Federal Railroad Administration Nominee Plans to Push Rail Industry to Self-Regulate

Train in Alaska

Ronald Batory — President Trump’s nominee to lead the Federal Railroad Administration (FRA) — will be pushing for the controversial self-regulatory approach to safety known as “performance-based regulations,” according to his July 26 statement for the U.S. Senate Committee on Commerce, Science and Transportation. Shifting toward this self-regulatory approach could have major implications for the safety of trains carrying potentially dangerous cargo, including oil and ethanol.

I recognize the Federal Railroad Administration has a multitude of responsibilities, but safety will always be the priority just as it has been throughout my career. Moving to performance-based rulemaking will focus FRA’s efforts on getting the desired outcomes and safety improvements, not just on enforcement of rules and processes.”

If you have been following the rail industry, this shouldn’t come as a surprise. In May, after the first Trump-era Congressional hearing on rail industry regulation, I wrote that we should “prepare to hear a lot about performance-based regulation in the Trump era.”

In that hearing Rep. Bill Shuster got right to the point about why performance-based regulations are better for industry when he said that government should “allow the railroad industry to keep more of their profits.” It would seem, then, that profits rather than safety is the goal of performance-based regulations.

What's Wrong With Performance-Based Regulations?

It’s no secret that safety costs any industry money. Whether it is protecting workers, the environment, or the general public, safety measures inevitably require various industries to make investments in things like protective equipment, training, and technology. Yet in the past, DeSmog has highlighted how the rail industry has lobbied against proven safety measures for oil trains (such as electronically controlled pneumatic brakes) simply because the “business benefits” did not “outweigh” the cost to implement the safety technology.

So, the industry admits it will not invest in safety unless it results in “business benefits” — also known as profits. And now Congress and the nominee to lead the FRA are pushing hard to move to a performance-based regulatory model, in which the industry can decide if it will invest in safety technology … or not.

According to a 2002 paper from Harvard’s Kennedy School of Government, performance-based regulation is “when a regulation sets performance goals, and allows individuals and firms to choose how to meet them.”

For example, instead of requiring rail companies to install modern braking systems on dangerous oil and ethanol trains, the regulation would set a performance goal for fewer derailments and let the companies decide how they achieve that. 

Performance-based regulation would effectively allow rail companies to self-regulate. And with a history of those same companies fighting and in some cases blatantly ignoring Congressionally mandated safety regulations, it is pretty easy to see where this goes.

In “The Limits of Performance-Based Regulation” — a 2017 paper published in The University of Michigan Journal of Law Reform — author Cary Coglianese warns that performance-based regulations can have significant downsides, and that politicians and regulators should not just rush to embrace the idea.

… the seemingly unbridled enthusiasm for performance-based regulation by regulatory commentators and officials around the world masks some of its challenges and limitations,” Coglianese writes. Throughout the paper, the author notes multiple times that performance-based regulations are harder to monitor and that without robust monitoring efforts, they can fail to achieve their goals.

Colgianese notes that the Volkswagen emissions cheating scandal was one recent massive failure of performance-based regulations which was the result of a corporation cheating to get around regulations. Volkswagen was able to do this for seven years due to the failure of regulators to properly monitor the vehicles' “performance.” 

The Pipeline and Hazardous Materials Safety Administration (PHMSA) is the division of the FRA responsible for monitoring the rail industry on the transportation of hazardous materials such as oil and ethanol. PHMSA was already cutting staff during the Obama administration and now faces further challenges.

In July Dr. Rachel A. Meidl, deputy associate administrator in the Office of Hazardous Materials Safety at PHMSA, spoke to an industry gathering and noted that PHMSA was already “operating in a difficult and challenging environment right now, with the demands continuing to grow. There are so many new energy sources … the scope of our work continues to grow. That’s a little bit of a challenge, considering the new administration and some of the budget shortfalls we have right now.”

Performance-based regulations will be asking more of an already overburdened regulatory agency as it seeks to regulate the movment of hazardous materials by rail. This is all for an agency that has been so ineffective at enforcing existing regulations that Rep. Jackie Speier referred to it as “a fluffy industry pet that frightens absolutely no one.” 

It certainly seems like the industry is being set up to effectively self regulate in order to keep more of its profits.

A Plan Comes Together

In four years, I've published over 80 articles on DeSmog about oil-by-rail and regulations and I never once used the phrase “performance-based regulations” because it wasn’t being discussed in any serious way. Not at congressional hearings on oil-by-rail safety, industry conferences, or National Transportation Safety Board hearings. No one proposed this as a way to make the transportation of hazardous materials by rail safer.

And then in May of 2017, the phrase dominated a hearing on rail regulations. All six members of the panel testifying that day were for performance-based regulations.

And then in July when Ronald Batory’s nomination was announced, a positive piece ran in RailwayAge, which included this insight from former Association of American Railroads employee Frank Wilner:

[Batory] can expect to be grilled on his opinion of performance standards. If the legislation fails passage, and Batory is confirmed by the entire Senate, then the Commerce Committee, with FRA oversight, likely will pressure him to pursue that objective administratively.”

That article also mentioned a new bill proposed by Sen. Deb Fischer (R-NE) that would prioritize performance-based regulations.

And we know from his own written statements that Ronald Batory is going to make this a priority if he is confirmed to head the FRA. It certainly seems like the rail industry and its supporters have all suddenly gotten on the same page about how to approach safety regulation.

With a former rail CEO about to take the helm of the Federal Railroad Administration, a coordinated effort to move to performance-based regulation, and a weak and overburdened regulatory agency, the rail industry looks poised to keep a lot more of its profits while failing to address well-known safety issues endangering the tens of millions of people who live near railroad tracks.

In 2013 the industry effectively fought regulation regarding rail wear even though broken rails are a leading cause of derailments. Richard Inclima, director of safety for the union representing rail inspectors, summed up the reality of what happened: “There was certainly a lot of pushback and a lot of political pressure put on FRA not to adopt regulations for rail wear. The industry doesn’t want to be regulated.”

And with performance-based regulations, the industry will be one step closer to that goal.

Main image: Renadu CHODKOWSKI, CC BY-NC-ND 2.0