The U.S. Departments of Transportation, Justice and Agriculture filed comments about the need for the Surface Transportation Board to take a serious look at how the lack of competition in the railroad industry is hindering U.S. exporters, particularly agricultural shippers. The STB has scheduled a June hearing on its Ex Parte No. 705 proceeding to consider competition in the freight rail industry.

'These comments underscore the need for the STB to thoroughly examine the lack of competition in the railroad industry and its impact on American manufacturers, farmers and consumers,' said Glenn English, Chairman of Consumers United for Rail Equity, a coalition of rail dependent shippers. 'The Agencies are emphasizing the need for a freight rail policy that restores fair, market-based pricing and better access for American companies and the jobs they support.'

Highlights of the DOT, DOJ and USDA comments include:

  • Despite the initial success of the Staggers Act, agricultural producers and shippers continue to express concern about decreased rail-to-rail competition, rapidly increasing rail rates, poor rail service, rail capacity constraints and the fair allocation of rail capacity (USDA).
  • Almost 75 percent of agricultural crop reporting districts lost rail competition from 1992 to 2007, and the crop reporting districts in which a railroad had a monopoly in transporting grain and oilseeds increased from 10 to 15 percent (USDA).
  • The Agencies believe it is appropriate to investigate the extent to which relevant circumstances (such as rail capacity constraints, industry consolidation, and increasing revenue adequacy) have changed, and whether a proper balance of these or other considerations warrants different policy choices (e.g., on rate regulation or access or trackage rights) to serve the same underlying statutory goals (DOT/DOJ).
  • To compete effectively in increasingly competitive world markets, U.S. farmers must have access to efficient, reliable, and cost-competitive transportation. The rates agricultural shippers pay for rail transportation must be at a level that promotes, rather than penalizes, American competitiveness in world agricultural markets (USDA).
  • Railroad termination of reciprocal switching services and rapid increases in reciprocal switching fees have precluded rail-to-rail competition in many instances (USDA).
  • The Board report on rail competition in 2008 estimates that reciprocal switching will have a small effect on railroad profitability and investment incentives. In addition, the report identifies reciprocal switching as one of the methods most likely to result in shipper gains (USDA).
  • Although captive shippers bear the brunt of the deregulated industry's differential pricing, Coal Rate Guidelines, Nationwide, 1 I.C.C.2d 520,526-27 (1985), the rates and services such shippers receive must nonetheless be "reasonable" and must not reflect an abuse of market power. Yet captive shippers have consistently charged in recent years that their rates and/or services are often unreasonable and that existing precedent often offers them no real protection (DOT/DOJ).