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Stakeholders spar over scope of Surface Transportation Board’s authority

Rail service issues, PSR, common carrier obligation and Amtrak service dominate congressional hearing

A rail yard. (Photo: Jim Allen/FreightWaves)

As Congress considers funding the Surface Transportation Board over the next several years, freight rail stakeholders are divided on whether the agency should maintain its current ability to address freight rail service and rate issues or if it is time to expand that authority.

That dispute was on display at a recent hearing on STB’s reauthorization in front of the House Transportation and Infrastructure Committee.

The Association of American Railroads (AAR) largely seeks to maintain the status quo, arguing that implementing shipper-friendly practices such as reciprocal switching could compromise the railroads’ ability to invest in their networks. 

“[These regulations] would, in one way or another, put price controls on railroads,” AAR President and CEO Ian Jefferies noted in written testimony.

But shippers such as the American Chemistry Council (ACC) insist that proposed remedies before the board would address the needs of companies that don’t have other rail options and are exposed to potentially subpar rail service. 

“We have to prove to the STB that the railroads are doing something unreasonable to us. We would like that flipped around,” said Brad Hildebrand, member of the National Industrial Transportation League (NIT League) and former vice president for global rail and barge at Cargill.

Adding to decades-old tensions between the railroads and shippers are three other factors: 

  • Impact of precision scheduled railroading
  • Whether Congress needs to define the common carrier obligation
  • The federal directive per the infrastructure bill to expand Amtrak passenger service.

Those issues may influence how much funding STB gets and the power it wields.

Shippers press for change

Shippers say the STB is one of the few forums where their concerns are addressed, especially as the freight rail industry has consolidated over the past 40 years since the Staggers Act. Yet, remedies can remain elusive. 

“Too often … the Board’s policies and procedures are too complex, costly, and burdensome to provide timely and meaningful solutions,” said ACC President and CEO Chris Jahn in written testimony.

Jahn asked the U.S. House committee to ensure that STB has adequate funding and staff so that it can meet its responsibilities, including new oversight of Amtrak service. He also asked the committee to improve data on rail rates, which would include commissioning the Transportation Research Board to develop a new economic model that uses real-world data to compare rates paid by captive shippers to those paid for similar shipments in competitive markets.

“Currently, the Board has no way to measure how much extra a rail shipper pays solely because it lacks competitive transportation options,” Jahn said. “Creating a new model could serve as a more accurate and realistic starting point for evaluating whether a rate is ‘reasonable.”

Other shipper-friendly remedies before the board include whether STB should collect data on first-mile and last-mile movements as well as revise economic models that determine whether rail rates are reasonable. 

The board is also holding a hearing next week on whether it should permit reciprocal switching, which is when a shipper has access to one freight railroad but seeks access to a nearby competing freight railroad in order to cultivate a competitive pricing environment. 

“It would be helpful for Congress to direct the STB to develop a standard by which railroad service performance can be measured,” said Herman Haksteen, president of the Private Railcar Food and Beverage Association (PRFBA). 

Hildebrand echoed Haksteen’s sentiments. 

“Adopting such a standard and metrics would improve transparency that would facilitate supply chain planning and meaningful dialogue between railroads and their customers to address service shortcomings,” Hildebrand said.

Shippers contend that STB should have the opportunity to “provide remedies for rail service failures,” according to Jahn. He added that Congress “should authorize relief and damages where a carrier has failed to provide adequate service.”

Said Haksteen, “The simple fact that freight rail volume is down, and truck volumes are up, helps illustrate that something is wrong with our freight rail network.”

Also at issue is reexamining whether to revise the common carrier obligation. That refers to the federally imposed duty of railroads to provide service on reasonable request. 

Those in favor of redefining the common carrier obligation say it would provide STB with knowing when to enforce that obligation upon the railroads. 

Grappling with the legacy of PSR

Many panelists at Tuesday’s hearing criticized precision scheduled railroading (PSR), an operational model publicly adopted by almost all of the Class I railroads in which the railroad seeks to streamline operations and costs. 

Haksteen said PSR exacerbated some of the service issues his members were facing, resulting in “companies dealing with the worst service and the highest rail costs in recent history.” 

He explained: “Some PRFBA member companies are experiencing record poor service levels ranging from missed switches, reduced switching service days, bunching caused by longer trains, bottlenecks primarily driven from a reduction of serving yards and crews to the reduction of cars and locomotives, which all have led to longer transit times and irregular service.”

Dennis Pierce, president of the Brotherhood of Locomotive Engineers and Trainmen, said PSR has subjected members to “harsher” attendance policies because the railroads are seeking to meet PSR goals. Consequently, he said, companies are reducing staff to minimum levels, and forcing them to work without scheduled days off or sick day.

“This is all part of the railroad business philosophy of extreme ‘leanness,’” Pierce said. 

While certain rail labor issues might lie outside the board’s purview, how the railroads address service does not, Pierce added.

“Whenever there is an upturn in business, or an unexpected event that affects operations, the capacity of the system cannot handle the increases or impediments,” Pierce wrote in testimony. “The only answer the railroads have consistent with their business model is to make everybody work more, thus their harsh attendance policies forcing employees to do just that.”

STB’s role in passenger rail service

Multiyear congressional funding for STB is vital because of the agency’s new responsibilities to support Amtrak passenger rail, according to Dennis Newman, executive vice president of planning, strategy and accessibility for Amtrak. 

Many of Amtrak’s trains run on tracks owned by the Class I railroads, and the freight railroads must give Amtrak priority use of their tracks, per federal mandate.

Those responsibilities include ensuring that STB can adequately investigate Amtrak’s on-time performance should service deteriorate because of freight rail service, according to Newman. STB is also now responsible for resolving disputes between Amtrak and host railroads over the operation of Amtrak trains at accelerated speeds.

“While railroad mergers and line sales have helped large U.S. freight railroads achieve record profits, implementation of many mergers has triggered rail service meltdowns with lasting adverse impacts on Amtrak train performance and in some cases has jeopardized the continued operation of Amtrak routes,” Newman said.

Furthermore, the newly passed infrastructure bill robustly supports expanding Amtrak’s offerings and route network, Newman said. The bill also calls for dedicated STB staff to work on passenger rail-related issues.

The enactment of the infrastructure bill “will greatly increase the importance of the role the STB plays with respect to Amtrak and its existing and future operations over host railroad lines,” Newman said.

He added that Congress should require that railroads operating very long trains develop safety plans to submit to STB and the Federal Railroad Administration for review, detailing the safe operation of long trains as well as the operational practices and/or infrastructure investments railroads would implement so that the operation of these trains would not negatively impact passenger rail service or communities.

“When two very long freight trains are operating in opposite directions, they can effectively shut down a rail line,” Newman said. “The operation of such trains also produces lengthy grade crossing blockages, and concerns have been expressed that they can create safety risks.”

Freight rail trade group: New regulations endanger competition

Freight rail carrier advocates contend that placing more regulations on the industry could stifle the railroads’ ability to invest in ways to grow rail’s market share, particularly at a time when the rail industry faces competition from emerging technologies like autonomous or platooned trucks.

“Inadequate earnings would put America’s best-in-the-world freight rail network at serious risk,” Jefferies said. “… By reducing revenues and adding significant operational complexities, railroads would be less competitive for the broad base of business needed to make these investments. If railroads are unable to make such infrastructure investments, there could be cascading impacts on the health of the rail network.”

Jefferies countered criticism of railroads’ profits by saying much of that profit is reinvested in the rail network.

“Some now claim that railroads are doing so well financially that they can, in essence, ‘afford’ more onerous regulations and that the STB should effectively transfer the financial benefits of the railroads’ hard- and long-fought financial stability to certain shippers. Penalizing success is bad public policy,” Jefferies said.

As passenger rail service expands in the U.S., host railroads must be part of the planning process to ensure capacity needs are met for both freight and passenger rail. That discussion should also include how passenger rail service gets its future funding needs met, Jefferies said. 

“Freight railroads should not be expected to pay for the additional capacity necessary for passenger trains. … It is crucial that this funding be spent where it has the greatest impact, and freight railroads are committed to helping to ensure this happens,” Jefferies said.

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Click here for more FreightWaves articles by Joanna Marsh.

Joanna Marsh

Joanna is a Washington, DC-based writer covering the freight railroad industry. She has worked for Argus Media as a contributing reporter for Argus Rail Business and as a market reporter for Argus Coal Daily.