Two of the most prominent and complex challenges we face today — supply chain slowdowns and rising inflation — could soon be exacerbated if an under-the-radar federal agency greenlights a rule that would make freight railroad operations less efficient.
Those in Chicagoland, the busiest rail hub in the nation, are familiar with the importance of railroads to daily life. Six of the nation’s largest railroads and nearly 1,300 trains pass through our region every day. Chicago, a key transfer point for east-west traffic, sees one-third of the nation’s rail cargo and half of its intermodal traffic. This rail presence is a core and historical economic driver of our city.
We’ve also seen our logistics networks tested in recent months — trains flowing into Chicago with record numbers of containers that then pile up at terminals because of warehousing and trucking shortages. Railroads have addressed these outside bottlenecks where they can by adjusting their operations and expanding capacity. One Chicago railroad covered its own tracks with a mat to stack extra containers, for example, while another reopened a shuttered facility to help handle volume spikes.
These anecdotes were endorsed by a Northwestern University Transportation Center report last year on rail’s role in the supply chain throughout the pandemic. Researchers found that railroads were highly adaptable in meeting consumer demands, providing intermodal capacity when trucking struggled.
This context is important for understanding a proposed “reciprocal switching” rule being considered by the U.S. Surface Transportation Board, or STB, the railroads’ economic regulator. The rule, supported mostly by large chemical shippers, would compel rail companies to open their tracks for use by competitor railroads. While mandated switching would be advantageous for a handful of shippers in the form of lower rates, it would have widespread negative consequences for the rail network and most shippers.
In the short term, mandated switching could create network disruptions that add to our supply chain problems and threaten more inflation. That’s because the rule introduces enormous operational complexity on the rail network — such as requiring railroads to reduce their capacity and efficiency.
Over the long term, the rule would create uncertainty about whether a given railroad may be compelled to cede traffic and revenues to a competitor, despite its ownership of the infrastructure. This creates a lack of incentive to keep investing what is needed to maintain healthy railways. For context, in recent years, U.S. railroads have spent a collective $25 billion annually on their networks. But mandated switching would undercut this spending, resulting in worse service for shippers and freight diverted from rail to road.
Chicago’s own Marty Oberman, a former alderman and Metra board member, is chairman of the STB. In reference to the law that economically deregulated railroads 40 years ago, Oberman has pointed out that 2022 is not 1980. And he is correct — the freight landscape is more competitive today.
Technological advances such as automation and evolving supply chains have altered logistics. The Northwestern report echoes this point, noting that as consumer demands change, as with e-commerce, rail “regulatory and investment policies should keep these long-term shifts in mind and remain neutral in the competition among freight modes.”
A broad range of groups is opposed to mandated switching, from major rail shippers and rail labor to passenger rail and environmental groups. The Intermodal Association of North America has said it would lead to a deterioration in intermodal service. Metra recently filed in opposition to the policy, citing concerns about its impact on passenger operations in Chicago, while Amtrak has stated in the past that it is particularly concerned with the impact of switching in Chicago, its most important connecting hub. Several state and local leaders, including me, also recently wrote the STB to oppose the policy.
Communities across Illinois and Chicagoland are tied to the railroads, which support local development and jobs, as well as less congestion and carbon emissions.
By all objective measures, the current balance of rail regulation is working — for the economy and for consumers. Let us hope the STB keeps the future of rail in mind during its deliberations.
Illinois state Rep. Marcus Evans Jr., a Chicago Democrat, is chairman of the Labor and Commerce Committee.