Freight railroad stakeholders herald 40th anniversary of the Staggers Act

With this week marking the 40th anniversary of the landmark Staggers Act, various freight railroad stakeholders have banded together to take a look back at how it has fundamentally shaped the sector since it was enacted.

The Staggers Act, which was named for the late West Virginia Rep. Harley Staggers and signed into law by President Jimmy Carter on October 14, 1980, has provided myriad benefits for freight railroad stakeholders, according to the Association of American Railroads (AAR).  

AAR explained that, due to the Staggers Act, a strangling web of overburdensome regulations was unwinded and replaced with the market-based system that remains intact today, with railroads now operating akin to most other types of businesses, in terms of managing their assets and pricing their services. What’s more, it added that rail customers, or shippers, have seen the benefits of the Staggers Act, in the form of increased network productivity and reductions in shipper rail rates, which now stand 43% lower than in 1981 when adjusted for inflation.

And AAR added that the Staggers Act has brought other benefits based upon the framework it established. As an example, AAR said that going back to 1980 freight railroads have subsequently invested a cumulative $710 billion into their own operations, at around $25 billion annually in recent years, with these investments helping to “fuel economic growth, help meet growing freight demands and connect American businesses and communities to markets spanning the globe at no cost to taxpayers.”

Many of these same themes were echoed in a letter written by GoRail, a Washington, D.C.-based concern comprised of freight railroad industry stakeholders, on behalf of more than 1,000 individuals, including seven former U.S Transportation Secretaries, former members of Congress, and state and local officials, among others, to the Surface Transportation Board’s (STB) Chairman Ann Begeman, Vice Chairman Martin Oberman, and Board Member Patrick Fuchs. 

“This landmark, bipartisan legislation was necessary because decades of rigidly prescriptive federal overregulation had decimated the U.S. freight rail network,” the letter stated. “Bankruptcies were commonplace, rail rates were rising, safety was deteriorating, and rail infrastructure and equipment were in increasingly poor condition because railroads simply could not earn enough to pay for basic upkeep, let alone innovation and improvements. Since the implementation of a balanced system of economic regulation under the Staggers Act, which protects rail customers while allowing railroads to manage their assets and pricing, U.S. freight railroads have invested hundreds of billions of dollars in the rail network. Rail traffic has doubled, rail productivity has more than doubled, rail rates are down more than 40 percent, and recent years have been the safest on record.”

The letter’s authors also called on the STB to preserve the delicate regulatory balance created by the Staggers Act, which has allowed freight railroads to innovate, adapt, and reinvest in the rail network.

AAR President and CEO Ian Jefferies told LM that the Staggers Act remains one of the most successful bipartisan pieces of legislation enacted by Congress.

“It is hard to believe it has been 40 years, but it is something that our industry is celebrating and recognizing, and our industry is educating and re-educating policymakers and other stakeholders, because the impact of this legislation continues to be felt to this very day,” he said. “When President Carter signed the Staggers Act, he said that it would help assure a strong and healthy future for our nation’s railroad and benefit shippers throughout the country by allowing railroads to improve equipment and better tailor service to shipper needs. That is exactly what became of the legislation…and what it enabled. It is a textbook case of two parties of disparate interests coming together to develop smart commonsense outcomes-based solutions to solve, at the time, what was really a national challenge, which was the health of the freight railroad industry.”

When asked to put the principles of the Staggers Act into perspective, as they related to the era in which it was enacted, Jefferies noted that in 1980, the freight rail sector was not too far off the tracks from being in ruins, with around 25% of the industry at or near bankruptcy.

And he said that the term “a standing derailment” was thrown about, from time to time, which indicated a railroad was collapsing under the unhealthy tracks and equipment underneath it, meaning the industry was in dire straits.

“That was due largely to an overly interventionist federal regulatory role that really controlled how railroads operated, set rates, required service to be run, where it was not rational to run service,” he said. “So the Staggers Act really allowed railroads to start acting in a market as an industry that lets the market dictate rates and lets competition play out. What that did for railroads was to allow them to rationalize their networks, for both the size of the network and the routes that they ran, to start to charge market rates. The outcome of that is a rail network across the country that has been investing billions upon billions of dollars of its own capital back into its network over the past 40 years, resulting in the best condition that this centuries-old industry has ever been in and the envy of the world. You have a railroad operating in the safest manner it has ever operated in, rail rates 42%-to-45% lower, when adjusted for inflation, than they were in 1980, and service is higher.”

He also highlighted that it is a much healthier rail industry that is not reliant on federal intervention, or federal investment, while serving its customers and communities, at a very high level. While this week marks the 40th anniversary of the Staggers Act, various industry groups have threatened its framework by calling for the “re-regulation of the freight railroad sector.

Jefferies explained that there are powerful shipper stakeholder groups keenly focused on taking the freight railroad sector back to what he called a heavy-handed, or federal regulatory, structure. But he said those efforts have largely been squelched, with Congress having repeatedly rejected efforts to cap rates and to dictate how railroads set rates and having gone back to the principles that the Staggers Act set in place.

“Pieces of legislation have been frequently introduced that would set us backwards, but Congress has wisely rejected them time and time again,” he said. “Because, at the end of the day, Congress recognizes that the system worksm, and there is a system in place that allows railroads to thrive, invest, and serve their customers and act as a regulatory backstop for disagreements that are out there.”