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10/27/2003



Rail News: Rail Industry Trends

Senate subcommittee hearing: Railroads, shippers state rail-competition act cases


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On Oct. 23, the Association of American Railroads told the Senate Surface Transportation and Merchant Marine Subcommittee that the Railroad Competition Act of 2003 (S. 919) "would re-regulate the railroad industry, according to AAR President and Chief Executive Officer Edward Hamberger's testimony released Oct. 24.

"[Although] AAR’s opposition is to be expected . . . what was not expected was the overwhelming outpouring of opposition to this bill from the railroad customer community," said Hamberger, adding that about 400 shippers wrote letters to Congress opposing the legislation, including Ford Motor Co., General Motors Corp., Schneider National Inc., Oregon Steel Mills, Georgia-Pacific Corp., Mid America Energy, Texas Petrochemical L.P. and Solvay Engineered Polymers.

Arguments over "re-regulation" are "not a fight between railroads and their customers, but rather a fundamental difference between some customers who continue to cling to the belief that government should dictate the marketplace, and the rest of America's shippers who understand and recognize how deregulation has improved service and lowered rates," said Hamberger.

By imposing uniform pricing, the legislation would severely restrict railroads' use of differential pricing, dragging down rates and making it impossible for roads to earn their cost of capital, he said, adding that rail rates have gone down an average of 60 percent since 1980's Staggers Act.

"Do the railroads remain a self-sustaining private industry or do we return to an era of heavy regulation, capital starvation, poor service and eventual bankruptcy or nationalization?" Hamberger asked.

Railroads aren't the villains, they're just doing what the law, as interpreted by a regulatory body, allows, and S. 919 is not a re-regulation bill, would not cap rates or mandate open trackage rights, Terry Whiteside told Senate subcommittee members during testimony on behalf of the Montana Wheat and Barley Committee, Wheat and Barley Commissions of Colorado, Idaho, Oregon, South Dakota and Washington, and The Alliance for Rail Competition.

"The issue here is competition [and] fairness that comes from competition," said Whiteside, a principal in Montana law firm Whiteside & Associates. "The issue is that the railroad federal law that is designed to protect the U.S. public from monopoly market abuse does not work. The law needs fixing to restore balance."

Shippers believe S. 919 would initiate competitive reforms and "establish the goals that the captive rail customer and consuming public want," said Whiteside.

The legislation — also under consideration in the House as H.R. 2924 — would require STB to provide "final offer" arbitration of certain rail-rate cases; remove paper barriers in future line sales or leases to regionals and short lines; eliminate an "anti-competitive conduct" test instituted in the mid-1980s for terminal area and switching agreements; place a cap on filing fees in rate cases involving "coal rate guidelines" to federal district court levels; mandate that railroads quote rates to customers between any two points where freight moves originate, terminate or transfer, when requested by a shipper; and declare that all or part of a state is an inadequate area of rail competition if petitioned by a state.


Contact Progressive Railroading editorial staff.

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