Railroad industry spokesmen warned yesterday that without a lessening of rail regulation and a reordering of Federal transportation priorities, the railroad industry could face "imminent disaster."
In response to their remarks, which came during a panel discussion on "Rail Problems and Perspectives" held by the House Commerce Subcommittee on Transportation, Interstate Commerce Commission Chairman Dan O'Neal outlined his agencys plans for changes in the regulatory process.
In their statements prior to the panel discussion, William H. Dempsey, president of the Association of American Railroads, and Benjamin F. Biaggini, chairman of Southern Pacific Company, voiced similar concerns.
"The fundamental problem of the railroad industry is inadequate earnings," said Dempsey. "If the earnings problem continues, we could easily see a replay of the Penn Central scenario in the Midwest. Railroads I would now call strong would slip into marginal positions, and nationalization - the step nobody really wants to take - could become inevitable."
He said that even the strongest of railroads are only strong "in the sense that they do not face imminent disaster. But the earnings problem will weaken them, too," if it continues, he said.
Dempsey pointed out that inland water carriers and heavy trucks "are beneficiaries of significant public subsidiaries at the expense of railroads."
"Every dollar spent by shippers for the use of water freight transportation is matched by 41 cents provided by the U.S. taxpayer," he said.
He said the subsidies to other modes of transportation affect the railroad industry in two ways.
"First, freight traffic is directly diverted from railroads to barges because barge costs and therefore barge rates are artificially reduced by the magnitude of the public subsidy," he said.
"The second effect of these subsidies is to depress the railroads' rate structure," he added.
Dempsey called the subsidies to shippers a "pittance" alongside the subsidy enjoyed by those who operate heavy trucks.
Instead of calling for matching subsidies for railroads, Dempsey recommended that all subsidies should be reduced, allowing "the marketplace (to) be the determining factor, not the public treasury."
Biaggini echoed many of Dempsey's concerns, but came down even stronger on what he called "outmoded and inequitable regulation."
"Further efforts are needed," Biaggini said, "to loosen archaic restrictions which govern the railroads . . .The emphasis now seems to be on proposals to give even more freedom to other modes whereas the major effect should be to loosen the regulatory shackles of the railroads."
"Instead of less regulation, new rulings have resulted in more regulation in the pricing and merger areas," he said. He reminded the audience that Congress has mandated deregulation in the Railroad Reorganization and Regularoty Reform Act of 1976.
Biaggini estimated the cost of regulation on the rail industry at "some two or three billion dollars a year." But he said, "the cost of nationalization will be much more than that."
ICC chairman O'Neal responded by outlining the various questions concerning regulation that he, and the ICC, are reviewing in their efforts to restructure regulation.
"Public policy needs to be as concerned with railroad service performance as railroad financial condition," he said. "We want (railroads) to provide transportation that will help make it possible for producers to market commodities that consumers will find useful and affordable."
He said he felt that the railroad system "physically will for some time look very much as it does today." He did say that he anticipated an increase in consolidations, and "at least a few more railroad bankruptcies.
"Charges of inequitable government treatment of the several modes (of transportation) - both in terms of funding and regulation - will need to be explored."