The Surface Transportation Board (STB) announced Jan. 7 a Notice of Proposed Rule Making (NPRM)—Eliminating Regulatory Barriers to Competition: Review of Part 1144, Docket Ex Parte No. 788—which, if finalized following public comment, will repeal a 40-year-old controversial rule imposed by STB predecessor Interstate Commerce Commission (ICC) that was intended to protect captive shippers from railroad market power abuse.
The rule to be repealed has proven for captive shippers a remedy impossible to satisfy yet promised them by Congress when it partially deregulated railroads 45 years ago in 1980 (the Staggers Rail Act). In announcing the NPRM, the STB said it “has never issued a prescription under Part 1144.”
All 3 current members of the 5-member STB—Republican Chairperson Patrick J. Fuchs, Republican Michelle A. Schultz and Democrat Karen J. Hedlund—voted in favor of the NPRM. Fuchs said of the NPRM, “This proposal would embrace market forces, enable meaningful choice for American businesses as provided under the statutes, and eliminate regulatory barriers unnecessarily stifling rail competition. By proposing to remove these regulations, the Board would return to the text of statutes that advance excellence, entrepreneurship, and innovation to support economic growth and supply chain resilience.”
Presidents Barack Obama (2016), Joe Biden (2021) and POTUS 47 (2025) each have urged federal agencies to reduce competitive barriers. The STB said the Jan. 7 NPRM “follows the March 2025 launch of the Justice Department’s Anticompetitive Regulations Task Force in response to [POTUS 47’s] Executive Order 14192, which declares a policy that federal agencies “alleviate unnecessary regulatory burdens placed on the American people.”
The rule to be repealed was born of honest intentions, but its implementation was flawed, which a brief history will explain.
When freight railroads were partially deregulated in 1980, they were mired in spreading bankruptcy, deferred maintenance and poor economic prospects owing to decades of biased public policy treating them as transportation monopolies while bestowing substantial rights-of-way subsidies on barge and motor carrier rivals that faced far less economic regulation. Although some railroads remained financially strong, railroading is a network industry where the strongest links are largely dependent on the weakest, of which there were many. Shippers able to shift modes did so.
What remained was a dysfunctional marriage between a financially teetering rail industry and victimized shippers unable to relocate or choose new markets.
A bargain was struck. Congress would loosen the economic regulatory reins on railroads, giving them greater freedom to right-size through mergers and line abandonments, and to adjust prices and practices based on market forces to win back customers. Shippers lacking effective transportation alternatives to rail (captives) would have a cop on the beat to ensure effective competition and, failing that, protections from unreasonable carrier actions.
All stakeholders agreed that competition ensures greater innovation, improved productivity and superior service quality.
Unquestionably, partial economic deregulation restored railroads to financial health—especially beneficial being redundancy-eliminating mergers that reduced the number of major (Class I) railroads from scores to just 6 today, causing the number of captive shippers to grow substantially. Not all shippers, however, found the cop on the beat as effective as promised even though the 1980 Staggers Act (49 USC 11102(c) and 49 USC 10705) authorized the ICC (now STB) to prescribe remedies where it finds them “practicable and in the public interest [or] necessary to provide competitive rail service.” And shippers saw little relief from a different competitive access statute (49 USC 10705).
This means that if a captive shipper can demonstrate a need for competitive access, the STB may prescribe a more competitive freight rate; or allow a second railroad to serve the shipper over the incumbent’s tracks; or order the incumbent railroad to interchange the shipper’s traffic to a second railroad at a convenient junction point.
As stakeholders struggled to implement the Staggers Rail Act, the National Industrial Transportation League (the nation’s largest shipper organization) and Association of American Railroads collaborated on recommendations adopted by the ICC to give specificity to the law, which the ICC did in 1985 (49 CFR 1144).
The implementation wasn’t as shippers expected. In one of the ICC’s most controversial decisions, known as the Midtec Paper, the ICC ruled in 1985 that to gain the promised remedy, a captive shipper must prove affirmatively that its railroad is engaged in, or is likely to engage in, market power abuse or anticompetitive conduct. Meeting the burden proved unobtainable; shippers won not a single case.
Years of shipper lobbying encouraged the STB to revisit its Part 1144 rule and relax the standard of proof. In 2016, the STB opened a new rulemaking (Ex Parte No. 711, Sub-No. 1) in which the STB proposed a rule that set two new regulatory standards, on a case-by-case approach but not having to demonstrate market power abuse or anticompetitive conduct.
In a dissent, Republican member Ann D. Begeman said, “How can the Board provide fair and consistent switching judgments on a case-by-case basis without creating complexity and cost impacts on the one hand, and not introducing more unpredictability to the rail network on the other?”
Notwithstanding that the STB already employed a case-by-case approach for other authorities, progress stalled as Begeman became chairperson in 2017. From 2023-2025, a renewed effort to craft an improved rule met railroad resistance and was remanded by a federal appellate court. Since, the effort has lain fallow.
Unlike prior efforts, today’s decision does not establish new regulatory standards but instead returns to the text of the Staggers Rail Act and continues the STB’s tradition of a case-by-case approach to often highly fact-specific situations.
The STB said its Jan. 7 NPRM would “restore the Board’s discretion to consider—on a case-by-case basis—the merits of each case brought before the agency under the statutory standards set by Congress. The statutes recognize that competitive access issues do not have a one-size-fits-all solution and allow the Board to consider these cases in the full context of a carrier’s operations, competitive situation, and other considerations.”
The late E. Hunter Harrison, who led four railroads—Illinois Central, Canadian National, Canadian Pacific and CSX—embraced increased shipper options such as through reciprocal switching (known as “interswitching” in Canada).
In an interview with Railway Age Editor-in-Chief William C. Vantuono in 2015, when Harrison was named Railway Age’s Railroader of the Year, Harrison said: “A lot of railroaders have been scared of the term ‘open access,’ and I don’t know why. [I]f an individual carrier … provides the right type of service for the customer, at an appropriate fair price, we have nothing to worry about. If we do not provide the service, we should not be resistant to someone [else] coming and providing that service.”
Robert G. Szabo, now retired and who served as executive director and legal counsel for Consumers United for Rail Equity (CURE)—a captive shipper organization that nearly succeeded in placing railroads more under the antitrust laws—told Railway Age, “If the STB abandons its unachievable competitive access test, this will be a great day for captive rail customers. A few competitive access cases may need to be brought to prove relief is achievable, but the real benefit will be more-robust negotiations as shippers and railroads strive to work out their transportation arrangements in the normal business marketplace.”
A currently practicing captive shipper attorney, asking not to be named, told Railway Age, “The NPRM places captive shippers and railroads more on a level playing field. However, captive shippers have been burned on this issue for so long that they are wary of the outcome.”
Railway Age Capitol Hill Contributing Editor Frank N. Wilner is author of “Railroads & Economic Regulation,” available from Simmons-Boardman Books, 800-228-9670.
