The Surface Transportation Board (STB):
January 19, 2022
Background and Current Issues
Ben Goldman
The Surface Transportation Board (STB) was created by Congress in 1995 to replace the
Analyst in Transportation
Interstate Commerce Commission (ICC) as the economic regulator of providers of interstate land
Policy
and water transportation. It most often deals with issues facing the railroad industry. STB is

smaller in size and more limited in regulatory reach than its predecessor, and the powers that it
inherited upon its creation are more limited than those the ICC possessed prior to the

deregulatory initiatives of the 1970s and 1980s.
Railroads are generally far freer to set their own cargo carriage rates under STB than they were under the ICC. However,
STB retains the power to impose maximum rates in situations where the railroad is considered “market dominant,” and if the
rate quoted by the railroad is deemed unreasonable. The definition of market dominance is a mathematical one, based on
complex assumptions about railroad operating and capital costs, and the process to challenge the reasonableness of a rate can
be costly and time-consuming.
Related to the rate reasonableness issue is the potential for customers to obtain service from a competing railroad that may
offer a better rate but lacks access to the shipper’s facilities. STB has the authority to prescribe such arrangements, but has
rarely done so. Procedures to expedite the determination of market dominance, to reduce the burdens associated with minor
rate disputes, and to reexamine competitive access and reciprocal switching policies are currently under consideration by
STB. A perennial concern is the treatment of shippers that claim to have no other economically viable alternatives for freight
transportation than a single railroad company. These so-called captive shippers frequently complain about what they
characterize as monopolistic behavior on the part of railroads. One behavior to come under scrutiny more recently is the
approach railroads take to assessing “demurrage” fees on customers who exceed allotted time for loading or unloading of
railcars. In 2021, STB ordered large railroads to disclose demurrage fees more clearly to shippers.
In addition to its limited powers to set maximum rates, STB has authority over railroad corporate mergers and acquisitions. It
may approve such transactions only when it finds them to be “in the public interest.” Following a surge in activity during the
1970s and 1980s, which saw competing railroads consolidate their networks to take advantage of economies of scale and
shed redundant capacity, no major railroads have successfully combined since the mid-1990s. STB updated its merger
policies in 2001, setting a somewhat higher bar for major railroad mergers. Two railroad mergers involving at least one large
railroad are currently pending before the board.
STB occupies a limited but growing role in the regulation of passenger rail. The creation of Amtrak and commuter rail
authorities in the 1970s and 1980s helped return the private rail sector to profitability, but resulted in passenger rail carriers
depending on access to tracks they do not own, with dispatching outside their control. If disputes arise between Amtrak and a
freight railroad over the terms of access to tracks and facilities, STB is empowered to adjudicate them, but Amtrak’s network
has seen little change in recent decades, so this power has been rarely exercised. The American Infrastructure and Jobs Act
(IIJA) of 2021 (P.L. 117-58) directs STB to hire additional staff to handle passenger rail issues; it also provides funding for
expansion of passenger rail service, potentially creating additional conflicts between Amtrak and freight railroads that STB
may be asked to adjudicate. In the Passenger Rail Improvement and Investment Act of 2008 (P.L. 110-432), Congress
empowered STB to monitor the on-time performance of Amtrak trains on freight tracks and penalize host railroads for
obstructing passenger traffic, something it could not previously do. A series of court challenges effectively prevented these
provisions from taking full effect until 2021, and STB has yet to render decisions under this authority.
STB also retains some regulatory power over interstate commerce by motor carrier, water carrier, and pipeline, though these
represent a small fraction of its annual workload.
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The Surface Transportation Board (STB): Background and Current Issues

Introduction
The Surface Transportation Board (STB) is an independent federal agency tasked with economic
regulation of common carriers engaged in interstate commerce.1 It most often deals with issues
facing the railroad industry (which will be the focus of much of this report), but its authority also
extends to motor carriers, waterborne carriers, and pipelines under certain circumstances.
Railroads have been regulated at the federal level since 1887, when Congress created the
Interstate Commerce Commission (ICC).2 When many large railroads began to fail in the 1960s
and 1970s amid intense competition from truckers and airlines, Congress began relaxing some of
the rules governing the industry, granting railroads considerable freedom to set freight rates and
terminate unprofitable services.3 In 1995, Congress replaced the ICC with STB, a new agency
smaller in size and more limited in regulatory reach.4
The law that abolished the ICC and created STB, the Interstate Commerce Commission
Termination Act of 1995 (P.L. 104-88), began with a 13-point articulation of national policy that
included, among other elements,
In regulating the railroad industry, it is the policy of the United States Government [ ... ] to
allow, to the maximum extent possible, competition and the demand for services to
establish reasonable rates for transportation by rail; [ ... ] to minimize the need for Federal
regulatory control over the rail transportation system [and] to reduce regulatory barriers to
entry into and exit from the industry [ ... ].5
The environment surrounding the railroad industry in the 2020s is considerably different from
that of half a century ago. At that time, a series of bankruptcies threatened the ability of the rail
system to reliably move freight, to the extent that several failed railroads serving the Northeast
and the Midwest were taken into federal ownership6 and regulators gave priority to the railroads’
ability to operate self-sufficiently. In recent decades, the railroad industry, having shed excess
capacity and transferred responsibility for passenger transportation to Amtrak or public
authorities, has consolidated into a handful of consistently profitable companies. The extent of
railroads’ power over freight shippers has arguably become a larger issue for STB than ensuring
the survival of the industry.
In recent years, Congress has commissioned studies and solicited input from carriers, shippers,
and others concerning STB’s role and procedures:
 The Safe, Accountable, Flexible, Efficient Transportation Act of 2005 directed
the Secretary of Transportation and the Transportation Research Board (TRB) of
the National Academy of Sciences to publish a comprehensive study of the

1 A “common carrier” is a person or corporation that holds itself out to the general public to transport property or
passengers for compensation and must do so upon reasonable request for service.
2 Interstate Commerce Act, 24 Stat. 379.
3 The main deregulatory law was the Staggers Rail Act (P.L. 96-448) of 1980.
4 STB is one of several agencies that inherited powers once held by the ICC. Many former ICC functions have been
transferred to modal administrations at the U.S. Department of Transportation, including the Federal Railroad
Administration (in 1970) and the Federal Highway Administration (in 1980, until a separate Federal Motor Carrier
Safety Administration was created in 2000).
5 49 U.S.C. §10101(1), (2), and (7).
6 This process was initiated under the Regional Rail Reorganization Act of 1973 (P.L. 93-236), which led to the
creation of the federally owned Consolidated Rail Corporation (Conrail) pursuant to the Railroad Revitalization and
Regulatory Reform Act of 1976 (P.L. 94-210).
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nation’s railroad system since 1980, including the future role of STB in
regulating the industry (P.L. 109-59, §9007). Funding for the study was
appropriated in 2011, and the study report was published in 2015.7
 The STB Reauthorization Act of 2015 (P.L. 114-110, §15) commissioned a study
of the sufficiency, complexity, and cost-effectiveness of STB’s methodologies to
resolve major rail rate disputes, and of whether additional methodologies might
constitute an improvement while remaining consistent with sound economic
principles. The study report was published in 2016.8
 The Fixing America’s Surface Transportation Act of 2015 (P.L. 114-94, §11311)
directed the Secretary of Transportation to evaluate passenger and freight rail
systems’ shared use of railroad rights-of-way and the operational, institutional,
and legal structures—including the current and future role of STB in these
structures—that would best support improvements to such arrangements. The
study report was published in 2017.9
STB Governance and Structure
At its inception, STB was an agency administratively aligned to the U.S. Department of
Transportation, though it had independent decisionmaking ability. It became an independent
agency under the Surface Transportation Board Reauthorization Act of 2015 (P.L. 114-110),
which also increased the number of board members from three to five and amended some of the
agency’s powers and requirements. Despite the new seats, no more than three members served
concurrently until 2021, when the last two vacancies were filled.
The five members of STB, called commissioners in a continuation of ICC-era practice, issue
decisions after weighing filings by one or more parties. By statute, board members are appointed
by the President (subject to confirmation by the Senate), may serve a maximum of two five-year
terms, and may remain in office for up to one year after the expiration of a term if a replacement
has not yet been confirmed. Not more than three members may belong to the same political party.
The board can be likened to some degree to a court, in that commissioners consider petitions
brought by various parties and hear arguments and motions offered by attorneys for the parties,
and a concurring majority issues decisions based on legal tests and following agency precedent.
However, the board also has the power to initiate its own proceedings in some cases, conduct
investigations, and carry out a number of support functions relevant to its rulings (e.g., STB may
serve as the lead federal agency managing an environmental review pursuant to the National
Environmental Policy Act). Some proceedings may require oral hearings, while others involve
only written submissions. When a case docket is open, outside parties such as Members of
Congress, local officials, or members of the public may enter written comments into the records
of the proceedings.
Certain railroad actions expressly require STB review and approval under federal law, while
others may be challenged in an STB proceeding. Before 1980, many proposed changes to railroad
operations, pricing, or ownership or control were likely to require ICC approval. By comparison,

7 National Academies of Sciences, Engineering, and Medicine, Modernizing Freight Rail Regulation, Washington, DC,
2015, at http://nap.edu/21759.
8 InterVISTAS Consulting Inc., An Examination of the STB’s Approach to Freight Rail Rate Regulation and Options
for Simplification, Surface Transportation Board, September 14, 2016, at https://prod.stb.gov/wp-content/uploads/STB-
Rate-Regulation-Final-Report.pdf.
9 Federal Railroad Administration, Report to Congress: Shared-Use of Railroad Rights-of-Way, Washington, DC, July
2019.
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far fewer actions—mainly those involving a change in ownership or control—now require STB
approval, and the threshold for approval tends to be lower. Moreover, many STB decisions are
determinations that an action is exempt from further STB review, as is often the case with
proposed service discontinuations or track abandonments. In FY2020, the most recent year for
which data are available, STB issued 419 decisions, of which 156—37%—concerned exemptions
from further STB review (Table 1).
Table 1. STB Decisions Issued, FY2018-FY2020
Decision Type
FY2018 FY2019 FY2020
Complaints
46
32
31
Rate
16
7
0
Non-Rate
30
25
31
Declaratory Orders
53
40
33
Ex Parte Proceeding Decisions
43
53
57
Rulemakings
21
25
32
Other
22
28
25
Licensing
310
377
266
Applications/Petitions
57
85
70
Notices of Exemption
185
224
156
Other (incl. Grant Stamps)
68
68
40
Nonrail Decisions
9
3
4
Other
20
10
28
All Decisions
481
515
419
Source: STB Budget Requests.
Notes: STB introduced the current classification of the agency’s
workload for reporting purposes in FY2018; figures for prior years
unavailable.
STB has consistently employed between 100 and 200 personnel since its founding. By contrast,
the ICC employed over 2,000 personnel at its peak, though at the time of its dissolution it
employed roughly 400. A portion of STB’s operating budget, which was just under $37 million in
FY2020, is derived from the fines it collects (see Table 2).
Table 2. STB Operating Budget, FY2016-FY2020
(in thousands of nominal dollars)

FY2016 FY2017 FY2018 FY2019 FY2020
Salaries & Expenses
31,390
32,257
34.998
35,258
36,625
Offsetting Col ections
643
633
458
736
814
Source: STB Budget Requests.
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Authority to Set Maximum Rates
Historically, railroads’ status as common carriers meant that they could not be arbitrary or
discriminatory in the rates they charged their customers or in the services they provided. Under
the ICC, freight rates were tightly controlled and made to comply with pricing guidelines
(“tariffs”) that applied broadly to most railroads and commodities. The commission frequently
considered complaints that a railroad was unreasonably favoring one shipper, one community, or
one commodity over another, and it was empowered to initiate inquiries into pricing compliance.
A 1976 law gave railroads limited flexibility to set rates without ICC approval and to enter into
contracts with customers using a negotiated rate instead of using a common carriage rate.10 Since
1980, such contracts have been confidential, giving railroads further flexibility to customize rates
for individual customers. However, not all rail freight is handled in this manner.
STB retains authority to set a “reasonable” maximum price for common carriage, but only in
response to customer complaints (it cannot initiate its own rate inquiries) and only in cases where
the railroad company is “market dominant”—that is, where no economically viable other
transportation option exists. In such cases, STB is constrained by law to impose a rate no greater
than 180% of the railroad’s “variable cost” of providing the service in question. STB determines
the variable cost by employing the Uniform Railroad Costing System (URCS) adopted by the
ICC in the 1980s.
There have been 51 rail rate cases brought before STB since its creation. STB has issued a
reasonableness ruling in under half of these; the remainder were either withdrawn or settled by
the parties before STB issued a decision (Table 3).
Table 3. STB Rail Rate Case
Table 4. STB Rail Rate Case Methods
Outcomes Since 1996
Used Since 1996
Outcome
Number of Cases
Method
Number of Cases
Rates reasonable
11
Stand-Alone Cost (SAC)
37
Rates unreasonable
11
Simplified SAC
5
Settlement reached
27
Three-Benchmark
5
Complaint withdrawn
2
Stipulated 180% rate-to-
4
Total
51
variable-costs (R/VC)
Total
51
Source: STB, Report on Rate Case Review
Metrics, Third Quarter, October 1, 2021,
Source: STB, Report on Rate Case Review
https://prod.stb.gov/wp-content/uploads/Report-on-
Metrics, Third Quarter, October 1, 2021,
Rate-Case-Review-Metrics-Third-Quarter-
https://prod.stb.gov/wp-content/uploads/Report-on-
October-1-2021.pdf.
Rate-Case-Review-Metrics-Third-Quarter-
October-1-2021.pdf.
Even though shippers occasionally file rate- or service-related complaints with STB, no formal
rate cases have been argued before the board in several years. Some shippers complain that the
process of formally challenging a rate is too costly to pursue. Using what is known as the Stand-
Alone Cost (SAC) method, a shipper challenging a rate must essentially design a hypothetical,
completely new railroad capable of handling its traffic and calculate the rates that railroad would
charge given the costs associated with operating the route (including other hypothetical revenue-

10 Railroad Revitalization and Regulatory Reform Act (P.L. 94-210).
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generating traffic it would carry). If STB were to find that the real-world railroad is charging a
shipper more than this hypothetical railroad would, it would rule the rate unreasonable, and the
hypothetical rate would become the new maximum allowable rate.11
The SAC process is very detailed, requires extensive documentation, depends on assumptions
derived from the URCS, and frequently results in prolonged litigation. When it established STB,
Congress directed the newly formed agency to develop ways to resolve rate disputes that would
be more accessible to shippers in cases where a full SAC process would be too costly to pursue.12
In 1997, STB established two alternative methods of determining whether a rate is unreasonable,
the Simplified SAC and Three-Benchmark methods. These alternatives, which have been revised
several times since their creation, are notionally simpler than the Stand-Alone Cost method in that
they require less evidence to be submitted by the shipper, rely on less-intricate calculations, and
impose stricter timelines on when a decision must be reached. Alternatively, the parties may
stipulate that STB should simply impose the maximum rate allowed, equal to 180% of the
variable cost of providing the service, instead of a hypothetical competitor’s rate. The SAC
method has been used in the majority of rate complaints adjudicated by STB (Table 4).
There is dispute as to whether the statutory definition of market dominance blocks STB from
granting relief to shippers who claim to have no economically viable alternative to transportation
other than a single railroad. These entities often refer to themselves as “captive shippers,” and
they generally tend to be customers who cannot ship their product economically by truck because
of its bulk and who lack viable access to a navigable waterway to ship by barge.13 The term
“captive shipper” is not defined in law, however, and shippers in a wide variety of situations have
asserted that they are captive to a single railroad.14
Proposals for Reform in Rate Reviews
Proposals to reform the rate review process have ranged from subtle adjustments to near-total
overhauls. The 2015 TRB report recommended abandoning the uniform rail costing system,
repealing the 180% variable cost ratio threshold for market dominance, and replacing the entire
rate reasonableness hearing process with a new system of accelerated arbitration.15 (Repealing the

11 Related to the concept of rate reasonableness, but not an explicit factor in STB’s power to set maximum rates, is
revenue adequacy. A railroad can be considered revenue adequate if its operating revenues are enough to cover the
necessary costs of providing service. STB publishes an annual list of which railroads qualify as being revenue
adequate, including an annual recalculation of the Railroad Cost of Capital, a measure of return on investment that is
one component of STB’s revenue adequacy formula and also a component of SAC calculations.
12 P.L. 104-88, 49 U.S.C. §10701(d)(3).
13 See CRS Report RL34117, Railroad Access and Competition Issues, by John Frittelli.
14 For example, DuPont, a chemical company, has asserted in the past that its Spruance plant was captive to CSX
Transportation. The plant is located just south of the city of Richmond, VA, along CSX tracks. Bordering the other side
of the plant is Interstate 95. Across the highway is the Port of Richmond on the James River. This port provides a 25-
foot deep shipping channel to Norfolk. Three miles downriver from the Port of Richmond, DuPont owned a wharf
along the river where it received bulk material by vessel. The river terminal was also served by CSX. CSX’s
competitor, Norfolk Southern Railroad, can be accessed approximately 6 miles north of the plant in Richmond or about
15 miles south of the plant in Petersburg. DuPont’s definition of captivity would appear to have been based on the
claim that none of these nearby alternatives was economically viable for shipping some of the plant’s inputs or outputs.
See written testimony of Gary Spitzer, Vice President/General Manager DuPont Chemical Solutions Enterprises, House
Transportation and Infrastructure Committee Hearing 110-70, Rail Competition and Service, September 25, 2007, p.
648.
15 National Academies of Sciences, Engineering, and Medicine, Modernizing Freight Rail Regulation, Washington,
DC, 2015, pp. 5-6, at http://nap.edu/21759.
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statutorily defined 180% threshold can only be accomplished by Congress, not by STB.) The
2016 InterVISTAS report found that the SAC process, while often difficult to justify in terms of
time and expense, is nonetheless an appropriate process to follow in large rate cases, and that the
existing alternative methods (simplified SAC and three-benchmark) offer viable alternatives and
may not benefit from further streamlining.16 In January 2018, STB convened a Rate Reform Task
Force to recommend options for more accessible and less burdensome ways to challenge rail
rates. The task force report, published in April 2019, made several recommendations, including
providing less costly ways of resolving small rate disputes.17
STB has begun to act on some of these recommendations. In 2019, it initiated rulemakings that
would (1) streamline the process by which a complaining shipper could demonstrate a railroad’s
market dominance and (2) establish a new dispute resolution procedure known as Final Offer
Rate Review (FORR).18 The market dominance proposal would establish six “prima facie factors”
that, when demonstrated to exist by a complaining shipper, would constitute sufficient evidence
to show market dominance, effectively bypassing the need for STB to conduct its own qualitative
analysis. Under FORR, parties would furnish STB with a packet of evidence and documentation
to support their demanded rates, and STB would select a single party’s package when rendering a
decision. The parties could reply to each other’s submissions, but would not be permitted to alter
their offers or supporting materials. Both arrangements would be intended to provide a shorter
and more predictable time frame for moving through the various steps in resolving rate disputes,
and would limit opportunity to extend costly and time-consuming litigation.
The streamlined market dominance regulation was adopted in 2020; no rate cases pursuant to the
new regulation have been opened yet. A supplementary notice was published in 2021 to solicit
additional feedback on the FORR program, alongside a new proposed rulemaking that would
create a voluntary third-party arbitration process for small rate claims.19 STB lacks the authority
to compel the use of third-party arbitration of rate disputes. STB regulations have permitted the
use of voluntary arbitration to resolve certain other types of disputes, although this procedure has
been used infrequently.
The largest railroads have generally opposed the FORR proposal but have generally supported the
creation of a voluntary arbitration pilot program for small rate disputes.
“Captive Shippers” and Competitive Service
Besides imposition of maximum rates, shippers have sought expanded access to other remedies
that STB is authorized to grant, including competitive access and reciprocal switching (also
referred to, usually by opponents, as Forced Access and Forced Switching). The central idea of
each remedy is similar: a customer who is physically served by only one railroad would be able to
solicit service from a different railroad to reduce costs and/or improve service. Under competitive
access, a competing railroad would be granted access to the incumbent railroad’s infrastructure to
allow it to serve the customer’s premises directly; under reciprocal switching, the incumbent
railroad would be directed to haul the customer’s freight as far as an interchange point with a

16 InterVISTAS Consulting Inc., An Examination of the STB’s Approach to Freight Rail Rate Regulation and Options
for Simplification, Surface Transportation Board, September 14, 2016, pp. 157-158.
17 Rate Reform Task Force, Report to the Surface Transportation Board, April 25, 2019, p. 11, at https://www.stb.gov/
wp-content/uploads/Rate-Reform-Task-Force-Report-April-2019.pdf.
18 84 Federal Register 48872 and 48882, September 17, 2019.
19 86 Federal Register 67588 and 67622, November 26, 2021.
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competing railroad and then hand it off to the competitor. Under either arrangement, the
incumbent railroad would receive a fee, but much of the revenue would go to the competing
railroad. Either remedy would give shippers greater bargaining power with respect to rail carriers.
Under existing standards, adopted by the ICC in 1985, STB can authorize a reciprocal shipping
agreement only if the shipper can show that it is necessary “to prevent an uncompetitive act.”20
This has proven to be a high bar, as few reciprocal switching petitions have been filed since 1985
and none have ever been granted. The 2015 TRB report recommended that reciprocal switching
agreements be included among the remedies STB can prescribe during rate disputes.
STB proposed a new standard for reciprocal switching agreements in 2016, which would instead
require that shippers show the proposed arrangement is “practicable and in the public interest” or
“necessary to provide competitive rail service,” in line with STB’s statutory authorities.21 STB’s
proposal was roundly opposed by the railroad industry, and it has not been adopted. A hearing on
reciprocal switching is scheduled for 2022, signaling that STB remains interested in the issue.
Demurrage Charges and the Railcar Supply
While many rail customers own their own or lease their own railcars, customers sometimes use
railcars that are owned by the rail carriers themselves. Customarily, a rail carrier will allow its
railcars to remain at a customer’s facility for a certain amount of time (“free time”) for loading
and unloading, but if the customer keeps the railcars for longer than initially stipulated
(“demurrage time”), it will incur a fee. During deregulation in the 1970s and 1980s, railroads
gained flexibility to establish individual free time and demurrage charges instead of complying
with a set of uniform rules for all customers. Demurrage charges offset costs that delays pose to
rail carriers, and serve to incentivize the efficient utilization of the pool of available railcars.22 In
recent years, however, customers have complained of demurrage policies that feature higher fees
and less “free time.” This has coincided with the rise in popularity of “precision scheduled
railroading” (PSR), a set of industry practices designed to maximize efficient use of railroad
assets, among the largest railroads.
STB held a hearing on this issue in May 2019, and issued a proposed policy statement the
following October detailing how it would assess the reasonableness of demurrage policies.23 In
response to shipper complaints that railroads provide little notice for them to prepare for changes
in free time or demurrage rates, STB concurrently adopted a rule in April 2021 requiring Class I
railroads—those with annual operating revenues above $504 million24—to more clearly and
consistently disclose certain information in demurrage invoices.25 Starting in 2018, STB has also
asked all Class I railroads to disclose the amount of demurrage fees they collect on a quarterly
basis. Though this is not a regulatory requirement, all Class I railroads have so far complied, and
STB makes their submissions available to the public on its website.26

20 49 C.F.R. §1144.2(a)(1).
21 81 Federal Register 51149, August 3, 2016; see also 49 U.S.C. §11102(c).
22 Maintenance of an adequate supply of railcars is in fact a statutory requirement; see 49 U.S.C. §10746.
23 STB Docket No. EP 757, decision no. 47133, decided October 4, 2019, at https://dcms-external.s3.amazonaws.com/
MPD/48301/7EBA2E5972A0ECE8852584AC00138BED/47133.pdf.
24 Class I railroads were defined by the ICC in 1992 as those having annual operating revenues of at least $250 million,
and the amount is adjusted for inflation each year.
25 86 Federal Register 17735, April 6, 2021.
26 Surface Transportation Board, Demurrage & Accessorial Charges: Board Letters and Quarterly Reports, at
https://www.stb.gov/reports-data/demurrage-accessorial-charges/.
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Freight Railroad Mergers and the Public Interest
Railroad company mergers and acquisitions (or “changes in control”), including the acquisition of
one company’s railroad line(s) by another, must be approved by STB. This approval depends on
different factors according to the complexity of the transaction:
 Any merger involving more than one Class I railroad is automatically considered
a “major” transaction subject to the highest level of STB scrutiny.
 Other transactions can be deemed “significant” (entailing an elevated level of
scrutiny) or “exempt” (no longer requiring STB review prior to approval) if
certain conditions are met.
 All other transactions are considered “minor.”
Federal law holds that STB “shall approve and authorize a transaction [ ... ] when it finds the
transaction is consistent with the public interest,” and may impose conditions on the transaction.27
In minor or significant transactions, STB is essentially directed to approve all transactions unless
there is likely to be a substantial lessening of competition, or if any anticompetitive effects of the
transaction outweigh the public interest in meeting significant transportation needs.28 Determining
what is and is not in the public interest is therefore central to STB’s review of proposed mergers
and acquisitions.
The 1970s and 1980s saw many railroad mergers. In some cases, these transactions enabled the
surviving railroads to consolidate their networks by abandoning or selling off parallel lines. In
other instances, end-to-end mergers allowed railroads to improve profitability by carrying long-
haul traffic greater distances, often leading to the divestiture of lightly used lines to smaller “short
line” railroads. This merger wave left seven Class I carriers controlling almost all long-distance
freight traffic in the United States and Canada.
STB revised its merger regulations in 2001, creating a higher bar for transactions involving
multiple Class I railroads. Under the previous standards, Class I carriers intending to merge had
to demonstrate to STB that the level of competition would remain unchanged following the
transaction, but since 2001 such transactions will be approved only if the parties can demonstrate
that competition will be enhanced as a result. Since the revised regulations were implemented,
most railroad mergers and acquisitions have involved smaller carriers, as potential mergers
among Class I carriers have triggered strong enough objections that the parties never formally
applied for STB approval. For example, Canadian Pacific Railway explored mergers with CSX
Transportation in 2014 and with Norfolk Southern in 2020, but neither was consummated.
The Acquisition of Kansas City Southern (KCS)
In March 2021, Class I railroads Canadian Pacific (CP) and Kansas City Southern (KCS)
announced a merger agreement. In April, another Class I carrier, Canadian National (CN),
submitted a competing proposal to acquire KCS, which KCS accepted in May before ultimately
accepting another counteroffer from CP in September.
When STB adopted new merger regulations in 2001, it granted KCS—the smallest of the Class I
railroads—a waiver that allows it to meet the less stringent pre-2001 standards in the event of a
merger proposal. The reasoning at the time was that KCS was small enough that its involvement

27 49 U.S.C. §11324(c).
28 49 U.S.C. §11324(d).
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in a merger would present fewer anticompetitive effects than a merger between any two of the six
larger railroads. On April 23, 2021, STB affirmed that it would allow KCS and CP to invoke this
waiver, noting that the combined system would still be the smallest Class I railroad based on U.S.
operating revenue and that the merger would join two railroads whose routes meet end-to-end
without major overlap. The overlap of CN’s and KCS’s existing routes factored into STB’s May
17 decision to apply the newer set of rules in CN’s case, as an overlapping network could reduce
options for some shippers and therefore might not be in the public interest. (A combined KCS-CN
system would have become the third-largest Class I railroad.) When KCS accepted CP’s
counterproposal, STB clarified that it would continue to abide by its decision to honor the waiver
and apply the older set of rules.
The merger application of KCS and CP is still awaiting final STB approval. In December 2021,
shareholders of both companies approved the deal, and shares have been placed into a “voting
trust” that consolidates ownership in anticipation of final approval.
Acquisition of Pan Am Railways by CSX Transportation
CSX Transportation announced an agreement to purchase Pan Am Railways,29 a smaller Class II
railroad in New England, in November 2020. CSX has limited access to markets in New England,
where Pan Am, which operates over 1,200 miles of track in five New England states and New
York, is an important player. In its initial filing, CSX described the acquisition as a “minor”
transaction, but STB determined in March 2021 that it would be evaluated as a “significant” one.
This merger is also awaiting final STB approval. Though a “significant” transaction does require
a more thorough evaluation process than a “minor” one, STB has affirmed that no environmental
or historical reviews will be needed to complete the deal. CSX anticipates being able to close the
transaction in May 2022, but this is far from certain. For comparison, Class I railroad Canadian
National proposed in September 2007 to acquire the Elgin, Joliet and Eastern, a Class II carrier in
Illinois, in what STB termed a “minor” transaction, but CN was required to agree to a number of
measures, such as building several road bridges over its tracks to mitigate local concerns, before
receiving final STB approval in December 2008.
Passenger Rail
The prevailing model of passenger rail service involves the national intercity carrier Amtrak or a
commuter rail authority operating trains over tracks owned by some other entity. On the
Northeast Corridor (NEC) line connecting Boston, New York City, and Washington, DC, much of
the infrastructure is owned by Amtrak, and it is heavily used by commuter trains making local
stops. Outside the NEC, tracks are generally owned by freight railroads, or at least shared with
freight rail traffic. Limited-stop intercity trains, commuter trains, and freight trains all have
distinctly different operating patterns and infrastructure needs. This occasionally results in
disputes between freight rail owners and passenger operators over the terms of shared use. STB is
the agency with jurisdiction to resolve these disputes.
This role may take on additional importance as Congress makes large infusions of funding
available for states to expand passenger rail service. The Infrastructure Investment and Jobs Act

29 Pan Am was known as the Guilford Transportation System until 2006. It acquired the branding rights from the
defunct Pan American World Airways in 1998.
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(IIJA) of 2021 directs STB to hire up to 10 employees to staff a new passenger rail program to
carry out the board’s passenger rail responsibilities.30
Track Access
Plans for expanded passenger rail service have generally assumed that Amtrak would operate
trains over existing freight tracks, but freight railroads often demand that additional infrastructure
be constructed at public expense on the grounds that without added capacity the passenger traffic
would interfere with freight trains.
One such dispute involves service along the Gulf Coast. This route was previously served by the
long-distance Sunset Limited train, which ran once daily in each direction between Los Angeles,
CA and Orlando, FL prior to the suspension of all service east of New Orleans, LA as a result of
Hurricane Katrina in 2005. Amtrak has proposed to restore service over a portion of the route by
operating two daily trains in each direction between New Orleans and Mobile, AL. Congress
created a grant program intended to fund a portion of the restored route’s operating costs in 2015.
The route was selected to receive federal funds from this program in 2020, but progress has been
slowed due to claims by the intended host railroads, Norfolk Southern Railway and CSX
Transportation, that Amtrak’s service will delay freight trains unless Amtrak pays for additional
infrastructure. The dispute has come before STB for adjudication, in an early test of the board’s
attitude toward passenger rail expansion plans to be paid for with funds authorized in the IIJA.
Once a passenger service is operational, federal law provides that Amtrak trains shall receive
“preference over freight transportation in using a rail line, junction, or crossing unless the
[Surface Transportation] Board orders otherwise [ ... ].”31 In practice, however, Amtrak has
frequently complained of delays to its trains from freight train interference.32 The freight railroads
that own the tracks generally control train movements, and Amtrak has asserted that they often
give priority to their own freight trains while requiring passenger trains to wait for clearance to
move.
Unlike Amtrak, commuter railroads and potential private-sector passenger train operators do not
have a statutory right of access to freight rail infrastructure or preference over freight traffic. They
face many of the same issues related to access charges and schedule reliability, but must seek to
resolve those through negotiations with track owners.
On-Time Performance
The Passenger Rail Investment and Improvement Act of 2008 (PRIIA; P.L. 110-432, Div. B)
directed the Federal Railroad Administration and Amtrak, in consultation with STB and other
railroads, to establish metrics and standards for on-time performance of Amtrak trains operating
on freight railroad tracks. As enacted, the law contained a provision—Section 207(d)—allowing
STB to resolve disputes between the parties negotiating these standards by appointing an

30 P.L. 117-58 , §22309.
31 49 U.S.C. §24308(c).
32 For example, “A legislative fix is necessary to remedy poor on-time performance and ensure host railroad
compliance with existing Federal law which requires that Amtrak passenger trains be given preference over freight
transportation. [ ... ] In addition, legislation is needed to provide a fair and expeditious process for determining
appropriate compensation for the use of host railroad infrastructure to support the expansion of Amtrak service to
underserved communities.” Amtrak, General and Legislative Annual Report & Fiscal Year 2020 Grant Request, March
19, 2019, p. 33, at https://www.amtrak.com/content/dam/projects/dotcom/english/public/documents/corporate/reports/
Amtrak-General-Legislative-Annual-Report-FY2020-Grant-Request.pdf.
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arbitrator after an initial deadline had passed, but that provision was eventually “severed” in a set
of federal court rulings.33 A set of standards issued in 2010 (but never enforced) was therefore
voided, and new standards were issued by regulation in 2020.34
Under the regulation, STB can initiate an investigation at the request of Amtrak, of a host
railroad, or on its own accord if an intercity passenger train fails to meet the on-time performance
standards for two consecutive quarters. If STB finds that on-time performance has suffered as a
result of host railroads’ failure to honor Amtrak’s statutory priority over other types of rail traffic,
it may award damages to Amtrak.
The new standards—which measure the percentage of riders who arrive at their ticketed
destinations on time (“customer on-time performance”) rather than the percentage of passengers
or trains arriving at the train’s final destination on time—did not enter into effect until July 1,
2021, two full calendar quarters after the publication of the final rule. During that time, host
railroads and Amtrak were free to renegotiate schedules. Host railroads specifically requested a
grace period to negotiate new schedules during the rulemaking process on the grounds that prior
schedules were not formulated with the new metrics in mind.
Some passenger rail supporters have cautioned that renegotiated schedules could be “padded”
with extra time to prevent cascading delays or allow trains to make up lost time, improving the
train’s on-time performance but effectively slowing down the trip. For example, the revised 2021
schedule of the New Orleans-New York City Crescent long-distance train, hosted primarily by
Norfolk Southern Railway, lengthened end-to-end trip times by 90 minutes southbound and 120
minutes northbound compared to pre-pandemic timetables. The route’s on-time performance in
FY2020 was 46%, which would have made it subject to penalties under the new performance
standards. It is possible that under the new schedule, Norfolk Southern may be better positioned
to avoid future enforcement action from STB, while Amtrak may feel that advertising a more
reliable service will offset the longer trip time.
STB Authority in Nonrail Modes
Some STB authority extends to transportation providers other than railroads due to their interstate
nature. Although nonrail decisions make up a relatively small share of the agency’s overall
workload, STB has a statutory duty “to promote the public interest” in carrying out federal
regulatory policy over certain nonrail modes and industries.
Motor Carriers
Certain interstate trucking and motor coach companies were brought under the jurisdiction of the
ICC by the Motor Carrier Act of 1935, a policy the railroad industry—already facing intense
competition from highway modes—strongly supported. However, the trucking industry was
largely deregulated by the Motor Carrier Act of 1980, and there were few authorities left for STB
to inherit upon the agency’s creation. As a result, trucking is essentially unregulated in terms of
freight charges and services provided. STB regulations do require carriers of household goods to
maintain publicly available tariffs pursuant to 49 U.S.C. §13704, and for carriers contracted by
the U.S. Postal Service to publicly disclose their contracts upon request.

33 United States Court of Appeals for the District of Columbia Circuit, Association of American Railroads v. United
States Department of Transportation, Decision of July 20, 2018.
34 These standards are codified in Part 273 of Title 49 of the Code of Federal Regulations.
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Mergers, acquisitions, and other changes in control of passenger motor carriers engaged in
interstate commerce are subject to an approval process similar to the one for the railroad industry.
A separate process exists for the approval of “pooling” arrangements, where revenue or assets are
shared by multiple carriers without a formal acquisition or merger.
Water Carriers
The STB authorizing statutes state that it is the policy of the United States, “in overseeing
transportation by water carrier, to encourage and promote service and price competition in the
noncontiguous domestic trade”—that is, transportation from the contiguous 48 states to Alaska,
Hawaii, Puerto Rico, Guam, or any U.S. territory or possession.35 Waterborne transportation in
the noncontiguous domestic trade is subject to the Jones Act, which bars foreign-controlled ships
and requires that the master, all of the officers, and 75% of the remaining crew must be U.S.
citizens. In most cases, the vessels must be built in the United States.36
Under 49 U.S.C. §13701 and §13702, water carriers operating in the noncontiguous domestic
trade are required to maintain and file public tariffs containing their rates, charges, rules, and
service terms with STB. In accordance with a final rule issued in 2019, STB permitted water
carriers to post their tariffs electronically on the internet and required them to file an annual
certification in accordance with the terms of the final rule. For FY2021, 20 carriers filed
certifications and tariffs with STB, the same number as filed in FY2020 and one more than filed
in FY2019.
The House report accompanying H.R. 7616 (116th Congress), an appropriations bill for U.S.
Department of Transportation agencies, directed the Government Accountability Office (GAO) to
report to Congress on how STB exercises its authority over these carriers, especially concerning
how it evaluates rate reasonableness.37 The report is due to be completed in June 2022, 18 months
after the enactment of the Consolidated Appropriations Act, FY2021 (P.L. 116-260).
Pipelines
STB’s jurisdiction over the pipeline industry is limited to pipelines carrying commodities other
than oil, gas, or water.38 As stated by a 1998 GAO report (issued pursuant to a statutory
requirement),
The ICC Termination Act of 1995 limited the Surface Transportation Board’s role in
regulating pipelines by specifying that the Board can investigate pipeline issues only in
response to a complaint by a shipper or other interested party. The act also eliminated the
requirement for pipeline carriers to file the rates they charge to transport commodities,
which was the sole reporting requirement for pipelines under the Interstate Commerce
Commission’s regulation.39
Given this narrow jurisdiction, GAO found that fewer than two dozen pipelines were subject to
STB regulations, transporting five commodities—anhydrous ammonia, carbon dioxide, coal
slurry, hydrogen, and phosphate slurry. These pipelines are required by STB regulations to

35 49 U.S.C. §13101(a)(4).
36 The Jones Act is Section 27 of the Merchant Marine Act of 1920; see CRS Report R45725, Shipping Under the
Jones Act: Legislative and Regulatory Background, by John Frittelli.
37 H.Rept. 116-452, pp. 149-150.
38 49 U.S.C. §15301(a).
39 Government Accountability Office (formerly the General Accounting Office), Surface Transportation: Issues
Associated With Pipeline Regulation by the Surface Transportation Board, GAO/RCED-98-99, April 1998, p. 2.
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publicly disclose their shipping rates upon request, and are subject to certain conditions if they
intend to establish a new rate or raise an existing one.
Brokers and Freight Forwarders
Freight brokers and freight forwarders are businesses that arrange the movement of cargo by
several different carriers, though they themselves may not be directly responsible for the
transportation of goods. A freight forwarder might take possession of cargo at a warehouse or
transfer facility, and might own the shipping containers used in some or all of a freight journey,
while a broker generally does not take physical possession of the cargo for which it is
coordinating transportation. These entities are subject to STB jurisdiction in some cases, and can
be affected by changes in STB policy. Furthermore, where STB tariff requirements remain in
place for certain carriers, those requirements also apply to freight forwarders who contract with
those carriers.
While certain functions of a freight broker or forwarder may be the subject of an STB proceeding,
one issue of frequent interest to the industry—the enforcement of insurance and bonding
requirements—is the responsibility of the Federal Motor Carrier Safety Administration, not STB.
Executive Order on Competition
STB was one agency encouraged—though not required—to take actions to protect or enhance
competition by President Biden’s executive order of July 9, 2021.40 The chair of the board was
directed to:
 Consider commencing or continuing a rulemaking to strengthen regulations
pertaining to reciprocal shipping.41
 Consider rulemakings pertaining to any other relevant matter of competitive
access, including bottleneck rates, interchange commitments, or other matters.
 Ensure that passenger rail is not subject to unwarranted delays and interruptions
in service due to host railroads’ failure to comply with statutory requirements for
passenger rail access and preferential use of facilities, and “vigorously enforce”
the new on-time performance requirements that took effect on July 1, 2021.
 Consider a carrier’s fulfillment of its responsibilities relating to Amtrak’s
statutory rights to host railroad tracks when determining whether a proposed
merger/acquisition is consistent with the public interest.
The last two items have little to do with promoting competition among rail carriers, but rather are
primarily related to enhancing Amtrak’s ability to compete with airlines, motor carriers, or
automobiles for intercity passenger traffic.
In response to the executive order, Board Chair Martin J. Oberman stated,
[W]hile underscoring that the STB is an independent agency and that maintaining its
independence is vital, I welcome the nationwide policy contained in this new Executive
Order. [ ... ]
In harmony with the White House’s policy that the federal government should seek to boost
competition nationwide, as I have previously indicated since being named as Chairman, I

40 E.O. 14036, “Protecting Competition in the American Economy,” July 9, 2021, §5(n).
41 For the 2016 proposed rulemaking that has not yet been finalized, see note 21.
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intend to urge my fellow Board members to prioritize and strongly consider the concepts
embodied in several measures which are already pending or have been recommended by
Board staff or stakeholders, including but not limited to reforming the Board’s competitive
access policies; enhancing shipper visibility into first mile/last mile service; and increasing
the practical accessibility of rate relief measures to shippers in market dominant
situations.42

Author Information

Ben Goldman

Analyst in Transportation Policy

Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan
shared staff to congressional committees and Members of Congress. It operates solely at the behest of and
under the direction of Congress. Information in a CRS Report should not be relied upon for purposes other
than public understanding of information that has been provided by CRS to Members of Congress in
connection with CRS’s institutional role. CRS Reports, as a work of the United States Government, are not
subject to copyright protection in the United States. Any CRS Report may be reproduced and distributed in
its entirety without permission from CRS. However, as a CRS Report may include copyrighted images or
material from a third party, you may need to obtain the permission of the copyright holder if you wish to
copy or otherwise use copyrighted material.

42 Statement From STB Chairman Martin J. Oberman on Executive Order on Competition, July 9, 2021, at
https://www.stb.gov/news-communications/latest-news/pr-21-29/.
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