A strong economy needs a strong railroad system, says Edward M. Emmett, president of the National Industrial Transportation League. North American railroads that already are failing to provide the level of service that shippers need are headed in the wrong direction financially, he says, and that has to change.

Speaking to the Traffic Club of New York last month, Emmett announced that the league would push hard for national rail reform—an effort he calls "the most important legislative [and] regulatory effort in the league's 94-year history." "I am here tonight," he told the group, "to announce that the league is committed to having the best possible freight-transportation system, and that commitment cannot be fulfilled without major reform of the railroads—the way they operate, the way they compete, and, most of all, the way they view their role in the overall transportation system."

"If the U.S. economy is going to continue its amazing growth, there needs to be a renaissance of the North American railroad industry," Emmett continued. "...[T]he situation with the major railroads has to change—for everyone's sake."

Emmett charged that the large railroads have had a poor relationship with shippers. "Major rail customers continue to be frustrated not only by inconsistent service but also by an 'imperial' attitude on the part of some railroads," he said. "Certain rail lobbyists in Washington treat rail customers like the enemy."

At the same time, he urged a cooperative effort to develop reform legislation that would benefit both shippers and carriers in all modes. The league's railroad committee has approved the initial outlines of a plan for reform legislation. Other industry groups—most notably the Alliance for Rail Competition—have pushed hard for rail reform in recent years, but adding the clout of the nation's largest shipper group would strengthen that effort. In a later interview, Emmett said that he foresaw the push for change in national rail regulation as being similar in scale to the long-term effort behind the passage of the Ocean Shipping Reform Act in 1998, in which the league played a major role.

Any proposal the league will put forward is likely to seek changes in terminal-access rules. "We're not saying that multiple railroads should roll up and down one another's tracks," Emmett said. "But we've got to give the shipper some sort of pressure-relief valve if he can't stomach the rates and service provided, and the [Surface Transportation Board] has not done that."

The league's new focus comes after two decades of industry consolidation that has reduced the number of major railroads to just a handful. It also comes in response to decisions by the Surface Transportation Board (STB) that favored the railroads in "bottleneck" cases. (In rail industry terms, a bottleneck occurs when a single railroad controls a section of a route at the origin or destination, but competition is available on the rest of the route.)

In those cases, the board ruled that railroads that controlled a "bottleneck" portion of a route did not have to offer rates for just that segment. Shippers had hoped that the STB would require railroads to offer separate rates for the bottleneck portion as a way of encouraging competition. But railroads contended that it was sufficient for them to offer through rates rather than bottleneck rates, and the STB has by and large agreed with them. A more recent decision by the board, moreover, makes it very difficult for shippers to contest railroad rates by requiring them to develop complex cost models to support such challenges.

Emmett said that prior to the bottleneck case decisions, he had believed rail reform could proceed without new legislation. Those decisions, however, changed his mind. "Our members desperately want change sooner rather than later," he said. "We are going to get very serious about legislation."

But Emmett acknowledges that getting major legislation through Congress could take four years or more. "I don't kid myself that this is going to be easy," he said. "It would be a miracle if it were shorter, and it could be longer."

Yet Emmett promises a tenacious effort. "We're going to be like a pit bull on this," he said.