AAR's Jefferies on 2024: High hopes for more growth, less tumult
12/21/2023
By Jeff Stagl, Managing Editor
It’s been a very active year, but more of a rough one than a good one, for the rail industry in 2023.
That’s how Association of American Railroads (AAR) President and CEO Ian Jefferies characterizes what’s transpired for U.S. railroads over the past 12 months.
There have been a number of challenges, such as negotiating new national contracts with rail labor unions, lobbying against proposed legislation and regulations that could negatively impact the industry and continuing to deal with a soft economy that’s impeded traffic growth. Yet, railroads have found ways to navigate the often-choppy waters.
“Railroads have shown their resilience this year, making their way through the ups and downs,” Jefferies says.
For example, the roads have hammered out labor contracts that include sick leave and address some quality-of-life issues, and changed their recruiting/hiring practices to attract young workers.
“They are trying to develop a workplace that better suits modern employees,” Jefferies says.
Railroads also have faced a lot of action in Washington, D.C., this year. For one, the Surface Transportation Board (STB) was very engaged, Jefferies says.
“The board knew what the priorities are and addressed them in a way that focused on a consensus. The STB deserves credit for that,” he says.
In addition, the Federal Railroad Administration was highly active with issuing new or revised regulations and a number of rail-related bills were introduced on Capitol Hill. Among them: the Rail Safety Act of 2023, which was drafted in response to Norfolk Southern Railway’s troubling Feb. 3 derailment in East Palestine, Ohio.
“All railroads are trying to be prepared for the unpredictable,” says Jefferies about 2024. He also was a speaker at the 2022 RailTrends conference (shown). Jeff Stagl“No one in January could have predicted how safety would become front and center this year,” says Jefferies. “Now, safety has been taken up on the Hill.”
The year is drawing to a close with another hard-to-predict matter stemming from D.C.: U.S. Customs and Border Protection (CPB) on Dec. 17 temporarily suspended freight-train operations at rail border crossings in El Paso and Eagle Pass, Texas, because of a surging number of migrants entering the United States. The CPB had issued a similar suspension in September.
The move immediately impacted BNSF Railway Co.’s and Union Pacific Railroad’s operations into and out of Mexico, as well as their customers’ transportation needs. But it ultimately has much broader implications since all railroads interchange goods across the North American rail network, according to the AAR. The longer the closure is in effect, the more difficult it will be for cross-border trade to resume.
Since railroads have worked closely with their partners in both the United States and Mexico to create an effective and efficient screening process, the suspension isn’t warranted, AAR officials believe. It’s vital the nation’s supply chain is safeguarded from disruptions, says Jefferies.
“We need strong supply-chain security for the millions of loads crossing the borders,” he says.
[Editor's note: The CPB reopened the rail border crossings the afternoon of Dec. 22.]
Getting ready for potential growth
Looking ahead to 2024, Jefferies hopes for fewer disruptions and more growth.
“Railroads are trying to work through the economic cycles and grow market share in intermodal,” he says. “They have done a lot over the past year to be better positioned and be ready when the opportunity to grow volumes is there.”
If there is any progress on passing economic-related legislation, it needs to be based on data and accurate principles, Jefferies believes.
“We have a big impact on the broad economy, and it tends to go as we go,” he says.
Many of the Class Is are aiming to make a better go of it with building intermodal business by introducing new joint services with other large roads or service providers. Those efforts could pay dividends next year.
“They are trying to be hyper-competitive and shorten the distances they can compete on. We are real excited about that,” says Jefferies. “Railroads will continue to try and improve service.”
The AAR also is encouraged about how the STB is pursuing a new reciprocal switching rule. In September, the board proposed a new set of regulations governing reciprocal switching agreements to address inadequate rail service that will be determined using objective standards based on a railroad’s original estimated time of arrival, transit time and first-/last-mile service.
“They threw out the 2016 rule and have shown they are willing to churn through it with a consensus-type product,” Jefferies says. “The STB has been clear they want to wrap it up by the second quarter.”
What also could energize railroads in 2024 is smart environmental regulations. Policies that seek to reduce greenhouse-gas emissions should leverage market-based competition, be grounded in data and be established through a cooperative approach involving all stakeholders, the AAR believes.
What such regulations shouldn’t do is set unreasonable deadlines, such as a first-of-its-kind state regulation enacted by California in April. The rule will ban locomotive engines that are more than 23 years old by 2030 and require locomotives in the state to not idle longer than 30 minutes if they’re equipped with an automatic shutoff device. The regulation also calls for an increase in the use of zero-emissions technology to transport freight from California ports and throughout rail yards in the state.
But there is no clear path or timeline for a transition to alternate locomotives and adoption of zero-emission technologies, says Jefferies.
“All railroads are working on ways to use alternative fuel sources. That will take a certain amount of time to do — you can’t just flip a switch,” he says.
It’ll also take time in 2024 for the National Transportation Safety Board to complete its investigation of the NS derailment in East Palestine. It appears rail safety will continue to be under the microscope next year, Jefferies says.
“We all will be interested in the investigation results. With rail safety legislation, it’s an opportunity to make sound policy,” he says.
Jefferies biggest hope for next year? That 2024 isn’t anywhere near as tumultuous as the past six years have been.
“All railroads are trying to be prepared for the unpredictable,” he says. “They can be nimble and be flexible where needed.”
