Shipper group argues the current framework of U.S. rail regulations is “broken” and “needs to be rethought and rebuilt.”
The National Industrial Transportation League applauded a report released last week by the Transportation Research Board (TRB) on the regulation of U.S. railroads.
NIT League president Bruce Carlton, said in a statement the title of the report, Modernizing Freight Rail Regulation, “says it all.”
“It’s time to modernize the way we regulate the freight rail industry,” said Carlton. “We are still regulating this industry from a 1970’s perspective and with Staggers Act tools designed to rescue it from bankruptcy and collapse.
“We agree with the report’s exceptionally qualified study team, which said Staggers worked well to transform the freight rail industry from a near-disaster to a highly successful and profitable industry. Now it is time to retool and rebalance the regulatory apparatus for both railroads and their customers.”
“We now have a report from an independent, unbiased and non-adversarial group of exceptionally qualified analysts saying what we and other shipper groups have been saying for quite some time. The current regulatory framework is broken. It needs to be rethought and rebuilt, and it need not threaten the economic vitality of the railroads we all need to be successful,” Carlton added.
The NIT League highlighted recommendations in the report that would:
- Abandon the Uniform Railroad Costing System (URCS) and the 180 percent revenue to variable cost ratio tool derived from URCS as the baseline requirement for challenging a rate and replace it with competitive rate benchmarking methodology.
- End annual “revenue adequacy” measurements and replacing them with deeper, periodic assessments of the industry.
- Have final offer arbitration instead, with the possibility of adding reciprocal switching, used as a means to resolve disputed rates, instead of existing rate case methodologies.
Association of American Railroads (AAR) President and CEO Edward R. Hamberger last week called the TRB report “a solution in search of a problem.”
“The United States already enjoys the most efficient, safest freight rail network in the world,” argued Hamberger. “In fact, freight rail customers today pay rates that are on average 43 percent less than they paid in 1980. The report is a theoretical exercise that would upend the real world concrete successes achieved since the Staggers Act passed in 1980.”
The TRB report was discussed last week at a Surface Transportation Board hearing on grain shipments where AAR Associate General Counsel Timothy J. Strafford said calls to create new grain-specific regulations are unjustified.
“Like other rail customers, grain shippers today have options for seeking STB review of their rail rates,” he said. “Whether it’s a proposal to force binding arbitration, or create artificial formula-based rate review processes, these proposals are nothing more than further attempts by certain shipper groups to use the federal government to get themselves below-market rates.”