[Congressional Record Volume 147, Number 90 (Tuesday, June 26, 2001)]
[Senate]
[Pages S6926-S6927]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. ROCKEFELLER (for himself, Mr. Dorgan, and Mr. Burns):
  S. 1103. A bill to amend title 49, United States Code, to enhance 
competition among and between rail carriers in order to ensure 
efficient rail service and reasonable rail rates in any case in which 
there is an absence of effective competition, and for other purposes; 
to the Committee on Commerce Science, and Transportation.
  Mr. ROCKEFELLER. Mr. President, I am happy today to join with my 
colleagues Senator Dorgan and Senator Burns, in introducing the Rail 
Competition Act of 2001. Very simply, the purpose of this legislation 
is to encourage a bare minimum of competitive practices among 
participants in the freight rail industry, which has undergone 
unprecedented concentration in recent years, to the detriment of 
virtually all rail customers.
  This legislation is a renewed effort on the part of my colleagues and 
me to address an issue that has amazed and shocked us for years. The 
monopoly power of the railroads places pervasive burdens on so many 
industries important to our states and to the national economy. No 
other industry in this country wields as much power over its customers 
as the railroad industry, and no other industry has as close an ally in 
the agency charged with its oversight as the railroad industry has with 
the Surface Transportation Board, known by the abbreviation STB. In 
fact, no other formerly regulated industry in this country continues to 
maintain this level of market dominance over its customers and 
essential infrastructure.
  Shippers of bulk commodities, like coal from mines in West Virginia 
and grain from the Plains states, must routinely deal with shipments 
that move more slowly, and at rates much higher than would normally be 
charged in a truly competitive market. Every company that ships its 
product by rail has a trove of horror stories regarding how high prices 
and poor service attributable to the lack of meaningful competition in 
the freight rail industry has affected their ability to compete in 
their own industries. I know this because these companies have been 
telling me the same types of stories since I came to Congress.
  I know that other members of Congress have heard the stories, too. As 
many of my colleagues will remember, the point was driven home last 
year when more than 280 CEOs from companies covering the broadest 
possible spectrum of the American economy wrote to Senators McCain and 
Hollings asking them to do something to insert real competition in the 
freight rail industry. For the record, the STB has also heard the 
complaints. However, the Board's focus has been the railroads' still-
weak financial health, rather than the continued service problems that 
are its root cause.
  I want to give my colleagues an example from an industry that is very 
important to my State and the rest of the Nation, the chemical 
industry. Throughout the country, approximately 80 percent of 
individual chemical operations are ``captive'' to one railroad, meaning 
they are served by only one railroad, and are subject to whatever 
pricing scheme the railroad chooses to use. In my home State of West 
Virginia, where the chemical industry is one of the pillars of the 
State's economy, 100 percent of chemical plants are captive. Some might 
be tempted to just write this off as the cost of doing business, but 
let me impart another view: These plants produce bulk chemicals that 
other companies buy and turn into countless products in use in every 
home and business in America.
  Make no mistake, while the immediate beneficiary of this legislation 
will be the Rail Shipper who will have the opportunity to operate with 
the confidence that they are getting a fair deal the true beneficiary 
of this legislation is the retail shopper. Every purchase of every 
product that began its life in a chemical plant will be cheaper when 
that chemical plant receives competitive rail service because of this 
bill. Every ingredient in your families' dinners will go down in price 
when the shippers of agricultural commodities see their costs go down 
because this bill has produced efficiencies that benefit both shipper 
and railroad. Every time you flip the switch, and the lights turn on at 
a lower kilowatt-per-hour rate, it will happen because utilities 
throughout the nation have a more reliable and inexpensive supply of 
coal because of the Railroad Competition Act of 2001.
  Congress deregulated the railroad industry with the passage of the 
Staggers Rail Act in 1980. Many of the predicted results of 
deregulation came to pass in relatively short order. The major freight 
railroads, which were in pretty bad financial shape at the end of the 
1970's, put their fiscal houses in order. In the course of these 
improvements, some weaker railroads were swallowed up by stronger 
corporations. Our Nation's rail network, which was extensive but 
inefficient in some respects, became more streamlined. Unfortunately, 
some of the benefits of competition that Congress was led to expect 
most notably improved service at lower cost have simply not 
materialized for many shippers in several parts of the country.
  Indeed, rather than improving over time, the situation has grown 
steadily worse. The second half of the 1990's saw an unprecedented 
spate of railroad mergers, to the point now that the more than 50 Class 
I railroads in existence when I entered the United States Senate has 
dwindled to only six with four railroads carrying a staggeringly high 
percentage of the freight.
  STB has considered these mergers to be ``in the public interest,'' 
and I will not dispute the possibility that some of them may have been. 
I tend to believe that the notion that fueled many of the mergers was 
that somehow financially weak corporations with poor track records of 
service could be transformed overnight into efficient, businesslike 
railroads providing good service at lower costs. Meanwhile, rail 
shippers had to contend with newly merged railroads with monopoly power 
that did not seem to care any more about customer service than the 
separate companies that preceded them.
  Before I complete my remarks, I want to address what I predict will 
be some of the rhetoric bandied about by the railroad industry. This 
bill is not an attempt to re-regulate the industry. When Congress 
passed the Staggers Rail Act in 1980, it did not do so with only the 
financial health of the railroads in mind. The Interstate Commerce 
Commission, and its successor agency, the STB, were supposed to 
maintain competition in the rail industry. Both agencies have failed 
miserably to contain the anti-competitive behavior of the railroads. My 
cosponsors and I only seek to require railroads to quote a price for a 
portion of a route on which they carry a company's products. This bill 
does not seek to give the STB more regulatory authority over the 
railroads, it only serves to remind the Board of the pro-competitive 
responsibilities authorized by Congress in the Staggers Act.
  Likewise, we do not offer this bill to hasten the demise of the 
industry. The companies that have come to us time and again for help in 
getting competitive rail service absolutely need a strong railroad 
industry. Their products, for the most part, cannot be moved 
efficiently via trucks or barges. The competition that will be fostered 
by this legislation is intended to help the railroads as much as it is 
intended to help shippers. Some may dispute the fundamental economic 
logic of this, to

[[Page S6927]]

which I respond: Giving the railroads relatively unfettered regional 
monopolies with the right to engage in anti-competitive behavior has 
not produced the strong railroad industry the Staggers Act sought to 
produce. At the very least, perhaps it is time to give competition a 
chance to succeed.
  Mr. DORGAN. Mr. President, I rise today to speak about a bill, the 
Railroad Competition Act of 2001, which, along with Senator Burns and 
Senator Rockefeller I hope will introduce a bit of competition and 
better service in our railroad industry. The truth is that our rail 
system is completely broken, deregulation has only led to a system 
dominated by regional monopolies and both shippers and consumers are 
paying the price.
  Since the supposed deregulation of the rail industry in 1980, the 
number of major Class I railroads has been allowed to decline from 
approximately 42 to only four major U.S. railroads today. Four mega-
railroads overwhelmingly dominate railroad traffic, generating 95 
percent of the gross ton-miles and 94 percent of the revenues, 
controlling 90 percent of all U.S. coal movement; 70 percent of all 
grain movement and 88 percent of all originated chemical movement. This 
drastic level of consolidation has left rail customers with only two 
major carriers operating in the East and two in the West, and has far 
exceeded the industry's need to minimize unit operating costs.
  But consolidation has not happened in a vacuum. Over the years, 
regulators have systematically adopted polices that so narrowly 
interpret the pro-competitive provisions of the 1980 statute that 
railroads are essentially protected from ever having to compete with 
each other. As a consequence rail users have no power to choose among 
carriers either in terminal areas where switching infrastructure makes 
such choices feasible, nor can rail users even get a rate quoted to 
them over a ``bottleneck'' segment of the monopoly system.
  The negative results of this approach have been astonishing. In North 
Dakota it costs $2,300 to move one rail car of wheat to Minneapolis 
(approx. 400 miles). Yet for a similar 400 mile move between 
Minneapolis and Chicago, it costs only $310 to deliver that car. And 
move that same car another 600 miles to St. Louis, Missouri and it 
costs only $610 per car. Looking at it another way--An elevator in 
Minot, North Dakota pays $2.99 to the farmer for a bushel of wheat. The 
cost to ship that wheat to the West coast on the BNSF is $1.30 per 
bushel. At that rate, rail transportation consumes 43 percent of the 
value of that wheat. Not only is that totally unfair to the captive 
farmer, but in the long run it is unsustainable.
  How has this happened? Since the deregulation of the railroad 
industry, it has been the responsibility of the Interstate Commerce 
Commission, later renamed, the Surface Transportation Board, to make 
sure that the pro-competitive intent of the law was being upheld. It is 
the STBs charge to protect captive shippers through ``regulated 
competition.''
  That clearly hasn't happened. In 1999 the GAO reported on how 
complicated it is for a shipper to get rate relief under the 
``regulated competition'' approach at the STB. The GAO found that this 
process takes up to 500 days to decide, and costs hundreds of thousands 
of dollars. Hundreds of thousands of dollars and about approximately 
two years--that's hardly a rate relief process. But it's about the only 
relief shippers have under the law.
  The Railroad Competition Act of 2001 will reaffirm the strong role 
the STB should play in protecting shippers by: jump-starting 
competition by requiring railroads to quote a rate on any given 
segment; facilitating terminal access and the ability to transfer goods 
among railroads in terminal areas; simplifying the market dominance 
test; eliminating the annual revenue adequacy test; bolstering rail 
access by making the rate relief process cheaper, faster and easier 
through a streamlined arbitration process, and requiring the railroads 
to file monthly service performance reports with the Department of 
Transportation, similar to what we require of the airline industry, so 
that rail customers have access to the information then need to make 
good railroad and transportation choices.
  All Americans, whether they are farmers who need to ship their crops 
to market, businesses shipping factory goods, or consumers that buy the 
finished product, deserve to have a rail transportation system with 
prices that are fair. It is time for Congress to stand up for farmers, 
businesses, and consumers by making it very clear that the STB has to 
be a more aggressive defender of competition and reasonable rates.
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