Class Is’ service problems aired at STB’s two-day hearing
4/28/2022
By Julie Sneider, Senior Associate Editor
(Editor’s note: This story is the first of two parts. Part 2 will feature the Class Is’ response.)
As if the seriousness of freight-rail service problems wasn’t evident enough to Surface Transportation Board members at the start of their two-day hearing this week, the image of U.S. Transportation Secretary Pete Buttigieg seated at the board’s witness table put an exclamation point on the occasion.
Buttigieg was the first person to testify at the April 26-27 hearing, which STB Chairman Martin Oberman called to address the flood of complaints about rail-service delays and other problems that have hurt shippers’ and customers’ ability to get their products to market.
"The fact that the secretary is here indicates the seriousness of the problems which have instigated this hearing,” Oberman said.
The hearing included perspectives on the extent of the problem, the railroads’ recovery plans and potential regulatory solutions. To that end, the board — days before the hearing — issued a notice of proposed rulemaking (NPRM) to amend its emergency service rules to provide relief for shippers in situations requiring immediate relief. The proposed rule would clarify that the STB may act on its own initiative to direct emergency rail service and establish an accelerated process for acute service emergencies.
Over the past year, the board has heard informally from a range of stakeholders about inconsistent and unreliable rail service. In recent weeks, service has become even more unreliable, with most stakeholder concerns focusing on crew shortages and inability to move trains, STB officials said in explaining their rationale for the NPRM.
Buttigieg: Freight rail is ‘indispensable’
During his April 26 testimony, Buttigieg noted the “indispensable” role freight-rail service plays in the nation’s supply chain and overall economy.
“With the right federal oversight, rail is a safe, reliable way to move goods, and it has a lower carbon footprint than most alternatives,” Buttigieg said. “The industry itself is profitable and has historically reinvested its profits back into its networks and employees — most of whom are union members — allowing it to remain self-sustaining.”
Yet, challenges have emerged, some of which have been years in the making, he said.
“The supply-chain crisis has left us moving more goods with a smaller workforce, leading to higher costs and longer delays,” Buttigieg said. “American freight rail has lost a significant amount of its market share as well as its workforce, which has been cut 20% when compared to before the pandemic.”
The share of intermodal rail traffic also has declined, and service issues have mounted.
“It’s been a real problem for people and industries who rely on rail to move their goods — particularly for farmers, many of whom have no other adequate way to access feed and fertilizer, or get their goods to market,” the secretary added.
Confronting supply-chain challenges requires several solutions, the first of which is addressing turnover among rail workers, “which presents both safety and workforce concerns,” Buttigieg said, adding that the USDOT is investing in training programs and workforce development through the new federal Infrastructure Investment and Jobs Act.
Another way to resolve rail-service problems is through better data collection and sharing between different links in the supply chain. Many of those links use different systems of data collection and don’t share that information with each other, he said.
Furthermore, Buttigieg called on the board to find ways to incentivize railroads to provide better service.
“We know that the board will require improvement plans from each of the railroads,” he said. “We ask that the board also require those improvement plans to take into account both the need for a larger workforce and the impact on employees of expanding service without expanding the workforce.”
The reduction in the rail workforce over the past several years — both during the pandemic and while the Class Is adopted new precision-scheduled railroad (PSR) operating plans — was a point raised by Oberman and many witnesses testifying over the two-day period. According to Oberman, the Class Is collectively have cut their workforce by 29% — or about 45,000 people — over the past six years.
“In my view, all of this has directly contributed to where we are today – rail users experiencing serious deteriorations in rail service because, on too many parts of their networks, the railroads simply do not have a sufficient number of employees,” Oberman said.
From shipper groups to rail unions to other industry stakeholders, the shrinking workforce caused by furloughs, retirement and attrition — particularly among train and engine (T&E) employees who drive and operate the trains — was cited as a cause for rail service delays and other problems.
USDA: Poor service leaves farmers struggling
Immediately after Buttigieg spoke, U.S. Deputy Secretary of Agriculture Jewel Bronaugh testified on the economic problems that farmers, ranchers and consumers face as a result of poor freight-rail service.
“Unfilled grain car orders are at the highest on record, highlighting how poor rail service has halted the movement of grain." — Deputy Secretary Jewel Bronaugh, U.S. Department of Agriculture usda.gov“Because agricultural shippers operate on thin margins and in hyper-competitive global markets, efficient and reliable rail service is essential,” said Bronaugh. “When railroads charge unreasonable rates and provide poor service, farmers struggle to make ends meet, consumers pay higher prices at the grocery store and the United States becomes less competitive on the global market.”
In recent months, the number of rail-service complaints to the U.S. Department of Agriculture have grown in number and urgency.
“Unfilled grain car orders are at the highest on record, highlighting how poor rail service has halted the movement of grain,” she said. “Agricultural shippers are paying thousands of dollars extra per car just to get service, easily representing a 50% to 100% increase in cost. Elevators are full and cannot purchase more from farmers and livestock operations are unable to receive the grain that they need for feed. We've even heard that some producers have been so close to being unable to feed their livestock and poultry that they were preparing to depopulate their animals.”
The STB has a responsibility to “course-correct” railroads by focusing on fulfilling their common carrier obligation, Bronaugh said. Under the federal common carrier obligation statute, railroads must provide transportation or service upon reasonable request. They may not refuse to provide service just because doing so would be inconvenient or unprofitable.
USDA officials hope the STB will come up with immediate- and long-term solutions to the rail-service situation, Bronaugh said.
“We appreciate the board’s recent decision to update the emergency service rules, which will enable shippers to more quickly and directly get relief when they aren’t receiving adequate service,” she said. “USDA also appreciates that the STB requests that railroads provide detailed plans to improve service and share their expected time for recovery.”
Bronaugh urged the board to collect weekly service improvement reports from the railroads “to ensure they follow through with their plans.”
And like Buttigieg, Bronaugh asked the board to use its authority in the short term to incentivize railroads to provide better service. That solution should include finalizing the proposed reciprocal switching rule, and the board should consider penalties for the inefficient use of privately owned rail cars, she said.
“We cannot continue to have a system where the railroads face no consequences for providing unpredictable service, and shippers and ultimately farmers, ranchers and the American public pay for it when it goes wrong,” said Bronaugh.
Suggested solutions: More rail regs, workers
Rail customers testifying included National Grain and Feed Association President and CEO Mike Seyfert, whose association represents grain shippers. In an April 21 letter to the board, the NGFA and 32 other members of the Agricultural Transportation Working Group suggested several measures the board can take to address current rail service problems and prevent future problems of the current magnitude. Among their suggestions: Adopt reciprocal switching rules that would allow shippers served by just one railroad to request bids from a nearby competing railroad.
Also testifying was American Chemistry Council President and CEO Chris Jahn, who told the board members that rail service problems are harming chemical manufacturers’ production and magnifying supply-chain problems. But rail-service troubles are not solely due to the pandemic’s impact, he said.
“Years of railroad decisions to cut staff, eliminate switch yards, and slash customer service resources have gutted network resilience, making service crises like this one entirely predictable, if not inevitable,” Jahn said.
Jahn asked the board to require railroads to report “meaningful data” on first-mile-last-mile service, impose greater accountability for service failures and adopt reciprocal switching rules to promote rail-to-rail competition.
Executives representing several rail unions spoke of the impact workforce reductions have had on rail service, on the workers themselves and on the subsequent labor shortage.
“While the elimination of jobs across all crafts of the freight-rail network has undoubtedly contributed to operational breakdowns and service degradation, TTD notes that a number of shippers have specifically cited a lack of available crews as a major component of reduced service quality,” said Greg Regan, president of the Transportation Trades Department, AFL-CIO, in written testimony.
In the five years before the pandemic, BNSF Railway Co. reduced its T&E workforce by 27%; Norfolk Southern Railway cut 24% of such employees; Union Pacific Railroad cut 32%; and CSX cut 43% of its engineer and conductor jobs, Regan stated.
Those cuts came as the Class Is transitioned to PSR, Regan and other labor leaders pointed out.
Brotherhood of Locomotive Engineers and Trainmen National Vice President Mark Wallace told the STB that customer service at the railroads has suffered, and train crew employees are resigning at unprecedented levels because of PSR-related policies.
“There’s a culture of profits over safety as railroads have become controlled by hedge fund speculators,” Wallace said. “It’s the business model that’s impacting service.”
(Up next: The Class Is respond.)
