On Thursday, September 20th, the Transportation & Infrastructure Committee, chaired by Minnesota Congressman Jim Oberstar, held a hearing on the Railroad Competition and Service Improvement Act (HR 2125). The bill would impose new regulation on the railroad industry, effectively reducing their ability to earn much needed revenue.

Railroading is an extremely capital intensive business. The costs of rail, locomotives, rolling stock, fuel, labor and the many other expenses of railroading all require significant on-going capital investment. That money comes directly from railroad revenues – what we charge shippers to assure transport of their products across this nation and continent.

Whatever restricts the ability of railroads to earn revenue – excess regulation, restrictions on operations, congestion – reduces their ability to reinvest in maintenance and operations. After years of losses prior to the Staggers Rail Act, the railroad industry has finally started to earn enough revenue to make many long delayed and necessary improvements to its infrastructure.

While there are some good changes contained in HR2125, such as reducing the filing fees for certain rate case challenges, the industry is concerned that several of the provisions of the legislation could adversely impact the ability of railroads to earn the revenue needed to make the investments required.

And, restrictions on Class I operations have a trickle down impact on smaller shortline and regional railroads. Less investment by the Class I's means less system capacity, generally, and less access for shortlines and regional railroads.

To see a link to Chairman Oberstar's webpage on the hearing and testimony from those who appeared before the committee, please see the following link: http://transportation.house.gov/hearings/hearingdetail.aspx?NewsID=293.

At the hearing an excellent presentation was given to the committee by William Rennicke, a director at the international strategy and consulting firm of Oliver Wyman, Inc. For your review, we have included it here.