The latest rail crisis south of the border should send a warning signal to those who say rail deregulation is the solution to Canada’s grain transportation woes, says a United States transportation consultant.
“I would be very cautious about deregulating further when you’ve only got two railroads and they’re side by side,” said Terry Whiteside, of Radermacher, Whiteside and Associates of Billings, Montana.
“The concern I would have is if you create two monopolies side by side, they really are not very competitive between themselves. They just carve up their territory.”
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Grain transportation in the U.S. is in a mess this fall, with rail cars in short supply, plugged elevators and limited delivery opportunities.
It has left farmers feeling frustrated and powerless, especially in Montana, which is served by only one railway, the Burlington Northern/Santa Fe.
“They have us,” said Norman Sullivan, president of the Montana Farmers Union. “We’re landlocked and we’re captive.”
Farmers in Montana pay about $1 (U.S.) a bushel to ship their grain by rail to the Pacific Northwest, representing about 25 percent of the price of wheat.
Sullivan lamented that there is no federal regulatory agency with any teeth to oversee the railways or order them to improve their performance. He describes the Surface Transportation Board, which replaced the old Interstate Commerce Commission, as “ineffective.”
Lack authority
“As far as them actually doing anything to regulate, there’s no regulatory role that I see they have any power for, let alone the willpower to do,” he said.
John Mielke, a railway watcher with the North Dakota Public Service Commission, said even though farmers in the Upper Great Plains pay some of the highest freight rates in the country, it doesn’t mean good service.
“The fact is we don’t have any alternatives to getting the grain to market,” he said. “If they haul somebody else’s today, ours will still be there tomorrow because we don’t have barges and we don’t have a short enough haul to market to make trucks a competitive alternative.”
Whiteside said there are also problems in a regulated system. For example, a way has to be found to provide financial incentives for carriers to invest in equipment.
But he said there’s no doubt many shippers south of the border are questioning whether the U.S. system is too deregulated and concentrated. The number of class one railroads in the U.S. has dropped from 42 in 1980 to five today.
“You’ve got to wonder whether deregulation makes sense when you don’t have competitive railroads,” he said, adding the solution may be to allow more than one railroad to use the same tracks.
Barry Prentice, director of the University of Manitoba’s Transport Institute, said whether a rail system is regulated or deregulated, there will be times when it can’t meet the demand.
Farmers don’t build storage to handle record harvests nor do railways buy cars and equipment to ship record volumes, he said.
