In wait-and-see mode (more on the STB bill) - by Tony Hatch

Now that the Surface Transportation Board Reauthorization Act of 2009 (S. 2889) has finally emerged out of the Senate Committee on Commerce, Science and Transportation (SCC), and the so-called "Cone of Silence" that's prohibited insiders from discussing it has been lifted, it won't be long before we begin to hear what rail and shipper interests really think about the measure ... not to mention their respective takes on what it took to get us to where we are — so far. But at this late-December writing, we're still in wait-and-see mode regarding the bill, which was introduced Dec. 17 by Sen. John "Jay" Rockefeller (D-W.Va.) — see "Rail and shipper interests begin to weigh in on STB reauthorization bill" for details. I cannot stress enough that the devil is in the "balanced competition" bill's details in terms of modeling future changes to cash flows from individual bottleneck applications, etc. — information we simply don't possess.

Exceedingly Complex, This Was

And, as we prepared to turn the page on 2009, we also were still waiting on the antitrust "insert" — would it reflect Sen. Herb Kohl's (D-Wis.) original position (hostile to rails) or what appeared to be hammered out earlier by the SCC (in actual collaboration with the rails in terms of votes)?

What I can say is this: The SCC, both members and staff, managed an extraordinarily complex process and did so while maintaining a strict silence. And, clearly, they've succeeded at least to some degree, given the anecdotal evidence that suggests all sides appear to be somewhat agitated — but it appears that the rails are a bit more so.

Again, it is impossible for non-insiders to interpret the bill's language into EBITDA estimates for the near, intermediate or, certainly, longer term, with so much based on regional and route-by-route costing, for example; with benefits undefined; with antitrust not yet included; and with so much subject to future STB (and Department of Justice?) interpretation.

Perhaps this isn't the compromise that enables the rails to get on board, removes the long overhang (what I have referred to as the industry's "Sword of Damocles") and drag on rail stocks, and restores the rails to the "good graces" of the government in time to get future infrastructure funding — notably for what they refer to as the "unfunded mandate" that is positive train control.

	Tony Hatch
	So far, investors and analysts seem sanguine about the bill — "It's not so bad; let's move on" — but that is not what I am hearing from the rail carriers.ÂÂ

Will the Rails Be On board?

Is it the best deal they can get? Is it better for some roads (say, the western carriers)? So far, it seems that most investors and analysts are sanguine — "It's not so bad; let's move on" — but that is not what I am hearing from the carriers. Might it make more sense, as some investors in the "hawk" camp firmly believe, to withdraw from participation in the process and fight a vigorous rear-guard action as they've done so successfully since the Staggers Act was passed (and then immediately attacked) in 1980? We'll learn more in the coming weeks and duly report it — within these pages and at progressiverailroading.com. Stay tuned.

Mea Culpa. A note to those of you who read my Dec. 18 commentary ("STB reauthorization bill mark-up a non-event") posted on www.progressiverailroading.com: It has been suggested to me that I was perhaps too flip in describing the actions and comments of various members of the SCC during the fraught days of the release and the mark-up.

With Wall Street long having surpassed Congress as the butt of late-night jokes and the subject of national ire, I should have recognized a cheap shot before I delivered one. I still stand by what I believe on the subject, as well as what I believe the investment community would accept, but here's my first New Year's resolution: I'll stick with baseball analogies rather than one-liners.

Tony Hatch is an independent transportation industry analyst and consultant.