What Does Rail Freight Reform Look Like?

President Barack Obama is expected to sign S. 808, the Surface Transportation Board (STB) Reauthorization Act of 2015 into law. The STB has never been reauthorized since its inception in 1996. Now, what exactly does reform of a nearly 20 year-old agency entail?

STB reform has been in the works for a while. There have been many instances of concern regarding the agency’s inefficiency of regulating the U.S. rail system. The purpose of the STB is to have regulatory oversight over disputes, rates, mergers, and other issues. However, the STB has wasted millions of dollars trying to litigate rate reviews and was not effective in solving backlogs created by poor weather conditions. All of these issues have stalled the U.S. rail system.

Competition lies in the foundation of rail reform. Many railroads own monopolies over their lines and have charged exorbitant rates. The new law removes barriers to reflect a competitive and healthy market by allowing shippers to be served by more than one railroad.

According to the Freight Rail Reform Coalition, of which IWLA is a member, it takes the STB on average 3.5 years to resolve a major rate case at a cost of more than $5 million. This is being addressed in the new law: It establishes timelines for rate cases, provides adequate staffing and resources, and requires the STB to publically report on case status. The standard for determining an unreasonable rate will be revised as well. This will help boost the arbitration process rather than relying on the costly case reviews that are not necessarily more effective in the long term. Another measure prohibits bundling practices that lock rates into contractual agreements that are usually not challenged by the STB.

“As time goes on, the industry has changed and we need to make it fair for both railroads and shippers again,” says IWLA President & CEO Steve DeHaan. “This will give the STB relevancy and autonomy to settle disputes and keep the freight moving through our network efficiently.”

The railroads recently received an extended deadline to upgrade rail lines with Positive Train Control (PTC), added safety mechanisms designed to stop trains before an accident occurs.

Stay tuned for more updates on rail reform. See the announcement.

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