(The following story by John D. Boyd appeared on The Journal of Commerce website on September 15, 2010.)
WASHINGTON, D.C. — The railroad industry sharply rejected criticisms of railroad finances by a new report from the Senate Commerce, Science and Transportation Committee and warned that efforts to slap new regulations on the industry would “undermine” the financial health of carriers.
“We vehemently disagree with the assertion that there is a need to roll back the successes achieved since the 1980 Staggers Act” that deregulated railroads, said Edward R. Hamberger, president and CEO of the Association of American Railroads.
He said that law worked as intended to make faltering railroads into “a true American success story.” However, “imposing new Washington regulations will undermine railroads’ ability to sustain the private investments in the nation’s rail network that supports both freight and passenger rail.”
The committee report described major railroads as financially strong but said they portray themselves to regulators as needing more income to invest in their infrastructure, and said they have “robust” pricing power over their customers.
“The report makes profits and corporate efficiency sound like dirty words,” said Hamberger, “when the reality is that the railroad industry’s return to financial health has resulted in private capital – not taxpayer dollars – getting turned back into building and maintaining the nation’s rail network.”
He emphasized that “even during the worst recession in 80 years, America’s freight railroads have kept investing, spending $21.8 billion of their own private capital in 2008 and $20.2 billion in 2009 to build, maintain and modernize the nation’s 140,000-mile rail network that serves both passengers and freight.”
The Commerce Committee, which has been trying to get a shipper-friendly bill passed by the Senate, said its staff study was designed as a status report on the health of the railroads and on “the need for level playing field to create competition” for rail customers.
But the AAR chief said “the reality is this report is aimed not at leveling the playing field, but at justifying attempts to regulate lower rates for some large shippers, like chemical companies, agribusiness and electric utilities.”
And he criticized how the report was constructed, saying it “cherry-picks statistics, and cites rail company data from 2008 – the only year in the past two decades where rail company earnings exceeded the median for all other industries.”
Railroads call the Commerce bill a move toward “re-regulation,” and Hamberger said it “makes absolutely no sense. There’s nothing wrong with success. We’ve run smart, successful businesses, improving efficiency and service for our customers. Now is not the time to inject greater regulatory involvement from Washington, but instead to keep letting the current system work.”