If an obscure federal agency prevails in its quest to increase the regulation of freight railroads, this could be the last holiday season for the transportation of millions of presents and consumer goods in an environmentally friendly manner.
In a shining example of the law of unintended consequences, a little-little noticed rule under consideration at the U.S. Surface Transportation Board could have profound implications for the delivery business and damaging results for the environment.
The rule would force freight railroads to open their lines to competitors through so called “reciprocal switching.” A more accurate term for the proposal is “forced access” — Railroad One gets access to Railroad Two’s customer because the government forces Railroad Two to provide that access across its lines — not because it is the optimal route.
The government’s goal is to reduce costs that a few large companies pay to transport their commodities over rail lines. But facts are stubborn things and the truth is much different than the ideal sought by the agency.
Because switching is a complicated process that takes time to carry out, the rule would slow shipments across the nation’s freight railroad network and reduce efficiencies on rail lines. Analysis by the Association of American Railroad economists found that 7.5 million car loads of traffic could be affected annually, which would place nearly $8 billion in revenues at risk for an industry universally recognized as capital intensive.
Many railroad customers that rely on speedy, efficient and environmentally friendly freight rail transportation would flee for the highways. The result — a massive uptick in highway traffic and a concurrent rise in damaging greenhouse gas emissions.
This is not mere speculation.
UPS Inc., the nation’s largest transportation company, which ships the equivalent of 6 percent of U.S. gross domestic product and is a major user of freight railroads, is very concerned that rail service will deteriorate if forced access is imposed. And if the rail network is slowed as seems very likely, then UPS said it would be forced to shift its freight transportation onto highways.
In a recent public filing in response to the government proposal, the shipping giant said that its “experience in other contexts leads it to conclude the implementation of a new reciprocal switching scheme will lead to decreased network velocity, diminished capital investments into the freight network, and deteriorating rail intermodal service levels.
“Ultimately, if rail intermodal service levels fall below UPS’s time-in-transit obligation standards, we would have no business option but to shift intermodal traffic back to the highway.”
The irony is that an independent agency taking action during an administration with a high-priority goal of reducing greenhouse gas emissions will be adding to the problem in a big way.
By UPS’s calculations, leaning on freight rail to transport intermodal containers that can travel mainly by rail and then be transferred to trucks for a short haul has avoided belching 914,287 metric tonnes of CO2e emissions into the atmosphere in 2014 alone and more than 4.3 million metric tonnes since 2010.
And that’s just one freight rail customer. Imagine the environmental damage when factoring in many other rail customers who take to the highways if the STB prevails.
A further irony is that forced access is only one of several rules in the works at the STB, the totality of which will lead to an increase in environmentally damaging highway traffic, not to mention a further degradation of highway infrastructure. For example, the agency is developing rules that will cap rates of return a railroad can make, which means reduced investments in rail infrastructure from railroads. This exacerbates the degraded service — and flight to the highways — brought on by unnecessary regulatory intervention.
The STB is undermining a highly effective way to reduce greenhouse gas emissions. Moving freight by rail instead of truck reduces greenhouse gas emissions by 75 percent, while just one gallon of fuel for a freight train can move one ton of freight 473 miles.
According to Environmental Protection Agency data, freight railroads account for just 0.6 percent of U.S. greenhouse gas emissions from all sources and just 2.5 percent of emissions from transportation-related sources.
An astute observer of the wheels of government, Groucho Marx captured the head-shaking nature of an agency that acts as if it has no responsibility to the environment it is supposed to protect.
In a withering assessment, Groucho said, “Politics is the art of looking for trouble, finding it everywhere, diagnosing it incorrectly and applying the wrong remedies.”
As forced access and other re-regulatory efforts wind through government offices in the waning months of the Obama administration, environmentalists of all political stripes should be concerned.
Edward R. Hamberger is president and CEO of the Association of American Railroads.
Morning Consult welcomes op-ed submissions on policy, politics and business strategy in our coverage areas. Submission guidelines can be found here.