Railroad Workers United (RWU), an independent group of union members who represent different crafts in the industry, in early October adopted a resolution supporting public ownership of railroad infrastructure in the U.S.
The resolution, adopted at the group’s annual convention, is RWU’s response to what it calls a lack of desire by the freight railroads to expand the rail network and invest in it beyond regular maintenance. RWU believes that the railroads have focused too much on reducing their operating ratio, a measurement that investors use to gauge the financial health of a company. As a result of this focus on OR, as well as the deployment of precision scheduled railroading to streamline operations, rail service has suffered, RWU contends.
FreightWaves spoke with Paul Lindsey, a locomotive engineer and a member of RWU’s steering committee, on why his group adopted the resolution.
This question-and-answer interview has been edited for clarity and content.
FREIGHTWAVES: Why did RWU adopt this resolution?
LINDSEY: “You have to really be careful with how you explain it because people’s eyes will gloss over because they have assumptions. What we are not advocating is the government running all the trains, coming in and saying they want all the freight trains to run like Amtrak. …
“What we’re advocating is putting the railroad infrastructure — the physical plant, the tracks — into the same type of situation that our national highways and our waterways and airports, to a large extent, are placed in: They are managed, dispatched, controlled, maintained publicly. …
‘We believe that the rail industry should be growing for the future prosperity of our nation and for the future sustainability of transportation. Traffic volumes should be going up to take a lot of this [truck] traffic that is destroying our highly expensive, highly subsidized highway infrastructure. …
“If you were to actually look at the external costs of trucking to our highway system and count things like highway safety, like congestion, like carbon emissions, then most of the trucking companies that are on the road today — owner-operators, company drivers — they wouldn’t actually be profitable because they’re only profitable using highly subsidized government highway systems. …
“The railway industry at the turn of the 20th century voluntarily chose to be regulated by the Interstate Commerce Commission system. … [But] interstate trucking was largely unregulated, [and so] they could better control [and lower] their prices to take the traffic. That’s what happens when you have a subsidized system trying to compete with an unsubsidized system: Eventually you get more [profit] on the subsidized system.
“What ended up happening is that the railroads started to go bankrupt. It wasn’t until deregulation, the Staggers Act in the ’80s, that railroads were actually able to start making a profit again. But the problem here is that the railroads consolidated into larger and larger and larger monopolies. And now, they are completely unchallenged, and because of that, they use their dominant market power to not compete at all. In fact, they pick and choose their customers. They drive away business.
“I mean, we saw it in the federal STB [Surface Transportation Board] hearings in April. … They embargo whoever they want and only want the most profitable business. If you’re not the most profitable business, they will raise their rates on you, they will charge demurrage, they will kill you with demurrage. They will provide you terrible service, they’ll cut you from five days a week service down to three days and do anything they can to drive you out so that they are only left with the most profitable business.
“And they don’t compete with trucks anymore because pretty much every business that can go to trucks has already gone to trucks because they know that they can’t rely on the railroad. So basically, the customers that the railroads have left are the captive shippers. …
“The railroads would rather buy back their own shares. … And then they’ve changed what they consider to be infrastructure investments — like they’ll brag about replacing railroad ties … . That is not a capital investment. That’s necessary repairs that you’ve got to do to maintain your railroad. …
“We advocate because there needs to be reciprocal switching. There needs to be open access. If you want to come in there and start a railroad and run on these publicly owned tracks to provide more competition just like trucking companies do, you should be able to. As it sits now, there’s no ability to do that. You have monopolies that own the track and control the investment in infrastructure when we should be electrifying, [when] we should be making our infrastructure better for the future. … Even if a railroad wanted to come in and serve customers the railroads don’t want to serve, they can’t because it’s considered private property whereas the interstate highways are not considered private property. Any truck, anyone can get a motor carrier number and a DOT number and go out there and haul freight on our nation’s highways.”
(Editor’s note: Shippers may pursue reciprocal switching when they have access to one freight railroad but want access to a nearby competing freight railroad to cultivate a competitive pricing environment. Shippers can receive that access at an interchange between the two railroads.)
FREIGHTWAVES: How would it look if rail infrastructure were public in the U.S.?
LINDSEY: “So, disclaimer: No one knows exactly. Everyone can try to predict and say they know the solution. I’ve always believed in free markets, I don’t believe in strict top-down control of everything. So, no one knows.
“However, the basic framework for something like this would be that all or most rail lines in the United States would be maintained similar to the interstate highway system. They would be under the same Department of Transportation budgets and publicly owned, or at least, maintained and operated by the public. Then railroads would be tenants on those tracks. In that case, you wouldn’t have this situation where, the way most American cities are, you only have one railroad servicing you.
“Any railroad — not just the ones we have now, new ones — could enter the market to compete, could enter any line theoretically and run their trains. There would be large amounts of competition. …
“There’s a company [in Idaho, where Lindsey lives] that has this operation for shipping alfalfa — big giant bales of hay — and shipping it overseas. They were going to put it in intermodal containers and ship it overseas. They built a facility up there — a brand new building — and were going to load intermodal cars and ship them overseas. Well, after they’d already built that facility, the railroad told them, no, we’re not going to service you there. If you want to load them on your trains, you need to track them to Pocatello and put them on there. All that money went to waste.
“How in the world does this dominant, unchallenged monopoly have the right to screw over private businesses that invested their own capital into their infrastructure and buildings? How do they have the right to tell them to do that? That is the definition of impeding interstate commerce. So, that goes back to what I was saying about the railroads only wanting the most profitable business and nothing else.”
FREIGHTWAVES: Let’s say that the federal government is far from able to pay for all the highway infrastructure improvements that need to be done. If it can’t pay for highway infrastructure, how can it pay for rail infrastructure?
LINDSEY: “I understand that logic there. However, the United States every year invests an astounding amount on highway infrastructure, even if it may not seem like that as you drive along roads that have potholes or cracks.
“Just for example, here in Pocatello, Interstate 86 and Interstate 15 come together. There’s a big ‘Y’ where the two interstates come together. It’s been there for a long time. It worked just fine. But they said that it doesn’t meet modern standards anymore so we’re redesigning the whole thing. It’s a three-year project to rebuild a remote highway interchange in Pocatello, Idaho. How many millions and millions of dollars are put into this in materials and labor over a three-year project so that maybe cars can go 60 miles an hour through the turnouts, through the off ramps instead of 50 miles an hour?
“Meanwhile, along our line going to Pocatello, we still have 15-mile-an-hour switch turnouts. If a fraction of that money went into that one interchange — and there was nothing wrong with the interchange before — went into the rail infrastructure in this area, it would make an amazing difference. … You could probably double track most of the way across the entire state of Idaho for that. That is just one project, and there are countless projects like that going on on the highway system all around the country at any given time. …
“If the government were responsible for maintaining both rail and interstate highways, I would venture to say that they would figure out really fast that it would behoove them to invest more into rail infrastructure intentionally to keep trucks off of the interstates because the interstates are far more expensive to repair and replace when they are out than the rails. You can haul hundreds of trucks [volumes] on one train. …
FREIGHTWAVES: What you’re proposing sounds similar to the European rail system.
LINDSEY: “It is. The European model is not perfect. But I’ll tell you something that I read about recently that I thought was really interesting about the European rail system.
“You know, all of their rail infrastructure over there is publicly owned. And then they have the SNCF, which is the French-owned passenger rail network that runs French passenger trains. They run high-speed trains from Paris to Lyon, things like that. But there are also private passenger trains in France. And this is a recent development. …
“So, France runs their own high-speed passenger trains. … Whether people like high-speed trains or not, they have some of the best trains in the world. The government basically maintains and owns the rail infrastructure. But they’ve started introducing private passenger trains on certain alternate lines that are not necessarily high-speed lines. The [concern] was that it’s going to take away from the state-run passenger trains and it’s just a terrible idea, right? But the opposite happened. You actually increased rail on the government-owned passenger trains and the private passenger trains.
“The reason is the same reason why when you add extra lanes of interstate highway after a few years, the traffic will be backed up right to where it was before. It’s called induced demand. So, whenever you add another lane of freeway somewhere, more people choose to get in their cars and drive because it’s faster now. So eventually, the highway is jam-packed just like it was before.
“Well, the same thing happened with those trains over in France. They added private passenger trains over there and came up with new creative lines that never even had passenger trains on them, serving some [new] markets. But those trains intersect and interchange with the state-run passenger trains. So, because of that, it gives passengers more options. It gives them more lanes, like more lanes on a freeway. Because of that, more people choose to take the train. And all of a sudden, the French government-owned passenger trains increase their business right along with private passenger trains.
“That would not happen if that network was not open access. … Even if people don’t like the 100% public ownership thing, [you can provide] open access and reciprocal switching. You just have to open up these networks.”
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Robert Cooper
It’s nigh on impossible to compare a single country like France, where you can cross it in a matter of hours, to the US, where Texas alone can take 2 days to cross. The model he was referring to simply won’t work in the US.
People need to realize that rail is best for BULK shipments and non-time sensitive, long distance freight. Trucks are better at non-bulk or time sensitive goods or short haul. Instead of competing, the two industries should be cooperating. And include the air freight, barge and shipping companies, too. There’s a reason it’s called a supply CHAIN.
However, there are 2 things that can be done immediately to help alleviate the rail problem.
First, get rid of the neversufficientlydamned E. Hunter Harrison Precision Scheduled Railroading. Yes, you can schedule your network but make it realistic by running shorter trains. These 1 1/2+ mile behemoths are too big. Yes, it might require more crews and locomotives but it will make it easier to handle each train as it arrives at its next point on its journey. And to do that better leads to the second step…..
Rebuild your infrastructure. By that, I mean expand the amount of double tracked mainlines. Re-activate embargoed branches. Re-open or expand yards where practical. Eliminate or upgrade crossings to reduce potential accidents. Can you imagine the chaos if the government started closing interstates and tore them up because there’s another route nearby that duplicates the route? But that’s what railroads have done.
It is, quite frankly, corporate suicide.
daniel benoit
I agree with these views to the extent that, as a Los Angeles based foreign freight forwarder, I KNOW I cannot move my spot freight on the railroads cheaply or efficiently or at all. I am often asked by my foreign counterparts to get a rail rate for a single loaded/sealed ocean container, and I know I can’t do that without transloading it and giving it to an intermodal carrier in a 53′ rail box, which adds too much complexity and cost to make it worthwhile.
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Whatever the answer is, I would LOVE to have the rail as an open market option to using trucks to move containerized freight from the US West coast into the heartland and beyond.
Pete Swan
While it is clear that monopoly power is being exercised by railroads, open access of the rail system is not the answer. Giving all train operators access to all business makes it impossible to build density in operations which is what makes US railroads the most efficient in the world. There are market-based alternatives that could preserve density while providing incentives for improving service. Rates however is the toughest problem. When you have a natural monopoly (single provider has lower costs) you need some form of regulation. Problem is that our firm is ineffectual.