Thursday, June 23, 2011

Rail Freight Carriers and Shippers Launch War of Words at STB Hearing

Fierce Arguments Over Regulation
Shipping News Feature

USA – A two-day hearing launched yesterday by the Surface Transportation Board, the federal agency that regulates the American rail freight industry, has become a battleground for disgruntled customers and senior executives from the rail industry. The U.S. Departments of Transportation, Justice and Agriculture have also filed comments with the hearing concerning their worries about how the lack of competition in the rail freight sector is impacting on U.S. exports.

Clients to the industry alleged at the hearing that a virtual monopoly on individual routes exists with the ‘Gang of Four’ rail companies – CSX, Kansas City Southern, Union Pacific and Norfolk Southern – being able to set arbitrary prices on critical transport lines without fear of competition.

The complainants have asked that the rail operators be forced to link their facilities to competitors' rail lines, which will free market forces to take effect and remove what the shippers describe as excessive pricing powers. They also state that failure to open their lines to competition should result in price regulation from the federal government.

Bob Szabo of lobby group Consumers United for Rail Equity said that:

"The railroads are operating in a presumed deregulated environment, which works fine if the customer has access to competing options. If we have to buy electricity from one company, then obviously in our society we regulate that price."

The shippers’ arguments have been countered by representatives of the Big Four rail companies, who argue that increased investment is being made in infrastructure, equipment and employees to cater to future needs in the market.

James Young , Union Pacific’s CEO, stating to the inquiry that price regulation would: "…would have a serious negative impact on our investment plans. Capital spending would decrease immediately just as our nation is looking to railroads to provide more transportation capacity. This would reverse the progress we've made during the last 30 years."

The representatives also argued that there already exists competition from other transport mediums such as road haulage and barge freight.