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Scrap industry mulls rail exemptions challenge

Keywords: Tags  STB, rail exemptions, scrap, ISRI, Nathan Laliberte


NEW YORK — Scrap companies that ship large volumes of material by rail could step up efforts to encourage Congress to remove a set of regulatory exemptions that benefit the railways but that some allege might be doing more harm than good to the scrap industry.

The exceptions, dating back to several deregulation efforts by Congress in the 1970s and 1980s, were intended at the time to help railroads better compete with the trucking industry, sources said. These efforts, which included the Railroad Revitalization and Regulatory Reform Act of 1976 and the Staggers Rail Act of 1980, effectively reduced the power of the Interstate Commerce Commission, which was terminated in 1995, and gave railroads more flexibility to freely establish pricing and service arrangements with shippers.

While the deregulation efforts might have served a purpose at the time, some scrap market participants contend times have changed. With the rapid decline in competition on several freight railway routes amid an ongoing consolidation of the nation’s railroad companies, some allege the exemptions have removed the ability for proper negotiations and even allowed some rail companies to operate in an anti-competitive manner.

"(The exemptions) were put in to help railroads and now hurt shippers," according to one source.

Robert Szabo, a partner at Washington-based law firm Van Ness Feldman LLP, agreed. "These exceptions do not help shippers," according to Szabo, who represents a large group of rail customers, including scrap companies, in an effort to promote railroad policy reform. "They have outlived their usefulness and should be withdrawn."

Opponents of the exemptions say railroads are no longer competing with trucking companies in the same way as when the rules were put in place, particularly as scrap flows change and material moves much longer distances around the country.

With widespread deregulation, limited competition and a decline in long-distance trucking, the existing exemptions only serve to make things harder for recyclers attempting to ship scrap, a second source said.

But the railways disagree, contending that the exemptions are still appropriate in today’s market, don’t impede competition and help keep small railroads in business.

"A curtailment of the exemptions would be unwarranted with respect to small railroads, because in general those carriers do not have a history of abusing market power and their service is limited in scope," Richard F. Timmons, president and treasurer of the American Short Line and Regional Railroad Association, told the U.S. Surface Transportation Board in February 2011, according to a transcript of the hearing. Timmons couldn’t be reached for comment this week.

Union Pacific Railroad Co., Omaha, Neb., and BNSF Railway Co., Fort Worth, Texas, didn’t return calls.

The Institute of Scrap Recycling Industries (ISRI) also declined to comment.


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