(The following story by Marvin Baker appeared on the Minot Daily News website on May 6.)
MINOT, N.D. — Two industries whose commerce depends on rail service say passage of the Railroad Antitrust Enforcement Act of 2007 would be a big step in the right direction to repairing a broken Surface Transportation Board.
Since the House Judiciary Committee passed H.R. 1650 on April 30, representatives of Basin Electric and the North Dakota Grain Dealers Association say they will continue to support legislation to reset the STB because it is a broken monopoly that needs to be regulated.
Introduced into the House in March 2007 and finally passed 13 months later, the bill is expected to come up in the Senate Judiciary Committee in the next couple of months with Sen. Byron Dorgan, D-N.D., and Sen. Jay Rockefeller, D-W.V., as co-sponsors.
Kathleen Risch, a communications supervisor with Basin Electric in Bismarck, said lack of rail competition has driven shipping rates to unprecedented levels. She said the STB was created to protect captive shippers – those without competition – but it has actually enhanced rates for the four railroads in the United States that control 90 percent of the nation’s rail traffic.
Risch said Basin Electric, after spending $6 million on standalone costs resulting from a 2004 rate case against STB, is resending its evidence of unfair freight rates to Congress in mid-May to keep the message on Washington’s radar screen.
When Basin Electric’s contract expired in 2004, Burlington Northern Santa Fe dramatically increased its rates, amounting to $1 billion in increases over the next 20 years.
“In summary, the rates are higher and the service is slower,” Risch said of BNSF, which services Basin Electric. “We’re trying to push legislation. Our case is really with the STB, not the shippers. STB is a broken monopoly.”
Chris Vandeventer is a legislative representative for Basin Electric. He said railroads have enjoyed antitrust exemptions and like everyone else in business, should be subject to antitrust laws. Rates have steadily increased to nearly double for captive shippers versus those industries that have rail competition.
The STB has placed the burden of proof on Basin Electric to substantiate its claims of excessive freight rates, according to Vandeventer.
“So, we run our own railroad on paper to prove the numbers,” Vandeventer said. “Captive shippers have to be able to challenge these rates. We’re not asking for preferential treatment. We want fair treatment.”
Vandeventer said in BNSF’s defense, rates have actually come down in the past year or so, but so has the service. He said the rate correction is actually industry wide.
“The costs are shifted to the customer,” Vandeventer said. “We own our own (rail) cars and the rate went down, but it really just shifted costs. Right now, it costs more to ship coal than what we pay the mines for the coal.”
According to Vandeventer, this ongoing case has already cost Basin Electric $62,000 just to file the case.
“The STB is statutorily required to regulate railroad shipping rates,” Vandeventer said. “They’re supposed to decide whether rates are unreasonable.”
Dan DeRouchey is on the transportation committee of the North Dakota Grain Dealers Association. DeRouchey, who is also general manager of the Berthold Farmers Elevator, said the grain dealers have the same issue – the STB isn’t stepping up to oversee the railroads.
DeRouchey said costs have risen to ship wheat to market in Portland, Ore., while it is often considerably less for a similar, non-captive elevator.
And depending on the amount of grain shipped, according to DeRouchey, it can add up to a lot of money the farmer is not receiving for his wheat.
“It’s costing more to pay the shipping and we think it’s unfair,” DeRouchey said. “It boils down to service and rates. There’s been better service in the last year. There’s also less demand, but rates keep on marching higher.”
DeRouchey, whose Berthold elevator is served by BNSF and Carpio station served by Canadian Pacific Railway, said fuel surcharges that were recently placed on shipping, are really a stated way of enhancing profits. He said the railroads have enjoyed record profits in the past several quarters.
“Coal and grain are essential to North Dakota,” DeRouchey said. “We’re hoping STB becomes more favorable to the shipper.”
But Suann Lundsberg disagrees with DeRouchey. Lundsberg, a director of communications for BNSF in Fort Worth, Texas, said rates where competition is available are often more expensive than in North Dakota elevators that are often served by one railroad.
She said rates to ship grain are actually cheaper than they were 10 years ago, but the price of fuel has increased the overall cost.
“Fuel is up considerably and that is our biggest cost now,” Lundsberg said. “It’s reflected in the surcharge.”
Currently, shipping wheat from Rugby, which has one railroad, to Kalama, Wash., costs $2.79 per mile, while Berthold, which BNSF considers non-captive because CP Rail is located in Carpio, gets charged $3.22 per mile to ship wheat to St. Louis.
Lundsberg said fuel is now costing BNSF more than labor, but to make shipping more efficient financially, BNSF switched from percentage to a mileage-based fuel surcharge.
Jeffrey Johnson, the manager for municipal affairs for CP Rail, declined to comment.