November 8, 2011

STB decision delaying action on rail switching leaves shipper group hot under collar

Others hail ruling as a welcome strike at federal 'leviathan.'

By Mark B. Solomon

The Surface Transportation Board (STB), the federal agency regulating the nation's railroads, has postponed action on a shipper request to introduce more competitive access rules for the rail industry to follow. And the leading shipper group is not too happy about it.

The three-person STB on Friday deferred action on a bid by the National Industrial Transportation League (NITL) to institute a rulemaking aimed at adopting new rules governing the practice of "reciprocal switching." Under reciprocal switching, a railroad, for a fee, transports the cars of one of its competitor and gives a shipper that is "captive" to one railroad for its traffic access to another railroad that might not otherwise reach its facilities.

The petition, filed in July, required the STB to respond within five months. But the agency deferred action on the request, saying its resources would be best allocated by incorporating the issues raised by the League into a broader review of rail competitive practices.

In a Nov. 4 statement, NITL President Bruce Carlton said the group is "extremely disappointed in the Board's decision which indefinitely delays action on the critical problems faced by captive shippers and (on) proposed solutions presented in our petition."

Carlton added that the board's inaction "means that captive shippers who are dependent on rail service will continue to pay a monopoly tax on their rail shipments. Those shippers need competitive relief to grow their business and hire more workers."

Lawrence H Kaufman, a long-time railroad writer, executive and consultant, called the STB action a "non-decision, and as such, I think it qualifies as a win for the railroads. They are very happy with the status quo on competitive access, so as long as STB doesn't muck about, they win."

Marc Scribner, land-use and transportation policy analyst at the Competitive Enterprise Institute, a Washington-based think tank that opposed the NITL request, hailed the STB decision. "We consider it a victory for railroads, consumers, and anyone who opposes the expansion of the already-crushing federal regulatory leviathan," he said.

Scribner applauded the STB for avoiding a "misguided rulemaking" and viewed the agency's action as a "sign that they are not yet ready to abandon and reverse years of prudent, pro-market precedent."

The NITL has asked the STB to require each of the four "Class I" carriers—industry lingo for the nation's four largest rails—to enter into "competitive switching agreements" whenever a shipper or a group of shippers can demonstrate that certain "operating conditions exist" to justify the arrangement.

According to the petition, shippers or their advocates must prove a shipper's or receiver's facilities are served by only one Class I carrier; have no effective intermodal competition for the rail movements, and have an already existing "working interchange" (or the potential develop one) with two class I carriers within a reasonable distance of the shipper's facilities.

The NITL proposal added that a competitive switching agreement will not occur if either rail carrier can establish that the arrangement is either not feasible, unsafe, or would unduly hamper the ability of the carrier to serve its shippers.

Shippers have long argued they are being victimized by monopolistic practices by the railroads that have led to inconsistent service and skyrocketing prices. They have asked Congress or the STB to reform the industry's practices.

Railroads argue that shippers generally have competitive service options for most of their traffic, that shippers have adequate redress before the STB, and that a move toward reciprocal switching would degrade service and add costs that will eventually be borne by shippers.

About the Author

Mark B. Solomon
Senior Editor
Mark Solomon has spent 25 years in the transportation, logistics and supply chain management fields as a journalist and public relations professional. From 1989 to 1994, he worked in Washington as a reporter for the Journal of Commerce, covering the aviation and trucking industries, the Department of Transportation, Congress and the U.S. Supreme Court. Prior to that, he worked for Traffic World for seven years in a similar role. From 1994 to 2008, Mr. Solomon ran Media-Based Solutions, a public relations firm based in Atlanta. Mr. Solomon graduated in 1978 with a B.A. in journalism from The American University in Washington, D.C.

More articles by Mark B. Solomon

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