ND Wants Railway Regulated as Monopoly

WASHINGTON - Feb 16/06 - SNS -- North Dakota Agriculture Commissioner Roger Johnson wants the U.S. government to regulate the largest railroad serving his state as "a monopoly".

Speaking before a congressional committee, Johnson said, "If left to operate as the monopoly it has become, the Burlington Northern Santa Fe (BNSF) will continue to undermine the profitability of North Dakota agriculture and the agricultural industry throughout the country.

U.S. Senator Byron Dorgan (D-ND), a member of the committee, echoed his theme. "As the railroads have merged and become more powerful in recent years, competition has been all but eliminated and prices have skyrocketed. These monopolistic-type pricing structures are unfair to farmers and consumers, and Congress ought to take action."

Addressing a "listening session" of the committee, Johnson said BNSF has been creating artificial railcar shortages, causing steep rates hikes. He cited an example in 2005, when the railroad suspended nearly all ordering of railcars for upcoming harvest months with the result that shippers paid up to $419 per car over tariff for the few available cars.

"By restricting the allocation of car supply, BNSF has been able to reap higher and higher profits as shippers desperately scramble to book transportation," Johnson said. "BNSF takes these bookings and bids as signals that the market will bear even higher rates."

The commissioner also charged BNSF with imposing unfair fuel surcharges that he said had little to do with distance, the primary component of total fuel cost.

"Some wheat shipments from my state paid 70% more fuel surcharge per car mile than shipments of other crops more distant from the same destination market," he said. "Calculations using BNSF numbers show that in some cases these rate-based surcharges exceeded the entire cost of fuel and in some cases the surcharge was seven times the actual increase in cost."

Johnson said in the fourth quarter of 2005, BNSF reported an increase in fuel surcharge revenue over the prior year of $274 million, while the actual fuel cost increased only $210 million.

"That was an extra $64 million windfall in only one quarter," he said.

Johnson said BNSF is not the only railroad engaging in these business practices.

"We are also concerned about the second-largest rail carrier in North Dakota, the Canadian Pacific Railway," he said.

Johnson urged the committee to demand action by the Surface Transportation Board (STB) to act more boldly in enforcing the laws that govern the railroads and end BNSF’s monopolistic operations.

"The lack of response from the STB destroys the statutory requirement that carriers must provide service upon reasonable request, as well as the requirement that railroads ‘shall furnish safe and adequate car service and establish, observe, and enforce reasonable rules and practices on car service,’" he said. "Captive rail customers need protection from abusive dominant railroads, not the other way around."

Finally, Johnson asked committee members to support Senate Bill 919, the Railroad Competition Act of 2005, which amends federal transportation law and sets specific objectives for transportation policy governing the U.S. rail system.

"This legislation provides several measures that will extend competition to captive rail customers – states like North Dakota – and will address many of the problems with the STB’s implementation of railroad deregulation," he said. "Congress should enact the Railroad Competition Act of 2005 to rebalance interest between railroads and their customers."