Commentary: Rail regulation must recognize vital service

By Ian Jefferies

Amazon reportedly has ambitions to develop its own delivery fleet to round out its already massive sales operation. Under the theoretical business model Amazon won’t need UPS, FedEx or the U.S. Postal Service to deliver the diverse set of goods consumers now receive at their doorstep.

The idea is novel, and perhaps even doable for the Seattle-based company. But until then, and even when implemented, a fundamental truth remains: Amazon — like other corporate titans such as Boeing and Microsoft — will need an integrated shipping network to seamlessly move goods from production to warehouses before last-mile delivery.

And for that to be feasible, another truth remains: Our nation’s most storied means of moving goods — freight railroads — will play an integral role, moving finished consumer goods between boats and trucks, as well as the variety of goods that help make the products we use daily without always remembering what occurred to create them.

However, against the backdrop of structural market and traffic shifts — namely the steep decline of a coal sector that railroads invested to support (sometimes at the government’s behest) — this will only occur if policymakers forgo measures that induce uncertainty and threaten revenues required for investments to maintain and upgrade infrastructure and equipment.

Freight rail is part of a network that together moves some 54 tons of good per American each year. This includes basic goods — food, consumer goods, automobiles — as well as critical resources — water treatment materials, agricultural fertilizer and home-powering energy resources.

The movement of these goods profoundly impacts the economy and communities. Major U.S. rail carriers supported 1.5 million jobs, generated $33 billion in local, state and federal taxes and produced $274 billion in economic activity in 2014 alone.

Sustaining this positive force depends on investment — railroads spent more than $30 billion alone in 2015 — which rests on economic freedom to earn necessary revenue.

So it is especially troubling that members of an independent agency known as the Surface Transportation Board want to disregard Congressional intent and reregulate railroads through a series of questionable measures.

Just last year, in a praiseworthy effort led by the Senate Commerce Committee — on which Sen. Maria Cantwell, D-Washington, serves — Congress plotted a path for the board. It expanded membership from three board members to five and allowed greater autonomy.

It did not, however, direct the board to reregulate commodities such as iron and steel without any request to do so from these industries. Nor did Congress hope the board would consider capping rates of return that railroads can earn.

But most importantly, reauthorization in no way advocated for “forced access,” a rule that would require railroads to open their lines to competitors.

Under this framework, Railroad A gets access to Railroad B’s infrastructure and customer because the government forces Railroad B to do so — not because it is the optimal route.

It is a radical approach that disregards property rights, ignores the time-consuming nature of railroad switches and forces carriers to provide access at below-market rates. It would create chaos as railroads deal with widespread orders to switch traffic and would lessen railroad efficiencies and it would reduce railroads’ abilities to invest in their networks. This, despite the clear correlation between partial deregulation in 1980, $600 billion in investments since, and historic improvements in safety, service and pricing.

Federal reregulatory efforts occur amid a steep drop in coal production, permitting red tape and an uptick in bullish state and local governments. Just this year, in a measure that was ultimately withdrawn but may now re-emerge, the Spokane City Council proposed fining rail cars carrying crude oil or coal. The unprecedented move is a microcosm of what the larger business community faces: unfounded opposition.

The collective result of these factors, particularly if the proposed regulations are enacted, is a slowed rail and logistics network and a lack of needed dollars for private infrastructure that helps the Washington and U.S. economies. Railroads are as safe, resourceful and reliable as ever in 2016 because they are treated the same as other private businesses. This should remain the case, as positive public impact rests on public policy pillars that allow for differential pricing, nimble operations and a respect for private property rights.

The Senate Commerce Committee continues to recognize the need for a healthy and financially viable freight railroad sector. That is why the committee passed a balanced reauthorization that kept in place the economic framework that has worked so well over the years. Leadership is as paramount as ever today.

Ian Jefferies is senior vice president of government affairs at the Association of American Railroads.

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