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STB urged to resume developing rule on rail competition

IStock Railroad tracks IStock1033284510.jpg
RAIL COMPETITION: Ag groups seek STB action on preventing anticompetitive actions that harm those using rail system.
Agricultural Transportation Working Group seeks action to prevent railroads from abusing their market dominance.

Members of the Agricultural Transportation Working Group urged the Surface Transportation Board to resume its consideration of a proposed rule that would enable agricultural shippers to request bids from nearby rail carriers.

In a National Grain and Feed Association-led letter to the STB on July 20, members of the ATWG note that President Biden’s July 9 executive order encourages the STB to resume its consideration of a proposed rule on “competitive switching,” which has been pending since 2016. Competitive, or “reciprocal,” switching would allow shippers served by a single railroad to request bids from a nearby competing railroad. The order also directs STB to consider rulemakings pertaining to any other relevant matters of competitive rail access, including bottleneck rates and interchange commitments.

“We believe that enhanced competition is an important vehicle through which the Board can address pervasive challenges faced by rail shippers, including poor rail service, and unreasonable rail rates and practices,” notes the letter signed by 27 ATWG members. They urged STB to adopt initiatives that the order identifies “to enhance rail competition and prevent railroads from abusing their market dominance.” 

Over the past 40 years, railroad mergers have shrunk the number of Class I railroads from 33 to seven, and two major duopolies have formed in the eastern and western halves of the United States. 

“While these mergers succeeded in rationalizing rail capacity, they increased railroad market power such that many shippers no longer have access to competition necessary to promote efficient service, reasonable rates and charges, and fair practices,” the letter notes. 
The absence of effective competition in the rail industry also has a significant impact on prices for the agricultural industry, resulting in decreased farm-gate prices for crops and increased crop-input and feedstock prices, the groups say.

The lack of effective rail competition is reflected in increased crop-input and feedstock prices paid by farmers, livestock operations, poultry operations, biofuel operations, feed mills, food processors, and other agricultural operations that depend on rail service. For example, rail rates to ship anhydrous ammonia, which is a key ingredient for 75% of the essential fertilizers utilized by farmers, have increased over 200% in the past 20 years, the letter says.

In addition to resuming the competitive switching proposal, the groups urged STB to finalize proposed regulations creating a Final Offer Rate Review process for small rail rate disputes and to support shippers’ ability to challenge unreasonable rail rates.

“To maintain the ability of U.S. agriculture to remain competitive in a very dynamic domestic and world market and to be positioned to capture new market opportunities, the Board must address the serious issues posed by the lack of effective rail competition,” the letter states. “Pragmatic reforms to make the rail industry more competitive will strengthen this vital transportation sector, both to the benefit of rail carriers and their customers.”

Signing the letter includes organizations such as the American Farm Bureau Federation, Agricultural Transportation Coalition, American Feed Industry Association, National Association of State Departments of Agriculture and other commodity groups representing row and livestock producers.

The National Grain and Feed Association is solely responsible for the information provided and is wholly owned by the source. Informa Business Media and all its subsidiaries are not responsible for any of the content contained in this information asset.

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