Rail Policy Needs to Be Modernized Times and markets have changed, - - PowerPoint PPT Presentation

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Aug 06, 2023 114 likes •263 views

Rail Policy Needs to Be Modernized Times and markets have changed, but policies have not No Industry Is Spared By the Lack of Rail Competition Diverse set of shippers have one thing in common Times and Markets Have Changed; Policies Have

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No Industry Is Spared By the Lack of Rail Competition

Diverse set of shippers have one thing in common

Rail Policy Needs to Be Modernized

Times and markets have changed, but policies have not

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“The goal of the Staggers Acts was not to enrich railroad companies, but to ‘provide a regulatory process that balances the needs of carriers, shippers, and the public.’ [Policymakers] will need to carefully consider whether changes are needed to reach this goal.”

Senate Committee on Commerce, Science, and Transportation; 2013

1980: Policy Goals

Strengthen Railroad Finances Provide Quick Dispute Resolutions Ensure Effective Competition Wherever Possible Maintain Reasonable Rates Even Without Effective Competition

2013: Time to Reassess

Railroads are Financially Sustainable Disputes Costly and Time Consuming Policies Prevent Shippers from Competitive Access and Reasonable Rates Rail Mergers Significantly Reduced Competition and Rates Soared

Times and Markets Have Changed; Policies Have Not

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What We Already Know

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78% of freight rail stations are captive by a single Class I railroad. In every state, the majority of rail stations are now captive to a Class I railroad.

Source: Analysis of Freight Rail Rates for Chemical Shippers; Escalation Consultants; 2012

Most Shippers Lack Competitive Rail Service

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New Research Shows the Freight Rail Problem is Getting Worse

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Analysis of Freight Rates for All Commodities

Escalation Consultants studied STB’s Public Use Waybill Sample for all Non- Intermodal U.S. rail traffic and calculated railroad revenues and variable costs for all commodities in 2005 and 2011. The analysis calculated the ‘premium’ for non-competitive rates (above 180% RVC). Rates greater than 180% RVC are subject to potential STB review.

Premium = (avg. rate above 180% RVC – avg. rate below 180% RVC) X total carloads with rates above 180% RVC

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$- $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500 $4,000

Average Non- Competitive Rate Average Competitive Rate

2011 Premium on Non-Competitive Shipments $1,335 per car

In effect, a 53% premium

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Total premium is $16.2 billion, with most coming from rates above 300% RVC

Premium by RVC Range (2011)

RVC Range % of Total Carloads Premium for Rates above 180% RVC 180-240 22% $2.9 Billion 241-299 12% $3.1 Billion >300 23% $10.2 Billion Total 57% $16.2 Billion

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Railroad Pricing Power – Not Demand

r Costs – Is Driving Rates Higher
1%

90%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Change in Carload Volume (2005 - 2011) Change in Rate Premium (2005 - 2011)

What other industry can get away with charging much higher prices even as demand drops?

The Common Sense Gap

Competitive markets simply do not work like this

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Premium By Commodity (2011)

Description Carloads >180% RVC Premium for Rates Above 180% RVC Coal 56% $5.2 Billion Chemicals or Allied Products 77% $4.5 Billion Transportation Equipment 37% $1.2 Billion Food & Kindred Products 42% $763 Million Nonmetallic Minerals Except Fuels 66% $750 Million Petroleum or Coal Products 70% $659 Million Clay, Concrete, Glass or Stone Products 75% $605 Million Primary Metal Products 64% $597 Million Farm Products 52% $558 Million Pulp, Paper or Allied Products 43% $449 Million

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