STB Study on Railroad Regulation Prompts Different Interpretations

The Surface Transportation Board released its latest study on the status of railroad competition this month.

The STB is seeking comments from the public on the study until Dec. 21. The board plans to use the study and the comments in setting policies for rail regulation and resolving rate disputes.

The STB commissioned its “Study of Competition in the U.S. Freight Railroad Industry and Analysis of Proposals that Might Enhance Competition” in September 2007.

It concluded that Class 1 railroad rate increases in recent years result largely from “declining productivity growth” and higher costs rather than because railroads are exerting monopoly power over their customers.

Greater regulatory control over rail rates in areas served by a single railroad would hurt the carriers financially, the study said. They could be forced to raise rates in other areas to make up the difference.

Nevertheless, the rail shipper coalition Consumers United for Rail Equity (CURE) used other portions of the study as a basis for finding that railroads do exert monopoly power. For example, the study said shippers with few transportation options other than rail usually pay higher rates than other shippers.

“In ruling after ruling, the STB has denied captive rail shippers their due process for reasonable rates and fair treatment by the railroads, even though that was the charge given the board when Congress created it in 1995,” said CURE Executive Director Bob Szabo in a statement. The new study proves CURE’s allegations of unfair pricing, he said.

The Association of American Railroads interpreted the study results far differently. The trade association for major railroads said in a statement that the study shows “both railroads and their customers benefited” from partial rail deregulation in the Staggers Rail Act of 1980.

The AAR interpreted the study to show railroads must earn sufficient revenue to maintain their privately funded rail networks, but their revenues since 1980 generally have not reached the level of revenue sufficiency. Only now are a few railroads coming close to the threshold, the AAR said.

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