As such, utility associations and coal operators say that railroads' exemptions from
federal antitrust laws must be deleted. While they have strong support, those interest
groups face an uphill fight. Rail transportation is gaining appeal from those who say its
energy and environmental advantages are the wave of the future.

Nevertheless, critical questions are being raised and hinge on the issue of economic
fairness. Before deregulation of the rail sector in 1980, roughly 40 railroads existed. But
now only four Class 1 companies operate, providing 90 percent of all rail service.

Isolated power systems such as Lafayette Utilities in Boyce, La. are paying the price. The
utility, for instance, relies on Union Pacific for the last 20 miles of track leading to its
plant. That stranglehold forces it to pay exorbitant fees.

Some officials are taking notice. Currently, bills are circulating through both the U.S.
House and Senate to eliminate some market advantages that rails hold on service in rural
areas. At the state level, 17 state attorneys general have asked Congress to re-think parts
of the federal law that pertain to such "monopolistic" powers. The General Accountability
Office, furthermore, recently concluded that the rail industry was insufficiently
competitive. That has resulted in an increasing number of rail customers that now pay
three times more than those that have transportation options.

"The railroads cannot be deregulated and then not be expected to compete," says Bob
Szabo, executive director of Consumers United for Rail Equity. "We all agree they have
to make profit. But you cannot exploit a captive shipper."

The rail industry, however, says that current regulations are working. The sector has
evolved from one that was in disarray before deregulation to one that is now investing in
the future to accommodate a huge influx of rail traffic. Building such infrastructure is
expensive, particularly in rural regions. But the rail industry says that it is committed and
is re-investing an average of $6 billion a year. American commerce is the benefactor, it
adds, noting that coal shipments are up nearly 5 percent from a year ago.

The railroads collectively argue that re-regulation would come back to haunt consumers.

Rail lines are pricey, they say, requiring them to earn fair returns to recoup their capital
cost. Projections are that rail service is expected grow by 70 percent by 2020 and require
billions of dollars to achieve that. Union Pacific and Burlington Northern, Santé Fe, for
example, say that they are investing in new infrastructure in Wyoming's Powder River
Basin. The result is a record number of coal shipments from the region.

Deserved Scrutiny

Utility advocate Szabo challenges those assertions. He acknowledges that 75 percent of
the industry is competitive but emphasizes that the remaining 25 percent has largely been
ignored. In competitive markets, he says that prices have come down. In essence, those
shipping consumer goods into population centers can use rail or trucks and if they choose
the former, they can pick among carriers.

But the remaining shippers lack that opportunity. A coal mine, for example, is at the
mercy of the rail system. The end result, says Szabo, is that the average 2007 rate that
customers paid to move coal by one of the major carriers was $21 and $23 a ton. That
compared to more than $9 a ton to transport coal for those companies that have choices.

Under the current system, the railroads are given an exemption from certain rules of
competition by the U.S. Surface Transportation Board. In areas of the country where the
infrastructure is inadequate, the board has the authority to regulate rates. The bills now
winding their way through the House and Senate committee process would ensure a rate
challenge process for those rail customers without access to transportation competition
and empower the transportation board to be pro-active when it has knowledge of
unreasonable railroad practices.

Specifically, proponents of the legislation want to correct what they say are two
inequities: The first is to eliminate "restrictive contracts" whereby the smaller rail
companies are obligated to use the lines of the four major carriers. Those competitive
enterprises can avoid making lease payments to the big carriers if they contract with them
to use their networks for their business. The second applies to cases where two lines
intersect. There, the rail company providing long haul service will not give shippers an
option to use the alternate rail line.

In a letter to lawmakers who expressed concern over those barriers to competition, the
U.S. Department of Justice says that the immediate oversight authority, the Surface
Transportation Board, has accepted those practices. Therefore, it may not be a violation
of anti-trust laws that ensure adequate competition and prevent price gouging.

That is what irks utility interests. "The private interests of the railroad industry -- but not
the public interests of the nation -- continue to be protected by the Surface Transportation
Board that is unwilling to provide adequate oversight of the railroad industry or to
restrain their unbridled exercise of market power over captive customers," says Glenn
English, head of the National Rural Electric Cooperative Association whose members use
coal to fire 80 percent of their electric generation.

Any industry that gets a pass from the laws governing competition deserves scrutiny.
Utilities and coal shippers are rightly concerned about spiking rail rates and the
subsequent result on consumer electricity prices. But they face a daunting task when it
comes to removing the anti-trust exemptions given to the transport sector. Similar
measures have faltered in the past. The reality now is that lawmakers generally view the
rail industry as futuristic and integral to the American economy.