Interview with
Glenn English Chairman, Consumers United for Rail Equity
and Brian Jennings, Executive V.P., American Coalition for Ethanol
AgriTalk Radio program
Host: Mike Adams
October 13, 2008

MIKE: Welcome back to AgriTalk. Do we need changes in federal policy to require railroads to provide more competitive pricing and reliable service is our topic today as we hear from both sides of the debate. Starting with a group called Consumers United for Rail Equity or CURE if you will. The chairman of this group is Glenn English, CEO of the National Rural Electric Cooperative Association. Glenn good to talk to you again, how are you?

GLENN: Well I am doing great, good to visit with you.

MIKE: Also with us is Brian Jennings, Executive Vice President of the American Coalition for Ethanol, a group that is a member of this Coalition. Hi Brian, good to talk to you again.

BRIAN: Good morning Mike. Thanks for having me.

MIKE: Glenn, first of all, tell us about this group, CURE, and your concerns about the pricing situation the railroads have, I believe you call it “captive” rail or a monopoly basically on what they can charge customers such as Ag users.

GLENN: Right, it is Consumers United for Rail Equity and certainly there is a broad coalition that is engaged in this effort. It is one that really focuses on those areas of the country where there is no competition, the so called stranded shippers, are people who are at the mercy of the railroad and certainly they have abused the railroads. We also find that the Surface Transportation Board designated as a result of legislation that was passed in 1980 for deregulation of the railroads that the Surface Transportation Board has pretty much been “asleep at the switch” and has been unwilling to enforce the provisions of the law which would help avoid abuse as far as stranded shippers. Now I might also say very quickly that those stranded shippers are pretty much located in the rural areas of America.

MIKE: And the situation, basically we refer to it as a monopoly because the users, say agricultural users, many times really don’t have many options available to them do they?

GLENN: That is exactly right. They have no options available to them and even when they are able to reach the lines where there may be some competition, they are not able to take advantage of it because the contracts that they are struck with and had to sign are contracts that are for the entire length of the shipment.

MIKE: Let’s give an example. Brian you are representing the ethanol industry, I guess this is a double whammy for the ethanol industry because of the movement of grain needed to make the ethanol and in the movement of ethanol itself out to markets.

BRIAN: Well, that is exactly right Mike, and particularly when it comes to moving ethanol to those markets where consumers need it. Somewhere between 65 and 75 percent of the ethanol that we make in the country today relies on the railroad to move that product from the Midwest or the “Corn Belt” to the coast where the people are, and some ethanol companies, in fact a lot of ethanol companies, have literally one railroad to deal with. We have a situation where in the last 25 years, the number of major railroads has been consolidated from more than 40 down to 4 and, often ethanol companies and others feel like they are in a take it or leave it situation with respect to the relationship that they have and the rates that they have and so that is why CURE is trying to accomplish through some competitive reform to the market is so critical for ethanol producers and other businesses in rural America.

MIKE: So Glenn, is there any regulation at all and what these railroads can charge users for their services?

GLENN: Well, what was established under the law in 1980, was a provision that recognized that there would be those people who could not have access to any competition and keep in mind that when the law was passed, some 40 railroads were in the country at that time so you did have the opportunity for competition in many areas, now we are down to only four railroads, the railroads it appears pretty much divided up the country in different territories, service territories, and competition is becoming more and more difficult, but as far as stranded shippers are concerned, we continue to be abused and certainly those that were put in charge of making sure the abuse did not take place don’t seem to have much appetite for justice.

MIKE: And there are also service issues in concern aren’t there?

GLENN: No question. Obviously if you are in a position that you have no alternative then the services are not very good so to go along with the high rates you get poor service.

MIKE: What is the impact? Can you assess the impact not only for agriculture but how this affects average consumers across the country?

GLENN: Well, as you know Mike, we are a not-for-profit organization. We are owned by all those consumers out there that are being serviced by electric cooperatives and anytime that we have overcharges, anytime we have this kind of abuse by the railroads, that finds its way into the electric bill and these days people are having a difficult enough time that they don’t need the additional burden of unjust cost.

MIKE: We are talking with Glenn English, Chairman of the group Consumers United for Rail Equity and Brian Jennings, Executive Vice President of the American Coalition for Ethanol, whose group is a member of this coalition. Let’s take a break and when we come back what does this group, CURE propose to do about this situation? What is needed? What are they pushing for? We will find out next on AgriTalk.

Welcome back to AgriTalk. With rail customers feeling captive to the railroad because they must rely on a single railroad to deliver their products, usually bulk commodities such as coal or grain or any materials that can’t be effectively moved by truck, they are captive to the railroads and have no competitive options. And ag and rural America are especially hard hit because they are more likely to be captive to one railroad as we said. And then pay the rates and also not get the service they are looking for. So a group has been formed, Consumers United for Rail Equity. Their chairman, Glenn English, is with us. And a member of that group, American Coalition for Ethanol, their executive vice president, Brian Jennings is with us as well.

Glenn, what are you pushing for here? How do you hope to address this situation?

GLENN: Well we’re looking for two remedies. The first deals with the antitrust laws. Now, believe it or not only baseball and railroads are exempt from our nation’s antitrust laws. And certainly we feel that some of the injustice can be dealt with through the antitrust enforcement, and we’re asking the Congress to pass legislation that would place the railroads under antitrust regulations, through the Railroad Antitrust Enforcement Act. Now this would allow then the Justice Department to treat the railroads as they do any other business in this country and to make sure that we don’t have any of the anti-competitive activities that have been so prevalent here in the past. The second piece of legislation addresses the Surface Transportation Board, it’s called the Railroad Competition and Service Improvement Act, and it changes the process so the Board is more workable for rail customers and that the decisions of the Board are pro-competitive and the Board will become more active in the oversight of the railroads. Now I think most people, certainly in the last few months, have become painfully aware of the kinds of abuses that can take place if we have regulators that are not doing their job. And I would dare say that as far as the Surface Transportation Board is concerned those of us who are captive shippers have long experienced the abuses that can take place when regulators don’t do their job.

MIKE: Brian how critical is this for the ethanol industry?

BRIAN: Well this is so critical because today, as you know Mike, ethanol producers are under great financial stress. We have a squeeze on margins with corn prices and ethanol prices standing where they are, an incredibly volatile marketplace, and as Glenn indicated, the last thing we need is for great uncertainty because either the STB is asleep at the switch, or ironically, major league baseball and railroads are the only industries not subject to antitrust laws. I can’t for the life of me understand why we would make railroads exempt from antitrust laws when virtually every other industry on the planet is subject to those laws. And so I’d be curious to learn why we can’t at least get that sort of common sense reform started soon.

MIKE: Glenn, real quick here, what’s the timetable for this? And the prospects for this legislation you’re pushing for?

GLENN: Well we’re in a race against the clock. We have the antitrust legislation – it has passed both the House and Senate Judiciary Committees and has been reported to the full House and Senate with the recommendations that they be adopted. If there is a lame duck session this year we have a chance to get the antitrust legislation passed. If not, it looks very positive in 2009. We have a couple of committee chairman who have indicated that they would be inclined to bring this legislation up early and we’re very hopeful for that. We’re also hopeful for the Railroad Competition and Service Improvement Act that that too can be moved forward in 2009 and finally be passed. We’re very encouraged that given the change of environment, given the fact that people seem to recognize and understand that much abuse can take place, and if people aren’t doing their job then obviously much harm can come from it. We’re encouraged that certainly if not by the end of this year, next year, that we will be able to see some progress and get this legislation into law.

MIKE: Alright gentlemen, thank you very much. It’s halftime on AgriTalk.

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