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Rail News Home Federal Legislation & Regulation

6/23/2011



Rail News: Federal Legislation & Regulation

Rail industry stakeholders speak out at STB's 'rail competition' hearing


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Yesterday, more than 20 rail industry constituents provided testimony on the first day of the Surface Transportation Board’s (STB) “rail competition” hearing.

Association of American Railroads President and Chief Executive Officer Ed Hamberger told board members that the current rail economic regulatory framework allows freight railroads to sustain billions of dollars in private capital investments annually and support more than 1.2 million jobs. Today’s rail regulations “have engendered a competitive freight marketplace that encourages private investment in railroads, rather than relying on the federal government to fund the nation’s rail infrastructure,” said Hamberger, according to a prepared statement.
 
“Freight railroads today spend more than $20 billion in private funds each year to keep our nation’s rail network the envy of the world and American businesses competitive in the global marketplace,” he said. “These are private investments made by railroads so that taxpayers don’t have to.”
 
The STB should maintain and preserve the current balanced regulatory framework because it has benefited both rail customers and the public, Hamberger said.

“Rail rates are down by 51 percent since 1981, which means the average shipper can move twice as much freight for the same price as 30 years ago,” he said.
 
Changing rail regulations and “forcing the railroads to provide other carriers with access to their networks and property” would make the nation’s rail network less efficient and affect service, Hamberger believes.

“Railroads know best how to operate their networks efficiently to best serve their customers,” he said.

However, National Grain and Feed Association (NGFA) President Kendell Keith believes the STB needs to review its policies that allow freight railroads to “unilaterally impose excessive switching charges” that can hinder access to agricultural markets. Established in 1896, the NGFA represents the interests of more than 1,000 grain, feed, processing and grain-related companies.

“We believe that, just as carriers do not want to be ‘reregulated,’ neither should they have a free hand in cutting off existing physical and economic access through closures or excessive switch rates,” he testified, according to a prepared statement. “To allow such autonomy on switch charges will have a negative impact on the competitive fabric of the nation’s economy.”

A major reason freight railroads confronted drastic financial conditions prior to enactment of the Staggers Rail Act in 1980 was that government regulation did not allow innovation and market forces to govern carrier behavior, said Keith. Given the “vastly improved economic condition of rail carriers today,” it’s important for the STB and Congress to recognize that a “more competitive transportation environment” is good for industries and provides companies a “competitive edge,” he said.

“We want to be competitive and expand [agricultural] businesses and create jobs,” said Keith. “To do that, we need a partner in the rail industry to assist in responding to competitive market forces, both domestically and internationally.  We need reasonable rates, reasonable business terms and quality service. We also need access to a reasonable and cost-effective method to address problems with rates, terms and service.”

One way to do that is for the STB to establish a government-based dispute-resolution system to serve a broader range of shippers, Keith believes.

“Whatever dispute-settlement system is agreed to, it must be understandable and practical … and it needs to encourage one-on-one dialogue between carriers and their customers,” he said.

Meanwhile, American Chemistry Council Senior Director of Regulatory and Technical Affairs Tom Schick asked the STB to act on several policies that could enhance competition and help improve the U.S. economy.

“We believe that competition among railroads has declined significantly in recent years,” he said, according to a prepared statement. “The board has the ability to change outdated policies that would enhance competition and profoundly improve the U.S. economy.”

Schick recommended that the board overturn certain current policies that could benefit both shippers and railroads, and consider adding pro-competitive criteria to past railroad mergers.


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