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Transportation Feds Seek To Unplug Railroad Bottlenecks

Posted  January 19, 2011

The federal transportation agency that oversees regulation of railroads is looking for ways to unplug bottlenecks that may be blocking competition on U.S. railways.

The U.S. Surface Transportation Board (“STB”) has issued a notice that it “will receive comments and hold a public hearing to explore the current state of competition in the railroad industry and possible policy alternatives to facilitate more competition, where appropriate.”

The Board is seeking written comments prior to a hearing addressing the legal, factual, and policy matters described in the notice, including whether the STB should amend its earlier decisions concerning so-called “bottleneck carriers.”  A rail bottleneck rate issue arises “when more than one railroad can provide service over at least a portion of the movement of a shipper’s goods from an origin to a destination, but where either the origin or destination is served by only one carrier, i.e., the bottleneck carrier.”

Under the current rules, a shipper cannot routinely force a bottleneck carrier capable of providing origin-to-destination rail service to quote separate prices for different portions of the route.  According to the STB, shippers do this so they can use a different carrier for those portions of the route served by non-bottleneck carriers.

The STB will also consider changing its rules on terminal facilities access and reciprocal switching agreements.

The STB noted that it has not recently examined these issues, and that the railroad industry has changed dramatically since the STB initially adopted its competitive access standards in the 1980s.  Further, it noted that while productivity gains in the railroad sector “appear to be diminishing,” overall rail transportation prices have increased since 2004, suggesting that it is time for the STB to consider competition issues again.

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