June 23 (Bloomberg) -- The U.S. Supreme Court agreed to rule on the constitutionality of a federal law that lets Amtrak help set on-time performance standards that can lead to penalties against freight railroads.
The justices today said they will hear the Obama administration’s appeal of a lower court ruling that the industry-opposed 2008 measure is an illegal delegation of legislative power to Amtrak, a private corporation.
The performance standards are designed to enforce a requirement that freight railroads, including Union Pacific Corp., give Amtrak priority on their tracks. An industry trade group says the railroads are being forced to substantially change their business operations, at times by delaying their own freight traffic.
The law “grants Amtrak a distinct competitive advantage,” the Association of American Railroads argued in court papers. “Amtrak seized that competitive advantage by drafting regulations that require the freight railroads to modify their operations and delay freight traffic in order to benefit Amtrak’s for-profit business.”
The performance standards, which took effect in 2010, were jointly drafted by Amtrak and the Federal Railroad Administration. They require on-time performance from 80 percent to 95 percent, depending on the Amtrak route.
The Obama administration contends in its appeal that the government retains adequate control over the standards and the potential enforcement actions against freight railroads.
The administration also says a federal appeals court in Washington was wrong to view Amtrak as a private entity. Set up by a 1970 law, Amtrak is subject to government oversight, is almost entirely owned by the U.S. government and receives taxpayer subsidies.
“The court minimized a host of ties between Amtrak and the federal government demonstrating that Amtrak should not be considered a private entity,” U.S. Solicitor General Donald Verrilli argued.
Washington-based Amtrak tracks and publishes, in monthly reports on its website, how many minutes its trains are delayed each month and assigns causes.
If Amtrak trains don’t meet the on-time performance standards set by the company and its regulators, the U.S. Surface Transportation Board can investigate the railroads that own the tracks they use and assess damages.
The Supreme Court hasn’t struck down a federal law as delegating too much authority to a private party since a 1936 ruling involving the coal industry.
The justices will hear arguments in the nine-month term that starts in October. The case is Department of Transportation v. Association of American Railroads, 13-1080.
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