A frequent critic of the rail industry (and of Class I carriers in particular), Robert Szabo is known for his controversial statements. So when he got up to speak at the Coalition of New England Companies for Trade's annual conference earlier this year, audience members undoubtedly knew that they were in for a lively time.
Even so, Szabo, who is executive director of the shipper advocacy group Consumers United for Railroad Equity (CURE), managed to create a stir. The following five statements, in particular, drew a reaction from the crowd:
1. The four largest U.S. railroads—the BNSF, Union Pacific, CSX, and Norfolk Southern—move more than 90 percent of all rail traffic in the United States
2. Analysts downgrade railroads' stock if they build more capacity than they need at the moment. This creates a strong disincentive to build now in order to meet future needs.
3. CURE's members report that railroads are refusing to renew long-term contracts for some bulk commodities. Coal shippers that had 10-year contracts, for instance, can only get two- or three-year deals at significantly higher rates—100 percent higher in some cases.
4. Railroad contracts for intermodal container traffic do not fall under the jurisdiction of the Surface Transportation Board. If the STB should rule in shippers' favor in a rate case, container shippers won't get a piece of the refund action.
5. Contracts between Class I carriers and connecting shortline railroads are sometimes anti-competitive. For example: The Missouri & Northern Arkansas Railroad pays no rent to the Union Pacific if it ships more than 95 percent of its annual traffic over UP trackage. If it ships less than 95 percent via the UP, it pays $10 million. This type of agreement, Szabo said, virtually guarantees that shippers will be given no choice in routing, even when more than one option is available.
Gartner, Inc.
