# Presentation: 903257

***Railroad Regulation Since ******The Staggers Rail Act of 1980***

**Francis P. Mulvey**
**Vice Chairman**
**Surface Transportation Board**
***TransAction 2008***
***Atlantic City, New Jersey***
***April 3, 2008***

## The Deregulation Movement

- Air Cargo Deregulation Act of 1977
- Airline Deregulation Act of 1978
- Motor Carrier Act of 1980
- Staggers Rail Act of 1980
- Bus Regulatory Reform Act of 1982
- Interstate Commerce Commission Termination Act of 1995

## RR Industry Pre-Staggers

- 40 Class I Railroads
- 9 Railroads bankrupt
- Industry-wide low return-on-investment
- Railroads unable to raise capital
- Railroads faced steadily declining market share
- Regulation prevented RRs from any flexibility in pricing to compete with other modes
- Carriers could not abandon redundant or light density lines to cut costs
- Rates could not cover inflation due to regulatory lag in rate adjustments

## Staggers Rail Act of 1980

- Railroads given freedom to set rail rates based on demand
- Streamlined procedures for the abandonment and sale of rail lines
- Encouraged Railroad-Shipper contracts
- Expanded ICC power to exempt categories of traffic
- Rates evaluated by ICC under a reasonableness test

## Rail line Rationalization Since Staggers Class I Rail Miles 1830 - 2006

## Railroad ROI 1970 - 2006

## RR Employment1939-2006

## RR Capital Expenditures1955-2006(Amounts shown in Thousands)

- Total

- Roadway & Structures

- Equipment

## Since Staggers

- Rail industry market share has increased from 37.5% to 41.7%
- Rail rates down 55% on average (inflation adjusted)
- Railroads’ ROI increased
- Railroads substantially increased investment in infrastructure
- Improvement in safety performance

## The Railroad Industry Today

- 7 Class I Railroads
- 525 Class II and Class II railroads
- Much reduced system through rationalization
- Average length of haul – 900 miles

## The Surface Transportation Board Today

- Created by ICC Termination Act of 1995
- Three Board Members
- Residual economic regulation of the railroads
- Reduced scope of regulatory activity--*many rail movements deemed competitive*
- Smaller staff

## STB Mission 

- Exclusive review and approval of rail mergers
- Review rail rates and practices to ensure they are reasonable and not discriminatory
- Approval, including environmental review, of
- 	(i) construction of any new rail line or
- 	(ii) abandonment of existing lines
- Rates for water carriers  in non-contiguous domestic trade
- Rates for pipelines not carrying energy products

## STB Merger Authority

- Mergers in the post-Staggers Era
- STB merger policy in 1990’s
- Merger moratorium
- Categories of merger transactions (major, significant and minor)
- Mergers and downstream impacts
- STB merger policy today

## STB Responsibilities over Rates and Service

- Oversee and monitor rail practices nationally
- Enforce common carrier obligation
- Ensure rail practices are reasonable
- Ensure that rates charged captive customers are reasonable
- Policies should allow railroads to earn adequate revenues
- Determine the railroads’ cost of capital and whether they are revenue adequate

## Environmental Review

- Approval of new construction
- DM&E
- Yucca Mountain
- Abandonment cases (OFAs)
- Rails to Trails
- Rail transload facilities
**	**

## Other STB Powers

- Amtrak - Direct Service Orders
- Emergency service orders
- Operating issues (e.g. car supply, unreasonable practices)
- Industry specific meetings
- Ongoing monitoring
- Issues of national significance
- Certain local disputes needing STB attention

## Current Issues 

- Railroads’ Common Carrier Obligation
- Large vs. Small rate case handling
- Rail Fuel Surcharges
- Paper Barriers
- Rail Cost of Capital
- Investment in Rail Industry

## Thank you.  Questions?