As a result of that experience we went on the Rock Island Railroad, which we took from our reporting analysis, the worst railroads, and starting working from the bottom up.

At the time we completed our assessment of the Rock Island Railroad, there was a strike on the property. As a result of the information that we had, it was used on the ICC and Department of Justice, the corrective service order.

Toward the end of last year we went on to the Illinois Central Gulf and made an assessment of that railroad and worked with that management, and I believe we will be as successful with the Illinois Central as we were with the L. & N.

This year we are taking another look at how we can redirect our forces to continue this program and yet not have it impact on our overall inspection requirements. But this is what we have done last year and this is what I intend to do this year.

Mr. MATSUI. So as a matter of policy in FRA, you are addressing this problem by looking at those railroads that have profitability margins less than others, for example. Is that a correct statement? Mr. SULLIVAN. If I may, Mr. Matsui, it is not just because they have a profitability problem. That is reflected in the condition of their plant.

Mr. MATSUI. I know, but what good are these statistics unless you are going to act on them?

Mr. SULLIVAN. Which statistics?

Mr. MATSUI. The ones you just gave us about the correlation between profit and safety. Obviously you did that for some reason. Mr. SULLIVAN. I guess that's part of the message we had been trying to take to the public.

Mr. MATSUI. I understand that and I'm glad you did it because it is important, but at the same time what are you going to do with it besides advocate deregulation, and that is an issue which may or may not have a major effect on profitability? We don't know. You may kill railroads as a result of that or you may promote them. I don't know. That's something you have to determine.

So what are you going to do with these statistics?

Mr. SULLIVAN. I would presume that those railroads, and if I may say that includes all of them who are not able to generate sufficient cash to keep up with their maintenance requirements, would draw our attention. But I guess what I'm saying is there seems to be a delay. You can take a perfect track structure and say UP, Southern or whoever, and give it 3 years of no maintenance and they would be in trouble, and that would start to draw our attention.

Mr. MATSUI. Mr. Sullivan, let me say this. I don't want to go on because I think we both know where we are on this thing, but I would have a difficult time voting in favor of any authorization if in fact you would prepare these studies and not act upon them. I think this is a significant study. We are talking about safety, the obvious purpose of this hearing.

Unless I can see some methodology developing out of this soon, I don't know how I could vote for this authorization. So I'm just going to leave it at that, Mr. Chairman, and I will yield that. Mr. SULLIVAN. Thank you, sir.

Mr. FLORIO. You have touched upon a couple of points I would develop. One specifically is the reference you made to the L. & N. emergency order, I think you called it. Wasn't there some question as to DOD's authority to issue that emergency order?

Mr. SULLIVAN. Yes, it was challenged, Mr.Chairman. Mr. James can give you the complete story on that.

Mr. FLORIO. It was in the courts, I assume?

Mr. JAMES. Yes, Mr. Chairman. The order was issued early in February of 1979 and there were six judicial decisions involved before the termination of the order by judicial decree, and we had one administrative hearing. So we had a lot of challenges.

Mr. FLORIO. What was the ultimate determination?

Mr. JAMES. The ultimate determination, 42 months after the order was issued, was that the FRA exceeded its statutory authority.

Mr. FLORIO. Will there be recommendations from your agency to modify your authority so that in the event of a situation comparable to this your authority would be sustained in court?

Mr. JAMES. One of the provisions in the administration's Safety Authorization bill would clarify our emergency power authority to overcome some of the deficiencies perceived by the court in the issuance of the L. & N. emergency order.

Mr. FLORIO. Thank you. I just ask your thoughts-you were bragging, and perhaps justifiably so, about the civil penalties you have received. Suggestions have been made those penalties would be put to better use, rather than putting them into the general Treasury, put them into some sort of a safety trust fund. Do you have any thoughts on that proposal?

Mr. SULLIVAN. We don't support that, Mr. Chairman. Would you like to expand on that, Mr. James?

Mr. JAMES. I think the objective of the fines is to make railroad management, particularly top management, feel very uncomfortable about the conditions which led to the fines. So we would be somewhat concerned if the whole process turned out to be a way of raising money for reuse by the railroads. We know they need the money, at least many of the railroads, but the process is one of unpleasantness, of bringing to top management a concern with the condition of the railroad and the practices of their subordinates. Mr. FLORIO. The deterrent value of the fine would in no way be diminished if in fact there was a trust fund. I'm not advocating this, just exploring this. Your trust fund would not be turned over to the railroads but would be made available at the Government's authority for purposes of utilizing those moneys for rail inspectors or whatever else you think is needed in a safety-related way. I don't think anyone is advocating turning the money back to the railroads.

Mr. JAMES. The amounts are still relatively small compared to the total amounts available for financial assistance and other expenses, so I don't think it would make much of an impact.

Mr. FLORIO. I am interested in the State inspection programs. It was brought to my attention that States can go to court if FRA has not undertaken enforcement action within 90 days on alleged deficiencies. I'm interested in why the 90-day lag, inasmuch as I assume we are talking about only those States which have been

thoroughly certified by you as being competent to handle inspections in lieu of the Federal inspection system.

If in fact they are fully certified, why do we have to have the delay? And if there is a reason for the delay, that you have some questions about the ability of the State level, why would they be fully certified to be out doing the things you should be doing in terms of track inspection systems?

Mr. JAMES. The 90-day period is a statutory period contained in the 1970 Safety Act, after which time if a violation has not been processed by my office the State may bring suit independently.

Mr. FLORIO. Am I correct in saying this applies only to those States who have a fully certified inspection system and so take over the responsibilities you take over in those other States that did not have such inspection systems?

Mr. JAMES. There are 30 States right now that have certified inspection systems.

Mr. FLORIO. Fully certified inspection systems?

Mr. JAMES. Well, certified enough to send in violations to FRA. Mr. FLORIO. So if in fact the State is certified only to the point of having a track inspection system to be certified, as opposed to other aspects of safety, that State with that partially certified system would be able to go into court after 30 days on safety violations in a yard that had nothing to do with the track deficiencies?

Mr. JAMES. No, they could only write violations in the area in which they are certified.

Mr. FLORIO. How many States are fully certified to take over the total safety program for which you have the responsibility of administering?

Mr. JAMES. I don't know the exact number of fully certified States. There are 30 in the program.

Mr. FLORIO. I assume someone knows the number?

Mr. WALSH. Yes, there are 30 States in the program now. In track and equipment there are 29 equipment inspectors out there and 55 track inspectors from State programs. These people can issue violations where they find a railroad in violation of any of our standards.

Mr. FLORIO. I'm still not clear because it's my understanding there are a smaller number of States, perhaps as few as six or nine-

Mr. WALSH. Of the 30, Mr. Chairman, there is a difference in certification in the agreements, but really those 30 States, their inspectors have the authority to issue violations in any of the railroads in the State.

Mr. FLORIO. In any aspect under the safety regulations with which you are charged with enforcing?

Mr. WALSH. No, only in track or equipment. Those are the only two areas where the States are participating in the program.

Mr. FLORIO. So what you are saying is a fully certified State program, fully certified would entail just those two sections? Mr. WALSH. Just those two disciplines, Mr. Chairman.

Mr. FLORIO. All right. Your responsibilities, then, go beyond those two areas?

Mr. WALSH. Yes.

Mr. FLORIO. So it's fair to say there is no State right now that really is able to do what you are able to do?

Mr. WALSH. That's entirely right, Mr.Chairman.

Mr. FLORIO. Is there any statutory authority for a State taking over the full responsibilities of DOT inspection systems?

Mr. WALSH. There is nothing at the present time, Mr. Chairman, for the State to take it over. Basically, the 1970 Safety Act gave the Federal Railroad Administration authority to go into other areas. The existing legislation, such as the Signal Inspection Act, Locomotive Act, were not transferred over to the 1970 act. So therefore any of those existent prior to the 1970 Safety Act remain in effect, and the States do not have the authority to go in in that area and inspect or file violations.

Mr. FLORIO. I think some of the States are confused in this whole

area.

Mr. WALSH. There's no doubt about it, Mr.Chairman. Mr. Sullivan recently took a look at the problems in this area. He transferred the responsibility which was fractured within the FRA to the Office of Safety. We have taken a very, very close look at it. We have gone out and at the present time we are interviewing the States. We have looked in our own shop where there are problems within the Office of Safety, and I think within the next few months I would be really on top and able to address all of the problems and track most of them.

Mr. Sullivan has stated, after we have taken a very close look at it, and have resolved all of the problems or as many as we can, then we will be ready to come back to your committee and make recommendations or whatever we find and whatever we feel is

necessary.

Mr. FLORIO. Assuming, notwithstanding the spending analysis, you have made some sort of decision because you are reducing the authorization for the State inspection program down from $3.5 to $2 million. That indicates to me that you are moving in the direction of less reliance upon the system than you have had in the past.

Is that a fair conclusion?

Mr. WALSH. Not quite, Mr. Chairman. I believe a decision was made that the amount of money, in that we have presently 84 State inspectors on in 30 States, that leaves 18 States to go and there is carryover in there sufficient to carry us through the next 2 years while we see-they have an obligation and responsibility to go out and try to bring the other 18 States on board and get them into the program.

We are seeing at the present time that some of the States, one of the States in our area, New York, is losing some of their inspectors due to low salaries.

Mr. FLORIO. How can they be losing inspectors at low salaries when I think you're telling me we had left over money?

Mr. WALSH. We only pay 50 percent, and even with our 50 percent, they have through their own State requirements that they can only pay I believe $16,000, and most of the trained railroad employees that we usually draw on to fill both Federal and State inspector positions are making more than that. So they have a recruiting problem.

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Mr. FLORIO. If you have extra money it seems to me more cost effective to do this at the State level, assuming we have qualified people. Shouldn't you be asking for statutory changes to increase the proportion of the ratio so that you can use some of that money on a 75/25 basis or however?

Mr. WALSH. That has been called to my attention. The biggest thing that has come to my attention, Mr. Chairman, is this is supposed to be a State partnership, a 50/50. This was basically the intent when the program was set up. Until I explore all of the problems that are out there and get an honest handle on it, I just don't think I could make any recommendations.

Mr. FLORIO. I certainly wouldn't want to put you in the position of making premature judgments, but the purpose was not per se to have a 50/50 partnership. The purpose was to extend the ability to have inspections take place. The decision was made that the States might be the appropriate mechanism to increase the capability of the Federal Government through this partnership. So there's nothing sacred about a 50/50 breakdown.

If in fact the Federal revenues are not being utilized such that you are coming in to ask for a reduction, and we can perceive a problem inhibiting the States from expanding from capability, it may well be deserving of your consideration and our consideration that we modify the system to a certain extent to expand the ability to have more inspectors. Because every year that I have been here we're all lamenting the fact that we don't have enough inspectors at the Federal level and certainly not at the State level.

I would really appreciate some suggestions after you conclude your analysis, and hopefully it can be concluded before very long, as to how we can provide more inspectors, and if they have to be at the State level that's fine, we'll do it at the State level, assuming they all meet minimum qualifying standards.

If I could go into one or two other areas, the tank car question, the fact is as we understand it, the regulations are going forth on 112, 114 tank car retrofit program. The suggestions were made that we have comparable problems with the 105 type tank cars.

Can I ask why the regulations were not put forward at the same time for all three types of tank cars since they carry essentially the same types of materials? Is there a justification for not treating all three cars the same?

Mr. SULLIVAN. Mr. Chairman, when this administration came into office the regulation was ready to go for the 112 and 114 cars, and we went with that as something in being. We later, at the suggestion of NTSB and the committee, accelerated that program, but at that time a similar amount of work had not been done on the 105 cars and I believe that is why it trailed along. Mr. Walsh can tell you where we are on that right now.

Mr. WALSH. First of all, Mr. Chairman, it was my understanding with the 112 and the 114 tank car were bad actors. Therefore, the emphasis was put on retrofitting those cars.

Mr. FLORIO. In the sense of the volume of the material or something structural?

Mr. WALSH. The volume of the material, the release and that. It was determined those cars should be the cars that needed the