Date: 4/4/2018

The Trump administration recently nominated two Republicans to begin filling the three vacancies at the Surface Transportation Board (STB). Washington observers expect the nominees — Patrick Fuchs of the Senate Commerce Committee and Michelle Schultz of the Southeastern Pennsylvania Transportation Authority (SEPTA) — to face a nomination hearing sometime this month.

With that in mind, Marc Scribner of the Competitive Enterprise Institute (CEI) recently published a column calling on the U.S. Senate to “ensure potential board members have a sound grasp of railroad economics and the gains made in the rail sector in recent decades.”

“Any qualified nominee should be supportive of partial railroad deregulation, which has brought enormous benefits to railroads, shippers, and consumers. But recognizing the societal gains post-Staggers Act is not enough. Senators should press nominees to state their commitment to preserving these gains and opposing efforts to reverse this progress.”

Addressing the outstanding proposal from the STB on forced switching, Scribner argues, “the STB of 2016 sought to convict the railroads for crimes the STB conceded they had not committed.”

“This Kafkaesque reversal of three decades of precedent is grounded neither in law nor economics. For years, economists had decried this type of regulation as a backdoor price control that failed to consider the railroads’ major capital investment risks. This dangerous re-regulatory proposal threatens to reduce the efficiency of existing rail networks by mandating more time-consuming switching, reduce investment from rail carriers, and harm shippers and consumers through higher rates and lower service quality.

Members of the Senate Commerce Committee should ask each of the nominees for their perspectives on the economic impacts of partial freight deregulation, the current state of railroad competition, and the relevance of the longstanding anticompetitive conduct requirement for imposing forced reciprocal switching arrangements.”

Scribner’s arguments relate to a recent analysis from the Mercatus Center at George Mason University calling on independent agencies, such as the STB, to conduct regulatory impact analysis before proposing new rules.

“Instead of demonstrating with evidence that anticompetitive abuse is widespread, the STB proposal simply claimed that proving anticompetitive abuse is too difficult. The sole evidence cited in support of this claim is that very few competitive switching cases have been brought before regulators since the current policy was adopted in 1985, and shippers have never won a case. But these facts are not sufficient proof. An absence of anticompetitive abuse cases could indicate either that the current STB procedures are too cumbersome or that little anticompetitive abuse is occurring. A thorough regulatory impact analysis would have systematically examined evidence of anticompetitive abuse to determine whether a major problem exists, and if so, what caused the problem. Armed with an evidence-based explanation of the problem’s cause, the STB could then assess the likely results of alternative solutions.”

Discussion surrounding these issues will certainly be front and center with the expected nomination hearing. The AAR will do its part to protect the successful economic regulatory currently in place.