On June 10, 2015 the Transportation Research Board (TRB) of the National Academy of Sciences issued a report detailing a comprehensive study of the nation’s railroad transportation system since the enactment of the Staggers Rail Act of 1980. Congress originally requested this study in 2005, but did not appropriate funds until 2012.
The report, “Modernizing Freight Rail Regulation,” closely examines regulatory provisions for maximum rate protections, the common carrier obligation, railroad revenue adequacy determinations, railroad merger approvals and competitive access, issues that are at the center of the current regulatory debate between shippers and railroads. The report finds many aspects of the current law outdated and economically invalid and makes the following seven recommendations for modernizing freight rail regulation:
- Repeal the 180 percent revenue-to-variable cost formula and develop competitive rate benchmarking methods to replace URCS in screening rates for eligibility to be challenged.
- Expedite market dominance determinations through strict time limits and do not limit the types of evidence that can be used to assess market dominance, such as product and geographic competition.
- Replace STB rate reasonableness hearings with final-offer arbitration procedures that compel faster rulings.
- Allow reciprocal switching as a remedy for unreasonable rates.
- Replace annual revenue adequacy determinations with periodic monitoring and assessment of industrywide economic and competitive conditions.
- Transfer merger review authority to the antitrust agencies and apply customary antitrust principles rather than a public interest standard.
- Undertake a strategic review of STB data programs to simplify or discontinue the reporting of little-used data and to support the other recommended changes in the STB’s regulatory practices and approaches.
These recommendations have the potential to frame the debate over rail regulatory reforms in the coming years.
A free PDF of the full report is available for download.