Statement on Signing the Regional Rail Reorganization Act of 1973.

AS ONE of my first acts of this new year, I am pleased to sign into law H.R. 91412, the Regional Rail Reorganization Act of 1973. I believe this bill can mark an important turning point in the history of America's railroad industry.

The purpose of the act is to establish special procedures for restructuring the rail system in the Northeast and Midwest regions. There are today seven large railroads in these regions which are in bankruptcy. Some of those railroads, including the huge Penn Central, are threatened with court-ordered liquidation and cessation of operations. This act was necessary because existing laws for the reorganization of railroads are inadequate to the enormous task of providing a satisfactory way to meet these problems.

The rail industry in the Northeast and Midwest faces unusual difficulties because it has not been able to adapt its operational patterns, most of which were laid out 50 or more years ago, to today's economic conditions. This act provides special procedures for planning and financing a consolidated new rail system, for abandoning totally unnecessary service, and for providing court review of the impact that the transfer of rail properties would have on the creditors of the estates of bankrupt railroads. By combining these complex steps into a single program, the act clears the way for dealing with these problems without upsetting the regional rail transportation service that is so vital to the economy of all regions of the Nation.

In addition to these procedural steps, the act authorizes the issuance of up to $1.5 billion in federally guaranteed obligations and authorizes more than $500 million in direct Federal payments that can be used for interim cash assistance to the bankrupt railroads, for protection of displaced rail employees, and for interim local rail service subsidies to ease the impact of the restructuring process. While some of these expenditures are higher than I believe they should be, I feel that overall the act strikes a responsible balance between the burden on the taxpayer and the gains to the Nation that will flow from a healthier private-sector rail freight system.

When I signed legislation last November authorizing additional funds for rail passenger service, I stated my position that "... Federal action to shore up the financial condition of our major Northeast and Midwest railroad freight lines must take the form of a private solution that would impose only a minimal and finite financial burden on the taxpayer."¹ I have concluded that this act meets these criteria. While there are some troublesome aspects of the legislation, the act represents an appropriate legislative compromise.

¹See 1973 volume, Item 320.

I want to commend the Congress for passing such responsible legislation and for the spirit of cooperation with which it approached the long and, at times, tedious development of this very complex bill. In particular, the Senate and House Commerce Committees have devoted long hours of work to this task, with members from all regions of the country treating this legislation as an important national issue and not simply as a Northeast problem.

I look now to Secretary of Transportation Brinegar, who has been deeply involved in the development of this bill, to ensure that this legislation is implemented quickly and effectively. While this task will be difficult and will require the continued cooperation of all concerned, I am confident that the joint efforts of the public and private sectors can and will make this legislation work effectively.

In the years ahead, with the added pressures brought on by the energy crisis, we must press hard to rebuild and strengthen our entire nationwide rail freight system. This effort will require fundamental changes in the regulatory environment and stepped-up capital improvement and modernization programs. To address these issues, I plan to send additional rail legislation to the Congress in the near future, legislation which will deserve the same careful attention and close cooperation which were devoted to H.R. 9142.