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Surface Transportation Board Holding Railroads Liable for Improved Service

09/12/2023

The bipartisan U.S. Surface Transportation Board (STB) recently voted unanimously in favor of a new rule to encourage and ultimately to enforce improved rail service.  The rule would require all six of the nation's Class-1 railroads to establish and reveal data relating to on-time performance.  The rule would also promote competition among railroads and would allow the more efficient systems to make use of reciprocal switching to serve customers.

 

Predictably, the railroad industry is opposed to reciprocal switching that would allow competing systems to make use of all available track.  The CEO of the Association of American Railroads stated, “Forced switching would not increase real competition but instead is regarded as being a backdoor attempt to drive down rates to below-market levels.”  Martin Oberman Chairman of the Surface Transportation Board countered that the freight industry had brought the proposed rule on itself through years of labor reductions that created a crisis during the COVID-19 lockdown.  The Surface Transportation Board is attempting to resolve the problem of shortages of both labor and rolling stock leading to cancellations and delays. Inefficient service was exemplified by the series of legal actions taken by Foster Farms to maintain supplies of corn.

 

The prospect of reciprocal switching was first proposed in 2016 but was not acted on until a Presidential Executive Order was issued in 2021 requiring federal agencies to act aggressively to enhance economic competition. The Surface Transportation Board was specifically directed to resuscitate the reciprocal switching rule.

 

As with all rule making, there will be a period for public comment before finalization although the STB is under political pressure to act expeditiously.