Skip to comments.Federal Bill Would Regulate Most National Railroad Rates
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Print this Page [Back to Site View] Federal Bill Would Regulate Most National Railroad Rates Posted Friday, January 1, 2010 ; 06:00 AM | View Comments | Post Comment
A bill sponsored by Sen. Jay Rockefeller seek to overhaul the railroad industry. Story by Walt Williams Email | Other Stories by Walt Williams
With only a handful of companies owning most of the nation's railways, federal lawmakers want to rewrite industry regulations to give shippers more say over the rates they're charged for using those lines. The Surface Transportation Board Reauthorization Act would be the most significant overhaul of railroad law in 30 years. It seeks to hold down shipping costs by making the pricing process more transparent and giving shippers an advocate in government.
Sen. Jay Rockefeller, D-W.Va., is the lead sponsor of the bill. In a news release, he said it addresses the competitive disadvantages shippers face when haggling with the railroad industry over prices.
"For a quarter of a century, I have worked to advance railroad reform legislation that is important for the West Virginia shippers who depend on the railroad industry -- chemicals, coal, steel and many others," he said. "This bill will level the transportation playing field for some of our biggest employers, and that is essential right now."
Rockefeller said the legislation was the result of negotiations even more difficult than those that took place over health care reform. And just like health care, not everyone walked away totally satisfied with the result.
"I think it is fair to say that both sides see this as a work in progress," said Patti Reilly, spokeswoman for the Association of American Railroads, which represents the nation's largest rail carriers.
The bill would represent the most significant regulatory changes for freight railroads since the passage of the 1980 Staggers Rail Act, which deregulated the industry. Freight carriers say they have invested $440 billion in upgrading and maintaining the nation's rail infrastructure since then.
Seven large, Class I carriers now operate in the U.S. -- BNSF, Canadian National, Canadian Pacific, CSX, Kansas City Southern, Norfolk Southern and Union Pacific.
Those carriers own most of the nation's freight lines, so when companies need to ship products, they might have only one carrier to deal with. Shippers believe that lack of choice puts them at a disadvantage in negotiating prices.
"Some of these problems stem, in part, from the fact that in the 29 years since the passage of the Staggers Rail Act, the railroad industry has changed considerably," Rockefeller wrote in an e-mail response to an interview request.
"Railroad companies have consolidated to the point that today there are only seven Class I railroads serving the United States, and there has been a proliferation of Class II and Class III railroads (about 550 short lines).
"However, the current regulatory environment that was created under the Staggers Act to protect captive shippers has not kept pace with these changes."
Lawmakers have taken those concerns to the U.S. Government Accountability Office, which investigated shipping rates several times. Reports released in 1999 and 2002 found rates generally decreased between 1985 and 2000, although the latter report found rates for shipping wheat long distances and coal short distances either stayed the same or increased.
However, a 2006 GAO report found shipping rates slightly increased from 2001 to 2004. The authors also noted while shipping rates as a whole have generally decreased since the Staggers Act, some shippers are paying higher rates than others.
Congress tried to resolve the issue in 1995 by creating the Surface Transportation Board, which gave both sides a venue to settle disputes. However, shippers believe the STB isn't easily accessible or responsive to their concerns.
"It has done a pretty good job for the railroads, not such a good job for shippers," said Scott Jensen, spokesman for the American Chemistry Council.
One measure in the bill would pull the STB out of the U.S. Department of Transportation and make it a separate agency. The new agency would be given the authority to investigate rail practices on its own initiative. It also would have a "rail consumer advocate" to review rail costs and efficiency.
Other provisions require large carriers to quote "bottleneck rates" when another carrier owns a line needed to reach a destination and clarify access rules for carriers when they operate at a train terminal owned by another company.
Missing from the legislation is language ending rail carriers' exemption from federal antitrust law. It is language that shippers' desperately want, believing it will level the playing field when negotiating with carriers over rates.
"It is really tough to have commercial relations with an industry that does not play by the same rules you have to play by," Jensen said.
Freight carriers are opposed to the idea, noting the STB already had jurisdiction over the rates they charge. They have pledged to withdraw their support for the effort if antitrust language is included.
"If you introduce the (U.S.) Department of Justice you risk overlapping jurisdictional oversight, which is going to lead to confusion and might cause us, in some instances, to break the law even if we are following regulation," Reilly said.
The U.S. Senate Committee on Commerce, Science and Transportation, which is chaired by Rockefeller, passed the Act in December. If passed by the full Senate, it will head to the U.S. House of Representatives for consideration.
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Paging Dagny Taggart ... pick up the white courtesy phone please.
It’s like a page out of Atlas Shrugged.
Wonder if this impacts Taggart Transcontinental...
No sense of irony here. Senator Rockefeller’s great-grandfather, John D. (aka Robber Baron), famously colluded with the railroads to control freight rates, under which his company, Standard Oil, received preferential treatment as a high-volume shipper. This included rebates of as much as 50 percent for its product and rebates for the shipment of competing products. Surprise. This sharply increase freight charges for EVERYONE else. The Senator is just picking up where his ancestor left off, in the same moral vacuum and with the same absence of scruples.
zero’s buddy buffet just bought BN...
The Rockafellers and company are longing for the days of the inefficient and costly ConRail prior to the Staggers Act.
‘the Staggers Act of 1980, which significantly loosened the Interstate Commerce Commission’s rigid economic control of the rail industry. This allowed Conrail and other carriers the opportunity to become profitable and strengthen their finances.
The Staggers Act allowed the setting of rates that would recover capital and operating cost (fully allocated cost recovery) by each and every route mile the railroad operated.
Didn’t one of America’s richest just acquire a large railroad noting we move freight at 400 miles a gallon in fuel usage.
Clearly not enough is spent so congress needs to get involved.
I shipped a mold I made last week and called around for the best price from the three truck lines that gave me a discount, very similar system to what goes on in the rail shipping companies.
The best price was $264 for 675 lbs, my customer who ships far more than I ever do was quoted $115 from the same shipper.
Trucking is heavily regulated like the rail industry is, the small guy always pays more so the bigger companies can enjoy cheaper prices. Kind of sucks for little guys starting out to compete with companies getting the huge discounts though.
they just can’t help themselves.....Jay rockefeller always wanted to be an engineer.....now he’s engineering the world’s greatest economy right back into the last century.
The “Anti-Dog-eat-dog” act?
Just where and when did Jay get all of his business experience????
If he was really interested in saving West Virginia jobs, he would be raising Hell with President Obama about the EPA withdrawing mining permits that had already gone through the entire permitting process. He'd be raising Hell with Reid and Pelosi about that stupid Cap and Trade bill which will shut down coal fired power plants.
The least he and Byrd could have done was trade their votes on Health Care for getting the Federal Government off the backs of our biggest industry.
Both of our senators are carpetbaggers (Bryd from North Carolina and Jay from New York). You'd think with the whole United States to choose candidates from, we could have done better.
These Dims won’t quit until they’ve bankrupted every privately controlled industry and forced them into the hands of the government. This is all very much planned. Geez, I even heard that Obummer forced a guy whose football team won the Rose Bowl had to pay for the snow cone of another guy whose team lost. THEY MUST BE STOPPED NOW!
It's urgent because someone somewhere will be making millions from this legislation and is promising payoffs to politicians of the DemonRAT variety.
10-289 here we come!! w00t!