[Congressional Record Volume 141, Number 148 (Thursday, September 21, 1995)]
[Senate]
[Pages S14096-S14097]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         ADDITIONAL STATEMENTS

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                    ICC FUNDING AND RAILROAD MERGERS

 Mr. BOND. Mr. President, I rise today to discuss some concerns 
I have about the flurry of recent proposed mergers by certain rail 
carriers.
  The Commerce, State, Justice appropriations bill that we will 
consider later, terminates funding for the Interstate Commerce 
Commission at the end of year. Downsizing the Federal Government and 
eliminating Federal agencies is a goal I certainly support and I have 
supported elimination of the ICC, but as of today, reorganization of 
the ICC's statutory responsibilities has not been done. I understand 
the Commerce Committee is preparing to report out legislation to 
accomplish this reorganization and I support that effort as I believe 
we must not eliminate the Commission without reassigning their most 
important regulatory responsibilities.
  In the meantime, the Commission continues its mission. One 
responsibility they have that I wish to comment on today is their 
review of proposed railroad mergers.
  In the past several months we have seen two huge railroad 
combinations. The Burlington Northern/Sante Fe merger has been approved 
and appears to be moving toward completion. Now recently, the Union 
Pacific/Southern Pacific merger has been proposed. Little thought seems 
to have been given to the impact that both these mergers will have on 
the continued availability of effective and efficient railroad 
transportation. For example, what effect will these exceptionally large 
combinations have on consumers, shippers, and communities as well as on 
the surviving competing railroads? Consider the current critical rail 
transportation situation in the Midwest, as reported recently in the 
Journal of Commerce, where timely rail movement to market of grain, 
corn, and soybeans is seriously threatened. According to this article, 
which follows my remarks, because of a shortage of cars, freight rates 
are going up significantly.
  What will be the impact of these megamergers on other railroads and 
their ability to provide a needed and competitive service? Take for 
example, a regional railroad such as Kansas City Southern Railroad Co., 
and I am sure there are others; will KCS survive as a reliable 
competitive line offering a needed service to thousands of shippers and 
hundreds of communities? If it and others like it do not survive as 
viable competitors, isn't it likely that the serious freight car 
shortage and escalating rate problems we're seeing, as reported by the 
Journal of Commerce, will become even more serious? And how about the 
consumers? Any such increased costs of necessity are passed on to them.
  If all of this were not worrisome enough, the Union Pacific/Southern 
Pacific combination is being hurried through at a time when the only 
deliberative body charged with evaluating the ramifications of this 
sort of activity, the ICC, is threatened with legislative extinction. 
In the absence of the ICC, who is going to impartially assess the 
anticompetitive impact on the public of these mergers? Serious 
nationwide public policy issues are raised which must be addressed 
before the 

[[Page S 14097]]
merger of the Union Pacific and Southern Pacific Railroads is 
consummated. It is not my intention to prejudge the legitimacy of this 
merger, but only to be certain that the public interest is not 
adversely threatened.
  Mr. President, these megamergers pose very serious questions which 
must be answered by the players themselves or the agencies charged with 
maintaining an essential competitive transportation system.
  Mr. President, I ask that the Journal of Commerce article referred to 
in the body of my statement appear in the Record at this point:
  The article follows:

             [From the Journal of Commerce, Sept. 13, 1995]

             Rails Strain to Service Midwest Grain Harvest

                            (By Rip Watson)

       The U.S. Midwest's rail network, normally no stranger to 
     the crunch of the fall harvest, is beginning to strain this 
     year under the weight of strong demand, tight car supply and 
     skyrocketing prices.
       Conditions are so tense in Iowa that farm trade 
     associations will hold a Grain Transportation Summit on 
     Thursday in Des Moines to vent their frustrations with some 
     rail carriers, while seeking ways to ease the problem before 
     soybean harvests begin in a few days.
       ``Grain is hot. Export demand is huge and will continue to 
     be that way in the foreseeable future,'' said Jim Higgins, an 
     analyst for Donaldson, Lufkin & Jenrette in New York.
       As an industry, railroads boosted grain carloadings 23% in 
     August from a year ago. Burlington Northern Railroad led the 
     pack with a 28% increase, followed by Union Pacific Railroad 
     at 19%.
       That higher traffic volume is proving to be little comfort 
     to Iowa shippers.
       ``We are sitting with most of our facilities full.'' said 
     Dawn Carlson of the Iowa Institute for Cooperatives. ``People 
     are getting concerned. Every day that goes by is tacking on 
     more and more charges and the farmer will get less and less 
     for the grain delivered. If we don't get the grain moving, 
     we'll have a lot of grain sitting on the ground.''
       Arthur Breenken, manager for the Farmers Co-Op Society in 
     Wesley, Iowa, said, ``The Soo Line is shipping cars but they 
     are not supplying them fast enough.'' He said the problem was 
     that much Iowa grain is moving to the Gulf of Mexico instead 
     of the Mississippi River, which lengthens the round trip time 
     to more than 30 days.
       John Bromley, a spokesman for Union Pacific, blamed rail 
     unions for not allowing UP employees to work in Iowa, where 
     the railroad is short staffed. UP is hiring and training new 
     workers now, he said.
       Without those industrywide increases, the Association of 
     American Railroads would have been 1% lower than last year.
       ``Our export projections are strong,'' said Brad Clow, 
     director of transportation for Sparks Commodities in Memphis, 
     Tenn. ``In some commodities, shipments could outdo USDA 
     forecasts.''
       With export demand strong and the corn and soybean harvests 
     expected during the next several weeks, industry observers 
     see no changes in the rate and car supply situation.
       ``We expect cars to remain tight until January or 
     February,'' Mr. Clow said.
       ``It would surprise me if we didn't continue to have this 
     shortage problem for a while,'' said Steve Strege, who 
     directs the North Dakota Grain Dealers Association in Fargo. 
     ``We're just getting into the usual crunch time. I don't know 
     if there is much precedent for us to have a problem at this 
     time of year and have it relax at the time of corn and 
     soybean harvest.''
       With shippers paying premiums of up to $500 a car to 
     guarantee availability of covered hopper cars for grain 
     shipments late in 1995, Mr. Strege said he believed rates 
     will continue to climb.
       ``We have people willing to pay a hell of a premium for 
     cars,'' one official said.
       ``These programs (for ordering cars in advance) give 
     signals to the railroads that they should or can raise their 
     rates,'' Mr. Strege said.
       Other forces are influencing the 1995 grain shipping 
     picture.
       Operating under a strike threat last year, CP Rail System's 
     Soo Line unit posted meager grain carloadings in August 1994 
     that were nearly quadrupled last month.
       Barge freight markets are facing similar pressures, several 
     industry observers said.
       One factor affecting the barge markets is the continued 
     strong northbound river movements of aluminum ore, steel and 
     other products that have reduced availability of barges to 
     haul grain, said Jerry Fruin, a transportation economist for 
     the University of Minnesota in Minneapolis.
       ``Even with the recent fall in rates in the past week, we 
     expect barge freight rates will continue to remain very 
     strong as we move into harvest,'' Mr. Clow said.
       The traffic picture is brightening for some other 
     commodities but remains dim for manufactured goods.
       Coal traffic could pick up this month, Mr. Higgins said, 
     because of the hot summer and a resulting reduction in 
     utility stockpiles that have to be replenished.
       Export traffic is showing some cyclical strength driven by 
     demand for some steam coals and metallurgical coal, he said.
       August carloadings were 2% below last year.
       ``We're expecting a strong fourth quarter (for coal),'' 
     said Dave Rohall, director of planning for CSX 
     Transportation.

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