US senators back chemical firms on rail issue

23 October 2007 20:53  [Source: ICIS news]

Rail issue heats upWASHINGTON (ICIS news)--Chemical producers along with other manufacturing, utility and agricultural representatives urged the US Senate on Tuesday to provide legislative relief for what they and some senators termed monopolistic rail freight rates.


David McGregor, senior vice president for North American logistics at BASF, told a Senate hearing on rail competition that “captive shippers like BASF are placed at an extreme disadvantage, without the means for effective relief from unreliable service at unreasonable rates imposed by the railroads”.


A captive shipper is one whose production site is served by only a single major railroad. 


Under the 1980 Staggers Act that largely deregulated US railroads, rail operators are allowed to charge captive shippers higher rates, but that law also is supposed to give shippers a means of challenging exorbitant rates by filing a complaint before the US Surface Transportation Board (STB).


However, McGregor and other witnesses complained that filing rate complaints is too costly, the board does not adequately enforce rail competition and too often sides with rail operators when complaints are brought. McGregor and others testified that pursuing a rate hike complaint before the board can cost $3m (€2.1m) and as much as $5m and take three years or more to reach a usually negative result.


“The system is broken, and we are asking Congress to act quickly to provide relief,” McGregor said. He complained that rates charged by railroads for service at some captive-shipper BASF production sites are as much as 165% higher than rates charged for rail service at BASF sites served by two railroads.


“This would not happen if there was real rail competition available for captive shippers or if the STB were really doing its job,” McGregor said.


McGregor’s complaints and those of other witnesses testifying for high-volume rail shippers were welcomed and endorsed by several senators on the Senate Committee on Commerce, Science and Transportation.


“I have been following this captive rail issue for 23 years now, and of all the issues I follow this one makes me the angriest and most outraged,” said Senator John Rockefeller (Democrat-West Virginia).


“This has allowed railroads to increase their profits while they stick it to consumers, and this rail situation is the single greatest embarrassment of this government,” Rockefeller said.


“Our railroads have done untold damage across the country, and the railroads are anti-competitive and are actually breaking the law,” he added.


Senator David Vitter (Republican-Louisiana) said the lack of true competition among US rail carriers is hurting the US economy and the petrochemicals industry in particular.


“In my state, Louisiana, petrochemical and chemical manufacturers are under assault from worldwide competition, and the high cost of rail rates and the high cost of natural gas are the two most onerous factors that make these valuable industries less and less competitive each year,” Vitter said. 


Senator Byron Dorgan (Democrat-North Dakota) charged that major US rail carriers “are unregulated near-monopolies, and frankly the STB in my view is relatively worthless in dealing with this”.


Dorgan, Vitter and Rockefeller are co-sponsors of a bill, S-953, that would require rail carriers to offer competitive rates to captive shippers and give the STB greater authority to pursue anti-competitive issues in rail service.  The bill is now pending before the committee.


Charles Moorman, chief executive of Norfolk Southern (NS) railroad and testifying for the Association of American Railroads, warned that efforts by Congress to re-regulate rail freight rates could undermine railroad revenues and retard capital investments necessary to meet anticipated rail capacity demand growth.


Glenn English, a former congressman representing chemical and other volume rail shippers in Consumers United for Rail Equity (CURE), said he has hopes that Congress will enact S-953 this year or next.


($1 = €0.71)

By: Joe Kamalick
+1 713 525 2653

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