(The following story by Ron de Yong appeared on the Great Falls Tribune website on December 2. Mr. de Yong is director of the Montana Department of Agriculture.)
GREAT FALLS, Mont. — Montana is among several “captive shipper” states where no effective rail competition exists. Grain growers and elevators here pay the highest per-bushel, per-mile rates in the nation to transport grain to seaports on the West Coast.
Montana agriculture organizations and the state of Montana are united in their resolve to address high rates and poor service by BNSF Railway. These efforts are occurring on several fronts, including bills in Congress and actions before the federal Surface Transportation Board.
Gov. Brian Schweitzer is an active participant in these initiatives. The governor brought the last two chairmen of the Surface Transportation Board to Montana to hear from growers, and he was the first governor to testify before the STB.
His efforts have made a difference in the board’s attitude when hearing agriculture-related cases. For the first time in years, recent rulings on issues such as fuel surcharges and how rail revenue is calculated have been resolved in favor of entities shipping agricultural products.
Two major pieces of legislation are before Congress.
One set of bills, HR1650 and S772, would remove the antitrust exemptions that railroads have enjoyed for many years. (Only railroads and a few other entities such as major league sports teams are exempt from most antitrust laws.)
A second set of bills, HR2125 and S953, seeks to ensure reasonable rates and reliable service where effective competition does not exist. Included is a significant requirement for final-offer arbitration between railroads and their customers.
The National Association of State Departments of Agriculture, which represents agriculture directors, secretaries and commissioners from the 50 states, strongly supports both pieces of legislation. Also supporting the legislation is the Alliance for Rail Competition, a broad coalition of agriculture and non-ag shippers.
The antitrust legislation has been approved by committees and is awaiting action in the full House and Senate. The rail competition bills have not yet emerged from the committee process. One reason is that the railroads strongly oppose a provision that requires the use of final-offer arbitration.
Railroads favor a different method of binding arbitration that gives them an advantage in seeking higher rates. Under the railroads’ format, each side presents its data and an arbitrator works with both sides to narrow the gap. Since the railroads have greater resources in attorneys, money and time — and also own the data — they can game the system to justify high rates.
Under final-offer arbitration, each side presents its best offer first. Then, an arbitrator chooses one of those packages. Both sides have an incentive to be reasonable, to achieve an outcome they can live with. This method levels the playing field in situations in which a large entity like a railroad is opposed by a small entity like a shipper.
It has been used for years with success on rail issues in Canada. The requirement that each side present only its best offer has the effect of narrowing differences to a point that often the two sides negotiate an agreement before an arbitrator rules in favor of one or the other.
The current agreement that some Montana agriculture organizations are working on with BNSF does not include final-offer arbitration. It is gratifying to see that pressure nationally has prompted BNSF to reach out to Montana producers, and the organizations should be commended for pursuing the opportunity.
However, growers and shippers should realize that this is only a small step, and that Montana agriculture organizations and the state of Montana will continue to pursue fair rates and adequate service through national legislation that includes final-offer arbitration and through actions before the Surface Transportation Board.
Railroads also have their own legislation. They want Congress to give them up to $35 billion in tax credits to make infrastructure improvements on their lines. Montana shippers see absolutely no reason to even consider tax credits for railroads while they continue to charge excessive rates and provide poor service.
We continue to stand united in pursuit of necessary means to achieve fair competition, equitable rates and reasonable service.