Imagine an agricultural company watching helplessly as competitors gain market share while its own profits shrink under the weight of high and unpredictable rail shipping costs. This common predicament may soon see relief through new regulatory reforms.
Late last year, Congress passed the Surface Transportation Board (STB) Reauthorization Act, granting the agency expanded authority to resolve rate disputes more efficiently and fairly while promoting free-market reforms in the rail industry. The Rail Customer Coalition (RCC), representing major rail freight users across manufacturing, agriculture and energy sectors, is now pushing for full implementation of the legislation's measures.
Funding and Implementation Push
The RCC recently sent letters to Senate, House and appropriations committee leaders urging adequate funding for the STB to execute its congressional mandate. "With proper funding and staffing, the STB can quickly implement reforms that will make our rail freight system work better for railroads, shippers and all stakeholders," the coalition stated.
In a separate communication to STB leadership, the RCC called for immediate action on several key provisions:
- Incorporating shipper perspectives in STB reports on rate case methodologies
- Advancing competitive switching procedures with regular progress reports
- Prioritizing rate review timelines
- Investigating railroad practices affecting national or regional shippers and implementing corrective measures when warranted
- Expanding the STB's arbitration capabilities through new regulations
Historical Context and Industry Challenges
The legislation arrives as the rail industry faces persistent challenges. Service disruptions and rate concerns have plagued stakeholders for years, particularly since the widespread delays during the harsh 2013-2014 winter. These issues persisted even as Class I railroads invested record capital expenditures, primarily in infrastructure improvements.
The RCC has characterized the STB Reauthorization Act as the most comprehensive rail economic legislation since the 1980 Staggers Rail Act, which substantially deregulated the industry. The coalition also cited a July report from the Transportation Research Board that criticized current federal rail regulations as outdated and in need of modernization.
The TRB report examined several critical areas including rail service quality, rate performance, projected freight demand over the next two decades, and the effectiveness of public policy in balancing railroad profitability with shippers' needs for reasonable rates and adequate service.
Industry Perspectives
Edward Hamberger, President and CEO of the Association of American Railroads, welcomed the legislation, stating it maintains an appropriate market-based balance while improving STB processes. "The industry uses its earnings—not government funding—to grow the nation's rail system and meet customer transportation needs," Hamberger noted, adding that Congress reaffirmed balanced economic regulation allowing market competition to establish rates and service standards.
Class I railroad executives have long maintained that the current regulatory environment has created a freight rail system envied worldwide. While acknowledging imperfections, they warn that undermining railroads' ability to earn their cost of capital could chill infrastructure investments and reverse the sector's significant progress.
As implementation moves forward, agricultural and industrial shippers await tangible results from these regulatory changes, hoping for relief from the cost pressures that have constrained their competitiveness in global markets.