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Shippers Blast Soaring Rail Profits by Dave Wilkins Capital Press, October 30, 2008

Some ag producers demand Congress intervene to limit transportation costs

Railroads are raking in huge profits while the nation's economy seems to have been hit by a train, a coalition of shippers said.

Profits at the major railroads hit a blistering pace in the third quarter, even as shipping volumes sagged and the economy continued to slow, a coalition of rail customers said in a statement issued on Thursday, Oct. 23.

Union Pacific reported a 32 percent increase in third quarter net income to $703 million, up from $532 million a year ago.

Burlington Northern Santa Fe reported third quarter earnings of $818 million (21 percent) or $2 per diluted share, compared with $1.47 per share in the third quarter of 2007.

CSX reported a 40 percent increase in quarterly net income of $382 million.

Glenn English, chairman of Consumers United for Rail Equity, said monopoly pricing power has allowed the major railroads to post soaring profits even as the economy is suffering, railcar volumes are declining and fuel prices are soaring.

The agriculture sector has been especially hard hit because it has no viable transportation option, he said.

"Our farmers and our rural communities are being hit with a massive hidden tax imposed by the monopoly pricing power of our nation's railroads," English said. "Our farmers are already suffering. The last thing they need are indefensible rail transportation price increases while all of their input costs are increasing and commodity prices are declining."

Many parts of the country are served by a single major railroad, so shippers have little choice other than truck transportation and that may not be practical.

A bill intended to increase rail competition has been stalled in Congress.

The Rail Competition and Service Improvement Act has 55 co-sponsors in the House, including Rep. Mike Simpson R-Idaho.

Co-sponsors of an identical Senate bill include Republican Sens. Larry Craig and Mike Crapo of Idaho, Democratic Sens. Max Baucus and Jon Tester of Montana and Maria Cantwell of Washington.

The legislation would require the Surface Transportation Board to declare all or a substantial part of a state an "area of inadequate rail competition," after making certain findings.

Within 60 days of a designation, the Surface Transportation Board would be required to "fashion a remedy for this lack of rail competition."

The legislation would also require the board to post rail service complaints on its website.

A coalition of agricultural groups urged the House Transportation Committee to make the legislation a high priority next year.

The lack of competition among the railroads has resulted in "unreasonably high rates and unreliable service for captive shippers," the agriculture organizations said in a letter to the committee in September.

Wheat and barley groups in Idaho, Oregon, Washington and Montana are strong supporters of the rail bill.

The National Association of Wheat Growers, National Barley Growers Association and the American Sugarbeet Growers Association have also pushed for passage of the legislation.