Oct 16 2013
Captive Rail Shippers Plead: Set Us Free
Producers of coal, steel, grain, energy and other commodities located in certain rural areas complain that a lack of transportation options places them at the mercy of just one railroad, which is free to charge whatever it wants — or even not to haul their goods at all.
These “captive” shippers further argue that the Surface Transportation Board, which is supposed to be looking after their interests, overwhelmingly favors railroads in its rulings.
The complaints aren’t new. They date back to passage of the Staggers Rail Act of 1980, which largely deregulated the railroads. The years since then have seen a wave of industry mergers and consolidations.
Prior to Staggers, there were approximately 40 railroads big enough to be classified as what are now known as Class I carriers. Today, just four railroads handle more than 90 percent of rail freight in the U.S., according to Steve Sharp, president of Consumers United for Rail Equity. CURE is a group of agricultural, energy and commodities producers challenging what they call “the existing unrestrained freight rail monopoly power over rail-dependent shippers.”
CURE believes the situation has grown worse for shippers in the last 10 years. Many of its members are forced to rely almost exclusively on two railroads in the western U.S., the Burlington Northern Santa Fe Railway (BNSF) andUnion Pacific Railroad, and two in the East, Norfolk Southern Railway andCSX Corp.
Since 2003, rail rates have risen two and a half times those of trucking and overall inflation, Sharp said. He blames regulatory agencies “for allowing us to get to this point.”
Sharp charged that railroads often agree not to compete for the freight of a given shipper. “They have kind of divided the market,” he said. “There’s really not that much incentive for them to poach each other’s business.” Members of CURE assert that other possible transportation options, such as truck, barge and pipeline, are either non-existent or unsuitable for their products.
The cost to shippers has been significant, critics say. Sharp works for theArkansas Electric Cooperative Corp., a wholesale supplier of power to 17 distribution cooperatives in the state. The lack of competition among local railroads is costing AECC’s customers approximately $30 million a year in the form of higher bills, he claimed.
Sharp cited a study by Escalation Consultants, commissioned by the American Chemistry Council, which found that railroads had charged chemical shippers a $3.9 billion premium in 2010. Another ACC study reported that the largest U.S. railroads had overcharged customers by more than $6.4 billion over four years, solely through the use of fuel surcharges. Read more
Source: FORBES