Bangor residents witnessed firsthand what a 21st century economy can look like this month when the e-commerce merchant Wayfair opened a call center that will employ some 450 people. Through an integrated shipping and logistics network that together moves some 54 tons of good per American each year, businesses can quickly move products to consumers and compete not just locally but globally.
One key part of that network — freight railroads — remains under threat by federal regulators. To ensure companies can continue to move goods efficiently between transportation modes, particularly rail, we must preserve the structure enacted by Congress that allows the private market to dictate rates and private companies to manage their business and property as they see fit.
Maine’s industrial outputs consist mainly of paper, lumber and wood products. These forest products make up the bulk of the demand for shipping on Maine’s freight rail lines, which cover more than 1,100 miles across the state.
Nationally, privately owned and maintained freight railroads operate a 140,000-mile network. Trains traditionally move goods, such as energy, agricultural and industrial products. Over time, the industry has diversified the commodities it moves, increasingly partnering with other modes of transportation through “intermodal” shipping, moving cars, consumer goods and groceries.
Story continues below advertisement.
The sector is an indispensable part of the economy, including in Maine, as it helps move the items we all depend on daily. Major U.S. rail carriers supported 1.5 million jobs, generated $33 billion in local, state and federal taxes and produced $274 billion in economic activity in 2014 alone, according to a 2016 Towson University study, commissioned by the Association of American Railroads.
The ability of railroads to move large goods over long distances, as well as its private funding, differentiates the industry and serves a purpose unmatched by other transportation services that operate on publicly funded roads and bridges.
Yet, this confluence of factors stands on shaky ground, underpinned by partial deregulation of freight railroads enacted in 1980. Many Mainers likely remember that U.S. railroads nearly died and that before the government removed itself from day-to-day business decisions, 20 percent of the nation’s railroad miles were operated by bankrupt entities. The investment we see today — more than $600 billion since the landmark change in policy and $30 billion in 2015 alone — was not possible in a time that government set prices and dictated rail routes. The industry did not earn the revenues it needed to invest for the future.
Today, railroads are as safe, efficient and reliable as ever, a direct result of being treated the same as other private businesses. There is a clear correlation between smart public policy tied to balanced regulation, railroad investments and public benefits.
So it is especially troubling that the Surface Transportation Board, a unit of the U.S. Department of Transportation, continues to advance rules that would undermine railroads’ ability to earn needed revenues.
The Surface Transportation Board most recently proposed a rule that would require railroads to open up their lines to competitors, introducing a radical approach that would force carriers to turn over their tracks to other railroads without showing competitive abuse. It is anti-free market to suggest the government can dictate property usage of a private owner.
The Surface Transportation Board also is proposing to re-regulate certain commodities that the agency has previously determined are subject to competition, including from trucks. The Surface Transportation Board proposed this rule without any evidence that market conditions have changed adversely.
All the while, the Surface Transportation Board wants to cap rates that railroads charge shippers based on their overall level of revenue, a step that would amount to nothing less than government price control.
Combined, these proposals threaten the network and amount to re-regulation.
Congress has maintained a key role in overseeing the sector. Maine Sens. Susan Collins and Angus King are well known as leaders who support sensible policies. In that Congress did not order the Surface Transportation Board to introduce such drastic measures, continued oversight by Collins, King and the rest of Congress is especially paramount. To sustain the freight railroad industry’s role as a crucial piece of the national economy, as well as regional economies, smart economic regulations must remain in place.
Ian Jefferies is senior vice president of government affairs at the Association of American Railroads.