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Chemical Industry Testifies on Freight Rail Rates

Oct 2015

Freight rail shippers, including members of the American Chemistry Council (ACC) and the Chlorine Institute (CI), testified this week before the Surface Transportation Board (STB) on increasing competition amongst railroads and implementing more realistic approaches to resolving rate cases. 
On behalf of our members, the Vinyl Institute has made freight rail reform a top priority and the good news is our efforts are beginning to pay off with growing support in Congress.  However, the railroads have taken notice and recently launched a large advertising campaign to protect their ability to keep charging exorbitant fees to shippers. 
Financial health of the railroads is a key factor in STB decisions about rates and other rail practices.  Yet, the STB uses an outdated methodology that systematically understates the profitability of the nation’s Class I rail lines.  As CI President Frank Reiner explained, “The real issue is quite simple: the STB formula used to evaluate rail rates is inherently unfair to shippers and, therefore, their employees, customers and, ultimately, America’s consumers.  That’s why America needs the STB to objectively revise the formula for calculating the profitability of railroads.” 
A nonpartisan report from the Transportation Research Board, a part of the National Academy of Sciences, concluded that “Currently, burdensome STB rate hearings compensate for an unreliable initial process for identifying unusually high rates and in effect, they safeguard railroad revenues by making it too costly for most shippers to litigate a case. So, a more credible method for identifying unusually high rates would permit the use of less burdensome arbitration procedures, while not risking the adequacy of railroad revenue.” 
A report from the American Chemistry Council estimates chemical and plastic shippers paid a $3.9 billion premium in 2010, a 75 percent increase from 2005.  As our industry grows and rail costs continue to rise, the need for adequate freight rail competition will become increasingly important.  

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