Did you know that the U.S. standard railroad gauge (distance between the rails) at the odd dimension of 4
feet, 8.5 inches can be traced back to the Roman Empire? It seems that's the way they built them in England, as the story goes, and U.S. railroads were built by English expatriates. The English built them that
way because the first rail lines were made by the same people who constructed pre-railroad tramways. The tramway builders followed that gauge because they used the same jigs and tools that they used for building
wagons. And the spacing of those wagon wheels was used to match arterial road ruts long put in place across Europe by Roman war chariots, made all alike in the matter of wheel spacing.
The railroad dimension
link to Imperial Rome seems ironic, in light of the intensifying debate of captive rail shipping and mega rail mergers.
"Consolidations of the last 20 years have made the rail industry into regional monopolies and the
Canadian National Railway Burlington Northern Sante Fe Railroad merger announcement proves that we are merely a few steps away from having two North American rail monopolies," said Diane Duff, executive director
of the Washington, D.C.-based Alliance for Rail Competition(
in a Houston Chronicle editorial earlier this year.The ARC is a diverse coalition of shippers, representing companies from many rail dependent industries,
including agriculture, coal, chemicals, consumer products, forest and paper products, industrial products, minerals and petrochemicals. Several state wheat and barley groups and the North Dakota Grain Dealers
Association are among trade associations affiliated with the ARC, formed in March 1997 to develop a consensus plan for achieving better rail service, rates, and competition.
A study released by the General Accounting
Office in April, 1999 suggests that changes are needed. The study looked at the effects of rail regulations, rates, and service quality since 1990.
Surprisingly, one of the findings from the GAO study was
that overall railroad rates have generally decreased since 1990. However, the decrease has not been uniform, and in some cases, rail rates have stayed the same or are actually higher than they were in 1990.
"This was particularly true on selected long distance rail shipments of wheat from northern plains states like Montana and North Dakota to west coast destinations," the study said. Rail routes with effective competitive
alternatives—either from railroads or from trucks and barges—experienced greater decreases in rail rates.
The GAO noted that industry consolidation is a factor. The number of independent Class I railroad systems has
been reduced from 30 in 1976 to 9 in early 1999, with the 5 largest Class I railroads accounting for 94% of industry operating revenue. As the rail industry has consolidated, shippers have complained that service
quality has deteriorated. Roughly 60% of the coal, grain, chemicals, and plastics shippers responding to GAO's survey said that their service was somewhat or much worse in 1997 than it was in 1990.
Compounding
concerns is the proposed merger between Burlington Northern Santa Fe and the Canadian National Railway. It will likely be mid 2001 before the governments on both sides of the border finish their review of this
merger that if approved would create the continent's largest railroad under the name North American Railways Inc.
This winter, the North Dakota Wheat Commission pointed out that rail rates for hauls from points in
Canada to Minneapolis are as much as 20% or 18 cents per bushel lower than for similar or lesser distances from North Dakota to Minneapolis. Further, that U.S. wheat can't access Canada's cheaper rail rates, which
by Canadian legislation are for grains grown in western provinces only. Would a BNSF-CN merger exacerbate the longstanding grain dispute between the U.S. and Canada? That should be a key question studied
during the BNSF-CN merger review.
Rail problems have not gone unnoticed by federal lawmakers. Measures have been introduced in both the House (H.R. 2784) and Senate (S. 621) that would improve the rail situation
and would be, according to the ARC, "a step in the right direction."
According to the ARC, last year's GAO study pointed out that North Dakota wheat producers spend three months of their earnings paying for rail
service. Thus, it can be argued that transportation is every bit as important to the future competitiveness of the U.S. grain industry as the direction of "Freedom to Farm" and the World Trade Organization
talks. The issue deserves to be at the legislative forefront. The result will hopefully be a solution that finally puts Northern Plains states on par with rail service and rates elsewhere.
"Association
Perspectives" represents the views of the MAWG, NDGGA, SDWI, and the MBGA. This issue's topic is also supported by the Minnesota Wheat Council.
