The U.S. freight railroad industry has experienced significant modernization and financial stability since the Staggers Rail Act of 1980. However, a recent special report (318) from the Transportation Research Board (TRB) highlights that some economic regulations governing the industry have not kept pace. This congressionally-requested report, titled “TRB Special Report 318: Modernizing Freight Rail Regulation,” delves into the future role of the Surface Transportation Board (STB) in overseeing railroad service levels and rate offerings, especially as railroads achieve revenue adequacy. The recommendations within this report aim to update a regulatory framework that has become outdated in the context of today’s freight rail system.
Addressing Outdated Rate Dispute Procedures
One of the key findings of the Transportation Research Board study committee is the inadequacy of current procedures for resolving rate disputes. The report emphasizes the need for more appropriate, reliable, and user-friendly methods. The current formula for screening rates for rate relief eligibility is identified as outdated and Congress is urged to prepare for its repeal. To replace this, the Transportation Research Board recommends directing the U.S. Department of Transportation to develop a more dependable screening tool. This new tool should benchmark disputed rates against rates in competitive rail markets, offering a more realistic assessment compared to the artificial cost estimations used in current methods for rail shipping.
The existing adjudication methods are criticized for being costly and time-consuming. Litigation can extend for years and cost millions of dollars, effectively deterring shippers, particularly those with smaller claims, from pursuing rate relief. The Transportation Research Board report advocates for replacing STB hearings on rate reasonableness with arbitration hearings. This shift is intended to ensure faster and more cost-effective resolutions for rate cases. Furthermore, the report suggests empowering arbitrators to utilize reciprocal switching as a remedy when rates are deemed unreasonable.
Streamlining Merger Review and Enhancing Service Oversight
Beyond rate disputes, the Transportation Research Board report addresses broader regulatory aspects. It recommends transferring the authority for merger review to antitrust agencies, suggesting a different approach to industry consolidation oversight. In another critical recommendation, the report emphasizes the need for the STB to prioritize data collection and analysis related to railroads’ fulfillment of their common carrier service obligation. Specifically, the Transportation Research Board advises the STB to collect and analyze shipment-level data on service quality. This data-driven approach would enable more effective oversight of railroad service performance and responsiveness to shipper needs.
In conclusion, the Transportation Research Board Special Report 318 provides a comprehensive analysis of the current state of freight rail regulation and offers concrete recommendations for modernization. By addressing outdated rate dispute mechanisms, proposing streamlined merger review processes, and advocating for enhanced service quality oversight through data, the report provides a roadmap for resynchronizing regulation with the realities of the modern freight rail industry. This research underscores the ongoing importance of the Transportation Research Board in shaping transportation policy and practice.
