Shifting Tracks: Policy, Process, and Challenges in US Rail Networks

Written for a class on the public and private sectors, this report explores the origins, problems, and solutions for efficient cooperation between Class I Freight Railroads and passenger rail.

Initially, I wrote this report for a class I took at UNC-Chapel Hill on the relationships between the public and private sectors. The format and content have not been changed.

Executive Summary

The evolution of the United States rail network reflects the lasting legacies of deregulation, innovation, and collaboration. The Staggers Rail Act of 1980 revitalized the freight rail industry by removing restrictive Interstate Commerce Commission policies, enabling market-driven reforms and modernization. However, consolidation has created conflicts about labor relations, market equity, and disputes with passenger rail operators like Amtrak.

To address these challenges, policy proposals include leveraging passenger rail networks for urban freight delivery during off-peak hours and investing in grade-separated corridors to reduce delays and enhance reliability. These initiatives require significant investment but promise long-term efficiency gains, emphasizing the need for federal coordination.

Class I Freight Railroads dominate the industry, benefiting from economies of scale while relying on federal incentives like tax credits for infrastructure upkeep. Federal bodies such as the Federal Railroad Administration and Surface Transportation Board oversee safety and operational standards, balancing public needs and economic growth.

Labor disputes, longer freight trains, and strained passenger service highlight the ongoing need for regulatory innovation and infrastructure investment. Aligning freight, passenger, and government goals is essential for unlocking the rail network's full potential for all involved parties.

Class I Freight Railroads and Government Involvement

The history of the freight rail industry in the United States has been one of uneven development and ever-changing economic conditions. Since the founding of the United States, rail has been a vital link in transporting goods and services. About 28% of the goods transported in the United States are loaded onto a freight train at some point during their journey to store shelves, manufacturing facilities, or warehouses (Freight Railroad Chronology - AAR, n.d.).

Railroads were key players in many important moments in United States history, from the War of Independence to mail operations in the 20th century. Freight railroads have played a critical role in connecting a vast geographic region and serving as centers for economic development (Freight Railroad Chronology - AAR, n.d.).

Class I Freight Railroad operations vary, but they most commonly operate on segregated corridors with little interaction from other railroads (See Figure 1). Born from deregulation in the 1980s, Class I Freight Railroads have geographic poles that operate in a hub-and-spoke manner, creating areas of the United States where one railroad is the sole operator of usable freight main lines. Before the 1980s, rail companies struggled to remain profitable, with an estimated 21% of goods in the United States being transported by bankrupt railroads through the 1970s (Freight Railroad Chronology - AAR, n.d.). One of the legislative fixes for this insolvency was the Rail Passenger Service Act of 1970, which established Amtrak. Amtrak is a private-public corporation that operates almost all passenger rail travel in the United States. The Rail Passenger Service Act relieved freight operators from the requirement to operate passenger services, including restitution for physical infrastructure, in exchange for right-of-way priority for passenger rail and other stipulations like minimum service standards for passenger rail operations (Rail Passenger Services Act, 1970

Later, in 1980, the Staggers Rail Act was passed (Freight Railroad Chronology - AAR, n.d.). This act, a second attempt at saving the rapidly deteriorating freight rail industry, had a profound impact. It introduced a comprehensive deregulation scheme, promoting efficient operations and profit structures for existing freight rail companies. The act freed freight rail companies from federal regulation, allowing them to choose their routes and prices. It also facilitated private contracts between freight rail companies and shipping clients and streamlined various business processes, such as abandoning a rail line (Freight Railroad Chronology - AAR, n.d.). The Staggers Rail Act and the Rail Passenger Service Act of 1970 have shaped the industry's current regulatory and economic landscape.

As a government body providing economic regulation to forms of surface transportation in the United States, the Surface Transportation Board (STB) classifies Class I Railroads as rail companies that have an annual operating revenue of at least $1,053,709,560 (Railroad Definitions, n.d.). There are currently seven major freight operators who are classified as Class I Freight Railroads by the Surface Transportation Board: Burlington Northern & Santa Fe (BNSF), Union Pacific (UP), Chessie System & Seaboard Coast Line (CSX), Norfolk Southern (NS), Canadian National (CN), and Canadian Pacific & Kansas City Limited (CPKC). Amtrak is the only Class I Railroad that operates passenger services (Freight Rail Overview, 2024).

Figure 1

Understanding Freight Rail Operations

Class I Freight Railroads are often situated in the middle of a value chain. This model is rigid when considering freight rail operations and the various value chains in which they participate, but freight transport service is a squarely intermediary position. Class I Freight Railroads sometimes transport raw materials to manufacturing facilities; other times, they transport finished goods to places of commerce for sale and distribution.

In the United States, freight rail companies operate over 140,000 route miles, generating around $80 billion in economic benefits annually (Freight Rail Overview, 2024). Freight rail operators are directly responsible for employing some 167,000 people nationwide. As previously mentioned, deregulation in the 1980s led to the oligopolization of the freight rail industry in the United States (Rodrigue, 2024). While oligopolization is generally a concerning trend for consumer welfare, the economies of scale and scope at play complicate the issue of Class I Freight Railroads (Chouman & Crainic, 2021). In decades past, there were thousands of short-line freight operators nationwide. Because of their status as private corporations, virtually no standardization practices were implemented within freight transport networks. This lack of cohesion created obsolete or circuitous routes, forced unnecessary goods transfers to other networks and made pricing unpredictable for shipping goods by rail (Freight Rail Overview, 2024). Beginning in the 1970s, as regional railroads started to merge and form some of the freight companies we know today– companies began to slowly modernize their vehicles and track to relatively common standards of operation. Such actions led to rapid jumps in efficiency and revenue for Class I Freight Railroads (Chouman & Crainic, 2021) (Irani et al., 2018). Today, on average, Class I Freight Railroads deliver five million tons of goods every day (Irani et al., 2018). Coal remains an essential commodity in the freight rail supply chain, accounting for 32.2% of tonnage and 14.8% of revenue for Class I Freight Railroads in 2017 (Irani et al., 2018). The Staggers Act further addressed the issues of standardization and datedness of rail infrastructure by allowing consolidation of rail networks, companies, and dispatching systems (Sen. Cannon, 1980). Since the passing of the Staggers Act, rail track miles have decreased by 41%, while rail traffic density on existing corridors has increased from 3.4% to 9.9% (Irani et al., 2018). The data suggests that over the last forty years, Class I Freight Railroads have made gains in efficiency at the expense of unprofitable freight services. Some economic studies have found that since the passing of the Staggers Act, productivity among freight rail companies has increased by 172% (Irani et al., 2018).

In comparison, fees imposed on shipping customers have fallen by 46%. All told, the deregulation of the rail industry has proven beneficial for consumers and freight rail companies, improving efficiency, throughput, and on-time performance. Critical failures remain in the network, but oligopolies as an economic model are not to blame. For example, as locomotive technology improved throughout the 1990s, Class I Freight railroads began operating longer trains, maximizing their benefit from the grand economies of scale freight rail operates within (Dick et al., 2021). This presents issues for single-tracked corridors, as freight trains are now too long to pass within rail sidings, forcing Amtrak to bear the brunt of the delays (Amtrak Host Railroad Report Card 2021). Such innovations in rail transport have spurred the need to understand the freight rail industry as a system; see Figure 2 (Chouman & Crainic, 2021) for details.

Figure 2

The following hub-and-spoke model is a standard mode of contemporary operation of Class I Freight Railroads. For example, in Carrboro, the P07 Norfolk Southern local travels along a short branch line from the main line that follows the I-85/I-40 corridor. Monday through Friday, NS-P07 delivers coal and other raw materials to the UNC Chapel Hill cogeneration plant (Our Railroad Network, n.d.). Dispatching from a yard in Durham, NC [Item A in Figure 2], the train travels along the branch and main line to the cogeneration plant [Item 1 in Figure 2]. At some point before the NS-P07’s local deliveries, a leading train service delivers coal as part of a larger consist to Yard A before being broken up and dispatched to local services such as P07 or loaded onto a last-mile delivery vehicle directly from the rail yard in Durham.

Government Involvement in the Industry

The Federal Railroad Administration (FRA) and the Surface Transportation Board (STB) are Class I Freight Railroads' two primary regulatory bodies at the federal level. The STB primarily imposes economic regulations on railroads and is responsible for their classification system, classifying them as I, II, or III. These categories are mainly based on annual operating revenue (Surface Transportation Board, n.d.). The Federal Railroad Administration is responsible for most other regulations, including but not limited to creating and enforcing safety regulations, administering funding for rail projects, and researching emergent rail or safety technologies.

The Federal Railroad Administration and Surface Transportation Board maintain various reporting requirements for Class I Freight Railroads (Freight Rail Overview, 2024). The STB requires that Class I Freight Railroads submit an annual economic report detailing the railroad’s financial status and operational statistics. An independent accountant must verify the report's results, and railroads may file individually or jointly with the Association of American Railroads. This report must also include weight, damage, and loss data for the STB to review and analyze. Additionally, freight railroads must submit a weekly service report detailing on-time performance data and manifest information (Surface Transportation Board, n.d.). Further reporting requirements include retention and hiring reports due to the STB and a thorough report immediately following an incident to the FRA for further analysis and policy recommendations (Close Call Reporting, 2019). Crash and Problem reports are confidential to curb fear of retaliation from employers or the FRA.

Inspection schemes vary, but railroads are often the employers of those who inspect equipment and other vital infrastructure (Keeler, 1983). Inspectors must be certified according to FRA standards and have reporting requirements regarding defects or issues in infrastructure. Class I Freight Railroads have also heavily integrated automated detection systems into daily operations. Sensors embedded into tracks and signaling infrastructure collect millions of data points about speed, vibrations, wheel shape, and other conditions that might indicate a mechanical issue with a freight train (Keeler, 1983). For example, the ‘hot box detector,’ as it is colloquially known, is designed to detect overheating axles, wheel bearings, and other components of the bottom truck system of a particular train car. Throughout the United States, overheated wheel bearings are responsible for about 20% of the annual wheel replacements on freight rail cars, and this is one of the most common wayside detection systems (Office of Research Development & Technology, 2019). The ‘hot box detector’ uses infrared sensors to measure wheel and bearing temperature as the train passes over the tracks. Should a defect be detected, it will be communicated automatically to the train crew through their radios. While the wayside detection technology has not been explicitly mandated by the FRA or STB, railroads and regulatory bodies have found them useful preventative tools for safe freight rail operations (Office of Research Development & Technology, 2019). Using the data collected from the wayside detection tools, railroad employees identify patterns in defects, which inform more efficient operation through preventative maintenance. This also makes the railroad safer.

One mechanism that the federal government employs to encourage proactive track maintenance is the Qualified Railroad Track Maintenance Credit (QRTMC). This credit is provided to short-line and regional railroads who spend on track maintenance and upkeep. Eligible railroads receive a maximum 40% tax credit (About Form 8900, Qualified Railroad Track Maintenance Credit | Internal Revenue Service, n.d.). Class I Freight Railroads are subject to property taxes on land for yards, maintenance facilities, administrative buildings, and track right-of-way. In some instances, railroads are also expected to pay taxes on the value of their train cars and other physical infrastructure (Irani et al., 2018).

Various contractual obligations exist in the world of freight railroading. Class I Freight Railroads maintain the most direct contractual obligation with government entities: Trackage Rights Agreements (TRA) (Norfolk Southern & North Carolina Railroad, 2017). Trackage Rights Agreements coordinate government or privately-owned rail corridor usage and establish mutually agreed upon service standards, dispatch, and infrastructure maintenance. Some TRA’s allow freight railroads to operate on government-owned corridors, while others enable Amtrak or other passenger rail providers to manage service along freight corridors. There are various mechanisms to facilitate such agreements, such as running freight trains at night.

Norfolk Southern and the North Carolina Railroad facilitate freight and passenger travel along a heavily traveled corridor using a Trackage Rights Agreement (Norfolk Southern & North Carolina Railroad, 2017). The North Carolina Railroad (NCRR) has existed since the 1850s, owning the 317-mile rail corridor between Charlotte and Morehead City (“About NCRR,” n.d.). The state of North Carolina owns 100% of the stock in the NCRR, effectively providing the government with ownership of the rail corridor. The state-sponsored Amtrak service, the Piedmont, currently operates between Charlotte and Raleigh, the two largest cities in North Carolina. While the NCRR owns the track from Charlotte to Raleigh (Piedmont Corridor), it leases out the operation and maintenance of the railroad to freight rail corporations. Norfolk Southern operates most of the rail along the Piedmont Corridor (“About NCRR,” n.d.). According to the lease agreement between Norfolk Southern and the NCRR, Norfolk Southern has discretion over many aspects of railway operations, including the ability to dispatch trains on the track (Norfolk Southern & North Carolina Railroad, 2017). Norfolk Southern can signal as they wish and stop other trains in sidings (track lengths for trains to wait while another train passes) on single-tracked sections (Government Accountability Office, 2019) (See Figure 3). Norfolk Southern, a private freight corporation with specialized interests, can stop passenger rail trains in favor of improved freight rail operations. And this is precisely what Norfolk Southern does. According to Amtrak's report (Amtrak Host Railroad Report Card 2021), Norfolk Southern is the highest-offending freight rail company when prioritizing freight trains. In the first quarter of 2022, Norfolk Southern caused over 5,000 minutes of delay for both the Piedmont and Carolinian passenger rail services (Amtrak Host Railroad Report Card 2021). In another report by Amtrak (Quarterly Report on the Performance and Service Quality of Intercity Passenger Train Operations, 2022), the Carolinian was on time only 67% of the time (Amtrak Host Railroad Report Card 2021). In many cases, Class I Freight Railroads will operate as a replacement for traditional government services. This includes track maintenance, dispatching, and safety inspections.

Figure 3

The landscape of special interest groups in the freight rail industry is varied. On one hand, the Association of American Railroads (AAR) exists. The AAR is a quasi-think tank and advocacy firm that works with and on behalf of the Class I Freight Railroads. As the only consolidated corporate interest group involved, the AAR wields significant political and intellectual power. According to Open Secrets, the railroad industry has spent over $12 million in lobbying activities in 2024, with the AAR making up the most significant single contributor at $2.6 million (Railroads Lobbying., n.d.). Class I Freight Railroads, manufacturers, and passenger rail companies comprised the rest of the spending. Advocacy efforts in recent years have focused on alleviating antitrust standards, breaking a large railway strike, and removing legislatively mandated sick pay for railroad employees (“Biden Signs Bill to Block U.S. Railroad Strike,” 2022). Additionally, the AAR produces much of the research and literature on freight railroads in the United States. The AAR has entrenched itself so deeply into the information economy around Class I Freight Railroads that legislators and news outlets will even see them as credible sources when discussing legislation related to freight railroads (Video: Sen. Moran Speaks on Senate Floor Regarding Rail Dispute and Impact on Agriculture Industry, 2022).

Other interest groups represent workers' and passenger rail companies' and customers' interests. In recent decades, Amtrak has involved itself directly in the legislative process to dislodge some of the political power freight railroads have accrued (Amtrak Host Railroad Report Card 2021). Union organizing and political action have recently risen within the freight rail industry. In 2022, unions and freight rail companies met to discuss a new contract, which the unions’ rank-and-file members ultimately rejected. A strike was imminent but eventually avoided when President Biden signed a bill to break the strike and end political activity (“Biden Signs Bill to Block U.S. Railroad Strike,” 2022). The following unions participated in negotiation and strike preparations:

• International Association of Sheet Metal, Air, Rail and Transportation Workers – Transportation Div. (SMART-TD)

• Brotherhood of Maintenance of Way Employes (BMWE)

• Brotherhood of Locomotive Engineers & Trainmen (BLET)

• Brotherhood Railway Carmen (BRC)

• Brotherhood of Railroad Signalmen (BRS)

• International Association of Machinists and Aerospace Workers (IAM)

• International Brotherhood of Electrical Workers (IBEW)

• Transportation Communications International Union (TCU)

• National Conference of Firemen and Oilers (NCFO)

• American Train Dispatchers Association (ATDA)

• International Association of Sheet Metal, Air, Rail and Transportation Workers – Transportation Div., Yardmasters Dept. (SMART-TD-YDM)

• International Association of Sheet Metal, Air, Rail and Transportation Workers (SMART)

• International Brotherhood of Boilermakers, Blacksmiths, Iron Ship Builders, Forgers and Helpers (IBB)

Tensions between Class I Freight Rail companies and their employees remain high, with government intervention likely to secure future employment contracts.

Class I Freight Railroads, shaped by critical regulatory reforms like the Rail Passenger Service Act and the Staggers Rail Act, have grown into powerful entities driving economic efficiency and growth. However, this consolidation and deregulation have not been without consequences. While freight operators have modernized and increased productivity, challenges remain—especially regarding worker relations, infrastructure demands, and conflicts with passenger rail priorities. Government oversight through bodies like the Federal Railroad Administration and Surface Transportation Board continues to play a vital role, balancing corporate interests with public needs. The industry's future depends on maintaining a positive relationship with the federal government while addressing the critical issues of modernization, labor rights, and service efficiency.

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The Staggers Act and the Regulation of Freight Rail

We all know the experience: waiting at a railroad crossing while a seemingly endless freight train rumbles on, often at relatively low speeds. Although it may be an almost ubiquitous experience for people across the United States today, these large consists, operated by a few large corporations, have not been the normative way to transport freight by rail in the United States. The Staggers Rail Act of 1980 is mainly responsible for the deregulation schemes that caused freight rail companies' consolidation and the subsequent lengthening of freight rail (Sen. Cannon, 1980). While the Staggers Rail Act and its related effects are vast, and each history is more extensive, we will be focusing on path dependence to frame our review of material leading up to, during, and well after the passage of the Staggers Rail Act after which we will answer the question; to what extent did the Staggers Rail Act of 1980 and its self-regulation schemes force rail company development on a particular path?

The Rail Industry before the Staggers Rail Act

Following the Sherman Act of 1890, a significant research effort was undertaken to understand business and economic practices, developing new terminology to describe favorable business conditions and operations (McCraw, 1984). One such term, ‘scale economies,’ has emerged as a crucial economic concept for the freight rail industry. This concept can describe two distinct forms of market dominance in its original form. The first definition focuses on the physical scale, referring to the equipment volume in a business operation (McCraw, 1984). The second definition, however, is more about the method than the equipment; it suggests that the more specialized workers or equipment a business requires, the greater its potential for productive efficiency within the market (McCraw, 1984). Both these definitions mirror the current [and to some extent historic] structure of the freight rail industry, characterized by a small number of highly skilled, well-organized operators, dispatchers, and technicians who manage large quantities of complex machinery, often totaling in the thousands of tons per freight consist (Taillon, 2021).

Before the implementation of the Staggers Rail Act, much of the regulatory friction was attributed to the Interstate Commerce Commission (ICC). As the governing body overseeing the transfer and sale of goods and services across state lines, the ICC faced persistent questions about its regulatory authority and ability to influence transactions between shippers and shipping customers (Martin, 1971, p. 38). At the turn of the twentieth century, Chief Statistician and Economist for the ICC, Henry Carter Adams, got the Senate to agree on a standardized measure to fix maximum rates for shipping carriers, specifically the freight rail industry. Though understandable, Adams’ focus on bringing marginal rates on either end closer together (Martin, 1971, p. 39) ignored the real economic constraints of the freight rail industry at the time and set rate regulation schemes on a path that would necessitate an intervention like the Staggers Rail Act of 1980. For example, shortly before the advent of the Staggers Rail Act, seven smaller railroads were forced to merge to remain profitable due to the strict rate-setting obligations laid out by the ICC’s regulatory standards (Ralph Blumenthal Special, 1975).

Contrary to its economic miscalculations, the Interstate Commerce Commission was a politically savvy regulator who understood the politics of the time. Those who wanted rail regulation essentially got what they wanted. Farmers and smaller shippers no longer felt the freight rail companies were prejudicing them, and the assertion that they pay the same rates as large shippers were enforced regularly (Keeler, 1983, p. 23). Additionally, some carriers accepted the pricing regulations with little fight, which provided more stable profits on densely traveled routes reliably utilized by shipping customers. While the pricing regulations of the ICC were designed to dynamically shift based on what the market can bear, it was also a naturally cartel-based pricing model due to the lack of other methods for mass shipping across the United States at the beginning of the twentieth century (Keeler, 1983, p. 24). Through World War I, other mass transport methods across land became popularized, and the technology commercialized, like trucks, planes, and larger cargo ships. This additional economic competition began to strain freight rail carriers' ability to profit through their Common Carrier Obligations (CCO), a provision of the Interstate Commerce Commission dating back to 1887 (Keeler, 1983, p. 24). The CCO broadly requires that railroads honor a shipper’s “reasonable request to transport traffic under reasonable conditions at reasonable rates by offering to carry the traffic (Mulvey & McBride, 2020).” What this meant, in reality, is that as alternative shipping methods became more popular [and less expensive], freight rail companies continued to be beholden to economically unviable routes and, due to strict ICC oversight on rail abandonment practices, were often unable to discontinue or otherwise relinquish themselves from these economically unsustainable routes (Martin, 1971, p. 363).

Additional political constraints, like the professional makeup of the ICC Commissioners in 1910 and its refusal to allow signal block upgrades to improve capacity and on-time performance for trains (Martin, 1971, p. 357), led to a common understanding among carriers going into the 1930s that the Interstate Commerce Commission was not a body who was willing to work with carriers or shippers to establish mutually beneficial terms. While the ICC initially established some regulation schemes that both carriers and shippers benefitted from, the relationship on either end soured (Berk, 1997, p. 49). By the end of World War I, the national mood around commerce had changed radically. Most of the previous fervor for reforms and strict regulation schemes fell away when economic and cultural interests became a popular priority (Klein, 1994, p. 128). It should be noted that many anecdotal writings and comments from would-be politicians returning from Europe admired and understood the efficiency and competitive advantage their European counterparts had found in grand state-run freight and passenger rail systems. Further deviations from the traditional regulation scheme introduced by the ICC came from the Transportation Act of 1920, which sought to create a protected cartel under strict regulation rather than enforcing competition (Klein, 1994, p. 129). Subsequent legal battles and policy reversals by the Interstate Commerce Commission dulled the effectiveness of this attempt to shift from unbridled competition to a regulated monopoly, which would have provided stability for freight rail executives and their related benefactors.

One of the most consequential pricing structures the ICC imposed was “value of service” pricing, where high-value goods, such as electronics or manufactured items, were charged premium rates to subsidize lower-value commodities like coal and grain. Initially, this system was intended to democratize rail access, keeping shipping costs manageable for critical raw materials, particularly for smaller, rural shippers. However, as this pricing structure persisted, it became an economic constraint. By preventing freight rail operators from setting rates based on the actual service cost, the policy left rail carriers at a disadvantage in the face of growing competition from trucking going into the 1930s (Williams, 1982, p. 8). This industry operated with lower costs and minimal regulatory intervention. Trucking firms could price services based on market conditions, enabling them to respond to market variations. Freight rail operators, however, found themselves limited by rigid ICC pricing guidelines, a restriction that would later drive their dependency on bulk commodities like coal to make up for revenue lost to more adaptive transportation modes (Winston, 2005, p. 2; Williams, 1982, p. 9).

The ICC’s strict rate of return limits posed another substantial challenge to freight rail operators that would resonate across their operations and infrastructure. During the 1970s, the ICC capped freight rail operators’ allowable return on invested capital at only 2-3%, far below the return rates typical in less regulated industries. This policy deterred investors, as freight rail operators could offer little promise of profitability, leading to chronic underinvestment. Railways struggled to modernize their infrastructure without external capital, leading to declining service reliability and frequent delays. By 1979, the rail industry’s return on net investment had fallen to a mere 2.7%, compared to over 10% in other sectors—a stark contrast highlighting how regulatory rigidity got in the way of freight rail operators’ economic sustainability (Carter, 1980). For freight rail operators, the cost of adhering to these restrictive policies was not just financial; it was structural, manifesting in decayed infrastructure, outdated equipment, and deteriorating service quality that further eroded their competitive position and confidence with remaining shipping customers.

Further complicating the issue of freight railroads leading up to the sweeping deregulation schemes of the late twentieth century was that of organized labor and freight rail carriers' historic [and often violent] hostility to organized labor, which gave voices and political power to many Black laborers in the late nineteenth and early twentieth century (Taillon, 2021). As railroads fell to the economic conditions created by strict regulatory standards, workers' power diminished, contributing to the more significant overall trend of union decline in the mid-to-late twentieth century.

The Staggers Rail Act and Preceding Understandings of Regulation

Due to the Interstate Commerce Commission’s restrictions and limited operational revenue, freight rail operators had insufficient capital to fund essential infrastructure improvements, resulting in widespread deterioration. Track quality declined, delays increased, and shippers lost confidence in freight rail operators’ ability to provide reliable service, especially for high-value goods that depended on speed and predictability. Norfolk Southern’s decision to rely on video cameras in rail yards to monitor rail cars—an outdated and labor-intensive tracking method—illustrates how financial constraints limited technological upgrades (Winston, 2005, p. 3). This lack of investment led to a cascade of operational issues that further hampered rail’s competitiveness, especially in a market where efficiency and reliability had become non-negotiable priorities for high-value freight shippers like the coal industry (Winston, 2005, p. 7).

Beyond pricing and contractual limitations, the ICC’s oversight extended to technological investments, substantially limiting freight rail operators’ modernization ability. Freight rail operators proposed implementing larger, more efficient freight cars to maximize load capacity and reduce per-unit costs. However, the ICC frequently denied rate adjustments necessary to support such innovations. Without the ability to cover these expenses through adjusted rates, freight rail operators avoided investing in new equipment, leaving them reliant on outdated technologies that could not compete with the more modern capabilities of trucking and other transport sectors (Winston, 2005, p. 4).

Over time, freight rail operators increasingly relied on low-value bulk commodities like coal, which generated minimal revenue and could not support the industry’s operating costs (Winston, 2005, p. 4). By 1975, rail’s share of intercity freight had plummeted from nearly 70% post-World War II to just 37% (Winston, 2005, p. 14). By the 1970s, several significant freight rail operators, such as Penn Central, Lehigh Valley, and Erie Lackawanna Railway, had declared bankruptcy. The freight rail operator bankruptcies underscored policymakers’ growing concerns over preserving the rail industry as a national asset while holding rigid to their concept as private goods, spurring debate on whether a shift toward deregulation was necessary to prevent further destabilization and potential nationalization (Williams, 1982, p. 14; Carter, 1980).

The Staggers Rail Act of 1980 represented a decisive shift in United States regulatory policy. It aimed to restore the rail industry’s financial health and operational viability by removing the restrictive oversight impeding growth and market responsiveness (Carter, 1980). Despite its lasting deficiencies, this deregulatory intervention ultimately set the stage for a more competitive, market-driven industry that could modernize and attract investment (Williams, 1982, p. 13).

The Rail Industry after the Staggers Rail Act

Following the partial deregulation schemes introduced by the Staggers Rail Act of 1980, freight rail operators were granted more freedom to set prices as they saw fit, enter into private contracts with shipping clients, and the ability to [relatively] easily consolidate operations through mergers and acquisitions, further enhancing profitability, efficiency, and affordability of shipping freight by rail (Jordan, 2020). Some crucial outcomes of these deregulation schemes were reduced shipping rates for rail transport, increased competitiveness against the relatively pollutant trucking industry, and a regulatory shift towards cost-efficient strategies (Jordan, 2020). Changes in industry structure allowed for further efficiency innovations like the double-stack rail cars [and the larger concept of intermodal transportation] we have become so familiar with today (Shin, 2024).

The deregulation schemes introduced by the Staggers Rail Act were not only structural; they also alleviated requirements for minimum and maximum rates for freight rail carriers, further reducing overall costs for shippers. Controlling productivity, freight rail costs accounted for 90% of this rate reduction, which resulted in approximately $28 billion in annual cost-savings for shippers in the United States by the mid-1990s (Dennis, 2001). Rate declines can be attributed to various changes in shipping characteristics, such as more extended hauling capacity, larger bulk shipment sizes, and increased maximum loading weight for freight cars––ultimately reducing per-ton mile costs (Dennis, 2001). Such changes made freight rail transport more competitive with trucking through the turn of the twenty-first century.

After implementing the Staggers Rail Act, the freight rail industry saw sustained growth in labor productivity and Total Factor Productivity (TFP), a standardized measure of productivity and efficiency (Jordan, 2020). New technologies like Radio Frequency (RF) information systems boosted operations, enabling a quicker transfer of goods from intermodal stations to other modes of last-mile transit (Jordan, 2020). Further interventions in contractual regulations for freight rail companies allowed firms to build strategic and long-standing partnerships with worldwide shippers, securing a measure of economic stability for all parties (Jordan, 2020). Double-stacking and long-term investment agreements allowed United States shipping hubs to develop new technology rapidly, growing overall capacity and economic impact.

During this period of renewed improvements in productivity, technology innovation, and market [re]permeation, market concentration increased, which is to say, a small number of companies became more prominent and occupied a more significant portion of the freight rail market (Shin, 2024). In 1995, following the abolition of the Interstate Commerce Commission (ICC), the industry was incentivized to consolidate itself within a few firms and reduce competition. Concerns about competitive equity persist, as this economic model has come to rest as a regulated oligopoly (Shin, 2024). Deregulation schemes introduced by the Staggers Rail Act and subsequent supporting legislation facilitated the merging of smaller railroads, streamlining operations and taking advantage of the aforementioned scale economies, in which standardized route practices lead to lower costs for shippers and higher profits for freight rail firms. Of note, Shin’s (2024) study finds a negative correlation between industry concentration and labor productivity, suggesting that market consolidation has led to lower labor productivity over time. The ICC Termination Act of 1995 shifted towards a more deregulated market, with the Surface Transportation Board (STB) subsuming the remaining regulatory responsibilities of the defunct ICC (Shin, 2024).

In response to the deregulation schemes introduced in the late twentieth century, freight rail carriers adopted flexible pricing models and optimized resource allocation, which enhanced profitability and service levels across core markets (Jordan, 2020). There was a significant expansion in intermodal freight service, which took advantage of deregulation to maximize efficiency and profitability. Many local routes were discontinued due to low use or inability to compete with last-mile truck delivery. Still beholden by weaker Common Carrier Obligations (CCO), freight rail companies continue to phase out local routes as legacy shippers exit the market [see Norfolk Southern’s current intent to abandon the branch line to the cogeneration plant in Chapel Hill, NC] (Sorell, 2024). The cost-effectiveness of freight for bulk transport, such as coal and grain, cemented itself as an industry that would continue into the twenty-first century. However, shifting market conditions have led to recent trends that may buck this assessment.

The Staggers Rail Act of 1980 introduced a cascading period in the freight rail industry, in which deregulation schemes were recognized for their contributions to market health and overall affordability for shippers. A regulated oligopoly was introduced, which resulted in ongoing issues with passenger rail priority, peripheral access to freight rail transport, and market fairness. Questions remain about the Surface Transportation Board’s role and authority in regulating freight rail carriers. That being said, it becomes clear through the histories of the freight rail industry that the Staggers Rail Act and its related ideology cemented the freight rail industry on a deregulatory path focused on efficiency and cost-effectiveness.

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Policy Solutions for a National Collaborative Passenger Rail Network

When addressing inefficiencies within the rail network in the United States, a wealth of available policy solutions could foster mutually beneficial outcomes for Class I Freight Railroads and Amtrak, the federally-run passenger rail service. We will focus on two policy options addressing contemporary issues when running freight and passenger rail on shared-use corridors. Shared-use corridors are sections of the rail lines often owned by the government or freight rail company where freight and passenger rail services operate (North Carolina Railroad Company n.d.). The first solution we will look at involves shifting some freight load from freight manifests onto passenger rail during off-peak times or overnight hours. This solution is particularly applicable in urban areas, where access to a density of rail networks is expected, in addition to any ancillary rail transport like the subway (Li et al., 2021). Another policy solution we will analyze is a targeted approach to grade separation. Observing different strategies like junction separation and full grade separation, we will see how deliberate investments in corridor separation can lead to compounding benefits for both passenger and freight rail operators (Allen & Newmark, 2020). Though both policy recommendation present their problems, closer collaboration between freight and passenger rail is critical to the future success of both sectors in the United States.

Passenger Rail as Last-mile Goods Delivery

Shifting freight load onto passenger-transporting rail networks is a relatively novel concept in the United States. However, many successful examples of this mode change exist worldwide, particularly in dense urban areas that provide reliable service levels at all times of the day. The basic premise [which can be replicated on different scales depending on capacity and needs] is for freight companies to load goods onto a form of passenger rail transit to a particular stop, where they will be delivered to their destination. This form of last-mile delivery aims to keep heavy rail freight trains on the peripheries of the urban core, facilitating a higher level of passenger service in the most densely populated areas of a region. For example, the RER D, an urban rail line running through the historic core of Paris, has been used to sustain freight and passenger rail services. Monoprix, a private freight contractor, developed specialized shipping containers that could facilitate quick loading and unloading of passenger rail cars transporting freight goods. In this scenario, Monoprix utilized the regional passenger rail service [often running at headways of ten minutes or better] to transport goods like textiles and cosmetics from the suburbs of Paris to a central station close to commercial centers, in this case, the Bercy RER station. In the early morning, Compressed Natural Gas (CNG) vans would complete the last-mile delivery to stores and other customers (Li et al., 2021, p. 3).

Another example of passenger rail corridors being utilized for shared use is the Metropolitan Transportation Authority’s (MTA) refuse train service, which operates along its various subway lines (Li et al., 2021, p. 3). Specialized refuse trains, which can collect trash, travel at scheduled intervals during the off-peak period to collect trash from its various subway station receptacles and select community partners. This reduces the number of garbage trucks on ever-crowded New York City streets while also maintaining key service levels in one of the busiest cities in the world due to the advanced signaling systems installed along core trunks of the New York City Subway. (Li et al., 2021 3).

Additional networks in Beijing, Japan, and Germany have proven the resilience and viability of running freight and passenger rail within urban rail networks. This niche policy solution will only work for some contexts in the United States. Still, it would address some of the longest-standing issues of reliability and frequency of our urban rail networks in the United States. Multiple pilot programs, including the United States, have taken shape globally. As such, it makes most sense to allow mixed modes but not mandate them, as that could jeopardize existing strong passenger rail networks such as Amtrak’s Northeast Corridor and Brightline’s services in Florida. This provision could come to fruition in various ways, though the Federal Transit Administration (FTA) seems like the most likely mechanism for such a specific rule change. The FTA would pass a rule allowing cargo to be loaded onto passenger rail. While the FTA could mandate some standardizations, like container size, etc, it would likely impede a firm’s ability to operate the freight service efficiently. Other considerations might be made for more complex schemes of freight transport on long-distance Amtrak trains, which could even include full freight rail cars attached to the back of existing long-distance passenger rail services (Li et al., 2021, p. 5). While this policy intervention is relatively simple, and its potential payoff is significant, there are some areas of concern. Firstly, the logistics of loading freight quickly and efficiently onto a rail vehicle, which was not designed to transport it, is not an easy task. Secondly, freight or passenger capacity at a given time limits the amount of goods you can transport, which is already relatively low compared to traditional freight services. Additionally, this intervention does nothing to address rights-of-way or structural development issues, which often play a more critical role in delays experienced by passengers on longer-distance rail services.

Corridor Separation for Freight and Passenger Rail

The second policy option targets the built environment rather than regulation mechanisms to maximize the efficiency and cost of freight and passenger rail operations in the United States. We will analyze six strategies for corridor separation, each with its benefits and drawbacks, and look at their recommended applications concerning cost and rail traffic density. These six options can be separated into three categories of application: Temporal, Physical Trunk Line, and Downtown. See Figure 4 for more details.

Figure 4 (Allen & Newmark, 2020, p. 218)

The Freight Curfew is the first intervention option, which yields the least cooperative advantages for freight and passenger rail. This intervention does not involve any changes in the built environment but rather is a scheduling mechanism in which passenger [often commuter] rail operates on freight company-owned track during the day to provide adequate levels of urban rail service. Freight trains operate unimpeded at night, while passenger rail solely operates during the day. While low cost, this intervention involves long negotiation processes to nail down acceptable service levels. Additionally, this intervention relies on non-time-sensitive freight that can be transferred during overnight hours. Lastly, it does nothing to address existing track speed and state-of-good-repair issues (Allen & Newmark, 2020, p. 218).

Grade Separation at Junctions is the subsequent intervention, and it targets chokepoints in rail networks where multiple networks or different rail modes diverge. Through fly-overs/under and cooperation between operators and rail owners, the grade separation of junctions removes the need for switches, allowing freight and passenger rail services to maintain speed through corridor diversions while avoiding other rail transport modes. Should a corridor pursue a commitment to 100% grade-separated junctions, they might eliminate the need for additional dispatch staff who would typically be responsible for the operation of switches throughout the corridor (Allen & Newmark, 2020, p. 218).

The Freight Bypass is a common intervention in many European cities and could prove a promising application in urban areas in the United States (Shih et al., 2015, p. 63). This intervention involves utilizing a peripheral rail corridor [common in many pre-war urban areas] to bypass freight traffic around the city center and through intermodal freight terminals at the metropolitan area’s periphery. This reallocation of space allows an exclusive corridor for passenger rail operation through city centers, facilitating increases in speed, service level, and efficiency for the respective freight and passenger rail networks. The Freight Bypass would require the rehabilitation of peripheral rail lines and the possible modernization of city-center alignments depending on the urban area, which presents significant upfront costs for the government or operators of rail corridors (Allen & Newmark, 2020, p. 218).

The following two interventions are iterations of the same strategy, Trunk Line Separation. Partial Trunk Line Separation involves designating specific tracks of an existing multi-track corridor for one rail transport mode, such as freight. The other intervention is Full Trunk Line Separation, which consists of constructing new tracks along an existing corridor for a designated rail transport mode, such as passenger. Both interventions present their benefits and drawbacks, with partial separation presenting capacity issues and full separation presenting cost and rights-of-way issues (Allen & Newmark, 2020, p. 218).

The final and most effective [and costly] intervention is Downtown Separation. This intervention calls for the complete trunk line separation of freight and passenger rail through urban centers. In many applications, this means a trench or tunnel that carries freight rail along one city-center corridor and another that carries passenger rail along a city-center corridor, often with stations at the urban core (Allen & Newmark, 2020, p. 218). While the most costly intervention, due to the creation of entirely new rail alignments, often with complex engineering challenges, the benefits of Downtown Separation are excellent service levels for both passenger and freight rail [often at increased speeds], all while providing connections to intermodal and passenger terminals in metropolitan areas. We have an existing metro area in the United States with a Downtown Separation scheme. In Philadelphia, Pennsylvania, the City Center Tunnel provides a separate corridor for passenger service through the city center of Philadelphia, connecting to public transit and Amtrak rail services. Just north of the city center lies a segregated freight rail alignment where Norfolk Southern and CSX have unimpeded access to the city’s various freight terminals and last-mile delivery locations (Allen & Newmark, 2020, p. 223).

For these six interventions, the Federal Railroad Administration (FRA) should develop criteria for recommended application areas, considering service density, the number of functional tracks within a corridor, available land, and other relevant considerations. This would allow the FRA to develop a calculator to determine the optimal intervention for a given location or corridor. Additionally, as part of the bill or budget amendment that would empower the FRA to do this, funding should be provided for the continuous evaluation, design, and implementation of corridor separation interventions nationwide. Allocation of this funding could take the shape of existing granting processes like the Federal Transit Administration’s (FTA) Small Starts programs or the FRA’s Corridor ID program, allowing flexibility within the application and funding process. General drawbacks of this policy intervention are representative of existing costs within the rail transit industry, such as construction costs, the length of planning periods, and general lags in project spin-up.

Improving the efficiency and cooperation between freight and passenger rail in the United States requires a balanced approach that combines regulatory innovation with deliberate infrastructure investments. Policies enabling shared use of urban rail networks for freight during off-peak hours offer creative ways to address urban congestion and leverage existing passenger rail systems—however, their success hinges on practical logistics and capacity considerations. Simultaneously, targeted investments in corridor separation—from grade separations to whole trunk line divisions—can unlock significant long-term benefits by minimizing conflicts and delays between rail modes. While these interventions come with challenges, such as high upfront costs and complex planning processes, their potential to enhance service reliability and capacity makes them essential for a more integrated and efficient rail system. A cohesive strategy, supported by federal agencies like the FRA and FTA, is critical to advancing these solutions, ensuring sustainable freight and passenger rail growth in the decades to come.

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