US chemicals, other industries hope for rail reform soon

16 September 2010 22:55  [Source: ICIS news]

A railroad train in the USWASHINGTON (ICIS)--The US chemicals sector and other industries heavily dependent on rail freight on Thursday expressed hopes that Congress may at last approve railroad rates reform legislation before the end of this year.

“I think change is happening and there is some prospect of action,” said Bob Szabo, executive director of Consumers United for Rail Equity (CURE), a group of high-volume rail shippers that includes chemical, cement and steel manufacturers, electric utilities and agriculture interests.

Szabo said a meeting on Wednesday of the Senate Commerce Committee along with that panel’s report on the financial health of major railroads helped advance CURE’s interest in getting final congressional action on a reform bill.

That bill, S-2889, The Surface Transportation Board [STB] Reauthorisation Act, would give that rail regulation agency greater authority and make it easier for shippers to challenge railroad companies’ freight rates.

The bill has been approved by the Commerce Committee but has yet to be reported out to the full Senate for a floor vote.

Szabo hailed the financial status report by the committee staff, saying that it confirmed what chemical producers and other high-volume rail shippers have long argued, that railroads are charging disproportionate rates, especially on so-called captive shippers.

A captive shipper is a manufacturing or distribution site that is served by only one of the seven major US rail carriers.

Under the 1980 Staggers Act, passed by Congress in order to revive the then struggling US rail industry, railroads were exempted from many aspects of anti-monopoly law and allowed to charge high rates in order to increase revenue and financial standing.

But the staff report issued by Commerce Committee Chairman John Rockefeller (Democrat-West Virginia) on Wednesday said that the Staggers Act’s goal of restoring financial stability to the US rail system has been achieved.

In addition, the report said that the rail carriers’ claims that they still need the pricing powers granted under the Staggers Act “need to be more carefully scrutinised”.

Daniel Elliott, chairman of the Surface Transportation Board, told the committee that even before the rail reform measure is approved by Congress, his agency should and would take an expanded role in considering the plight of captive shippers.

“It is in those instances where it is most important that the agency be able to step in,” Elliott said, especially in cases of “captive shippers that have no competitive alternatives”.

“The statute mandates that such rail rates be ‘reasonable’,” Elliott added.

However, Scott Jensen, a spokesman on rail issues for the American Chemistry Council (ACC), said that while chemical shippers would welcome more rate intervention by the STB, they would prefer passage this year of the reform bill as a more comprehensive solution.

Referring to the committee staff report on the railroads’ financial health, Jensen said: “Everyone wants the railroads financially health because we rely on them, we’re dependent on them.”

“But the Staggers Act had two parts,” Jensen added.  “One part was to restore the financial health of the railroads, and the other part was to balance the interests of the railroads and shippers - and that second part still needs to be addressed.”

Rockefeller told the hearing that “I want everyone to know that whether we do it this year or next year, railroad reform is going to happen.”

“Either Congress will do it, or it will need to be done through regulation,” Rockefeller added, referring to the STB chairman’s plans to expand the board’s role in freight rate reviews.

The Association of American Railroads (AAR) voiced strong opposition to the Commerce Committee’s report analysing the rail industry’s financial health.

“We vehemently disagree that there is a need to roll back the successes achieved since the 1980 Staggers Act,” said AAR president Edward Hamberger.

“The report is aimed not at levelling the playing field, but at justifying attempts to regulate lower rates for some large shippers, like chemical companies, agribusiness and electric utilities,” Hamberger said.

With the current 111th Congress nearing its end and most of its members anxious to get home to campaign for re-election in the 2 November US national vote, very little time is left in the legislative calendar to complete work on the rail reform bill.

Szabo said that Rockefeller and other congressional supporters of S-2889 might try to attach it as an amendment to one or another of the major appropriations or omnibus spending bills that Congress must complete in weeks ahead.

To discuss issues facing the chemical industry go to ICIS connect
Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy


By: Joe Kamalick
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