News From the
Committee on Small Business
Nydia M. Velázquez, Chairwoman

CONTACT: Erin Donar  / Jaime Zapata

Committee Examines Impact of Rail Transport Issues

on Rural Small Businesses and Family Farms

WASHINGTON, D.C. — Rising oil prices are not the only costs adversely impacting rural America’s small businesses. In these areas of the country, farmers and small firms depend largely on rail-borne freight to ship and receive their products. Over the past years, rail transit has increased considerably, and various railroad companies have consolidated.  As a result, shipping rates have gone up by as much as 80%.  Today, the House Committee on Small Business heard from a panel of rural entrepreneurs who said the skyrocketing cost of rail transport is undermining economic growth. 

“Farming and small firms make up more than 90% of the rural economy, and their contributions to the nation are immense,” said Chairwoman Nydia M. Velázquez.  “An effective and affordable rail transport system is essential to the success of these entrepreneurs. With our economy in a downturn, ensuring they can continue getting their products to market is more important than ever.”

Rail shipment is the only practical option for many industries, but current law gives railroads ample leeway to set unreasonable rates and sign confidential contracts.  In fact, since the mid-20th century, rail shippers have been exempt from most anti-trust laws.  Instead, they are overseen by the Surface Transportation Board (STB), which has failed to curb many questionable practices. Consolidation has compounded the problem, and customers are being held captive.  The Government Accounting Office reports states like Idaho already pay exorbitant freight rates because they are served by a single railroad.  That is a troubling assessment, considering most of the Western United States depends on just one or two rail lines.

“The nation’s rail system may be overstretched, but that does not give massive transport companies license for unreliable service or price gouging,” said Chairwoman Velazquez.  “When Congress passed the Staggers Act, it did not intend for rail monopolies to develop.  Clearly, it’s time we revisit how the law is being enforced by the STB.”

Witnesses noted the payments wheat and corn growers receive are based on rail costs.  They also explained that U.S. agricultural producers continue losing market share to foreign imports.  In fact, the volume of imported food and feed rose by more than 12% between 2002 and 2003. That means lost American jobs, reduced farm income and lagging U.S. competitiveness at the global level.

“Rural businesses across America have proven they can adapt to new technologies and changing market conditions.  Their products won’t remain competitive, however, without affordable and reliable means of transportation.” said Chairwoman Velázquez. “Addressing this problem is not optional.  It is a priority for our rural communities—and for the nation’s economy as a whole.”

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Click here to view list of witnesses and testimony.
Click here to view video highlights of the hearing.