposed transaction, including the effects on local 
        communities, such as public safety, grade crossing 
        safety, hazardous materials transportation safety, 
        emergency response time, noise, and socioeconomic 
        impacts; and
          (7) the effect of the proposed transaction on 
        intercity rail passenger transportation and commuter 
        rail passenger transportation, as defined by section 
        24102 of this title.
  (c) The Board shall approve and authorize a transaction under 
this section when it finds the transaction is consistent with 
the public interest. The Board shall not approve a transaction 
described in subsection (b) if it finds that the transaction's 
impacts on safety and on all affected communities, as defined 
under subsection (b), outweigh the transportation benefits of 
the transaction. The Board may impose conditions governing a 
transaction under this section, including conditions to 
mitigate the effects of the transaction on local communities.
  [(c) The Board shall approve and authorize a transaction 
under this section when it finds the transaction is consistent 
with the public interest. The Board may impose conditions 
governing the transaction, including] (d) The conditions the 
Board may impose under this section include the divestiture of 
parallel tracks or requiring the granting of trackage rights 
and access to other facilities. Any trackage rights and related 
conditions imposed to alleviate anticompetitive effects of the 
transaction shall provide for operating terms and compensation 
levels to ensure that such effects are alleviated. When the 
transaction contemplates a guaranty or assumption of payment of 
dividends or of fixed charges or will result in an increase of 
total fixed charges, the Board may approve and authorize the 
transaction only if it finds that the guaranty, assumption, or 
increase is consistent with the public interest. The Board may 
require inclusion of other rail carriers located in the area 
involved in the transaction if they apply for inclusion and the 
Board finds their inclusion to be consistent with the public 
interest.
  [(d)] (e) In a proceeding under this section which does not 
involve [the merger or control of at least two Class I 
railroads, as defined by the Board] a transaction described in 
subsection (b), the Board shall approve such an application 
unless it finds that--
          (1) * * *

           *       *       *       *       *       *       *

  [(e)] (f) No transaction described in section 11326(b) may 
have the effect of avoiding a collective bargaining agreement 
or shifting work from a rail carrier with a collective 
bargaining agreement to a rail carrier without a collective 
bargaining agreement.
  [(f)] (g)(1) * * *

           *       *       *       *       *       *       *


                             MINORITY VIEWS

    This legislation will have dramatic consequences on 
railroad merger and acquisition transactions.
    It will enlarge the universe of transactions subject to the 
full STB environmental review by requiring close analysis for 
even the most minor Class I transactions. This is likely to 
discourage railroads from engaging in transactions that would 
enhance underutilized infrastructure controlled by smaller 
railroads.
    This legislation also creates a new balancing test whereby 
the Board will be required to weigh the transportation benefits 
of a transaction versus the effects on communities impacted by 
the transaction. It is likely that the creation of a new 
balancing test in the STB merger review process will make it 
more difficult, costly, and time consuming for railroad mergers 
and acquisitions to be approved.
    Additionally, this legislation will have a retroactive 
impact on railroad transactions entered into months or even 
years ago. Retroactive Congressional action must be taken with 
great care, or confidence in the regulatory regime is 
undermined. This legislation has the potential to affect not 
only the CN/EJ&E transaction, it could impact other pending 
deals before the Board, including Norfolk Southern's planned 
Patriot Corridor, and Canadian Pacific's merger with Dakota, 
Minnesota & Eastern. All parties involved in these proposed 
transactions have incurred significant expenses in the review 
process that is now being changed midstream. CN in particular 
expects to spend up to $25 million in environmental review 
expenses for their proposed EJ&E acquisition.
    It is also unclear if this legislation addresses the root 
concern of the communities that would be affected by the CN/
EJ&E transaction, which is an increase in train traffic. Even 
if this legislation results in the cancellation of this 
transaction, it is possible that the communities will see an 
increase in traffic with the existing owner. Nothing in this 
legislation would prevent the EJ&E from increasing the number 
of trains it runs on its own property. Further, CN is offering 
at least $40 million to communities to mitigate the effects of 
an increase in traffic if they become the owner, funds which 
will not be available if the current ownership remains in 
place.
    Also, STB staff has expressed concern that this legislation 
was drafted without their input, and could have unintended 
consequences if passed into law. For instance, STB staff has 
stated that by explicitly requiring environmental review and 
``balancing'' of impacts versus benefits on Class I 
transactions, Congress is implicitly stating that no such 
review is required for transactions involving Class II and 
Class III railroads (not involving a Class I). Class II and III 
transactions can, in some cases, have much greater 
environmental impacts than Class I railroad's acquisition of a 
short branch line, for example.
    Goals of rail transportation policy, as set forth at 49 
U.S.C. Section 10101 include ensuring the development of a 
sound rail transportation system to meet the needs of the 
public, and providing for the expeditious handling and 
resolution of required STB proceedings. For the above reasons, 
the minority is concerned that this legislation will result in 
focus away from these goals by discouraging parties from 
entering into mergers and acquisitions.

                                                      Bill Shuster.