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Shippers, unions, railroads take sides at Senate hearing

The debate about how much oversight Congress and the Surface Transportation Board (STB) should have regarding freight rail operations and rates took center stage at a hearing before the Senate Commerce Committee last week.

At one corner was the Association of American Railroads (AAR), which represents the Class I railroads operating in the U.S. and argues that the status quo enables the railroads to make the millions needed to maintain, invest and expand the nation’s freight rail network. At the other corner were grain and chemicals shippers, as well as the rail unions, which contend that the focus on precision scheduled railroading (PSR) has put profit over service and safety. 

The hearing occurred one week after the rail industry recognized the 40th anniversary of the Staggers Act, which deregulated the railroads and paved the way for the railroads to invest billions into their infrastructure. 

But the Oct. 21 hearing also occurred less than two weeks before the U.S. presidential election, the outcome of which could change how the White House and Congress view their roles in governing the nation’s transportation network. The strains on the transportation network brought about by the COVID-19 pandemic also have brought to light potential areas where the network might not be as efficient.

Indeed, two-thirds of the three-hour hearing entitled “Passenger and Freight Rail: The Current Status of the Rail Network and the Track Ahead” centered around Amtrak’s operations throughout the coronavirus pandemic.

“Throughout this pandemic, workers have continued to keep food on the table and get medical equipment to the hospitals of first responders, they have brought those first responders to the loved ones who’ve been affected by COVID-19 and they continue to keep our frontline workers in all sectors going strong with the services and supplies they need,” said Senate Commerce Committee Ranking Member Maria Cantwell, D-Wash., in a prepared statement. 

“That is why I think it’s so important for the Senate to take up legislation that would include relief for the transportation sector, both in help and support of this Amtrak we’re talking about today as well as the airlines. So I look forward to continuing to work with our colleagues on that,” she said. 

Shippers seek reexamination of the common carrier obligation 

While chemicals and grain shippers at the hearing praised the railroads for being “collaborative and responsive” during the pandemic, they said the operational changes brought about by PSR has affected service, which in turn affected rail rates. 

To address this issue, Congress and the federal government should ensure that the railroads meet their common carrier obligation and provide means for shippers to secure reasonable rail rates, according to Frank Chirumbole, vice president of the global supply chain for Olin Corp. Chirumbole was also speaking on behalf of the American Chemistry Council (ACC).

The Federal Register defines the common carrier obligation as requiring railroads to provide transportation or service at a reasonable rate per the railroads’ statutory duty. 

“While Congress has mandated that rates for captive shippers be reasonable, that directive has been unrealized for carload shippers such as Olin who do not move their commodities in unit trains,” Chirumbole said. He also said that 70% of ACC members are captive shippers, or shippers that have access to only one railroad.

Chirumbole said that in the 40 years since the Staggers Act, no carload shipper has succeeded against a railroad in a rate challenge case. But the STB’s proposed rulemaking for the final offer rate review could address shippers’ concerns over rate challenges.

Randy Gordon, president and CEO of the National Grain and Feed Association, said agricultural shippers have had “nervous apprehension” over whether the railroads will keep up with demand for rail service this fall.

Grain carloads for the week ending Oct. 17 were up 24% from the same period in 2019 to 25,547 carloads, according to AAR, amid an ample harvest and higher export demand.

Gordon said the concerns stem from two issues: the railroads’ ability to deploy quickly stored locomotives and workers who had been furloughed because of the coronavirus pandemic and the impacts of PSR.

“For many ag customers, PSR has resulted in arbitrary, sudden and disruptive changes in rail service schedules and the type of rail service being offered,” Gordon said, citing examples of loaded trains not being pulled from facilities in a timely manner or railroads not meeting scheduled trip plans. 

Gordon said because PSR reduced the number of switching and deliveries into facilities, it has sometimes resulted in situations where deliveries take longer. For instance, soybean meal is being shipped in long merchandise trains, and it can take twice as long for some cases and at twice the cost that some unit trains used to be, he said.

Congress should enable the STB to redefine the common carrier obligation for the 21st century and it should seek ways to encourage more rail competition, Gordon said. 

“We are at a bit of a tipping point concerning the extent to which rail service is reliable, cost effective and reflective of true competition,” he said.

The kind of service issues that arise depend on the individual operations of different carriers, Gordon said. 

“It’s really going to be how each carrier … mobilizes its crews and locomotive capacity to meet this increased demand,” he said.

National Cotton Council Chairman Kent Fountain said shippers need consistent information to prevent railcar bunching, or situations in which a shipper might receive too many railcar deliveries at the same time. He also noted that cotton shippers are facing a chassis shortage, and a multimodal freight transportation collective in Memphis is seeking to address the root causes of the chassis shortage. 

Union concerned about labor cuts

Teamsters Rail Conference President Dennis Pierce also criticized PSR for reducing employee headcount levels too deeply and promoting a culture in which a railroad’s profits take precedence over service.

Employment levels have fallen by 17%, or 30,000 workers, between 2014 and 2019, he said.

“America needs a railroad industry that balances rail operations, shipper needs, effective maintenance, safety, employment and manpower concerns and the industry’s long-term health. PSR has transformed the industry. It went from a customer service model to a customer-serves-the-railroad model,” Pierce said. 

He continued, “PSR has cut much deeper than eliminating fat from the industry. It has cut into muscle and bone required to maintain the nation’s railroad infrastructure.”

The unions are concerned that the headcount reductions have taken elasticity out of the network, with the industry relying too much on technology to make up the difference, according to Pierce. Not only has the relationship become frayed between the railroads and the unions, the industry is “understaffed,” he said. There are up to 10,000 engineers and conductors still furloughed following the April-May trough of the COVID-19 pandemic, and the railroads “need to be prepared for the rebound we all hope to see,” Pierce said.

Pierce also asked committee members to support S. 3884, the Essential Transportation Employee Safety Act; S. 3677, the COVID-19 Every Worker Protection Act; and S. 1979, the Safe Freight Act.

Railroads say they’ve been responsive

The Staggers Act has enabled the railroads to invest billions of dollars into their networks, which they privately maintain and upgrade, according to AAR President and CEO Ian Jefferies.

In support of the act, more than 1,000 individuals recently signed a letter to the STB asking that the board be mindful of the impact that the Staggers Act has had on the rail industry, he said. 

AAR doesn’t support the STB’s proposed final offer rate review; instead, it has offered proposed changes to the existing voluntary arbitration program, Jefferies said.

Jefferies contended that its Class I members have been responding to customers’ service needs, especially during the harvest season. The investments made by the railroads have enabled network efficiency, while constant communication with customers enables the railroads to respond accordingly with customers’ needs. He also pointed out that shippers have been supportive of rail service in meetings this fall before the STB.

“Ag shipments have been one of the bright spots in rail traffic,” and the railroads know that the pace of harvest volume growth can rise quickly and so “communication is needed to forecast needs,” Jefferies said.

Although service hiccups are inevitable, communication between the railroads and shippers helps to minimize hiccups, he said. Meanwhile, while the rail industry can always improve on ensuring safe working environments, data trends point to decreases in annual rates for casualties and injuries, Jefferies said.

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