Railroads fight against freight competition bill

On paper, it looks like an unfair fight. On one side are heavy-hitting lobbying groups that represent electric utilities, farmers, chemical companies, paper and wood companies, and oil and gas refiners. On the other side are railroads. So far, the railroads are winning. The fight is over a bill that supporters — utilities, farmers, et al. — argue will increase competition on America’s freight rail lines in remote areas that are served by only a single railroad.

On paper, it looks like an unfair fight.

On one side are heavy-hitting lobbying groups that represent electric utilities, farmers, chemical companies, paper and wood companies, and oil and gas refiners. On the other side are railroads.

So far, the railroads are winning.

The fight is over a bill that supporters — utilities, farmers, et al. — argue will increase competition on America’s freight rail lines in remote areas that are served by only a single railroad. Now, the groups argue, those areas pay relatively higher rates than places with greater rail competition.

As many as 18 groups support the bills, S. 919 and H.R. 2047, including the Edison Electric Institute, which represents investor-owned utilities, the National Rural Electric Cooperative Association, the American Forest & Paper Association, the National Association of Wheat Growers, the American Chemistry Council and the Portland Cement Association.

But the legislation, some variation of which has been introduced periodically since 1999, hasn’t had enough steam, so to speak, to reach a floor vote, an unequivocal lobbying victory for the rail carriers and their main trade association, the Association of American Railroads (AAR).

Tom White, a spokesman for AAR, said the bill “would reduce railroads’ revenue by several billons [of dollars] a year,” leaving much of the industry teetering on the edge of bankruptcy again, unable to maintain the nation’s 143,000 miles of rail lines.

So far, the bills have had only modest support. There are 10 co-sponsors in the Senate and 20 in the House, although supporters are encouraged that one of the co-sponsors is Rep. James Oberstar of Minnesota, the ranking Democrat on the Transportation and Infrastructure Committee, which has jurisdiction over the battle.

Today, two coalition groups — Consumers United for Rail Equity (CURE) and the Alliance for Rail Competition (ARC) — are holding a joint rally and lobby day on Capitol Hill to support the railroad-competition bills.

As many as 125 representatives from various groups supporting the bill will be on hand. Bob Szabo, executive director of CURE, said these back-home lobbyists are scheduled to meet with more than 100 congressional offices, which he said is another indication of growing support for the bills.

Also, the Senate Commerce Committee has asked the Government Accountability Office to review the issue of rail competition.

But supporters acknowledge they have a tough haul overcoming opposition from one of Capitol Hill’s most successful lobbies.

“The railroads have been lobbying this place since 1870, and they’ve done a pretty good job of it,” said Michael Grisso, executive director of ARC.

The railroad lobby provides a steady stream of contributions to lawmakers. The AAR, for example, donated nearly $150,000 to campaigns in 2004, much of which was targeted at committees with oversight over the railroad industry. In total, railroad groups and freight lines donated nearly $3 million to federal candidates, according to the Center for Responsive Politics.

Grisso and Szabo said about 20 percent of the country is “captive” to only one railroad. That means they pay higher rates, as measured against the costs to operate the rail lines, than other areas, they said. Whereas a rail line’s rate payers in one area might pay just 10 percent more than it costs to operate that line, so-called captive ratepayers can pay four times as much.

White said the industry rates are set by demand.

The co-sponsors of the bills represent areas with limited or no competition. Lawmakers from Western states such as North Dakota, Montana and Idaho have been the main backers of the bills.

Grisso called the series of measures in the bill a “wish list” of improvements designed to reduce rates. Something less than full victory would count as a win, he said.

One high priority provision in the bill would create an arbitration panel that would review freight-line rates.

Critics say it can cost as much as $4 million to bring a case before the Surface Transportation Board — the current regulatory body with oversight over the train industry, including the rates they charge.

Freight users also say the standards the board uses to determine if rates are too high are too tough, requiring in some instances that users create an expensive model train system, with everything from fuel to healthcare costs factored in, to demonstrate that transportation could be handled more cheaply.

But the real motive of those backing the bill, says White of the AAR, is to reregulate the rail industry, which has largely been free of government intervention since the passage of the Staggers Rail Act in 1980.

Before that act, the rail industry was in a shambles, White said. Rates of return on investment averaged 2 percent, and 20 percent of the freight lines were opertated by bankrupt companies.

White said it isn’t just the rail industry against the bill. Nearly 1,000 other freight users sent opposition letters to members during the last Congress. The letter campaign was fueled by concerns that rail rates would increase if a rail-competition bill passed both chambers and President Bush signed it.