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Railroads likely to 'dodge the re-regulation bullet' — Stifel Nicolaus research note


U.S. freight railroads likely will remain under the regulatory authority of the Surface Transportation Board (STB) as there is scant evidence that broad railroad rate “re-regulation” is “absolutely needed,” Stifel Nicolaus analyst John Larkin wrote in a research note issued yesterday.

“In fact, railroads may ultimately benefit from their inherent relative energy efficiency and environmental friendliness to become a larger part of the nation’s developing integrated plan to transport freight over the coming decades,” Larkin wrote.

Larkin’s comments came after he hosted a conference call to discuss the “current state of the U.S. railroad regulatory landscape” Friday with Bill Rennicke and Jeff Elliott, partners at Oliver Wyman, and Charlie Banks, president of R.L. Banks & Associates Inc.

Although the Railroad Antitrust Enforcement Act of 2009 (S. 146) that was unanimously approved March 5 by the Senate Judiciary Committee is “of little worry” to the trio, they are concerned about the possibility of a “full-blown rail re-regulation bill” making it out of committee, Larkin wrote. Sen. Jay Rockefeller (D-W.Va.), chairman of the Senate Committee on Commerce, Science and Transportation, and Rep. James Oberstar (D-Minn.), chairman of the House Transportation and Infrastructure Committee, have “suggested” that they’re in favor of “re-regulation,” Larkin noted.

Still, one of the call participants — whom Larkin didn’t identify — noted that the railroad lobby has plenty of influence in Congress, and some “insiders” think the lobby is making “inroads” with Rockefeller and Oberstar. As a result, “we expect that railroads will dodge the re-regulation bullet” and continue to be covered under STB regulatory purview, Larkin wrote.

“Shippers, given the broad fragmentation of the railroad customer base, seem to have trouble mounting a compelling, cohesive message in support of their position,” he added.

By Desiree J. Hanford. A Chicago-based free-lance writer, Hanford covered the equities market, including transportation, for Dow Jones & Co. for 10 years.

Contact Progressive Railroading editorial staff.

More News from 3/17/2009