Although decades away, the deployment of autonomous trucks in truck-only lanes could potentially be the death knell for the freight railroads should the railroads do nothing to ensure their relevance, an economist said during a recent panel on legacy of the Staggers Rail Act and the Motor Carrier Act.
The Surface Transportation Board (STB) “is going to be regulating a graveyard. There’s a good chance that rail won’t survive once we start moving to autonomous vehicles,” said Clifford Winston, senior economic fellow at the Brookings Institution, at a question-and-answer event on the Staggers Act and the Motor Carrier Act sponsored by the George Washington University Regulatory Studies Center. Winston authored a book about the government’s role in encouraging autonomous vehicles.
This issue of autonomous trucks arose during the Oct. 23 panel because the future of rail regulation and rail rates depends in part on the future of the rail industry overall.
The panel was the third in a three-part series commemorating the 40th anniversary of the Staggers Act and the Motor Carrier Act. Part 1 is available here and Part 2 is available here.
“Concerns now ought to look forward to just how competitive trucks are going to be once they’re autonomous. It doesn’t take much imagination to really think that it’s going to be more than just the labor savings and the improvements in travel time and reliability,” Winston continued.
Once there are autonomous truck-only highways, “there’s no reason we’ll have to be limited to two trailers” that can run throughout the night, he said.
Winston added, “I bring this up simply to raise the question of whether the regulatory agency wants to think in terms of this vision about where the industry is going, and/or the industry and say, look, collectively we may need to think more long term about what we’re going to do because here’s eventually what’s going to happen. That’s a hard thing to expect regulatory agencies to do, but I would encourage the industry to do it because if they wait, it’s going to be much harder for them to adjust.”
Meanwhile, although it’s uncertain how autonomous trucks would affect the need for truck drivers, the deployment of technology within the rail industry could affect the industry’s employee headcount. For instance, the primary roles needed to operate a train are the engineer and the conductor. Other roles, such as switching operators, are no longer needed because of the changes brought about by technology, said James Peoples, economics professor at the University of Wisconsin-Milwaukee.
Should the STB move away from its use of revenue adequacy?
The panelists also discussed the STB’s current and future role as a regulator.
The board’s current role includes deciding whether a shipper has the ability to contest a rail rate under certain market conditions.
Under federal law, STB must determine annually whether a Class I railroad is “revenue adequate.” The purpose of this determination is to ensure that the railroads were generating enough revenue so that they had enough funding to invest in their network infrastructure. Prior to the Staggers Act, many railroads were on the brink of bankruptcy.
But the rail industry has been financially successful in recent years, causing some to question whether the board should consider another measurement that gauges the health of the rail industry. Revenue adequacy is one the factors that the board considers when it decides whether a shipper is allowed to protest a rail rate.
“There is an argument about what constitutes revenue adequacy, but the plain truth is that the railroads are doing a lot better than they used to be … which means that the edifice is perhaps not the best going forward,” said Darius Gaskins, founder and partner of the Brigadier Consulting Group and chairman of the Energy Policy Research Foundation. Gaskins had also served as chairman of the Interstate Commerce Commission from 1980 through 1981, where he supported the passage for the Motor Carrier Act. He served as president and CEO of the Burlington Northern Railroad from 1985 to 1989 as well.
But “what you do about that is a conundrum because everything is set upon that set of principles,” Gaskins continued. “If you do something different, you’re going to need a different methodology, a different set of principles, and I don’t think we have either one of those at this point.”
Panelist Jerry Ellig, GWU research professor, said his personal view was to “run from anything that looks like rate-of-return regulation in this industry, and opt for something better.”
STB General Counsel Craig Keats said the April 2019 report produced by the board’s rate reform task force put out options related to the role of revenue adequacy. The board is considering different remedies for revenue-adequate railroads, but it still needs to move forward with seeing those remedies come to fruition, according to Keats.
STB’s role in the future
Although revenue adequacy is one area that could see regulatory changes, another question is what role the STB should play in the future regulatory landscape.
One area that could see change is whether the approval of mergers should move from the STB to the U.S. Department of Justice since the Justice Department looks at potential mergers from the vantage point of whether a merger would decrease market competition.
Congress would be the governing body that would decide how the STB governs and what role it should have in the future.
“The STB is tied a bit by legislation,” resulting in a status quo bias, and so some legislation would be needed to modernize regulation and change STB’s responses to rate and service issues, according to University of Oregon Professor Wesley Wilson. Wilson was involved with the National Academy of Sciences Committee for Study of Freight Rail Regulation, which published a report on the topic in 2015.
Keats said the board has been working within the parameters given to it to provide some regulatory remedies and address issues such demurrage.
”We are doing our best to step out within the statutory constraints that we have,” Keats said.
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