Commenary: Keep the Railroad Competition Act on Track

By Commissioner Jamie Doggett
Meagher County, Mont.

In l980, the Staggers Rail Act deregulated the rail industry. Congress mandated two main goals: 1) to improve the financial posture of the railroads through deregulation of pricing and service constraints; and 2) to protect the shippers that will be left without competitive options. The intentions of the Staggers Rail Act in improving the financial posture of the railroads were largely met and successful. However, since l980, when there were more than 40 Class I railroads, mergers and consolidations have reduced that number of Class I railroads to seven with four major railroads accounting for 95 percent of the railroad shipping.

The Staggers Rail Act mandated protection of captive shippers. Despite congressional intent, remedies for exorbitant pricing and the lack of access to viable competition have remained elusive to nonexistent. Today, whole states, whole regions, and whole industries are often captive to a single railroad.

Many members of Congress are now championing the idea of reinvigorating competition by further deregulation. The Railroad Competition Act of 2005 was introduced in the 109th Congress as H.R. 2047 by Rep. Richard Baker (R-La.) and cosponsored by Reps. James Oberstar (D-Minn.), Earl Pomeroy (D-N.D.), Dennis Rehberg (R-Mont.), among others. It was also introduced as S. 919 by Sens. Conrad Burns (R-Mont.), Max Baucus (D-Mont,), John D. Rockefeller IV (D-W.Va.), Byron Dorgan (D-N.D.), Larry Craig (R-Idaho) and David Vitter (R-La.). Note the non-partisan nature as well as the broad national interest in the proposed legislation.

The issue here is not about rates, or service or thwarting economic development by the railroads. The issue here is competition. The issue is fairness that comes from competition. The issue is that the federal law designed to protect the U.S. public from monopoly market abuse does not work. The law (Staggers Act) needs fixing to restore the balance between the railroads and the customer that Congress originally intended. The lack of rail-to-rail competition in large areas of the country can effectively thwart local and city-county economic development efforts.

How does this legislative effort change the competitive environment and bring competition back to the railroad industry without hurting the railroads economically? The Railroad Competition Act of 2005 will initiate the necessary reforms to bring competitive forces and establish the goals that the captive rail customer community needs.

The Railroad Competition Act of 2005 will preserve existing rail-to-rail competition in areas of the United States where competition is working and take action to reduce impediments to competition that adversely affect rail customers. The primary objectives are: to maintain consistent and efficient rail transportation service for shippers, including the timely provision of rail cars requested by shippers; to promote effective competition among rail carriers at origins and destinations; and to maintain reasonable rates in the absence of effective competition.

"The lack of competition does more than reduce the on-farm income; it drives up basic living expenses. We rely on coal-fired plants for 57 percent of our electricity generation, which means that the price and service issues faced by coal shippers cause our electric bills to go up. It’s getting harder and harder to make dollars stretch on the farm, so these unnecessary costs can really hurt. Since the railroad industry was partially deregulated in l980, there has been significant consolidation, from over 40 major railroads down to seven. Roughly 35 percent of the rail traffic in America is captive, driving up the cost of transportation, placing a heavy burden on the shippers, and costing us jobs," Sen. Burns has said.

All states’ economic survival depends on having access to good, affordable and adequate rail transportation and attendant facilities so that its shippers can deliver a competitively priced product outside the state boundaries.

The NACo Transportation Committee passed a resolution of support for the Railroad Competition Act of 2005, which was then approved by the NACo Board of Directors in March 2005, and later adopted by the NACo membership at its 2005 annual conference.