Rail shippers await STB reauthorization bill components to move forward

With Congress having passed the Surface Transportation Board Reauthorization Act into law late last year, a rail shippers group is ready for the bill’s objectives to be put into motion in order for the STB to be able to implement free-market reforms and resolve rate disputes in a swift and fair manner.

That is the word from the Rail Customer Coalition, a collection of trade associations representing a broad cross section of manufacturing, agricultural, and energy industries whose members represent the largest users of freight rail that depend on the railroads to deliver reliable and affordable service in order to remain competitive in a global market.

In a letter to leadership of the Senate House and Appropriations Committees, RCC is asking for the STB to be fully funded in order for the STB to have the resources it needs to follow the bipartisan direction of Congress.

“With proper funding and staffing, there is no reason that the STB cannot quickly carry out reforms to make our freight rail system work better for railroads, shippers, and all stakeholders,” RCC stated.

The RCC also penned a separate letter to STB leadership, asking for the new set of reforms, as per Surface Transportation Board Reauthorization Act, to be implemented without delay, which cited:
-including rail customer viewpoints in the STB’s required report on rate case methodologies;
-moving forward on key proceedings, including competitive switching, and provide regular reporting on progress of pending action;
-prioritizing rate review timeline requirements;
-initiating investigations (where appropriate) into railroad practices that impact rail shippers on a national or regional scale and, more importantly, order remedies based on the conclusions of the investigation; and
-enacting regulations for the expansion of existing STB arbitration capabilities

When the STB Reauthorization Act was rolled out, the situation among railroad stakeholders remained the same as it has for essentially decades with railroad service issues and rates remain front and center, as has been the case in previous incarnations of this legislation. The bill is focused on addressing inefficiencies within the STB, which serves as the federal regulatory body responsible for economic oversight of the U.S. rail system, with regulatory jurisdiction over railroad rate reasonableness, mergers, line acquisitions, new rail-line construction, line abandonment, and other issues.

While similar attempts to improve the STB have been proposed in recent years, this effort is different in that rail service, going back to the winter of 2013-2014, saw major delays in various parts of the country even while Class I railroad carriers continue to make record capital expenditure investments, with much of that capital allocated for infrastructure improvements.

Last December, the RCC observed that S. 808 represents the most comprehensive rail economic legislation since 1980, which happens to be when the Staggers Rail Act, which effectively deregulated the industry, was enacted.

And it also cited a July report from the National Research Council’s Transportation Research Board (TRB), entitled “Modernizing Freight Rail Regulation,” that took the freight railroad sector to task, stating that current federal railroad regulations have not “kept pace with the industry’s transformation” and need to be replaced with a system that better matches what is needed today.

The report’s focus areas included: the performance of the railroads’ service levels, quality, and rates; the projected demand for freight transportation over the next two decades and the constraints limiting the railroads; ability to meet that demand; the effectiveness of public policy in balancing the need for railroads to earn adequate returns with those of shippers for reasonable rates and adequate service; and the future role of the Surface Transportation Board in regulating railroad rates, service levels, and railroads’ common carrier obligations as railroads may become revenue adequate.

Association of American Railroads President and CEO Ed Hamberger said that with the House following the Senate’s lead in passing this bill, Congress has made it clearly stated the critical need for railroads to be able to earn the revenues to build, maintain, and further modernize the nation’s 140,000-mile privately-owned rail network.

“This legislation strikes the right balance of preserving a market-based structure for shippers and railroads, while also providing commonsense process improvements that will allow the STB to work more efficiently,” he said. “The industry invests revenue it earns, not government funding, to grow the nation’s rail system and respond to the shipping needs of customers, large and small. Congress has reaffirmed balanced economic regulations that allow market-based competition to establish rate and service standards, with a regulatory safety net available to rail customers.”

Class I railroad executives have said many times over the years that the existing regulatory railroad environment has produced—for North American railroad shippers—a freight railroad system that is the envy of the world.  And while it not perfect, depriving the industry of its ability to earn its cost of capital could have a chilling effect on capital investments to support traffic growth and it could begin to reverse the great strides the rail freight sector has made.