Freight Rail Reform: How Would It Work Under the Senate “Surface Transportation Board (STB) Reauthorization Act of 2015”?

May 6, 2015

Congress established the Surface Transportation Board (STB) to, among other things, mediate disputes between railroads and shippers as well as determine the reasonableness of challenged rates in the absence of competition. Since 2001, just four large freight railroads have controlled 90 percent of the market—often leaving shippers with no competitive options. As competition has all but vanished, the STB’s role became more important, but it turns out that the STB is ill-equipped to handle today’s challenges and hasn’t been reauthorized since 1998.

For example, rate cases today can cost shippers $3 million to litigate and take over three years to resolve. The STB also does not have authority to proactively investigate rail issues and does not have a systemized, publicly available database of complaints. Because the STB only has three members, Board members cannot discuss pending matters with each other outside of a public hearing. Much-needed reforms, such as competitive switching and rate review reform, remain stuck in a seemingly never-ending process of STB review with no resolution in sight.

Thankfully, Senator Thune and Senator Nelson are working together to help address some of these issues and introduced the “Surface Transportation Board (STB) Reauthorization Act of 2015,” which was recently approved by the U.S. Senate Committee on Commerce, Science, and Transportation with strong bipartisan support. This important legislation would modernize the STB and help make it be more efficient and effective.

Specifically, the bill would:

• Expand voluntary arbitration procedures to make rate cases quicker and less costly
• Provide the STB with the authority to initiate investigations on matters other than rate cases
• Set rate review timelines for the stand-alone cost test to ensure the STB efficiently decides on relief
• Require the STB to establish a database of complaints and prepare quarterly reports on them
• Expand membership from three to five members and allow board members to talk with one another without a prior public hearing notice
• Require the STB to study its current rate case methodologies and identify potential alternatives that could reduce the burdens and complexity of rate reviews

A large array of U.S. manufacturers, farmers, utilities, and other producers are urging Congress to finish the job and pass this commonsense legislation so that American businesses can remain competitive in the global economy.