Rail Strike Averted – What Happens Next?

It may not have been an ideal situation, but taxpayers could at least breathe a little easier when, earlier this month, Congress acted to prevent a rail strike with potentially devastating economic and fiscal consequences. Yet, this is hardly the end of important federal rail policy decisions for 2022, and beyond.

This week, the Surface Transportation Board (STB) issued a decision on proposals for settling rate disputes between shippers and rail carriers -- proposals for which NTU has previously submitted several official comments and policy analyses. Of particular interest to taxpayers is the decision’s creation of a new, voluntary Alternative Dispute Resolution (ADR) process that railroads and their customers could use to avoid more formal proceedings where the STB would have even more (and potentially concerning) powers to manage and direct private sector business relationships. As NTU recently wrote:

Based on its experience in designing pro-taxpayer grievance procedures when interacting with the IRS, Alternative Dispute Resolution … offers the prospect of an enhanced arbitration system that is voluntary to enter but ultimately binding.

This structure could not only avoid reliance on schemes with much greater potential for harm to consumers and taxpayers (e.g., reciprocal switching), it could also foster confidence among all actors in the sector that disputes need not be hopelessly adversarial.

No parties to an arbitration process are thrilled at the lack of certainty over outcomes; yet, over time, the process itself becomes institutionalized as those outcomes show a basis on the merits of each case. Accepting [STB] Chairman Oberman’s recent comment that STB does not suffer from “polarization and tribalism,” the Board should be capable of designing FORR and ADR plans that are fair and impartial.

NTU has a long history of experience in advocating for robust ADR procedures in the tax space, for similar reasons. Affording taxpayers the ability to settle disputes out of Tax Court or Federal District Court can save time as well as money for Americans who can afford neither when facing tax controversies, through an avenue for straightforward settlement. Getting this procedure off the ground with the IRS has been difficult, and remains a priority for NTU.

Nonetheless, other federal agencies, like STB, can embrace ADR as well. At one point, STB did so, but a nascent ADR process for shippers and carriers withered several years ago, as our comments from 2019 noted:

Carriers and shippers disagreed on how the pool of arbitrators who preside over rate disputes would be chosen. They also had differing concepts of how arbitrators would be chosen from that pool for specific cases, and how the parties would file challenges to each other’s designees. Another point of contention was whether market dominance could be conceded, or automatically assumed (with a rebuttal opportunity) to apply.  Still more sources of disagreement were over what constituted a “rate dispute,” which methodologies for setting maximum rates would be permitted, and for how long a rate prescription might remain in effect. …

[Yet}, [w]ithout a systematic means of collecting information on the reluctance of parties to utilize this tool, practical improvements became impossible.

Will this new decision provide the ADR process that can cut red tape for everyone, with less burdensome regulatory policy to boot? Will the requirement for all, not just some, Class I railroads to voluntarily agree to the new ADR be a help or a hindrance toward utilizing this tool more often? As with all ADR structures, a great deal depends on the trust that all involved parties will have in the fairness of the process.

This time around, ADR for rate and service disputes needs to succeed, and there will be early clues in utilization rates to show whether additional changes are needed. NTU is still reviewing the decision in detail, and may have further design recommendations. One thing is certain: STB, Congress, and other stakeholders must carefully monitor the implementation of the final decision. NTU will be doing so, and providing encouragement to work out remaining structural matters for an ADR procedure that could, if properly functioning, allow a dynamic sector of our economy to move past many bureaucratic impediments on the tracks ahead.