Washington, D.C. — The Biden Administration on July 9 issued an Executive Order that included language directing railroads’ economic regulator, the U.S. Surface Transportation Board (STB), to consider issuing a rule mandating reciprocal switching among railroads, among other regulations.
Perhaps more accurately referred to as “forced access,” such a rule would compel railroads to open their privately owned and maintained railways up for use by their competitors at below-market rates. While railroads currently enter “reciprocal switching” agreements with each other voluntarily, forced access would replace negotiations between rail companies with government control.
Those calling for this change—a small group of mostly large companies—have pushed this misguided policy for decades. Their aim is to help their bottom lines while sacrificing the efficiency of the rail network for all shippers. Here, we debunk some of their claims.
Claim: Railroads don’t face competition. Forced access would change this.
✅ Reality: The image of a shipper “captive” to one railroad might be compelling, but it’s not the full picture. That’s because railroads aren’t just competing among themselves, they’re also competing with other modes like trucks, pipelines and barges.
Taking this a step further, other forms of competition affect railroads—for example geographic competition enters into play when a product can be sourced from different areas of the country, meaning customers can pit one railroad against another.
What’s more, regarding competition, the very nature of forced access is antithetical to free-market principles. It is the government stepping in to compel one company to open its infrastructure to a competitor. Rail infrastructure is not only privately owned, it is also massively expensive; for example, railroads typically need to reinvest into maintaining and growing their lines at six times the rate of the average manufacturer. Overregulation would strangle rail’s ability to invest and keep the network running efficiently, ultimately hurting competition in the long term.
Claim: Forced access would benefit shippers and Americans at large.
✅ Reality: Forced access mandates would undermine the efficiency and safety of the nationwide rail network that shippers and consumers rely on.
We’ve seen this before—railroads have not always had the ability to invest at levels high enough to sustain healthy rail lines. Before the Staggers Act of 1980 replaced government controls with the balanced regulations we have today, much of the rail network had fallen into disrepair because railroads could not invest.
In addition to the threat of diminished private rail spending, forced access would create enormous costs for shippers because it complicates the switching process exponentially. One evaluation of a similar proposal said that forced access could affect an estimated 7.5 million carloads of traffic, jeopardizing $8 billion in revenues. It is for this reason that UPS, one of the biggest shippers in the country, opposes the rule.
Claim: Re-regulation proposals are necessary to update outdated policy.
✅ Reality: Today’s balanced rail regulations have benefited and continue to benefit shippers, consumers and rail carriers alike. Over 1,000 local leaders across the country, including eight former USDOT Secretaries, signed a letter at the end of 2020 commemorating the 40th anniversary of the Staggers Act and calling on policymakers to maintain its balanced approach to rail policy.
Freight rail investments topping $740 billion since the Staggers Act have given America the world’s safest, most efficient and productive rail network. The rates shippers pay today are on average 44% lower than they were 40 years ago, meaning they can move significantly more freight today for about what they were paying in 1980.
What’s more, in bipartisan legislation supported by both shippers and railroads, Congress reauthorized the STB in 2015 for the first time since 1996. The legislation increased the board’s membership from three to five and streamlined its process for reviewing rate cases. Despite these reforms, and the process in place since the 1980s that allows shippers to petition for a forced reciprocal switching arrangement, no shipper has ever demonstrated anticompetitive behavior by railroads.
Further, the success of the Staggers framework allowed railroads to respond nimbly during the COVID-19 pandemic. A recent report by the Northwestern University Transportation Center found that freight railroads were able to quickly increase their intermodal capacity to stabilize the supply chain when other modes were unable to do so. Further new technologies have improved service and reliability. These are directly related to the investments made by railroads over time—the same investments that are at stake if regulators roll back the delicate balance of rail regulation.
There’s a lot at stake here. As freight demand continues to increase and policymakers simultaneously look to the transportation sector for combatting climate change, freight railroads can and should be a tool at their disposal. But misguided policies like forced access could undermine the efficiency of the entire rail network, hurting shippers and ultimately shifting freight away from railways.
