The importance of transportation to Nebraska consumers and the economy, including sectors such as agriculture and manufacturing, cannot be overstated. Located with access to key markets in the Midwest and beyond, Nebraska plays a key role in U.S. and international supply chains.
These systems have come under increased pressure in recent months, causing Americans to better understand the complexities of how goods get to market while unfortunately feeling the pain of increased prices, in part, due to logistics constraints.
Federal policymakers like President Biden and Sen. Deb Fischer have rightly turned their attention to finding ways to improve the situation and empower private businesses to better deploy their resources. Unfortunately, the White House is also pursuing regulations that would hinder progress, particularly as it relates to private freight railroads that have a major presence in Nebraska and that make the state’s economy hum.
Put simply, President Biden and his team must stop efforts that would overregulate freight railroads like BNSF, Union Pacific and others.
Some may remember that in 1980 Congress passed the Staggers Rail Act, greatly reducing federal regulatory control over virtually every aspect of freight rail operations and unleashing a period of unprecedented economic gains. Economists estimate that American consumers enjoy at least $10 billion in annual benefits because of these reforms, and perhaps closer to $20 billion.
The success of this law was celebrated by scores of individuals just last year, including several Nebraskans like former U.S. Sen. Ben Nelson.
Yet, in an executive order signed in July, President Biden urged the Surface Transportation Board — the agency responsible for overseeing economic regulation of railroads — to “strengthen regulations pertaining to reciprocal switching agreements.”
The innocuous and bureaucratic language threatens to take us back 40 years to a time when railroads were going bankrupt, productivity was low and consumer prices high.
Under this recent proposal, a railroad with physical access to a specific shipping facility is forced to accept rail traffic to the facility for another railroad that lacks physical access. While that may sound reasonable at first blush, these regulations could lead to reduced rail traffic for the carrier and increased traffic congestion, much like the inefficiencies already hampering today’s supply chain.
Nebraska farmers would suffer as would state manufacturers – or any business in the state that relies on freight rail transportation. History shows it could also lessen private investment in railroad infrastructure.
Another outcome would be higher shipping costs that undermine rail’s competitiveness against other modes of transportation, especially trucking.
The case for reregulating freight railroads, however, doesn’t stand up to scrutiny. Freight rail operators face intense intermodal competition from trucks and water transport. As gas prices have jumped recently, railroad prices have increased less than trucking, In addition, while trucking is advantaged by publicly financed roads, railroads invest about $19 billion annually to maintain their own infrastructure.
An in-depth independent report commissioned by the federal government concluded that railroad operators’ earnings “do not appear to be excessive from a financial market perspective” and warned against exactly the type of regulation that the administration is pursuing.
Some special interest groups stand to massively benefit from an expansion of reciprocal switching – or “open access” – and have aggressively lobbied policymakers to secure favorable policies. Yet there’s no evidence that these shippers need financial relief — in fact, a recent analysis found these companies to be much more profitable than large rail operators they seek to have regulated. Nebraska businesses and consumers could suffer while the administration possibly favors other industries, like chemical makers.
As the U.S. supply chain faces challenges and consumers see price increases for the goods and services they buy, the mistakes should be clear as day. Senator Fischer, with her role on the Senate Commerce Committee, has long been a leader in maintaining a light touch of the nation’s railroads. Nebraska businesses and its people should hope the Biden administration follows suit.
Published in the Lincoln Journal Star