Cost-benefit analysis key takeaway:
- Cost-benefit analysis is a tool that would help the STB better understand the pros and cons as they consider various regulatory actions.
In March 2019, AAR petitioned the Surface Transportation Board (STB) — the adjudicatory and regulatory panel that oversees railroad economic dealings — to incorporate cost-benefit analysis (CBA) into rulemaking proceedings. In response to AAR’s petition, the Board solicited “information on whether and how particular cost-benefit analysis might be more formally integrated into its rulemaking process.”
While the rail industry supports the Board’s plan to review how other independent agencies have adopted the practice, AAR believes the Board should undertake its analysis without further delay. After all, the implications could be significant should the STB incorporate this common-sense tool, which regulatory experts across the ideological spectrum view as a “best practice.”
CBA makes decisions easier to understand and more publicly transparent.
If there is very little benefit, except perhaps to a narrow special interest group, then the analysis will make that clear. CBA is an important tool that helps agencies like the STB:
- Better understand the positives and negatives of possible regulatory action;
- Better articulate the purpose of regulation; and
- Weigh potential outcomes before instituting policy that could have major implications to the economy.
The pending “forced switching” rule is a potential case study.
For instance, in the STB’s forced switching proposal — which would force a railroad to move customer freight cars over its tracks and then hand them over to competitors — the STB could use cost-benefit analysis to assess the financial implications of disrupted railroad operations.
AAR and many outside observers believe that widespread forced switching would reduce fluidity on the mainline network and in terminals, which in turn would depress investment and negatively affect the majority of rail shippers. Understanding these costs is crucial to maintaining a healthy rail network and national economy. Incorporating CBA into STB actions would provide a critical tool for the Board and support the goals of its members to regulate wisely.
The STB should include reliable data in all analysis.
Given the importance of accurate information, the AAR also called on the STB to ensure that all analysis at the Board includes the most current and reliable data possible. It is also why the AAR urged the Board to consider the cumulative impact of regulations when proposing and adopting new rules — as nothing happens in a vacuum, especially not in a networked industry. Government intervention into operations on one side of the country can reverberate across the country.
As noted in the filing, cost-benefit analysis is also “a critically important tool that can help the Board fulfill its statutory mandates to ‘minimize the need for Federal regulatory control over the rail transportation system,’ ‘foster sound economic conditions in transportation,’ and ‘ensure effective competition and coordination between rail carriers and other modes’.”
The petition is straightforward and would bring the STB in line with all executive government agencies, which are required to conduct analysis when proposing new rules. The petition would also align STB to other independent agencies with the power to substantially impact national commerce, such as the Federal Communications Commission, which voluntarily adopted new regulations that require CBA.