(The following story by Adrian Burns appeared on the Business First of Columbus website on March 30, 2009.)
COLUMBUS, Ohio — A hotly contested effort to revamp regulation of rail industry competition and carriers’ pricing could have broad implications for a portion of Central Ohio’s economy that has bet its future on the shipping business.
One bill has been introduced in Congress and another may soon be reintroduced that together seek to impose increased competition among rail carriers while giving industrial shippers a regulatory framework that they argue would lead to lower prices on many shipments.
The measures are being fought by the rail industry, which maintains the legislative efforts would create more government-imposed constraints on price, reducing their profit and slowing infrastructure development and shipping capacity growth in places such as Columbus.
“There won’t be the resource available to invest in such things as major intermodal terminals or double-stack lines or longer passing sidings,” said Tom White, spokesman for the Association of American Railroads trade group. “If the money is not there, we can’t invest in them.”
But there’s at least one major Central Ohio interest on the other side of the debate – American Electric Power Company Inc. AEP executives wouldn’t comment directly on the debate, but the Columbus utility is a member of the Consumers United for Rail Equity. The Washington, D.C.-based coalition has taken a hard line against the rail industry and posits that the current rules and system for addressing shipper complaints give a handful of major railroad companies free rein on pricing and service quality, said Executive Director Bob Szabo.
“Rail’s attitude is that you’re lucky we’re here and you’ll pay whatever we say you’ll pay,” he said.
The result is that shippers, such as a coal mine served by a single rail line owned by one rail company, are helpless to contest prices, Szabo said. The Surface Transportation Board rules on price complaints, but its decisions can take years, cost companies millions and put a heavy burden of proof on shippers to win a case, he said.
Proponents of the measures hope to make it easier for shippers to argue for lower prices, in addition to forcing more competition among rail providers.
But the bill’s opponents insist the measures suggested by Consumers United for Rail Equity would force rail companies to lower prices on trains to out-of-the-way places with little access, typically where their costs are highest. That could neutralize the competitive advantage and benefit of lower prices offered by robust shipping hubs such as Central Ohio, said James Seney, who once headed the Ohio Rail Development Commission and is now helping to fight the regulatory proposals.
“Ohio has a unique advantage,” he said, because its numerous rail lines, cargo transfer hubs, waterways and highways work together to make shipping convenient and comparatively inexpensive.
“If we lose that advantage because of government-imposed pricing,” he said, “then what does Ohio have to compete with?”
Decades in the making
The root of the measures reaches to the 1970s, when the rail industry was heavily regulated. Companies back then needed approval on most price adjustments and infrastructure growth. The restrictions nearly put the railroads out of business because they were unable to set prices and adjust to market changes, White said. But the Staggers Act in 1980 deregulated the industry, allowing it to consolidate and restore its profitability, he said.
But those seeking the new rules say the consolidation since then into a handful of providers – each owning its own track – has shippers at the mercy of rail.
“Really, the current state of rail service is retarding economic development,” said Jack Pounds, president of the Ohio Chemistry Technology Council, a trade group for chemical manufacturers. “But if you are a monopoly, you have very little incentive to worry about detailed service issues for customers.”
Consumers United for Rail Equity is working for reform on two fronts. One is the Railroad Antitrust Enforcement Act of 2009. It seeks to remove rail’s antitrust exemptions for collective rate-making and would enact greater oversight of rail company mergers and acquisitions.
Another measure is a planned reintroduction of a broad bill known in the last session of Congress as the Railroad Competition and Service Improvement Act of 2007. It sought requirements that some rail providers share their tracks, among other measures aimed at boosting competition.
“And we want to make the rate challenge process better,” Szabo said.