By Donna Harman
Fully Staffed STB Critical for Freight Rail Across Nation
President & CEO
American Forest & Paper Association
Chairman & CEO
Packaging Corporation of American
Morning Consult, July 26, 2017
In Washington, D.C., the saying goes that personnel is policy. A president communicates his priorities, and how he intends to address them, with the choices he makes to take leading positions in his administration.
The president has the authority to appoint 554 positions that require confirmation by the U.S. Senate — however, candidates for less than half of those positions have been announced so far. With key personnel missing, progress on policies vital to economic growth across the nation is also absent. Freight rail reform is a perfect example of why the president needs to move quickly to fill critical positions, and the Senate should act quickly to consider his nominations.
Freight rail is crucial for economic growth across the nation because it is a key transportation link for our states’ pulp, paper, packaging, tissue and wood products industry. This industry employs approximately 900,000 Americans with a combined payroll of over $50 billion and generates more than $5 billion a year in taxes to state and local communities in which it operates. We move an incredible $282 billion worth of goods, and much of it moves by freight rail.
You would think that kind of volume would make the forest products industry an important customer for freight rail companies, and it would — if those companies had to compete for our business. The problem is that they don’t.
From more than 40 Class I railroads in 1980, the freight rail industry has undergone significant consolidation. Nationwide, one-third of forest products facilities have access to one rail carrier. The elimination of rail-to-rail competition in the freight rail industry has come at a heavy cost for businesses that rely on it. Rail-dependent customers with no access to railroad competition have experienced significant rate increases.
From 2004-2014, rail rates for our industry increased by 91 percent. That compares to an increase of just 25.7 percent over that period for shipment by the still-competitive long-haul trucking. Those increases have translated into much higher costs to consumers and businesses trying to compete in domestic markets against foreign imports and access the export market to sustain or create American jobs.
The good news is that captive pricing by freight rail companies can be addressed by the federal Surface Transportation Board, which has regulatory oversight of rail rates and service. The bad news is that the STB has two open board seats, and until they get nominated by the president and confirmed by the Senate, efforts to better protect shippers are stalled.
The rate review process at the STB allows shippers to challenge excessive freight rail costs in markets that lack competition. However, these Stand Alone Cost rate cases can take three-and-a-half years to finish and cost $5 million to pursue — an unfair and unmanageable burden for small businesses that have a reasonable claim. The STB is considering improvements in this process to make it fair and reasonable for shippers of all sizes.
The STB is also in the process of considering another sensible reform that would increase access to competitive rail service by allowing certain rail customers to request that their freight be moved to another major railroad only if another rail line is reasonably accessible.
Some shippers currently have no access to STB rate relief processes at all because of existing federal exemptions. These companies have no real recourse when they encounter poor service or exorbitant rates from a freight rail company and have no other competitive rail option to consider. A new STB rulemaking would remove that exemption for forest products companies and help us negotiate on a level playing field with freight rail companies.
But without a full set of members for the STB, none of these reforms can move forward and shippers across the nation will remain at the mercy of rail carriers that face no competition. Until the president and the Senate act to nominate and confirm new STB board members, many businesses will be subjected to unfair pricing that makes them less competitive than their foreign counterparts, ultimately harming the families and communities they support.
We can do better. If our nation’s policy priority under our new president is a strengthening economy that is growing good jobs across the country, then fully staffing the STB must be a top personnel priority in Washington. The president and the Senate should act now to nominate and confirm objective candidates committed to moving the STB forward instead of preserving the status quo.
Donna Harman is president and CEO of the American Forest & Paper Association. Mark Kowlzan serves as chairman and chief executive officer of Packaging Corporation of America.