(The following story by Noelle Straub appeared on the Casper, Wyo., Star-Tribune website on September 26.)
WASHINGTON, D.C. — Companies that rely on a railroad to ship their products, including Powder River Basin coal, blasted the federal Surface Transportation Board as a rubber stamp for the railroad industry during a daylong congressional hearing Tuesday.
STB officials promised reforms as the House Transportation and Infrastructure Committee considered new legislation to address railroad competition and service.
Ron Harper, CEO and general manager of Basin Electric Power Cooperative, which operates the Laramie River Station near Wheatland, testified that changes must be made to the STB to restore fairness. Showing a huge stack of documents to the committee, Harper recounted his cooperative’s long fight before the STB against BNSF Railway.
“It’s been grueling, it’s been frustrating, and it’s been expensive,” he said.
After a 20-year contract expired, BNSF doubled its rates, Harper testified. Basin Electric brought a case before the STB in 2004, arguing the railroad had monopoly power, and has spent nearly $6 million on it, he said. On Sept. 10 the board ruled against Basin Electric, which may appeal. Harper noted the STB changed its rules during the process.
“Unfortunately, some of their changes prejudiced our case,” he said.
Harper also said Basin Electric is now required to buy and maintain its own railroad cars without any incentives or lower rates in return. The co-op just spent $10 million for cars for the Laramie River Station, he said.
“That’s a sweet deal for the railroads,” committee Chairman James Oberstar, D-Minn., replied.
Terry Huval, director of Lafayette Utilities Service, said coal makes a 1,500-mile trek from Wyoming to power plants in Louisiana. Although only 20 miles of that route are served by only one railroad, STB rules mean the whole route is subject to a higher “captive shipper” rate, Huval said.
Huval and Harper advocated legislation being pushed by Oberstar. The chairman said his bill would give shippers access to the STB under reasonable terms, without excessive time or cost to bring their cases. It would also set STB directives calling for increased competition.
“The board is not meeting its responsibility,” Oberstar said. “This legislation will ensure the board does a better job carrying out its rate relief responsibilities.”
Railroad officials who testified at the hearing opposed Oberstar’s measure. They said it would introduce uncertainly into the industry, push more traffic to overcrowded highways and take away money the industry would otherwise invest in much-needed infrastructure. Railroad officials also oppose new STB rate case processes and other changes.
“It would be tragic indeed if government policy changes would step in now to stop the growth potential for a significant component of our country’s vital infrastructure,” said Jim Young, head of Union Pacific Corp.
Sen. Byron Dorgan, D-N.D., who introduced similar legislation in the Senate, called the STB “paralyzed” and said it had “precious little effective capability” to intervene on behalf of consumers and competition.
Charles Nottingham, who became chairman of the STB about a year ago, said the agency has begun to make changes.
Nottingham said he sympathizes with complaints about the high costs of bringing complaints and that he’s “distressed” to see the situation has gotten to this point.
“We are changing fast for a regulatory agency,” he said.
Nottingham said less than 10 percent of rail traffic is technically considered captive.
“Are there others who feel captive? Probably, yes,” he said. “If you are that captive, it’s your family farm or your family business, you’re in a huge hole, and it’s understandable why those folks feel the way they do.”
He noted that trucking coal from the Powder River Basin is not an option.
The STB commissioned a firm to study the extent of competition, current capacity constraints and the effects on service and recommend policy changes, he said. The study will be done in one year.
Nottingham noted that the board recently changed its procedures for handling rate disputes. Now shippers can choose to pay $150 and bring a case up to $1 million in relief and get an answer in eight months, or pay more and bring a case up to $5 million and have an answer in 17 months.
“We have greatly improved a situation that really wasn’t working,” he said.
The board also investigated and acted on fuel charge problems on its own initiative, ending industry practice of charging for fuel as a percentage of the base rate regardless of the actual cost. Nottingham called the fuel surcharge an “outrageous practice” and doesn’t understand how it lasted as long as it did.
He said the steps demonstrate this board’s commitment to providing robust oversight.
STB board member Francis Mulvey also pledged, “I am committed to monitoring the results of these initiatives to ensure they work as intended and to make changes if necessary.”
“There is no evidence that competitive options have increased for captive shippers,” Mulvey said.
Harper applauded the STB for recognizing they need to make changes.
JayEtta Hecker of the Government Accountability Office said it’s too soon to tell whether the board’s reforms will have an impact. Although rates generally are going down, there continue to be pockets of captive shippers who are paying substantially more, she said.
Despite a supposed STB process to protect shippers from unreasonable rates, “nothing’s ever gotten through the process,” she said.
Glenn English, CEO of the National Rural Electric Cooperative Association, said the STB has been unwilling to regulate the industry for the past two decades. “We deserve to have the law enforced, and that is not taking place today, and that’s the problem,” he said.
He said railroads are seeing record profits and that the bulk of that money is coming from stranded shippers. “We’re being abused every day — and the STB could care less.”
But Nottingham urged those concerned to take a fresh look at the agency and the changes it is making.