Freight rail makes staggering comebackDeregulation. In 2013, the word itself elicits some visceral reactions from people. The reactions tend to be felt through the prism of our ideological leanings.
By: Craig Thompson, Superior Telegram
Deregulation. In 2013, the word itself elicits some visceral reactions from people. The reactions tend to be felt through the prism of our ideological leanings. Those right of center feel all warm and cozy inside when they hear this word as they picture commerce humming along unfettered while birds chirp and angels sing. Those left of center tend to feel their stomach tighten as they envision robber barons left free to pillage and plunder.
In these days of hyper polarization, we forget it wasn’t all that long ago when everything wasn’t quite so black and white. Take the Staggers Act of 1980. It was a law that largely deregulated a struggling railroad industry. Named after the late Democratic Congressman Harley Staggers, it was signed into law by — not Ronald Reagan — Jimmy Carter.
Take a second and to see the YouTube video of President Carter’s remarks at the bill signing ceremony.
At the ceremony, President Carter points out the railroad deregulation act resulted from strong bipartisan support in both houses. He goes on to say, “this effort is crucial to promote more competition, to improve productivity and to hold down inflation … The importance of this Act is clearly reflected in the outstanding and diverse group of people who are assembled here for this ceremony. Representatives from railroad management and labor, from such shippers as automobile and steel and coal, retail stores, farm organizations and also environmental organizations.”
Ah, coalition building, reaching across the aisle to pass major legislation: Who knew 1980 could feel so long ago?
As my kids ask, “is that when you had to talk on phones that were tied to the wall?”
So, did this kumbaya moment, along with all of the grandiose claims, result in any of the predictions coming true? Because we all know the rhetoric we hear at these types of events doesn’t always hold up over time
The answer is yes and then some.
Allowing railroad companies to set their own rates and providing flexibility to respond to market forces has resulted in an industry that was in free fall coming back from the brink. In the 30-year period before 1980, railroad market share fell from 56.1 to 37.5 percent. Since 1980 it stabilized and has increased to 40 percent.
Inflation-adjusted rates have plummeted over 40 percent while productivity and volume have exploded. During that same period, the train accident rate dropped 80 percent.
This freight rail renaissance has provided the rail companies with the means to invest in what is an incredibly capital intensive business.
Right now I can read the bubbles above my dedicated readers’ heads. The bubble says: “Wait a minute. What is all of this talk about these private railroad companies investing in track? Are they taking credit for using my tax dollars to keep up and improve the railroad tracks?
Well, dedicated readers’, the answer is “no.” The cost of the whole system including track, engines and cars is borne almost entirely by the privately owned railroad companies. This is something that is not well understood. In 2012, these companies invested about $14 billion in capital improvements.
Who are these private railroads? Well, the major North American freight railroads are: BNSF Railway, Canadian National Railway, Canadian Pacific, Union Pacific Railroad, CSX Transportation, Ferrocarril Mexicano or Ferromex, Kansas City Southern Railway, Norfolk Southern, Kansas City Southern de MéxicoIn.
In Wisconsin we have 12 railroads, including the first four Class I railroads listed above, which carry around 200 million tons of cargo each year.
Am I arguing the Staggers Act was a panacea? No, but I am saying that it has been an incredible success story. Allowing these railroad companies the flexibility to set rates and routes means they will decide the areas they serve based upon the cost effectiveness to their businesses. This does not always jive with shippers’ needs or desires. There is a tension over this balance, which continues today in Wisconsin. Some tension is not necessarily a bad thing.
The good news is the business community is working with the railroad industry to try and bundle shipments to create enough volume so as to make it profitable for the rail line to service them more frequently and on more beneficial terms.
Wisconsin also has a program that is relatively unique that tries to fill in the gaps in service, which can sometimes exist when railroads base their decisions on profitability. The program is called the Freight Railroad Infrastructure Investment Program.
The idea is to retain, service when justified, in areas where a railroad has decided to abandon service for whatever reason. Initially, the program was limited to grants to local governments because of constitutional restrictions on state assistance to railroads. But in 1992, Wisconsin voters approved a constitutional amendment that allowed state money to fund railroads as a type of internal improvement.
This last state budget included $52 million intended for the state to negotiate the purchase of the 70 mile line between Madison and Reedsburg that was abandoned by Union Pacific Railroad. While the purchase has not yet occurred, the inclusion of money in the budget made officials from Sauk County and Seneca Foods, a Baraboo can manufacturing plant, very pleased indeed. A Reedsburg Times-Press article stated: Sauk County Board Chairman Marty Krueger of Reedsburg said local leaders supported state acquisition of the rail line to ensure industries’ viability and create a recreational amenity. “This is a great day for Sauk County,” he said. “We’re tremendously excited across the county.”
What is apparent in this example is just how important freight rail service is for many industries as well as entire communities across Wisconsin. What is also evident is that nothing is ever easy.
In freight rail, we have an iconic American industry that has not only come roaring back but has done so without the assistance of the taxpaying public. While it may be frustrating that we can’t always tell these private companies where and when they should run their trains, the results are a lot better than when we could.
Craig Thompson is executive director of the Transportation Development Association of Wisconsin.