A bipartisan group of five U.S. Senators is pressing a federal oversight board to increase competition in the rail industry so that the nation’s farmers and other small and medium-sized businesses aren’t forced to pay excessive shipping rates that raise operating costs and limit their ability to compete with foreign companies.

Senators Al Franken, D-Minn., Amy Klobuchar, D-Minn., David Vitter, R-La., Herb Kohl, D-Wis., and Tim Johnson, D-South Dakota, urged policy changes in a letter Monday to Daniel Elliott, Chairman of the Surface Transportation Board.

The five lawmakers outlined several reforms that would increase rail competitiveness and ensure that U.S. farmers, paper mills, local utilities, and other “captive shippers” aren’t forced to pay significantly higher rates because they have access to just one railroad to transport their goods.  

“We cannot expect American businesses to participate in the global economy if they can’t afford to transport or export their goods using freight rail — especially if foreign companies are able to obtain lower rates as a result of substantial competition between rail carriers at U.S. ports,” the four wrote in their letter to Elliott.

CN response

But Patrick Walden, Canadian National Railway Public Affairs manager, said railroads face considerable competition in today's economy from other railroads and other modes of transportation, such as trucks moving intermodal containers.

CN, and its subsidiary the Duluth, Winnipeg and Pacific Railway, operate in Borderland.

“CN is always willing to work with policymakers on rail-related economic regulatory issues, and we and our industry colleagues continue to participate in the Surface Transportation Board's ongoing rail competition proceedings,” said Walden. “During this debate, CN believes it is important for policymakers to recognize the need to ensure that the regulatory system provides appropriate protection for rail customers while also providing railroads the opportunity to earn sufficient revenues to continue to make the significant investments necessary to maintain and improve the rail infrastructure.”

Walden also said that rail rates on average are 55 percent lower, adjusted for inflation, than they were 30 years ago.

“This a result of the 1980 Staggers Act which partially deregulated the rail industry,” Walden said.

No impact to mill

Bob Anderson, Boise public affairs manager, said the proposal won’t have an impact on the paper mill in International Falls or it’s rail line, the Minnesota, Dakota & Western railway.

“We have long-term agreements with Fort Frances, and CN is a long-haul carrier, so they are not interested in the markets here,” said Anderson.

However, he said, there are other locations in Minnesota that are having challenges with rail lines, which is where the senators are looking to increase competition.

“We don’t see that as an issue here,” he said.

Meanwhile, the senators cited the 2006 case of Dairyland Power Cooperative operating in Wisconsin, Minnesota, Iowa, and Illinois, which saw a 93 percent increase in rail transportation costs for coal delivery. The increase forced Dairyland to increase its wholesale electric rates on customers by 20 percent.  

“The cost of these rate increases is ultimately born by families and small businesses through higher electric bills, which is deeply disturbing,” the letter stated.  

The letter recommended that the STB adopt proposals put forward in a 2006 Government  Accountability Office report to increase competitiveness, including:

• Requiring railroads serving shippers who are close to another railroad to transport the competing railroad’s cars for a regulated fee. This would give shippers access to railroads that come close to their facilities but do not actually reach them.

• Requiring railroads to provide access to their terminal facilities or tracks to another railroad for a regulated fee.

• Requiring railroads to grant competing railroads access to their tracks for a regulated fee.

The senators also once again urged that the STB no longer allow investors to pay an inflated price to acquire a railroad and then pass those inflated costs onto captive shippers in the form of higher rates. In March, Franken, Klobuchar and other senators wrote to the STB urging they adopt this reform.

Klobuchar and Franken are original cosponsors of the Railroad Antitrust Enforcement Act, which would subject the freight railroads to the same antitrust laws that most other industries have to abide by, making it easier for shippers to sue freight railroads for anti-competitive behavior.

Last month, Franken testified at a STB hearing, saying lack of competition in the railroad industry is forcing farmers and businesses in Minnesota and across the country to pay more to ship their goods, and he pressed the board to ensure that a single rail carrier can no longer impose unreasonable rates and tariffs.