STB prepares to hear from stakeholders on freight-rail growth
9/6/2024
By Julie Sneider, Senior Editor
Class Is, short lines, analysts, shippers, suppliers and other rail stakeholders are weighing in with their perspectives in advance of the Surface Transportation Board’s Sept. 16-17 public hearing on recent trends and growth strategies in the freight-rail industry.
Several organizations have filed written testimony and indicated they will be testifying in person at next week’s hearing, which will be held at the board’s Washington, D.C., headquarters and broadcast live on the board’s YouTube channel.
The STB asked executives from all Class Is to attend. Board members called the hearing because they want to “explore how industry participants are strategizing and innovating to ... achieve freight rail growth,” they said in a press release.
Following is a sampling of industry stakeholders who’ve already filed written statements with the board, which can be viewed under the “Filings” category on the STB website.
CPKC: PSR done ‘the right way’
CPKC Executive Vice President and Chief Marketing Officer John Brooks wrote that the company and its predecessors have collectively grown at a faster rate since 2018 than the rest of the Class Is put together. This fact was enabled by a regulatory environment that has been “predictable, fair and founded upon market principles” that supports competitive moves like the merger of Canadian Pacific and Kansas City Southern, a transaction that accelerated the railroad's growth, he said.
“In the first year of CPKC’s existence as a combined network, we have grown by helping customers meet their transportation needs through CPKC’s broader network reach and service focus, and in the process we have spurred other railroads to step up their competitive efforts,” Brooks’ written testimony states.
“PSR done the right way — the CPKC way — creates a virtuous cycle.” — John Brooks, CPKC Canadian Pacific Kansas CityCPKC initiatives to continue growth in the current economic environment include encouraging shippers to co-locate facilities in its terminals or next to its facilities and to expand the reach of the CPKC network through transloads and connections to short lines.
Brooks also addresses that its operating model, the CPKC version of precision scheduled railroading (PSR) is at the core of the railroad’s growth story. He explains how it helps attract new traffic and help existing customers expand their traffic on the CPKC network.
“PSR done the right way — the CPKC way — creates a virtuous cycle: a constant pursuit of operational and safety excellence enabled through optimizing processes across a rail network; controlling costs, improving asset utilization, and delivering predictable and reliable service for our customers,” states Brooks. “That, in turn, enables us to facilitate success for our customers in their markets, which in turn earns their trust and leads them to award us the opportunity for further growth. Those growth opportunities provide the business case for us to invest in capacity to support even more service offerings.”
Brooks’ entire written statement can be read here.
CSX: Employees are the No. 1 asset
Prior to joining CSX as president and CEO in 2022, Joe Hinrichs spent 30 years in the automotive industry, where he experienced rail service from the customer’s perspective.
“From my roles as a plant manager to president of Ford Motor Co.’s global automotive business, my experience with railroads was disappointing as it never felt like the railroads had an authentic customer-centric approach to doing business. Over the years I watched as we converted rail docks to truck docks and moved most of our parts by truck instead of rail," Hinrichs states in his written testimony.
That first-hand experience is key to Hinrichs now because it showed the opportunity at CSX to change its culture to become “authentically service-oriented and customer focused,” he says.
That starts with how the company treats its 23,000 employees, which Hinrichs says are the company’s most valuable asset.
“We believe that any successful service business relies on engaged, motivated and inspired employees,” Hinrichs says. “When our employees feel valued and empowered, they are more likely to go the extra mile to deliver efficient and exceptional service to our customers.”
“When our employees feel valued and empowered, they are more likely to go the extra mile to deliver efficient and exceptional service to our customers.” — Joe Hinrichs, CSX CSXFor ideas on what CSX can do to improve its work environment, the company surveys its front-line employees every year. From their responses — Hinrichs says he personally read over 11,000 comments — the company became the first to proactively address paid-sick leave for unionized CSX workers and became the only railroad that changed the attendance policy to excuse all absences for medical appointments.
Moreover, CSX has launched new training and development programs for employees; reinforced safety initiatives; continued to invest in capital expenditures to improve the network by increasing annual capex since 2019 from $1.7 billion to $2.5 billion; and increased strategic opportunities for growth.
Due to those and other efforts, CSX is seeing some results. In 2023, the company improved safety performance throughout the year; logged consistent and industry-leading service metrics; saw merchandise volume growth ahead of industrial production and solid coal volume growth, as well as “superior intermodal service performance,” according to Hinrichs’ statement.
And in second-quarter 2024, CSX posted saw quarter-over-quarter increases in revenue, operating income and earnings per share, he adds.
To read more of Hinrichs’ statement, click here.
BNSF: Intermodal is key to growth
BNSF Executive Vice President and Chief Marketing Officer Tom Williams’ written testimony tells the Class I’s growth story, including its efforts to expand the intermodal business, now BNSF’s largest and most truck-competitive segment.
Today, BNSF is North America’s largest intermodal and agricultural products rail carrier by a “significant margin,” he says. How it got there is the result of decades of consistent and strategic investments in its network and customer relationships.
The markets that drive BNSF’s volumes are intensely truck competitive, so it must remain “scrappy” in competing for business. Intermodal conversion remains core to the railroad’s growth strategy, Williams says.
Intermodal now represents about half of BNSF’s volume, with almost 2 million units of incremental growth since 1996.
“That is particularly notable given the intensely competitive nature of that market and how hard we need to compete on service performance, reliability, rate and customer experience to continue converting truck moves to rail,” Williams says. “This has only become more intense as competition has grown between rail carriers, motor carriers and even routing options for import containers via the Panama and Suez canals versus U.S. West Coast ports.”
To continue converting truck to rail, Williams says BNSF is investing in intermodal service by:
• logistics park expansion: Over the 10 years, BNSF has invested $1 billion in intermodal facility expansion and another $300 million on land acquisitions in support of our intermodal business. Those investments have helped BNSF handle an additional 3 million intermodal lifts over the past 10 years, and they are positioning the railroad to handle more going forward;
• the Barstow International Gateway. BNSF plans to invest $1.5 billion to build a 4,500-acre integrated rail intermodal facility in Barstow, California, which is expected to eliminate thousands of truck miles from California’s highways, reduce carbon emissions and expedite the speed at which BNSF customers can get their products to market; and
• Quantum, a new “white glove” door-to-door intermodal service created with partner J.B. Hunt.
To learn how BNSF intends to grow business beyond intermodal, click here to read Williams’ entire testimony.
GURR: STB must address NIMBY-ism
Grafton and Upton Railroad Co. (GURR) President Jon Delli Priscoli’s testimony addresses the regulatory obstacles to growth for short lines.
GURR owns and operates a 16.5-mile rail line that runs between a CSX connection in North Grafton, Massachusetts, and Milford, Massachusetts. It also operates a CSX-owned 8.4-mile extension of the GURR’s original line between Milford and Franklin.
Since 2008, the short line has experienced year-over-year volume growth has averaged between 10% and 15%. Over the past decade, GURR has invested millions of dollars to meet current and anticipated future business opportunities where the railroad competes head-to-head with long-haul trucking, his testimony states.
But there are regulatory elements that hurt GURR’s plans for growth. One Priscoli calls “NIMBY-ism,” or “not in my backyard”; the second is the need for timely resolution of proposed rail growth projects. In one case, GURR has tried for years to build a new transload facility in Hopedale, Massachusetts. If built, the facility would take thousands of trucks off the highway and enable GURR to better serve existing customers and attract new ones. But the project has been delayed for several years by local government actions, Priscoli says.
NIMBY-ism comes in, Priscoli believes, when local opponents of freight-rail service attend public hearings on projects and create political tension for local government leaders who feel obliged to reject projects that would enable freight-rail growth.
However, Priscoli says the STB has the authority to change this situation under 49 U.S.C. 10501(b) of the United States Code, which prevents states and localities from interfering with matters that are directly regulated by the STB. That includes rail growth projects, and therefore should be used for “swift resolution of most NIMBY-ism delays to railroad growth projects,” Priscoli says.
To read Priscoli’s entire testimony, click here.
NGFA: Some additional regs can help freight-rail grow
National Grain and Feed Association (NGFA) President and CEO Mike Seyfert’s testimony offered a shipper’s perspective. Seyfert notes that U.S. Department of Agriculture data shows that rail carries about 40% of U.S. grain to export terminals; barges carry 45%; and trucks carry 15%. The modes used have remained relatively the same for 40 years, with only truck slightly gaining share.
In the 1980s, rail moved over 40% of domestic grain, but that share has fallen to under 20%, Seyfert writes. The reasons, according to NGFA: railroad mergers made shorter hauls less common; and the grain industry has increased its own domestic processing capacity, with the plants built closer to the farms that grow the grain and trucks transporting it to those facilities.
Meanwhile, U.S. grain production has nearly doubled over the past 40 years, and the USDA projects that production will continue to grow over the next decade. Seyfert believes there’s room to grow market share for grain and grain products “through sustained efforts by the Class I railroads to improve service and become more cost-competitive" against other transportation modes.
Seyfert notes that all six Class Is are members of the NGFA; communication between those railroads and the shippers in the group has improved as of late. However, the shippers support the adoption of rules that would help the freight-rail industry become more efficient and competitive. The NGFA shipper members supported the STB’s recent adoption of reciprocal switching rules (something the Class Is have opposed) and believe the STB should adopt rules that would permit rail customers to levy financial penalties on railroads for “inefficient use of private rail cars,” Seyfert says. He also calls on the STB to further define standards under the common carrier obligation.
“To the extent the board can introduce reasonable incentives for both sides, our shipper/receiver members believe it would lead to more reliable freight-rail service and one could argue that freight-rail growth would follow,” he adds.
Seyfert’s entire written testimony can be read here.
