The U.S. wheat industry, tired of what it describes as gouging by the nation’s railroads, is pressing that nation’s lawmakers to bring the rail companies to heel.
Industry officials say the railways are taking unfair advantage of their monopoly status in major wheat growing areas.
“Since there is no competition, railroads can charge what they want and they can deliver cars when they want, not necessarily on a schedule that works for shippers,” said Jennifer Spurgat, director of government affairs for the U.S. National Association of Wheat Growers.
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NAWG has spent much of the summer lobbying in support of two bills, one in the House of Representatives, the other in the Senate, which would change the rules to benefit shippers.
The lobbying effort included “captive rail customer day,” in which 150 people representing “captive” shippers from across the country – those lacking substantial transportation choices – including about a dozen from the wheat industry, met with senators and congressmen in late July.
Spurgat said those kinds of lobbying efforts are crucial if legislation is to have any hope of passing in the current Congress, which runs to the end of 2006.
“A lot of people haven’t been aware that this is an issue,” she said. “That’s why we have to increase awareness and make sure it’s up the radar screen.”
Another bill introduced in the House would remove U.S. railways’ exemption from anti-trust legislation. Only two industries now have such an exemption – the railways and baseball.
The bills are strongly opposed by the U.S. rail industry, which says the net effect would be to allow the federal government to artificially lower freight rates for a limited class of shippers.
The Association of American Railroads also says the legislation would reduce the industry’s already slim profits and prevent railways from investing in infrastructure improvements.
“Instead, there would be deferred maintenance, abandonments of lines and services and disinvestment in the rail network,” the association says.
In 1980 there were 40 Class 1 railroads in the U.S. Today, following a long series of mergers, failures and takeovers, there are seven, with four of them – Union Pacific, BNSF, CSX and Norfolk Southern – controlling more than 95 percent of the business. As a result entire states, regions and industries have become captive shippers to one railroad.
That includes major wheat states like Montana, North Dakota, Kansas and Texas.
Information compiled by NAWG shows a huge difference in freight rates between areas with no rail competition and areas with competition.
For example, in Montana and North Dakota rail rates on 100-car movements to Portland, Oregon, range from 250 to 330 percent of variable rail costs. That compares with about 170 percent for a similar movement from competitive points in Nebraska.
Shipments to the Texas Gulf Coast out of Kansas range from 210 to 250 percent of variable rail costs, compared with 160 to 170 percent from competitive points in Nebraska.
Among their provisions, the bills would:
- Set up a system of Final Offer Arbitration, under which shippers or railroads could submit to the Surface Transportation Board any dispute over rates, service or other issues for a binding decision.
- Require rail carriers to provide a rate quote for service between any two points in their system.
- Allow the free interchange of traffic among Class 1, 2 and 3 railroads.
- Allow the STB to designate a state as an “area of inadequate rail competition.”
