Thomas Mulcair is Wrong on Rail Deregulation

Commentary, Mary-Jane Bennett (historic), Saskatchewan, Transportation, Uncategorized

Thomas Mulcair, NDP leader, has linked the July rail disaster at Lac-Mégantic, Quebec, with what he calls “years of government deregulation.” In doing so, he creates a compelling narrative for the Lac-Mégantic was a tragedy of such consequence that surely, something other than the Montreal, Maine and Atlantic Railway must be to blame. Deregulation has become Mulcair’s whipping boy since the accident, and, although he’s not alone, there are problems with this conclusion.

First, if deregulation were the reason for the tragedy, rail accident statistics over the years would have pointed in that direction. The opposite is true. Railway safety has dramatically improved over the years since de-regulation.

Second, the claim that new regulation would better address safety contradicts the history of rail regulation in North America. Both in Canada and the United States, over-regulation of rail had brought railways to the brink of financial ruin. Lacking the funds even properly to maintain tracks, safety deteriorated. Standing derailments were not uncommon. Rail was eventually deregulated in the U.S. in 1980 and more gradually in Canada thereafter.

A Transportation Research Forum (TRF) study in 1997 focused on the link between safe rail operations and deregulation. It found that since deregulation in the U.S., safe rail operations had increased dramatically with the rate of collisions and derailments at “about a quarter of what it was in the late 1970s.” To determine whether deregulation was the cause for increased safe operations, the study examined the factors that lead to transportation safety regulation in the first place.

Safety regulations are principally enacted to protect consumers who cannot be expected to know the levels of safety in their transportation provider. Yet, rail customers are highly informed and rationally compare pricing and safety records of railways on a daily basis, the study found. Poorly informed consumers are much more likely found in the airline business.

The TRF study found safety lapses in two types of railways. The first are the small railways, known as short lines. These were established since deregulation when the large railways were allowed to shed their uneconomic lines. The second is the railway that reduces expenditures on accident prevention while hoping its customers don’t notice and take their business elsewhere. The study found that scrutiny by the insurance industry and by the regulator on those two types of railways provides the best answer to safety.

While Mulcair dismisses the Canadian system of rail safety regulation as “selfregulation,” it is not so. The Canadian approach complements rather than replaces traditional compliance inspections. Similar safety systems to that governing Canadian rail are in place in Canada’s air industry and in most provincial railways. In fact, the International Civil Aviation Authority (ICAO) recommends that all aviation authorities implement this regulatory system.

There are two methods of rail safety oversight. The first is the traditional approach of providing minimum standards with inspections to ensure compliance. The Canadian approach differs. It requires railways as well as Transport Canada to develop safety rules. The rules are intended to encourage railways to identify hazards and to take steps to minimize risk. The rules, either those developed by Transport Canada or industry, require approval by the minister. Enforcement through inspectors and auditors is mandated by the legislation.

The benefit of the Canadian approach is that it is less static than the traditional method.

Behind the Canadian system is the recognition that the rail industry, like the air industry, is driven by technological, engineering and scientific advances. In rail, new braking systems and rail and road bed flaw detectors, for example, are under continuous upgrade. Regulation, a fixed-in-stone solution, stifles creative solutions and advances.

Strengthening of the rule-making process and better quality drafting of the rules may improve safety. The 2011 Auditor-General’s Report pointed to the serious lapse by regulators in ensuring safety compliance. These are better approaches than a return to over-regulation.

A return to over-regulation of rail in Canada would be a serious mistake. Safe rail operations were not the only downside of the highly regulated environment. Growth of the industry stalled, rail rates rose, service was poor, secondary industries, such as the grain, remained frozen in time. Traffic diversion from rail to road increased. Deregulation benefitted railways and consumers alike. Brookings Institution’s transportation expert Clifford Winston claims that de-regulation put rail on “a secure footing” and turned out to be a “great boon for shippers.” So great has been the benefit to consumers, he claimed, that initiatives to re-regulate rail in the United States since have “gained little momentum.”

Mary-Jane Bennett is a transportation consultant and is research fellow with the Frontier Centre for Public Policy (www.fcpp.org)

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