Transportation regulators are determined to stretch their powers to the limit

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Since 2008, the freight-railroad industry has contested an effort by two federal regulators to rebalance the relationship between freight-rail operators and Amtrak. The issue is one of control and timing.

Amtrak, which is government-funded but operates as a for-profit corporation, predominantly runs its many passenger rail routes over lines owned by freight-railroad companies. Even though freights own most of the lines, Congress has historically granted preference to Amtrak trains, meaning that freight trains must generally yield to Amtrak trains if their routes conflict. Even with this priority, however, Amtrak has proven remarkably poor at running its trains on time. Amtrak, in turn, has blamed its poor performance on the freights, arguing that they do not sufficiently prioritize Amtrak trains along their routes.

In an effort to rectify Amtrak’s lagging performance, Congress passed the Passenger Rail Investment and Improvement Act of 2008, which ordered the Federal Railroad Administration and Amtrak to promulgate joint metrics and standards to measuring the performance and quality of intercity passenger trains. Under PRIIA, the metrics are used to investigate substandard performance and, in some situations, may be used to award Amtrak damages if freight railroads are found to be the true cause of Amtrak’s poor performance.

While the statute required the FRA and Amtrak to promulgate the performance metrics, it charged a different federal agency, the Surface Transportation Board, with undertaking any such investigations into laggard performance. This framework drew a constitutional challenge from the freight-rail operators. Because the law empowered FRA and Amtrak to come up with the performance metrics together, the freight railroads argue the law violates the so-called “non-delegation doctrine.” That doctrine prohibits Congress from delegating its legislative powers to other entities, particularly private entities. Given that Amtrak is managed as a for-profit corporation, the rail industry argues that it qualifies as a private entity.

The rail industry initially won on this argument at the D.C. Circuit Court of Appeals, which agreed that PRIIA’s delegation of metric-setting power to a quasi-private entity like Amtrak was an unconstitutional delegation of Congress’ powers. On appeal to the Supreme Court, though, the tide turned. The high court held that Amtrak was, in fact, a government entity rather than a private entity. As a result, Congress enjoyed more leeway in delegating its power to Amtrak.

The drama didn’t end there. The D.C. Circuit revisited the case and again struck down the metric-setting section of PRIIA. This time they struck it down on alternative grounds—namely, that the law violates due process because it allowed Amtrak effectively to act as a regulator in a market in which it had “skin in the game.” In other words, Amtrak was competing as an economic actor with the freight railroads, while also having power to regulate and impact the conduct of its competitors.

The federal government is expected once again to appeal that ruling to the Supreme Court. In the meantime, another related skirmish has broken out. While the non-delegation dispute was working its way up and down from the Supreme Court, the Surface Transportation Board stepped in and declared its authority to define PRIIA’s metrics and standards. As laid out above, PRIIA clearly awarded the power to define metrics—such as on-time performance to the FRA and Amtrak—while it reserved the powers of investigation and enforcement to the STB. But since the FRA/Amtrak version of the regulations are tied up in court, the STB claims it has the power to step into the fray and define its own metrics.

Unsurprisingly, this development sparked another court case by the freight-rail industry—this one in the 8th U.S. Circuit Court of Appeals—arguing that the STB usurped powers not granted to it by the law. At stake in this case is the proposition that, just because a protracted legal battle has halted the implementation of a law, another regulator is not suddenly empowered to fill the gaps.

The best option would be for Congress to step in again and fix the statutory defect and clarify whether the FRA or the STB has metric-setting power (and at the same time, clarify that Amtrak does not have such power). Either way, the drama surrounding this controversy is just one more demonstration of federal agencies pursuing creative methods to implement regulations and accrue power—even in the face of seemingly clear statutory language and court decisions to the contrary. If their power to do so is affirmed, both regulated industry and Congress have something new to fear.


Image by Sherman Cahal

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