(The following article by Peter Johnson was posted on the Great Falls Tribune website on October 12.)
GREAT FALLS, Mont. — The federal Surface Transportation Board will conduct a hearing on Nov. 2 in Washington, D.C., to discuss concerns involving shipping of grain by rail.
One of those topics figures to be whether railroads charge unfair rates to shippers in so-called captive markets like Montana. A captive market is where shippers are served by just one railroad.
Board chairman Chip Nottingham announced the hearing Wednesday at a meeting in Great Falls after spending several hours Tuesday meeting with Montana agricultural leaders.
The hearing will be at 10 a.m. in Room 760, the STB hearing room, at its headquarters in the Mercury Building, 1925 K St. N.W., Washington, D.C.
Nottingham also said the regulatory agency will study possible overcharging and alternative methods of helping captive shippers that were suggested by a new Governmental Accountability Office report.
U.S. Sen. Conrad Burns, R-Mont., who invited Nottingham to Great Falls and called for the GAO study along with seven other senators, welcomed the STB chairman’s pledge to look into the issue of railroads overcharging captive shippers.
Burns said he was pleased that progress seems to be occurring on a crucial issue to Montana farmers and other shippers.
“In agriculture, especially in states like Montana without competitive shipping, we sell wholesale, buy retail and pay the freight both ways,” Burns said.
He said he does not want to go back to the days when railroads were more regulated, but said the STB has not done a good job in its role of setting fair and reasonable rates in areas that lack rail competition.
“The board also has a habit of holding hearings rather than taking action,” Burns said, saying it is typical of Washington agencies that suffer from “paralysis by analysis” — collecting data for studies that sit with inches of dust on top of them.
Burns’ Democratic opponent, state Sen. Jon Tester of Big Sandy, issued a release Wednesday saying: “High rail-freight rates stop economic development and hurt Montana agriculture.
“I want to reduce freight rates so farmers’ money stays here if they ship out of state,” said Tester, an organic grain farmer.
He added that Burns “has long paid lip-service to Montanans on the captive shipper issue, without delivering results.”
The GAO report urged the STB to make its rate appeals process cheaper and quicker. Nottingham acknowledged that it can cost $3 million in legal fees to appeal a major rate case, which can take five to seven years to resolve.
The GAO report also suggested that the STB study alternative ways to make rates and service more fair for shippers in markets that lack competition. Nottingham said he’s willing to take on such a major study, but will need more congressional financing.
The GAO did praise the 1976 and 1980 deregulation measures for reviving a railroad industry that had been in financial crisis and for lowering shipping rates in much of the country.
Nottingham said he’s “been given the impression that our courthouse door is not fully open” to hear complaints quickly and affordably.
He promised to go forward with the study GOA suggested, though he added, “these are not quick fixes.”
He also said the regulatory agency will announce its own proposals in the next few months to:
— Expedite decisions on major rate challenges
— Ensure that railroads aren’t overcharging when they adjust rates based on higher fuel costs
— Make it easier for small shippers to file rate complaints.
Burns said that the threshold under which grain growers and other small shippers can file complaints under STB’s proposed new regulations still are too low. He said he will urge the board to raise the threshold to allow more grain shippers to have access to the expedited process.
Nottingham said the agency’s proposed change would limit claims to $200,000 in expedited cases filed by small shippers. Since rail costs can amount to as much as one-third of the revenue farmers earn, that might not be a high enough threshold for larger Montana growers, he conceded.
Burns said he will pursue his separate amendment to the 2007 Transportation Department spending bill that would require the STB to issue new regulations, making it easier for small shippers to appeal rates that railroads charge.
The Burns amendment, which awaits full Senate action in November, also would require the STB to reconsider its so-called “bottleneck” decision. That 10-year-old decision allows railroads to refuse to provide service to midway points where shippers could then transfer their commodities to a competing railroad.
State Rep. John Witt, R-Carter, told Nottingham and Burns that he supports efforts to investigate overcharging by railroads. Witt suggested they broaden their effort to encourage railroads to maintain and use north-south rail routes and spurs in Montana.
Retaining spurs would help smaller farm communities keep jobs and remain vital, he said. Additionally, repairing and using major routes, like BNSF’s from Great Falls to Helena, could be a matter of homeland security.
If a major railroad trestle on BNSF’s busy east-west route was destroyed, it would be a disaster to area producers who could not transfer their grains for several months, he added.
Jon Stoner, president of the Montana Grain Growers Association and a Havre farmer, said his group is “very energized at the new STB chairman’s refreshing attitude of taking on these issues.
“The GAO report more clearly defines the board’s power to determine fair and reasonable transportation rates and to rectify problems that it sees,” he added.