National Academies Press: OpenBook

Modernizing Freight Rail Regulation (2015)

Chapter: Front Matter

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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2015. Modernizing Freight Rail Regulation. Washington, DC: The National Academies Press. doi: 10.17226/21759.
×

TRANSPORTATION RESEARCH BOARD

SPECIAL REPORT 318

MODERNIZING
FREIGHT RAIL
REGULATION

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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2015. Modernizing Freight Rail Regulation. Washington, DC: The National Academies Press. doi: 10.17226/21759.
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Transportation Research Board 2015 Executive Committee*

Chair: Daniel Sperling, Professor of Civil Engineering and Environmental Science and Policy; Director, Institute of Transportation Studies, University of California, Davis

Vice Chair: James M. Crites, Executive Vice President of Operations, Dallas–Fort Worth International Airport, Texas

Executive Director: Neil J. Pedersen, Transportation Research Board

Victoria A. Arroyo, Executive Director, Georgetown Climate Center; Assistant Dean, Centers and Institutes; and Professor and Director, Environmental Law Program, Georgetown University Law Center, Washington, D.C.

Scott E. Bennett, Director, Arkansas State Highway and Transportation Department, Little Rock

Deborah H. Butler, Executive Vice President, Planning, and CIO, Norfolk Southern Corporation, Norfolk, Virginia (Past Chair, 2013)

Jennifer Cohan, Secretary, Delaware Department of Transportation, Dover

Malcolm Dougherty, Director, California Department of Transportation, Sacramento

A. Stewart Fotheringham, Professor, School of Geographical Sciences and Urban Planning, University of Arizona, Tempe

John S. Halikowski, Director, Arizona Department of Transportation, Phoenix

Michael W. Hancock, Secretary, Kentucky Transportation Cabinet, Frankfort

Susan Hanson, Distinguished University Professor Emerita, School of Geography, Clark University, Worcester, Massachusetts

Steve Heminger, Executive Director, Metropolitan Transportation Commission, Oakland, California

Chris T. Hendrickson, Professor, Carnegie Mellon University, Pittsburgh, Pennsylvania

Jeffrey D. Holt, Managing Director, Bank of Montreal Capital Markets, and Chairman, Utah Transportation Commission, Huntsville, Utah

Roger Huff, Manager, Ford Global Customs, Material Export Operations, and Logistics Standardization, Ford Motor Company, Farmington Hills, Michigan

Geraldine Knatz, Professor, Sol Price School of Public Policy, Viterbi School of Engineering, University of Southern California, Los Angeles

Ysela Llort, Director, Miami–Dade Transit, Miami, Florida

Abbas Mohaddes, President and CEO, Iteris, Inc., Santa Ana, California

Donald A. Osterberg, Senior Vice President, Safety and Security, Schneider National, Inc., Green Bay, Wisconsin

James Redeker, Commissioner, Connecticut Department of Transportation, Newington

Mark Rosenberg, President and CEO, The Task Force for Global Health, Inc., Decatur, Georgia

Sandra Rosenbloom, Professor, University of Texas, Austin (Past Chair, 2012)

Henry G. (Gerry) Schwartz, Jr., Chairman (retired), Jacobs/Sverdrup Civil, Inc., St. Louis, Missouri

Kumares C. Sinha, Olson Distinguished Professor of Civil Engineering, Purdue University, West Lafayette, Indiana

Kirk T. Steudle, Director, Michigan Department of Transportation, Lansing (Past Chair, 2014)

Gary C. Thomas, President and Executive Director, Dallas Area Rapid Transit, Dallas, Texas

Paul Trombino III, Director, Iowa Department of Transportation, Ames

Thomas P. Bostick (Lieutenant General, U.S. Army), Chief of Engineers and Commanding General, U.S. Army Corps of Engineers, Washington, D.C.

James C. Card (Vice Admiral, U.S. Coast Guard, retired), Maritime Consultant, The Woodlands, Texas, and Chair, TRB Marine Board (ex officio)

Alison Jane Conway, Assistant Professor, Department of Civil Engineering, City College of New York, New York, and Chair, TRB Young Members Council (ex officio)

T. F. Scott Darling III, Acting Administrator and Chief Counsel, Federal Motor Carrier Safety Administration, U.S. Department of Transportation (ex officio)

Sarah Feinberg, Acting Administrator, Federal Railroad Administration, U.S. Department of Transportation (ex officio)

David J. Friedman, Acting Administrator, National Highway Traffic Safety Administration, U.S. Department of Transportation (ex officio)

LeRoy Gishi, Chief, Division of Transportation, Bureau of Indian Affairs, U.S. Department of the Interior, Washington, D.C. (ex officio)

John T. Gray II, Senior Vice President, Policy and Economics, Association of American Railroads, Washington, D.C. (ex officio)

Michael P. Huerta, Administrator, Federal Aviation Administration, U.S. Department of Transportation (ex officio)

Paul N. Jaenichen, Sr., Administrator, Maritime Administration, U.S. Department of Transportation (ex officio)

Therese W. McMillan, Acting Administrator, Federal Transit Administration, U.S. Department of Transportation (ex officio)

Michael P. Melaniphy, President and CEO, American Public Transportation Association, Washington, D.C. (ex officio)

Gregory G. Nadeau, Acting Administrator, Federal Highway Administration, U.S. Department of Transportation (ex officio)

Peter M. Rogoff, Under Secretary for Transportation Policy, Office of the Secretary, U.S. Department of Transportation (ex officio)

Mark R. Rosekind, Administrator, National Highway Traffic Safety Administration, U.S. Department of Transportation (ex officio)

Craig A. Rutland, U.S. Air Force Pavement Engineer, Air Force Civil Engineer Center, Tyndall Air Force Base, Florida (ex officio)

Vanessa Sutherland, Acting Deputy Administrator, Pipeline and Hazardous Materials Safety Administration, U.S. Department of Transportation (ex officio)

Barry R. Wallerstein, Executive Officer, South Coast Air Quality Management District, Diamond Bar, California (ex officio)

Gregory D. Winfree, Assistant Secretary for Research and Technology, Office of the Secretary, U.S. Department of Transportation (ex officio)

Frederick G. (Bud) Wright, Executive Director, American Association of State Highway and Transportation Officials, Washington, D.C. (ex officio)

Paul F. Zukunft (Admiral, U.S. Coast Guard), Commandant, U.S. Coast Guard, U.S. Department of Homeland Security (ex officio)

________________

* Membership as of August 2015.

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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2015. Modernizing Freight Rail Regulation. Washington, DC: The National Academies Press. doi: 10.17226/21759.
×

SPECIAL REPORT 318

MODERNIZING

FREIGHT RAIL

REGULATION

Committee for a Study of Freight Rail
Transportation and Regulation

Transportation Research Board

TRANSPORTATION RESEARCH BOARD
Washington, D.C.
2015
www.TRB.org

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Suggested Citation:"Front Matter." National Academies of Sciences, Engineering, and Medicine. 2015. Modernizing Freight Rail Regulation. Washington, DC: The National Academies Press. doi: 10.17226/21759.
×

Transportation Research Board Special Report 318

Subscriber Categories

Railroads; freight transportation; policy; economics; law

Transportation Research Board publications are available by ordering individual publications directly from the TRB Business Office, through the Internet at www.TRB.org or nationalacademies.org/trb, or by annual through subscription through organizational or individual affiliation with TRB. Affiliates and library subscribers are eligible for substantial discounts. For further information, contact the Transporation Research Board Business Office, 500 Fifth Street, NW, Washington, DC 20001 (telephone 202-334-3213; fax 202-334-2519; or e-mail TRBsales@nas.edu).

Copyright 2015 by the National Academy of Sciences. All rights reserved.

Printed in the United States of America.

NOTICE: The project that is the subject of this report was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the National Academy of Medicine. The members of the committee responsible for the report were chosen for their special competencies and with regard for appropriate balance.

This report has been reviewed by a group other than the authors according to the procedures approved by a Report Review Committee consisting of members of the National Academy of Sciences, the National Academy of Engineering, and the National Academy of Medicine.

This study was sponsored by the Federal Railroad Administration and by the U.S. Department of Transporation.

Cover and inside design by Beth Schlenoff, Beth Schlenoff Design.

Cover photograph by A. and I. Kruk, shutterstock.

Typestting by Circle Graphichs, Inc.

Library of Congress Cataloging-in-Publication Data

Modernizing freight rail regulation / Committee for a Study of Freight Rail Transportation and Regulation, Transportation Research Board of the National Academies of Sciences, Engineering, and Medicine.

pages cm — (Transportation research board special report 318)

 ISBN 978-0-309-36906-0

 1. Railroads—Freight—United States. 2. Railroads—Freight—Rates—United States. 3. Railroads and state—United States. States. 4. Railroads—Economic aspects—United States. I. National Research Council States. (U.S.). Committee for a Study of Freight Rail Transportation and Regulation, author. II. National Research Council (U.S.). Transportation Research Board, issuing body. III. Series: Special report (National Research Council (U.S.). Transportation Research Board); 318.

 HE2355.M63 2015

 354.76'742840973—dc23

2015023365

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image

The National Academy of Sciences was established in 1863 by an Act of Congress, signed by President Lincoln, as a private, nongovernmental institution to advise the nation on issues related to science and technology. Members are elected by their peers for outstanding contributions to research. Dr. Ralph J. Cicerone is president.

The National Academy of Engineering was established in 1964 under the charter of the National Academy of Sciences to bring the practices of engineering to advising the nation. Members are elected by their peers for extraordinary contributions to engineering. Dr. C. D. Mote, Jr., is president.

The National Academy of Medicine (formerly the Institute of Medicine) was established in 1970 under the charter of the National Academy of Sciences to advise the nation on medical and health issues. Members are elected by their peers for distinguished contributions to medicine and health. Dr. Victor J. Dzau is president.

The three Academies work together as the National Academies of Sciences, Engineering, and Medicine to provide independent, objective analysis and advice to the nation and conduct other activities to solve complex problems and inform public policy decisions. The Academies also encourage education and research, recognize outstanding contributions to knowledge, and increase public understanding in matters of science, engineering, and medicine.

Learn more about the National Academies of Sciences, Engineering, and Medicine at www.national-academies.org.

The Transportation Research Board is one of seven major programs of the National Academies of Sciences, Engineering, and Medicine. The mission of the Transportation Research Board is to increase the benefits that transportation contributes to society by providing leadership in transportation innovation and progress through research and information exchange, conducted within a setting that is objective, interdisciplinary, and multimodal. The Board’s varied activities annually engage about 7,000 engineers, scientists, and other transportation researchers and practitioners from the public and private sectors and academia, all of whom contribute their expertise in the public interest. The program is supported by state transportation departments, federal agencies including the component administrations of the U.S. Department of Transportation, and other organizations and individuals interested in the development of transportation.

Learn more about the Transportation Research Board at www.TRB.org.

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COMMITTEE FOR A STUDY OF FREIGHT RAIL TRANSPORTATION AND REGULATION

Richard L. Schmalensee, Massachusetts Institute of Technology, Cambridge, Chair

Kenneth D. Boyer, Michigan State University, Lansing

Jerry Ellig, George Mason University, Arlington, Virginia

José A. Gómez-Ibáñez, Harvard University, Cambridge, Massachusetts

Anne V. Goodchild, University of Washington, Seattle

Wesley W. Wilson, University of Oregon, Eugene

Frank A. Wolak, Stanford University, Stanford, California

TRANSPORATION RESEARCH BOARD STAFF

Thomas R. Menzies, Jr., Study Director

Joseph R. Morris, Senior Program Officer

Timothy Devlin, Senior Program Assistant

CONSULTANTS

Rosalyn Wilson, Parsons Corporation

Lindsey Carroll, Parsons Corporation

Kevin Henrickson, Gonzaga University

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PREFACE


In the Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users of 2005, Congress called on the Secretary of Transportation to

enter into an arrangement with the Transportation Research Board [TRB] of the National Academy of Sciences [NAS] to conduct a comprehensive study of the Nation’s railroad transportation system since the enactment of the Staggers Rail Act of 1980. The study shall address and make recommendations on—(1) the performance of the Nation’s major railroads regarding service levels, service quality, and rates; (2) the projected demand for freight transportation over the next two decades and the constraints limiting the railroads’ ability to meet that demand; (3) the effectiveness of public policy in balancing the need for railroads to earn adequate returns with those of shippers for reasonable rates and adequate service; and (4) the future role of the Surface Transportation Board [STB] in regulating railroad rates, service levels, and the railroads’ common carrier obligations, particularly as railroads may become revenue adequate.1

Congress appropriated funds for the study for Fiscal Year 2012,2 and the U.S. Department of Transportation (USDOT) contracted with NAS to conduct the study beginning in September 2013. USDOT added some tasks to the study charge, which is presented in full and discussed in detail in Chapter 1.

To conduct the study, the National Research Council (NRC) of NAS convened a seven-member committee of experts in economics, regulatory policy, and freight transportation led by Richard L. Schmalensee, Dean Emeritus, Massachusetts Institute of Technology (MIT) Sloan School of Management. The contents and findings of the report represent the consensus effort of the members, who served uncompensated in the public interest. Committee members convened five times from January 2014 to January 2015 and held numerous conference calls

______________

1 Public Law 109-59, Section 9007.

2 H.R. 3, 109th Congress. Public Law 109-59 and Conference Report 112-284 (Fiscal Year 2012 Appropriations), November 14, 2011.

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during preparation of the report. Data-gathering sessions included briefings by carrier and labor representatives from the railroad industry, shipper groups, and government agencies, as well as academia and consulting organizations.

ACKNOWLEDGMENTS

The committee thanks the many individuals and organizations who contributed to its work.

The USDOT liaison for the study was Scott Greene, Federal Railroad Administration. Greene provided contract oversight and, along with William Huneke and Jamie Rennert of STB, arranged for the committee to have access to the confidential Carload Waybill Sample data, which were vital to the study’s analyses. Greene, Huneke, and Rennert, along with Marvin Prater of the U.S. Department of Agriculture, briefed the committee.

From the railroad industry, the committee was briefed by John Gray of the Association of American Railroads (AAR) and by Michael Ogborn, who represented the American Short Line and Regional Railroad Association. Gray, along with AAR’s Frank Hardesty, arranged for the committee to have complimentary access to the Centralized Station Master file, courtesy of Railinc Corporation. In addition, the committee was briefed by rail labor representatives James Stem, United Transportation Union, and John Tolman, Brotherhood of Locomotive Engineers and Trainmen.

From shipper groups, the committee heard from Bruce Carlton, National Industrial Transportation League; Thomas Schick, American Chemistry Council; Paul Gutierrez and Brian Cavey, Consumers United for Rail Equity; Daniel Jaffe, Western Coal Traffic League; Thomas Canter, National Coal Transportation Association; Mark Fisher and Randy Gordon, National Grain and Feed Association; and Terry Whiteside, Alliance for Rail Competition.

The committee invited other individuals to make presentations on matters relevant to the study: Francis P. Mulvey, former Acting Chairman of STB, on the responsibilities and functioning of the regulatory agency; Malcolm Cairns, Cairns Research and Consulting, on Canadian freight rail regulation; Stewart Myers, MIT, on revenue adequacy evaluation;

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Mark Meitzen and Kelly Eakin, Christensen Associates, on recent STB-sponsored studies on freight rail competition and capacity; and Russell Pittman, Antitrust Division, U.S. Department of Justice, on freight rail competition policy.

Thomas R. Menzies, Jr., and Joseph R. Morris were the principal project staff. Menzies managed the study and drafted the report with assistance from Morris and under the guidance of the committee and the supervision of Stephen R. Godwin, Director, Studies and Special Programs, TRB. Committee members Wesley W. Wilson and Frank A. Wolak authored Appendix B, which demonstrates a statistical model for identifying freight rail rates that are unusually high compared with rates for comparable traffic established under competitive conditions. Kevin Henrickson, Gonzaga University, reviewed and assisted with model programming. Rosalyn Wilson and Lindsey Carroll, Parsons Corporation, supported the committee in its analyses of the Carload Waybill Sample data. Timothy Devlin provided extensive support to the committee in arranging its many meetings and in managing documents.

The committee acknowledges Norman Solomon, who edited the report; Juanita Green, who managed the production; and Jennifer J. Weeks, who prepared the manuscript for prepublication web posting, under the supervision of Javy Awan, Director of Publications, TRB.

The report was reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise in accordance with procedures approved by NRC’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making the report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process. NRC thanks the following individuals for their review of this report: Andrew Brown, Jr., Southfield, Michigan; Joseph Farrell, University of California, Berkeley; Robert E. Gallamore, Gallamore Group, LLC, Rehoboth Beach, Delaware; Darius W. Gaskins, Jr., High Street Associates, Inc., Ipswich, Massachusetts; Curtis M. Grimm, University of Maryland, College Park; Joel L. Horowitz, Northwestern University, Evanston, Illinois;

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William A. McCurdy, Avondale, Pennsylvania; Craig E. Philip, Vanderbilt University, Nashville, Tennessee; and Alan R. Washburn, Monterey, California. Although these reviewers provided many constructive comments and suggestions, they were not asked to endorse the committee’s findings or recommendations, nor did they see the final draft of the report before its release. The review was overseen by National Academy of Sciences members Charles F. Manski, Northwestern University, and Susan Hanson, Clark University (emerita), Worcester, Massachusetts. Appointed by NRC, they were responsible for making certain that an independent examination of this report was carried out in accordance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of the report rests solely with the authoring committee and the institution. Karen Febey, Senior Report Review Officer, managed the report review process.

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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:

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