WASHINGTON — Carload shippers who have access to only one rail line are waging a multiprong campaign this year to increase railroad competition, as one of their fiercest champions, Sen. John Rockefeller, winds up his last term.
The railroad customers, who refer to themselves as “captive shippers,” may be able to get some relief through an antitrust bill Sen. Amy Klobuchar, D-Minn., is expected to introduce this year, said Bob Szabo, executive director of Consumers United for Rail Equity. Many of the group’s more than 3,500 shipper members are lobbying congressmen and senators this week as part of CURE’s annual effort on the Hill.
Szabo said a bipartisan group of unnamed senators also are working on legislation that would ensure more competitive markets, including the rail market. The legislation would likely come out of the Commerce Committee, which Rockefeller chairs. The West Virginian senator, who last month announced he won’t seek a sixth term, still has two years to advance shippers’ interests.
“Yes, there is a generational change in leadership on who is fighting for rail customers,” he said. "But there is still a freight rail monopoly and it is unrestrained.”
The railroads counter that none of their customers are "captive" because shippers can use other transportation modes, such as trucks and barges. The rail industry argues that its pricing levels are needed to ensure carriers can spend the billions of dollars needed to maintain and expand their networks.
Rail shippers have been trying to poke holes in this defense. Szabo pointed to a recent study suggesting chemical and plastic shippers' rates vastly exceeded the railroads' ratio of 180 percent Revenue to Variable Cost, a barometer used to determine whether the Surface Transportation Board can review the rates. The study commissioned by the American Chemistry Council, a shippers group, said premiums paid by its members for rates higher than the railroad ratio of RVC exceeded $3.9 billion in 2010, and three-quarters of all chemical traffic was hauled at rates above 180 percent RVC in that year alone. The ACC said a reduction of the rate premiums would have allowed shippers to increase output by as much as $6.8 billion, spurring the creation of 24,000 new jobs.
The Association of American Railroads rejected the finding, saying it was "disingenous or even relevant" to consider a 180 percent RVC a premium or to infer that it's a cap. The rates are governed by the marketplace and have fallen by about 45 percent since 1980, when the Staggers Act deregulated the rail industry, according to AAR spokesman Patricia Reilly. Rail rates above 180 percent RVC can be contested with the STB, she added.
"The irony is the very rules these groups propose could actually mean higher costs and lower efficiency across the entire rail network — having a negative effect for all rail shippers," Reilly said in a statement.
Congress in recent years has had little appetite for major freight rail reform, but there are other avenues for rail shippers to make their case in Washington, if antitrust legislation falters. One way is to include language in the next farm bill that requires the departments of agriculture and transportation to update their study of rural transportation issues, including rail pricing. Getting the DOT's Freight Policy Council and the Commerce Department's Advisory Committee on Supply Chain Competitiveness to identify unfair rail pricing as a hindrance to U.S. competitiveness is another avenue, Szabo said.
CURE is keeping pressure on the STB, the rail regulatory agency, to eliminate paper barriers and allow reciprocal switching. If the STB accepts a proposal from the National Industrial Transportation League, shippers will be allowed to switch their loads from one rail line to a competing network if the interchange is within 30 miles.
The lineup of STB commissioners is also subject to change, as Francis Mulvey’s term has already expired, although he can serve on the board for up to another year unless President Obama names his successor before the end of 2013. Similarily, STB Chairman Daniel Elliott’s term expires at the end of 2013, meaning he can serve through 2014 unless a replacement is named before the end of the year.