STB Moves on Closing Loopholes for Railroads

March 31, 2016

The Surface Transportation Board (STB) recently concluded what rail shippers have known for the last 15 years: few commodities are spared from the railroads’ increased market power. Specifically, the STB recently proposed restoring access to the Board’s rate review challenge process for rail customers that have been left out in the cold because of arcane exemptions that the railroads currently enjoy for certain commodities.

In its announcement, the Board couldn’t have been clearer when it stated, “A number of factors suggest the transportation markets for these commodities have changed significantly since the exemptions were adopted, in ways that point toward an increased likelihood of railroad market power.”

The Board’s proposal comes more than five years after it received public comments and held a public hearing on the issue. The Rail Customer Coalition welcomes this change since it would close an important rate review loophole that has allowed railroads to take advantage of their customers without any access to recourse.

The foundation for the Board’s decision was its use of waybill data to show that certain commodity groups “may be subject to increased market power from the railroads.” The STB’s analysis shows that the share of potentially captive traffic and the average RVC ratios have increased for these commodity groups. This echoes the findings of our coalition’s economic research, which determined that freight rail rates are skyrocketing for many farmers, manufacturers, and energy producers that depend on the railroads. The question is no longer if the railroads abuse their market power but how much longer will it take the STB to fix this problem.

We are encouraged that the STB is taking this long overdue step, and we hope that this is an indication that the Board will adopt a series of reforms that have been under its consideration for years, including competitive switching and providing a workable rate review process.