[Congressional Record Volume 149, Number 59 (Friday, April 11, 2003)]
[Senate]
[Pages S5378-S5379]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BURNS (for himself, Mr. Rockefeller, Mr. Dorgan, Mr. 
        Craig, Mr. Baucus, Mr. Coleman, and Mr. Johnson):
  S. 919. 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, and for other 
purposes; to the Committee on Commerce, Science, and Transportation.
  Mr. ROCKEFELLER, Mr. President, I am proud today to join a bipartisan 
and geographically diverse group of Senators to introduce the Railroad 
Competition Act of 2003. When enacted, the Railroad Competition Act 
will benefits rail shippers, retail shoppers, and, I believe, the 
railroad industry itself, by promoting real competition in the nation's 
freight rail transportation sector.
  I am especially proud to be working on this issue alongside two of my 
colleagues, Senators Dorgan and Burns, with whom I have shared this 
effort for many years. This is an issue I have been dealing with since 
my first days as Governor of West Virginia. I cosponsored similar 
bipartisan legislation during my first year as a United States Senator. 
Including today's introduction. I have sponsored legislation in six 
different Congresses going back to 1985 to try to instill competition 
in the freight rail market to invigorate an industry that is essential 
to the commerce of this Nation. This is the fourth straight Congress in 
which Senators Burns and Dorgan have joined me to fight for fairness 
for shippers in our states and throughout the country.
  I frequently say that I have worked on this for my entire Senate 
career, and with little discernible success. Still, I am not dissuaded 
from pursuing this legislation again because I know our cause is right. 
What this bill does is really very simple. We seek nothing more than a 
freight rail industry governed by the principles of capitalism--
competition, service, fair prices, and the ability of sophisticated 
actors to conduct arms-length negotiations for these things. We also 
seek a return--not to the regulated industry that predates the Staggers 
Act--but to the competitive freight rail industry envisioned by the 
Congress that passed it.
  If we are successful in this effort, it will mean a newly level 
playing field for shippers and railroads. It will mean goods being 
picked up on time and being delivered on time. It will mean products 
traveling short distances will not be priced per mile at a price that 
is almost usuriously higher than products traveling great distances. 
Shippers moving small amounts of product will not be unduly 
disadvantaged by railroads who answer to no person or governmental 
entity. What this bill will not do, is re-regulate the railroads.
  The Railroad Competition Act will do the following: clarify that the 
STB shall promote effective competition among rail carriers, helping to 
maintain both reasonable freight rail rates and consistent and 
efficient rail service; create a system if ``final offer'' arbitration 
for matters before the STB; authorize the STB to remove so-called 
``paper barriers'' in place for ten years or more that prevent short-
line and regional railroads from providing improved service to 
shippers; remove the requirement for shippers to demonstrate ``Anti-
Competitive Conduct'' on the part of railroads--retains statutory 
authority for STB to act in the ``public interest''; cap filing fees 
for STB rate cases at the level of Federal district courts, reducing 
filing fee from approximately $65,000; require railroads to quote rates 
to their customers; call for a Department of Transportation, DOT, study 
of rail competition; allow States to petition the STB for declarations 
of ``areas of inadequate rail competition,'' and creates applicable 
remedies; create position of Rail Customer Advocate at U.S. Department 
of Agriculture (USDA).
  Perhaps the most striking aspect of the freight rail industry that 
the authors of the Staggers Act sought to create, and to which we hope 
to give new life with this bill, is really fairly mundane. Upon 
enactment of this legislation, shippers weighing their transportation 
options will be able to get railroads to do the most basic thing that 
occurs in business relationships--quote a price for the service 
requested. In other words, railroads will tell shippers how much it is 
going to cost to move a certain amount of product from Point A to Point 
B. Hardly remarkable, hardly earth-shattering, but that very simple, 
everyday aspect of business negotiations is so rare in the freight rail 
sector today that it is hardly ever seen.
  How can this be? How can railroads get away with not telling their 
customers how much they are going to be charged for a service? 
Railroads can carry out this bizarre practice, as well as other 
amazingly anti-competitive business practices, because they are one of 
the last unfettered monopolies in our economy. The Staggers Act only 
partially deregulated our freight rail industry, and provided for a 
government entity to protect competition for shippers. That authority 
fell then to the now-defunct Interstate Commerce Commission, ICC, and 
the power should now be exercised by the Surface Transportation Board, 
STB. The ICC did not do a very good job of protecting competition, and 
the STB has fairly consistently chosen not to.
  This has resulted in a freight rail market in which customers have no 
power. In real-world terms, this means that electricity produced from 
coal, and virtually everything you buy in the store--food, medicines, 
paper products, plastics, and anything made from any number of basic 
chemical products--is more expensive than it should be because 
railroads abuse their monopoly power to keep rail rates artificially 
high.

  In fact, even back in the bad, old days of the ICC-regulated rail 
sector,

[[Page S5379]]

many railroads enjoyed ``natural'' monopolies over portions of their 
network. In most cases, this fact could usually be balanced by the 
number of railroads providing service. In the twenty-three years since 
Congress passed the Staggers Act, however, the previous number of Class 
I freight railroads--more than 40--has dwindled down to an all-powerful 
few. This has expanded a handful of scattered ``natural'' monopolies to 
basically four regional monopolies--two in the eastern United States, 
and two in the West (with the smallest of the Class I railroads 
operating its small network of track along the Mississippi). There is 
no balance in the system; there is only the railroad industry charging 
its take-it-or-leave-it prices and providing woefully bad service.
  I would conclude by saying to my colleagues that this legislation has 
laudable goals, but it is not revolutionary. We have seen how 
competition in other industries has strengthened the players willing 
and able to compete. It is not the reactionary, re-regulatory vehicle 
the freight rail industry will try to tell you it is. It is nothing 
more and nothing less than an attempt to implement fairness where it 
has been lacking. The viability of so many of our industries--the 
railroads included--depends on this legislation becoming law.
  Mr. DORGAN. Madam President, I rise today to speak about a bill, the 
Railroad Competition Act of 2003, which, along with Senators Burns, 
Rockefeller, Craig, Baucus, Coleman, and Johnson, 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 4 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 policies that so narrowly 
interpret the procompetitive provisions of the 1980 statute that 
railroads are essentially protected from ever having to compete with 
each other. As a consequence rail users to 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 $2,600 to move one rail car of wheat to Minneapolis, 
approximately 400 miles. Yet for a similar 400 mile move between 
Minneapolis and Chicago, it costs only $918 to deliver that car. Not 
only is that totally unfair to the captive farmer, but in the long run 
it is unsustainable.
  It is actually $500 per car cheaper to ship a carload of corn from 
Iowa to the PNW, through North Dakota, than it is if that carload were 
to originate in North Dakota. The farmer in Iowa pays $2,900, while the 
farmer in North Dakota is charged $3,400.
  The same pattern is true with shipments going to the Gulf of Mexico. 
Minot, ND is 1,732 miles from the gulf whereas the distance to the gulf 
from Herman, MN is 1,430 miles, a difference of only 332 miles. But 
when it comes to paying the shipping costs the farmer in Minot pays 
$1,630 more per car because Minot is just isolated enough that it 
cannot take advantage of trucks and barges the way Herman, MN, can 
meaning the price of being captive is $1,600 per carload from central 
North Dakota.
  Another example is Hastings, NE. Hastings is 1,700 miles from the 
Pacific Northwest, PNW, grain markets in Portland, OR. But, if an 
elevator from Hastings wants to ship a carload of wheat to the PNW they 
will pay $4,316. Meanwhile, Minot, ND, is 1,300 miles from Portland, 
450 miles closer than Hastings, NE, yet the farmer in Minot will have 
to pay $4,442 to ship the same carload of wheat to the PNW, a surcharge 
of $126 for a shipment that is shorter by 400 miles.
  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.''
  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. That is hardly a rate 
relief process, but it is the only relief shippers have under the law.
  According to the North Dakota Public Service Commission ``while the 
Staggers Rail Act uses a revenue-to-variable cost ratio of 180 percent 
as a benchmark for reasonableness, North Dakota's rail rates on wheat 
often generate ratios of 270 to 400 percent. On an annual basis, North 
Dakota's farmers and grain shippers pay $50 to $100 million in excess 
freight rates [each year].''
  The Railroad Competition Act of 2003 will seek to improve things by 
reaffirming the strong role the STB should play in protecting shippers 
by: clarifying national rail policy; requiring railroads to quote a 
rate of any given segment; facilitating terminal access and the ability 
to transfer goods among railroads in terminal areas; removing paper 
barriers to competition; capping filing fees; creating a Rail Customer 
Advocacy Office in the Department of Agriculture; designating Areas of 
Inadequate Rail Competition; and by making the rate relief process 
cheaper, faster and easier through a streamlined arbitration process.
  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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