As part of his efforts to give Minnesota farmers and businesses relief from unfairly high rail shipping costs, U.S. Sen. Al Franken (D-Minn.) pressed President Obama to take a number of actions to address the problems posed by monopolies in the freight rail industry.
The text of the letter is below.
February 25, 2013
Dear Mr. President,
I am writing you about a matter of great importance to the economy of my state and the nation: the freight railroad monopoly power over customers that must use a freight railroad for transportation. There are several ongoing executive branch activities regarding our transportation system, and I respectfully request that you direct them to consider the railroad monopoly problem in their proceedings.
You mentioned in your Inaugural Address the importance of railroads, highways, and other infrastructure to the strength of our national economy. I agree. But to really serve our nation, that infrastructure must be available to all prospective users on a competitive basis, and unfortunately that is not currently happening. Recent analysis indicates that 78% of the 28,000 "stations" in the continental United States where a major freight railroad picks up or delivers freight are served by a single railroad. Of the remaining 22% of rail stations that are nominally served by a second railroad, a significant number are served by a short line or regional rail carrier that is dominated by the major railroad serving the location. This lack of competition in our national freight rail transportation system and the resulting railroad monopoly power over a significant portion of annual railroad freight movement create significant problems for our state and national economies.
The freight railroads are exempt from our nation's antitrust laws for any issue that is jurisdictional to the Surface Transportation Board. This treatment of railroads is different from our treatment of interstate electric transmission lines, interstate natural gas pipelines, and telecommunications companies, all of which must comply with both federal economic regulation and the provisions of the nation's antitrust laws. The Surface Transportation Board is charged with the responsibility of ensuring that the freight railroads do not exercise their market power to the detriment of their customers. This small and under-funded agency is attempting to apply federal law adopted in 1980 that presumes that the relationship between the railroad and its customers will be governed by market competition instead of by regulatory policy. This 1980 presumption does not match current reality, where there are very limited opportunities for rail dependent shippers to have access to more than one major railroad.
In March 2011, your Export Council wrote you a letter setting forth federal actions that could be taken to increase American exports that will create more American jobs. Addressing this freight rail monopoly power was listed as one of the five actions that could increase American exports.
Those of us who are concerned about this problem need your help. There are several ongoing activities in the Executive Branch that provide opportunities either to produce information that will illuminate this problem or to produce policies to address this problem. They include:
*The Surface Transportation Board has several policy proceedings pending that address both the level of competition in the national freight rail system and the discredited and burdensome procedures by which rail customers without access to transportation competition can challenge their rail rates for being excessive. Other executive branch agencies who have identified the lack of rail competition as a problem should engage in these proceedings and advocate for increased competition in the national freight rail system and a less burdensome rate challenge process.
*The Department of Transportation has an ongoing effort to develop a national freight rail plan, and recently established a Freight Policy Council. The rail plan and the work of the Council must address the freight rail monopoly problem.
*The Department of Agriculture worked with the Department of Transportation to produce an excellent report in April 2010 on transportation issues in rural America. This report highlighted railroad monopoly problems in rural America that adversely affect agriculture input costs, the marketing of agricultural products, the price of electricity in rural America, and economic development in rural America. This study needs to be updated as a source of reliable information on this important issue.
*Finally, an Advisory Committee on Logistical Supply Chain Competitiveness was established recently in the Department of Commerce. This Committee needs to focus on the freight rail monopoly that exists in our domestic supply chain and its impact on the competitiveness of American industries and producers.
To help address this significant problem, I also request that you appoint a senior official to coordinate these ongoing efforts, to analyze the freight rail monopoly problem, and to suggest federal policies that can be adopted to ensure a competitive national freight rail transportation system. I believe strongly that efforts to grow our national economy and create jobs are hampered by the freight rail monopoly problem. I look forward to working with you to address this problem in the coming Congress. Please do not hesitate to contact me with any questions.
United States Senator