the film
Economic and dam related articles

Rail Solutions Sought: Competition

by Glen W. Squires
Wheat Life, February 2004

The following are oral testimony excerpts of Terry C. Whiteside before the U.S. Senate Commerce Subcommittee on Surface Transportation and Merchant Marine, on behalf of the Washington Wheat Commission and other wheat organizations on the challenges shippers face with the current railroad environment.

Whiteside noted that since passage of the Staggers Act in 1980 "the freight rail industry has chosen short-term profit over healthy evolution and an open American marketplace." As a result, growth in freight over the last 20 years has been just one percent per year. Contending that concentration by merger has changed the balance and reduced competition, he explained that "railroad federal law that is designed to protect the U.S. public from monopoly market abuse simply is not working and the law needs to be fixed to restore balance."

He gave evidence of service and rate problems and abuse from market domination of whole industries by single railroads saying that the freight rail marketplace does not behave like a marketplace at all: "There are federal protections for railroads that do not exist for any other industry, such as anti-trust exemptions." In addition, years of regulatory tweaking have skewed the intent of Congress when it passed the Staggers Act in 1980.

That statute says, in part, that the policy of the United States Government is ". . . to allow, to the maximum extent possible, competition and the demand for services to establish reasonable rates for transportation by rail . . ." and ". . . to maintain reasonable rates where there is an absence of effective competition . . .". The regulatory agency (Surface Transportation Board, or STB) has not kept this congressional intention of balance in mind when issuing rulings and interpretations since 1980.

Explaining that captive shippers are dependent upon railroads, and are the last ones who would ever want to see harm come to availability of rail service or further contraction for the rail system in the marketplace, he said shippers want"

Recognizing that STB administrative procedures have created the unhealthy situation that now exists, captive shippers believe congressional action is now required and propose that Senate Bill 919 will initiate the necessary reforms to bring competitive forces and establish these goals.

Whiteside emphasized that S. 919 is NOT a re-regulation bill, does NOT cap rates and does NOT mandate open trackage rights; but that the issue is competition and the fairness that come3s from competition. He noted studies confirming that competitive conditions will produce greater volumes and market share for the railroads.

Acknowledging that railroad companies would respond that they could not survive in a S. 929 world -- or in other words, a world in which competition drives price, and not captivity -- he said, "If that is true . . . if it is true that an American industry cannot survive without these kinds of unfair and non-competitive market practices, then the whole issue bears even closer examination. In that case it would seem to me that you as policy makers have an amplified responsibility to consider long-term solutions to bring balance to all parties, including the consuming public . . . which ultimately pays for all of this."

Cautioning that congressional inaction will simply create a larger transportation problem for the country as time passes, Whiteside said he reasoned the problems would just become more complex and more expensive to fix. He concluded that the "day has long since passed when anyone can credibly say that there is no problem, or that things are just great as they are."

Written testimony further revealed whole states, whole regions and whole industries are now captive to a single railroad. Approximately one-third of the shipping community in the country is now captive. Just four mega carriers generate 95 percent of the gross ton-miles and 94 percent of the revenue. In the West, two carriers generate 92 percent of the gross ton-miles and 90 percent of the revenues in the West. Thee carriers control over 70 percent of grain movement. Shortline carriers need rail-to-rail competition as well. The issue is not about railroad rates, service or thwarting economic development; the issue is that federal law does not protect the U.S. public from monopoly market abuse practices. Concluding that the regulatory mechanism has skewed congressional intent of competition that Congress relied upon when it passed the Staggers Rail Act of 1980, shippers are requesting legislative changes through S. 919.

S. 919 Key Points

Glen W. Squires
Rail Solutions Sought: Competition
Wheat Life, February 2004

See what you can learn

learn more on topics covered in the film
see the video
read the script
learn the songs
discussion forum
salmon animation