US chemical, other industries press Congress on rail freight reform

WASHINGTON (ICIS)–US chemicals producers and a broad range of other manufacturing, agricultural, auto, electric power and steel producers on Wednesday urged prompt action by Congress to reform federal railroad freight rate-setting rules.

In a hearing before the House Subcommittee on Railroads, Pipelines and Hazardous Materials, American Chemistry Council (ACC) president Cal Dooley argued that the 35-year-old rail regulation Staggers Act badly needs an update to allow more flexibility in federal oversight of freight rail rates.

Dooley noted that as the US chemicals sector is undergoing a renaissance due to greatly improved natural gas feedstock resources from shale deposits, his industry will be even more dependent on rail freight and vulnerable to what many producers consider unreasonable rates.

He said that the 1980 Staggers Act – credited with rescuing US railroads from potential financial collapse – “has been successful in many ways, but the freight rail service landscape has changed dramatically since its passage”.

“Consolidation has reduced the number of Class I railroads from 26 in 1980 to only seven today, with four essentially operating like regional duopolies that control 90% of the market,” Dooley said.

US Class I railroads control some 100,000 miles of the nation’s total 140,000 miles of track. So-called short-line railroads operate various segments of the 40,000-mile balance of rail track capacity.

As he has so often in the past, Dooley cited in particular the plight of many chemicals producers and other manufacturers who are “captive shippers”, those dependent on only a single rail carrier to receive bulk raw materials and to ship out products.

“Today, more than three-quarters of US rail stations are served by only one rail company,” Dooley told the panel, “leaving customers captive to a single freight rail provider with no alternative if service or rates are unsatisfactory.”

He said that rail freight rates have increased by nearly 100% over the past decade, about three times the rate of inflation.

Those increases, he said, are “forcing shippers to divert significant resources from research and development [R&D], operations, investment, expansion and hiring to pay extremely high rail shipping rates”.

Joined by 47 other industrial groups heavily dependent on rail freight services, Dooley urged Congress to make changes to the Surface Transportation Board (STB) so that the agency can be more proactive and efficient in monitoring and addressing freight rail rate issues.

The STB, also known as the SurfBoard, was created under the Staggers Act and is supposed to ensure fair freight pricing.

Among other reforms, Dooley said that “the STB should eliminate outdated exemptions and allow shippers to seek review of unreasonable rates for shipping certain products such as automobiles, food, lumber and metals”.

“The board should no longer automatically assume that shippers of these products have access to competitive service,” he said.

To address the problem of captive shippers, Dooley asked that STB allow shippers to use one Class I rail carrier to move products to a nearby rail connection with another Class I provider.

He also asked that the board institute a more efficient, workable and lower cost method for review of freight rail rates, a process that now can cost hundreds of thousands of dollars and take years to resolve.

The chemicals sector and other rail-dependent industries support a bipartisan Senate bill, the “Surface Transportation Board Reauthorisation Act” (S-808), that would mandate many of the freight rail review reforms sought by industry.

In addition to chemicals and fuels producers, the Rail Customer Coalition (RCC) includes the American Farm Bureau Federation, the Alliance of Automobile Manufacturers, the American Forest & Paper Association, the American Public Power Association, the Fertilizer Institute, the National Association of Chemical Distributors (NACD), steel manufacturers and cement producers.

The Senate STB reform bill was approved by a unanimous committee vote in that chamber and is awaiting a full vote on the Senate floor.  That bill, if passed in the Senate, would then be heard in the House unless a separate companion bill is introduced.

Paul Hodges studies key influences shaping the chemical industry in Chemicals and the Economy