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Cash Market Moves
By Mary Kennedy
Monday, August 8, 2022 11:33AM CDT

The Freight Rail Shipping Fair Market Act, introduced in the House, includes several updates that would provide fairer treatment for agricultural shippers. The most recent STB Reauthorization expired almost two years ago.

On Aug. 2, Chair of the Subcommittee on Railroads, Pipelines and Hazardous Materials Donald M. Payne, Jr., D-N.J., Chair of the House Committee on Transportation and Infrastructure Peter DeFazio, D-Ore., Chair of the House Committee on Agriculture David Scott, D-Ga., and Chair of the Subcommittee on Livestock and Foreign Agriculture Jim Costa, D-Calif., introduced the Freight Rail Shipping Fair Market Act.

This legislation will reauthorize the Surface Transportation Board (STB), the federal agency charged with the economic regulation of freight rail, and create a fair marketplace for the Class I freight railroads and their captured customers.

Key components of the bill include:

-- Strengthening the STB's authority to address rail service emergencies and requiring rail contracts to include service delivery standards and remedies, while leaving details to be privately negotiated between parties.

-- Providing the STB with clear direction to resolve common carrier obligation complaints.

-- Creates financial incentives for both railroads and their customers to efficiently move railcars.

-- Supports freight railroad efforts to identify where freight is located on their systems while in transit.

-- Adequately funds the STB to allow for quicker dispute resolution when petitioned.

Industry groups applauded the introduction of the bill. The NGFA has been encouraging lawmakers to introduce and support a bill to reauthorize the STB and help address insufficient, unreliable freight rail service for the U.S. agricultural value chain. "NGFA members appreciate Chairman Payne, Chairman DeFazio, Chairman Scott and Chairman Costa for their leadership in responding to severe rail service issues that have caused supply chain disruptions, endangered the delivery of feed to livestock, led to grain processing facilities slowing and shutting down, and negatively impacted U.S. grain exports," NGFA President and CEO Mike Seyfert said.

"The Freight Rail Shipping Fair Market Act would bolster the STB's existing authority to regulate railcar use by authorizing shippers to charge railroads demurrage to incentivize them to perform in the same way railroads incentivize their customers. The bill also would establish specific criteria for the STB to consider when determining whether a railroad is meeting its common carrier obligation to provide rail service. If the STB determined a carrier was not meeting its common carrier obligation, the bill would empower the STB to prescribe reasonable transit or cycle times or other service standards consistent with the needs and requirements of the shipper making the request. These policy measures, and several others included in this bill, are necessary to improve rail service for agricultural shippers," said Seyfert.

However, there was backlash on the bill from the Association of American Railroads (AAR).

"This imprudent proposal turns the clock back more than 40 years and reinstates an unbalanced regulatory framework that replaces free-market principles with unjustified government mandates," said AAR President and CEO Ian Jefferies. "Since the industry was partially deregulated in 1980, freight railroads have invested nearly $760 billion to improve the safety, competitiveness and sustainability of their operations. Their ability to continue this level of spending is critical to meeting today's and tomorrow's freight demands. Safe, reliable, cost-effective and fuel-efficient freight rail transportation is essential to our future. Overreaching reregulation will take us backward and won't do a thing to solve current service challenges and supply chain problems."

However, industry groups have made it clear that this bill is necessary to protect shippers. Chris Jahn, president and CEO of the American Chemistry Council, said, "This important legislation contains many thoughtful solutions that complement the much-needed reforms being considered by the STB. We urge Congress and the STB to work together on meaningful reforms that will incentivize the railroads to provide reliable and competitive service and hold them accountable when they fail to deliver."

Amid all of this, remember that the rail workers and railroads have yet to agree on a new contract. Hearings are currently taking place with the Presidential Emergency Board (PEB). Following the hearings, the PEB will issue recommendations for settlement of the national agreement dispute. A second 30-day cooling off period will begin when those recommendations are issued, which should occur on or before Aug. 15. If nothing is decided by the second cooling off period, 115,000 rail workers could go on strike, hampering rail service just as harvest starts.

Fact Sheet about the Freight Rail Shipping Fair Market Act: https://transportation.house.gov/…

Letter from the NGFA and 88 other shipper groups of the Agricultural Transportation Working Group: https://www.dtn.com/…

Statement from the AAR: https://www.aar.org/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn


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