Alexandria, VA — The U.S. Surface Transportation Board (STB), a government agency with broad economic regulatory authority over railroads, has announced a plan to impose a series of new regulations on freight railroads.
The new rules, in a broad sense, would hurt freight railroads by undermining the balanced regulatory framework that enables them to earn enough to adequately reinvest back into their infrastructure and operations. This framework was established by the Staggers Rail Act of 1980, legislation that brought freight railroads back to financial health and stability after years of federal over-regulation had nearly driven them to extinction.
Fast forward to STB’s recent Notice of Proposed Rulemaking (NPRM), first announced in July. Among the agency’s proposed changes, railroads would be required to let competitors use their lines — a radical approach that would result in railroads turning over traffic to other railroads, potentially at below-market rates and without proof that they are being uncompetitive. This part of the proposal, coined “forced access,” is not only in opposition to free market principles, it would compromise the efficiency of the nation’s rail network.
The changes would also re-regulate certain commodities — crushed and broken stone, coke produced from coal, primary iron and steel products, hydraulic cement, and iron and steel scrap, wastes and tailings — that the STB has previously determined are subject to pervasive competition. This proposed action comes despite a lack of evidence that market conditions have changed and despite the fact that none of these commodity groups petitioned for re-regulation.
Several other proposed regulations, which are detailed in GoRail’s issue brief, would amount to government price controls and giving preferential treatment to certain shippers.
The stakes for the STB’s proposals are big and significant, not just for railroads but also for the consumers, manufacturers, farmers, ports and others from coast to coast that rely on trains. If passed, the changes would create service problems across the 140,000-mile rail network, jeopardizing everything from energy transportation to passenger rail service. Past analysis by the Association of American Railroads found that a proposal similar to STB’s forced access proposal could affect an estimated 7.5 million carloads of traffic, placing nearly $8 billion in revenues at risk.
Freight railroads are leaders in terms of private spending, reinvesting at six times the rate of the average manufacturer back into their network. It would be a costly mistake to stifle this level of investment at a time when railroads are enhancing and expanding their lines to meet the needs of a growing economy.
For more information on this issue, download our issue brief here.
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