Modernizing Freight Rail Regulation

TRB Special Report 318: Modernizing Freight Rail Regulation examines the future role of the Surface Transportation Board (STB) in overseeing and regulating the service levels and rate offerings of railroads, particularly as they become revenue adequate. The approaches recommended in this congressionally-requested report are intended to resynchronize a regulatory program that has become outdated.

The study committee finds that while the U.S. freight railroad industry has become modernized and financially stable since the Staggers Rail Act of 1980, some of the industry’s remaining economic regulations have not kept pace and should be replaced with practices better-suited for today’s modern freight rail system.

Specifically, the study committee finds that more appropriate, reliable, and usable procedures are needed for resolving rate disputes. It recommends that Congress prepare for the repeal of the current formula for screening rates for eligibility for rate relief, and direct the U.S. Department of Transportation to develop a more reliable screening tool that compares disputed rates to those charged in competitive rail markets. This tool would replace current methods that make artificial and arbitrary estimates of the cost of rail shipping.

Current adjudication methods can cost millions of dollars for litigation and some have taken years to resolve, deterring shippers with smaller claims from seeking rate relief. Simplified methods that are economically valid and practical to use have yet to be introduced. The study committee recommends that STB hearings used to rule on the reasonableness of challenged rates be replaced with arbitration hearings that compel faster, more economical resolutions of rate cases. It also recommends that arbitrators be empowered to use reciprocal switching as a remedy for those rates found to be unreasonable.

The study committee recommends the transfer of merger review authority to antitrust agencies. It also recommends that STB give priority to the data needed to oversee the railroads’ response to their common carrier service obligation by collecting and analyzing shipment-level data on service quality.

Press Release

Two page summary of the report

Recording of Surface Transportation Board Roundtable Discussion, October 25, 2016:

Recording of Richard Schalensee's Testimony at Surface Transportation Board Hearing, June 10, 2016: