If the Surface Transportation Board is inclined to impose new competition and shipper access rules on U.S. railroads, the Obama administration appears to be OK with it.
And if the board moves in that direction, it could be the first step toward the first broad tightening of rail oversight since the 1980 Staggers Act deregulated railroads to try to save a financially failing industry.
That’s because changing market conditions could mean the STB needs to change its regulatory stance, the departments of Transportation and Justice told the agency in carefully phrased comments ahead of a June 22 hearing.
Top lawyers at the DOT and in Justice’s antitrust division told the STB that rail customers “have consistently charged” they are often forced to pay unreasonable freight rates in recent years. They gave the STB a list of pricing guideline rules to prevent shippers being forced to pay more than necessary for rail transportation.
Those departments also “urge the STB to consider the extent to which current circumstances warrant a different application” of regulatory power, while weighing railroads’ financial needs against shippers’ needs for reasonable rates and service.
The U.S. Department of Agriculture was more direct. It described a farming industry in which fewer big railroads handle most of the traffic, while more parts of farm country have little or no effective transportation competition compared to 30 years ago.
The USDA asked the STB to order mandatory reciprocal switching of loads between competing rail lines, at distances up to 30 miles and at rates far lower than today. Right now, railroads do not have to switch a load to an alternative carrier if they serve the same destination, and the USDA said typical switching fees of $500 per railcar go far beyond the carrier’s variable cost, which it put closer to $100.
While they carry the weight of official administration views, those are only a small part of a huge public comment file that has built since the STB said in January it might review competition in the railroad industry.
That followed a failed two-year effort in Congress to enact a major overhaul of rail regulation. The vehicle was a bill championed by Sen. Jay Rockefeller, R-W.Va., who chairs the Science, Commerce and Transportation Committee and had listed rail reform legislation as one of his top priorities.
But after a tougher-than-expected version passed his panel in December 2009, railroads said they couldn’t support it. The bill died last fall without going before the full Senate.
Rockefeller’s bill would have set new rules for shipper access to competing rail lines, eliminating service bottlenecks in which railroads now can lock in cargoes for the full route. It also would have changed terminal switching access rules, knocked down STB fees for shipper complaint cases and taken other steps railroads said would erode their profits to woo investors or plow back into their lanes.
The STB recently held a separate hearing on whether to lift some exemptions, under which it opts to leave many cargo types outside its regulatory protection. That began a process many think will end with regulators spreading their reach so they can oversee more goods.
And the STB already has announced plans to cut its case fees, an action that could become final within a few months.
But industry observers say the upcoming competition review could be the STB’s most far-reaching effort, and lead to the biggest changes to shipper-carrier rules since 1980.
Shipper groups hope so, anyway. “We believe that the board’s action or inaction will have profound implications for our national economy, for the creation of American jobs and for increasing American exports,” said Glenn English, chairman of Consumers United for Rail Equity, an activist shipper lobby. “We are encouraging the STB to recognize the lack of competition in the national freight rail system and take steps to improve rail competition.”
Railroads and their many allies again are pushing back to prevent major changes in their market rules.
The Association of American Railroads, which primarily represents the largest carriers, filed initial comments running more than 100 pages. It said the STB already has the tools to address instances of rail market power that threaten economic efficiency, without making wholesale changes to the regulatory system.
But, the AAR said, “The potential impact and negative consequences of any change in access policy are far-reaching.” It also warned the board, in remarks more or less repeated by numerous supporters, to “avoid unnecessary regulatory change that would undermine reinvestment and new investment of private capital.”
The DOT-DOJ joint filing tried to thread the needle at first, and said the STB must “exercise deft judgment on matters of law, economics and policy” to balance the tension of its responsibilities to carriers and shippers. But they urged regulators to investigate the current market, with an eye to “whether a proper balance … warrants different policy choices.”
Contact John D. Boyd at firstname.lastname@example.org.