The lack of competition for rail services has become a critical problem for American industry, as more than three-quarters of US rail stations are now served by just one major rail company. (Check out Railroaded Part I here.) The lack of alternative service providers is one of the reasons the 1,000 rail-car wait to get everything from grain to steel out of North Dakota and to ports, customers and markets has gotten so bad.
As oil and natural gas shipments have increased in the Dakotas, the single major railroads serving smaller communities have fallen behind. The Burlington Northern Santa Fe Railway, which is the only game in town in some parts of rural North Dakota, is lagging by 1,336 cars. If commodities sellers are lucky enough to live in an area where the Canadian Pacific also operates, the backlog with their cars is a little less than a thousand.
Producers of large loads of grain, steel or other heavy commodities shipped in bulk can’t simply turn to trucking or shipping their products by air freight because of the much higher fuel costs those forms of transportation bring. According to the Association of American Railroads (AAR), rail companies can now move one ton of freight 476 miles on one gallon of diesel fuel. However, these increases in productivity have coincided with sharp increases in rail rates and declining service performance.
There were 26 Class I rail companies in 1980; now, four corporations control more than 90 percent of the market. According to AAR data, rates spiked 94.8 percent from 2002 to 2012, which outpaces increases in inflation and truck rates by about a factor of three. What led to this consolidation? In 1980 Congress passed the Staggers Railroad Act. Its goals were to promote effective competition between rail companies, maintain reasonable rates where there is an absence of effective competition, and provide expeditious resolution of all proceedings.
Yet in the decades since, freight competition has shrunk, not expanded. The Surface Transportation Board, the federal regulator in charge of the nation’s freight railways, has not exactly been expeditious when it comes to resolving the line and rail care shortage.
For a case in point, a $403 million proposed rail line jointly owned by BNSF Railway, Arch Coal, Inc. and candy-industry billionaire Forrest Mars, Jr. was planned for Wyoming two years ago. If built, the Tongue River Railroad would open a path to new mines in the Powder River Basin along the Montana-Wyoming border – home to one of the largest coal reserves in the world with enough coal to supply about 40 percent of the fuel burned in the nation.
The STB was scheduled to approve or deny the plan back in July. What happened? The decision was tabled. The STB said it will take until next April to complete its draft analysis of the Tongue River Railroad. That’s the second significant delay in work originally scheduled for completion last year that was to be entirely privately funded. It is now two years behind its original permitting schedule.
STB spokesman Dennis Watson told the Washington Times the decision to bump back the schedule on the railroad study was made to accommodate the “intense interest” in the project. The additional time will give all sides a chance to make their views known, he said.
That same month a broad coalition of industries that depend on rail transportation including steel, agribusiness, coal and even cement sent a letter to the members of the Senate subcommittee that oversees the STB, in support of reforms that would increase competition among railroad companies and make the STB a more effective and efficient regulatory body.
Continued in Part 3 here.