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 nations 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
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
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
todays market, dont 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 couldnt be reached for
comment this week.
Union Pacific Railroad Co.,
Omaha, Neb., and BNSF Railway Co., Fort Worth, Texas,
didnt return calls.
The Institute of Scrap Recycling
Industries (ISRI) also declined to comment.