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Balanced Regulation

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America has the safest, most efficient and cost-effective freight railroad industry in the world due in large part to a balanced regulatory structure that has benefitted railroads and customers alike. Over the last 30 years, this regulatory structure has allowed railroad to reinvest $525 billion in the nation’s rail network and develop cutting edge technologies to improve safety and efficiency while helping keep rates low for customers. While this railroad renaissance has been made possible by this balanced regulatory structure, railroads continue to be subject to strict government oversight in the areas of safety, the transportation of hazardous materials transportation, rates, service and mergers.

Railroad Safety Regulation

Virtually every aspect of railroad operations is subject to strict safety oversight by the Federal Railroad Administration (FRA). Among many other areas, the FRA regulates track and equipment inspections; employee training and certification programs; train operations; the capabilities and performance of signaling systems, etc. Hundreds of FRA personnel perform regular inspections of rail facilities and operations throughout the country. In many states, FRA safety inspectors are supplemented by state safety inspectors. Railroads are also subject to safety oversight by additional federal agencies, including the Occupational Safety and Health Administration, the Pipeline and Hazardous Materials Safety Administration and the Department of Homeland Security.

Economic Regulation of Railroads

While the nation’s railroad industry was largely deregulated by the Staggers Act of 1980, railroads today are subject to economic regulatory oversight by the U.S. Surface Transportation Board (STB). Today, the STB has jurisdiction over railroad rate and service issues, rail restructuring transactions and has the authority to take action, including setting maximum allowable rates, if it is determined that a railroad has engaged in anti-competitive behavior. In addition, railroads are subject to most antitrust laws, and in areas where they do have limited exemptions they are regulated by the STB.

This economic regulatory structure has allowed the market to determine the health and success of railroads, which have thrived under post-Staggers Act regulations. Since then, there have been vast improvements in railroad safety, efficiency, and affordability, while also ensuring railroads have had the ability to make record private investments in infrastructure and equipment. As a result:

  • Average inflation-adjusted rail rates (as measured by revenue per ton-mile) are down 44 percent through 2012. That means the average rail shipper can move nearly twice as much freight for the same price it paid 30 years ago — saving consumers billions of dollars in shipping costs each year.
  • Railroads are much safer. From 1980-2012, the train accident rate was reduced by 80 percent and the employee injury and illness rate fell by 85 percent. 2012 was the safest year ever for railroads, breaking the safety records set in 2011.
  • Freight railroads have reinvested more than $525 billion back into their operations from 1980-2012, creating a national network second to none worldwide. Over the past few years, railroads have re-invested more back into their networks than ever before.
  • Railroads are stronger financially. Return on investment, which had been falling for decades, rose to 4.4 percent in the 1980s, 7.0 percent in the 1990s, and 8.5 percent from 2000 to 2011. That’s important, because railroad earnings today lead to rail investments in new locomotives, tracks, bridges, and more so taxpayers don’t have to.

Source: AAR