The Surface Transportation Board (STB) recently extended the comment period for Docket No. EP 711, its proposed rulemaking on reciprocal switching as a remedy for inadequate rail service, until December 20. This extension has sparked industry-wide attention and speculation about forthcoming changes to rail service regulations.
Reciprocal Switching: A Solution to Rail Service Challenges?
On September 7, the STB unanimously approved the Notice of Proposed Rulemaking (NPRM) titled "Reciprocal Switching as a Remedy for Inadequate Service." The proposal aims to provide freight rail shippers with access to reciprocal switching when service falls below established standards.
Reciprocal switching occurs when one railroad that has physical access to a shipper's facility transfers traffic to another railroad that lacks such access, with the receiving railroad compensated through per-car switching fees. This mechanism is designed to increase competition among railroads and improve service quality.
Key Components of the Proposal
The current NPRM differs from a 2016 version by establishing a simplified path to reciprocal switching agreements when service fails to meet any of three performance metrics:
1. Service Reliability
This measures whether Class I railroads deliver shipments within 24 hours of their Original Estimated Time of Arrival (OETA). The proposal suggests requiring 60% compliance in the first year, increasing to 70% subsequently.
2. Service Consistency
This evaluates whether transit times have increased by 20-25% compared to the same 12-week period in the previous year for loaded cars, unit trains, and empty cars.
3. Local Service Performance
This assesses whether railroads successfully complete local deliveries and pickups within established service windows at least 80% of the time over 12 consecutive weeks.
Industry Perspectives
STB Chairman Martin Oberman noted that no shipper has successfully obtained a reciprocal switching order in four decades, despite consolidation reducing Class I carriers from 40 to just six since 1980.
"The proposed rule provides specific, objective, and measurable standards for when a reciprocal switching prescription would be warranted," Oberman stated. "It should significantly reduce litigation costs and enable faster processing of petitions."
Industry analyst Tony Hatch observed that this service-based approach differs fundamentally from the 2016 mileage-based proposal, calling it "the STB Full Employment Act" due to its potential to create ongoing regulatory oversight.
Association of American Railroads President Ian Jeffries acknowledged the STB's shift from what he called "backdoor rate regulation" to a service-focused approach, while cautioning that "the devil is in the details" regarding proper metrics and contract traffic considerations.
Potential Impacts and Challenges
The proposal could significantly reshape the rail industry by:
- Increasing competition among carriers
- Improving service quality and consistency
- Enhancing shippers' bargaining power
- Promoting operational innovation
- Potentially lowering transportation costs
However, implementation faces several hurdles:
- Resistance from railroads concerned about profitability
- Technical and operational coordination challenges
- Regulatory complexities in establishing fair practices
- Potential legal challenges to the STB's authority
Looking Ahead
As the comment period continues, stakeholders are closely evaluating how this proposal might balance competition and cooperation in the rail industry. The STB's final rule could represent the most significant change to rail service regulation in decades, with far-reaching consequences for shippers, carriers, and the broader transportation network.