Proposed legislation calls for a revamped STB
By Jeff Berman, Senior Editor -- Logistics Management, 4/1/2007
WASHINGTON — Bi-partisan railroad legislation put forward by three United States senators last month intends to repair what the senators say is a broken railroad system that is a detriment to shippers moving freight on the rails, and hinders the country’s competitiveness.
The legislation, entitled the Railroad Competition and Service Act of 2007, was introduced by John D. Rockefeller, IV (D-W. Va.), Larry Craig (R-Idaho), and Byron Dorgan (D-N.D.). Its main objective is to correct certain policies of the Surface Transportation Board (STB), which the senators believe are contributing to a lack of rail competition, a lack or railroad accountability, and unreliable railroad service.
Much of this legislation stems from a Government Accountability Office (GAO) report on freight railroad competition in which the GAO found a lack of competition coupled with a lack of attention from the STB on this issue this issue.
The GAO report also said the STB’s rate challenge process is ineffective because rail customers are forced to pay steep filing fees, bear all burdens of proof, and also demonstrate that they can own and operate a railroad for less than the fees being charged.
This legislation proposes that the filing fees be removed, ensures that the rate standard will be the same as that applied by most American regulatory agencies—which is the cost plus a reasonable rate of return—and also distributes the burden of proof more equitably between railroads and shippers.
Some other components of the legislation call for the STB to be more proactive in addressing railroad problems by giving it more authority to investigate and suspend unreasonable railroad actions under certain circumstances. Under the current law, the STB has no power to address rail problems; they must wait for a case to be brought to them by shippers.
Regarding the railroad service issue, Bob Szabo, executive director and counsel for CURE (Consumers United for Railroad Equity), a Washington-based railroad customer advocacy group, said this problem first came to light three years ago when railroads began having major issues regarding domestic coal freight services.
“The demand for rail services began to outstrip the ability of the railroads to provide that service and that put them in a favorable position,” said Szabo.
“Now, they can price their services any way they want to and choose to move what they like. What they have done is focus on their most profitable movements. When it comes to coal, the railroads had problems moving it for everyone that needed it, so instead they moved it for those shippers with the highest priced contracts.”
Szabo labeled this as an example of unfair competition and lack of service. He added that since the railroad industry was consolidated down to four major U.S-based Class I railroads in the Staggers Act of 1980, these railroads—Union Pacific, CSX, Burlington Northern Santa Fe, and Norfolk Southern—move more than 90 percent of the nation’s rail freight and retain anti-trust exemptions.
Because they are not covered by anti-trust laws, they are overseen by the STB, whom Szabo says “is not up to the job it is supposed to be doing to constrain the monopoly power the railroads have.”
But the anti-trust situation may be changing if the Railroad Antitrust Enforcement Act of 2007, which was also introduced this month, nullifies the railroads’ current exemption from anti-trust laws.
While much of this bill centers on railroad service improvements and the STB taking a more proactive role on the behalf of shippers, Brooks Bentz, a partner in Accenture’s Supply Chain Practice, contends that this legislation is largely driven around rates.
“This is principally driven around the fact the fact that rates have risen and continue to rise,” said Bentz. “And the shipping community has largely benefited significantly by a steady decline in rail rates by any metric you use—whether it be constant or adjusted dollars, cost per mile, or cost per ton—since deregulation in 1980.”
But as more traffic shifted to the nation’s highway system after World War II, which was followed by years of declining railroad investments and retrenchment and ripping up excess capacity by double- and triple-tracking lines, Bentz noted that railroads are seeing more traffic growth and tighter capacity—resulting in higher rates.
He said that there must be broader thinking and more dialogue between the railroads and shippers in order to come up with a workable solution.
The STB declined to comment on the legislation at press time.
Which track will the STB take?
05/31/2000
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