With a new year and a new White House administration ahead, rail shippers and industry observers say these are some key issues they hope will be addressed soon:
Issues before the Surface Transportation Board
Rail shippers and others are looking forward to having a full complement of five members on the Surface Transportation Board (STB). Although it’s still uncertain how the two new members, Robert Primus and Michelle Schultz, will respond to issues, having “fresh eyes” on the several outstanding proceedings could help move those proceedings along.
“We’re pleased with the board’s recent performance. It seems like there’s an effort to make sensible reforms,” Rob Benedict, senior director of petrochemicals, transportation and infrastructure for American Fuel & Petrochemical Manufacturers, told FreightWaves.
Also, with Chairman Ann Begeman’s term coming to a close, Vice Chairman Marty Oberman could move into the chairman’s seat, and rail shippers will be watching how he chooses which proceedings to focus on and what the pace of those proceedings will be.
“There’s going to be a little bit of wait and see. We’re going to need to listen carefully to their announcements and speeches,” said Karyn Booth, legal counsel for the Institute for Scrap Recycling Industries (ISRI), to FreightWaves.
Indeed, several proceedings await further movement by the board. Some of them include Ex Parte 704, a proceeding on when and how to lift class exemptions as they pertain to rail rate, and Ex Parte 711, a proceeding on reciprocal switching as a means to increase competition and address rate and service issues.
“It’s important that the STB modernize some of its policies … . There really is a need to address the longstanding and far-reaching reforms that haven’t been finished,” Jeff Sloan, senior director of regulatory and technical affairs for the American Chemistry Council, told FreightWaves. Tackling these reforms could promote a more competitive rail industry, he said.
Some rail shippers are also asking STB to consider requiring freight railroads to submit additional data pertaining to the first mile and last mile in order to resolve service issues. Meanwhile, the Class I railroads want STB to consider a new arbitration program for smaller disputes, which makes some shippers wary.
“Our focus has been on the transparency of data that STB gets so it can do its job,” Benedict said. The quality of data that the railroads report can help assess the health of the network, he said.
For example, on-time performance data can be a meaningful metric, according to Benedict.
“When the average person orders a package from Amazon, we have real-time information where that package is throughout the shipment, and having a similar idea of where a rail shipment is would be hugely beneficial to rail shippers,” Benedict said. “Having some real-time idea of where a shipment is and when it’s going to arrive helps shippers better plan our operations and gives us an understanding of how frequently the railroads are meeting their marks.”
Said Sloan, “We do think that the board should be looking more at meaningful service metrics from a customer’s perspective. It’s not just dwell time delays, but what is the first-mile and last-mile service and are customers getting the cars they ordered on time.”
Sloan also said he and other rail shippers would be watching how STB approaches CSX’s (NASDAQ: CSX) move to acquire short line Pan Am Railways, which serves New England.
“We’re keeping a close eye on what the STB decides to do,” Sloan said. That includes seeing how the board ensures that the merger will improve rail service and make service offerings more competitive, he said.
As the board takes up existing issues, it should consider examining or modifying current rules to align with today’s market conditions, according to Ann Warner, spokesperson for the Freight Rail Customer Alliance (FRCA).
Legislative or administrative action should be taken to clarify or reinforce the common carrier obligation, according to Warner in an email. This includes potentially encouraging STB “to initiate a new proceeding to clarify what constitutes railroads’ common-carrier obligation — the legal requirement to provide ‘transportation or service on reasonable request.’”
The board should consider this action in this “era of PSR [precision scheduled railroading], when rail carriers increasingly and unilaterally dictate the terms and frequency of service provided to shippers and receivers,” she said.
However, although STB now has five members, Begeman’s imminent departure means that the board will need another member soon.
“The STB Reauthorization Act of 2015 has helped the Board make some progress. In order to maintain this momentum, [FRCA] encourages President-Elect Biden to designate a new Chairman upon the onset of his new Administration and a knowledgeable leader who is fair-minded but also understands the shipper perspective — current Vice Chairman Martin Oberman is that person,” Warner said.
“In addition, while the STB is an independent agency which all stakeholders support and was made possible in the 2015 Act, interest and support from The White House is also essential,” Warner said.
She added that the FRCA recommends “that the upcoming board vacancy be filled, as soon as possible, by an individual who shares the commitment in moving the board forward, as demonstrated by Vice Chairman Oberman and Member Patrick Fuchs. The nominee needs to be fair-minded, objective and innovative in addressing freight rail issues while also being experienced in shipper issues.”
Congressional bills addressing rail service and infrastructure
There are a number of bills in Congress that rail shippers are watching, including the surface transportation bill that addresses transportation infrastructure and the bill encouraging the recycling of older railcars.
“Investment in the nation’s infrastructure is essential to ensuring our products move safely and efficiently across the nation’s rail and highway systems. Moving raw materials to mills and products to customers remains costly, and improvements are desperately needed,” said Michael Blume, manager of government and industry affairs for the American Forest and Paper Association, in an email.
Blume continued, “We are looking forward to working with Congress to address surface transportation infrastructure in the upcoming Highway Bill and potentially make needed reforms for our nation’s interstate highways. Safely increasing truck weights on federal interstates will decrease traffic and drastically improve productivity. Moreover, we are encouraging increased investment in truck parking spaces, improving hours of service regulations, growing the pool of available drivers, and maintaining the current truck insurance standards.”
Rail shippers are also hoping Congress will take action on a bill that was introduced Sen. Tammy Baldwin (D-Wisconsin) in December on rail shipping issues.
Baldwin’s bill, S. 4961, the Rail Shipper Fairness Act, addresses rail service and competition, and many of the issues before STB. The bill has been referred to the Senate Commerce Committee.
“There may be more appetite” to look at these issues in Congress, said Billy Johnson, ISRI lobbyist. Looking at rail service issues now may be timely, given PSR and increased consolidation activity occurring among the short line railroads, he said.
What will the PSR landscape really look like?
Almost all of the Class I railroads have adopted PSR, an operating model that seeks to streamline operations. While PSR has been part of the railroads’ operations for several years, some rail shippers consider 2020 to be an anomaly because of the COVID-19 pandemic’s effect on rail volumes and service.
In 2021, rail shippers are hoping market conditions can normalize so that they can get a better sense of what PSR means for the rail industry and whether or not shippers should press for additional oversight from Congress or STB.
“One of the other things we’ll be focused on is returning to a normal, post-COVID world,” Benedict said. “Prior to COVID, with the implementation of PSR, the railroads were already operating super lean. And while all industries were impacted by COVID, including reduced staffing levels at railroads, rail shippers want to ensure the rail industry is able to return to previous levels of service when the economy fully rebounds.”
Benedict continued, “When the world gets back to driving and using our members’ products at previous levels, we need the railroads to be able to bounce back to facilitate that production.”