The world coal market is sufficiently competitive to ensure that U.S. railroads will not charge so much to carry coal to port that U.S. mines cannot compete internationally, the Interstate Commerce Commission said yesterday.
That finding, an affirmation of the railroads' primary argument, appears to be the basis for the ICC's decision granting total deregulation of export coal rates. The decision was announced without comment in March but was released in full yesterday.
The 3-to-1 decision is highly controversial in the coal industry and is regarded as a certain candidate for litigation. Further, coal shippers and other interests have kicked up considerable fuss about the decision on Capitol Hill, where there is uneasiness about the impact of railroad deregulation.
Some Rocky Mountain state congressmen have been concerned that, because their coal is a long way from port, high rail rates will deprive their states of export markets.
Further, total deregulation of export coal rates is strengthening the hand of promoters of coal slurry pipelines that could compete with railroads in carrying coal from mine to port. The pipeline proponents want legislation that would grant federal eminent domain so coal slurry pipelines could be built and are telling Congress that pipelines offer protection against high rail rates.
If there are no injunctions, the decision will take effect in 90 days.
The ruling came on a petition originally filed by the Norfolk and Western Railway, now a subsidiary of Norfolk-based Norfolk Southern, for the exemption of export coal rates from ICC oversight. Other railroads supported the petition, but a variety of interests from the mine owners, competing barge operators and the departments of State and Commerce opposed it.
The arguments of all the opponents center around the fear that, in the absence of regulatory oversight, the railroads will dramatically jack up the rates to carry export coal.
State and Commerce suggested further that such rate increases would reduce U.S. coal exports and jeopardize the United States' international energy policy. The majority disagreed.
"The railroads will not be able to price export coal beyond the reach of foreign countries except at ruinous cost to themselves," the decision said. "Because we expect the carriers to act rationally, it simply is not reasonable to forecast a decrease in the amount of coal exported as a result of this exemption."
The ICC also found that regulation of export coal was not necessary to protect shippers from the abuse of market power because, if such abuse were to occur, remedies would be immediately available. The majority--Commissioners Malcomb M. B. Sterrett, Frederic N. Andre and Heather J. Gradison--also said there would be no significant environmental impact.
Commission Chairman Reese H. Taylor filed a strongly worded dissent. Evidence in the proceeding, he said, "strongly indicates" that total deregulation of export coal rates "will result in increased rates, together with decreased demand and production." He called the decision contrary to both the domestic and foreign policies of the United States.
The majority disagreed and noted, in one trenchant sentence, that "If regulation is not necessary, our instructions from Congress are to end it."