Monday, May 18, 2009

Will new regulatory climate chill railroad spending?

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Union Pacific CEO Jim Young, who is also chairman of the Association of American Railroads, says he expects new railroad regulations from Congress "probably within the next year" in response to complaints from captive shippers that they are being overcharged.

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Young believes a compromise is possible between railroads and their customers that will protect shippers from unfair pricing and at the same time permit railroads to recover their replacement costs.

"If they get this wrong, I will cut back capital [spending] significantly," said Young.

The Omaha-World Herald suggested that a replacement-cost pricing formula would not satisfy the shipper lobby, Consumers United for Rail Equity, whose executive director, Bob Szabo, fears railroads might inflate their costs by scheduling projects they will never build.