Page ContentThe U.S. Surface Transportation Board (STB), an independent federal agency charged by Congress with resolving certain railroad rate and service disputes and reviewing proposed railroad mergers, is weighing several proposals that threaten to damage railroads and hurt U.S. companies and consumers alike.The proposals under consideration are echoes of an earlier era. Before the rail industry was partially deregulated in 1980, excessive government intervention permeated nearly every aspect of railroads, driving much of the industry into financial ruin. “The fundamental achievement of partial deregulation was that it brought market-based principles to an industry forced into severe inefficiencies by a century of man-made regulations," said Bob Gallamore, a nationally recognized expert on railroad economics, technology and safety.The market-based approach favored by regulators over the last three decades has allowed the freight rail industry to greatly enhance efficiencies and attract the revenue necessary to make railroads the “comeback kid" of the U.S. transportation network, Gallamore said. Today, U.S. freight railroads are widely regarded as the best in the world. Proposals that would begin to reverse rail’s advances, however, suggest a new willingness of the STB to revert to interventionist, anti-market options. The physical and financial conditions of freight railroads before partial deregulation provide ample evidence of the downside of overzealous government intervention. Today’s healthy, market-influenced freight rail industry, on the other hand, has a significant impact on the U.S. economy, serving as a potent economic multiplier. “The economic regulation proposals before the STB should be a wakeup call for anyone who relies on freight railroads, which includes major manufacturers and most Americans,” said John Gray, senior vice president for policy and economics at the Association of American Railroads. Here are three of the most concerning proposals currently under consideration at the STB:Reregulation of Select CommoditiesThe STB is proposing to reregulate the transportation of five commodities: primary steel products, coke made from coal, hydraulic cement, scrap steel and crushed stone. These commodities have not been regulated for two decades because competitive transportation options, such as barge, rail and truck, are pervasive. Regulation would distort and disrupt the competitive marketplace that currently protects shippers of these goods.This proposal is a step backward toward a time when government was heavily involved in the pricing system for all rail commodities. The regulations of the day did not allow railroads to adapt their prices and services to market conditions. That lack of adaptability caused network inefficiencies that damaged service for shippers around the country.Conversely, marketplace competition resulting from deregulation has provided shippers the opportunity to reach out into new markets and has kept freight rail rates among the lowest in the world. This new proposal would replace the market with regulatory controls, ultimately hurting shippers, rail companies and consumers. Forced AccessA segment of rail shippers wants to force railroads to turn over their business to other railroad competitors. Doing so would upend the logistical efficiencies that today benefit all customers using the U.S. rail system to move their goods. Railroads purposely concentrate and move traffic along certain routes to maximize operational efficiencies and network fluidity. The railroads’ purposeful routing practices, which have been honed over three decades, take into account the health and operation of the entire network and benefit all customers, not just a few.Undoing the efficiencies and benefits recognized by all rail customers under today’s routing operations for the benefit of a few shippers would hurt the overwhelming majority of businesses that rely on rail. Forced access is an anti-competition move that will slow rail traffic, increase shipment delivery time and result in higher costs to both shippers and consumers. Railroad Price ControlsA proposal being pushed by a handful of rail customers who want to pay less to move their goods by rail would cap the rates a railroad could charge when the railroad’s revenues exceed a ceiling designated by the STB, a concept referred to as being “revenue adequate.” Such direct government intervention would effectively impose price controls on railroads, allowing market forces to only work on the downside. The proposal would also leave railroads with much less money to expand and modernize a nationwide rail network that helps move 54 tons of goods for each American every year and provides the foundation for most passenger and commuter service in the United States.“The success of today’s robust rail network is the result of three decades of smart economic regulations that encourage, not thwart, private investments,” Gray said. “The reason the U.S. rail system outperforms and offers lower freight prices than every other rail network in the world is because regulators have encouraged market forces that provide incentives for competition and private investment.”“Continuing those incentives for private investment should be how the federal government looks to meet the freight rail challenges of the future. Regulatory handicapping of these investments will have a negative effect for generations to come,” said Gray.