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NGFA Presents Ag Perspectives at Rail Shippers' Roundtable

National Grain and Feed Association believes rail industry is at a "tipping point"

NGFA rail table

On July 25, the National Grain and Feed Association (NGFA) presented perspectives on the current rail environment and its top rail policy concerns during a Railroad Shippers’ Roundtable discussion with members of a key House Transportation and Infrastructure Committee subcommittee.

NGFA was invited by Rep. Angie Craig, D-Minn., and was the sole agricultural representative on the eight-member roundtable panel, which also included representatives from the forest and paper products, scrap metal, National Industrial Transportation League, American Chemistry Council, chemical and electric power sectors, as well as an academic from the University of Minnesota.

The free-wheeling, interactive format enabled roundtable participants to provide brief opening comments, followed by more than an hour of questions from members of the Subcommittee on Railroads, Pipelines and Hazardous Materials.

Much of the discussion focused on the adverse service- and cost-related impacts of the implementation of the so-called precision scheduled railroad (PSR) operating model adopted by six of the seven Class I railroads.

House Committee Chairman Peter DeFazio, D-Ore., in his opening remarks, said he had “grave concerns” about PSR and added that, “We don’t want … Wall Street destroying the precious asset that is rail transportation in the United States, which is the best, most efficient network that is the envy of much of the world.”

During its opening remarks, NGFA focused on the importance of efficient, predictable and cost-effective rail service to agricultural shippers, noted the declining share of grain and oilseed traffic shipped by rail (now 25% compared to more than 50% as recently as 1980); the preponderance of rail cars (more than 75%) now owned or leased by rail customers, not the railroads; and the unique aspects of grain, oilseed and grain product shipments compared to other non-agricultural products, such as weather and quality variability, the globally fungible nature of the grain and oilseed supply, and international trade aberrations.

NGFA also discussed its philosophical preference that railroad-rail customer issues be resolved through private-sector mechanisms, whenever possible, and cited its unique Rail Arbitration and Mediation Service in that regard.

NGFA also told the House, however, that many agricultural rail users believe the industry is at a “tipping point” on the extent to which they can rely on obtaining cost-effective, competitive and predictable rail service, citing the railroad duopolies that exist in the East and West – with four carriers now hauling 80% of the grain and oilseed traffic – and the implementation of PSR.

Finally, the NGFA’s statement focused on its top priority rail policy objectives, including:

  • Urging the Surface Transportation Board to follow up on its robust and revealing May 22-23 public hearing (at which NGFA testified) by developing policy principles or guidance to govern railroad demurrage and accessorial tariffs so they are commercially fair, commercially achievable by rail customers’ facilities, and reciprocal (providing comparable penalties if railroads fail to perform). NGFA commended the STB for initiating data collection from the Class I railroads on the revenues being generated through demurrage and accessorial charges – which amounted to more than $1.43 billion in 2018 alone – and for initiating the proceeding to spotlight egregious practices being engaged in by several of the major carriers.
  • Reforming the STB’s current “unworkable” process for challenging unreasonable rail freight rates. NGFA commended STB Chairman Ann Begeman for establishing a Rate Reform Task Force within the agency, which developed several “thoughtful and creative proposals that deserve consideration.” NGFA submitted a comprehensive proposal for reforming the STB’s rate-challenge process in 2014, several elements of which were included in the STB task force’s report. Begeman has pledged further action, stating that the status quo is not acceptable.
  • Clarifying the railroads’ common carrier obligation to provide transportation or service on reasonable request – a requirement embodied in federal law – given the current rail environment. NGFA noted that the National Academy of Sciences’ Transportation Research Board in its landmark 2015 study concurred that the common carrier obligation is “poorly defined” which has led shippers to believe a railroad has no reason to maintain a consistent common-carrier service and that consequently, carriers unilaterally will revise service terms and conditions, as has proved to be the case.

To view the approximately two-hour roundtable, click here.

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