Contact: Scott Jensen (202) 249-6511
WASHINGTON (March 26, 2014) –The Surface Transportation Board (STB) should adopt competitive switching reforms to reintroduce some free market forces that have been lost through past railroad mergers. That’s according to a statement given today before the STB by the American Chemistry Council (ACC). Specifically, ACC advocated for the National Industrial Transportation League’s (NITL) competitive switching reform proposal – noting that the lack of freight rail competition is harming U.S. chemical manufacturers.
The NITL proposal would require a Class I railroad to allow a shipper or receiver to have its freight moved to a competing rail line in certain circumstances. The shipper or receiver would have to demonstrate its facility is eligible for competitive switching and pay an appropriate fee.
Congress envisioned such switching arrangements to help provide competitive rail service. Unfortunately, current STB rules are so onerous that not one shipper has successfully obtained competitive switching service since the rules were adopted in the mid-1980s.
ACC’s statement before the STB comes less than two weeks after it released new research detailing the cost of the lack of freight rail competition. The research found that chemical shippers alone paid a $4.5 billion premium on rail shipments in 2011 – more than twice the premium from 2005 ($2.2 billion). The findings echo other ACC research that found that rates have soared 76 percent since 2001 – nearly three times the rate of inflation and truck rate increases.
“Since the last major merger that completed the current east-west duopoly, rail rates have increased at an unprecedented pace,” according to ACC. “The NITL proposal would reverse some of the anti-competitive effects from 30 years of rail consolidation by breaking some of the bottlenecks that have grown increasingly longer with each merger.”
ACC also noted that the proposal would accomplish more than slowing skyrocketing freight rail rates. “Providing access to nearby rail alternatives promotes the use of the most efficient carriers and routes for each movement, and it permits manufacturers to design more flexible supply chains,” according to ACC.
ACC called on the Board to swiftly enact competitive switching reforms. “More than three years after launching a wide-ranging review of policies to facilitate more rail competition, Board action is long overdue. ACC strongly supports competitive switching and urges the Board to proceed promptly to issue a proposed rule based upon NITL’s petition.”