In 1887, Congress passed the Interstate Commerce Act. The act established a five-member enforcement board known as the Interstate Commerce Commission (ICC). The act also made the railroad industry the first industry subject to federal regulation. At that time, the railroads were the primary mode of transportation, moving both passengers and freight. Following the Civil War, most railroads were privately owned and entirely unregulated. Moreover, the railroads held a natural monopoly in the areas that only they serviced. Congress passed the law largely in response to public demand that railroad operations be regulated.
The ICC regulated the economics and services of specified carriers engaged in transportation between states from 1887 to 1995. The ICC was also the first regulatory commission established in the U.S., and oversaw common carriers (the ICC’s jurisdiction was broadened to include the trucking industry, as well as other industries).
While the argument can be made that the industries under ICC jurisdiction needed regulatory oversight, many industry observers believe that the ICC’s heavy-handed approach harmed those industries (particularly the railroad and trucking industries) over the decades.
When the ICC was abolished in 1995, other federal agencies acquired some of its duties and responsibilities. In regard to the railroad industry, the Surface Transportation Board (STB) was established on January 1, 1996, to assume some of the regulatory functions that had been administered by the ICC.
The STB is a federal, bipartisan, independent adjudicatory board. The STB is charged with the economic regulation of various modes of surface transportation, primarily freight rail. The STB “exercises its statutory authority and resolves disputes in support of an efficient, competitive and economically viable surface transportation network that meets the needs of its users.”
In operation now for more than 25 years, the STB has broad economic regulatory oversight of U.S. railroads, including rates and service, as well as the construction, acquisition and abandonment of rail lines. It also has oversight of carrier mergers (including the current acquisition of the Kansas City Southern Railway Company ) and interchange of traffic among carriers.
In addition, the STB has oversight of pipeline carriers, intercity bus carriers, moving van companies, trucking companies involved in collective activities, and water carriers engaged in noncontiguous domestic trade. The Board has wide discretion, through its exemption authority from federal, state and local laws, to modify its regulatory activities to meet the nation’s changing transportation needs.
The Board has five members nominated by the President and confirmed by the Senate for five-year terms. Under the terms of the Surface Transportation Board Reauthorization Act, the Board was expanded from three to five members in 2015.