FREIGHT RAIL POLICY OUTLOOK, RAILWAY AGE FEBRUARY 2025 ISSUE: The political and policy waves crashing across the nation’s capital seem more likely in the near term to flood the “D.C. swamp” further, not drain it.
New Administrations bring change to Washington, and the President has already delivered plenty. With the Senate now under GOP control along with a narrow Republican House majority, the Administration has a governing trifecta. A look at familiar dynamics along with unfolding policy changes may offer insight into what the freight rail industry can expect this year in Washington.
Boarding the Tax Train First
Before reassuming office, the President proclaimed his legislative agenda and endorsed “one powerful Bill” to “Secure our Border, Unleash American Energy, and Renew the Tax Cuts.” Moving this program through Congress using the budget reconciliation process will require only House and Senate majorities to pass. Freight railroads, their customers and much of the American economy eye the reconciliation aim to preserve the 2017 tax cuts, including the 21% corporate tax rate.
Short lines seek more: modernizing the 45G rail investment tax credit. This upgrade would increase the 40% credit for eligible rail investments from $3,500 to $6,100 per mile with an ongoing index to account for inflation and allow eligibility for new short line track. Building on progress in the previous Congress, the American Short Line and Regional Railroad Association (ASLRRA) has enlisted lead sponsors to push inclusion of 45G modernization in the reconciliation measure.
Preserving the 2017 tax cuts, however, drew a Congressional Budget Office ten-year score of $4 trillion-plus. At the November “Tax Prom” in Washington, lobbyists fretted over finding the pay-fors. Yet Congressional pay-for rules can be waived, as happened in 2017. This year, fusing tax with immigration and energy policy through budget reconciliation may drive momentum otherwise impossible. Modernizing 45G could be attractive as part of a larger deal, as enacting 45G permanently into the tax code carried in 2020 with 364 House and Senate cosponsors.
In contrast to reconciliation, rail safety should not be as visible as in the prior Congress. Two years ago, the tragic hazmat derailment in East Palestine, Ohio, triggered swift Senate Commerce Committee approval of rigorous rail safety legislation (S. 576). The National Transportation Safety Board weighed in with its findings on East Palestine 18 months after the incident and testified at a widely covered House Transportation and Infrastructure Committee (T&I) hearing in July 2024.
Though S. 576 counted 58 supportive senators, the bill never came to the Senate floor. Nor did the House rail safety counterpart move to a vote. These measures failed because freight railroads made the case that rail safety performance has improved dramatically in recent years, rendering legislative mandates unnecessary. The political dynamics have evolved too, with former Ohio senators JD Vance (now Vice President) and Sherrod Brown no longer serving in Congress. Senator Ted Cruz (R-Tex.) now chairs Senate Commerce while Rep. Sam Graves (R-Mo.) continues to lead House T&I, so near-term movement of rail safety legislation appears unlikely—barring something unforeseen.
Congress also confronts must-pass legislation. The latest FY 2025 federal spending continuing resolution runs out in mid-March. Raising the debt ceiling awaits. Congress must enact FY 2026 appropriations. Positioning has already started on the 2026 expiration of the Infrastructure Investment and Jobs Act. This debate will see demands to change truck size and weight limits, revisit shipper equity, reconsider further safety intervention and other concerns. Sustaining federal transportation grants including investments important to railroads faces sharp scrutiny.
Next Moves at USDOT
At his Senate confirmation hearing on Jan. 15, former Representative and Secretary of Transportation nominee Sean Duffy outlined his vision for a “golden age of travel.” Duffy cited the President’s encouragement to “invest in rebuilding our nation’s crumbling infrastructure,” and emphasized his intent to “craft clear regulations that balance safety, innovation and cutting-edge technology.”
Recapping the hearing, Politico concluded, “Duffy appears on an easy path to confirmation: He seemed comfortable at the witness table, from which he fielded questions easily during a hearing that was more remarkable for its comity than anything else, especially during a time of high partisanship …”
Before the President took office, he also announced his selection of former Pan Am Railways President David Fink to lead the Federal Railroad Administration (FRA). He praised Fink as a “fifth-generation railroader” with decades of experience who “will deliver the FRA into a new era of safety and technological innovation.”
The President’s emphasis on innovation speaks to ongoing freight railroad frustration with FRA inaction on pending waiver requests to deploy advanced safety technology. The new FRA Administrator will face pressing issues, but the pace of technology adoption may be paramount. “Our member railroads want to innovate through new technology and new ways to operate,” said Association of American Railroads (AAR) Senior Vice President Adrian Arnakis. “FRA has not taken timely action to approve or disapprove pending waivers. That’s a problem, because railroads are stuck in place, which does nothing to advance safety and efficiency while the technologies continue to progress.”
Pending waivers include requests to expand test deployment of automated track inspection (ATI) systems and wayside detectors while also reducing required visual inspections. FRA’s rejection and deferral of multiple railroad safety waiver requests led to a Fifth Circuit U.S. Court of Appeals rebuke. In reviewing FRA’s denial of a BNSF petition to expand an ATI pilot, in June 2024 the Fifth Circuit found FRA’s action “to be arbitrary and capricious.” The Court remanded with “instruction [to FRA] to grant the waiver expansion” and noted, “We need not doom BNSF to an endless loop of regulatory activity.”
Following this decision, in October 2024 FRA issued a notice of proposed rulemaking (NPRM) defining “in the public interest” and “consistent with railroad safety” the two core elements of the statutory waiver and suspension standard at 49 U.S.C. 20103(d). Notably, FRA proposed that “in the public interest” means “not only how a proposal for regulatory relief may improve railroad operations, but also how the request may positively affect relevant stakeholders, including workers and communities” (emphasis added).
In November 2024, the AAR announced that the freight rail industry “filed litigation in multiple courts across the nation” challenging FRA’s inaction on “numerous overdue waiver requests … seek[ing] to implement safe and modern railroading technologies.” Then on Dec. 31, 2024, FRA withdrew its safety waiver NPRM “[i]n light of resource constraints” and “because FRA has previously issued guidance on the subject matter covered by the NPRM …”
Charting a path out of this morass will challenge the next FRA Administrator. Getting rail technology adoption right is urgent, because rail competitors pushing autonomous trucks move ever faster. FRA has a daunting agenda, but David Fink would bring to the agency not only freight rail experience but the highest skills, as ASLRRA President Chuck Baker summed up well, as a “high-energy, solution-minded strategist.”
Driving the STB
In one of his last statements as Surface Transportation Board (STB) Chair, in January Robert Primus highlighted for a shipper audience recent STB accomplishments. Primus said that if he had more time to lead the STB, “I would have moved on issues associated with competition, private railcars and commodity exemptions.” He urged Congress to act on STB reauthorization and examine the common carrier obligation. Primus lamented that the STB has not acknowledged and addressed “the pervasiveness of retaliation and intimidation around the network,” as he put it, while at the same time freight rail volumes “continue to decline, even when excluding coal from the analysis.”
Member Karen Hedlund earlier also zeroed in on this growth question. Sizing up the STB’s September 2024 freight rail growth hearing, Hedlund pinpointed “a tale of two cities” and declared, “From our economists and consultants, we heard a pretty grim story. From our Class I railroads, ‘Hey! Look at all the investments we’re making! We’re just doing great!’ And somewhere in between we have to figure out what’s really going on.”
New leadership at the STB will grapple with this and multiple agendas. Patrick Fuchs is now Chair (p. 6) and Michelle Schultz is Vice Chair. A fifth open seat is to be filled. Speaking with Railway Age prior to his appointment, Fuchs said, “I am pleased that the Board has acted collaboratively to conduct rigorous oversight of rail service problems, drive transparency and accountability, institute new protections for railroad customers, and streamline avenues for relief—all through unanimous vote.” Going forward, Fuchs emphasized his commitment to resolve pending matters, and to conducting the Board’s business outside of formal proceedings “with a spirit of openness with the public and robust exchange of ideas, all to facilitate proactive problem solving.”
Schultz, whose term expires in January 2026, has focused on network performance, customer concern, and paths for resolution across the STB’s agenda. She expressed her philosophy to Railway Age: “Railroads will do a much better job of voluntarily assuring service than perhaps any changes driven by regulations. While regulations may correct certain issues, at the end of the day, only the railroad carriers themselves can deliver the good service that meets the needs of their customers.”
No matter how the STB proceeds, alignment with the White House will tighten. Russell Vought, the President’s pick to head the Office of Management and Budget (OMB), told Tucker Carlson shortly after the November elections that “the whole notion of an independent agency should be thrown out.” Said Vought, who also led OMB during the President’s first term, “There are no independent agencies.”
(Reading the play, the California Air Resources Board preemptively withdrew its petition to the Environmental Protection Agency to restrict operation of in-use locomotives. See Financial Edge, p. 9.)
Beyond Vought’s pledge, the Supreme Court will dictate the contour of STB authority. In December 2024, the Court heard arguments in Seven County Infrastructure Coalition v. Eagle County, Colorado over the scope of the STB’s ability to interpret the National Environmental Policy Act as applied to the upstream and downstream environmental impacts of the proposed Uinta Basin Railway in Utah. The fact that the Supreme Court will weigh in on the STB’s power reflects broader currents now raging inside the Beltway.
New Waves
From a freight rail perspective, three policy whitecaps deserve attention. First, the President promised during the campaign to impose “universal” tariffs on all imports into the U.S., plus duties of 25% on trade with Mexico and Canada and more on China. If elevated tariffs arrive, economists warn of trade impacts and consequences for railroads. Among the inefficiencies, as British American Nobel economics laureate Simon Johnson suggested to The New York Times, higher tariffs could drive “a lot more gamesmanship and a lot more effort going into playing the system and getting special breaks …”
Such an outcome would run counter to a second breaker curling over Washington—the new nongovernmental Department of Government Efficiency (DOGE). Led initially by Elon Musk, the world’s wealthiest individual, and Vivek Ramaswamy (who later stepped down from DOGE to run for Ohio Governor), DOGE will pursue “three major kinds of reform: regulatory rescissions, administrative reductions and cost savings.” DOGE leadership opened with a $2 trillion federal spending reduction target.
Mick Mulvaney, a former OMB Director and Chief of Staff to the President in his first term, quipped that “going to Mars is easier” than cutting $2 trillion in federal spending. And Washington Post columnist Dan Balz observed that Elon Musk may not appreciate that the “business of government doesn’t conform to the business of business.”
Still, it is wise to recognize the scale of the crusade that Musk and Ramaswamy launched. In a Wall Street Journal column best read as a mission statement prior to the President’s Executive Order formally establishing DOGE, they asserted, “DOGE will help end federal overspending by taking aim at the $500 billion plus in annual federal expenditures that are unauthorized by Congress or used in ways that Congress never intended.” The authors cited the 1974 Impoundment Control Act, which as they put it “stops the President from ceasing expenditures authorized by Congress,” as ripe for repeal by the Supreme Court.
Executive branch impoundment of Congressionally authorized and appropriated funds could target grants for transportation projects including rail. Deeply trimming federal headcount, moreover, could make the government less capable. “Safety is a core value, and FRA inspectors in the field help assure that all in the rail industry follow the rules,” SMART Transportation Division President Jeremy Ferguson told Railway Age. “DOGE has to consider what’s really important to the public—including safety and security—and not drive heedless reductions that hurt taxpayers more.”
Mixing with DOGE looms a third swell of unknown force. In Loper Bright v. Raimondo (2024), the Supreme Court jettisoned the 40-year Chevron precedent that accorded deference to federal agency decisions unless deemed “arbitrary and capricious.” Overturning Chevron, the Supreme Court 6-3 majority held, “Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.” Pointing to plain words of the 1946 Administrative Procedure Act (APA), the Court rejected the core tenet of Chevron that agencies with their expertise are best suited to interpret laws passed by Congress.
Highlighting Loper Bright and another Supreme Court case limiting agency power, West Virginia v. Environmental Protection Agency (2022), Musk and his then-partner Ramaswamy charged in their WSJ column, “Together, these cases suggest that a plethora of current federal regulations exceed the authority Congress has granted under the law.” DOGE will present “thousands of regulations” to the President for nullification, they pledged, noting that the “use of Executive Orders to roll back regulations that wrongly bypassed Congress is legitimate and necessary to comply with the Supreme Court’s recent mandates.”
Loper Bright opens innumerable battlefields, with long-standing regulatory paradigms now subject to reordered scrutiny. To be sure, Loper Bright has limits: The ruling applies only where Congress was ambiguous, and per the Court does not touch where a “statute’s meaning may well be that the agency is authorized to exercise a degree of discretion.” Loper Bright leaves unaffected judicial deference to agency fact-finding, and makes clear, as the Court said, that “[m]ere reliance on Chevron cannot constitute a special justification” for overturning past cases upholding agency authority.
If it is confirmed following yet more APA-related litigation that Presidential Executive Orders cannot “roll back” regulations permanently, Loper Bright may actually impede the DOGE reform agenda. The same arguments under Loper Bright that an agency overreached its authority also hold where an agency seeks to pare back regulations. As a result, rail industry objectives such as performance-based safety rules now face uncharted obstacles.
Unclear Signals Ahead
The political and policy waves crashing across the nation’s capital seem more likely in the near term to flood the “D.C. swamp” further, not drain it. New tariffs will spawn influence centered on desired exclusions. Advocacy and litigation will accelerate with multiplying legislative, regulatory, policy and funding fights. Loper Bright may cement increased lobbying if Congress depends more on outside experts to craft legislation instructing agencies precisely. With these tides, indicators across the board for policy and funding outcomes are far from clear.
Peggy Noonan, the Pulitzer Prize-winning former speechwriter for President Ronald Reagan, has compiled her best recent columns into a new book, A Certain Idea of America. Her thoughts reprinted from July 2023 apply vividly today. “I think I sense a general mood of carefulness about the future, a sobriety that isn’t down, precisely, but is, well, watchful,” wrote Noonan.
The United States has never required seat belts on trains. But 2025 will be an interesting ride, and freight railroaders approaching Washington should strap in.
Don Itzkoff is Chief Policy Officer for Patriot Rail. He currently serves as a member of the STB Railroad-Shipper Transportation Advisory Council.
