Re-regulating the Railroad Industry Would Harm Railroads, Shippers, and Consumers

Washington, D.C., April 13, 2011 — Yesterday, the Competitive  Enterprise Institute (CEI) submitted a second comment letter in response to the Surface Transportation Board (STB)’s request for comments on Competition in the Railroad Industry. CEI previously submitted comments on March 18.

CEI Land-use and Transportation Policy Analyst Marc Scribner said, “Since deregulation of the railroad industry began more than three decades ago, shippers have enjoyed lower freight rates and consumers have benefited from these decreased shipping prices. However, some rent-seeking business interests, particularly so-called ‘captive shippers,’ resent having to pay higher rates on low-demand rail segments. After numerous failed attempts in Congress, they are now pushing for special favors through the regulatory process.”

In the submitted comments, Scribner develops the following points:

1. “Bottleneck” pricing faced by “captive” shippers reflects low-demand and risks to capital investment.

2. Increasing regulation on “bottleneck” carriers would enhance neither competition nor economic efficiency.

3. “Open access” regulation would increase the risk of investment, particularly to underserved areas.

4. Regulatory inefficiencies in the railroad industry do exist. However, this is a matter more appropriately addressed by Congress, not through STB rulemaking.

“Enacting rigid price controls and forced access will neither enhance competition nor increase investment in rail infrastructure,” Scribner said. “With rail congestion reaching increasingly worrisome levels, it would be a mistake to restrict the ability of carriers to recoup capital costs in the most socially beneficial manner possible. The freight rail system in the United States is second to none and regulators’ well-intentioned meddling risks the future success of this critical American industry. We urge the Surface Transportation Board to reject new onerous regulations on the railroad industry.”

• CEI’s April 12 Supplemental Comments to Surface Transportation Board (PDF)

• CEI’s March 18 Comments to Surface Transportation Board (PDF)