Endpoint: The railroad antitrust act will benefit chemical companies

Rail's new day

16 March 2009 00:00  [Source: ICB]

It's a really nice feeling when bad rules are changed for the better. It's just sad it doesn't happen more often

IN EARLY March, when the US Senate Judiciary Committee approved the Railroad Antitrust Enforcement Act of 2009, the Association of American Railroads (AAR) said the repeal of monopoly exemptions would create a confusing set of regulations.

Pardon me for asking, but confusing to whom?

The Antitrust Act was developed because a handful of US railroads, including Union Pacific, Burlington Northern Sante Fe, CSX and Norfolk Southern, control about 90% of the freight.

According to the American Chemistry Council (ACC), rail moves roughly 170m tonnes of chemicals and chemical-related products every year, the second-largest railroad commodity in terms of volume (after coal).

"The railroads have used [the exemptions] to consolidate the country's rail shipping down to four regional monopolies, giving these corporate behemoths tremendous monopoly pricing power that results in record profits at the expense of captive shippers," says Glen English, chairman of Consumers United for Rail Equity (CURE).

But AAR president and CEO Edward Hamberger argues: "Overlapping regulatory schemes could derail the industry's ability to meet the nation's increased need for environmentally sound freight transportation."

That "is the phoniest argument the railroads have come up with," said CURE executive director Bob Szabo in response.

In November, Chris Jahn, president of the National Association of Chemical Distributors (NACD), told ICIS Chemical Business: "Basically, two-thirds of the chemical industry is a captive shipper - when a chemical manufacturer or distributor has only one railroad serving its facility, that's a monopoly."

Jahn continued: "I have talked to about 90 NACD members who regularly use rail, and only one of them has been happy with his rail service. An NACD prospect company representative recently told me that his rail service has gotten worse and costs him more."

Therefore, rail's overall good safety record gets outweighed by the railroad companies' often exorbitant pricing.

In a survey of 2003-2007, the ACC found that several of the largest railroads overcharged chemical industry customers by $6.4bn (€5.12bn). The ACC is a member of CURE.

New regulations should not be the solution to all problems, but a seemingly abusive monopoly should not get a government sanction either.

The Railroad Antitrust Enforcement Act of 2009 could help put customers back on the right track.

By: Ivan Lerner
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