Rail customers in prime position for reforms?

Farm Week
By, Martin Ross
March 04, 2009

Producers and ag shippers appear in the best position in decades to gain crucial rail reforms, according to Consumers United for Rail Equity (CURE) Executive Director Bob Szabo.

“Captive” rail customers effectively limited to one shipping option won a victory against what CURE terms the “monopoly pricing power” of major carriers via a roughly $345 million federal Surface Transportation Board (STB) judgment against the Burlington Northern-Sante Fe railroad (BNSF).

The STB awarded rate reductions of nearly 60 percent in response to a 2004 complaint about Wyoming coal transportation rates.

Meanwhile, House Transportation and Infrastructure Chairman James Oberstar (D-Minn.) and new Senate Commerce, Science, and Transportation Chairman Jay Rockefeller (D-W.Va.) are pushing improvements in the STB rate challenge process.

The STB has offered customers “meaningful relief” in only three of 16 rate cases since 2000, and no ag rates have been challenged since 1982, Szabo told FarmWeek.
But with five Illinoisans on the House Transportation Committee and Sen. Dick Durbin, a Springfield Democrat, on the Senate Judiciary Committee, he sees opportunities for reform.

“This is our Congress — everything’s in place,” he argued. “We think Obama is not against us, and may even be for us. All the chairmen of the committees of jurisdiction are on our side for the first time since 1980. The farm community in Illinois ought to engage at this point.”

BNSF’s fourth quarter 2008 earnings showed revenue up $124 million from 2007 despite freight volumes dropping 7 percent. Szabo believes the STB’s ruling came in part because of congressional pressure.

The Oberstar-Rockefeller measure would shift the burden of proof in rate cases from customer to carrier and set a rate standard that balances rail service costs vs. a “reasonable rate of return.”

It would eliminate “exclusive service” agreements between major railroads and short-line carriers that block competing carriers from crucial connecting lines.

The measure likely would encourage carriers to negotiate rates, Szabo said. That would benefit ethanol producers who ship product via dedicated “unit trains” and are often captive shippers, he said.

Szabo suggested policymakers may be more willing to help fund rail infrastructure improvements if they can first “fix” the rate issue.

“Rockefeller’s No. 2 on the Senate Finance Committee, where (carriers) want tax credits,” he related. “A lot of guys in Congress are going to fight with all their might to stop the railroads from getting any benefit until they deal with the rail customer problem.”