Railroads Fight Back

Railroads Fight Back

 Top railroad executives are throwing down the gauntlet, serving notice to Congress and freight shippers they will push back hard against efforts to tighten rail regulations.

James R. Young, chairman, president and CEO of the largest rail carrier, Union Pacific Railroad, said flatly his team opposes the version of a rail regulatory bill that cleared the Senate Commerce, Science and Transportation Committee just before Christmas.

Young told Wall Street analysts on Jan. 21 that although UP officials worked with the panel ahead of time on legislative language and with its chairman, Sen. Jay Rockefeller, D-W.Va., “without additional changes, we cannot support the bill.”

Young said UP and other carriers are still negotiating with congressional staff to make changes, but said the bill threatens rail earnings at a time when national policy should provide incentives for railroads to haul more freight. “I hope common sense prevails,” he said.

The legislation is a reauthorization of the Surface Transportation Board, the federal regulator for economic issues concerning railroads and their shippers. The measure has not been scheduled for action by the full Senate. Although some rail customers complain it does not go far enough to rein in what they consider monopolistic market power by the largest railroads, the bill would mark a historic toughening of federal oversight for the first time since deregulation in 1980.

Railroads in 2009 took the view that they needed to work with Congress to shape the legislation, making some concessions to long-angry customers so the carriers could move on to their own policy goals, including a major new investment tax break specific to their industry.

Still, they warned they would oppose a regulatory bill that goes too far and threatens future profits. Young said that is what the railroads face in the Rockefeller bill.

CSX’s Transportation’s Michael Ward also criticized the measure, although he stopped just short of saying he would oppose it. “As the bill is written today, we have serious concerns,” the CSX chairman, president and CEO said.

The measure took all last year to hammer out. Even then, Rockefeller had to issue two versions of the bill within days, and leave out wording to strip railroads of a limited antitrust exemption to get it through his committee. He then said he would produce such phrasing before it goes to the Senate floor.

The bill would expand the board from three members to five, enlarge its mandate over rail-shipper disputes and increase agency staffing to investigate service and pursue complaints. It would force railroads to give customers the right to change carriers at rail junctions, in hopes of producing more competitive long-haul rates.

Senior rail executives offer few specifics, in public, on what they want changed in the bill. They liken the measure to a costly new federal mandate for railroads to install automated train-control systems before 2016 to prevent train crashes. Each of the large carriers is spending hundreds of millions of dollars on such systems this year, and they are just getting started. But they say it is already causing them to cut spending elsewhere.

Washington sources say there have been a flurry of meetings in recent weeks about the Senate’s rail bill, how to get a companion measure started in the House, and about a separate House track for the antitrust piece. The comments from rail CEOs suggest those meetings may heat up even more.

Contact John D. Boyd at jboyd@joc.com.