OUTLOOK ’12: Rail reform by US Congress seen as unlikely

29 December 2011 23:00  [Source: ICIS news]

A freight trainBy Brian Ford

HOUSTON (ICIS)--Anyone waiting for Congress to act on rail-freight rates reform in 2012 shouldn’t hold their breath, according to the American Chemistry Council (ACC).

ACC president Cal Dooley said the political environment in Congress is such that he does not see any legislative action aimed at easing rail rates for chemical manufacturers and other high-volume freight shippers.

US chemical manufacturers and other industries have long sought legislative relief for what they contend is an unfair railway price-setting authority that for practical reasons could not easily be appealed or challenged.

Chemical producers have protested high prices charged by the major US rail carriers to so-called captive shippers. A captive shipper is a manufacturing or distribution site that is served by only one of the four major US railways.

Under the 1980 Staggers Act, passed by Congress to revive the US rail industry, railways were exempted from many aspects of US anti-monopoly law and allowed to charge higher rates in order to increase revenues and raise the financial wellbeing of rail carriers.

Chemical producers and other high-volume freight shippers argue that, with the railways’ fiscal health restored, the anti-trust exemptions are no longer needed.

However, legislation aimed at rolling back some of the anti-trust exemptions and making it easier for industries to appeal rail rates seems to have stalled.

In March, the US Senate Judiciary Committee approved S-49, the 2011 Railroad Anti-trust Enforcement Act, which would eliminate some anti-trust exemptions that US railways have enjoyed since 1980.

The bill would also allow shippers to file suit in US federal courts to challenge rail rates. Under existing law, courts generally refer such complaints to the federal Surface Transportation Board (STB).

Rail shippers contend that rate appeals before the STB are costly and can take years to reach an often unfavourable resolution.

Meanwhile, S-158 by Senator Jay Rockefeller (Democrat-West Virginia) – also aimed at rail rate reform – was referred in January 2011 to the Senate Committee on Commerce, Science and Transportation.

Dooley said rail-rate reform legislation had bipartisan support at committee level but it was questionable whether it had adequate support within the entire Senate.

“This issue has pretty strong constituencies,” he said, including the chemical, agricultural and rail industries.

Meanwhile, the House of Representatives “made the determination of why we should put our members in the position of picking sides here if the Senate is not going to act,” Dooley said.

On other rail regulation fronts, the STB plans to hold hearings in early 2012 on whether Union Pacific (UP) may require chemical manufacturers to compensate the rail carrier for hazardous-substance accidents not caused by the railway.

The railway asked the board to decide whether UP’s freight charges may require shippers of toxic inhalant hazardous commodities (TIH cargoes) to compensate the company for any costs or damages related to a hazardous-cargo accident for which the rail operator was not responsible.

That would include liabilities for any spill resulting from a failure or defect in the shipper’s equipment, such as a tank car, or an accident during the loading, sealing or securing of shipper equipment.

US chemicals manufacturers argue that, if approved by the board, the UP petition would create an arbitrary policy on liability of the sort that the board had earlier refused in a separate case.

Shippers also argue that they cannot be held liable for accidents that occur when their equipment and cargoes are under the exclusive control of rail operators.

Meanwhile, the Federal Railroad Administration (FRA) is seeking to advance railways’ implementation of positive train control (PTC) technology.

The technology involves the installation of equipment on engines to monitor train speeds and routes to ensure control of cargo movement, especially for bulk hazardous materials. PTC is supposed to be implemented nationwide by 2015.

Rail carriers essentially want the cost to be absorbed by producers and shippers of high-risk TIH cargoes, while the chemicals sector argues that the costs should be spread across all freight shipments.

Dooley said that, despite their differences, the rail and chemical industries still share some common interests regarding ways to enhance TIH transport safety.

Additional reporting by Joe Kamalick

By: Brian Ford
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