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Congressman Baker Champions Rail Competition

Location: Washington, DC

Congressman Baker Champions Rail Competition

Opening Statement
Congressman Richard H. Baker

Full Transportation and Infrastructure Committee - Hearing on Rail Competition and Service

Thank you Chairman Oberstar and Ranking Member Mica for holding this hearing on rail competition and service. This hearing represents the first step in restoring competition to our nation's freight rail marketplace.

Restoration Not Re-regulation

When Congress passed the Staggers Act in 1980 there were over 40 Class I railroads competing for business. Today, after over 50 mergers and consolidations there are only 7 Class I railroads in North America and four of them control over 95 percent of the railroad business. This kind of unprecedented consolidation has led to whole states, regions and entire industries becoming captive to a single railroad. This level of concentration and the lack of competition it has brought were never envisioned by Congress in the 1980 Act.

Over this same period the agency that administers rail law, the Surface Transportation Board (STB), has produced rulings which have skewed the freight rail market place to the point that it is now a federally protected monopoly. Railroads are operating within the law, but that law is outdated given the current number of railroads and market conditions of the new century. It is our national policy that is broken and needs attention from this 21st century Congress; restoration of the STB is imperative to provide the cost effective rail competition that our nation needs in an increasingly competitive global economy.

At least 30 percent of the traffic of our nation's railroads is "captive" (where the rail customer is served by a single railroad). These captive rail customers, including coal shippers, utilities, chemical companies and agricultural producers, are at the mercy of that rail carrier with regard to both the level of their rates and their service. The captive rail customers in my state have made a very strong case to me that the STB has interpreted current law to allow their rail carriers to block their access to existing railroad competition. That I why I joined Chairman Oberstar in introducing H.R. 2125, the "Railroad Competition and Service Improvement Act of 2007."

H.R. 2125

H.R. 2125 is the answer to restoring competition to our nation's freight rail marketplace. This legislation fortifies healthy market competition by removing artificial protections maintained by an outdated policy which allows freight railroads to operate in an atmosphere which no other business in the country enjoys. Among other things, H.R. 2125 would:

* Direct the STB to (1) ensure effective competition among rail carriers; (2) ensure reasonable rates for rail customers in the absence of competition; and (3) ensure consistent and efficient rail transportation, including the timely provision of rail cars as requested by customers;
* Eliminate "paper barriers", contractual agreements that prevent short-line railroads that cross two or more major rail systems from providing rail customers access to competitive service on one of these systems;
* Reduce fees for filing rail rate cases. Shippers are now required to pay a $140,600 fee for filing a rate case. Under this legislation, filing a rate case would cost the same as filing before a federal district court, about $500;
* Prohibits the STB from using their current practice of requiring shippers challenging rail rates to submit estimates of the costs of constructing and operating a new, hypothetical railroad that carries only the commodity that the shipper transports.

In short, H.R. 2125 aims to make the Surface Transportation Board (STB) a fair moderator in disputes between railroads, customers and the public, to preserve existing rail-to-rail competition in areas of the country where competition is working, and to reduce impediments to competition that adversely affect rail customers.

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