(The following story by Walt Williams appeared on the WVNS website on January 1, 2010.)
GHENT, W.Va. — With only a handful of companies owning most of the nation’s railways, federal lawmakers want to rewrite industry regulations to give shippers more say over the rates they’re charged for using those lines.
The Surface Transportation Board Reauthorization Act would be the most significant overhaul of railroad law in 30 years. It seeks to hold down shipping costs by making the pricing process more transparent and giving shippers an advocate in government.
Sen. Jay Rockefeller, D-W.Va., is the lead sponsor of the bill. In a news release, he said it addresses the competitive disadvantages shippers face when haggling with the railroad industry over prices.
“For a quarter of a century, I have worked to advance railroad reform legislation that is important for the West Virginia shippers who depend on the railroad industry — chemicals, coal, steel and many others,” he said. “This bill will level the transportation playing field for some of our biggest employers, and that is essential right now.”
Rockefeller said the legislation was the result of negotiations even more difficult than those that took place over health care reform. And just like health care, not everyone walked away totally satisfied with the result.
“I think it is fair to say that both sides see this as a work in progress,” said Patti Reilly, spokeswoman for the Association of American Railroads, which represents the nation’s largest rail carriers.
The bill would represent the most significant regulatory changes for freight railroads since the passage of the 1980 Staggers Rail Act, which deregulated the industry. Freight carriers say they have invested $440 billion in upgrading and maintaining the nation’s rail infrastructure since then.
Seven large, Class I carriers now operate in the U.S. — BNSF, Canadian National, Canadian Pacific, CSX, Kansas City Southern, Norfolk Southern and Union Pacific.
Those carriers own most of the nation’s freight lines, so when companies need to ship products, they might have only one carrier to deal with. Shippers believe that lack of choice puts them at a disadvantage in negotiating prices.
“Some of these problems stem, in part, from the fact that in the 29 years since the passage of the Staggers Rail Act, the railroad industry has changed considerably,” Rockefeller wrote in an e-mail response to an interview request.
“Railroad companies have consolidated to the point that today there are only seven Class I railroads serving the United States, and there has been a proliferation of Class II and Class III railroads (about 550 short lines).
“However, the current regulatory environment that was created under the Staggers Act to protect captive shippers has not kept pace with these changes.”
Lawmakers have taken those concerns to the U.S. Government Accountability Office, which investigated shipping rates several times. Reports released in 1999 and 2002 found rates generally decreased between 1985 and 2000, although the latter report found rates for shipping wheat long distances and coal short distances either stayed the same or increased.
However, a 2006 GAO report found shipping rates slightly increased from 2001 to 2004. The authors also noted while shipping rates as a whole have generally decreased since the Staggers Act, some shippers are paying higher rates than others.
Congress tried to resolve the issue in 1995 by creating the Surface Transportation Board, which gave both sides a venue to settle disputes. However, shippers believe the STB isn’t easily accessible or responsive to their concerns.
“It has done a pretty good job for the railroads, not such a good job for shippers,” said Scott Jensen, spokesman for the American Chemistry Council.
One measure in the bill would pull the STB out of the U.S. Department of Transportation and make it a separate agency. The new agency would be given the authority to investigate rail practices on its own initiative. It also would have a “rail consumer advocate” to review rail costs and efficiency.
Other provisions require large carriers to quote “bottleneck rates” when another carrier owns a line needed to reach a destination and clarify access rules for carriers when they operate at a train terminal owned by another company.
Missing from the legislation is language ending rail carriers’ exemption from federal antitrust law. It is language that shippers’ desperately want, believing it will level the playing field when negotiating with carriers over rates.
“It is really tough to have commercial relations with an industry that does not play by the same rules you have to play by,” Jensen said.
Freight carriers are opposed to the idea, noting the STB already had jurisdiction over the rates they charge. They have pledged to withdraw their support for the effort if antitrust language is included.
“If you introduce the (U.S.) Department of Justice you risk overlapping jurisdictional oversight, which is going to lead to confusion and might cause us, in some instances, to break the law even if we are following regulation,” Reilly said.
The U.S. Senate Committee on Commerce, Science and Transportation, which is chaired by Rockefeller, passed the Act in December. If passed by the full Senate, it will head to the U.S. House of Representatives for consideration.