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>From the Surface Transportation Board, Washington, D.C.

An independent team of consultants charged with looking at competitiveness
in the U.S. rail industry has found that railroad rates have been steadily
increasing since 2004, with a particularly steep increase in 2008. But
Christensen Associates, Inc., of Madison, Wis., found that the rate
increases were driven by fluctuating fuel prices and other costs and did
not appear to reflect a greater exercise of railroad market power over
captive shippers.

               The updated study, which now includes data from 1987 through
               2008, found that a greater share of traffic in 2007 and 2008
               moved at rates less than 180 percent of variable costs than
               in 2005 and 2006. Variable costs include fuel, labor and
               other non-capital costs associated with moving freight.
               Christensen also observed that, since late 2008, railroad
               traffic has dropped nearly 20 percent from the levels of
               2006 and 2007. And Christensen said preliminary data show
               that rail transportation rates fell last year.

               While it was able to form conclusions about railroad rates,
               the Christensen team was unable to evaluate many of the
               shippers' service quality concerns beyond anecdotal
               evidence. Christensen urged the Board to develop better
               empirical data to capture the service performance of rail

               In 2007, the Board hired Christensen to assess the state of
               competition in the rail industry. The consultants engaged in
               extensive outreach efforts to shippers, railroads, trade
               associations and other stakeholders. Using data from many
               sources, including the Board, Christensen released its
               initial report in November 2008.  However, shippers raised
               concerns that the report's study period ended in 2006 and
               did not include subsequent years of rapidly escalating
               rates. The Board therefore directed Christensen to update
               its competition study to include the years 2007 and 2008.

               Overall, the updated study painted a portrait of a healthy
               rail industry that, since 2006, has remained largely revenue
               sufficient, meaning railroads are able to cover their
               operating costs and earn a rate of return that enables them
               to attract investment capital to pay for more locomotives,
               railcars and make other improvements. The study also found
               that the large productivity gains in the 1980s and
               1990s—when the railroads shed excess rail lines, reduced
               crew sizes, and streamlined operations—are no longer strong
               enough to offset rising operating cost. Since 2002,
               "increases in the rate of input price growth combined with
               slower productivity growth have resulted in unit cost
               increases."  "Economies of density," the study also reports,
               "appear to have been exhausted in recent years."

               The Christensen report issued today also restated the policy
               recommendations contained in its original report. "Because
               the railroad [industry] has remained approximately revenue
               sufficient in recent years, we re-emphasize one of our
               original conclusions: Providing significant rate relief to
               some shippers will likely result in rate increases for other
               shippers or threaten railroad financial viability."

               The report, "An Update to the Study of Competition in the
               U.S. Freight Railroad Industry," and the earlier full report
               can be found on the Board's Web site, www.stb.dot.gov under
               "E-Library" and then "Studies."


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