New Administration To Weigh In On Damaging Proposal Reregulating Freight Railroads

The more things change, the more they stay the same. This year promises to be a busy one in Washington, with a new administration and Congress promising plenty of action and reform. Confirmation hearings, budget negotiations, tax and regulatory reform and a rumored infrastructure package all dot the map.

Somewhere in there, perhaps later in the year, is the appointment and confirmation of two new leaders to the Surface Transportation Board (STB). Putting nominee prognostications aside, two things are clear: the STB will soon have five members for the first time ever - with a 3-2 Republican tilt - and the Board, even though the rail industry has asked for a freeze to all major rulemakings, will pick up where it left off in considering a bevy of regulatory proposals.

To begin the year and this conversation, I'd like to showcase a pointed 2014 rebuttal of the most troubling of the wayward proposals - forced access - from former STB Chief of Staff Frank Wilner. It is a must-read for all current and potential Board members, dispelling many of the arguments for railroad re-regulation.
The takeaway, as supported from experts across the ideological spectrum, from Brookings to CEI, from labor to UPS, is that deregulation worked - profoundly - and that forced access should be avoided.

"A recurring and intractable thread tying together railroad history is that when the choice has been between economic liberty and government intrusion, selecting the latter has repetitively discouraged capital investment, diminished service quality, adversely affected safety, and sooner than later caused hand-wringing among those most dependent on rail transportation."

Undeniably, policymakers have ample precedent for the detrimental effects of government dictating rail routes and pricing. So too, as Wilner notes, do the most vocal proponents of forced access.

"Indeed, shippers with first-hand or studied knowledge of history understand painfully the flight of investment capital and rail service deterioration in the pre-1980 Staggers Act era when regulators substituted their decisions for arms-length negotiations between those buying and selling rail transportation."

The questionable efforts from the small sect of rail shippers is puzzling on multiple levels, particularly given the outsized role freight rail has in safely delivering their generally hazardous goods.

"These hazmat shipper groups' assault on railroad rates and profits defies explanation, as it is railroad profits that make possible safety enhancing renewal of plant and equipment, which includes the costly design, development and implementation of Positive Train Control, and improved handling of the dangerous cargoes their members tender railroads."

Which is why Mr. Wilner rightly concludes the mission not only lacks an understanding of basic economics or past precedent, but also in the high fixed-cost nature of railroads. It disregards that there is ample competition - both within the rail sector and among other modes of transportation - and that imposing new regulations, as forced access supporters misleadingly advocate in the name of a "free market," is in fact oxymoronic.

"No matter how the shipper arguments are chopped, cubed, diced, minced, sliced, shredded or otherwise presented, the substitution of government fiat for market-based solutions will adversely affect traffic flows, swell the number of time-consuming and costly interline and yard switches of freight cars, reduce network reliability, and cause an overall reduction in service quality. Any immediate price reduction will be transient, at best."

The year ahead offers much excitement, and freight rail will be a part of much of the action. We hope that discussions can be more productive, focusing on how to make businesses and the tax code more competitive or improving a beleaguered regulatory system; not on advancing questionable policy at the direct behest of narrow yet powerful interests.

Mr. Wilner's column is a good place to start. Because while things may change, bad policy will always be bad policy.