Senate to Consider Stiffer Rail Competition Rules

This story appears in the May 11 print edition of Transport Topics.

Freight railroads are facing their stiffest legislative challenge in three decades, as a bill that would make the first changes to the industry’s competitive environment since 1980 is slated for a Senate vote in a matter of weeks.

The measure (S. 146), sponsored by Sen. Herb Kohl (D-Wis.), would expose railroads to antitrust laws, trim the power of the Surface Transportation Board — which currently sets rail competition policy — and permit lawsuits in state courts on rail competition policies.

Kohl’s spokeswoman, Lynn Becker, told Transport Topics on May 6 that the Senate will consider the measure when its session resumes on June 1.

“There hasn’t been a vote on this issue since the Staggers Rail Act of 1980,’’ Marty Durbin, vice president of federal affairs for the American Chemistry Council, told TT on May 7. “We consider it quite historic to actually make significant changes in freight rail policy. The current policy puts us in a position where the railroads are able to have monopoly-like power.”

The Staggers Act freed the railroads from major rate and service restrictions, allowing the industry to regain profitability that reached record levels over the past five years.

Railroads continue to staunchly oppose Kohl’s measure, which has been awaiting floor action since it was passed 14-0 by the Judiciary Committee in March.

The bill “would cause dual oversight of railroad activities, resulting in overlapping and conflicting regulation,” said Tom White, a spokesman for the Association of American Railroads. “Elements of rail labor have also come out strongly against the legislation because it would threaten the ability of the nation’s railroads to expand their networks and could threaten the jobs of railroad workers.”

Among the unions that side with AAR is the Transportation Communications International Union, which represents the industry’s clerical workers.

“Customers were promised two things in the Staggers Act: access to competition and protection from monopolistic practices,” said Robert Szabo, executive director of Consumers United for Rail Equity, known as CURE, whose members include the American Chemistry Council, as well as coal and grain shippers. “They have not gotten either.”

Szabo’s group has been at-tempting for more than two decades to change the competitive landscape, claiming that prices for shipping those bulk products typically are 50% higher when customers don’t have a choice of railroads.

Becker said Kohl is “cautiously optimistic” that the Senate will pass S. 146. A companion House bill has not moved yet.

Tim Lynch, senior vice president of American Trucking Associations, said ATA has not taken a position on Kohl’s bill, although he said that trucking has been subject to anti-trust rules for decades and that “the water is not that cold.”

Meanwhile, Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) and committee member Frank Lautenberg (D-N.J.) have signaled their intention to pursue legislative changes as well. Neither has introduced a bill in this congressional session, but they have asked the STB to postpone hearings on rail competition this month while they develop legislation.

Spokeswomen for both Rockefeller and the Commerce Committee declined additional comment. Chris Bender, Lautenberg’s spokesman, said the senator had been tied up with other rail issues relating to passenger trains and high-speed rail service, but he remained interested in freight matters.

Durbin, who described Kohl’s bill as “one step,” said it was up to Rockefeller’s committee to “get to the heart of the matter” by taking steps such as introducing rail competition where it doesn’t exist today and changing STB procedures to decide rate cases faster and more fairly.

AAR’s White said the group wouldn’t comment on any proposed legislation by Rockefeller.

“Our view is that railroads and shippers would both be best served by legislation that recognizes the need for a balanced and fair regulatory system and recognizes the enormous investments railroads must continue to make in order to expand rail capacity,” White said.

CURE’s Szabo said a particular sticking point was fourth-quarter rail profits that rose, despite an 8% decline in traffic.

“Increasing revenue from declining volumes of freight?” Szabo observed. “The answer is obvious: the railroads are exploiting their monopoly power . . . during the worst economic recession since the 1930s.”

White responded: “For most of last year, rail traffic remained at fairly high levels — within a couple of percentage points of 2007. As those declines have continued, it should be noted that almost all of the Class I railroads reported double-digit drops in earnings during the first quarter.”