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February 2009

Rail News: Shippers

John B. Ficker: It's Time for a Change

Recently, Alex Roth, who covers the rail industry for the Wall Street Journal, outlined issues facing the industry with the new Congress. He focused his discussion on the potential for this new Congress to take up the issue known as regulatory reform or re-regulation, depending on your view of the issue. There was also an op-ed piece in a rail industry publication by Richard Timmons, president of the American Short Line and Regional Railroad Association (ASLRRA), stating that regulation, not legislation, could drive change. Both suggested that passage of any such legislation would mark the end of the rail renaissance we have witnessed for the past 10 years.

I would propose a change in the approach.

For almost two decades, various groups representing “captive shippers,” such as the Alliance for Rail Competition (ARC) and Consumers United for Rail Equity (CURE), have had various bills introduced attempting to change the regulatory oversight of the rail industry. As a sidebar, the “captive shipper” concept does not adequately articulate the situation described by these groups. More properly it should be referred to as “captive movements” — unless a specific rail movement has competing rail carriers at both origin and destination, the movement, not the shipper is “captive.”

A Staggered Path

These legislative attempts have rarely made it out of committee and never had a floor vote in either chamber. In the last session of Congress, hearings were held on two bills; one in the House and one in the Senate. One must admire the persistence of these groups for their continuing effort and at the same time admire the lobbying success of the rail industry through the Association of American Railroads (AAR) for being able to forestall any legislative change. The status quo remains intact.

In 2005, the Surface Transportation Board (STB) held a hearing recognizing the 25th anniversary of the Staggers Act, inviting interested parties to share their views on its impact. Witnesses included the U.S. Department of Transportation, railroads, rail labor, shippers and shipper interests.

As you can imagine, the views differed, but on one fundamental point there seemed to be agreement: The rail industry is in much better condition in most respects — financially, business volumes, management focus — since Staggers’ passage. What was left unsaid was that it was not the Staggers Act itself, but the decisions on its implementation that created the current environment.

John B. Ficker  
It’s time for railroads and shippers to
collaborate and be willing to compromise to
reach a private-sector solution outside
the legislative and regulatory arena.

I had the privilege of serving as president of The National Industrial Transportation League (NITL) for more than four years, and this issue was always before our membership. For a short time, NITL supported the legislative effort for reform, but soon took a neutral position. NITL’s focus was to find an approach that would address the concerns of shippers while allowing railroads to benefit from the efficiencies and productivity they had achieved through improved work rules, mergers and various ICC/STB rulings. It was NITL’s view that the best solution would be one initiated and managed in the private sector with limited government involvement. This would allow the parties to work directly with each other to resolve disputes in a timely and efficient manner.

As it is in the Major League Baseball realm during spring training, when every team thinks it can make it to the World Series (how about Tampa Bay last year?), proponents of regulatory reform will again renew their efforts to push legislation through Congress. I believe these proponents will find a more sympathetic ear in the new Congress, and will make strides in their efforts, but with the multitude of issues facing Congress and the Administration, achieving their goal will be difficult. What troubles me is the significant funds and energy expended by both sides to espouse or defend their position — funds and energy that could be put to much better use.

Restoring Balance is Key

The reverberations of the current financial crises that have crippled the U.S. economy will change the focus of this industry of one completely driven by market forces to one with new and stronger regulations. Could this regulatory pressure find its way into the rail industry? It could.

It’s time for both sides to collaborate and be willing to compromise to reach a private-sector solution outside the legislative and regulatory arena. It will not be a simple undertaking and both sides will need to be opened to change. Such a solution will restore balance to this industry that is so critical to our economy, enabling shippers to focus on rebuilding our economy and railroads to serve as partners rather than adversaries.

A logistics consultant who has served the transportation industry for nearly 40 years, John B. Ficker was president of the National Industrial Transportation League from mid-2003 through early 2008.

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