T&I STB Reauthorization Hearing Deja Vu All Over Again
Written by William C. Vantuono, Editor-in-Chief
The House Committee on Transportation & Infrastructure hearing, “Board Member Views on Surface Transportation Board Reauthorization,” was for the most part a rehash of the topics that the STB has been covering in its own hearings on freight rail service problems, reciprocal switching and other areas the industry has had to address in recent weeks. T&I Chairman Peter DeFazio (D-Ore.), who is not seeking re-election in this year’s mid-terms, and Railroad, Pipelines and Hazardous Materials Subcommittee Chair Donald Payne Jr. (D-N.J.) chaired the hearing, which in a press release was couched as “The Surface Transportation Board’s Role in Resolving Freight Rail Conflicts.”
“This hearing was largely for show,” comments Railway Age Capitol Hill Contributing Editor Frank N. Wilner. “STB reauthorization won’t be considered until at least 2023. There’s no legislation pending affecting the STB, nor is there the possibility. The Senate has no interest in the topic.”
DeFazio Sounds Off
“The facts before this committee today are undeniable,” De Fazio said in his prepared statement. “Freight railroad service is abysmal. Shippers are being severely impacted by poor rail service, which forces them to shift to trucking, raw material delays that cause factory closures, and extra labor costs to load and unload once the rail cars finally arrive. This appalling service is forcing shippers to recoup their extra costs downstream and Americans are paying for it—with increased food costs and at the gas pump.
“Sadly, the freight railroad CEOs blame poor service on everyone but themselves. They blame COVID, supply chain disruptions, their workforce, and their customers. The CEOs are not looking for change. They are bringing in record profits for their shareholders, and they are not going to do anything to mess with this ‘winning formula.’
“I have been beating the drums about the dangers of Precision Scheduled Railroading (PSR) for years, leading some to dismiss me as a grumpy old man. Today, this grumpy old man has been joined by the agriculture industry, energy industry, chemical industry, and other shippers who bemoan PSR and its impacts on their businesses. In fact, these shippers have even joined forces with the labor movement to demand a free and fair freight railroad market with the capacity to grow and meet demand.
“I don’t have a lot in common with the big oil executives, but this quote from the American Fuel & Petrochemical Manufacturers testimony to the STB is spot on:
“‘Consolidation in the railroad industry has created a system of regional duopolies and the railroads understandable desire to maximize profits has come into conflict with railroads’ common carrier obligations. The Staggers Act was not intended to make the railroads attractive investment targets on Wall Street; rather it was designed to ‘meet the demands of interstate commerce and the national defense.’ PSR has interfered with those goals.’
“PSR is a business model that cuts expenses to the bone even when that slows customer and volume growth. Freight railroads accept only the most profitable freight. They are not going to spend a dime on growing their companies unless the new customer is truly captured and highly profitable to the railroad. Any ‘surplus’ asset is mothballed and worker furloughed, making it difficult for railroads to accommodate more business. PSR delivers short-term profits, while harming the long-term success of the freight railroad industry.
“You don’t have to take my word for it. Former BNSF CEO Matt Rose said it when he retired back in 2019: ‘The Street—I’m talking about sell-side analysts—has been extremely aggressive with the publicly traded railroads. They’re saying that less is better. Less capital is better. Fewer market opportunities are better. Fewer unit trains are better. It’s all about lowering the operating ratio. I disagree with almost all of that. I truly believe that every industry, every business, needs growth … I just don’t think you can shrink yourself into a virtuous-cycle model that works.’
“I am pleased the Surface Transportation Board is taking this matter seriously but let me say for the record the Board is moving too slow. American businesses and consumers are needlessly suffering at the hands of duopolies, while these duopolies extract record profits. We have five witnesses before us today who are the regulators and this is occurring on their watch. The STB needs to act quickly and decisively to protect the railroad network, a vital asset to the U.S. economy.
“Your testimony asks for very little from this committee, suggesting you have all the regulatory powers you need. If that is true, and I am not sure it is, how did the current freight failures get this bad under your watch?
“Some will argue this is a free-market problem to be resolved by the markets. But that doesn’t work with duopolies. It is, in fact, the very reason the STB exists.
“Current law lays out your responsibilities in Chapter 101 of Title 49. These responsibilities include:
- ‘To ensure the development and continuation of a sound rail transportation system with effective competition among rail carriers and with other modes.’
- ‘To meet the needs of the public and the national defense.’
- ‘To maintain reasonable rates where there is an absence of effective competition and where rail rates provide revenues which exceed the amount necessary to maintain the rail system and to attract capital.’
- ‘To encourage fair wages and safe and suitable working conditions in the railroad industry.’
- ‘To prohibit predatory pricing and practices, to avoid undue concentrations of market power, and to prohibit unlawful discrimination.’
“Your mandate is not to protect the freight railroads’ bottom lines or rail shippers’ bottom lines, but to ensure the rail network is operating efficiently, keeping costs low for Americans, maintaining reasonable profits for the railroads, and giving American manufacturers a competitive advantage worldwide. We need the STB to do more to meet those mandates.
“Let me be crystal clear that if the STB doesn’t move more quickly to rise to the occasion, this committee will legislate. I urge my Republican colleagues to join me and shippers from the agriculture, energy and chemical industries (just to name a few) to bring sanity back to the freight railroad business.
“My goal is simple. I want freight rail companies to be successful, but that success should be defined by the amount of freight they move across the nation, the amount of GHG emissions they prevent, the safety of their employees and the communities they traverse and serve, and the economic advantage that timely, efficient, and affordable freight rail provides the American economy.
“I urge the STB to incentivize the railroads to act like railroads, and not Wall Steet cash cows. Stock buy backs and dividends cannot be the sole measures of success for freight railroads. The ability for Wall Street to extract massive capital out of the railroads will undermine the U.S. freight rail network. They are the only mode with continued decline in freight rail volume, a sure sign that the industry is unhealthy.
“Congress cannot sit idle and ignore the current problems with the freight railroads. They are too important of an asset for our national economy. The rail system is broken, and it needs fixing. We need you to fix it, or we will.”
Payne Weighs In
Railroad Subcommittee Chair Payne, as one industry observer noted, “stumbled through the reading of an opening statement written for him, showing almost no familiarity with the subject, going out of his way to criticize railroad treatment of employees, as expected. The hearing itself was most likely called as an IOU to rail labor.”
“To continue this subcommittee’s work toward reauthorization of the Surface Transportation Board, today we have an opportunity to hear from members of the Board to determine what additional authorities are needed to improve rail service across the country,” Payne said in his prepared statement. “The STB is a unique independent agency that is the primary economic regulator of freight railroads, responsible for ensuring that the railroads honor their common carrier obligations. Shippers play a critical role in the national supply chain by making the food we eat, ensuring the water we drink is safe, providing electricity, and providing building materials. We held a hearing with stakeholders two months ago who sounded the alarm on rail service issues and to get their ideas for reauthorization.
“Recently, the STB held two days of emergency public testimony on the meltdown of our nation’s freight rail operations. The STB heard from many shippers, labor leaders, and even Transportation Secretary Buttigieg and Agriculture Deputy Secretary Bronaugh on the significant delays in transporting cargo by freight rail. Chemical shippers are enduring 78% longer transit times and service days have been cut nearly in half. Agriculture producers such as soybeans and rice have seen a particularly sharp decline in the quality of freight rail service.
“The National Grain and Feed Association recently wrote to this Subcommittee explaining that, and I quote, ‘The current inability of several Class I carriers to provide reliable rail service to their customers is impacting farmgate commodity prices and elevating food prices for customers.’
“Increasing prices for our food, gas prices at the pump, turning on our lights, having safe drinking water—these are all impacted by increasing delays in freight rail service. Quite frankly, this is unacceptable. The timely and efficient movement of goods remains of paramount importance to a strong economy.
“I understand that the Class I freight railroads’ explanation of the decline in service is due to several factors, including workforce shortage. What is maddening, is that the very workforce shortage contributing to the decline in service is a result of the Class Is implementing … PSR. By the end of last year, the Class I workforce was cut by nearly a third compared 2015. Those cuts began years before the pandemic hit, and—despite knowing it takes a number of months to return qualified workers to the rails—the railroads doubled down by cutting again in 2020.
“I have been concerned to hear from workers and their unions about employees being overworked and rushed on the job. Now, those worsening working conditions, years of job insecurity and the months required to properly train workers before they can return to service have come home to roost in the form of severe hiring challenges the railroads currently face.All of this is why the STB held the emergency hearing.
“Last week, the STB unanimously acted to require the largest railroads—UP, BNSF, CSX and NS—to develop service recovery plans to improve service and metrics to measure progress, including goals and measures for rail service performance and employment training and hiring levels. Stakeholders have also proposed new authorities such as expanding the STB’s ability to assess fines or allow for reverse delay charges that shippers can charge carriers.”
Oberman Opens
STB Chair Martin J. Oberman’s opening statement (edited here) was, as another observer put it, “the only substance of the hearing and actually just a rehash of what the STB has done in recent weeks.”
“I will say at the outset that our five-member Board has evolved into an extraordinarily collegial and effective group which strives hard to act by consensus and generally has succeeded in doing so,” he said. “… [T]he economics of freight rail regulation affect the national transportation network and are vital to our nation’s economy. For this and other reasons, Congress gave the STB sole jurisdiction over railroad rates, practices, and service. Congress also gave the STB sole jurisdiction over rail mergers and consolidations, abandonments of existing rail lines, and new rail line constructions, exempting them from federal antitrust laws and state and municipal laws.
“Rail network reliability is essential to the nation’s economy and is my top priority as Chairman. The rail industry is now facing a ‘severe crisis’ in service, as described by one Wall Street analyst, a description which in my view is all too accurate.
“I was designated Chairman by President Biden in January 2021, as our country was beginning to emerge from the depths of the COVID-19 pandemic. One of my first initiatives was to focus on the resilience of the freight railroad network with particular attention on congestion in the rail intermodal supply chain, which was affecting shippers not only at major ports, such as Los Angeles and Long Beach, but also inland gateways such as Memphis and Chicago. I continued the practice of holding more frequent meetings of the Rail-Shipper Transportation Advisory Council (RSTAC)—which includes rail carriers and shippers, large and small, from across the country—to help inform the Board’s intensive oversight work.
“In May 2021, I wrote letters to the CEOs of the Class I railroads asking them to report on their preparedness to meet growing demand for rail service, as freight volumes rebounded as part of the Nation’s larger economic recovery. In July 2021, I again wrote to the Class I railroads about protracted intermodal network congestion, and significant fees that railroads were imposing on their customers, largely due to circumstances beyond shippers’ control. In response, the railroads provided assurances and expressed confidence they could handle freight volume as the economy continued its recovery. Nevertheless, in the second half of 2021, rail service was erratic and inadequate for many rail customers, albeit with different Class I railroads performing better or worse at different points in time.
“Moving to the present day, the rail industry clearly is struggling to provide adequate and reliable rail service. Although the rail industry has been hit by many of the problems the pandemic has visited on all businesses, the railroads and their dedicated workers delivered for the public during the pandemic’s earliest and most uncertain days. Yet, as the nation’s economy has recovered, recent Class I business practices have undermined industry preparedness and service reliability. In particular, over the past 6 years, the Class I railroads have cut their work force by 29%—a loss of 45,000 employees. With demand back, and against the backdrop of these significant labor cuts and other changes, railroads face major holes in their service, with loaded trains sitting for days for lack of crews, factories struggling to obtain needed raw materials or deliver their finished products, farmers straining to obtain adequate fertilizer at the beginning of planting season, food producers finding it difficult to obtain grain and feed for their livestock, and on and on.
“The severity of the problem, and its impact on our nation’s food and fuel supplies, is distressing and has necessitated immediate Board action. Just two weeks ago, the Board held a two-day public hearing, Urgent Issues in Freight Rail Service, which revealed beyond any debate that rail service is unacceptably poor, with acute issues in many regions and with certain carriers. The testimony we heard was consistent with anecdotal reports we have steadily received in recent months and was further substantiated by the rail service performance metrics the Board collects on a weekly basis. It is clear the four largest U.S. Class I railroads’ earlier assurances about having sufficient employees, locomotives, and railcars to meet service demand going forward were incorrect. Here, again, it is worth noting that not all Class I railroads have had the same problems and that rail users have stated that Class II and III railroads—the smaller railroads that typically have less market power than their larger, Class I railroad counterparts—have been more responsive to their customers despite facing many of the same external forces.
“Railroads, rail users, rail labor, and rail experts all attribute the current service disruptions principally to a shortage of labor. To understand the cause of that shortage one must first take into account the Class I railroads’ actions in significantly cutting their labor forces in the years leading up to the pandemic. Then, in the spring of 2020, in response to a precipitous decline in economic activity that immediately followed the onset of the pandemic, the same railroads cut their already reduced labor forces even more, by as much as an additional 20%. They made these cuts despite the fact that neither they nor anyone else could have known at that time how long this unprecedented pandemic would last and when the economy would begin to recover, requiring the railroads to again be fully staffed. Nor could they have been confident that the laid-off workers would promptly return if asked to do so.
“Keep in mind that the workers dismissed by the Class I railroads are highly skilled and held positions that require lengthy training. Replacing them is difficult and requires months of rigorous training before they can actually begin the work of moving trains. Since June 2020, as the demand for freight rail service quickly rebounded, the railroads have not been able to achieve a commensurate and appropriate increase in work force levels. Many of the previously laid-off workers had found other careers and never returned to the railroads. And, as explained at our recent hearing, the Class I railroads have found it difficult to recruit and train new employees. The railroads have noted broader economic trends in the labor market, while rail labor has reported the particular difficulty in the rail industry directly caused by increased job uncertainty, worsened working conditions, and insufficient incentives.
“Given the challenges the railroads now recount regarding hiring and retaining employees, and the aforementioned difficulty in remedying the labor shortage problem quickly, I am not optimistic about significant improvement in rail service in the near term. The Board does not prescribe particular industry-wide labor levels, nor does it manage railroad labor agreements. However, I provide this information to explain what is driving a critical aspect of the Board’s oversight responsibilities—service—and why the Board is taking additional steps that I will describe in a moment.
“What has become clear over the past few years, and more acutely over the past few months, is that the railroad industry cannot thrive and fulfill its critical role supporting the Nation’s economy without some redundancy—that is, the railroads must maintain a workforce and equipment, particularly locomotives, at a level which provides an essential cushion to meet all the variable, but not unforeseeable, contingencies which have been known to afflict the rail industry since its inception nearly 200 years ago. Railroads must always be ready to nimbly respond to and work around events such as the recent spate of polar vortexes, forest fires, floods, international emergencies, and, yes, the pandemic. Railroads must maintain a buffer to protect their operations against external shocks, and if they fail to do so, then ultimately, they will suffer—but even worse, their customers and the public will suffer more. What could not be more clear is that, at present—and for the past several years—the major railroads do not have sufficient redundancy to keep pace with rapid shifts in demand.
“Partly in response to the growing problems with rail service reported to the Board, shortly before the rail service hearing two weeks ago, the Board issued a proposed rule to improve its process to provide relief in times of emergency and to ease the burden on rail users seeking such relief. As a follow-up to our rail service hearing, where we heard from Secretary of Transportation Pete Buttigieg and Deputy Secretary of Agriculture Jewel H. Bronaugh, in addition to representatives of many rail shippers and rail labor as well as the railroads, last week we issued an order aimed at focusing the industry’s attention on the urgent need to restore reliable service by the Class I railroads as rapidly as possible …
“The Board is also considering several additional mechanisms that would help enhance rail service. While the Board’s recent actions have included temporary reporting on first-mile/last-mile service issues related to the urgent service problems, and other crucial measures of whether shippers received their freight when expected, the Board is considering using its authority to permanently collect more detailed information on service reliability and has been considering comments recently filed on this topic from interested parties. In addition, this past March, the Board held a public hearing to consider updating its reciprocal switching regulations … In my view, reciprocal switching is a potential avenue for improving rail service by enhancing competition and is an area where I personally hope the Board will be able to act before this year is out.
“The Board has also recently advanced two proposed rulemakings to address the reasonableness of rates. The first, which proposes use of a streamlined final offer procedure, would utilize the Board’s existing authority to create simplified and expedited methods for determining rate reasonableness in those cases where a more fulsome presentation is too costly, given the value of the case. The second, which proposes use of an expedited arbitration procedure, would utilize the Board’s existing authority to establish a voluntary and binding arbitration process. The record in both of those proceedings closed last month and it is my intention that the Board will act on these two proposals by this fall. My hope is that adoption of either such procedure will add more balance to the Board’s regulations, thereby helping shippers lacking effective competition to receive reasonable rates and negotiate adequate service.
“As you can see, the Board has a number of tools in its existing statutory arsenal to enhance rail service. To be sure, and to be fair to some of my colleagues on the Board, not everyone agrees on the exact scope of that authority or on certain proposed regulations, and at least some of the proposals outlined have been challenged, including by the rail industry. However, while the problems facing the rail industry today are significant, in my view, the Board can use its existing authority to mitigate those problems in a meaningful way.
“While much of the Board’s work involves freight railroads, the STB’s involvement with passenger rail matters is extremely important and continues to expand. The Board has undertaken significant steps to establish a passenger rail program as required in the Infrastructure Investment and Jobs Act, including by planning the creation of a passenger rail office and identifying the key personnel with the requisite skills and expertise needed to staff that office. In addition, the Board has entered into an interagency agreement with DOT’s Volpe National Transportation Center for several data tools, including an analytic tool for handling the Federal Railroad Administration’s quarterly metrics publications. I am confident in the Board’s preparedness to meet its responsibility to enforce on-time passenger rail performance, and I can tell you that the agency stands ready to expeditiously handle any on-time performance cases that are filed, to fully analyze the quarterly data provided to us by FRA, and to determine whether any Board-initiated investigations may be necessary.
“In addition, the Board also has responsibility to approve construction of certain new passenger rail projects that provide rail service between two states or intrastate passenger rail service that is carried out as part of the interstate rail network. We have found jurisdiction over several projects since 2007, including high-speed projects. The Board also has statutory authority to order a freight railroad to allow the operation of additional Amtrak trains over its line. We are currently completing the first proceeding brought to us by Amtrak under this provision requesting access to freight lines along the Gulf Coast. Because this is a pending proceeding, I am precluded from commenting on this matter.
As noted, my fellow Board members and I have found RSTAC an absolutely invaluable resource for information on rail and shipper issues, especially during periods of strained service like that being experienced now. Indeed, at the height of the pandemic, the Board met with RSTAC weekly to hear updates from the carriers and from shippers on how the pandemic was affecting their operations. To expand the voices on this vital informational resource, we recommend adding three additional seats to RSTAC: one each for rail car lessors, labor, and port representatives. We also suggest updating the RSTAC enacting legislation to clarify that all five Board members are members of RSTAC. Congress passed that legislation at a time when the Board consisted of three members and the statute currently refers to that smaller figure. Lastly, the Board has initiated efforts to create a committee under the Federal Advisory Committee Act (FACA) to advise it on passenger rail issues. I understand, however, that creating a new committee under FACA is not a fast-moving or easy process, so we would suggest amending FACA to make the process more user-friendly.
“In my view, the Board presently has sufficient appropriations to properly carry out its mission. For each of its work force vacancies, the Board either is in the process of selecting an applicant, has issued a hiring announcement, or has initiated internal steps to fill the position. I have placed a priority on the Board’s office directors hiring the employees they need to handle all that is before the Board, and we are well on our way to doing that. In addition, as I mentioned earlier, the Board is in the process of establishing a passenger rail office and expects to be adding up to ten additional staff to ensure it successfully fulfills its important passenger rail responsibilities. While we can currently absorb at least some of those employees under our budget, with those additional employees, all of the things currently before the Board, and all of the items on which I would like to take action, it is probable that we will step up our budgetary asks in the coming years to meet our staffing needs.”
Q&A Highlights
A question and answer session with the five STB members followed the opening statements. Following are highlights.
DeFazio: Is the common carrier language too vague to prevent these reductions in service? Because we can redefine what it means.
Oberman: That is really the topic of the day in my view to some degree, Mr. Chairman. The common carrier language in the statute is general, but we have authority by rulemaking to define it more specifically. But I will tell you as a lawyer who’s done a lot of drafting in my time, there are so many variables in how shippers and customers get their service from railroads; trying to come up with rulemaking language that would be enforceable in court and covers a variety of situations has been a task. I have been struggling with it, and I think this Congress is struggling with it.
DeFazio: When I hear you want to get something done by the end of this year, I feel much more a sense of urgency so, this is really pointing toward the committee in your reauthorization to take action.
Oberman: I would welcome that Mr. Chairman, and I would be happy to have me and my staff work with your experts to try to come up with those definitions. I think it’s a legal challenge, but it’s needed.
DeFazio: we all know about inflation across the economy … What’s happening with freight rail is increasing costs for manufacturers, shippers and others, and they’re passing it on to consumers. UP just announced $25 billion in stock buybacks. I wonder how much that’s worth to the CEO and his salary. Norfolk Southern, $10 billion. CSX, a 7% hike in its dividend. And BNSF is doing very well for Berkshire Hathaway. Do you suggest something that we can do with this egregious behavior?
Robert Primus: I have the same concerns as you. I look at the first quarter of this year and the service degradation, and instead of immediately after that quarter talking about how they are going to fix service to their customers, how they’re going to address concerns of their employees, they turned around and gave billions of dollars in stock buybacks to investors that probably won’t invest back into the network, especially when we need more investment in the network at this moment. Their capital expenditures, their investment in the network, is far less than the dividends or buybacks they’re giving these shareholders. There has to be a refocus of priorities. If there’s anything that we need to look at or need help on is these activist investors, these hedge funds that come in only for short-term gain. You can see it clearly. It’s played out the past several years. This is not the same investment group that the railroads have had in the past, who understand that in order to run a railroad correctly there has to be long-term growth, long-term investment, long-term interest, and I think you see that now.
DeFazio: It’s pretty clear in the law when we took over the obligation to carry passengers from the railroads that Amtrak is supposed to get preference, and of course, they don’t. It’s been litigated many times by the industry. What can we do there?
Karen Hedlund: We now have authority to examine on-time performance, which will of course implicate the issue of whether the railroads are giving them preference. And we expect we’re going to get a case fairly soon given the on-time performance percentages that Amtrak has reported for the past two quarters, for the past year. There’s only one long-distance line that was above 80%. The rest were well below. Some of the shorter lines were above 80%, but the long-distance lines do not perform well. We need to look into to that to see whether one of the issues that has come up is long [freight] trains. And they’re running trains that are longer than their sidings. So when there is a three-mile-long train in front of a little Amtrak train, the three-mile-long train may not be able to get out of the way for many, many, many miles.
Railroad Subcommittee Ranking Member Rick Crawford (R-Ariz.): Would you commit today to ensuring that the Board fully considers the impact of any potential regulations or determinations on the supply chain before taking any action?
Oberman: We of course do that every time we consider a regulation, but I have heard this argument made. I want to have the opportunity in answer to your question to tell you that the railroads could not possibly have screwed up the system any more than they’re doing on their own. There’s nothing we can do to make it worse. Right now, it is in terrible shape as has been indicated by members of the Committee and by everything we heard at our hearing. One reason why it takes some time for us to carefully enact regulation is to do just what you said, to make sure if we are going to enact new regulations such as reciprocal switching, it is done with care to solve problems, not create them. But a lot of what we hear from the railroads, in my view, are just excuses for what they’re doing inadequately.
Crawford: STB has expressed concern about competition in the rail industry. However, the last update to the study of competition in the U.S. freight rail industry commissioned by the Board was completed in 2010. Dynamics of the industry markets that the railroads serve have changed significantly over the past 12 years. Would each of you support the Board updating that study?
Oberman: I always welcome more data, more research; it’s always helpful. But I do not need a study to know that competition is woefully lacking in the rail industry.
Crawford: I get that Mr. Chairman; you made that point abundantly clear. But I’m asking the question, would you support updating that 12-year-old study?
Oberman: Sure. There’s no reason not to; it will give us more information.
Payne: I’m deeply troubled by the testimony I hear from both our hearing last month and STB’s recent hearing on freight rail service in the country. I am aware the STB recently took emergency action to require railroads to submit plans to recover service and report information. Can you elaborate on what concerned you the most from the testimony you heard?
Oberman: It would take a long time to tell you everything that concerned me the most. It was very, very troubling, but it does boil down to the pressures that the railroads that Chairman DeFazio alluded to cut resources. They’ve cut labor to below the bone really. They have thousands of locomotives mothballed, which slows down trains, involved [fewer] locomotives to move trains when they need to be moved. That’s the big picture, the overview that concerns me the most. And what sort of exacerbates the problem in my view is that … during the past year, reports from rail labor [say] that … in order to make up to the shortage of labor, they are overworking and abusing the workforces that they have—not enough days off, sudden announcements of their assignments, and so forth, so they are forcing a larger than usual number of people, long-term employees, literally leaving, so there’s not only a shortage of workers but you’re losing a tremendous amount of institutional knowledge. You could argue whether the pressure is only from outside, from Wall Street, or internal in the C-Suites. I think it’s joint. They realize there’s a way they can make short-term profits at the expense of the public.
Payne: How did that inform the Board’s unanimous decision to require corrective actions?
Oberman: It certainly eliminated any debate among us that strong corrective action was needed, and we acted with lightning speed by issuing an order just … 10 days after that hearing. It’s very far-reaching in terms of requiring much more detailed reporting of on-time performance, which we never really had, and we had been working on a longer-term rule, which we’re still working on, but we couldn’t wait. So we are requiring a certain amount of first-mile, last-mile reporting immediately, and we have ordered the four big U.S. railroads to give us recovery plans … and then report to our staff every two weeks over the next few months so we can monitor their progress.
Michelle Schultz: Just to echo Chairman Oberman’s comments, there were so many issues brought to our attention, they were all incredibly important. What comes to mind immediately were the challenges that I believe the agricultural products industry as well as the energy industries are experiencing at this time and the impact that’s having on other areas of the supply chain.
Hedlund: When I joined the Board in January, I never thought that I would be worrying about whether we’d be able to export enough grain to make up for the reduction to the world market in grain caused by the war in Ukraine, but that’s where we are.
Fuchs: First-mile/last mile service failures are missed switches. This is just before a shipper or receiver is about to [ship or] receive freight, and so it has a disproportionate impact on their operation, and that includes service failures for both grain and energy but across the entire network. That’s what concerns me most.
Primus: I’ve been alarmed at just how comprehensive service failures have become. It’s not limited to region; it’s not limited to one industry or one area. It is widespread, a national crisis, a national emergency, a national security emergency. You look at food prices going up. You look at the cost of energy, even coal to our coal-fired power plants. You lookat chemicals to water-treatment plants, shortages there. I think across the board, we’re in trouble, and I think we’ve got to raise this to a level to address that.
Railway Age Executive Editor Marybeth Luczak contributed to this story.
