Railroad Re-regulation

Railroad Competition and Service Improvement Act of 2007

Read it here in Adobe Acrobat.

Sponsor and co-sponsors are:
Sen Rockefeller, John D., IV [WV] (introduced 3/21/2007)
Sen Baucus, Max [MT] - 3/21/2007
Sen Cantwell, Maria [WA] - 3/21/2007
Sen Craig, Larry E. [ID] - 3/21/2007
Sen Crapo, Mike [ID] - 3/21/2007
Sen Dorgan, Byron L. [ND] - 3/21/2007
Sen Klobuchar, Amy [MN] - 3/21/2007
Sen Landrieu, Mary L. [LA] - 3/21/2007
Sen Tester, Jon [MT] - 3/21/2007
Sen Vitter, David [LA] - 3/21/2007

UTU seems to support, Read the UTU article here.

AAR seems to oppose Read AAR press release here

It may well be something introduced each Congress. There are pointers in the AAR website to similar legislation introduced in 2005.

I've not read it in enough detail to see if there are Amtrak impacts in the legislation.

I read the AAR release and it seems to only apply to western railroads. They say that it would hurt the ability of the railroad to make infrastructure improvements, but I don't see CSX doing anything in terms of infrastructure improvements.

Maybe if this bill allowed the government to push for higher maintenance standards. Perhaps a minimum speed for mainline operations. I doubt it will pass though.

"Rereg", and for that matter "reg", initiatives have always followed abuses or inabilities of an industry to fufil an "obligation' to serve the public. After the various airline service 'meltdowns' that have hit Page 1, the cry of "rereg' surfaces. If there is to be a major service breakdown by the railroad industry, then cries of rereg will be heard.

But where has the railroad breakdown occurred. Is the NITL (shipper's NARP) crying for such?

(PS I'm waiting for someone to say "Amtrak")

Higher standards of maintenance are exactly what we need, along with substantial rewards for maintaining those standards. I don't condone CSX or anybody else defaulting on track maintenance, but federal policy seems to be indifferent.

I would propose to require railrads to maintain lines that see a certain level of traffic to certain standards or face increased taxes. Railroads that maintain track at adequate or better levels should be rewarded through tax breaks, especially if the line hosts passenger operations.

Most of the flack for reregulation, or regulation, of rail rates is from coal producers and electric utilities seeking to push rates down for unit train services and to get a guarenteed result (on time performance). Not all industries and shippers agree with this because there are some who rather see competition amongst carriers so as to get a better rate. (An aside: interesting that an electric utility supplier which is monopolistic by nature in delivery of its product be against the monopoly of a rail carrier in setting rates and standards.) The basic question is how a railroad decides the cost of running a coal train, for instance, from Powder River Basin to New Orleans, over the same tracks as a coast to coast stack train. Utilities and coal companies say the stack train should pay more, them less, then asks the railroad to prove the rates. Its as much a contract negotiation tactic as anything else.

Hmm, reminds me of the regulation legislation pushed every year by Sen Rockfellar during the 1990s - googling brought up mention of CURE (Consumers United For Rail Equity ) and ARC (Alliance for Rail Competition), and it seems they have been keeping busy in the background throught the decades. They are pretty much out for their own special interest groups (coal & grain respectively), as is any Washington lobby group.
If this is the same legislation (repackaged, of course), then this has little to do with Amtrak directly...

Farmers in Montana and North Dakota have been pushing for some controls over the rates they pay to BNSF for service, if they can get it at all. Smaller grain co-operatives are paying much higher tariffs than the larger co-ops that can fill 110 unit grain trains. What this proposed legislation might do is stimulate the various states to look more closely at their rail assets, both freight and passenger (Amtrak), and re-prioritize their transportation budgets to reflect the consequences of $3/gallon gas.

Most public and private utility rates are still subject to some oversight by state utility regulators. The Montana wheat farmers don't have any regulatory body to turn to if BNSF won't come pick up their crops at a "competitive" price. Because railroad mergers and acquisitions are subject to government oversight and approval, it is appropriate for government to investigate the consequences of allowing a formerly competitive market to become a monopoly market.

But rather than capping the tariffs, it might be wiser for the federal government to assist the states in providing better infrastucture. States with less population, like Montana and North Dakota, most likely don't have the resources to invest heavily in projects that will bring wheat and coal to the rest of the nation, so a federal commitment may be needed. Washington state has made many investments in rail infrastructure to benefit both the state and its citizens. Railex is an example of a project that benefits Washington state, the railroads and consumers, but due to the limited population base of many of the states with monopoly markets, some federal assistance might be needed to fund similar projects.

I tried to follow the PDF John linked to. Since I didn't have the text of what it was amending, I couldn't get a precise idea of what it was calling for, but it sure looked like it was suggesting re-regulation of railroads.
It's been the conventional wisdom around here that railroad regulation was a failure, and that the revitalization of the Class I's resulted from deregulatin.
Certainly business for the Class I's is actually much better than it ever was. I think now they are hauling 3 times as much freight as in WWII, and with vastly fewer employees, engines and cars.

I might wonder if the main reasons for this boom are Asian imports and Powder River coal, rather than regulatory changes.

Maybe some regulation is now called for, since the existence 4 big class I's and a couple of smaller ones means that rail competition is at an all-time low. Maybe railroads, being natural monopolies, should be regulated.

And maybe Amtrak and passenger rail in general could benefit from re-regulation.

I'd argue, finally, that regulation does not have to be as ham-handed as it was in the early 20th century. We've learned a lot since then, and technology (computer systems) could make the regulatory process much more responsive and reasonable.

I will now don my flameproof suit....

Although such as little impact to Amtrak, I see this bill as a huge negative to a large number of short-line railroads, who currently lease their trackage from their class one owners.

Section 103 of this bill prohibits any agreement between a class 1 and class 2/3 railroad that restricts interchange with other class 1 railroads. So, there is little incentive for the class 1s to maintain their lease agreement; and as such the option is for the shortline to buy the railroad or to revert back to class 1 operations.

Many shortlines have such limited traffic bases or deferred maintenance needs, that the asking price for the railroad simply cannot be justified. So purchasing may not be an option. If the shortline was truly successful, the class 1 may want the traffic back to itself.

On the other hand if the shortline was marginal, the class 1 could simply take the line over and abandon it, resulting in less - not more - service. At which point, it seems the only option would be a government takeover of the route (i.e. port authority, city, county or state), an option which has been exercised quite a few times just in Washington and Oregon alone. Of these routes, only one has seen significant traffic improvements, but the route would never be successful for intercity passenger service (it had a successful tourist operation, but that operation has been largely curtailed this year). Another state-owned railroad route is all but abandoned; another county-owned line sees only a weekly tourist train in the summer months, with little-to-no freight service.

In all but one of these cases, the government-owned railroad has no ability to interchange with multiple railroads (one railroad did, although such was a "fluke" with its sale agreement. The class one railroad did not repeat it's "mistake" elsewhere.)

JoeG wrote:I tried to follow the PDF John linked to. Since I didn't have the text of what it was amending, I couldn't get a precise idea of what it was calling for, but it sure looked like it was suggesting re-regulation of railroads.

Off topic, but Mr. Grossman notes a point that hinders the review of any pending or enacted legislation.

I recently attempted to review the ARAA '97 (available at Thomas) but so many references are to USC Title XXX Section XXX where I guess RPSA'70 was so incorporated (which is not available at the web and I turned in my copy along with the May 1, 1971 Agreement when I left the MILW during Dec 1981. I lived with comments such as "Gil, that stuff will be worth a fortune one of these days; Squealer - Chief Clerk, who else - doesn't know you even have it').

Maybe our Lawyers (aspiring and practicing) around here with access to Lexus have 'translators' that will take a reader from Section XXX of any enacted legislation to USC Title XXX, but I'll be darned that the general public does.

Addendum: apparently exexex translates to *

henry6 wrote: (An aside: interesting that an electric utility supplier which is monopolistic by nature in delivery of its product be against the monopoly of a rail carrier in setting rates and standards.)

I respectfully disagree with the analogy.

The USA's electric generation business, for which the coal is needed, has been deregulated for many years, with competiton everywhere and in many areas of the USA competition is intense. That is one factor driving the complaints agaisnt the railroads for coal delivery rates and quality of service.

For the railroad equivalent, the transportation of electricity over longer distances via the electric transmission system, has been open access also for many years with the transmission owners required to transport power for all requesters in a non-discriminatory manner at the same rates, terms and conditions as their own power. It removes the ability of the utility to favor its own generators over others with respect to the use of transmission system to transport power. This is essentially what the shippers are requesting be requied of the railroads, wherein any company could operate trains over anothers track on a non-discriminatory basis under the same rates, terms and conditions under which the track owner's train operate.

The only part of the electic utility business that remains a near-monopoly is the local distribution (the poles and wires in the streets), and even that is somewhat eroding with increasing competition from demand response aggregators and distributed "inside the fence" generation in some regions.

How does this proposal relate to Amtrak?

JoeG wrote:Maybe some regulation is now called for, since the existence 4 big class I's and a couple of smaller ones means that rail competition is at an all-time low. Maybe railroads, being natural monopolies, should be regulated.

And maybe Amtrak and passenger rail in general could benefit from re-regulation.

I'd argue, finally, that regulation does not have to be as ham-handed as it was in the early 20th century. We've learned a lot since then, and technology (computer systems) could make the regulatory process much more responsive and reasonable.

As someone with libertarian tendencies, I think I would oppose re-regulation on principle. Anyone remember what air-fares were like before dereg? (Interesting that it was Carter who did it). Or phone service? Not that customer service has improved that much, but you certainly have choices.

I think there's a solution there, I just don't think "re-reg" is it. I'm going to ruminate on this, but I think the key is some type of universal access to the rail network with set fees/mile? How do you incentivize railroads to go for that? What model do you use? Airlines, where airports are government owned, landing slots are bid, fees are paid, and the FAA controls the airspace? Trucking, where highways are government owned and carriers pay federal and state fees but time usage is only moderately controlled (where variable price tolls are paid)?

JoeG wrote:I will now don my flameproof suit....

LOL, have an extra?

The USA's electric generation business, for which the coal is needed, has been deregulated for many years, with competiton everywhere and in many areas of the USA competition is intense.

Respectfully, I would really like to see your figures on this. In my home state of Maryland, we just deregulated our power, and our electric rates shot up 72%. (PEPCO customers received no help from the Maryland Senate.)

To answer Mr Vondrak's question,

I don't know how re-regulation might affect Amtrak. We'd have to see administrative law in action for a year or two to see what happens.

When I did my public management grad school, a wise old head of a prof in my public policy analysis classes hit us again and again: Beware of unintended 2d and 3d order consequences.

For Amtrak, one of those I can see is an action by the railroads to void the low cost of access rules Amtrak now leverages. That would drive the grant request way up!