United States Department of Agriculture

Office of the Secretary

Washington, D.C. 20250

An Equal Opportunity Employer

February 14, 2022

Hon. Martin Oberman Hon. Michelle Schultz

Chairman Vice Chairman

Surface Transportation Board Surface Transportation Board

Hon. Patrick Fuchs Hon. Robert Primus

Member Member

Surface Transportation Board Surface Transportation Board

Hon. Karen Hedlund

Member

Surface Transportation Board

RE: STB Docket No. EP 711 (Sub-No. 1) Reciprocal Switching

Dear Chairman Oberman, Vice Chairman Schultz, and Members Fuchs, Primus and Hedlund:

The U.S. Department of Agriculture (USDA) appreciates that the Surface Transportation Board 

(Board) has brought reciprocal switching back to the forefront with its March 15-16 public 

hearing. USDA shares the perspective voiced by the U.S. Department of Transportation (DOT)

in 2016. DOT then noted it “appreciates the Board’s careful attention to the evidence and 

recommendations that stakeholders have raised in the course of these proceedings over the past 

several years. Although there is disagreement among interested parties over the Board’s 

proposal, the Department nonetheless recognizes the Board’s interest in striking the correct 

balance here, making relief available to shippers in appropriate cases while working to maintain 

competition and efficiency in the operation of the rail network as a whole.” USDA believes the

Board’s 2016 Notice of Proposed Rulemaking (NPRM) and public hearing are steps in the right 

direction and that reciprocal switching—properly designed—is in the public’s interest.

USDA notes the Board’s attention in this hearing focuses on recent changes in the rail industry—

specifically, “significant operational changes in and affecting the freight rail industry.” However, 

USDA encourages the Board to consider the rail industry’s evolution—positive and negative—

over the past 40 years. Railroads are much more profitable than they have ever been in the past,

and significant industry consolidation has altered the competitive landscape. The number of 

Class I railroads has fallen from 41 in 1979 to only seven in operation since the late 1990s. The 

Board’s recent rate study shows that, since 2011, rail rates for grain have exceeded their level in

1985. USDA believes the importance of broad industry changes over the past few decades 

greatly outweigh the importance of recent changes to rail operations. Moreover, the Board needs 
to ensure that operational changes, which do evolve over time (e.g., the emergence of precision 

scheduled railroading), take place against a regulatory backdrop that promotes a competitive and 

balanced environment. For these reasons, USDA encourages the Board to move beyond 

continual discussions of change and act on reciprocal switching.

In its December 28, 2021 decision, the Board asked for stakeholder comments with “additional 

or modified views,” since the 2016 NPRM. USDA’s position on reciprocal switching has not 

changed. This letter briefly reaffirms its past positions—foremost among these, that the benefits 

of reciprocal switching exceed the costs. Further, USDA believes the final rule should be 

structured to enable shippers to bring a case based on information they have available to them

(e.g., the benefits and need for a switch). USDA also maintains the railroads should be required 

to provide information they have (e.g., the costs of a switch). A few elaborations on these points,

as follows:

• USDA believes there would be large benefits in abandoning the overly burdensome 

Midtec standard for granting a reciprocal switch. The Board is charged with ensuring 

shippers do not face unreasonable rates and service. Essentially, two ways exist to ensure 

rates and service are reasonable: competition and regulation. With only seven railroads 

operating across the entire United States, many locations severely lack competition. In 

these competition “deserts,” the Board should inject additional competition and access,

while making its rate review procedures more accessible and effective. Shippers must be 

protected from unreasonable rates and service that come from a lack of competition.

• The benefits from enhanced competition should exceed the costs, and the Board’s 

NPRM guards against instances where the reverse is true. In 2013, USDA and DOT 

provided analysis showing the National Industrial Transportation League’s (NITL) 

reciprocal switching proposal would affect only 2 percent of grain revenues and 2 percent 

of overall revenues. It is worth remembering, during the Board’s 2019 hearing on 

demurrage and accessorial charges, that multiple railroads downplayed the significance 

of these charges as representing only 1 to 3 percent of their revenues. Regarding 

reciprocal switching, USDA believes the benefits of added competition and better rates 

and service outweigh the potential costs of reduced revenue to railroads—an amount they 

once portrayed as insignificant. It is also worth noting the USDA and DOT calculations

were the maximum projected effects, and in previous comments, USDA described several

reasons the maximum estimate is unlikely to be realized. Moreover, the Board’s proposed 

case-by-case process, rather than NITL’s bright-line rules approach, further avoids

granting a switch where the costs outweigh the benefits.

• USDA encourages the Board to construct its two-pronged approach to resemble its 

recent streamlined market dominance test. To bring a case before the Board, shippers 

should have to meet clearly defined standards, such as a working switch nearby, a

threshold revenue-to-variable cost ratio for the railroad in question, and lack of access to

inter- and intra-modal competition. Meeting these standards should make a prima facie 

case that a switching option is warranted. Railroads would then have the responsibility to 

dispute those claims or show sufficient evidence that the costs of the switch outweigh the 

benefits. These straightforward thresholds—designed around information shippers 
already have—would ensure the process is accessible. An accessible option at the Board 

would provide the necessary backstop to incentivize shippers and railroads to find 

workable solutions without bringing a formal case. In a similar vein, the Board should 

make its access pricing as clear and concrete as possible, so as to incentivize railroads 

and shippers to settle on a switch with a reasonable access price, without having to bring 

a formal case.

In conclusion, USDA appreciates the Board’s attention to reciprocal switching. USDA believes 

the benefits of granting shippers a reciprocal shipping option outweigh any potential costs. The 

Board is encouraged to quickly finalize an accessible and efficient reciprocal switching rule.

Sincerely,

Jennifer Moffitt

Under Secretary

Marketing and Regulatory Programs