STB’s Oberman: Freight-rail industry needs ‘robust’ competition
7/14/2021
By Julie Sneider, Senior Associate Editor
Surface Transportation Board Chairman Martin Oberman told Midwest shippers yesterday that “serious concerns” remain about whether the nation’s major railroads have the resources necessary to respond to an economy that’s roaring back to life after a pandemic-induced recession.
Speaking at the Midwest Association of Rail Shippers (MARS) summer meeting in Lake Geneva, Wisconsin, Oberman said STB members have been closely monitoring the state of the freight railroad network — from both the shippers’ and carriers’ perspective — throughout the pandemic.
“When you consider the burdens imposed on the entire supply chain by the pandemic, I think the railroad and shipping industries did a great job of keeping everything afloat, keeping people fed and clothed,” Oberman said.
Nevertheless, “it’s not a secret” that some rail carriers across the network are having more difficulty than others, with problems such as crew and equipment shortages leading to service interruptions. In late May, Oberman asked the Class Is to provide him an update on their preparedness to meet service demand as the nation continues to recover economically from the pandemic.
Oberman: 'This is not a pandemic-only reported problem'
In his May 27 letter, Oberman expressed concern that recent rail service problems — as reported by some shippers — might relate to a broader trend of rail labor and other resource reductions Class Is have made over the past several years.
“I’d like to emphasize that this is not a pandemic-only reported problem,” Oberman told the MARS group. “The problem has been exacerbated over the past several years as [Class Is] have reduced their workforce and mothballed other resources — though some are now coming back. While everyone applauds efficiency — and I do — I am concerned that we may have stripped those resources down too far to keep the national rail network where it needs to be to rebuild the economy.”
His perspective has been shaped in part by the “impression” that Wall Street pressures railroad CEOs to continue lowering their companies’ operating ratios in order to help fund stock buy-backs and dividend payments.
“People talk to me about PSR (precision scheduled railroading). PSR has done a lot of good things, but PSR is only part of the picture,” Oberman said.
In other comments, Oberman noted that the STB now has a full five-member board, a status that comes at a good time as it faces a number of high-profile cases. The list includes CN’s application to combine with Kansas City Southern and Canadian Pacific’s motion against it, which Oberman noted is the most significant rail merger case in over 20 years.
“This is a massive undertaking,” Oberman said of the case. “Part of it involves applying a new set of merger rules that have never been applied before. There’s a tremendous amount of legal and factual work the board will be undertaking to process that whole matter.”
Other major cases now before the board include:
- Amtrak’s “unprecedented” petition to reinstate passenger service on the Gulf Coast, which involves “implementing a section of the Amtrak statute which has never before been the subject of a petition,” Oberman said;
- CSX’s application for regulatory approval to acquire Pan Am Railways; and
- Watco’s application to acquire some lines from CN in Wisconsin.
Meanwhile, on the rulemaking side is the Federal Railroad Administration's new final rule that sets metrics and minimum standards for intercity passenger-rail service. Under the statute, the STB is charged with enforcing those new standards, which took effect July 1.
Oberman has formed an internal working group to advise the board on setting up the resources and staff that will be needed to process on-time performance cases likely to come to the board starting in January 2022.
“Those are very heavy data matters and will require a great deal of analysis. I will be making an announcement soon as to how we will proceed so that we can hit the ground running when those cases come in,” he said.
Also on the STB’s docket: processing the board’s final rule on rate reform, and the “long-simmering rule on how or if we authorize reciprocal switching.”
Oberman told the group he was honored to be present in the White House late last week as President Biden signed an executive order (EO) on economic competition, which included a directive that the STB require freight railroads to provide rights of way to passenger rail and to strengthen their obligations to treat other freight companies fairly.
Oberman said he shares the concerns Biden outlined in his EO.
“This administration is quite serious about moving the economy forward and [having] more robust competition,” he said. “And some of you have heard me speak on this before: I have learned quickly that there are many parts of our country where there is not effective competition among rail carriers. The railroads frequently remind me that [the STB] should butt out and let the market regulate rates and service.”
But there has to be a competitive market for that to happen, Oberman added.
“To me, it’s far better if we have more competition in the shipping and freight industry so that we don't have to get involved,” he said. “That, really, is where I think our emphasis should be.”
