(The following column by Eric Aasmundstad, Robert Carlson, Steve Strege, Dan Wogsland and Neal Fisher appeared on The Forum website on May 14. Aasmundstad is president of the N.D. Farm Bureau; Carlson is president of the N.D. Farmers Union; Strege is executive vice president of the N.D. Grain Dealers Assn.; Wogsland is executive director of the N.D. Grain Growers Assn.; Fisher is administrator of the N.D. Wheat Commission.)
FARGO, N.D. — North Dakota Sen. Byron Dorgan and Minnesota Sen. Amy Klobuchar wrote in the April 15 Forum about their legislation to protect railroad customers from excessive railroad power. Two weeks later BNSF Railway objected to the senators’ proposal. Many rail customer groups think the senators are on the right track. In fact this bipartisan federal legislation is supported by agricultural groups, coal and electricity generation interests, the chemical industry, forest products and others. This broad support indicates there truly are problems needing resolution.
In the past 25 years, we’ve gone from dozens of Class I railroads to four huge companies controlling more than 90 percent of U.S. railroad traffic. That’s great economic power for those four. The federal agency assigned to balance interests is not even-handed. It focuses on railroad profitability through a yearly “revenue adequacy” proceeding. Railroads have been reporting record revenues and earnings year after year. Rail customers want railroads to be profitable. But there is a limit.
One part of the Dorgan-Klobuchar legislation changes national rail transportation policy to promote effective competition among railroads, or to ensure reasonable rates where there is no competition. Another part says railroads shall provide “reliable and efficient” service. How could anyone find fault with those points?
The senators seek to limit fees for filing formal complaints. Recently, the Surface Transportation Board raised the filing fee in one rate complaint process from $140,000 to $178,000. That’s just the filing fee. Legal costs run millions more.
The legislation includes an arbitration option to settle disputes between railroads and certain rail customers. This can take the place of lengthy expensive formal complaint cases where the party with the most lawyers and deepest pockets has an advantage.
The legislation says if a railroad is market dominant the monkey will be on its back to prove its rates are reasonable. This is similar to what’s done with electric and natural gas rates. A state can be designated an “area of inadequate rail competition,” making additional remedies available. But only if most of the railroad rates are nearly twice the variable cost of providing the service.
The BNSF letter spoke of rate reductions, which are always welcome. But keep in mind that rail customers have provided railroads with cost savings by, among other things, spending millions on the construction and operation of facilities to load and unload larger trains. There is also a public cost through increased road maintenance around fewer but larger gathering points. By a government measurement of profitability called the revenue to variable cost ratio, North Dakota wheat rates remain higher than those offered where greater rail competition exists.
Other legislation in Congress seeks to put railroads under the same antitrust laws that other businesses are subject to. President Theodore Roosevelt was mentioned in the BNSF letter to the editor. TR was known as “the trust buster.” He would not have approved of a few large companies controlling an industry and also having antitrust immunity.
While railroads oppose these kinds of legislation, they support a bill to give them a 25 percent tax credit from the government for investment in infrastructure. Railroads like government intervention when it comes to their “revenue adequacy,” but reject most curbs on their immense economic power. It’s time for that to change. We believe the legislation Dorgan and Klobuchar are sponsoring is good for rail customers, railroads and the general public.