Railroad shipping: Differing views on regulatory efforts are apparent between rail-shipper group and CURE
Jeff Berman, Group News Editor -- Logistics Management, 10/26/2009
WASHINGTON-While no formal legislation to re-regulate the railroad industry has been introduced, a white paper recently released by a railroad-shipper group in conjunction with the Surface Transportation Board, is calling for limited changes to the railroad industry, compared to what many feel re-regulation would do.
In its white paper, the Railroad-Shipper Transportation Advisory Council (RSTAC), a 15-member council with 9 voting members representing small shippers and small railroads and the other 6 non-voting members representing large shippers and large railroads, noted that the railroad industry is at a "pivotal moment in its history as Congress considers applying new regulations to the industry with the goal of fostering more competition and more options for shippers in a manner that may affect the long-term viability of certain lines" and would also be a marked change from the deregulatory approach under the Staggers Act of 1980, when the industry was initially de-regulated.
In terms of what potential re-regulation legislation, which many industry insiders contend will be introduced by the end of the year by Senator Jay Rockefeller (D-WV), is comprised of, there are no definitive components at this point. But industry analysts and experts have noted some pieces of the bill may include: reforming review process on rail rates and service, strengthening the STB to give it more authority, resources and commissioners, and improving shipper access to rail networks, among others.
RSTAC members said that they believe more competition and options would be good for the rail industry, as long as any new regulatory option should not unduly infringe on the benefits that have come from Staggers.
"We understand we may be asking Congress to thread the proverbial needle with this advice, but our members feel a healthy, viable rail system is extremely important for the economic well-being of the United States. We believe any regulatory change must be balanced in its effect to both railroads and shippers."
Legislative issues: The RSTAC white paper called for railroads being required to open up shippers closed to reciprocal switching as long as they are within an acceptable interchange mileage distance from an interchange with another railroad in a terminal area. And they added that a universal reciprocal switching regime should allow carriers to charge each other fair rates that provide not only operating profits but also accept an acceptable return on terminal infrastructure.
On the antitrust front, RSTAC said that railroads should not be forced to give up their anti-trust exemption, with the potential impact of that being unclear, as well as act as a deterrent to future investment. Railroad antitrust legislation was passed by the Senate Judiciary Committee in March.
RSTAC members also supported the use of paper barriers-contractual obligations incurred when short lines acquire lines from the larger, connecting carriers-in past, current, or future short line agreements, with efficiencies in "first mile/last mile" and customer switching improvements depending on increased use of short lines to handle customer switching. And the RSTAC said that the rate standard used by the STB to calculate the maximum rate a hypothetical efficient railroad would challenge on a challenged rail movement-which is currently used in small rate cases today-should not be changed, as new standards for doing so would be damaging for shippers and rail carriers alike. Instead, they said that the STB should maintain or improve upon the current simplified process for small rate cases and the time frame for which shippers may get rates reduced.
Regarding bottlenecks, the situation that occurs when a railroad controls a bottleneck line segment owned by a carrier serving a specific origin or destination also served by another carrier, RSTAC said it had not reached a decision as to whether it supports it or not. In these bottleneck cases, railroads are not required to provide shippers with a rate for transportation over that segment to a point where a shipper can reach a competing railroad. RSTAC said its members are concerned over potential reductions in network routing efficiency and other issues concerning bottlenecks, too.
RSTAC's comments on these potential legislative efforts were cited as pro-railroad by the shipper group CURE (Consumers United for Rail Equity). CURE Executive Director Robert Szabo said in a statement that "exclusive tie-in agreements and the existing ‘bottleneck' rule are at the core of the abusive pricing power being exerted by the Railroad Monopoly, which is hurting the U.S. economy and costing American jobs."
He added that the STB's current rate challenge process is also too burdensome to consumers and too often protects the needlessly expensive rates paid by American businesses who have no access to rail competition-and was the promise of the Staggers Act.
Even though Szabo contends that shippers are not getting a fair shake when it comes to rail competition, a Class I rail executive recently noted that is not necessarily the case.
"The existing regulatory railroad environment has produced-for North American railroad shippers-a freight railroad system that is the envy of the world," said Deborah Butler, Executive Vice President Planning and Chief Information Officer at Norfolk Southern. "It is not perfect, but to deprive the industry of our ability to earn our cost of capital could have a chilling effect on capital investments to support traffic growth and it could begin to reverse the great strides we have made after Staggers in the areas of rail safety and service reliability."
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