Supporters Hopeful on Rail Bill

March 16, 2001

With the Surface Transportation Board moratorium on rail mergers set to expire in three months, supporters of legislation to more strictly regulate rail consolidation are optimistic that the reintroduction of a bill from the last congressional session will garner more attention this time around. Only two railroads carry the vast amount of goods being shipped west of the Mississippi River and in many areas they do not compete with each other.

Once the mergers between CSX, Norfolk Southern and the remnants of Conrail are complete, there will be only two major railroads in the East to move the bulk of traffic. In the West, consolidation has lead to large regions of the country being served by only one railroad, leaving farmers and ranchers captive to that operation with no leverage for bargaining price or service conditions, according to the American Farm Bureau Federation.

Last year, shippers expressed their concerns to the Surface Transportation Board and Congress. With the current consolidation trend in the rail industry, it is not inconceivable that for some farmers it will be too expensive to ship their goods, simply adding insult upon injury considering the high input costs and low commodity prices they face. STB responded to these worries by imposing a 15-month moratorium on rail mergers while the board considered policy changes, said AFBF.

Again this year, Rep. Earl Pomeroy (D-ND) will urge lawmakers to authorize the Justice Department to apply antitrust laws to the rail industry for the first time. The Farm Bureau-supported measure also would require STB to consider more criteria before approving mergers. Railroad companies would be required to show that their consolidations would improve customer service, provide additional rail competition and would not eliminate competitive shipping rules.

In a letter last week to the U.S. Surface Transportation Board (STB), the National Corn Growers Association voiced its support for the Dakota Minnesota & Eastern Railroad's (DM&E) expansion and upgrade project. If the project wins federal approval, corn growers in the Upper Midwest could see higher corn prices, said NCGA.

NCGA cited how the railroad project would benefit area growers. "First, it will improve the capacity of the existing track, allowing for larger, more efficient grain shipments. Second, it will provide competition to the Burlington Northern-Santa Fe Railroad (BNSF), and there are numerous examples of how competition benefits both shippers and carriers. Finally, this project will give corn and soybean growers in South Dakota and Western Minnesota greater market access."

Corn growers maintain that in terms of shipping corn to export markets, current freight rate spreads favor the Mississippi River Gulf over the Pacific Northwest. In other words, growers can make more money shipping their corn overseas via the Mississippi River rather than through ports in the Pacific Northwest. The problem for Upper Midwest growers, however, is that the BNSF's freight rates favor shipping corn to Pacific Northwest ports. NCGA encourages the STB to approve the DME's project without any additional delays, concluding that the project is vital to the economic well-being of the Upper Midwest.