Freight Rail Reform Can Help Move Louisiana’s Economy in the Right Direction
To date, the chemical industry has announced that it will invest $58 billion to support 85 new chemical production projects in Louisiana, which will provide a much needed boost to our state’s job growth and economic output.
As we invest in the future of our state we have to make sure that we’re not bogged down by regulatory policies of the past. Take our nation’s freight rail policies for example, many of which have not been updated in more than thirty years despite massive changes and consolidation within the freight rail industry. As a result, freight rail rates have doubled – more than three times the rate of inflation over the past decade while rail service has deteriorated.
Fortunately, leaders in Washington, D.C., thanks to Sen. John Kennedy, (R-La.), are starting to listen to voices of reason.
On Friday, the U.S. Senate Committee on Small Business and Entrepreneurship, led by Kennedy, held a field hearing in New Orleans to learn how small businesses would benefit from smart regulatory reforms.
Committee members were told how outdated freight rail regulations are disastrous for businesses, the freight rail system is anything but dependable, and that increased access to competitive rail service is the key to supporting businesses in our state.
One company lamented that high rail costs and current regulations stifle growth and make it hard to manage supply chains and product costs. These problems can have a broad impact since many chemical manufacturers depend on freight rail to get their products to thousands of smaller companies that in turn rely on them to stay in business. Often, it’s the smaller businesses that suffer because of chronic freight rail problems.
And, because chemicals are used to make everything from electronics to cleaning products to cars, the impacts trickle down through the economy and hit consumers in their wallets.
Clearly, many businesses are at the mercy of the railroads. That’s why the Rail Customer Coalition, a group made up of about 80 trade associations representing a wide range of commodities shipped by rail, is leading the fight to reform outdated rail regulations and open the free market to competition.
The first step to setting things right is for the U.S. Senate to confirm three pending nominees to the Surface Transportation Board (STB), which is responsible for overseeing the nation’s rail network.
Once new members are in place, the Board should quickly move forward on two important reforms: competitive switching and rate benchmarking.
Competition is the foundation of the free enterprise system and it is what helps drive innovation and cost-savings throughout our economy. Competitive switching would remove regulatory barriers and put the marketplace to work. It would allow a rail customer served by a single railroad to request that its freight be moved to another railroad, for a fee, if one is reasonably accessible.
Rate benchmarking would help shippers without competitive options by replacing the STB’s overly bureaucratic rate review process with streamlined, marked-based process. Benchmarking uses the wealth of existing rate data for shipments in competitive markets. A shipper could challenge a rate that is unreasonably higher than its competitive benchmark. This change would dramatically reduce the amount of time and money it takes for shippers, railroads and the federal government to decide a rate case.
Competition and free enterprise are values that we all support because they create jobs, promote innovation, and lower prices. It’s time to get our nation’s freight rail policies back on track so we can keep Louisiana’s economy moving in the right direction.
Greg Bowser is president of Louisiana Chemical Association
THE RAIL CUSTOMER COALITION
The coalition is a large collection of trade associations representing a broad cross section of manufacturing, agricultural, and energy industries with operations and employees throughout the United States, including: