The case for freight rail reform is undeniable

The case for freight rail reform is undeniable
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America’s freight rail system is in desperate need of reform, a sentiment admittedly in conflict with the railroads’ PR campaign showing an industry that is growing, facilitating commerce and even helping the environment. To believe the ads, today’s railroads are as American as apple pie — something to be revered, trusted and preserved at all costs. 

While it’s true that railroads provide an essential service to the American economy, the freight rail system is lacking something just as American as that apple pie: the kind of healthy competition that is the hallmark of our market economy. 

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Today’s 35-year-old system of antiquated rules and government procedures administered by the Surface Transportation Board (STB) blocks competition between railroads and, when no competitive options are available, deprives rail customers of an accessible means to resolve concerns with rates and service. The reality is that many shippers, from chemical producers to car manufacturers to corn farmers, are captive to a single railroad, and current STB practices offer almost no effective recourse if rates or services are unacceptable. 

In fact, thanks in large part to these arcane polices along with massive consolidation within the rail industry, freight rail rates nearly doubled between 2004 and 2014, rising at three times the rate of inflation, even as the volume of freight carried by the railroads has gone down.

Congress recognized the need for change and called on the National Academies of Sciences to conduct a review of the U.S. freight rail industry. The Academies’ Transportation Research Board report confirmed what rail customers had known for years: STB procedures to address shipper concerns “lack a sound economic rationale and are unusable by most shippers,” and many current policies “should be replaced with practices better suited for today’s modern freight rail system.”  

Congress took another important step last year by passing legislation to help improve how the STB operates, and it is making a good-faith effort to pursue important changes to do a better job resolving long-standing freight rail problems. 

For example, the STB has proposed to allow rail customers with access to only a single rail carrier to request to move their freight to another major railroad at a nearby interchange for an appropriate fee. This proposal is a commonsense, fair solution that would finally allow shippers to seek a competitive bid from another railroad. Canada has been allowing this “competitive switching” for more than a century, but U.S. rail carriers would have you believe it is a radical and unprecedented attack on their livelihoods. 

The Surface Transportation Board is also trying to simplify the way it resolves rate disputes, also over the protestations of the rail industry. Current policy requires that to dispute an unreasonable rate, a captive rail customer must prove that it could build and operate its own railroad for less than what it pays its current rail carrier. In no other industry must a customer demonstrate it could build and operate the necessary infrastructure, technical capabilities, equipment and human resources of a made-up competitor to challenge an unfair rate. Building such a case before the STB can cost years and millions of dollars, leaving carriers free to charge uncompetitive prices while the board is considering the matter. Even the STB commissioners have questioned if this approach is a workable method to resolve rate cases.

Railroads are using scare tactics and old-fashioned bullying to preserve the status quo by attacking the STB, and even their own customers. That is why rail customers large and small, including the business of chemistry, have united to form the Rail Customer Coalition. This diverse group of the manufacturing, agricultural and energy industries with operations and employees throughout the United States supports the STB’s efforts. The Surface Transportation Board’s proposals will allow the market to operate more effectively and foster competition, which drives innovation and cost savings throughout our economy. And just as important, these reforms will foster a healthier freight rail system — something rail carriers should fight for, not against. 

The STB’s pursuit of reform is not only justified by the times, it has been validated by an objective third party in the National Academies of Sciences and is consistent with the STB’s original statutory mandate from the Staggers Rail Act of 1980 to ensure effective competition among rail carriers. 

So despite the hyperbole and protestations from rail carriers, the case for the modernization of rail policies for the good of the entire U.S. economy is undeniable. 

Dooley is president and CEO of the American Chemistry Council. Dooley represented the 20th District of California as a Democratic member of the House from 1991 until 2004. He served on the House Agriculture Committee, as well as the House Resources Committee.