abstract. Railroading today is profitable but struggles to serve customers, workers, and communities, as punctuated by recent high-profile disputes and disasters. This Note traces the development of the legal regulation of railroads from the Progressive Era’s antimonopoly vision to today’s deregulated environment. Railroads’ financial success and operational failures both come from this deregulation in the 1970s and 1980s. Yet deregulators retained a Progressive Era tool requiring fair treatment for all—the common-carrier obligation—in muted form. Given the need for a resilient, expansive rail network today, policymakers should consider using the common-carrier obligation, or more direct legal and institutional responses such as reregulation, public options, and nationalization, to address the problems that plague the industry.

author. J.D. 2024, Yale Law School; B.A. 2017, Columbia University. I’m extremely thankful to Kevin X. Chen, Connie C. Cheng, Benjamin Dinovelli, Daniel Hanley, Richard John, Amy Kapczynski, Phil Longman, Morgan Ricks, Ganesh Sitaraman, Maddock Thomas, and Sandeep Vaheesan for generously reading drafts and giving comments and criticisms. Thank you also for feedback, insight, or encouragement to Elizabeth Anderson, Rachel Baker, William Boyd, Susan Buck, Charles Buck, Sara Buck, Brian D. Highsmith, Claire Kelloway, Saule Omarova, Lucas Osborne, Terin Patel-Wilson, and Sarang Shah, as well as the discussants at the Vanderbilt Policy Accelerator’s Third Annual Networks, Platforms, and Utilities Global Conference and the Networks, Platforms, and Utilities Fall 2024 workshop. And thank you to Phil Longman, Sarah Miller, David Dayen, Rakeen Mabud, and Robert Kuttner for early opportunities to write about railroads and to Phil for introducing me to today’s railroad problem. Finally, for excellent, challenging, and extraordinarily thoughtful edits, thank you to Nathan Brown, Victoria Maras, Shreya Minama Reddy, Lily Moore-Eissenberg, Beatrice L. Brown, Deja R. Morehead, and the editors of the Yale Law Journal.

Introduction

Since early 2020, the railroad industry has presided over a series of high-profile disasters. In 2021, amidst the influx of consumer goods during the COVID-19 pandemic, major railroads struggled to maintain service, hurting shippers and consumers.1 The next year, in 2022, the industry almost came to a halt as irate workers criticized a “brutal” scheduling regime that punished them for taking sick leave.2 Finally, in 2023, a Norfolk Southern train carrying hazardous chemicals derailed in East Palestine, Ohio, and emergency first responders released the chemicals for fear of an explosion.3 East Palestine residents reported finding dead animals in the area and developing coughs and rashes.4 The chairman of the railroad’s main economic regulator, the Surface Transportation Board (STB), observed “disturbing current trends facing the management of the four” major U.S. railroads.5

The railroads’ high-profile failures have not, however, hurt their strong financial performance. Most Class I railroads, the six big railroads that make most of the money and carry most of the country’s freight,6 routinely outperform the S&P 500 in total returns for much of this century.7 The railroads’ financial success in the 2020s continues its trend from the past decade; the American Journal of Transportation reported in 2019 that railroading was the country’s “most profitable industry.”8

Those incredible financial results bode well for the shareholders and managers of an industry that is foundational to the American economy. Measured in “ton-miles,” which is one ton of freight moved one mile, freight railroads ship about 30% of freight in the country, including important goods like food and chemicals.9 Countless goods have some connection to the rail network, and the railroad industry estimated in 2022 that a shutdown would cost the economy at least $2 billion per day.10 Both the Biden and the second Trump Administrations’ policy goals of promoting domestic manufacturing and extricating supply chains from China depend on being able to move materials too heavy and low margin to transport by truck.11

This Note argues that the railroad industry’s problems and profits today are legacies of the deregulatory era of the 1970s and 1980s. Not simply aberrations, railroads’ contemporary crises are manifestations of decades-long trends. Bringing together industry data, contemporaneous commentary, and legislative, judicial, and administrative decisions, this Note illuminates the legal sources of the railroad industry’s power and the problems that power presents today. In doing so, the Note seeks to recover how the law governing railroads previously advanced multiple values and to reveal how the different values law advances today are shortcomings of railroad deregulation. The current paradigm, which prioritizes competition through contracts and railroad profitability, fails to capture the full relevance of the railroad industry to policy goals other than private profit. The current situation of the railroad industry also suggests that accounting for increased corporate power of the railroads can resolve the ostensible disconnect between lackluster performance and high profits. Railroad deregulation worked, in the narrow sense of securing financial success, but failed in the broader sense of addressing the plural problems facing the public from railroading itself.

An alternative framework existed before deregulation. From the Progressive Era until deregulation in the 1970s, the Interstate Commerce Commission (ICC) regulated railroads, requiring them to offer open and fair prices on nondiscriminatory terms. As a prominent 1886 Senate Report explained, Congress structured substantive railroad regulation, motivated by the broader antimonopoly concern of “controlling the steady growth and extending influence of corporate power and of regulating its relations to the public,” while also recognizing that “no corporations are more conspicuously before the public eye” or more “directly affect every citizen in the daily pursuit of his business or avocation” than the railroads.12 The Progressive Era paradigm took railroads to be public utilities with special duties, including the duty as common carriers to serve all comers on reasonable request. This common-carrier obligation (CCO) captured the guiding principle that railroads and other infrastructural-networked industries owe a duty to the public and not only to their managers and shareholders.

The Progressive Era paradigm ended when, responding to a wave of both financial and operational difficulties, Congress and Presidents Ford and Carter “deregulated” the railroad industry, appointing like-minded regulators and removing the legal tools the country had used to govern rail networks.13 As one measure of success, profits suggest that the railroads have thrived. But they have thrived precisely by undermining the values that the regulated era sought to promote—such as stability, geographic fairness, and development—and by undermining the constituencies that it sought to protect. Railroads have become more powerful precisely because of their legal environment, including the ideological landscape of deregulation.

This Note argues not only that contemporary problems come from the deregulatory movement of the 1970s and 1980s, but also that the goals and distinct approach of the regulated era might prove instructive for the future. Part I traces the problems of today’s railroad industry to the advent of Precision Scheduled Railroading (PSR). Investors and managers now push railroads to prioritize cutting costs and raising prices over maintaining and improving service, capacity, resilience, and safety. Part II articulates the Progressive Era paradigm of railroad regulation that deregulation eventually replaced, emphasizing the Era’s animating concern: checking the concentration of private power over key infrastructure.

Part III connects the ability of railroads to enact PSR to the deregulatory moment of the late 1970s and 1980s. In that period, policymakers explicitly reoriented railroad policy around maximizing profits rather than checking corporate power. Deregulatory legislation contributed to discrimination between customers, consolidation of market power, and reductions in service to smaller communities. Despite deregulation, however, a key duty from the Progressive Era remained in place: the CCO. Concerned that excessively loosening constraints on railroads would harm less powerful and smaller shippers, Congress maintained the CCO, albeit in a significantly weakened form. Part III reviews the untapped potential of the CCO given the accommodating, if sparse, judicial precedent interpreting the CCO.

Part IV proposes using STB—the federal agency charged with the economic regulation of freight rail—and its power to enforce the CCO to begin to address many of the current harms that railroads pose to businesses, workers, communities, and climate action. Through rulemakings, adjudications, and guidance documents, STB could use what remains of the CCO to start alleviating these harms. Part IV also considers more active policy responses to the power and problems of the railroad industry, such as reregulation and public ownership or operation. While the values animating the Progressive Era are still relevant today, I do not argue for an unthinking and wholesale return to that approach, given the political and institutional limitations of the present. Part V lays out additional responses policymakers could consider to address the current shortcomings of rail regulation today: reregulation, public options, and public ownership.

This Note makes at least three contributions. First, it challenges prevailing narratives about the success of deregulation. Nearly all evaluations of railroad deregulation regard it as a success, with a characteristic appraisal concluding, “Policymakers’ faith in the market has, for the most part, been rewarded.”14 Most evaluations, however, have inadequately accounted for the railroads’ recent exercise of market power in PSR, focusing more on the 1980s and 1990s and less on the 2000s to the present. Regardless, railroad deregulation is, as one of its supporters touted, “widely regarded as [a] bipartisan policy success[]. Forty years later, no one has seriously proposed to reverse” it.15

Second, this Note refines the revived interest in the public-utility concept in the Law and Political Economy (LPE) and new Networks, Platforms, and Utilities (NPU) schools by drawing out the difficulty of regulating private enterprise to provide key infrastructure.16 In the process, this Note demonstrates the importance of the LPE movement’s emphasis on economic power. Registering the power of railroads and how that power shapes outcomes for other stakeholders in society helps to reveal the broader consequences of deregulation. Third, this Note draws on current case law regarding the railroads’ extant, yet diminished, CCO to suggest an existing pathway for addressing railroads’ power.

A few clarifications help focus this Note. First, though passenger rail service is important, most of this Note will be about freight railroading. Until the federal government’s creation of Amtrak in the early 1970s, private railroads carried both freight and people.17 But passenger service thrives in dense regions and is harder to run profitably by an entirely privately run railroad.18 Second, the railroad industry has two primary regulators: STB and the Federal Railroad Administration (FRA). STB is the primary economic regulator and succeeded ICC in 1996,19 while FRA focuses on rail safety. Third, the Note concentrates on “Class I” railroads since they are the dominant carriers in the rail industry.

A final clarification is conceptual. Throughout the Note, I discuss the ability of the public to participate in the exercise of private power through the regulatory process. This choice comes from the criticism of neoliberal policy that highlights neoliberalism’s “encasement” of economic activity from “other political demands beyond the demand for efficiency itself.”20 Applied here, railroad deregulation prioritized private profits and “encased” it from the oversight and supervision of the public as effected through ICC and STB. Part of the deregulatory project was statutory, but another part was ideological, as regulators themselves understood their mission to be ensuring railroads’ financial health.21 The point in understanding deregulation as removing public input over putatively private power is not to assume regulation’s efficacy but to highlight the democratic mechanisms and values that the Progressive Era paradigm advanced and the deregulatory one scaled back. By recovering a past way of ensuring public participation in private power, this Note aims to contribute to discussions over how law influences market outcomes.