By TIM ALEXANDER
Illinois Correspondent

WASHINGTON, D.C. — The nation’s leading railroad policy organization is opposing current legislation that would strip the major railroads’ limited antitrust exemptions, saying approval of the Railroad Antitrust Enforcement Act of 2009 (SB-146) would create an unprecedented and confusing regulatory scheme that could alter current economic oversight of the industry.

The Association of American Railroads (AAR) also defended the railroads’ desire to attach additional tariffs to shippers of toxic-by-inhalation (TIH) substances such as anhydrous ammonia and chlorine. The proposal is currently being considered by the Surface Transportation Board (STB).

Proponents of SB-146 who are seeking to withdraw antitrust exemptions from the railroads cite record profits posted in 2008 by the nation’s four major rail companies – even in the face of an economic recession affecting nearly all sectors of industry – as an example of the railroads’ monopoly power. This advantage, according to supporters of the legislation such as Consumers United for Rail Equity (CURE), results in a “captive rail” situation that permits the railroads to charge artificially high rates.

As previously reported in Farm World, rural communities and farmers are especially affected by the railroads’ monopoly, according to CURE Executive Director and Lead Counsel Robert Szabo.

Edward R. Hamberger, AAR president and CEO, said the antitrust legislation is confusing and flawed.

“We face two disparate schemes that spell nothing but confusion for the railroads and those charged with enforcing the regulations,” Hamberger said in a prepared statement dated March 5. “Congress should be promoting policies that help jump-start the economy and regain consumer confidence, not overburden an industry that stands ready to get America back on track.”

Tom White, a spokesperson for AAR, told Farm World during a March 24 interview that the legislation would subject railroads to two regulatory systems, which could cause confusion.

“We are subject to antitrust law in most every situation, and where we are not subject to antitrust law we are subject to regulation through the (STB),” said White. “If this legislation passes it would continue the STB regulation and layer antitrust regulation on top of that. That creates the potential for rulings in which one part of the regulatory system rules one way and the other part rules a totally different way.

“And then what’s the railroad to do? Which is going to be the guiding regulatory ruling, or is there going to be no guiding ruling? Is this just going to be sort of a helter-skelter approach? That’s something I don’t think any industry would want to face.”
Hamberger said there “is no justification for singling out railroads” in eliminating antitrust exemptions, since “agricultural marketing cooperatives,” newspapers and soft drink bottlers operate with limited antitrust exemptions.

SB-146 is sponsored by Sen. Herb Kohl (D-Wis.). A companion bill, HR-233, was authored by Rep. Tammy Baldwin (D-Wis.).

Regarding the transportation of TIH materials by rail, White said the AAR is not asking the STB for relief from their common carrier obligation to transport the materials at this time, “but we do feel that it places the railroads in a very difficult situation.”

Earlier this year, Union Pacific Railroad Inc. attached a tariff to a shipment of chlorine being transported by rail. Now AAR is asking the STB to approve additional tariffs for all TIH substances. The STB sought input from all affected parties until March 31 before considering a decision.

“We face virtually unlimited liability if there is an accident (with TIH materials), and some of our members have stated they would not carry it if not for that common carrier obligation,” explained White.
“You have to remember, too, that railroads don’t manufacture the stuff, and they don’t use it. Manufacturers can choose to manufacture or not to manufacture as they see fit. Those who use it can choose to use it or they can choose to use something else as they see fit. The only one in this whole chain that has no choice in the matter is the railroads, and that is a situation that we believe is inherently unfair.”

As they indicated during an STB hearing held in 2008, White said the AAR believes that farmers could stop applying anhydrous ammonia to their fields and municipalities could discontinue dumping chlorine in their public water supplies if they would choose or demand development of similar, safer products.

“There are some substitutes out there. A number of cities have stopped using chlorine for water purification. Some agricultural interests have used a substitute – I think it’s called urea – instead of anhydrous ammonia. So there are some options,” said White.
“What we really want to see is long-term further development of options so that you don’t have to use the stuff to begin with. The only way you can guarantee you’re never going to have an accident with (TIH substances) is if you don’t move it at all. We are very supportive of the idea of developing new technologies so you don’t have to use the stuff.

“In the meantime, we do believe it is appropriate for there to be some sharing of the liability, much as with the transportation of spent nuclear fuel.”

White said the U.S. railroad industry transports around 100,000 freight car loads of TIH substances per year, of which around 50,000 contain anhydrous ammonia. 30,000 to 32,000 car loads per year contain chlorine.