Marc Scribner, Author at Reason Foundation Free Minds and Free Markets Fri, 03 Mar 2023 19:47:37 +0000 en-US hourly 1 https://reason.org/wp-content/uploads/2017/11/cropped-favicon-32x32.png Marc Scribner, Author at Reason Foundation 32 32 Protecting customer privacy in mileage-based user fee systems https://reason.org/commentary/protecting-customer-privacy-in-mileage-based-user-fee-systems/ Thu, 09 Feb 2023 15:20:21 +0000 https://reason.org/?post_type=commentary&p=62027 How can location information be protected to prevent government surveillance?

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Mileage-based user fees are increasingly viewed as a viable replacement of fuel excise taxes as the principal source of road user revenue. Directly charging per mile rather than indirectly per gallon of fuel consumed can future-proof revenue collection in the face of increasing fuel economy and changing propulsion sources. Despite the promise of the mileage-based user fee (MBUF) approach, many have raised privacy concerns about the technologies that may be involved. These concerns are legitimate, and MBUF customer privacy must be protected to gain public acceptance. Fortunately, by incorporating privacy protections at the beginning of technology development along with strict legal requirements on data handling, privacy concerns can be addressed.

The simplest way to address privacy concerns is to offer mileage-based user fee options that do not collect any location information, such as odometer readings. However, these options come with downsides to the customer experience, such as the inability to fully automate odometer readings, the inability to automatically deduct mileage driven out of state or off public roads from customer bills, the lack of seamless integration with separate toll facilities, and the reduced ability to audit mileage counts to support customer billing disputes.

In addition to offering customers a superior billing experience, location-based MBUF technologies can also give customers access to optional features they may desire, such as quickly locating their parking spot or receiving alerts if their teen children have driven too far from home.

So, how can location information be protected to prevent government surveillance?

First, it is important to understand how the location information is generated in the first place. These systems rely on the Global Positioning System (GPS) constellation of navigation satellites. GPS satellites in orbit around the Earth broadcast radio signals that transmit their locations and the precise time from onboard atomic clocks. A GPS receiver, such as one incorporated into a location-based MBUF device, detects these signals and uses the time of arrival to calculate its distance from a GPS satellite. Using the distance calculations from at least four GPS satellites allows a GPS receiver to determine its longitude, latitude, and altitude at a given point in time.

The upshot is that because GPS signals are sent one-way from the satellites and location is calculated by the GPS receiver using multiple satellites, GPS alone cannot be used to track the location of a GPS receiver. Privacy concerns only become an issue when a GPS receiver is paired with a secondary wired or wireless communications system, such as cellular, that can transmit the location information that is computed and stored locally on a GPS receiver. As such, addressing location-based MBUF privacy must focus on how that location information is transmitted, processed, and stored.

From here, location-based MBUF technologies can be designed so that location information used to calculate distances driven on roads subject to MBUFs is separated from the mileage counts that are transmitted for state revenue collection purposes. Location information should be held securely for a short period of time to facilitate audits and customer billing disputes, after which it is destroyed. During the specified period of time that location information is retained, strict warrant requirements can be used to prevent abusive surveillance. 

Oregon, which led the country in developing both fuel taxes and their MBUF replacement, also developed strong privacy protections for location-based mileage-based user fees in consultation with civil liberties organizations. Here are key privacy protections codified in Oregon statute: 

  • Oregon relies on private “certified service providers” to administer the customer-facing elements of its location-based MBUF option, which then report metered road use stripped of location information for revenue-collection purposes. (ORS § 319.915(1)(a))
  • All location data must be destroyed within 30 days upon the completion of payment processing, billing disputes, or noncompliance audits. (ORS § 319.915(4)(a))
  • Location information and other personally identifiable information held to complete a monthly billing cycle are considered confidential and exempt from public records requests. (ORS § 319.915(2))
  • Law enforcement officers are required to obtain a court order based on probable cause in an authorized criminal investigation in order to access any personally identifiable information of a person subject to that criminal investigation. (ORS § 319.915(3)(a)(G))

As other states contemplate replacing their gas taxes with mileage-based user fees, they must ensure that customer privacy is protected. Failure to do so will understandably undermine public acceptance of MBUFs and reduce the viability of user-based revenue collection in the long-run.

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U.S. Department of Transportation regulatory pipeline slowed in the second half of 2022 https://reason.org/commentary/u-s-department-of-transportation-regulatory-pipeline-slowed-in-the-second-half-of-2022/ Fri, 27 Jan 2023 21:09:03 +0000 https://reason.org/?post_type=commentary&p=61334 The latest DOT update had the fewest number of new rulemaking projects since the beginning of the Biden administration.

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On Jan. 4, the White House Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) finally published the Fall 2022 edition of the Unified Agenda of Regulatory and Deregulatory Actions that had been due in October. The Unified Agenda is the biannual snapshot of the federal administrative state and tracks the thousands of regulatory actions across hundreds of agencies. While imperfect in many ways, it does provide some valuable insight into forthcoming federal agency actions.

I previously examined the transportation rulemaking contained in the Spring 2022, Fall 2021, Spring 2021, and Spring 2020 editions of the Unified Agenda. From a historical perspective, Figure 1 shows the current volume of regulatory activity at the U.S. Department of Transportation is typical of what has been seen since the Obama administration. The latest update had the fewest number of new rulemaking projects since the beginning of the Biden administration, but this slowdown is likely to prove temporary.

The Fall 2022 Unified Agenda lists 218 active rulemaking projects at the U.S. Department of Transportation. Of those 218, 17 are new rulemaking projects first published in the Fall 2022 edition, which are listed in Table 1 at the bottom of this article. The latest edition of the Unified Agenda contained no new rulemaking projects deemed “economically significant,” which is defined by Executive Order 12866 (1993) as regulations that would have an annual impact on the economy of $100 million or more or otherwise “adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.” However, there are currently 14 economically significant rulemaking projects active at the U.S. Department of Transportation.

The Fall editions of the Unified Agenda are also accompanied by the annual Regulatory Plan, which includes narrative agency statements on regulatory priorities. The U.S. Department of Transportation’s Fall 2022 agency statements emphasize the current political leadership’s focus on safety, economic growth, climate change, and equity.

While the second half of 2022 showed a slowdown in the flow of new rulemaking projects at the U.S. Department of Transportation, this is unlikely to persist. Given that the House of Representatives is now controlled by Republicans, ending unified Democratic control of the legislative and executive branches, the Biden administration is expected to shift its policymaking attention to regulatory actions to bypass anticipated legislative gridlock.

Perhaps most notable are two rulemaking projects flagged in the latest Regulatory Plan by the Department: “Enhancing Transparency of Airline Ancillary Service Fees” and “Airline Ticket Refunds.” Both of these regulatory priorities involve the use of the aviation consumer protection authority (49 U.SC. § 41712), which grants the secretary of transportation a large amount of discretion in determining whether airline or ticket agent business practices are “unfair.” This fact has been picked up by some progressive activists, who have called on the Biden administration to leverage this nebulous authority to tell airlines which software to purchase and how many employees to hire. This would have severe negative consequences, especially for low-cost carriers that offer the most affordable flights and put most of the downward pressure on average consumer airfares.

Congress has the opportunity to reform this outdated statutory authority in the Federal Aviation Administration multiyear reauthorization due by the end of September 2023, as I’ve previously discussed, but is likely to be hesitant about these actual pro-consumer reforms because the issue is complex and can be easily demagogued by opponents. This is unfortunate because the Biden administration’s expansive reading of the aviation consumer protection authority could enable the U.S. Department of Transportation to undermine Congress’s highly successful Airline Deregulation Act of 1978 and gradually transform air travel back into a luxury service for the wealthy. Congress should seek to protect these gains and build on them by eliminating the remaining regulatory barriers to airline competition.

Table 1: U.S. Department of Transportation Rulemaking Projects First Published in the Fall 2022 Unified Agenda

AgencyStage of RulemakingTitleRIN
FAAProposed Rule StageUpdate to Air Carrier Definitions2120-AL80
FAAFinal Rule StageExtension of the Prohibition Against Certain Flights in the Territory and Airspace of Somalia2120-AL78
FAAFinal Rule StageExtension of the Prohibition Against Certain Flights in the Tripoli Flight Information Region (FIR) (HLLL)2120-AL79
FAAFinal Rule StageControl of Non-Volatile Particulate Matter (nvPM) From Aircraft Engines: Emission Standards and Test Procedures2120-AL83
FHWAProposed Rule StageUpdate to 23 CFR Part 633, Subpart B–Federal-Aid Contracts (Appalachian Contracts)2125-AG11
FMCSAProposed Rule StageParts and Accessories Necessary for Safe Operation; Electronic Stability Control2126-AC59
FMCSAProposed Rule StageGeneral Technical Amendments2126-AC60
FMCSAProposed Rule StageIncorporation by Reference; North American Standard Out-of-Service Criteria; Hazardous Materials Safety Permits2126-AC61
FMCSAProposed Rule StageFees for the Unified Carrier Registration Plan and Agreement2126-AC62
NHTSAProposed Rule StageTemporary Exemption From Motor Vehicle Safety and Bumper Standards2127-AM57
NHTSAFinal Rule StageReconsideration of Motorcoach Rollover Structural Integrity Final Rule2127-AM58
FRAFinal Rule StageAmendments to FRA’s Procedures for Service of Documents in Railroad Safety Enforcement Proceedings and Other Administrative Updates2130-AC93
FTAPrerule StageTransit Worker Fitness for Duty2132-AB46
SLSDCFinal Rule StageSeaway Regulations and Rules: Periodic Update, Various Categories2135-AA53
SLSDCFinal Rule StageTariff of Tolls2135-AA54
PHMSAProposed Rule StagePipeline Safety: Cost Recovery for Siting Reviews for LNG Facilities2137-AF61
PHMSAProposed Rule StageHazardous Materials: Modernizing Regulatory Requirements and Responding to Stakeholder Petitions2137-AF62

Source: Office of Information and Regulatory Affairs, Unified Agenda of Regulatory and Deregulatory Actions, Fall 2022

Note: RIN = Regulation Identifier Number, a unique alphanumeric code assigned by the Regulatory Information Service Center to each rulemaking project listed in the Unified Agenda. An explanation of Stage of Rulemaking terms can be found on page 12 of the Introduction to the Unified Agenda from the Regulatory Information Service Center.

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Protecting customer privacy in mileage-based user fee collection https://reason.org/backgrounder/protecting-customer-privacy-in-mileage-based-user-fee-collection/ Tue, 03 Jan 2023 19:46:00 +0000 https://reason.org/?post_type=backgrounder&p=63130 Mileage-based user fees are emerging as a replacement for gas taxes to ensure user-supported road funding remains viable as the vehicle fleet becomes increasingly fuel efficient and eventually electrifies. Policymakers and the public have expressed concerns about road user privacy … Continued

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Mileage-based user fees are emerging as a replacement for gas taxes to ensure user-supported road funding remains viable as the vehicle fleet becomes increasingly fuel efficient and eventually electrifies.

Policymakers and the public have expressed concerns about road user privacy in mileage fee systems, especially those that involve a location-based component. Fortunately, protecting the privacy of location-based mileage fee customers is a solvable problem with practical technology and policy solutions. 

How the Global Positioning System (GPS) Works

  • GPS satellites broadcast radio signals that transmit their locations and the precise time from onboard atomic clocks.
  • A GPS receiver detects these signals and uses the time of arrival to calculate its distance from a GPS satellite.
  • Using the distance calculations from at least four GPS satellites, a GPS receiver can determine its position (longitude, latitude, altitude) and time.
  • Because GPS signals are sent one-way from the satellites and location is calculated by the GPS receiver using multiple satellites, GPS by itself cannot be used to track the location of a GPS receiver.
  • Privacy concerns only arise when a GPS receiver is paired with a secondary wired or wireless communications system that can transmit location information computed and stored locally on a GPS receiver.
  • Privacy and data security considerations should thus be focused on those secondary communications systems.

Addressing Location-Based Mileage Fee Privacy Concerns

  • In location-based mileage fee systems, policies should be implemented that ensure customers’ personally identifiable location data are protected. These include:
  • Storing all location data onboard vehicle computers, transmitting only mileage-count information for revenue-collection purposes. 
  • Strict data retention policies that destroy stored onboard location data after a set interval, upon completion of any customer billing disputes or audits.
  • The use of trusted third-party payment processors that operate as intermediaries between customers and government revenue agencies.
  • Requiring a court order based on probable cause in an authorized criminal investigation before granting law enforcement access to onboard location data.

Recommendation: Customer privacy protection and data security should be thoroughly investigated during mileage-based user fee pilot programs.

Protecting customer privacy in mileage-based user fee collection

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No evidence to support train crew size regulation https://reason.org/commentary/no-evidence-to-support-train-crew-size-regulation/ Thu, 22 Dec 2022 04:59:00 +0000 https://reason.org/?post_type=commentary&p=60872 In the Matter of Train Crew Size Safety Requirements Docket No. FRA-2021-0032 87 Fed. Reg. 45,564 Due to the lack of evidence supporting a safety basis for this proposed train crew size rule and the likely environmental harms that would … Continued

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In the Matter of Train Crew Size Safety Requirements

Docket No. FRA-2021-0032

87 Fed. Reg. 45,564

Due to the lack of evidence supporting a safety basis for this proposed train crew size rule and the likely environmental harms that would be generated if promulgated, the Federal Railroad Administration should withdraw the notice of proposed rulemaking.

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Freight rail deregulation: Past experience and future reforms https://reason.org/policy-brief/freight-rail-deregulation-past-experience-and-future-reforms/ Tue, 13 Dec 2022 05:01:00 +0000 https://reason.org/?post_type=policy-brief&p=60176 The U.S. railroad industry’s regulatory experience offers an important cautionary tale for proponents of additional regulation of the economy.

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Introduction

Railroads were the first industry to face national industrial regulation, beginning with the Interstate Commerce Act of 1887. In the early 20th century, the common carrier rules imposed on railroads were applied in a similar fashion to motor carriers, pipelines, and telecommunications. The stringency of these rules on freight rail gradually increased for two generations despite vast changes to the economic landscape that resulted in growing competition from less-regulated modes of transportation.

By the middle of the 20th century, economic regulation began to take its toll on the railroad industry, favoring its fast-growing competitors in highway trucking and passenger aviation. Facing the imminent collapse of rail as a viable mode of freight transportation in the U.S., Congress began reducing harmful economic regulation of the industry in the 1970s, culminating in the Staggers Rail Act of 1980.

Four decades after partial deregulation, U.S. freight railroads are now the most extensive and productive in the world, but new competitive and policy threats have appeared on the horizon. Part 2 of this report surveys the history of economic regulation of the U.S. railroad industry. Part 3 examines the results of partial freight rail deregulation. Part 4 details emerging threats and recommends reforms to ensure the long-run productivity and viability of transporting freight by rail.

The U.S. railroad industry’s regulatory experience offers an important cautionary tale for proponents of additional regulation of the economy. History and practice show that even the best-intentioned regulations—those carefully seeking to balance the interests of the parties involved—can lead to distorted markets, reduced prosperity, and a variety of other unintended consequences.

This is not to say that regulatory balance, which was explicitly addressed in the Staggers Act, is not something to be considered. But the public interest is not served when regulators acquiesce to the demands of self-interested parties overly focused on the short-run impacts on a narrow slice of economic activity. Rather, advancing the public interest demands that regulators consider the unique characteristics of the industry in question and its role in the broader economy over the long run.

Shippers and unions, as well as the U.S. as a whole, have greatly benefited from the partial deregulation that followed the enactment of the Staggers Act. Even with the COVID-19-era supply chain chaos currently plaguing carriers and shippers alike, inflation-adjusted rail freight rates remain far below the heavily regulated rates of the 1970s.

While righting market wrongs is a powerful impulse for many, the error costs of government action frequently exceed the costs of market failures. As shown by the history of railroad regulation, the costs of government failure can not only be enormous, but can persist over many decades—and difficult to undo once in place. When it comes to railroad regulation, Congress and regulators should tread lightly to avoid repeating the mistakes of the past.

Freight rail deregulation: Past experience and future reforms

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How to build on the success of past railroad deregulation https://reason.org/commentary/how-to-build-on-the-success-of-past-railroad-deregulation/ Tue, 13 Dec 2022 05:00:00 +0000 https://reason.org/?post_type=commentary&p=60386 Congress can protect the gains realized from the Staggers Act and help usher in 21st-century freight rail.

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Freight rail has been in the news lately over a labor impasse that threatened to shut down the U.S. national rail network earlier this month. Congress ultimately voted to impose a contract that will result in the average rail employee earning $160,000 in annual compensation by 2024. This dustup between rail management and labor will likely not be the last, especially as railroads seek to deploy new productivity-enhancing technologies necessary to compete in an increasingly high-tech transportation marketplace.

Unions are likely to resist labor-saving technologies out of perceived self-interest, but the 20th-century experience with over-regulation in the railroad industry suggests Congress and the Biden administration should be wary of calls to impose regulatory impediments to industry evolution in the 21st century.

My new Reason Foundation policy brief examines the history of economic regulation of the U.S. railroad industry, discusses emerging regulatory threats, and recommends reforms policymakers can enact to ensure freight rail remains on a strong competitive footing going forward.

Railroads were first subjected to national economic regulation under the Interstate Commerce Act of 1887, which created the Interstate Commerce Commission (ICC) to oversee the industry. In the decades that followed, Congress and the ICC produced a growing list of mandates and proscriptions into virtually every rail business decision. Customers and rail carriers could not negotiate customized service contracts under rigid common carrier rules, entry and exit were heavily restricted, and prices were divorced from economic reality, frequently being kept artificially high by regulators to protect weaker competitors (of which there were a great many).

By the middle of the 20th century, new developments such as ubiquitous auto ownership, the Interstate Highway System, rapidly growing trucking companies, and the introduction of jet airliners undercut demand for passenger and freight rail services. Between 1945 and 1955, passenger and freight revenue fell by 71.1% and 12.5%, respectively, while rail’s market share of intercity freight traffic declined from 68.7% to 49.4%.  

With fewer financial resources available to support their networks, the railroads began struggling to maintain their existing infrastructure. Congress and the White House grew increasingly concerned that rigid regulation was stifling the industry and preventing it from adapting to new economic conditions but did little beyond issuing official reports that merely acknowledged the worsening problem.

This finally changed in the 1970s when the situation became so dire that inaction was no longer an option. Penn Central, the major rail carrier in the Northeast U.S., filed for bankruptcy in June 1970. This would remain the largest corporate bankruptcy in U.S. history until it was eclipsed by the 2001 Enron collapse. With the Northeast on the verge of losing all meaningful rail service, Congress passed legislation establishing Amtrak in October 1970 to provide passenger rail service too unprofitable for private carriers to continue subsidizing with dwindling freight revenue. This was followed by legislation in 1974 and 1976 that created Conrail, which took over freight rail operations previously undertaken by Penn Central and six other bankrupt railroads in the 17-state Northeast/Midwest service region.

The prospect of perpetual government ownership and management of decrepit rail assets—so dilapidated that regulators began tracking “standing derailments,” incidents where the track bed crumbled away and caused stationary railcars to tip over—proved to be politically unappealing. In this environment, substantive regulatory reform began to be discussed in the halls of power.

Freight rail deregulation began with the 4R Act of 1976. Most significantly, the law legalized contract rates, allowing customers and railroads to negotiate tailored service agreements for the first time since 1903. The ICC even created an advisory office to encourage railroads to take advantage of this new regulatory freedom. In 1979, President Jimmy Carter appointed economist Darius Gaskins to chair the ICC. Gaskins quickly went to work identifying and eliminating the ICC’s bureaucratic inefficiencies, which included demoting career agency employees opposed to reform.

While this was taking place internally at the Interstate Commerce Commission, an emerging consensus among Congress, the Carter administration, industry, consumer advocates, and academia that spanned the ideological spectrum was developing a plan to replace command-and-control rail regulations with market processes. This culminated with the Staggers Rail Act of 1980, which eliminated most economic regulation of the railroads.

The results of the Staggers Act have proved that supporters of economic deregulation were right. The gains enjoyed by carriers and their customers in the decades that followed are large and unambiguous. Inflation-adjusted average freight rates have declined by 44% while freight volume grew by 57%. Even though the law only concerned economic deregulation, the Staggers Act enabled large safety gains, with a 76% decline in train accident rates and an 85% decline in employee injuries and occupational illnesses.

Despite the clear success of partial rail deregulation, some politicians and special interests seek to reverse these reforms and prevent freight railroads from adapting to new competitive market pressures. A coalition of large industrial shippers led by the chemical industry is seeking new regulations that would limit railroads’ return on investment and, thus, capacity to invest in system improvements. Tellingly, these shippers have strongly opposed the ICC’s successor agency, the Surface Transportation Board, adopting robust benefit/cost analysis for major new regulations similar to what has been required of all federal departmental agencies since the Clinton administration.

With rail’s truck competition anticipated to increasingly automate in the coming decades and with labor accounting for nearly half of truck operating costs, rail must also adopt new productivity-enhancing automation technologies to remain viable through the 21st century. Unfortunately, even small movements in this direction—such as by harnessing existing mandated automation and communications technologies to enable single-person crews on some trains, long the default in Western Europe—have been strongly resisted by rail unions. The unions currently have the support of the Federal Railroad Administration (FRA), the rail industry’s safety regulator, which has proposed a rigid crew-size regulation despite conceding it does not possess “any meaningful data” to support the conclusion that two-person train crews are safer than one-person crews.

Organized labor has also opposed automated track inspection that FRA’s own data finds is more accurate than traditional visual inspections. Adopting automated inspection technologies would not only improve safety for the trains operating over the rails, but it would also keep track inspectors out of harm’s way and reduce rail equipment accidents in the field. While FRA was an early supporter of these improved track inspection technologies, it has recently and inexplicably reversed course at the request of rail unions.

Between its recent proposal on crew-size mandates and its reversal on automated track inspection, there is growing evidence that the Federal Railroad Administration has been captured by and subordinated its statutory safety mission to rail labor unions. The good news is Congress can protect the gains realized from the Staggers Act and help usher in 21st-century freight rail.

Congress should mandate that new major rules promulgated by the Surface Transportation Board be supported by robust benefit/cost analysis and limit the agency’s discretionary powers. Congress should also explicitly prohibit the Federal Railroad Administration from regulating train crew size and establish a permanent automated track inspection program not subject to the whims of political appointees.

For more on this topic, see my full Reason Foundation policy brief, “Freight Rail Deregulation: Past Experience and Future Reforms.”

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Reforming the Department of Transportation’s aviation consumer protection authority https://reason.org/commentary/reforming-the-department-of-transportations-aviation-consumer-protection-authority/ Fri, 18 Nov 2022 05:01:00 +0000 https://reason.org/?post_type=commentary&p=59746 As Congress debates FAA reauthorization over the coming year, it should consider reforming DOT’s Aviation Consumer Protection Authority to align with other federal consumer protection statutes.

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In 1978, Congress passed the Airline Deregulation Act and President Jimmy Carter signed it into law, laying the basis for a greatly expanded, more competitive, and lower-priced airline industry. In recent years, the U.S. Department of Transportation (DOT) has increasingly used its authority to protect consumers from unfair or deceptive practices to chip away at airline deregulation.

The transportation department’s rulemakings on airfare advertising, ticket refundability, and tarmac delays during the Obama administration have been cited by critics as examples of a backdoor re-regulatory trend at DOT. The Trump administration attempted to bring the aviation consumer protection authority in line with similar federal authorities wielded by the Federal Trade Commission and Consumer Financial Protection Bureau, but the Biden administration has reversed course. Under President Joe Biden, the Department of Transportation has reinitiated a regulatory agenda based on an expansive reading of its statutory powers. It is increasingly clear that successful reform must come from Congress.

What is now known as the aviation consumer protection authority, the term that the Department of Transportation uses for its statutory authority to police unfair or deceptive practices in the aviation industry (49 U.SC. § 41712), long predates the department itself. The authority was created as Section 411 of the Civil Aeronautics Act of 1938 and modeled on the “unfair or deceptive acts or practices” language included months before in the Federal Trade Commission Act of 1938, which covered most other commercial contexts. The authority was soon transferred to the new Civil Aeronautics Board (CAB) in 1940, which was created by merging the Civil Aeronautics Authority and the Air Safety Board. In 1952, Congress expanded Section 411 to cover not only air transportation itself but the sale of air transportation. For the next three decades, the enforcement against unfair or deceptive practices in the airline and ticket agent businesses by the Civil Aeronautics Board remained the same.

When Congress passed the Airline Deregulation Act in 1978, it eliminated most economic regulation in the aviation sector and wound down the CAB. When the Civil Aeronautics Board was terminated in 1985, Section 411 authority was transferred to the Department of Transportation’s Office of the Secretary. In 1994, Congress reorganized the Title 49 Transportation Code, and Section 411 was recodified as Section 41712. 

While reorganizing the Transportation Code, Congress was also working to modernize authorities held by the Federal Trade Commission (FTC). The FTC Act amendments of 1994, among other things, codified longstanding internal FTC policy in dealing with claims of unfair or deceptive acts or practices that were synthesized for Congress in the FTC’s December 1980 Policy Statement on Unfairness. In a nutshell, the FTC’s approach, as affirmed by Congress, requires that specific elements be met to prove unfairness allegations, one of which necessitates careful benefit/cost analysis.

Specifically, three standards of proof of the Federal Trade Commission’s broad statutory prohibition on unfair business practices were added at 15 U.S.C. § 45(n) by the FTC Act amendments. For conduct to qualify as legally unfair, it must be (1) “likely to cause substantial injury to consumers,” (2) not “reasonably avoidable by consumers themselves,” and (3) “not outweighed by countervailing benefits to consumers or to competition.”

It is worth noting that these reforms were made at a time when Democrats controlled both chambers of Congress and the White House, and they earned bipartisan support. Similar language was included in the Dodd-Frank Act of 2010, covering the enforcement responsibilities of the Consumer Financial Protection Bureau (12 U.S.C. § 5531(c)), also when the federal government was fully controlled by Democrats. 

While bipartisan recognition of the problem of ill-defined “unfairness” exists in virtually every other federal consumer protection context, Congress has not moved to reform DOT’s similar Section 41712 aviation consumer protection authority. This failure to act has enabled regulators in recent years to engage in a variety of re-regulatory activities, from new restrictions on airfare advertising (14 C.F.R. § 399.84(a)) to outlawing true nonrefundable ticketing (14 C.F.R. § 259.5(b)(4)) to an inflexible tarmac delay rule (14 C.F.R. § 259.4) suspected of increasing flight cancellations. Each of these regulations has been criticized as perversely harming consumers, but without the FTC-style standards of proof, the scales have been tipped in favor of the regulators.

Despite congressional inaction, there has been some official interest in modernizing DOT’s Section 41712 powers. At the International Air Transport Association (IATA) Legal Symposium in New York in February 2020, then-Transportation Secretary Elaine Chao announced that the Department of Transportation would propose a rule to update policies and procedures for its aviation consumer protection authority. The final rule on defining unfair or deceptive practices was published in December 2020.

DOT’s rule added Federal Trade Commission-style standards of proof to Section 41712 enforcement and rulemaking while also codifying internal agency procedures for allowing alleged violators to present evidence defending themselves against possible enforcement or rulemaking activity derived from DOT’s aviation consumer protection authority. While this would have improved airline and ticket agents’ defensive positions, it also would have required bureaucrats to clearly explain themselves along the way and give consumers better insight into how decisions that affect them are made. In this way, the time-tested FTC-style standards of proof in unfairness claims are best understood as promoting regulatory quality and consistency in enforcement.

Unfortunately, the Biden administration quickly moved to reverse these reforms. In his July 2021 Executive Order 14036, President Biden ordered the Department of Transportation to amend the new Federal Trade Commission-style definitions of “unfair” and “deceptive” for Section 41712. In August 2022, DOT published a guidance document suggesting it will again take an expansive view of how its Section 41712 powers are defined and limited. This will likely open the door for future discretionary rulemaking guided more by political whims than careful empirical analysis.

The good news is Congress can take the lead and bring the Department of Transportation’s aviation consumer protection authority into alignment with other federal consumer protection authorities. At a minimum, it should adopt the FTC-style unfairness definition in Section 41712. This can be accomplished by adding a new subsection (d) at 49 U.S.C. § 41712 to read:

(d) Unfairness defined; standard of proof

The Secretary shall have no authority under this section to declare unlawful a practice or method of competition on the grounds that such practice or method of competition is unfair unless the practice or method of competition causes or is likely to cause the substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition.

As Congress debates Federal Aviation Administration reauthorization over the coming year, it should consider reforming the Department of Transportation’s aviation consumer protection authority to align with other federal consumer protection statutes. Doing so would help ensure regulatory quality and consistent enforcement at the department, which would benefit all parties involved.

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Webinar: The impacts of autonomous vehicle technology and role of public policy https://reason.org/commentary/webinar-the-impacts-of-autonomous-vehicle-technology-and-role-of-public-policy/ Thu, 20 Oct 2022 04:01:00 +0000 https://reason.org/?post_type=commentary&p=58963 Autonomous vehicles have captured the public imagination in recent years with promises of improved safety, access, and productivity. While vehicle automation offers significant potential benefits, the public discussion is often confused by the various technologies involved, the socioeconomic implications of … Continued

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Autonomous vehicles have captured the public imagination in recent years with promises of improved safety, access, and productivity. While vehicle automation offers significant potential benefits, the public discussion is often confused by the various technologies involved, the socioeconomic implications of those technologies, and the role of public policy. This is perhaps most apparent in the regular conflation of advanced driver assistance technologies aimed at improving human driving and automated driving systems designed to relieve human drivers of responsibility.

Reason Foundation, Brookings Institution, and Princeton Autonomous Vehicle Engineering recently held a clear-eyed webinar conversation aimed at correcting common misconceptions and injecting a dose of realism into the public debates surrounding autonomous vehicle technology, economic, and public policy issues.

In the webinar you can watch below, I am joined by:

This webinar was recorded on October 12, 2022.

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Reforming the Airport Investment Partnership Program https://reason.org/commentary/reforming-the-airport-investment-partnership-program/ Mon, 26 Sep 2022 13:00:00 +0000 https://reason.org/?post_type=commentary&p=58409 Privatization could bring needed improvements to U.S. airports while containing costs and shifting fiscal risk away from taxpayers.

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The United States lags far behind peer countries in airport privatization. Only one U.S. passenger hub has been successfully privatized to date—Luis Muñoz Marín International in San Juan, Puerto Rico, privatized in 2013. The annual Skytrax survey of passengers’ airport preferences shows that of the top 25 global airports, 10 are privatized. George Bush Intercontinental, a public commercial service airport owned by the city of Houston, is the only U.S. airport to break into the top 25 rankings (at 25th). But privatization could help bring needed improvements to U.S. airports while containing costs and shifting fiscal risk away from taxpayers.

Privatization could bring needed improvements to U.S. airports while containing costs and shifting fiscal risk away from taxpayers. And, by minimizing parochial politics in the management of airports, U.S. airports could work more productively with their airline customers to deliver service and facility improvements. Unfortunately, the Federal Aviation Administration’s (FAA) existing Airport Investment Partnership Program (AIPP) has been underused. 

In August, the Tweed New Haven Airport Authority voted to approve a 43-year public-private partnership lease with Avports. While this shows continued interest in airport privatization in the United States, Tweed New Haven is a small passenger airport that currently offers approximately 500 scheduled flights per year and is served by a single carrier, Avelo Airlines. The Federal Aviation Administration confirmed to me by email that Tweed New Haven has not yet applied for the Airport Investment Partnership Program as of Sept. 23. Reforming the AIPP by relaxing the current airline approval requirements to enter the program could increase interest in U.S. airport privatization among large commercial service airports.

The basic structure of the AIPP was initially established by the FAA Reauthorization Act of 1996. The pilot program allowed for the participation of up to five airports, although this was limited to one large hub airport, and one slot was reserved for a general aviation airport. Privatization of commercial service airports under the pilot program was limited to leases only, so outright sales to private airport companies were prohibited. The pilot program also instituted double-supermajority airline approval requirements, whereby a commercial service airport applying to the FAA must secure the support of 65% of airlines serving the airport as well as by airlines accounting for 65% of the annual total landed weight at the airport.

The 2012 FAA reauthorization increased the number of pilot program slots from five to 10. Major changes came in the FAA Reauthorization Act of 2018, which replaced the pilot program with the permanent Airport Investment Partnership Program that exists today. This eliminated the cap on the number of participating airports and authorized joint public-private airport ownership, but the law retained the double-supermajority airline approval requirements created in the 1996 pilot.

Since the enactment of the 2018 law, no additional hub airports have entered the AIPP despite the high value of these assets. Reason Foundation’s Robert Poole examined 31 large and medium hub U.S. airports in a 2021 study. Using recent international airport transactions, he estimated that 25 of the 31 airports could generate lease proceeds that could completely pay off their existing airport debts. And nine of those 31 airports could generate lease proceeds to more than make up for their government owners’ unfunded public employee pension liabilities. 

To promote more airport use of the AIPP, Congress should consider amending clauses (i) and (ii) of 49 U.S.C. § 47134(b)(1)(A) to read:

(i) in the case of a primary airport, by more than 50 percent of the scheduled air carriers serving the airport and by scheduled and nonscheduled air carriers whose aircraft landed at the airport during the preceding calendar year, had a total landed weight during the preceding calendar year of more than 50 percent of the total landed weight of all aircraft landing at the airport during such year; or

(ii) in the case of a nonprimary airport, by the Secretary after the airport has consulted with more than 50 percent of the owners of aircraft based at that airport, as determined by the Secretary.

By unlocking the value of airports through privatization, both the public and private sectors could enjoy substantial benefits—in addition to passengers who could enjoy modernized, world-class airport facilities. To encourage more interest in the AIPP among major commercial service airports, Congress could reform the double-supermajority airline approval requirements by lowering the approval thresholds to simple majorities. With less daunting approval requirements, more airports may choose to initiate privatization discussions with their airline customers.

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Modernizing the passenger facility charge to improve aviation https://reason.org/policy-brief/modernizing-the-passenger-facility-charge/ Fri, 09 Sep 2022 04:00:00 +0000 https://reason.org/?post_type=policy-brief&p=56843 Modernizing the passenger facility charge would promote local airport self-sufficiency and reduce airfares through enhanced airline competition.

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Executive Summary

The COVID-19 pandemic hit the transportation sector hard and perhaps the aviation industry hardest. At its worst in April 2020, U.S. air passenger transportation declined by 96% year-over-year. While air travel has rebounded since that nadir, full recovery is expected to take years, particularly for international and business travel. The passenger air transportation market at the end of the decade is likely to look very different than what had been projected prior to the pandemic.

Like all segments of the aviation market, airports will need to adjust to this new normal. Both airlines and airports received tens of billions of dollars in taxpayer bailouts in the United States, and returning the aviation industry to self-sufficiency is the only fiscally sustainable path forward.

To that end, giving airports maximum operational and financing flexibility to adjust to emerging conditions is critical to minimizing the costs and disruptions associated with aviation recovery. One important way that Congress can facilitate this flexibility at no cost to the Treasury is by modernizing the airport passenger facility charge.

The passenger facility charge (PFC) is a congressionally authorized, federally regulated local airport user fee. The PFC exists alongside the Airport Improvement Program (AIP), a federal grant program funded through aviation taxes. Together, the PFC and AIP have in recent years accounted for approximately half of total airport funding available for capital projects.

AIP funds generally can be used only for airside projects, such as runways, taxiways, aprons, noise abatement, and land acquisitions. In contrast, the PFC funds can be used for AIP-eligible projects plus numerous landside projects, such as passenger terminal and ground transportation improvements, and can be used to service debt. For commercial airports with sizable passenger volumes, these differences in flexibility have led to a strong preference for the PFC over AIP funding.

The federal passenger facility charge cap was last raised by Congress in 2000. Under current law, public airports in the U.S. can charge a maximum PFC of $4.50 per boarding for the first two flight segments of a trip, with PFC collections per passenger being capped at $9 per one-way and $18 per round-trip. Thanks to inflation, the passenger facility charge has seen its purchasing power plummet by approximately half, negatively impacting airports’ ability to address their growing list of needed improvements.

Two findings support modernizing the passenger facility charge. First, evidence suggests that PFC use has a positive effect on airport efficiency while AIP use has a negative effect. Legislation introduced in previous Congresses would have uncapped the PFC while proportionately reducing AIP authorized spending, with this change in the PFC/AIP mix expected to result in greater airport productive efficiency.

Second, major non-aeronautical revenue sources, especially revenue from parking and rental car fees, were facing heightened risks and declining prospects prior to the pandemic as travelers opted for new ride-hailing ground transportation services to and from airports. Pandemic-related concerns about shared transportation may have temporarily shifted traveler preferences back to driving modes that support parking and rental car revenue, but how long this will persist is highly uncertain. Since the PFC charges airport terminal users regardless of their use of terminal concessions, it represents a lower-risk, predictable, and sustainable revenue source.

In addition to providing airports with predictable and sustainable revenue, the PFC was also designed to promote airline competition. Beginning in the 1950s, airports negotiated long-term leases with their airline customers to lock in airline payments so as to retire debt and finance airport improvements. In exchange for this financial support, incumbent airlines received long-term exclusive-use gate leases, which they used to restrict access to new and often lower-cost entrants.

In recent years, the trend has shifted. Granting long-term, exclusive-use gate leases has faded as a concern, but limited gate availability at large and medium-sized hub airports has still been estimated to raise consumer airfares by billions of dollars every year. In addition to serving as an important airport self-help tool, the PFC can increase airline competition and thereby dilute price-setting power by dominant incumbent airlines. Air travelers can thus benefit from improved airport facilities and lower airfares.

Alternatives to the passenger facility charge are inferior from both airport revenue collection and consumer welfare perspectives. Modernizing the passenger facility charge would promote local airport self-sufficiency, airport efficiency, and reduced airfares through enhanced carrier competition as the U.S. recovers from the COVID-19 pandemic. As Congress debates the FAA reauthorization due at the end of September 2023, it should eliminate the statutory passenger facility charge cap of $4.50 to promote a pro-consumer and pro-taxpayer aviation recovery.

Full Brief: Modernizing the Passenger Facility Charge for Aviation Recovery

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A simple way to increase competition and reduce airfares in the US https://reason.org/commentary/a-simple-way-to-increase-competition-and-reduce-airfares-in-the-us/ Tue, 30 Aug 2022 16:20:00 +0000 https://reason.org/?post_type=commentary&p=57187 European experience with airline cabotage suggests deregulation could enhance airline competition and lower consumer airfares in the U.S.

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The Airline Deregulation Act was signed into law in 1978 and largely eliminated the economic regulation of the domestic U.S. airline industry. A 1969 article in Reason magazine by Reason Foundation’s Robert Poole detailed the strict regulations put forth by the Civil Aeronautics Board, which had established and enforced a “huge cartel” in air travel to the detriment of consumers prior to 1978. Since 1978, thanks to the additional competition enabled by deregulation, average inflation-adjusted airfares have fallen by more than 40%.

However, regulatory barriers to international airline competition remain in place, most notably the prohibition on cabotage—the service of domestic routes by foreign air carriers. The European experience with airline cabotage suggests deregulation targeting these remaining barriers could enhance airline competition and lower consumer airfares in the U.S.

Since the Air Commerce Act of 1926, the United States has prohibited airline cabotage. This law was designed to protect the nascent air travel industry and was modeled on the Merchant Marine Act of 1920 (commonly known as the Jones Act), which prohibits cabotage in maritime freight transportation.

Unfortunately, as the domestic air travel industry matured, restrictions on foreign carrier participation in domestic civil aviation did not decrease. Under current law (49 U.S.C. § 41703(c)), airline cabotage is prohibited unless the secretary of transportation declares an air service emergency (49 U.S.C. § 40109(g)) and specifically exempts a specific foreign carrier so it can serve a specific route, which has occasionally happened with far-flung Pacific territories after the sole domestic carrier exits the market or severely cuts air service.

In contrast to the U.S.’s rigid stance against airline cabotage, Europe has liberalized its air travel marketplace. In the early 1990s, the European Union began phasing in airline cabotage among member countries as part of its liberalization of civil aviation. In just a couple of years, the EU was seeing positive results. George Mason University transportation economist Kenneth Button noted in a 1998 article, “Since 1993, 80 new airlines have been created while only 60 have been dissolved; 90 to 95 percent of the passengers are now traveling at fares that are lower in real terms than they were in 1993.”

Today, comparable airfares in Europe are significantly cheaper than those in the United States, even when considering the significantly higher taxes and fees imposed on EU air travel. The evidence from Europe and basic economic theory suggests that cabotage can improve service and lower prices. But U.S. air carriers and their unions strongly resist the mere mention of adopting a similar policy in the United States.

In recent years, many politicians have alleged that growing concentration among U.S. domestic air carriers harms consumers. There is little economic evidence to support these claims, and many of these same politicians are vocal opponents of any foreign airline entry, even on international routes. One example is outgoing House Transportation and Infrastructure Committee Chairman Peter DeFazio (D-OR). For decades, Rep. DeFazio has opposed the streamlining of the U.S. airline industry through carrier mergers. The best available evidence finds that these mergers have benefited consumers.

Rep. DeFazio also led the charge against low-cost international air service operated by foreign carriers, introducing numerous bills aimed at banning a specific low-cost European carrier, Norwegian Air International, from entering the U.S. international air travel market. Fortunately, none of these counterproductive protectionist bills has passed, in large part because enacting and enforcing them would violate the US-EU air transportation treaty and trigger inevitable retaliation against U.S. air carriers operating international routes in Europe.

Despite growing evidence that the airline cabotage prohibition restricts competition and raises U.S. domestic airfares, Congress has done very little to attempt to address this problem. The only notable example came from former Rep. Dave Brat (R-VA), who happened to be an economics professor. Rep. Brat’s 2018 Free to Fly Act would have allowed foreign air carriers to service domestic routes, but only if they set up U.S.-based subsidiaries and employed U.S. citizens. Still, even this small step toward airline cabotage liberalization would have benefited consumers through enhanced airline competition. But the bill didn’t move, and Brat is no longer in Congress.

With Congress due to consider a major Federal Aviation Administration reauthorization bill next year, history suggests a variety of special interests will likely be pitching a variety of misguided anti-market measures under the guise of consumer protection. Instead, Congress should consider relaxing the prohibition on airline cabotage and build on the success of domestic airline deregulation.

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What Congress needs to know about drone airspace integration https://reason.org/commentary/what-congress-needs-to-know-about-drone-airspace-integration/ Thu, 28 Jul 2022 04:01:00 +0000 https://reason.org/?post_type=commentary&p=56359 Congress should avoid drastic policy actions while familiarizing themselves with ongoing industry and regulatory developments.

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Later this summer, congressional aviation staff are expected to begin initial discussions on a reauthorization of the Federal Aviation Administration (FAA), which is due at the end of Sept. 2023. One topic that Congress will consider is the integration of drones into the National Airspace System. This is a long-term effort that will require overcoming numerous technical and policy challenges, many of which cannot be addressed in time for next year’s FAA reauthorization. To ensure it acts in the public interest, Congress should pay close attention to ongoing activities in the drone industry and at FAA, which were both highlighted at a recent conference.

The general mood at the 2022 FAA Drone Symposium, held in Orlando earlier this year, was one of cautious optimism. FAA officials pledged their strong support for emerging drone technologies. Industry representatives praised recent airspace integration activities, chiefly the final report from FAA’s Unmanned Aircraft Systems (UAS) Beyond Visual Line of Sight Aviation Rulemaking Committee. Both sides noted, however, that the ultimate goal of fully integrating UAS into the National Airspace System (NAS) will take many years to achieve.

During a panel surveying UAS operations and policy around the world, Philip M. Kenul, from the F38 UAS Committee of ASTM International (formerly the American Society for Testing and Materials), noted that work on international regulatory harmonization is ongoing but remains at the early stages. Mr. Kenul suggested that industry consensus standards can guide coordination between national and multinational (in the case of the European Union) aviation regulators. 

Kenul highlighted remote UAS identification and UAS traffic management (UTM) as examples of standardization activities that are aimed at building both industry and regulatory consensus. ASTM’s remote ID standard (ASTM F3411-19) was originally adopted in 2019 and has since been updated to accommodate both FAA and European remote ID regulations. ASTM’s technical standard for promoting interoperability across providers of UAS traffic management (ASTM F3548-21) aims to similarly bridge UTM development activities from both commercial developers and regulators. This iterative process, coupled with industry and government feedback loops, can allow varied stakeholders to keep up with this rapidly evolving environment while avoiding the downsides of path dependence that come from an overly prescriptive, regulator-centric approach.

Alongside coordination through standards bodies such as ASTM and the International Organization for Standardization, Leslie Cary from the International Civil Aviation Organization (ICAO) said ICAO is working to develop comprehensive guidance on cross-border UAS operations among member states. However, formal recommendations will not be immediately forthcoming.

Asked to predict the next five-to-10 years of UAS airspace integration developments around the world, Kenul demurred, saying past predictions on the specific timing of airspace integration events have been completely wrong. ICAO’s Cary offered the safe prediction that collaboration and coordination will continue.

While a bit unwieldy, the 10-person stakeholder panel on FAA’s Beyond Visual Line of Sight (BVLOS) Aviation Rulemaking Committee (ARC) final report offered insight into current thinking on the next major step toward full integration of UAS into the NAS. Jim Williams of AURA Network Systems lamented that excessive attention on the few areas of stakeholder disagreement—notably the recommendation that UAS be granted right-of-way over crewed aircraft in certain low-altitude contexts—is overshadowing the fact that the vast majority of the more than 70 recommendations enjoyed broad consensus. As FAA moves forward with a BVLOS rulemaking, Williams said it should take care not to “throw the baby out with the bathwater.”

This issue is very important to UAS stakeholders and they are likely to express strong views on it during the forthcoming rulemaking process. Lisa Ellman of the Commercial Drone Alliance emphasized that the right-of-way issue is incredibly important to the UAS industry and is a major reason why large-scale commercial operations are not taking place in the United States. Whatever FAA ultimately decides to do about rights-of-way, the rules should be clear for all NAS users and enforced consistently.

UAS traffic management (UTM) also remains a top priority of drone stakeholders. The most recent version of FAA’s UTM Concept of Operations (ConOps) was released in 2020. The third version, originally slated for a second quarter 2021 release, has been delayed until at least the end of 2022 according to a March 2022 FAA UTM Field Test project presentation to the industry. While the revised UTM ConOps will reflect the final UAS remote ID rule that was published in January 2021, it is unclear if the timing will allow it to reflect FAA’s thinking—at least their initial thinking at the proposed rule stage—on the BVLOS regulatory framework. In any event, it is clear that a fourth version of the UTM ConCops will be needed to fully account for permissible BVLOS operations.

Tim Arel, acting chief operating officer of FAA’s Air Traffic Organization, did not provide a more precise date for the release of the UTM ConOps update but said that FAA anticipates that UTM will be provided competitively by the industry within five years. At the same time, Arel noted that the interface between UTM and conventional FAA air traffic management still needs to be worked out—no simple task. Taken together, this suggests some commercial UAS operations may be able to scale at low altitudes in the NAS before the decade is out, but the full integration of UAS into conventional controlled airspace remains a distant goal.

While drone market advancements will be largely market-driven, Congress can play a role in guiding the continued evolution and maturation of drone policy. In recent years, these political interventions have been both positive and negative. Among the counterproductive proposals, Congress has considered legislation that would grant state and local governments broad powers to limit safe drone operations that are legal under federal law (S. 600). In contrast, a more positive suggestion was a bill to promote infrastructure inspection by drone (H.R. 5315), a valuable use case that is viable today. 

As it debates FAA reauthorization in the coming months, Congress should avoid drastic policy actions. Instead, lawmakers should familiarize themselves with ongoing industry and regulatory developments. With a firm understanding of facts on the ground and reasonable expectations of technology development, Congress can play a positive role by identifying discrete policy problems and developing tailored solutions.

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Annual Privatization Report 2022: Aviation https://reason.org/privatization-report/annual-privatization-report-2022-aviation/ Wed, 20 Jul 2022 04:00:00 +0000 https://reason.org/?post_type=privatization-report&p=55613 This report reviews developments in the United States and worldwide regarding private-sector participation in airports, air traffic control, and airport security.

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Introduction

In the second half of the 20th century, the world’s airports and air traffic control (ATC) systems were essentially all departments of governments. Two events in 1987 launched an ongoing wave of organizational and government reforms. Those events were the privatization of the British Airports Authority (BAA) and the corporatization of the New Zealand government’s ATC functions as Airways New Zealand.

BAA was privatized as a single entity comprising the three major London airports plus several other airports in the United Kingdom. Later government policy decisions led to selling Gatwick, Stansted, and two Scottish airports to new private owners. The improved performance of the privatized airports inspired a global wave of airport privatization and long-term public-private partnerships (P3s) that has resulted in over 100 large and medium-sized airports being either sold to investors or long-term leased as revenue-based P3s—in Europe, Asia, Latin America, and elsewhere. The outlier has been the United States, which has only one P3-leased airport (San Juan International) and a small number of public-private partnership arrangements for airport terminals and other individual facilities.

The corporatization of Airways New Zealand in 1987 also led to a global trend under which more than 60 countries subsequently separated their ATC systems from the government’s transport ministry and set them up as self-supporting corporations, regulated for safety at arm’s length from the government. Within the first decade of this trend, the leading ATC providers organized a trade association called the Civil Air Navigation Services Organization (CANSO). Today CANSO has 86 full members (providers of ATC services) and 88 associate members (mostly supplier companies). CANSO is the ATC counterpart of the global organizations for airlines (IATA) and airports (ACI).

The corporatization of Airways New Zealand in 1987 also led to a global trend under which more than 60 countries subsequently separated their air traffic control systems from the government’s transport ministry and set them up as self-supporting corporations, regulated for safety at arm’s length from the government.

This report reviews developments in the United States and worldwide regarding private-sector participation in airports, air traffic control, and airport security. While the United States remains an outlier when it comes to airport and air traffic control organization and governance, interest in airport privatization via long-term public-private partnership leases continues.

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New regulatory burdens for the transportation sector from the Biden administration https://reason.org/commentary/new-regulatory-burdens-for-the-transportation-sector-from-the-biden-administration/ Thu, 07 Jul 2022 16:00:00 +0000 https://reason.org/?post_type=commentary&p=55623 New proposed transportation regulations from the Biden administration have officially arrived. What impact will they have?

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On June 21, the White House Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) released the Spring 2022 Uniform Agenda of Regulatory and Deregulatory Actions, the biannual snapshot of the federal administrative state. It’s a large and unwieldy document but sheds some light on regulatory activities usually shrouded by the complexity of the federal bureaucracy.

I previously examined the transportation rulemakings contained in Fall 2021, Spring 2021, and Spring 2020 editions of the Unified Agenda for Reason Foundation. From a historical perspective, Figure 1 below shows the current volume of regulatory activity at the U.S. Department of Transportation is typical of what has been seen over the past two administrations.

The Spring 2022 Unified Agenda lists 228 active rulemaking projects at the U.S. Department of Transportation. Of those 228, 35 are new rulemaking projects listed in Table 1 at the bottom of this article. And of those 35, the most impactful are the three deemed “economically significant.” Economically significant rules are defined by Executive Order 12866 (1993) as regulations that would have an annual impact on the economy of $100 million or more or otherwise “adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities.” 

For the U.S. Department of Transportation, the three economically significant rulemakings first published in the Spring 2022 Unified Agenda were all from the National Highway Traffic Safety Administration (NHTSA):

  • Advanced Impaired Driving Technology: Mandated by November 2021’s Infrastructure Investment and Jobs Act (aka the Bipartisan Infrastructure Law) Section 24220, this rulemaking would potentially mandate that new cars be equipped with technology designed to detect drunk and/or drugged driving. NHTSA anticipates publishing an advance notice of proposed rulemaking in December 2022. While the law mandates this rulemaking to be completed by November 2024, this statutory deadline will almost certainly be missed. NHTSA auto safety rulemakings involving established technologies typically take at least eight years, and the technology mandated here does not exist in a reliable form. Fortunately, the law provides an escape hatch if regulators cannot identify an appropriate technology to mandate within the next decade.
  • Rear Designated Seating Position Alert: Also mandated by the Infrastructure Investment and Jobs Act (Section 24222), this rulemaking would mandate that all new cars be equipped with audio and visual rear-seat occupant reminders. This comes in response to tragic accidents of parents forgetting their young children in the backseat of hot cars. NHTSA anticipates publishing a notice of proposed rulemaking in December 2022. The law requires this rulemaking to be completed by November 2023, but NHTSA will almost certainly miss this statutory deadline as well.
  • Light Vehicle CAFE Standards Beyond MY [Model Year] 2026: Unlike the other two new economically significant rulemakings, this planned fuel economy regulation is purely discretionary and is the companion to what will likely become the most costly rule on record. Over the past two decades, the two most costly federal regulations have been the Biden administration’s “Revised 2023 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions Standards” final rule from 2021 ($14 billion/year at a 7% discount rate) and the Obama administration’s “2017 and Later Model Year Light-Duty Vehicle Greenhouse Gas Emissions” final rule from 2012 ($10.8 billion/year at a 7% discount rate). Both of those rules were published by the Environmental Protection Agency, which jointly administers the Corporate Average Fuel Economy (CAFE) program with NHTSA. NHTSA anticipates publishing a notice of proposed rulemaking in March 2023.

In addition to these new economically significant rulemaking projects, there are several with smaller economy-wide impacts in the regulatory pipeline at the DOT that are worth highlighting in light of the current supply chain and energy market turmoil. These include:

  • Safe Integration of Automated Driving Systems-Equipped Commercial Motor Vehicles: This rulemaking from the Federal Motor Carrier Safety Administration (FMCSA) could begin to clear the path for autonomous heavy trucking. The technologies involved have the potential to dramatically improve freight transportation productivity and cut costs. However, the Biden administration is considered close with organized labor, which opposes transportation automation. FMCSA anticipates publishing a notice of proposed rulemaking in January 2023. However, in the Fall 2021 Unified Agenda, FMCSA indicated that it expected to publish the NPRM in June 2022, and politics may cause this rulemaking project to be delayed again.
  • Train Crew Staffing: While the U.S. Department of Transportation under the Biden administration is slowly moving forward on trucking automation, it appears poised to take a significant step backward on freight rail automation. Despite being forced to spend billions of their own funds over the past decade installing automated train safety technology known as positive train control, America’s private freight railroads may be prohibited from taking full advantage of emerging train automation technologies due to union opposition. This proposed regulation from the Federal Railroad Administration (FRA) was previously rejected as lacking a safety basis and would require that a minimum of two crewmembers be on board a freight train at all times, save a few limited potential exceptions. Such a rule would disadvantage freight rail relative to trucks, which produce 10 times more carbon dioxide to move shipping containers over the same distance. It also raises an interesting political question: Will this proposed rule from FRA cause friction between labor and environmental groups? In the Spring 2022 Unified Agenda, FRA anticipated a June 2022 publication of this proposed rule, suggesting publication is likely imminent.
  • Hazardous Materials: Suspension of HMR Amendments Authorizing Transportation of Liquefied Natural Gas by Rail: This final rule from the Pipelines and Hazardous Materials Safety Administration (PHMSA) would ban recently authorized liquefied natural gas (LNG) by rail until a separate new rule from PHMSA on LNG tank cars is completed or June 30, 2024, whichever comes first. Since PHMSA does not anticipate publishing the notice of proposed rulemaking on that second regulation until January 2023, the practical effect of this rule will likely be an 18-month ban on LNG by rail. While ostensibly about safety, this is largely being carried out at the insistence of environmental groups, which have adopted an absolutist “keep it in the ground” position on all fossil fuels. The safety basis is both unsupported by the data and ignores that LNG is currently shipped around the country by tank trucks on America’s roadways, which present far more potential safety conflicts than railways. Railroads have also safely moved liquefied petroleum gas for decades, which poses a similar or greater risk than LNG transportation. PHMSA anticipates the final rule to be published in December 2022.

The Biden administration faces some tough decisions. While the U.S. DOT under Transportation Secretary Pete Buttigieg often seems reflexively pro-regulation, the economic fallout from the COVID-19 pandemic and responses to it are casting an unfavorable light on some of its preferred policies. Thus, it would not be surprising if the regulatory pipeline slows over the next few months in response to the upcoming elections, inflation, supply chain issues, and other economic concerns.

Table 1: U.S. Department of Transportation Rulemaking Projects First Published in the Spring 2022 Unified Agenda
AgencyStage of RulemakingTitleRIN
OSTProposed Rule StagePeriodic Reviews of Basic Essential Air Service Levels2105-AF13
OSTProposed Rule StageEnsuring Safe Accommodations for Air Travelers With Disabilities Using Wheelchairs2105-AF14
OSTFinal Rule StageRevisions to Civil Penalty Amounts, 20232105-AF12
FAAProposed Rule StageAirman Certification Standards & Practical Test Standards for Airmen: Incorporation by Reference2120-AL74
FAAFinal Rule StageProhibition Against Certain Flights in the Tehran Flight Information Region (FIR) (OIIX)2120-AL75
FAAFinal Rule StageProhibition Against Certain Flights in the Baghdad Flight Information Region (FIR) (ORBB)2120-AL76
FHWAProposed Rule StageNational Electric Vehicle Infrastructure Formula Program2125-AG10
FMCSAProposed Rule StageEmergency Egress Requirements for Buses; Amendments to Determination of Seating Capacity and Designated Seating Positions2126-AC55
FMCSAProposed Rule StageParts and Accessories Necessary for Safe Operation; General Amendments2126-AC56
FMCSAProposed Rule StageProviders of Recreational Activities2126-AC57
FMCSAProposed Rule StageSelf-Insurance Program Cost Recovery2126-AC58
NHTSAPrerule StageAdvanced Impaired Driving Technology2127-AM50
NHTSAPrerule StageSeatback Safety Standards2127-AM53
NHTSAPrerule StageSide Underride Guards on Trailers and Semitrailers2127-AM54
NHTSAProposed Rule StageUniform Procedures for State Highway Safety Grant Programs2127-AM45
NHTSAProposed Rule StageRegistered Importer Regulation Modernization2127-AM47
NHTSAProposed Rule StageSeat Belts in Limousines2127-AM48
NHTSAProposed Rule StageRear Designated Seating Position Alert2127-AM49
NHTSAProposed Rule StageAmend FMVSS No. 108 For On-Vehicle Headlamp Testing2127-AM51
NHTSAProposed Rule StageMinimum Performance Standards for Lane Departure Warning and Lane-Keeping Assist Systems2127-AM52
NHTSAProposed Rule StageLight Vehicle CAFE Standards Beyond MY 20262127-AM55
NHTSAProposed Rule StagePart 572 THOR 5th Female Crash Test Dummy2127-AM56
NHTSAFinal Rule StageRegulatory Update to Transfer Programs2127-AM46
FRAProposed Rule StageDispatcher Certification2130-AC91
FRAProposed Rule StageSignal Employee Certification2130-AC92
FTAProposed Rule StageRail Transit Roadway Worker Protection2132-AB41
FTAProposed Rule StageState Safety Oversight2132-AB42
FTAProposed Rule StagePublic Transportation Safety Certification Training Program2132-AB43
FTAProposed Rule StagePublic Transportation Agency Safety Plans2132-AB44
FTAProposed Rule StageStatewide and Nonmetropolitan and Metropolitan Transportation Planning2132-AB45
MARADProposed Rule StageCable Security Fleet2133-AB93
MARADProposed Rule StageRevision of the State and Regional Maritime Academy Regulations2133-AB94
MARADProposed Rule StageAmendment to the United States Merchant Marine Academy Regulations; Maritime Service Obligation2133-AB96
MARADFinal Rule StageTanker Security Program2133-AB95
PHMSAPrerule StageHazardous Materials: Adjusting Registration and Fee Assessment Program2137-AF59

Source: Office of Information and Regulatory Affairs, Unified Agenda of Regulatory and Deregulatory Actions, Spring 2022
Note: RIN = Regulation Identifier Number, a unique alphanumeric code assigned by the Regulatory Information Service Center to each rulemaking project listed in the Unified Agenda. An explanation of Stage of Rulemaking terms can be found on page 8 of the Introduction to the Unified Agenda from the Regulatory Information Service Center.

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Examining the increase in traffic fatalities and surge in dangerous driving https://reason.org/commentary/examining-the-increase-in-traffic-fatalities-and-surge-in-dangerous-driving/ Mon, 06 Jun 2022 21:30:00 +0000 https://reason.org/?post_type=commentary&p=54909 A closer look at the data suggests the worst may be behind us.

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In April, the National Highway Traffic Safety Administration (NHTSA) released preliminary statistical projections estimating that 2021 would set a gruesome record with 42,915 traffic fatalities, up 10.5% from 2020’s startling 38,824 road deaths and a 7.6% increase over 2019’s 36,096 fatalities. This troubling upward trend in dangerous driving during the COVID-19 pandemic must be analyzed to better understand the causes and evaluate the effectiveness of potential safety countermeasures. If there is any good news, it is that while dangerous driving remained elevated through 2021, a closer look at the data suggests the worst may be behind us.

Despite the 10.5% increase in estimated traffic fatalities from 2020 to 2021, the annual fatality rate remained flat. Further, the annual fatality rate decomposed into quarterly and monthly rates shows that overall fatal crash risk was slowly declining through 2021, which suggests understanding the causes of the fatality rate spike that began in the second quarter of 2020 will be key to an effective safety response.

NHTSA’s projection that nearly 43,000 were killed last year on U.S. roadways is a grim reminder that road transportation can be hazardous. It is also important to put these fatalities in a risk-based context, specifically by controlling for the population’s exposure to hazardous driving conditions. This allows us to make relative risk comparisons over time, by geography, and for a number of other characteristics that change in population or travel volume would otherwise obscure. In NHTSA’s case, we often see this expressed in terms of a fatality rate per 100 million vehicle miles of travel.

In 2020, the U.S.’s annual traffic fatality rate was 1.34. For 2021, NHTSA estimates an annual rate of 1.33, even though the fatality count increased by more than 10% between 2020 and 2021. This is because Americans drove more, increasing exposure to hazardous driving conditions even though average driving conditions in 2021 did not become more hazardous than those of 2020. 

If one examines the quarterly fatality rates of the last decade (see table below), seasonal oscillation in fatality rates becomes clear. From these data, it is apparent that a massive spike occurred in the second quarter of 2020 as the coronavirus pandemic began, with the year-over-year fatality rate increasing by more than 30%. This occurred while the year-over-year fatality count for the second quarter actually fell 0.6% because of fewer vehicle miles of travel during the pandemic’s initial spring 2020 lockdowns.

Table 1: Quarterly Traffic Fatality Rates (deaths/100M VMT), 2011-2021*
1st Quarter2nd Quarter3rd Quarter4th QuarterFull Year
20110.981.091.181.171.10
20121.081.121.211.161.14
20131.041.071.171.161.10
20140.991.031.111.171.08
20151.031.081.201.211.15
20161.111.161.231.271.19
20171.121.131.211.201.17
20181.101.111.181.151.14
20191.051.091.181.141.11
20201.081.431.441.401.34
2021*1.251.341.371.351.33
*2021 figures are preliminary estimates based on statistical projections. (NHTSA 2022)

Looking even more closely at NHTSA’s monthly fatality figures, the pandemic fatality rate spike began in April 2020 and peaked in June 2020. The June 2021 fatality rate was down 11% relative to the June 2020 peak. Comparing the months of April through December for 2020 and 2021, the year-over-year monthly fatality rates declined by 3% on average. While the overall fatality rate remains elevated and data from 2022 will be important to establish a firm trend, there is reason to be cautiously optimistic that the worst is behind us and driving conditions are becoming less hazardous.

In May, NHTSA followed up its initial release of 2021 projections with a summary breakdown of crash fatalities by subcategory. While rural roads had much greater fatality rates than urban roads, urban roads—especially non-Interstate arterials and local roads—became much more dangerous over the last two years. Between 2020 and 2021, rural road fatalities increased 4% to 17,504 while urban road fatalities increased 16% to 25,411, with the urban fatalities share increasing from 56% to 59% of total fatalities. Fatality rates appear to be declining or at least plateauing across most roadway functional classifications, but remain elevated well above 2019 levels.

Table 2: Traffic Fatality Rates by Roadway Functional Classification, 2019-2021*
2019 Fatality Rate2020 Fatality Rate2021 Fatality Rate*
Rural Interstate0.760.800.79
Urban Interstate0.470.640.63
Rural Arterial1.992.142.02
Urban Arterial1.101.391.44
Rural Local/Collector1.982.282.11
Urban Local/Collector0.780.981.06
*2021 figures are preliminary estimates based on statistical projections. (NHTSA 2021, NHTSA 2022)

The last two years have been terrible for road safety in the U.S. An effective response will likely require a variety of countermeasures tailored to address specific local hazards, rather than a one-size-fits-all approach. The last edition of NHTSA’s biennial highway safety bible Countermeasures that Work was published in 2020. The 11th edition is due out later this year and will hopefully address the dangerous driving surge that occurred during the COVID-19 pandemic so state and local roadway owner-operators can mount effective responses.

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Time for Congress to fix the alternative minimum tax disparity in infrastructure bonds https://reason.org/commentary/time-for-congress-to-fix-the-alternative-minimum-tax-disparity-in-infrastructure-bonds/ Mon, 09 May 2022 04:00:00 +0000 https://reason.org/?post_type=commentary&p=54117 Interest income on governmental bonds is not subject to taxation. In contrast, interest income on private activity bonds is generally taxed.

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For supporters of the use of public-private partnerships to procure highway projects, the massive $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) was a mixed bag. Congress left in place the longstanding ban on tolling existing Interstate segments, but it also doubled the private activity bond (PAB) lifetime volume cap to $30 billion.

Additionally, two IIJA provisions require value for money (VFM) analysis (“or other comparable analysis”) could open the door for more procurements, although Reason’s Bob Poole highlights a possible implementation wrinkle with the VFM analysis provisions in the April issue of Public Works Financing.

But one important financing issue was ignored by Congress: the application of the alternative minimum tax to interest income from private activity bonds. Bringing tax code parity to PABs and governmental bonds would make PABs—and the public-private partnerships (P3s) that are in part financed with them—more attractive.

Under the federal tax code, bonds issued by state and local governments are broadly categorized as either governmental bonds or private activity bonds. Interest income on governmental bonds, such as municipal bonds, is not subject to taxation. In contrast, interest income on private activity bonds, as with commercial bonds, is generally taxed. Government-issued bonds are subject to two private business tests (26 U.S.C. § 141(b)). If both conditions are met, the bond interest income is generally taxable.

However, Congress has provided tax exemptions for some uses of private activity bonds. These are called qualified PABs. Most relevant to the infrastructure discussion are a subset of qualified PABs called exempt facility bonds. Relevant to this discussion is Section 142(m) of the Internal Revenue Code, exempt facility bonds for qualified highway or surface freight transfer facilities.

Since they were established for highway uses by the SAFETEA-LU (Safe, Accountable, Flexible, Efficient Transportation Equity Act: A Legacy for Users) surface transportation reauthorization of 2005, qualified PABs have been very important in highway public-private partnerships.

As Reason Foundation’s Baruch Feigenbaum wrote:

In most cases PABs provide financing for 20-30% of the project’s total cost. For megaprojects, $12 billion in private activity bonds led to $45 billion in project activity over the past 15 years. Without PABs many of these projects would not have been feasible.

However, these bonds were also subject to a national lifetime volume cap of $15 billion by Section 142(m)(2)(A) of the Internal Revenue Code, and this had essentially been maxed out by 2020. Fortunately, the IIJA doubled this lifetime volume cap to $30 billion, buying at least a few additional years of robust P3 project activity. The additional $15 billion in qualified highway or surface freight PAB capacity provided by IIJA Section 80403 was badly needed to ensure government and P3 financing remained competitive. But IIJA failed to address a longstanding disparity between governmental bonds and tax-exempt PABs: the application of the alternative minimum tax (AMT).

The AMT is an income tax designed to ensure that taxpayers who take many deductions and exemptions pay a minimum rate of 26% or 28%, depending on the level of gross income. Interest income from governmental bonds is excluded from the AMT. In contrast, interest income from normally tax-exempt PABs is generally taxable. This tax code disparity raises the relative cost of financing a project under a P3 procurement. As the Congressional Research Service points out, “Because private activity bonds are included in the AMT, the bonds carry a higher interest rate (approximately 50 basis points) than do tax-exempt government-purpose bonds, all else being equal.”

The good news is there is a simple fix. Section 57(a)(5)(C) of the Internal Revenue Code could be amended to add new clause (vii):

(vii) EXCEPTION FOR PRIVATE ACTIVITY BONDS FOR QUALIFIED HIGHWAY OR SURFACE FREIGHT TRANSFER FACILITIES.—For purposes of clause (i), the term “private activity bond” shall not include any exempt facility bond that is issued as part of an issue to finance a qualified highway or surface freight transfer facility (as defined in section 142(m)).

As Congress conducts oversight of the implementation of the Infrastructure Investment and Jobs Act in the coming years, it should not forget that the private sector can play a positive role in building, financing, and managing public-purpose infrastructure like highways. Small tweaks, such as bringing alternative minimum tax exemption parity to the private activity bonds used in highway public-private partnerships, could go a long way.

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As more states legalize marijuana, the Department of Transportation looks to change drug testing policies https://reason.org/commentary/as-more-states-legalize-marijuana-the-department-of-transportation-looks-to-change-drug-testing-policies/ Thu, 07 Apr 2022 18:51:00 +0000 https://reason.org/?post_type=commentary&p=53253 Drug tests for marijuana use continue to reflect a bygone zero-tolerance approach and fail to reliably detect on-duty use and intoxication.

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Three decades ago in response to deadly transportation accidents arising from drug and alcohol intoxication, Congress passed a law requiring “safety sensitive” interstate transportation workers to be screened for workplace drug and alcohol use. Since then, one of the covered substances—marijuana—has been increasingly decriminalized by state and local jurisdictions across the country. 

Despite marijuana’s alcohol-like legal status in many states, transportation worker drug tests for marijuana use continue to reflect a bygone zero-tolerance approach and fail to reliably detect on-duty use and intoxication. This policy mismatch is unnecessarily straining the critical transportation workforce at a time when supply chains are already overwhelmed. At a minimum, the federal government should modernize federal transportation drug testing requirements to eliminate pointless burdens on the transportation sector. 

In recent years, a majority of states have legalized medical marijuana and 18 states (plus Guam and the District of Columbia) have legalized adult recreational use of marijuana. In addition, 14 states plus the District of Columbia generally prohibit employers from discriminating against employees who use medical marijuana and test positive for marijuana on a drug test (Nevada and New Jersey prohibit employment discrimination for recreational use as well). 

There are a few exceptions to these state anti-discrimination laws, but the most significant relate to federally regulated transportation occupations. This is because of the Omnibus Transportation Employee Testing Act (OTETA) of 1991, which requires safety-sensitive employees in air, rail, road, and public transportation to submit to pre-employment and workplace screening for alcohol and federally controlled substances determined by the Secretary of Transportation. Those drugs specified in the Code of Federal Regulations (49 C.F.R. § 40.3) are marijuana, cocaine, amphetamines, phencyclidine (PCP), and opioids. 

Unfortunately, while the law was aimed at improving safety by preventing on-duty drug and alcohol use and intoxication, the approved OTETA test for marijuana use is an extremely imprecise method for detecting intoxication. Under current regulations, laboratories test urine specimens for the presence of marijuana metabolites (49 C.F.R. § 40.85), which can be detected days or even weeks after marijuana intoxication—and the danger associated with intoxicated transportation workers—has subsided. OTETA testing for marijuana thus primarily serves as a mechanism for generating false positives for marijuana intoxication.

This inaccurate marijuana intoxication testing has practical consequences. The Federal Motor Carrier Safety Administration (FMCSA), which regulates truck and bus drivers, reported in a January 2022 drug and alcohol summary report that its OTETA testing detected marijuana in 31,085 (64%) of 48,770 total positive drug tests in 2021. The majority of these positive tests occurred at pre-employment screening, although random workplace screening wasn’t far behind. Under current OTETA drug testing policies, more than 83,000 people with commercial driver’s licenses or commercial learner’s permits are currently prohibited from driving. This is roughly the same number as the truck driver shortage of 80,000 drivers estimated by the American Trucking Associations in 2021. And FMCSA isn’t alone with marijuana playing an outsized role in positive OTETA drug tests. The Federal Transit Administration reported that it detected marijuana in 77% of its positive drug tests in 2020.

If marijuana were still universally prohibited in the U.S., the extreme imprecision of urine testing for marijuana could perhaps be justified on misguided zero-tolerance grounds. And to be sure, marijuana remains a federally prohibited Schedule I controlled substance. But times have changed and federal regulations should be amended to accommodate new, more precise test methods for marijuana intoxication if marijuana is to remain on the list of five controlled substances tested under OTETA.

It’s important to note that OTETA does not require that the Department of Transportation rely on urine testing for marijuana use. Nor does OTETA require the Department of Transportation to test for marijuana at all. The selection of the five controlled substances and how they are tested is at the discretion of the secretary of transportation. In fact, current Department of Transportation drug testing regulations explicitly prohibit laboratories from testing “‘DOT specimens’ for any other drugs” than those five controlled substances selected by the secretary of transportation (49 C.F.R. § 40.85).

But in practice, the secretary of transportation isn’t interpreting OTETA and implementing it in a vacuum. Despite the broad discretion the Department of Transportation possesses related to transportation workforce drug and alcohol testing programs, it has long followed the Substance Abuse and Mental Health Services Administration (SAMHSA, an agency of the Department of Health and Human Services) mandatory guidelines for laboratory and specimen testing procedures. Since 1988, these guidelines have required that only urine specimens be collected and tested, with all the associated limitations of urinalysis in detecting recent use and intoxication, especially for marijuana.

In 2015, SAMHSA proposed updating the mandatory guidelines to permit oral fluid (saliva) testing. In contrast to the days and weeks following intoxication that marijuana can show up on urine tests, oral fluid tests generally do not detect marijuana use from more than 1-3 days prior. In the final mandatory guidelines that became effective January 1, 2020, SAMHSA estimated that if the Department of Transportation adopted the latest mandatory guidelines for its OTETA drug testing programs, oral fluid testing would displace 1.5 million to 1.8 million urine specimens per year after four years. This equates to 25-30% of total test specimens collected each year under federal transportation drug and alcohol programs. Such a change could significantly reduce marijuana intoxication false positives, the disciplinary consequences to transportation workers, and the impact of labor shortages on the transportation sector.

The good news is that in February 2022, the Department of Transportation published a notice of proposed rulemaking to revise its drug and alcohol regulations to reflect the current SAMHSA mandatory guidelines. Public comments are due April 29.

While adopting an oral fluid testing alternative to urinalysis wouldn’t eliminate OTETA’s false positives for on-duty marijuana intoxication, it would surely be an improvement over the status quo. Federal policymakers must continue to grapple with the expanding legal marijuana markets in the states and what they mean for outdated zero-tolerance policies.

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The real danger of mandatory reciprocal switching is freight rail stagnation https://reason.org/commentary/the-real-danger-of-mandatory-reciprocal-switching-is-freight-rail-stagnation/ Wed, 23 Mar 2022 04:01:00 +0000 https://reason.org/?post_type=commentary&p=52673 On March 15, the Surface Transportation Board held a hearing on a 2016 regulatory proposal that would amend agency policy for mandating a practice known as reciprocal switching. The purported aim is to combat alleged rail carrier market dominance and … Continued

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On March 15, the Surface Transportation Board held a hearing on a 2016 regulatory proposal that would amend agency policy for mandating a practice known as reciprocal switching. The purported aim is to combat alleged rail carrier market dominance and reduce shipping rates for the benefit of industrial and agriculture customers. Most of the debate has focused on questions of market power and short-term shipper benefits, but one subject largely ignored is arguably the most important: the long-term impact of the rule on freight rail innovation and the viability of the mode itself.

Reciprocal switching refers to a practice where one rail carrier exchanges the car(s) of another in order to allow a customer access to a facility served by only one carrier. This allows the competing carrier to offer single-line service to the customer even though its track does not physically reach a customer’s facility. 

Railroads voluntarily enter reciprocal switching agreements when it makes sense. Under current rules established in the 1980s by the (now defunct) Interstate Commerce Commission and affirmed by federal courts, the Surface Transportation Board (STB) can only impose reciprocal switching if anticompetitive conduct on the part of a rail carrier has been demonstrated. 

Most significantly, the proposed rule would eliminate the anticompetitive conduct requirement with the goal of forcing more carriers into reciprocal switching arrangements. The stated rationale for doing this was that shippers have failed to prove any anticompetitive conduct on the part of rail carriers. Is anticompetitive conduct too difficult to prove or is such conduct not occurring? The STB accepted the former hypothesis without seriously probing the latter.

One curious aspect of the Surface Transportation Board’s concern about railroad market power is that its own research does not support it. The STB’s most significant analytical undertaking on this topic was to commission a study from economic consultants Laurits R. Christensen Associates. The revised 2010 Christensen Associates study concluded that “increases in the railroads’ generic costs […] were driven primarily by the spike in fuel prices in recent years. Thus, while shippers have been exposed to increasing [railroad revenue per ton-mile] after 2004, it appears that costs rather than markup factors are largely the culprits.”

The U.S. railroad industry of 2022 looks quite different than the industry of 2008, the last data year of the Christensen Associates revised competition analysis. Most strikingly, the sharp decline of coal-fired electricity generation has led coal-by-rail tonnage to decline by nearly half since 2008.

The STB in December released its Annual Rail Rate Index Study (the first since 2009), which adds 12 years of data through 2019. A February update added 2020 rates. These are valuable new data, but as former STB chief economist William Huneke noted while calling for an update to the Christensen study, rate data alone cannot support the allegations of undue exercise of market power. “To implement more regulation without a better understanding of the industry’s financial health is akin to taking a deeper dive without checking the water depth,” said Huneke.

The proposed rule is also anticipated to increase operational complexity, which could be especially destructive during today’s unprecedented logistics network congestion and global supply chain uncertainty. The Association of American Railroads provides an example where switching a single railcar required 68 locomotive operations, the use of three switching yards, and six days to complete. While typical switching operations under the proposed rule may be less complex and costly, the STB cannot confidently say that they will be. This is why major freight rail customer UPS and passenger carriers that share freight-owned track (such as Amtrak and Chicago’s Metra) have opposed STB’s proposal.

Finally, an increase in mandatory reciprocal switching could reduce the long-term competitiveness of freight rail relative to trucking. In early February, Union Pacific and automated truck developer TuSimple announced a partnership to launch a fully automated 80-mile truck route from a Tucson rail yard to a Phoenix-area distribution center. This technology has the potential to cut truck operating costs by nearly half and lead to the development of “road trains.” These coordinated convoys of driverless trucks have the potential to greatly reduce rail’s traditional volume advantage over trucks for numerous commodity groups.

Unsurprisingly, railroads are interested in a variety of automation technologies to improve safety, productivity, and their competitive standing with other modes that are anticipated to become increasingly automated. Train automation is likely to be incremental as functions are gradually automated and personnel are relieved from certain tasks once safety is assured. But fully automated freight trains may be on the horizon, as mining giant Rio Tinto Group successfully demonstrated in a 2019 deployment of 240-car iron ore trains in Western Australia.

Unfortunately, the STB’s proposed regulations on reciprocal switching would likely negatively impact railroads’ returns on investment, thereby reducing their incentive to invest in train automation research, development, and deployment. Tom Wadewitz, then a managing director at J.P. Morgan Securities, pointedly warned the STB at a hearing more than a decade ago that investors will pressure railroads to reduce capital expenditures if the STB adopted any regulations that “negatively affect pricing.” And it is generally research and development of unproven technologies that gets axed first when shareholders throttle capital expenditures to maintain their desired returns on investment.

The STB should avoid disadvantaging freight rail relative to its modal competitors, which would incentivize customers to shift traffic from rail to trucks. This would have private as well as social costs. When compared to freight rail, the EPA estimates trucks emit 10 times as much carbon dioxide per ton-mile and more than three times as much particulate matter. Pushing even a small share of freight rail traffic onto the highways would increase the transportation sector’s air pollution emissions intensity. 

To assure a balance in favor of the public interest, the Surface Transportation Board should not amend its reciprocal switching regulations until it can credibly show that the benefits would exceed the costs. Moving forward absent this evidence would undermine its credibility. The STB’s authorization lapsed at the end of FY 2020 and Congress should pay close attention as it considers reauthorization.

A version of this column first appeared in Eno Transportation Weekly.

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The benefits of the pupil transportation policy reforms in Arizona’s SB 1630 https://reason.org/backgrounder/the-benefits-of-the-pupil-transportation-policy-reforms-in-arizonas-sb-1630/ Tue, 22 Mar 2022 22:34:00 +0000 https://reason.org/?post_type=backgrounder&p=52748 Some of Arizona’s highest-quality schools are unable to offer pupil transportation thanks to well-meaning but antiquated state law. Additionally, many of Arizona’s public schools cannot meet the geographic diversity of their students’ transportation needs through traditional 60-foot yellow school buses. … Continued

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Some of Arizona’s highest-quality schools are unable to offer pupil transportation thanks to well-meaning but antiquated state law. Additionally, many of Arizona’s public schools cannot meet the geographic diversity of their students’ transportation needs through traditional 60-foot yellow school buses. These buses are expensive to acquire, operate, and maintain, and require a driver with a commercial driver’s license. Smaller, lower-cost vehicles would help students living in rural, geographically diverse areas of the state, but also assist urban families who have the opportunity to attend a school that is miles across town.

Senate Bill 1630 would make the following improvements to the way Arizona manages student transportation:

1. Enabling the use of 11-to-15 passenger vehicles

  • Allows the use of 11-to-15 passenger vehicles that have been successfully and safely operated by transit agencies for decades.
  • Permits these vehicles as a tailored, environmentally-friendly pupil transportation solution for rural, suburban, and urban areas.
  • Includes generated route mileage in the Transportation Support Level.

2. Modernizing school transportation governance

  • Renames School Bus Advisory Council to the Student Transportation Advisory Council.
  • Increases council membership from 9 to 14 members to include representatives of public charter schools, with electric vehicle expertise, and the broader public.
  • Encourages consideration of vehicles beyond the traditional yellow bus.

3. Assuring safety in pupil transportation

  • Requires the Department of Public Safety to issue new regulations on 11-to-15 passenger vehicles used in pupil transportation.
  • Requires operators of these vehicles to meet the same standards as yellow bus drivers, minus the commercial driver’s license required for operating heavy-duty trucks and buses.
  • Any vehicle type must be assessed by the department before it can transport students.

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Recalibrating expectations for the true potential of automated vehicles https://reason.org/commentary/recalibrating-expectations-for-the-true-potential-of-automated-vehicles/ Thu, 24 Feb 2022 18:49:00 +0000 https://reason.org/?post_type=commentary&p=51635 While some critics disparage the pace of AV development, experts remain optimistic about AV technology advances and the U.S.'s automated future.

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In early February, The Washington Post published an op-ed by urbanist writer David Zipper asking the question, “What exactly is the point of self-driving cars?”

While this is an important question, this particular op-ed fails to answer it. The article vacillates from pessimism on the development of automated vehicles to pessimism on future operations, leading to a framing that centers on the worst of all possible worlds. What is missing from the piece is a dose of informed realism on ongoing automated vehicles development, how AV operations might scale in the future to benefit society, and the role of public policy in this debate. Those questions and challenges are the things that automated vehicle developers and policymakers should be looking to answer in the years and decades ahead.

The hype of automated vehicles vs. reality

Zipper is correct that hype surrounding automated vehicles has been rampant in recent years, at least in certain quarters. The 2010s were a period of overpromising and under-delivering from automated vehicle developers and their marketing departments, understandably leading many journalists and politicians to come away with very inaccurate perceptions of AV progress. The media and political class then helped extend these misunderstandings to the broader public.

For example, in 2015, Kevin Roose, now a technology columnist at The New York Times, wrote that conventional human driving on public roads should soon be outlawed entirely because much-safer automated vehicles were allegedly so close to deployment at scale. Roose believed that by 2020 “we could achieve full criminalization of driving, with penalties equivalent to those you’d get for bringing a bazooka to a schoolyard.” He wrote:

By outlawing driving and facilitating a switch to autonomous vehicles, we would make a significant and lasting impact on global public health. Thousands of lives would be saved in the U.S. alone, and those people’s families would be spared unthinkable tragedy. (We would also make cities like Los Angeles and New York eminently more livable by dramatically reducing traffic, but that’s another argument.)

Congress wouldn’t need the driving ban to kick in immediately. Like the Affordable Care Act or the Dodd-Frank Act, the No More Driving Act could be phased in over a period of several years, to allow car makers to perfect their technology and achieve mass production. Perhaps in 2017, companies that produce self-driving cars could receive a tax credit, and consumers could be paid to trade in their old, human-driven cars under a “cash for clunkers”-type scheme. Low-income families may require subsidies to make the switch. In 2018, drivers would begin to receive small fines for driving on public roads. In 2019, the punishment could become more severe—perhaps $500 citations for traveling in a human-directed vehicle. And in 2020, we could achieve full criminalization of driving, with penalties equivalent to those you’d get for bringing a bazooka to a schoolyard.

Similarly, in 2012, a decade ago, Mary Cheh, chair of the Council of the District of Columbia’s transportation committee, introduced legislation to impose mileage-based user fees on automated vehicles because she believed they would soon be ubiquitous and electric, thereby blowing a large hole in D.C.’s fuel tax coffers.

Not to pick on them, Roose and Cheh are just two of many, many people who got things very wrong on the timing of automated vehicles (and Cheh’s search for a viable fuel tax alternative happened to be forward-thinking and a good policy in a non-AV context), and one can see how their inferences are logically consistent with the way many at the time were implying automated vehicles would progress.

Eric Paul Dennis, an engineer and policy analyst formerly with the Center for Automotive Research, tracked the often outlandish AV deployment promises from developer CEOs and company press releases and compiled them into a graphical timeline of broken dreams that is worth reviewing.

While companies and their marketing-driven hype pushed overly optimistic claims and timelines for self-driving cars, there were other more sober expert voices and opinions on automated vehicle deployments, which garnered far less public and political attention. For example, at the 2014 Automated Vehicle Summit of the Transportation Research Board of the National Academies (the world’s premier AV research conference), expert attendees were surveyed on forecasted deployment years for various levels of automation in various use cases. While company press releases and media coverage may have given consumers the idea that deployment was imminent, for the fully automated self-driving taxis that Zipper focuses on in his Washington Post op-ed, the median forecasted deployment year was 2030.

This survey of experts occurred while the automated vehicles hype cycle was nearing its peak. The median forecasted deployment year among AV experts is still eight years in the future and investors continue to place multi-billion-dollar bets on these technologies, so if one’s expectations match those of the experts and investors with skin in the game, there is still no reason for disappointment.

If Zipper and others had merely sought out the views of experts at the time, their current disillusionment with AV progress could likely have been avoided.

The safety case

Zipper points out that the National Highway Traffic Safety Administration (NHTSA) estimated in 2015 that “[t]he critical reason [for the crash] was assigned to the driver in an estimated 94 percent (±2.2%) of the crashes.” He argues that “NHTSA’s nuanced finding was often boiled down to ’94 percent of crashes are caused by human error’” and that “AV companies placed that 94 percent figure at the center of their marketing pitches.” Zipper last year wrote an article in The Atlantic calling this the “dangerous 94 percent myth.”

However, Zipper ignores decades of research by NHTSA and others that goes far beyond the two-page 2015 memo he singles out as the source of this claim. For instance, a 1977 NHTSA-commissioned study found that “conservatively stated, the study indicates human errors and deficiencies were a cause in at least 64% of accidents, and were probably causes in about 90-93% of accidents investigated” and further “that human factors were possibly a cause in up to 97.9% of accidents.”

The source of the 2015 claim was NHTSA’s 2008 report to Congress on the National Motor Vehicle Crash Causation Survey, which provided summary weighted crash frequency data indicating that of a total of 2,189,166 crashes, 2,041,943 involved critical pre-crash events attributed to drivers—or 93.3%. Importantly, driver error goes well beyond legally prohibited misbehavior such as driving while intoxicated or texting while driving. NHTSA’s Fatality Analysis Reporting System reveals that “lost in thought” is a major critical factor in distraction-affected crashes, so add daydreaming to the list of normal human driver behaviors that AVs will not engage in.

While it is indeed an oversimplification to solely blame driver error for 94% of crashes, the fact remains that decades of statistical analyses of crash data have consistently found human factors are critical factors in the vast majority of crashes. This fact was reaffirmed in January by the U.S. Department of Transportation’s National Roadway Safety Strategy, which stated, “The overwhelming majority of serious and fatal crashes include at least one human behavioral issue as a contributing factor.”

In his Atlantic article, Zipper minimizes this fact by arguing that many driver errors can actually be attributed to non-driver factors. His example: “The foggy weather obscured the driver’s vision; flawed traffic engineering failed to compel him to slow down as he approached the intersection; the SUV’s weight made the force of the impact much greater than a sedan’s would have been.”

But the example ultimately fails to absolve the driver because the driver failed to take reasonable care by driving 15 miles over the posted speed limit in adverse weather conditions—and would likely be liable for the crash in some form. To what degree would be a case-specific finding. This ambiguity gets at the real reason why NHTSA generally avoids blame language in its crash risk research: liability is complex and legally determined.

So, what is the crash-reduction potential of automated vehicles?

This is difficult to confidently answer with precision and, as Zipper notes, AVs might generate new types of crashes. But it is safe to assume that if AVs are deployed at scale, they will crash less and less severely than conventional vehicles or they will eventually be driven from the market by regulators and trial lawyers. The Insurance Institute for Highway Safety (IIHS) published research in 2020 suggesting strong AV crash-reduction potential. Since AVs are anticipated to be designed to follow traffic laws (despite Zipper’s reliance on a single recent Tesla misdeed to dispute this), the IIHS study’s general methodology coupled with reasonable assumptions supports a conservative estimate of AV crash-reduction potential in excess of 70%.

The economic case

Zipper largely fails to present the obvious economic arguments in favor of automated driving. The discussion of freight is relegated to a single parenthetical sentence, where he concedes “self-driving trucks on highways may be more viable than self-driving cars in cities.”

This subject deserves more contemplation. The Census Bureau’s 2017 Commodity Flow Survey estimates that trucks move $11.4 trillion worth of freight every year in the U.S. and the American Transportation Research Institute estimates that driver wages and benefits accounted for 44% of trucking costs in 2020, so it is no surprise that automated vehicles have generated intense interest in the logistics industry.

The potential impact on passenger transportation is also large. Research published in 2018 by a team of Swiss academics suggests automated driving systems have the potential to reduce taxicab operating costs by 85% in urban settings and 83% in suburban and exurban settings. In this forecast, automated taxi service costs on a passenger-mile basis would fall below the present costs of providing rail and bus transit and shared automated taxis are projected to be cheaper even than automated buses.

Automated vehicles also have the potential to significantly reduce traffic congestion through coordination with other AVs. Brookings Institution economist Clifford Winston and lawyer Quentin Karpilow modeled the economic impacts of congestion reduction in a scenario of widespread AV adoption in their 2020 book, Autonomous Vehicles: The Road to Economic Growth? They estimate that a large reduction in travel delays from AVs could raise the annual economic growth rate of the U.S. by at least one percentage point. While this might seem small, a conservative estimate would still translate to hundreds of billions of dollars in additional annual growth for the economy.

Winston and Karpilow also suggest that AVs could generate substantial private and social benefits by “improving traffic safety, health, accessibility, land use, employment, the efficiency of the U.S. transportation, and public finance.” They conclude that public policy should be reformed to remove barriers to AV development and deployment, and warn that the “failure to do so would significantly reduce the benefits of a major technological advance and could result in billion—if not trillion—dollars bills being left on the sidewalk.”

The mobility case

Zipper dismisses the appeal of automated vehicles in urban areas for those who are vision- or mobility-impaired by arguing that “in cities and suburbs, people can already call a taxi or hail an Uber.” What he ignores, as was discussed in the previous section, is the potential for taxi-style AV service costs to decline so dramatically so as to be cheaper to operate per passenger-mile than conventional alternatives. This will allow more people to take more trips to satisfy their personal preferences, whatever they may be.

This is especially important because in the United States lack of access to automobiles and transit dependence greatly limits employment and social opportunities, perpetuating poverty and other inequities. The University of Minnesota’s Access Across America series shows that in 2019, those residing in the 50 largest U.S. metro areas could, on average, access 47% of metro area jobs by automobile in 30 minutes of travel (or one hour of bidirectional daily commuting).

In contrast, just 8% of jobs were accessible by transit in 60 minutes (or two hours of bidirectional daily commuting). Even in the New York City metro area, by far the most transit-oriented American metro area and where more than 40% of total U.S. transit trips take place, drivers can access 13% of New York metro area jobs in 30 minutes versus just 14% of jobs in 60 minutes by transit. In nearly all of the U.S. for almost every possible origin-destination pair, mass transit is a much worse option than travel by car.

The 2017 National Household Travel Survey revealed low-income households are also generally transportation-poor households. Rather than seeking to limit their vehicle-miles of travel (VMT) and person trips, equity-focused public policy should support an increase in their VMT and daily trips. Automated vehicles have the potential to expand the large benefits of automobility to underserved populations without the large costs associated with private car ownership and the physical and cognitive abilities required of drivers.

Public policy challenges

Due to the sharp reduction in per-mile driving costs, one would also expect some increase in VMT. These additional VMT will generate large private benefits to travelers who could better satisfy their personal preferences, but may also generate social costs such as increased traffic congestion. Zipper worries that “[w]ithout some sort of restrictive policy like a vehicle-miles-traveled tax or decongestion [sic] pricing, overwhelmed streets could become mired in gridlock.”

A recent review of three dozen international AV modeling studies suggests that AVs might reduce VMT by as much as 29% or increase VMT by as much as 89%. Zipper is referring to what is colloquially known as the “hell scenario” in the world of AV modeling, in which large increases in VMT are coupled with no congestion mitigations in order to create nightmarish levels of gridlock.

Fortunately, the “hell scenario” that Zipper fears is implausible. In the real world, people are quite capable of adapting and assuming zero adaptive behavior in response to rising congestion is unrealistic, even if some cannot adjust their schedules or routes to avoid congestion. Adaptive behaviors include personal user behavior, such as avoiding certain areas at certain times of day known to be congested, as well as infrastructure owner-operator behavior, such as implementing congestion pricing. And if taxi-style AVs become a dominant urban travel business model, Winston and Karpilow suggest in their book that:

“…congestion pricing may become less politically objectionable, because ride-sharing travelers will be accustomed to paying a charge per use. Riders do so today, with Uber and Lyft, and the price of those services often includes additional fees (for example, surge charges or tolls) as part of the full price.”

The appropriate response to possible VMT and congestion challenges should come from infrastructure owner-operators directly managing traffic flows, not technology developers or vehicle manufacturers who at best could have a small indirect impact on traffic flow (such as through the deployment of synchronized connected and cooperative automation technology). Congestion pricing solves this problem by ensuring those who enjoy the private benefits of travel are also internalizing social costs associated with their travel.

But much more important than congestion hypotheticals are policy considerations related to near-term development and deployment. Zipper mentions Federal Motor Vehicle Safety Standard (FMVSS) exemptions, but fails to explain the two reasons why modernizing the FMVSS exemption regime is so important for emerging AV technologies. The more obvious of the two reasons is that absent an FMVSS overhaul to fully incorporate AVs in the federal auto safety regulatory ecosystem, the current limit of 2,500 exempt noncompliant vehicles per year over two years (with a potential two-year renewal) effectively prohibits the deployment of light-duty AVs with novel designs at scale.

But the other reason is arguably even more important. Because proposed FMVSS exemption reforms would still require AV developers to demonstrate that their non-compliant vehicles achieve an equivalent level of safety or better as conventional FMVSS-compliant vehicles the data and analysis supporting exemption applications would be extremely valuable to regulators as they attempt to modernize the FMVSS regime for AVs in the coming years. A recent RAND Corporation study found that the traditional analytical tools and metrics used by safety regulators are generally not suitable for emerging AV technologies. Thus, new ones will need to be developed and the FMVSS exemption process is perhaps the best way for regulators to gain insight into the various safety cases being made by AV developers.

Before demanding “convincing answer[s]” from AV developers, as Zipper suggests, we ought to appreciate that in many domains there are none. We will be dealing with a large amount of uncertainty about both AV technology and policy for some time. It is also important to keep in mind that excessive risk-aversion to AV errors generates another form of risk: if AVs do in fact reduce crash risk, even if they are not flawless, any restriction or delay caused by over-cautious public policy translates to more property damage, injuries, and deaths than would otherwise have been the case.

Making the perfect AV the enemy of the good AV would be a deadly mistake and this dangerous precautionary approach should be forcefully rejected by state and federal officials. As Aaron Wildavsky, the late political scientist who made pioneering contributions to risk management, concluded in his 1988 book Searching for Safety, “Safety results from a process of discovery. Attempting to short-circuit this competitive, evolutionary, trial and error process by wishing the end—safety—without providing the means—decentralized search—is bound to be self-defeating.”

For more discussion on these topics, see Reason Foundation’s reports on near-term AV policy recommendations for the federal and state levels.

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