July 9, 2021
President Biden signed an executive order on “Promoting Competition in the American Economy”. The order addressed several sectors of the economy, including the freight rail industry. According to the White House press relief:
Encouraged Requirements for Railroad Track Owners
“In 1980, there were 33 “Class I” freight railroads, compared to just seven today, and four major rail companies now dominate their respective geographic regions. Freight railroads that own the tracks can privilege their own freight traffic—making it harder for passenger trains to have on-time service—and can overcharge other companies’ freight cars.
In the Order, the President: Encourages the Surface Transportation Board to require railroad track owners to provide rights of way to passenger rail and to strengthen their obligations to treat other freight companies fairly.”
While it remains uncertain how the independent STB will respond to this directive, the Association of American Railroads was swift in providing the following comments, among others in a released also dated July 9:
A Wrench in Freight Rail’s Role to Provide
“The Biden administration today announced an executive order that included a misguided direction to interfere with functioning freight markets that could ultimately undermine railroads’ ability to reliably serve customers. In part, the executive order called on the independent Surface Transportation Board (STB) to consider a forced switching rule and other ill-considered policy changes.”
“Competition is alive and well in the rapidly changing freight transportation market, with nearly three quarters of all U.S. freight shipments moving by a mode of transportation besides rail,” said AAR President and CEO Ian Jefferies. “With the logistics chain already challenged by the recovery from COVID, this executive order throws an unnecessary wrench into freight rail’s critical role in providing the service that American families and businesses rely on every day.”
As freight providers work to resolve issues at the ports and supply chain disruptions, the need for reliable, efficient transportation solutions has never been clearer. To meet today’s challenges and prepare for the 30% growth in freight demand projected by the U.S. Department of Transportation (USDOT) by 2040, a viable, thriving rail network is foundational to current and future economic health.
Railroads Compete Against Each Other and Other Transportation Modes
Railroads — one of the most environmentally friendly freight transportation modes — compete against each other and other transportation modes to win business and remain viable. The significant investments in private infrastructure made by railroads — nearly $25 billion annually — are only possible under a market-based economic regulatory framework overseen by the STB. Thanks to those investments and productivity improvements, today’s average rail rates are 44% less than they were in 1981 when the current economic regulatory framework was put into place.”
AAR went further to note any potential implementation of the rule could reduce the incentive to invest in the rail infrastructure among other potential downsides.
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