April 15, 2011

CURE URGES STB TO ACT TO INCREASE COMPETITION

IN FREIGHT RAIL INDUSTRY

Improving status quo that currently favors foreign imports over domestic production will create American jobs

WASHINGTON, D.C. – Consumers United for Rail Equity submitted comments to the Surface Transportation Board in advance of the STB’s scheduled June hearing on Ex Parte No. 705 which will consider the state of competition in the railroad industry.

“We believe that the Board’s action or inaction will have profound implications for our national economy, for the creation of American jobs and for increasing American exports,” said Glenn English, Chairman of Consumers United for Rail Equity, a coalition of freight shippers seeking changes in rail policy. “We are encouraging the STB to recognize the lack of competition in the national freight rail system and take steps to improve rail competition. Other free market American industries have benefited from intra-industry competition and the freight railroads would benefit as well.”

Highlights of CURE’s comments about the current lack of competition in the freight rail industry and how competition could be increased to help American manufacturers and producers include:

·          [The] national rail transportation system is not “sound” because it lacks “effective competition among rail carriers” and has resulted in the “undue concentration of market power” in the hands of the remaining major freight railroads, particularly the largest rail carriers that dominate the freight rail transportation market.

·         The current lack of competition in the national freight rail system has the unintended consequence that foreign imported goods are receiving more favorable rail transportation prices and service in the United States than many domestically manufactured and produced goods that are struggling to compete against these foreign goods in our domestic market.

·         [With] a few simple adjustments in policy, which rail customers are convinced the Board has the legal authority to adopt, increased rail-to-rail competition will benefit domestic manufacturers and producers by allowing them to access rail transportation competition, thus reducing the advantage of foreign imports in the current rail transportation system.

·         BOTTLENECK: [CURE] recommends that major railroads be required to provide a rate to any interchange point on a competing rail system when requested by a rail customer.

·         RECIPROCAL SWITCHING AND TERMINAL ACCESS: The Board should remove the “competitive abuse” requirement that was adopted in the Midtec decision. The Board’s predecessor adopted this interpretation of the statue; the Board can and should remove the test to ensure “effective competition among rail carriers.” Changing this test is essential if the Board is to ensure a “sound” national transportation system that includes “effective competition among rail carriers.”

·         ACCESS FEE: [Each] railroad should adopt and post an access fee that it must use for all access situations, whether voluntary or involuntary. Second, the access fee that the railroad adopts cannot be higher than what it would charge itself, an affiliate or another railroad in a voluntary transaction. This rule should be subject to the “unreasonable rail practice” complaint process and the Board’s own authority to act to prevent such practices in the rail industry.

·         PAPER BARRIERS: Rail customers believe “paper barriers” that last longer than a relatively finite period of time are unconscionable and often prevent the achievement of rail to rail competition and a sound national freight rail transportation system. One important mechanism for injecting competition into the national freight rail system was and is the transfer, to a smaller railroad, of operating rights over tack that previously belonged to a major railroad.

·         RATE REASONABLENESS STANDARD: [The STB’s predecessor] promised to move to an unspecified different standard when the major freight railroads have achieved financial health … [We] believe that the time has come for the Board to begin to work to indentify a rate reasonableness standard that can be applied more easily and provides more realistic upper limits on captive rail rates.

To read CURE’s full comments, please visit: www.railcure.org.

###