Transportation Regulation

Shippers Back Paper Barrier Change

By Steven Johnson | ECT Staff Writer Published: December 27th, 2012

Captive shippers, such as electric cooperatives, are backing a proposal to shine more light on a freight railroad practice that they say hinders competition and adds to their costs.

Federal regulators are seeking more information on deals between large and short-line railroads. (Photo By: Washington State DOT)

Federal regulators are seeking more information on deals between large and short-line railroads. (Photo By: Washington State DOT)

But they’d like the Surface Transportation Board to go further in reforming oversight of deals between major carriers and smaller short-line railroads known as “paper barriers.”.

“The Board’s proposal, while not adopting CURE’s position, at least would permit those who may consider challenging ‘paper barriers’ to have the information necessary for such a challenge,” according to Consumers United for Rail Equity.

CURE, a consortium of coal, grain and other shippers, submitted its comments on the STB’s plan in a Dec. 18 filing with the agency. NRECA CEO Glenn English is chairman of CURE.

Paper barriers are contractual provisions major carriers often include when they sell or lease track to short-line railroads.

Also known as interchange commitments, they limit access to competitive service by preventing the smaller carrier from serving any railroad other than the one that’s selling or leasing the track.

Saying paper barriers can affect freight hauling rates for years, the board proposed a rule Nov. 1 that would require large railroads to provide new information on interchange commitments and how they affect rail customers.

CURE said it believes all paper barriers should be declared illegal restraints of trade, but it acknowledged that the STB is unlikely to take that step right now.

In the interim, more disclosure will help rail customers plan to deal with paper barriers and possibly fight them in regulatory proceedings.

“If these proposals are adopted, shippers will be aware of future ‘interchange commitments,’ will have the information to assess whether the commitments are anti-competitive and will be able to challenge the proposed ‘interchange commitments’ before they become effective,” CURE said.

The board is expected to issue a final decision in 2013.

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