Applying the Pressure

Applying the Pressure

Copyright 2003, Traffic World, Inc.

Rail shippers are aiming to take full advantage of rail-related proposals being debated on Capitol Hill this year by looking beyond infrastructure financing to the regulatory environment in which shippers and railroads operate - and the railroads are paying attention.

The Association of American Railroads is coordinating an effort by the Class 1 railroads urging shippers to fight the Railroad Competition Act of 2003 by providing them with form letters opposing the bill to be sent to Senate Commerce, Science and Transportation Committee Chairman John McCain, R-Ariz. According to shippers, this marks the first time carriers have conducted such a campaign on the rail competition debate since it came into existence in its present form in 1996.

"They''ve never done this before," said Robert Szabo, executive director of Consumers United for Rail Equity, a captive-shipper lobbying group that played a major role in drafting the legislation. "We take that as evidence that they''re taking this current effort seriously."

As of July 8, McCain''s office had received roughly 25 letters opposing the legislation, most from shippers but also from shortline railroads and intermediaries, according to a transportation committee source. Among those in opposition: Guilford Rail Systems, Iowa Interstate Railroad, UPS Supply Chain Solutions and Nexus Distribution, a warehousing company.

Both CURE and the National Industrial Transportation League have been fielding questions from members regarding the railroads'' campaign. In its weekly member newsletter, NITL reported that members have asked league officials for additional information on the bill as well as NITL''s official position on the issue to help them frame a response to the railroads.

NITL voted in May to support the competition bill, which seeks, among other things, to promote effective competition among rail carriers at origins and destinations; maintain reasonable rates in the absence of effective competition; provide consistent and efficient rail transportation service for rail customers; and ensure that shippers are not prohibited from accessing rail systems due to volume requirements.

The bill, which is supported by 10 other trade organizations, includes provisions to remove the "paper barriers" set up by Class 1 railroads after a sale to a shortline that the smaller carriers claim prohibits them from competing for business, and calls for "final offer" (baseball) arbitration at the shipper''s choice for rate disputes. The bill also would allow the Surface Transportation Board to designate "areas of inadequate competition" over which the STB would have the authority to grant special remedies to shippers.

Rail industry officials note that the last time the railroads mounted such an aggressive campaign against legislation affecting the rail-shipper regulatory environment was in the mid-1980s, when the Committee Against Revising Staggers, a group of 400 major rail users, was organized by the railroads to help them fight those shippers looking for increased regulation of rail rates.

The AAR, however, has "done this in the past," said AAR Editorial Services Director Tom White, who claims that the current campaign is an educational effort more than anything else. "Otherwise, if the only people who write to Congress are those seeking changes, it leaves the impression that there''s a lot of dissatisfaction out there, and that''s not true. The fact is most shippers aren''t seeking this change, so we''ve encouraged them to make their feelings known."

CURE believes the carriers may be going beyond education, according to information from its members. "Shippers have called and told us that they''ve felt pressured to sign it - and that railroads have suggested to them that things will go better for them if they do," Szabo said.

From a railroad perspective - particularly one that serves captive shippers - the tactic makes sense, Szabo conceded. "Obviously shippers with competitive options will be happy to sign it, because they like the present situation. And some captive shippers might sign it, feeling that if they don''t, they''ll have worse treatment by the railroads than if they do sign it. When a monopolist says ''sign this and send it in,'' what are you going to do?"

Szabo believes the railroads'' ultimate strategy is to keep the captive-shipper debate - along with the fight over rail-to-rail competition - from getting to the floor of Congress. "The railroads know they''re vulnerable, and if this issue were debated fully and understood by the members, they might not fare so well," Szabo said. "So their entire strategy has been to try to bottle up the debate by making sure that the (congressional) leadership will not allow this debate to occur. I believe that continues to be their strategy."

Will it be successful? The AAR claims that the effort is "not related to any feeling that the bill is going anywhere," White said. "But even if nothing is happening now, down the road something might."

"We''ll see," Szabo said. "I think the fact they''re doing this suggests that they''re more doubtful this time than in the past."