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A Feb. 24 Surface Transportation Board hearing netted no real news — which was good news, indeed, considering that the subject was reviewing exemptions that some railroad commodities currently enjoy from regulation ... or, in other words, a possible first step toward increasing regulation.

At the hearing, the rail arguments were coherent, logical and forceful. The arguments from shippers (even from large auto and forest product shippers) were the opposite. Shippers also didn't appear to be unified. In fact, they argued that it was rail's service advantages that made trucks not viable in certain lanes — circular logic, indeed.

Although there might be additional study, score this match TKO for the rails. But this was the tune-up fight for the Main Event, the June 22 hearing on access and switching (etc.), the same issues raise in last year's unsuccessful Rockefeller bill year.
 
Back story: The Feb. 24 hearing occurred during the same month that Sens. Lautenberg and (yes) Rockefeller proposed their “Federal Surface Transportation Policy and Planning Act of 2011,” essentially calling for a 10 percent modal switch to rail/intermodal from the highway; and the very same day that BNSF Railway Chairman and CEO Matt Rose was in D.C. to serve on President Barack Obama’s business growth panel chaired by GE’s Jeff Immelt. Meanwhile, the STB held a meeting to discuss publicly the possibility of lifting some historic exemptions on some rail commodities — talk about mixed signals!  Even well-known economist/regulator Fritz Kahn noted in a letter to the Journal of Commerce that the Obama Administration and Congress were in agreement that the prevailing relationship between shippers and rails shouldn’t be changed.
 
Yet, there we were. The STB commissioners all took great pains to say that this was exploratory, nothing more as of yet (Note: This likely was Vice Chairman Charles Nottingham's last official act before he is replaced by GOP candidate Ann Begeman, whom President Obama appointed in December 2010). Representatives from the rails and their associations (the Association of American Railroads, American Short Line and Regional Railroad Association and, later in the day, the Intermodal Association of North America) were all concise and rational — on the merits, they won the day.

The shippers provided circular reasoning and a desire to get more access to rails, in part because of “excessive, onerous regulation” of trucking (quoting our friend, National Industrial Transportation League President and CEO Bruce Carlton), or lack of trucking capacity (meaning trucking is a slower, less-attractive option, but hardly not an option at all). One group, the “Wisconsin Central Group," simply wanted to complain about the CN and lament the loss of the Wisconsin Central serving paper shippers in that state —interesting but seemingly not the right forum for the lament. All noted the change in the rail status (from bankrupt to not), although that fact’s relevance is of some debate. The only heat in the debate was after the auto shippers — well known as the toughest of negotiators with their suppliers, including for years, the rails — made an offhand comment about “retaliation,” which didn’t sit well with the rails or (thankfully) the board.

After the shippers came the rail marketing folks, all of whom provided a factual cavalcade to discuss direct trucking competition, from the obvious (BNSF's Steve Branscum and intermodal — even STB Commissioner Francis Mulvey noted that intermodal was not really debatable vis a vis its exempt status) — to the perhaps less so (automotive, where Union Pacific made a strong case). My length of service enables me to recall directly when over-the-road dominated finished vehicle delivery — and when the rail comeback (based on the better condition of the finished vehicle upon delivery) beginning in the late 1980s was one of the industry's few marketshare bright spots.
 
As ever, this is a political process, but the hearing gave those who want to see exemptions lifted little comfort. It's really all about leverage, not economic facts, and this is simply another lever to use. The shippers surprised me by not being unified or, seemingly, very committed. We may see more hearings on the auto sector and perhaps forest products, but they're unlikely to ever develop into anything that hurts rail economics. I do not expect that to be the case when the STB takes up “competition," switching or access — the very tenets of last year's Rockefeller bill ("re-reg lite"). There, I expect a long line of Consumers United for Rail Equity-trained testimonies, so this match was a good training exercise for the rail defense needed in late spring.

Tony Hatch is an independent transportation analyst and consultant, and a Progressive Railroading columnist and program consultant for Progressive Railroading’s RailTrends conference. E-mail him at abh18@mindspring.com.