In reply comments submitted Nov. 4 to the federal Surface Transportation Board (STB) in response to the agency's proceeding on rail revenue adequacy, the National Grain and Feed Association (NGFA) contested several mischaracterizations from railroads regarding the degree to which a competitive rail marketplace currently exists.

The NGFA noted that it had not filed opening comments with the STB in the rail revenue adequacy proceeding (Ex Parte No. 722) since it already had addressed the topic to a substantial degree in its extensive opening comments submitted in the grain rail rate proceeding (EP 665-1). But NGFA found it necessary to submit reply comments after the Association of American Railroads and several individual carriers used the revenue-adequacy proceeding as an opportunity to oppose points raised by NGFA in the grain rail rate proceeding, as well as to misstate and mischaracterize the degree to which "competition" exists in the agricultural rail marketplace.

The NGFA pointed out that both the Staggers Rail Act of 1980 and the STB's rules and precedents constrain railroads' ability to price their services differentially to captive shippers once the carriers have reached revenue adequacy. "Having finally reached revenue-adequate status for the most part, the railroads now argue that finding them revenue adequate should not result in any changes to the status quo regarding the STB's regulation of railroad rates and service," the NGFA said in its statement, noting that the BNSF Railway and other carriers contend that rail rate levels already are disciplined by competitive market forces.

"The competitive railroad market envisioned by the framers of the Staggers Act (and its successor and predecessor statutes) has not existed for at least a decade or more," the NGFA said. "Railroad parties continue to leave the false impression that truck transportation is a viable competitive alternative, regardless of the size of shipment or distance traveled. Further, competition from barge transportation is available...only in certain specific geographic areas, and even then is highly dependent upon navigation restrictions or interruptions.

"Most significantly," the NGFA continued, "the consolidated U.S. rail marketplace today consists of regional duopolies within which the major Class I railroads exercise substantial market power, which has reduced competitive options significantly for many rail shippers and receivers of agricultural products, as well as the degree to which meaningful rail-to-rail competition occurs even where it is physically possible."

The NGFA concluded by reiterating that, given the revenue-adequate standing of most Class I railroads, the time is right for the STB to consider and act upon the simplified approach the association has proposed to give captive shippers and receivers of agricultural products the opportunity to challenge rates they believe are unreasonable.

"If the rail marketplace were as truly and universally competitive as the rail carriers portray, they will continue to respond to the strong demand for service by attempting to maximize revenues by increasing the volume of traffic that is competitively served," the NGFA said, noting the rail industry is enjoying record profits derived from both competitive and captive traffic. "Implementing simplified rate-challenge procedures for captive traffic that incorporate a revenue-adequacy component should provide better protection for captive shippers against abuse of rail market power while still generating more-than-adequate revenues to rail carriers to invest in increasing rail capacity, while providing adequate rates-of-return."