(The following story by Joseph Morton appeared on the Omaha World-Herald website on September 27.)
WASHINGTON, D.C. — Jim Young, chairman and chief executive of Union Pacific Corp., warned the federal government Tuesday not to tighten regulations on how much railroads can charge shippers. If that happens, he said, railroads will cut back on needed capital investment.
Congress and the Surface Transportation Board, which oversees railroad rates, are contemplating new regulations after hearing from outraged shippers who say a lack of competition has led to price-gouging by railroads.
Young told the House Transportation and Infrastructure Committee that the proposed changes would hurt railroad revenues and force railroads to reduce investment in infrastructure.
“Our nation is facing an infrastructure crisis,” he told the committee. “If we are going to continue to prudently invest in the capacity that our customers want and our nation needs, we need some assurance that we can earn revenues that can justify making those investments.”
In an interview, Young said Union Pacific is devoting $3.2 billion in 2007 to capital investments, with most of that money going to upgrade and maintain tracks. He said the company can justify that expense because of expectations of future revenues.
“If that changes, I’ll cut it back,” he said.
Young asked whether the country really wanted to return to the era before deregulation.
The railroads are now flourishing, with strong revenues fueled by efficiencies that came from a long series of mergers. But shippers say there is a downside to having only a handful of major railroads.
Limited competition means railroads have little incentive to transport their corn, coal and other materials at what shippers consider a reasonable rate. The Surface Transportation Board is supposed to keep the railroads in check, but critics say the board’s current practices are unfairly tilted in favor of the railroads.
Particularly in areas where one railroad is the only viable transportation option, shippers complain that they are paying exorbitant rates.