THE FUTURE SHAPE of North American railroading was signalled on October 3, when the US Surface Transportation Board issued a Notice of Proposed Rulemaking on proposed mergers. Releasing its proposed regulations for public and industry comment, the STB said the package ’represents a major shift in basis from the pro-merger approach that has guided agency decisions for the last 20 years.’ It noted that ’the last round of consolidations resulted in significant transitional service problems, which could recur.’
Comments are due by November 17 and final replies by December 18. Definitive rules must be issued by June 11 next year - the end of the 15-month moratorium imposed by the STB last March, which led to the cancellation of the proposed merger between Canadian National and Burlington Northern Santa Fe (RG 9.00 p512).
In future, the STB will be looking for enhanced competition, although the board says it ’does not intend to prevent transactions genuinely in the public interest’. But operators would be held more accountable for any benefits promised in their applications. The STB will also examine whether the proposed benefits could be obtained by other means. Railways seeking to merge would be required to submit alternative plans should ’the anticipated public benefits ... fail to materialise in a timely manner.’ STB will also consider ’downstream effects’ on short lines, employees and other transport operators. ’We must be confident that at the end of the day a balanced and sustainable rail transportation system is in place’, it emphasised.
To maintain on-rail competition, the STB is planning to require railways to price individual route segments separately. This would allow shippers to evaluate the cost of transporting goods on each portion of a route. Such a move reflects a growing concern among shippers and manufacturers about poor rail service, vocally demonstrated at a hearing by the Senate Subcommittee on Transportation Appropriations on September 12. With the number of US Class Is falling from 42 to four in 20 years, re-regulation is a growing threat. Arguing to retain market pricing, AAR spokesman TomWhite warned that this could do long-term damage to the rail industry. We can expect some tough talking in the next couple of months.