US Congress sees excessive rail charges for chems

10 November 2006 23:26  [Source: ICIS news]

WASHINGTON (ICIS news)--Some chemicals manufacturers and other high-volume rail shippers may be paying excessive rail freight rates and the government should act to solve the problem, congressional investigators said on Friday.

The report by the Government Accountability Office, the investigative arm of Congress, came as chemical producers and other rail-dependent industries announced on Friday a new effort to seek federal legislation in 2007 to increase government power to intervene in rail rate disputes.

The analysis suggests “a reasonable possibility that shippers in selected markets may be paying excessive rates related to a lack of competition in these markets,” the accountability office said in its report to Congress.

Since US railroads were largely deregulated in 1978 and 1980, chemical makers have complained that captive shippers - production sites served by only one railroad - often pay freight rates that are twice those paid by producers served by two rail carriers.

“Pockets of potential captivity and other factors raise the question of whether some rates reflect reasonable pricing practices or an abuse of market power,” the congressional report said.

The federal Surface Transportation Board has broad authority to monitor railroad practices, the report said, but while the board has taken some steps to protect captive shippers, “those efforts have led to little effective relief.”

The investigation recommended that the Surface Transportation Board “undertake a rigorous analysis of competitive markets, determine whether the inappropriate exercise of market power is occurring, and, where appropriate, consider the range of access available to address problems associated with the potential abuse of market power.”

The board also should review its data collection procedures to ensure that railroads are accurately reporting revenues, the report added.

Separately, a coalition of high-volume rail shippers - forest, paper, cement and coal companies as well as chemical firms and unions - said they are mounting a new effort to secure congressional action to give the Surface Transportation Board more authority over rail freight rates and to end exemptions that rail carriers were given from antitrust enforcement.

“Monopolistic control over key parts of our nation’s rail routes has led to skyrocketing prices and unreliable service by the railroads, making it difficult for companies dependant on these movements to compete in the global economy," said Consumers United for Rail Equity (Cure).

By: Joe Kamalick
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