Whose Rail Line Is It Anyway? Freight Carriers Could Be Forced to Share Tracks With Competitors
New rules aim to increase competition in the business of moving cows, corn, chemicals and other goods
WASHINGTON—Railroads that fail to provide reliable service could be ordered to share tracks with competitors under a proposed rule that backers say will increase competition in the business of moving cows, corn, chemicals and other goods across America.
The rule on so-called reciprocal switching, proposed Thursday by the Surface Transportation Board, is seen as a way to improve efficiency among major freight lines that have struggled to move goods and supplies from farms, factories and ports, especially during the Covid-19 pandemic.
“In my view, it’s likely to lead hopefully to better service, where railroads are going to say, ‘We’d better up our game,’” STB Chairman Martin Oberman, a Democrat, said in an interview.
The board’s goal, he said, is to have the threat of increased competition motivate railroads to boost their on-time performance: “We’d rather you solve it yourself.”
The bipartisan, five-member board voted unanimously in favor of the proposed rule. If adopted, it would require all six of the nation’s Class 1 railroads to maintain uniform data on their on-time performance. When a railroad fails to meet minimum service standards, customers could file complaints and regulators would be empowered to order that it offer competitors the ability to serve the same customers.
A railroad looking to fulfill a farmer’s order, for example, would have to let a competing railroad bid for the farmer’s business—and then let the competitor’s car roll over its tracks to move the shipment.
The move sets up a clash with the railroad industry, which has previously opposed reciprocal switching, arguing that it would undercut the railroads’ business and result in increased congestion.
“Forced switching would not increase real competition but instead is being sought as a backdoor attempt to drive down rates to below-market levels,” Association of American Railroads CEO Ian Jefferies said in 2021, when Oberman and his STB colleagues were considering the policy. “Such government intervention would undermine railroads’ efforts to maximize network efficiency and push more freight to already overburdened and underfinanced highways.”
Oberman said the freight industry had brought the rule on itself, as years of labor reductions aimed at boosting profits—along with furloughs of workers during the Covid-19 lockdown—led to a collapse in its ability to transport goods as mandated under federal law.
The board’s action comes after labor and locomotive shortages led to cascading delays and trip cancellations on the major freight networks, resulting in everything from delays shipping goods from American factories to shortages of feed at dairies and poultry plants.
“We have a job to do,” Oberman said. “Congress gave us the authority and a mandate to try to keep the system efficient, and to keep it fair, and to instill competition. The statute is there for a reason.”
Oberman noted that railroads already include similar switching arrangements in contracts with shippers voluntarily, and said he doubted industry claims that mandatory switching would lead to congestion or other problems.
Hannah Garden-Monheit, a special assistant to President Biden for economic policy, praised the STB’s move as “a strong, bipartisan proposal that would promote competition, improve service, and lower costs for the thousands of businesses who rely on railroad freight shipping to get their products to market.”
The STB considered a reciprocal switching proposal in 2016, but the idea lay dormant for years afterward. Debate about whether the STB should use its powers to compel railroads to share facilities took on new life after the Biden administration issued an executive order in 2021 urging federal agencies to take measures to foster economic competition, specifically calling on STB to revive the switching rule.
The board will take public comments on the proposal and says it wants to move toward a final rule expeditiously.