Stakeholder Views on Surface Transportation Board Reauthorization (Hearing, 2022)
Summary
The printed record of a remote hearing (117-42) before the Subcommittee on Railroads, Pipelines, and Hazardous Materials of the Committee on Transportation and Infrastructure, House of Representatives, dated March 8, 2022, on stakeholder views on Surface Transportation Board reauthorization. The staff summary of subject matter states that the purpose is to learn from railroad stakeholders about the Board's role in regulating the freight railroad industry. Witnesses include Chris Jahn of the American Chemistry Council, Dennis Newman of Amtrak, Ian Jefferies of the Association of American Railroads, Dennis R. Pierce of the Brotherhood of Locomotive Engineers and Trainmen, Brad Hildebrand and Herman Haksteen of the Private Railcar Food and Beverage Association.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
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“Stakeholder Views on Surface Transportation Board Reauthorization (Hearing, 2022).”
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[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
STAKEHOLDER VIEWS ON SURFACE TRANSPORTATION BOARD REAUTHORIZATION
=======================================================================
(117-42)
REMOTE HEARING
BEFORE THE
SUBCOMMITTEE ON RAILROADS, PIPELINES,
AND HAZARDOUS MATERIALS
OF THE
COMMITTEE ON
TRANSPORTATION AND INFRASTRUCTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
__________
MARCH 8, 2022
__________
Printed for the use of the
Committee on Transportation and Infrastructure
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Available online at: https://www.govinfo.gov/committee/house-
transportation?path=/browsecommittee/chamber/house/committee/
transportation
______
U.S. GOVERNMENT PUBLISHING OFFICE
47-959PDF WASHINGTON : 2022
COMMITTEE ON TRANSPORTATION AND INFRASTRUCTURE
PETER A. DeFAZIO, Oregon, Chair
SAM GRAVES, Missouri ELEANOR HOLMES NORTON,
DON YOUNG, Alaska District of Columbia
ERIC A. ``RICK'' CRAWFORD, Arkansas EDDIE BERNICE JOHNSON, Texas
BOB GIBBS, Ohio RICK LARSEN, Washington
DANIEL WEBSTER, Florida GRACE F. NAPOLITANO, California
THOMAS MASSIE, Kentucky STEVE COHEN, Tennessee
SCOTT PERRY, Pennsylvania ALBIO SIRES, New Jersey
RODNEY DAVIS, Illinois JOHN GARAMENDI, California
JOHN KATKO, New York HENRY C. ``HANK'' JOHNSON, Jr.,
BRIAN BABIN, Texas Georgia
GARRET GRAVES, Louisiana ANDRE CARSON, Indiana
DAVID ROUZER, North Carolina DINA TITUS, Nevada
MIKE BOST, Illinois SEAN PATRICK MALONEY, New York
RANDY K. WEBER, Sr., Texas JARED HUFFMAN, California
DOUG LaMALFA, California JULIA BROWNLEY, California
BRUCE WESTERMAN, Arkansas FREDERICA S. WILSON, Florida
BRIAN J. MAST, Florida DONALD M. PAYNE, Jr., New Jersey
MIKE GALLAGHER, Wisconsin ALAN S. LOWENTHAL, California
BRIAN K. FITZPATRICK, Pennsylvania MARK DeSAULNIER, California
JENNIFFER GONZALEZ-COLON, STEPHEN F. LYNCH, Massachusetts
Puerto Rico SALUD O. CARBAJAL, California
TROY BALDERSON, Ohio ANTHONY G. BROWN, Maryland
PETE STAUBER, Minnesota TOM MALINOWSKI, New Jersey
TIM BURCHETT, Tennessee GREG STANTON, Arizona
DUSTY JOHNSON, South Dakota COLIN Z. ALLRED, Texas
JEFFERSON VAN DREW, New Jersey SHARICE DAVIDS, Kansas, Vice Chair
MICHAEL GUEST, Mississippi JESUS G. ``CHUY'' GARCIA, Illinois
TROY E. NEHLS, Texas ANTONIO DELGADO, New York
NANCY MACE, South Carolina CHRIS PAPPAS, New Hampshire
NICOLE MALLIOTAKIS, New York CONOR LAMB, Pennsylvania
BETH VAN DUYNE, Texas SETH MOULTON, Massachusetts
CARLOS A. GIMENEZ, Florida JAKE AUCHINCLOSS, Massachusetts
MICHELLE STEEL, California CAROLYN BOURDEAUX, Georgia
KAIALI`I KAHELE, Hawaii
MARILYN STRICKLAND, Washington
NIKEMA WILLIAMS, Georgia
MARIE NEWMAN, Illinois
TROY A. CARTER, Louisiana
Subcommittee on Railroads, Pipelines, and Hazardous Materials
DONALD M. PAYNE, Jr., New Jersey,
Chair
ERIC A. ``RICK'' CRAWFORD, Arkansas TOM MALINOWSKI, New Jersey
SCOTT PERRY, Pennsylvania SETH MOULTON, Massachusetts
RODNEY DAVIS, Illinois MARIE NEWMAN, Illinois
MIKE BOST, Illinois STEVE COHEN, Tennessee
RANDY K. WEBER, Sr., Texas ALBIO SIRES, New Jersey
DOUG LaMALFA, California ANDRE CARSON, Indiana
BRUCE WESTERMAN, Arkansas FREDERICA S. WILSON, Florida
BRIAN K. FITZPATRICK, Pennsylvania JESUS G. ``CHUY'' GARCIA, Illinois
TROY BALDERSON, Ohio MARILYN STRICKLAND, Washington,
PETE STAUBER, Minnesota Vice Chair
TIM BURCHETT, Tennessee GRACE F. NAPOLITANO, California
DUSTY JOHNSON, South Dakota HENRY C. ``HANK'' JOHNSON, Jr.,
TROY E. NEHLS, Texas Georgia
MICHELLE STEEL, California DINA TITUS, Nevada
SAM GRAVES, Missouri (Ex Officio) JARED HUFFMAN, California
STEPHEN F. LYNCH, Massachusetts
JAKE AUCHINCLOSS, Massachusetts
TROY A. CARTER, Louisiana
PETER A. DeFAZIO, Oregon (Ex
Officio)
CONTENTS
Page
Summary of Subject Matter........................................ vii
STATEMENTS OF MEMBERS OF THE COMMITTEE
Hon. Peter A. DeFazio, a Representative in Congress from the
State of Oregon, and Chair, Committee on Transportation and
Infrastructure, opening statement.............................. 1
Prepared statement........................................... 3
Hon. Eric A. ``Rick'' Crawford, a Representative in Congress from
the State of Arkansas, and Ranking Member, Subcommittee on
Railroads, Pipelines, and Hazardous Materials, opening
statement...................................................... 4
Prepared statement........................................... 4
Hon. Donald M. Payne, Jr., a Representative in Congress from the
State of New Jersey, and Chair, Subcommittee on Railroads,
Pipelines, and Hazardous Materials, prepared statement......... 75
Hon. Sam Graves, a Representative in Congress from the State of
Missouri, and Ranking Member, Committee on Transportation and
Infrastructure, prepared statement............................. 76
WITNESSES
Chris Jahn, President and Chief Executive Officer, American
Chemistry Council, oral statement.............................. 5
Prepared statement........................................... 7
Dennis Newman, Executive Vice President of Strategy, Planning,
and Accessibility, National Railroad Passenger Corporation
(Amtrak), oral statement....................................... 9
Prepared statement........................................... 11
Ian Jefferies, President and Chief Executive Officer, Association
of American Railroads, oral statement.......................... 16
Prepared statement........................................... 17
Dennis R. Pierce, National President, Brotherhood of Locomotive
Engineers and Trainmen, oral statement......................... 28
Prepared statement........................................... 30
Brad Hildebrand, Member, National Industrial Transportation
League, and Former Vice President, Cargill--Global Rail and
Barge Lead, oral statement..................................... 33
Prepared statement........................................... 35
Herman Haksteen, President, Private Railcar Food and Beverage
Association, oral statement.................................... 38
Prepared statement........................................... 40
SUBMISSIONS FOR THE RECORD
Submissions for the Record by Hon. Donald M. Payne, Jr.:
Statement of the Brotherhood of Maintenance of Way Employes
Division/IBT; Brotherhood of Railroad Signalmen;
International Association of Sheet Metal, Air, Rail and
Transportation Workers Mechanical Division; and National
Conference of Firemen and Oilers, 32BJ/SEIU................ 76
Letter of March 4, 2022, from Sean O'Neill, Senior Vice
President of Government Affairs, Portland Cement
Association................................................ 81
Statement of Emily Regis, Vice President, Freight Rail
Customer Alliance.......................................... 83
Letter of March 8, 2022, from Corey Rosenbusch, The
Fertilizer Institute....................................... 91
Post-Hearing Comments From Witness Brad Hildebrand........... 94
Letter of March 7, 2022, from Michael Johnson, President and
Chief Executive Officer, National Stone, Sand, and Gravel
Association................................................ 96
Letter of March 8, 2022, from Chet M. Thompson, President and
Chief Executive Officer, American Fuel and Petrochemical
Manufacturers, Submitted for the Record by Hon. Randy K. Weber,
Sr............................................................. 97
APPENDIX
Questions to Dennis Newman, Executive Vice President of Strategy,
Planning, and Accessibility, National Railroad Passenger
Corporation (Amtrak), from:
Hon. Donald M. Payne, Jr..................................... 101
Hon. Eric A. ``Rick'' Crawford............................... 101
Hon. Jesus G. ``Chuy'' Garcia................................ 104
Questions to Dennis R. Pierce, National President, Brotherhood of
Locomotive Engineers and Trainmen, from:
Hon. Jesus G. ``Chuy'' Garcia................................ 104
Hon. Eric A. ``Rick'' Crawford............................... 105
Question from Hon. Eric A. ``Rick'' Crawford to Brad Hildebrand,
Member, National Industrial Transportation League, and Former
Vice President, Cargill--Global Rail and Barge Lead............ 106
Questions from Hon. Eric A. ``Rick'' Crawford to Herman Haksteen,
President, Private Railcar Food and Beverage Association....... 107
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
March 2, 2022
SUMMARY OF SUBJECT MATTER
TO: Members, Subcommittee on Railroads, Pipelines,
and Hazardous Materials
FROM: Staff, Subcommittee on Railroads, Pipelines, and
Hazardous Materials
RE: Stakeholder Views on Surface Transportation Board
Reauthorization
PURPOSE
The Subcommittee on Railroads, Pipelines, and Hazardous
Materials will meet on Tuesday, March 8, 2022, at 10:00 a.m. in
2167 Rayburn House Office Building and via Zoom to hold a
hearing titled ``Stakeholder Views on Surface Transportation
Board Reauthorization.'' The purpose of this hearing is to
learn from railroad stakeholders about the Surface
Transportation Board's role in regulating the freight railroad
industry. Participants in the hearing include the American
Chemistry Council, Amtrak, the Association of American
Railroads, the Brotherhood of Locomotive Engineers and
Trainmen, the National Industrial Transportation League, and
the Private Railcar Food and Beverage Association.
BACKGROUND
I. THE SURFACE TRANSPORTATION BOARD
The Surface Transportation Board (STB or Board) is the
economic regulator of freight railroads \1\, which carry one
third of the nation's freight.\2\ The STB is a five-member
independent agency whose members are appointed by the President
with the advice and consent of the Senate, serving staggered
five-year terms. Currently, all five members are installed
(three Democrats and two Republicans). The STB's predecessor,
the Interstate Commerce Commission (ICC), was created in 1887
by the Interstate Commerce Act.\3\ The STB was created by the
ICC Termination Act of 1995 (ICCTA) to maintain federal
economic oversight of rail carriers.\4\ Congress last
reauthorized the STB in the Surface Transportation Board
Reauthorization Act of 2015 through Fiscal Year 2020.\5\
---------------------------------------------------------------------------
\1\ Congressional Research Service, ``The Surface Transportation
Board (STB): Background and Current Issues.'' January 19, 2022
(R47013).
\2\ U.S. Department of Transportation, Pocket Guide to
Transportation 2019, Page 3.
\3\ P.L. 49-41.
\4\ P.L. 104-88.
\5\ P.L. 114-110.
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The STB's jurisdiction includes overseeing and monitoring
railroad commercial practices nationally; enforcing the
railroads' common carrier obligations; evaluating challenges to
the reasonableness of rail rates; reviewing proposed railroad
mergers; ensuring rail carriers provide fair employee
protective arrangements in certain transactions; monitoring
rail carriers to ensure they are able to earn revenues that are
adequate for the infrastructure and investment needed to meet
the present and future demand for rail services; investigating
rail service matters of regional and national significance;
authorizing construction, operation, discontinuance, and
abandonment of rail lines and service; and more recently,
passenger rail regulation.\6\
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\6\ STB also has jurisdiction over certain trucking company, moving
van, and noncontiguous ocean shipping company rate matters; certain
intercity passenger bus company structure, financial, and operational
matters; and rates and services of certain pipelines not regulated by
the Federal Energy Regulatory Commission. https://www.stb.gov/about-
stb/.
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In 2005, Congress asked the National Academy of Sciences to
conduct a comprehensive study of the nation's railroad
transportation system since the enactment of the Staggers Rail
Act of 1980. The study [was to] address and make
recommendations on--
``(1) the performance of the Nation's major railroads
regarding service levels, service quality, and rates;
(2) the projected demand for freight transportation over the
next two decades and the constraints limiting the railroads'
ability to meet that demand;
(3) the effectiveness of public policy in balancing the need
for railroads to earn adequate returns with those of shippers
for reasonable rates and adequate service; and
(4) the future role of the Surface Transportation Board in
regulating railroad rates, service levels, and the railroads'
common carrier obligations, particularly as railroads may
become revenue adequate.'' \7\
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\7\ P.L. 109-59. Sec. 9007.
These core considerations remain relevant to the
reauthorization of the STB.
II. RAILROAD SHIPPERS
Railroad shippers range from large, multi-national
corporations to small operations. They also vary in the
commodities they ship, such as corn, wheat, and soybeans;
fertilizers, and various chemicals; cement, sand, and crushed
stone; lumber, pulp, and paper products; various food products;
crude oil, coal, and other petroleum and energy products; and
scrap recycling products, among others.
Rail carriers have a common carrier obligation to quote
rates and provide service to shippers upon reasonable
request.\8\ Carriers also must maintain reasonable connections
with adjacent rail carriers' networks to allow for the free
flow of rail traffic. When a route involves more than one
carrier, the carriers may participate in a joint rate to
collect a single combined price from the shipper for the
transportation being provided.\9\
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\8\ 49 U.S.C. 11101.
\9\ 49 USC 10705.
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Numerous commodities are exempt from STB's regulations
governing the provision of common carrier service, maintenance
of reasonable practices and rates, and provision of adequate
service. Exempt commodities include a range of agricultural
products, such as fresh fish and meat, cheese and special dairy
products, as well as other commodities, including lumber or
wood products, chemical waste, and coke produced from coal,
among others.\10\ The Board is permitted to exempt commodities
when there is sufficient transportation competition to protect
shippers from market manipulation, and it may also revoke
exemptions when it finds that regulation is necessary to carry
out the Rail Transportation Policy.\11\
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\10\ 49 CFR part 1039.
\11\ 49 USC 10502.
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According to some shippers, an estimated 78 percent of
freight rail customers are ``captive'' to or dependent on a
single major railroad (i.e., that there is no intramodal
competition).\12\ While only served by a single major railroad
and depending on the movement, some shippers can use other
modes, such as truck or barge, to transport their products
(intermodal competition). A shipper may not challenge a rail
rate unless it is without feasible transportation alternatives.
Whether a shipper has feasible transportation alternatives, in
the form of intramodal or intermodal competition, is a
qualitative analysis undertaken by the STB in a particular
case.\13\
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\12\ Freight Rail Customer Alliance, https://railvoices.org/the-
issue/rail-dependent-shipper/.
\13\ Surface Transportation Board, prepared by InterVISTAS
Consulting, Inc. ``An Examination of the STB's Approach to Freight Rail
Rate Regulation and Options for Simplification,'' September 2016.
https://www.stb.gov/wp-content/uploads/STB-Rate-Regulation-Final-
Report.pdf
---------------------------------------------------------------------------
Numerous shippers have purchased or lease their own rail
equipment since Staggers.\14\ According to The Official Railway
Equipment Register and as outlined in the chart below, in 2019
nearly 70% of railcars were privately owned by rail customers,
rather than the railroads.\15\
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\14\ PSR and the rail car: Commentary by Richard Kloster.
Progressive Railroading. February 2019.
\15\ The Official Rail Car Register, April 2019. https://
www.progressiverailroading.com/resources/editorial/2019/PR0819-
CarOwners.jpg
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Breakdown of Rail Car Ownership in North America
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
A. SHIPPING RATES
Since the Staggers Rail Act of 1980 (Staggers), the STB is
authorized to set a ``reasonable'' maximum price for common
carriage, but only in response to customer complaints and only
in cases where the railroad company is ``market dominant''--
that is, where no other economically viable transportation
option exists.\16\ The STB adjudicates rate reasonableness only
for rates that exceed a minimum jurisdictional threshold
established in statute of 180 percent of revenue to variable
cost.\17\ In acting as adjudicator, the STB seeks to determine
the fair rate based on balancing the goal of protecting
shippers from unreasonably high rates with the goal of
railroads having as much pricing flexibility as possible to
earn adequate revenues to attract private capital and reinvest
in their networks.\18\
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\16\ Congressional Research Service, ``The Surface Transportation
Board (STB): Background and Current Issues.'' January 19, 2022
(R47013).
\17\ 49 U.S.C. Sec. 10707(d)(2): ``A finding by the Board that a
rate charged by a rail carrier results in a revenue-variable cost
percentage for the transportation to which the rate applies that is
equal to or greater than 180 percent does not establish a presumption
that (A) such rail carrier has or does not have market dominance over
such transportation; or (B) the proposed rate exceeds or does not
exceed a reasonable maximum.
\18\ Congressional Research Service, ``The Surface Transportation
Board (STB): Background and Current Issues.'' January 19, 2022
(R47013).
---------------------------------------------------------------------------
A shipper seeking to challenge a rate must file an
administrative complaint with the STB. In January 2018, the STB
established the Rate Reform Task Force to recommend
improvements to the existing rate review processes for both
small and large cases, and to propose new rate review
methodologies to reflect the current state of the industry.\19\
In its April 2019 report to the STB, the Task Force wrote that
many small shippers find rate cases too complex and/or too
costly to pursue.\20\ This finding echoed the same finding from
a 2015 Transportation Research Board panel.\21\ In November
2021, while not yet final, the STB advanced two rulemakings to
establish rate reasonableness processes for small rate
disputes: a voluntary arbitration program for small rate
disputes, and a final offer rate review procedure.\22\
---------------------------------------------------------------------------
\19\ Surface Transportation Board, ``Surface Transportation Board
Releases Report from the Rate Reform Task Force,'' April 2019. https://
www.stb.gov/news-communications/latest-news/pr-19-06/
\20\ Rate Reform Task Force, Report to the Surface Transportation
Board, April 25, 2019, page 9.
\21\ Transportation Research Board Special Report 318: Modernizing
Freight Rail Regulation, June 2015, https://onlinepubs.trb.org/
onlinepubs/sr/sr318highlights.pdf
\22\ Surface Transportation Board, https://www.stb.gov/news-
communications/latest-news/pr-21-47/
---------------------------------------------------------------------------
From 1996 to the present, 51 rate cases were brought before
the STB. Of those cases, 27 settled; 11 were found to have
unreasonable rates; 11 were found to have reasonable rates; and
2 were withdrawn.\23\ No rate cases have been filed for the
last three years.\24\ At the same time, a commensurate number
of informal complaints have been filed.\25\
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\23\ Surface Transportation Board, Quarterly Status of Rate
Complaint Cases Before the STB, Report-on-Rate-Case-Review-Metrics-
Fourth-Quarter-December-31-2021.pdf (stb.gov), page 2.
\24\ Id.
\25\ Surface Transportation Board, Quarterly Report on Formal and
Informal Service Complaints, https://www.stb.gov/wp-content/uploads/
Report-on-Formal-and-Informal-Service-Complaints-4Q-December-31-
2021.pdf
---------------------------------------------------------------------------
Since the enactment of Staggers, railroads have been
allowed to enter voluntary rate contracts with shippers to
provide service on specific terms and conditions.\26\ With very
limited exceptions, contract rates are not subject to STB
jurisdiction and do not require equal treatment of similarly
situated shippers as common carrier rates do.\27\
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\26\ P.L. 96-448.
\27\ Id.
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B. RECIPROCAL SWITCHING
Under reciprocal switching, an incumbent rail carrier
transports a shipper's traffic to an interchange point where
the cars are switched to a competing carrier. The competing
carrier pays the incumbent carrier a switching fee for bringing
(or taking) the cars from the shipper's facility to the
interchange point (or vice versa). That fee is incorporated
into the competing carrier's total rate to the shipper.\28\ In
doing so, a competing carrier can offer a single-line rate even
if its lines do not physically reach a shipper's facility,
thereby establishing a competing rate.\29\ Reciprocal switching
may also be called ``competitive switching'' by shippers or
``forced access.'' Reciprocal switching is known as
``interswitching'' in Canada.\30\
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\28\ Surface Transportation Board Federal Register Notice,
Reciprocal Switching, 87 Fed. Reg. 62 (January 2, 2022) https://
www.federalregister.gov/documents/2022/01/03/2021-28396/reciprocal-
switching.
\29\ Surface Transportation Board, Petition For Rulemaking To Adopt
Revised Competitive Switching Rules, Decision, Docket No. EP 711 (Sub-
No. 1) Reciprocal Switching, Service Date July 27, 2016, Page 2.
\30\ Marsh, Joanna. ``The Itch to Switch: Railroad Swapping in
Canada vs. the U.S.'' FreightWaves, August 24, 2021. https://
www.freightwaves.com/news/the-itch-to-switch-railroad-swapping-in-
canada-vs-the-us
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Staggers authorized the STB to require rail carriers to
enter reciprocal switching agreements under certain
circumstances.\31\ In 1985, the ICC adopted regulations
specifying that reciprocal switching would only be prescribed
if the agency determines it is necessary to remedy or prevent
an act that is contrary to the competition policies of 49
U.S.C. Sec. 10101 or is otherwise anticompetitive, and
otherwise satisfies the criteria of 49 U.S.C. Sec.
11102(c).\32\
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\31\ 49 U.S.C. Sec. 11102(c).
\32\ Surface Transportation Board, Notice of Proposed Rulemaking,
Petition for Rulemaking To Adopt Revised Competitive Switching Rules;
Reciprocal Switching, Docket No. EP 711, Vol 81, No. 149, August 3,
2016, page 51150.
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In July 2016, the STB issued a notice of proposed
rulemaking on reciprocal switching.\33\ The proposal included a
two-pronged approach, pursuant to which the Board would have
the ability to order reciprocal switching either when (1) it is
practicable and in the public interest, or (2) when it is
necessary to provide competitive rail service.\34\ Under the
proposal, reciprocal switching arrangements would not be
permitted if either rail carrier involved in the arrangement
showed the switching arrangement is not feasible or is unsafe,
or that the presence of switching would unduly hamper the
ability of that carrier to serve its shippers.\35\ The STB
received public comment on the proposal and has not issued a
final rule. The STB will hold a public hearing on the issue on
March 15, 2022.\36\
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\33\ Surface Transportation Board, Notice of Proposed Rulemaking,
Petition for Rulemaking To Adopt Revised Competitive Switching Rules;
Reciprocal Switching, Docket No. EP 711, Vol 81, No. 149, August 3,
2016.
\34\ Id. at 51156, 49 CFR Section 1145.2.
\35\ Id. at 51165, 49 CFR Section 1145.2.
\36\ Surface Transportation Board, Press Release, ``STB Chairman
Announces Three Upcoming Public Hearings.'' https://www.stb.gov/news-
communications/latest-news/pr-21-46/, November 12, 2021.
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C. DEMURRAGE AND ACCESSORIAL CHARGES
Railroads may charge shippers fees called ``demurrage
charges'' when the shipper detains rail cars beyond the time
permitted for loading or unloading rail cars (``free
time'').\37\ Demurrage is subject to Board regulation under 49
U.S.C. Sec. 10702, which requires railroads to establish
reasonable rates and transportation-related rules and
practices, and under 49 U.S.C. Sec. 10746, which requires
railroads to compute demurrage charges, and establish rules
related to those charges, in a way that will fulfill national
needs related to freight car use and distribution and
maintenance of an adequate car supply. Demurrage charges have
both compensatory and punitive aspects and are intended to
promote efficient use of rail resources.\38\ Shippers and
railroads may enter into contracts pertaining to demurrage, or,
in the absence of such contracts, demurrage is governed
according to the railroad's demurrage tariff.\39\
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\37\ 49 USC 10746.
\38\ Demurrage Liability, EP 707, slip op. at 2 (STB served April
11, 2014); 49 C.F.R. Sec. 1333.1.
\39\ 49 CFR 1333.
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Railroads also may assess ``accessorial charges.'' Not
defined in statute or regulation, accessorial charges are
generally understood to include charges other than line-haul
and demurrage charges, according to the STB.\40\ Accessorial
charges include those assessed for diverting a shipment in
transit, ordering a railcar but releasing it empty, weighing a
railcar, tendering one railroad's car to another railroad
without a line-haul move, special train or additional switching
services, or releasing a railcar with incomplete or incorrect
shipping instructions, among other causes.\41\
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\40\ Surface Transportation Board, Oversight Hearing on Demurrage
and Accessorial Charges, Notice of Public Hearing, Docket No. EP 754,
Federal Register Vol. 84, No. 73, April 16, 2019, page 15662.
\41\ Id.
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In July 2021, STB Chairman Martin Oberman sent a letter to
all Class I freight railroads requesting that they report
storage (demurrage) charges at their ten largest intermodal
facilities, to better understand the revenues these charges
generate for the railroads.\42\ The Class I freight railroads
answers varied. Below is a table showing the demurrage and
accessorial charges collected by the Class I railroads in 2021:
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\42\ Surface Transportation Board, Press Release, ``STB Chairman
Expresses Concern Over Intermodal Supply Chain Issues; Requests
Information From Class I Railroads.'' https://www.stb.gov/news-
communications/latest-news/pr-21-30/, July 22, 2021. In addition, prior
Surface Transportation Chairman Ann Begeman sent similar correspondence
dated December 17, 2018. https://www.stb.gov/stb/elibrary/
NDP_Correspondence.html
2021 Demurrage and Accessorial Revenues \43\
--------------------------------------------------------------------------------------------------------------------------------------------------------
Canadian Canadian Kansas City Norfolk Union
BNSF National Pacific CSX Southern Southern Pacific
--------------------------------------------------------------------------------------------------------------------------------------------------------
Demurrage Revenue..................................... $207,476,000 $61,299,000 $77,563,000 $442,600,000 $38,143,000 $520,608,000 $340,147,000
Accessorial Revenue................................... $308,002,000 $309,415,000 $11,383,000 $144,300,000 $16,536,000 $83,423,000 $88,575,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
D. FIRST MILE / LAST MILE\\
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\43\ Surface Transportation Board, https://www.stb.gov/reports-
data/demurrage-accessorial-charges/reports
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In response to a congressionally mandated study, experts
recommended in 2015 that the STB regularly collect usable data
demonstrating the quality of service rail carriers provide as a
means to monitor their response to common carrier service
requests.\44\ In September 2021, and after hearing concerns
raised by shippers and requests for transparency of first-mile
and last-mile data, the STB sought input from rail stakeholders
to determine whether collecting first-mile and last-mile data
is feasible and whether the benefits to rail customers and
oversight of the national rail system fluidity is balanced by
the increased reporting burden to the Class I freight rail
carriers.\45\ According to the STB, they have received numerous
letters about the need for first-mile and last-mile data over
the last year, though the Association of American Railroads
indicated this information would not be practical to collect or
meaningful to analyze service issues.\46\ First-mile and last-
mile refers to the movement of railcars between a local
railroad serving yard and a shipper or receiver facility.
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\44\ Transportation Research Board Special Report 318: Modernizing
Freight Rail Regulation, June 2015, https://onlinepubs.trb.org/
onlinepubs/sr/sr318highlights.pdf
\45\ Surface Transportation Board Press Release, ``Surface
Transportation Board Seeks Comment on First-Mile / Last-Mile Service
Issues'' https://www.stb.gov/news-communications/latest-news/pr-21-38/
\46\ Id.
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III. RAIL LABOR
With the Class I railroads' adoption of precision scheduled
railroading, the railroads have reduced their workforce. In
2015, the Class I workforce averaged 169,478 workers.\47\ By
2019 and pre-COVID, some 29,000 jobs were eliminated, a 17
percent decrease.\48\ By the end of 2021, the Class I workforce
averaged 114,701 workers, or approximately one-third fewer than
2015.\49\ Concurrently, the U.S. Class I railroads moved
roughly the same volume of traffic during that period. In 2015,
total rail traffic volume in the U.S. was 27.9 million carloads
and intermodal units, peaking in 2018 at 28.1 carloads and
intermodal units, and totaling 26.2 total carloads and
intermodal units in 2021.\50\
---------------------------------------------------------------------------
\47\ Surface Transportation Board, Economic Data, Employment Data,
https://www.stb.gov/reports-data/economic-data/employment-data/
\48\ Id.
\49\ Id.
\50\ Association of American Railroads, Weekly Rail Traffic Data:
https://www.aar.org/aar_news/weekly-rail-traffic-data/
---------------------------------------------------------------------------
Rail shippers voiced concern over the workforce cuts and
their subsequent impact on service reliability, raising
questions about whether the railroads are able to meet common
carrier obligations.\51\ STB Chairman Oberman sent letters to
the Class I railroads asking whether shipper service complaints
may be related to or exacerbated by the trend of reduced
railroad personnel.\52\ During the COVID-19 recovery, railroads
have attempted to re-hire some furloughed workers and train new
employees, though according to shippers and the STB, they have
been unsuccessful at hiring or retaining an adequate workforce
following the reduction in forces described above.\53\
---------------------------------------------------------------------------
\51\ U.S. House of Representatives, Committee on Transportation and
Infrastructure, Railroad Shippers Roundtable, July 2019. https://
transportation.house.gov/committee-activity/hearings/roundtable-titled-
railroad-shippers-roundtable
\52\ See ``Chairman Oberman Rail Service Letter'' to the seven
Class I railroads dated May 27, 2021: https://www.stb.gov/news-
communications/non-docketed-public-correspondence/
\53\ Paul Ziobro, The Wall Street Journal. ``Shortage of Railroad
Workers Threatens Recovery.'' July 22, 2021. https://www.wsj.com/
articles/shortage-of-railroad-workers-threatens-recovery-11626953584
---------------------------------------------------------------------------
IV. AMTRAK
Since Amtrak's creation in 1970, Congress has continually
refined the Surface Transportation Board's role in Amtrak
matters. When Congress created Amtrak to relieve the freight
railroads of their intercity passenger rail common carrier
obligation in 1970, Congress granted Amtrak certain rights
including access to freight railroads, preference, and
additional trains.\54\ In 2008, Congress expanded the STB's
passenger rail responsibilities to mediate cost allocation
methodologies between Amtrak and the states and to enforce
Amtrak on-time performance.\55\ In 2021, the Infrastructure
Investment and Jobs Act explicitly authorized the STB to create
a 10-person passenger rail office to carry out the Board's
passenger rail responsibilities.\56\ The STB is currently
considering an Amtrak application to restore Gulf Coast
intercity passenger rail service between New Orleans, Louisiana
and Mobile, Alabama.\57\
---------------------------------------------------------------------------
\54\ Federal Railroad Administration, ``Shared-Use of Railroad
Rights of Way,'' https://railroads.dot.gov/sites/fra.dot.gov/files/
fra_net/18863/Report%20to%20Congress%20Shared-Use%20
of%20Railroad%20Rights-of-Way%20July%202019.pdf, July 2019, page 3 and
49 USC 24308.
\55\ The Passenger Rail Investment and Improvement Act, P.L. 110-
432, Sections 209, 212 and 213, respectively.
\56\ P.L. 117-58, Section 22309.
\57\ Surface Transportation Board, FD 36496, Application of the
National Railroad Passenger Corporation Under 49 U.S.C. 24308(e)--CSX
Transportation, Inc. and Norfolk Southern Railway Company. https://
www.stb.gov/proceedings-actions/filings/
---------------------------------------------------------------------------
V. PENDING MERGERS & ACQUISITIONS
Railroad transactions can have broad implications for the
shape of the nation's transportation system going forward.
Since enactment of Staggers, the freight rail industry has
consolidated from 33 Class I railroads in 1980 to the seven
Class I freight railroads that operate in the U.S. today.\58\
The STB is currently considering two significant railroad
transactions--the merger of Canadian Pacific Railway (CP) and
Kansas City Southern Railway Company (KCS) and CSX's
acquisition of Class II Pan Am Railways in New England. The STB
has exclusive authority to review these proposed transactions
and to determine whether to issue approvals.\59\ Public
comments on the CP-KCS merger were due to the Surface
Transportation Board by February 28, 2022. If it goes forward,
the merger would reduce the number of Class I railroads
operating in the United States from seven to six and would
create the first North American railroad that operates in all
three countries--Canada, Mexico and the United States.\60\ On
the CSX-Pan Am acquisition, the STB held a two-day public
hearing on January 13 and 14, 2022.\61\ The docket for public
comments on this transaction has closed.\62\
---------------------------------------------------------------------------
\58\ United States Department of Agriculture, ``Railroad
Concentration, Market Shares, and Rates,'' February 2014. https://
www.ams.usda.gov/sites/default/files/media/
Railroad%20Concentration%2C%20Market%20Shares%2C%20and%20Rates.pdf
\59\ 49 USC 11324.
\60\ Surface Transportation Board, ``STB Accepts CP/KCS Merger
Application for Consideration,'' November 23, 2021. https://
www.stb.gov/news-communications/latest-news/pr-21-48/
\61\ Surface Transportation Board, ``STB Chairman Announces Three
Upcoming Public Hearings,'' November 12, 2021. https://www.stb.gov/
news-communications/latest-news/pr-21-46/
\62\ Surface Transportation Board, ``Surface Transportation Board
Issues Decisions in CSX/Pan Am Merger Application Review,'' December
10, 2021. https://www.stb.gov/news-communications/latest-news/pr-21-50/
---------------------------------------------------------------------------
WITNESS LIST
LChris Jahn, President and CEO, American Chemistry
Council
LDennis Newman, Executive Vice President of
Planning, Strategy and Accessibility, Amtrak
LIan Jefferies, President and CEO, Association of
American Railroads
LDennis Pierce, President, Brotherhood of
Locomotive Engineers and Trainmen
LBrad Hildebrand, Member, National Industrial
Transportation League and former Vice President of Cargill--
Rail and Barge Lead
LHerman Haksteen, President, Private Railcar Food
and Beverage Association
STAKEHOLDER VIEWS ON SURFACE TRANSPORTATION BOARD REAUTHORIZATION
----------
TUESDAY, MARCH 8, 2022
House of Representatives,
Subcommittee on Railroads, Pipelines, and Hazardous
Materials,
Committee on Transportation and Infrastructure,
Washington, DC.
The subcommittee met, pursuant to call, at 10:04 a.m. in
room 2167 Rayburn House Office Building and via Zoom, Hon.
Donald M. Payne, Jr. (Chair of the subcommittee) presiding.
Members present: Mr. Payne, Mr. DeFazio, Mr. Malinowski,
Mr. Moulton, Ms. Newman, Mrs. Napolitano, Ms. Titus, Mr. Lynch,
Mr. Auchincloss, Mr. Carter of Louisiana, Mr. Crawford, Mr.
Perry, Mr. Rodney Davis of Illinois, Mr. Weber of Texas, Mr.
Balderson, Mr. Stauber, Mr. Burchett, Mr. Johnson of South
Dakota, Mr. Nehls, and Mrs. Steel.
Mr. DeFazio [presiding]. The subcommittee will come to
order.
I ask unanimous consent the chair be authorized to declare
a recess at any time during today's hearing.
Without objection, so ordered.
I also ask unanimous consent that Members not on the
subcommittee be permitted to sit with the subcommittee at
today's hearing and ask questions.
Without objection, so ordered.
As a reminder, please keep your microphone muted unless
speaking. If you make noise, I will yell at you.
To insert a document into the record, please have your
staff email it to [email protected].
All right. We don't go through as many formalities at the
beginning as we used to, which is good.
Well, Chairman Payne is delayed, so, I will be chairing
here today.
So, I want to thank all of our witnesses for being here. It
is kind of an unusual thing, having been on the committee a
long time and observed these hearings, but I haven't seen too
many times when rail labor, railroad shippers, and Amtrak are
all raising similar concerns about the way the freight rail
industry is operating. And to say that I am concerned and share
their concerns is an understatement.
The STB, Surface Transportation Board, is heavily focused
on ensuring the economic vitality of the railroads, when it
should be supporting a balanced national freight rail system
that serves its customers well. Forty-two years after
Staggers--at that point, the freight industry was in very dire
straits--and 27 years after Congress replaced the ICC,
Interstate Commerce Commission, with the Surface Transportation
Board, the balance of power has swung too far.
Wall Street is destroying the freight rail industry, as
they are many other industries in the United States of America,
as they did when they put pressure on Boeing, and we ended up
with horrible tragedies.
I used to say, well, we have the greatest freight network
in the world, and it cannot be incompatible with a decent
passenger rail network. Unfortunately, the state of the freight
rail industry is deteriorating, all after the model of the not-
mourned Hunter Harrison, who came up with the idea of Precision
Scheduled Railroading--i.e., just look at the bottom line, not
the efficiency for shippers, not the safety of your railroad.
And it has spread like a disease through the industry since he
corrupted CSX. And it is just very sad.
I mean, you can't just infinitely increase your quarterly
profits with ever-decreasing operating ratios. So far, freight
rail has laid off nearly one-third of their workforce since
2015. They have parked locomotives and closed rail yards,
causing a number of shippers to temporarily close plants and
facilities due to erratic rail service. The rail workforce
strains under pressures to do more with less, the shrunken
employee count contributes to unreliable shipper service,
worker fatigue, and low morale.
At the same time, the investors on Wall Street have
demanded stock buybacks and nonstop returns on investment. The
pandemic has exacerbated the effects of pressure that began
years ago to cut, cut, cut. Now, after years of shrinking
footprints and workforce, Class I's find they have cut too far.
They are reopening facilities they closed to save costs and
desperately trying to rehire workers who have seen the industry
change before their eyes.
The Class I's left themselves so little cushion, and have
been unable to adjust for winter in Chicago, flooding in the
Midwest and Southeast, and wildfires in the West. Weather
events like these happen every year. They are getting worse,
due to climate change, and yet they are consistently used as an
excuse for degraded or degrading service.
Our national policy to reduce the transport sector's carbon
emissions cannot be achieved if the freight railroads are
cutting service to less lucrative shippers. We need the freight
railroads to be serving more customers at a time when the
overall volume of goods transport in the country is
skyrocketing.
Railroads consistently tell us how, if 25 percent of the
truck traffic moving at least 750 miles went by rail instead,
greenhouse gas emissions would fall. I agree with that goal. We
have all seen the ads on television. They are more efficient,
but you can't be part of the solution if you are following just
the stock ticker price and the pressures of Wall Street.
According to the Surface Transportation Board, outside of
coal the railroads have lost market share to trucks for the
past 15 years. They are cherry-picking only the most profitable
routes, working to make the less-profitable routes as
unappealing as possible, and forcing that freight to trucks. I
have spent my career raising concerns about Wall Street and its
attack on American industry and American workers. And,
unfortunately, now it has come to freight rail.
I want to have a healthy and the best, most robust freight
rail market in the world, keeping trucks off the road. And I do
want to have a viable passenger rail network. These two things
do not need to be incompatible, and I believe the Surface
Transportation Board is going to play a very key role in moving
us in that direction.
[Mr. DeFazio's prepared statement follows:]
Prepared Statement of Hon. Peter A. DeFazio, a Representative in
Congress from the State of Oregon, and Chair, Committee on
Transportation and Infrastructure
Thank you to all of our witnesses for being here today. Something
must really be wrong when rail labor, railroad shippers, and Amtrak
have similar concerns about the way the freight rail industry is
operating. To say I am concerned is an understatement.
The Surface Transportation Board is heavily focused on ensuring
economic vitality of the railroads when it should be supporting a
balanced national freight rail system that serves its customers well.
Forty-two years after the Staggers Act, and 27 years after Congress
replaced the Interstate Commerce Commission with the STB, the balance
of power has swung too far. Wall Street is extracting wealth from the
deregulated railroads at the expense of poor service to railroad
customers and on the backs of railroad workers.
This change has been driven by activist investors on Wall Street
who demand ever-increasing quarterly profits through ever-decreasing
operating ratios. The railroads have been forced to lay off nearly one
third of their workforce since 2015. Railroads have also parked
locomotives and closed rail yards causing a number of shippers to
temporarily close plants and facilities due to erratic rail service.
Meanwhile, as the rail workforce strains under pressures to do more
with less, the shrunken employee count contributes to unreliable
shipper service, worker fatigue, and low morale.
All the while, the same investors on Wall Street have demanded
stock buybacks and nonstop returns on investment. The pandemic
exacerbated the effects of pressure that began years ago to cut, cut,
cut. Now, after years of shrinking footprints and workforces, the Class
I railroads find they've cut too far. They are reopening facilities
they previously closed to save costs and desperately trying to rehire
workers who have seen the industry change before their eyes. The Class
I railroads have left themselves so little cushion that they have been
unable to adjust for winter in Chicago, flooding in the Midwest and
Southeast, and wildfires in the West. Weather events like these occur
every year--and are getting worse due to climate change--and yet they
are consistently used as an excuse for degrading service.
Our national policy goal to reduce the transport sector's carbon
emissions cannot be achieved if the freight railroads are cutting
service to less lucrative shippers. We need the freight railroads to be
serving more customers at a time when the overall volume of goods
transported across the country is skyrocketing.
Railroads consistently tell us how, if 25 percent of the truck
traffic moving at least 750 miles went by rail instead, annual
greenhouse gas emissions would fall by approximately 13.1 million tons.
I agree with their stated goal: to encourage modal shift so that
freight railroads can truly be part of our climate solution. They talk
a good game. They consistently highlight what we want to hear: rail is
three to four times more energy efficient than truck. But they can't
really be a part of the solution if Wall Street is pushing the Class I
railroads to consistently focus on increasing short-term profits
instead of expanding long-term service.
According to the Surface Transportation Board, outside of coal, the
railroads have lost market share to trucks for the past 15 years. They
are instead cherry picking only the most profitable routes and working
to make the less profitable routes as unappealing as possible, thus
shifting that freight to trucks.
I've spent my career raising concerns about the greed on Wall
Street and its detrimental impacts to Main Street. The challenges in
the freight rail industry remind me of what happened at Boeing with the
737 MAX where a storied company, with a proud workforce, changed
direction to focus more on the bottom line than on safety, and warnings
from employees were ignored. This committee is sounding the alarm
today. Activist investors out to make short-term profits with the
railroads have gotten nearly $200 billion in stock buybacks since 2010,
and I am concerned about the long-term viability of America's freight
railroads.
My goal is to foster a healthy freight rail market that boosts the
overall economy and reduces carbon emissions. Wall Street's goal is to
get wealthier--no matter the impact on our economy, environment,
transportation system, or workforce.
The pendulum has swung too far. I hope we can course correct before
it is too late. I look forward to hearing the testimony of our
witnesses today.
Mr. DeFazio. With that, I yield back the balance of my
time, and I would now recognize Ranking Member Crawford's
opening statement.
Mr. Crawford. Thank you, Mr. Chairman. I appreciate you
covering for your colleague, Mr. Payne. I thank him for holding
this hearing, and thank you to our witnesses for participating
today.
Today's hearing will examine stakeholder perspectives on
the Surface Transportation Board's role in regulating the
freight railroad industry, and thoughts on the STB's
reauthorization.
The STB is an independent agency that generally ensures
that freight railroads operate in an efficient and economically
competitive manner that serves the interests of freight
carriers, shippers, and other interested parties. This year,
the STB is busier than ever as it reviews an important
reciprocal switching rule, a merger between two Class I freight
railroads, and potential expansion of Amtrak service.
The STB must always weigh any consideration of further
industry regulations with the deregulatory spirit of the
Staggers Act, which opened the freight industry to increased
competition, lower rates, and efficiencies that benefit all
interested parties.
The STB was last authorized in 2015 through fiscal year
2020. It has subsequently received funding through continuing
resolutions.
I commend the chair for holding this hearing today and look
forward to hearing from our witnesses.
[Mr. Crawford's prepared statement follows:]
Prepared Statement of Hon. Eric A. ``Rick'' Crawford, a Representative
in Congress from the State of Arkansas, and Ranking Member,
Subcommittee on Railroads, Pipelines, and Hazardous Materials
Thank you, Chair Payne, for holding this hearing, and thank you to
our witnesses for participating.
Today's hearing will examine stakeholder perspectives on the
Surface Transportation Board's role in regulating the freight railroad
industry, and thoughts on the STB's reauthorization.
The STB is an independent agency that generally ensures that
freight railroads operate in an efficient and economically competitive
manner that serves the interests of freight carriers, shippers and
other interested parties.
This year, the STB is busier than ever as it reviews an important
reciprocal switching rule, a merger between two Class One freight
railroads, and potential expansion of Amtrak service.
The STB must always weigh any consideration of further industry
regulations with the deregulatory spirit of the Staggers Act, which
opened the freight industry to increased competition, lower rates, and
efficiencies that benefit all interested parties.
The STB was last authorized in 2015 through fiscal year 2020. It
has subsequently received funding through continuing resolutions.
I commend the Chair for holding this hearing today and look forward
to hearing from our witnesses.
Mr. Crawford. And with that, Mr. Chairman, I yield the
balance of my time.
Mr. DeFazio. OK, I thank the gentleman for his brevity, and
since we have no ranking member, I guess we will now proceed to
witnesses.
The first witness will be Chris Jahn, the president and CEO
of the American Chemistry Council.
Mr. Jahn, you are recognized for 5 minutes.
TESTIMONY OF CHRIS JAHN, PRESIDENT AND CHIEF EXECUTIVE OFFICER,
AMERICAN CHEMISTRY COUNCIL; DENNIS NEWMAN, EXECUTIVE VICE
PRESIDENT OF STRATEGY, PLANNING, AND ACCESSIBILITY, NATIONAL
RAILROAD PASSENGER CORPORATION (AMTRAK); IAN JEFFERIES,
PRESIDENT AND CHIEF EXECUTIVE OFFICER, ASSOCIATION OF AMERICAN
RAILROADS; DENNIS R. PIERCE, NATIONAL PRESIDENT, BROTHERHOOD OF
LOCOMOTIVE ENGINEERS AND TRAINMEN; BRAD HILDEBRAND, MEMBER,
NATIONAL INDUSTRIAL TRANSPORTATION LEAGUE, AND FORMER VICE
PRESIDENT, CARGILL--GLOBAL RAIL AND BARGE LEAD; AND HERMAN
HAKSTEEN, PRESIDENT, PRIVATE RAILCAR FOOD AND BEVERAGE
ASSOCIATION
Mr. Jahn. Thank you, Mr. Chairman, and good morning to
everyone, Ranking Member Crawford, and other members of the
subcommittee. I appreciate the opportunity to talk to you today
about the Surface Transportation Board.
Freight rail is critical to supporting the everyday
operations of ACC member companies. Our industry is one of the
largest customers of freight rail, both by volume and revenue,
and we are on track to be an even bigger customer in the
future.
Now, during his State of the Union Address last week, the
President talked about a number of new factories being built
across the country, and the growth of manufacturing jobs here
in the United States. [Inaudible] industry is playing a major
role in the revitalization of American manufacturing by making
historic levels of investment.
Our industry has announced expenditures of more than $200
billion, and over 350 chemical manufacturing projects here in
the United States. And as a result of this growth, we will need
to transport 200,000 additional railcar shipments per year by
2030. These shipments are important to every segment of the
economy and the supply chain.
Now, the Staggers Act set a course that helped put the rail
industry on the road to recovery and thrive. And that is
certainly a good thing. Our members need railroads to be safe,
innovative, and successful, and this should give the Board the
confidence to move ahead on other equally important objectives
also mandated by the Staggers Act: number one, to ensure
effective competition among railroads; number two, maintain
reasonable rates in the absence of competition.
Fulfilling this mission is vitally important. The
railroads, again, need to be financially strong to serve their
customers and invest for future growth. At the same time, rail
customers need reliable service and reasonable rates.
Competition and market forces provide the best means to balance
these goals.
Policies that promote greater competition within the
railroad industry help make it a more attractive and viable
option to move freight. However, most ACC members and other
rail customers do not have competitive options, leaving them
without market remedies and solely dependent on the STB when
faced with unreasonable rates or service failures.
The railroad industry of today looks very different than it
did in the 1980s, when STB policies were first adopted. And as
we go forward, we need to make changes and modernize these
rules to adapt along with the rail industry. So, let me give
you a couple of examples.
Consolidation has significantly reduced the number of Class
I railroads. This, in turn, has greatly limited access to
competitive rail service and led to sharp increases in prices
for shipping goods by rail. As one expert recently pointed out,
competitive pricing is no longer the norm, and rail customers
have to pay a substantial price for the consolidation of
railroads' market power. And in fact, the STB's most recent
analysis shows that, since 2004, rates have increased by 30
percent more than inflation. Rail rates also outpace increases
in long-haul trucking rates over that same time period.
In addition to consolidation of mergers, railroads have
dramatically changed their operations under the adoption of
Precision Scheduled Railroading. These changes have negatively
impacted service, and harmed many shippers and their customers
through additional costs and service failures. Given the impact
of these changes, the Board must adopt changes that are better
equipped to address current challenges and current problems.
We commend STB Chairman Oberman and the other members of
the Board for working with all stakeholders to develop sensible
policy changes. There are several helpful reforms currently
underway at the STB, but there is one that I would specifically
like to mention today.
ACC supports the Board's proposal to update its rules on
reciprocal switching. This long-overdue change would help
fulfill one of the primary goals of the Staggers Act by
providing greater access to competitive rail service. Canada
has demonstrated that a similar approach can promote
competition without harming the financial health of the rail
companies or the resiliency of the network. We hope that this
committee also values the importance of the STB. The new
approaches being considered by the Board can help support
American manufacturing and successful railroads.
We would like to work with you to help ensure the Board has
the resources it needs to help fulfill its congressional
mandate. As the committee moves forward with legislation to
reauthorize the STB, ACC urges you to consider the following
recommendations.
Number one, ensure the Board has adequate staff and funding
to keep pace with changes to the rail network.
Number two, create a better process for collecting data on
rail rates.
And number three, provide meaningful remedies for rail
service failures.
We appreciate your leadership on freight rail issues, and
we want to work with you in any way we can to help serve
shippers and railroads. Thank you.
[Mr. Jahn's prepared statement follows:]
Prepared Statement of Chris Jahn, President and Chief Executive
Officer, American Chemistry Council
Chairman Payne, Ranking Member Crawford and Members of the
Subcommittee, my name is Chris Jahn. I am the President and Chief
Executive Officer of the American Chemistry Council (ACC). I appreciate
the opportunity to discuss the importance of the Surface Transportation
Board (STB) and reforms that will provide greater access to economical
and reliable freight rail service.
About ACC
The American Chemistry Council is an industry trade association
that represents more than 190 of America's leading chemical companies.
Our members produce and manufacture a wide variety of chemicals,
polymers, and related products that make our lives and our world
healthier, safer, more sustainable, and more productive. The business
of chemistry supports over 25% of the U.S. gross domestic product and
directly touches nearly all manufactured goods. In addition to
supporting a vast supply chain, our members help create more than half
a million skilled, good-paying American jobs.
Freight rail is critical to ACC's members and chemical
manufacturing. Our industry is one of the largest freight rail
customers, shipping 2.1 million carloads in 2020. And the expansion of
U.S. chemical manufacturing means our transportation needs are growing.
With announced investments of more than $200 billion and over 350
chemical manufacturing projects, we expect to add 200,000 railcar
shipments per year by 2030.
We also rely on the Surface Transportation Board to help maintain a
reliable, resilient and efficient rail network that is responsive to
shipper needs. We are committed to working with Congress to pass
legislation that will reauthorize the STB and ensure that the Board has
the resources and tools needed to fulfill its vital mission.
Rail Customer Coalition
Because of the importance of freight rail issues to chemical
manufacturing, ACC is a member of the Rail Customer Coalition (RCC).
Members of the coalition include trade groups representing automobile
manufacturers, farmers, steel manufacturers, investor-owned electric
companies, and rural electric cooperatives, among others. Collectively,
the coalition members represent industries that provide more than 7
million jobs and contribute $4.8 trillion in economic output.
The members of RCC are major transportation stakeholders and the
largest users of freight rail. They account for more than half of the
total volume of cargo shipped by rail and generate more than three
quarters of the revenues collected by the railroads. The RCC is
committed to modernizing the Surface Transportation Board (STB) so that
it works better for both the railroads and the large and small American
businesses that rely on them.
The STB Plays a Crucial Role for ACC Members and Other Shippers
When Congress passed the Staggers Rail Act of 1980, it created the
STB to help foster a healthy and competitive freight rail system, and
it gave the Board sole authority to resolve commercial issues between
railroads and shippers. The Staggers Rail Act set a course for the STB
that has helped the rail industry recover and thrive, which is a good
thing. This success story should give the Board the confidence to
follow through on the other important objectives mandated by Staggers--
ensure effective competition among rail carriers and maintain
reasonable rates in the absence of competition.
Fulfilling this mission requires a balanced approach. Railroads
need to be financially strong to serve their current customers and
invest for future growth. At the same time, rail customers need
reliable service and reasonable rates. Competition and market forces
provide the best means to balance these goals. Policies that promote
greater competition within the rail industry help make it an attractive
and viable option to move freight.
However, many ACC members and other rail customers do not have
competitive transportation options and, therefore, no market remedies
when faced with unreasonable rates or service failures. For them, the
STB is the only recourse to address freight rail issues. Too often,
however, the Board's policies and procedures are too complex, costly,
and burdensome to provide timely and meaningful solutions.
The Rail Industry Has Changed and STB Must Change Too
The railroad industry of today looks very different than it did in
the 1980s when many key STB rules and policies were adopted. Forty
years later, consolidation has reduced the number of Class I railroads,
which has greatly limited access to competitive rail service leaving
many shippers captive to a single railroad. Following this
consolidation, the cost to ship goods by rail has increased
significantly.
As one expert on freight rail rate trends recently pointed out,
``Non-competitive pricing has become the norm, not the exception. Rail
customers continue to pay a substantial price for the consolidation of
the railroad's market power.'' \1\ In fact, the STB's most recent
analysis shows that since 2004, real rail rates (adjusted for
inflation) have increased by 30%.
---------------------------------------------------------------------------
\1\ Escalation Consultants analysis: Rail Rates Climb Higher as
Competition Gets More Scarce
---------------------------------------------------------------------------
In addition, railroads have dramatically changed their operations
and the level of service they provide to shippers following the
implementation of Precision Scheduled Railroading (PSR). These changes
have harmed many companies through additional costs and service issues.
Given the massive changes within the freight rail industry and
their ramifications for the economy, the STB can't stand still. The
Board must follow suit and adopt new approaches that are better
equipped to address the current environment.
In its report, the National Academy of Sciences' Transportation
Research Board concluded, ``while the U.S. freight railroad industry
has become modernized and financially stable since the Staggers Rail
Act of 1980, some of the industry's remaining economic regulations have
not kept pace and should be replaced with practices better suited for
today's modern freight rail system.'' \2\
---------------------------------------------------------------------------
\2\ TRB report: Modernizing Freight Rail Regulation
---------------------------------------------------------------------------
Smart Reforms Must be Adopted
We're encouraged that the STB has recognized that its current
polices need to be reexamined. It has taken several important steps to
gain a better understanding of the problems and potential solutions,
including convening its Rate Reform Task Force, holding numerous
hearings, and collecting public comments. Now it must act on that
information and move forward on the reforms the Board has carefully
crafted with input from many stakeholders.
Specifically, ACC supports the STB's proposal to change its
restrictive rules on reciprocal switching. This key reform, which has
been pending since 2016, would finally provide greater access to
competitive rail service as envisioned by Congress more than 40 years
ago. Reciprocal switching will unlock market forces to help provide
competitive transportation rates, open up more service options, and
ease congested routes.
We also support the Board's efforts to streamline its procedures by
adopting a policy known as Final Offer Rate Review. This new policy
would provide a more useful alternative to the Board's outdated and
burdensome rate review standards that have proven to be unworkable for
most shippers.
In addition, we support the Board's efforts to collect and report
more meaningful data on service performance to rail customers known as
``first mile/last mile service.'' Collecting this critical data would
provide the STB and rail customers with better insight into some of the
most disruptive service problems so they can be effectively addressed.
We commend STB Chairman Oberman and the other Board members for
focusing on these priorities and encourage them to finalize these
needed reforms. We hope that this Committee also recognizes the
importance of these reforms and how they can help support American
manufacturing.
Congress Must Build on the STB Reauthorization Act of 2015
When Congress reauthorized the STB in 2015 with bipartisan support,
it provided the Board with additional tools and resources so it could
act quicker and be more proactive in addressing freight rail issues.
The law expanded membership from three to five members and allowed
Board members more flexibility to discuss pending matters. It gave the
STB the authority to initiate its own investigations on rail service
and other significant issues. And it required the Board to study more
efficient and simplified rate review methodologies.
These changes have produced results. For example, the STB was
better positioned to tackle the service and demurrage issues that
resulted from operational changes adopted under Precision Scheduled
Railroading. It has also allowed the Board to develop some of the
reforms currently under consideration, including Final Offer Rate
Review.
Just like the STB, Congress should not stand still on freight rail
reform. As the Committee moves forward with legislation to reauthorize
the STB, ACC urges you to consider the following recommendations:
Ensure the Board has adequate funding and staff. The STB
must fulfill a broad range of responsibilities, including new oversight
of Amtrak service. Congress must provide the Board with the necessary
resources to meet its ongoing obligations and to keep pace with changes
to the rail network.
Improve data on rail rates. To help the STB meet its
mandate to maintain reasonable rates in the absence of effective
competition, Congress should commission the Transportation Research
Board to develop a new economic model that uses real world data to
compare the rates paid by captive shippers to the rates paid for
similar shipments in competitive markets. Currently, the Board has no
way to measure how much extra a rail shipper pays solely because it
lacks competitive transportation options. Creating a new model could
serve as a more accurate and realistic starting point for evaluating
whether a rate is ``reasonable.''
Provide remedies for rail service failures. The Board
currently lacks authority to provide meaningful remedies for customers
facing railroad service failures. Congress should provide the Board
with authority to require and enforce a service recovery plan if a
railroad fails to provide adequate service. In addition, Congress
should authorize relief and damages where a carrier has failed to
provide adequate service.
Conclusion
A robust and responsive freight rail network is important to the
continued growth of U.S. chemical manufacturing. We appreciate the
strong interest this Committee has shown on this important issue, and
we look forward to working with you on legislation that reauthorizes
the STB so that it serves both shippers and railroads.
Mr. DeFazio. Exactly 5 minutes. The gentleman is to be
congratulated, and thank you for that substantive testimony.
Now we will hear from Dennis Newman, executive vice
president of strategy, planning, and accessibility for Amtrak.
Mr. Newman, you are recognized for 5 minutes.
Mr. Newman. Good morning, Chairman DeFazio, Ranking Member
Crawford, and members of this subcommittee. My name is Dennis
Newman, and I am Amtrak's executive vice president for
strategy, planning, and accessibility. On behalf of Amtrak's
over 17,000 hard-working and dedicated employees, thank you for
allowing me to testify before this subcommittee and share with
you Amtrak's views on the reauthorization of the Surface
Transportation Board.
When Congress created the STB in 1995, passenger rail was
simply not top of mind. However, many things have changed since
then.
First, Congress has made several important updates to the
law, providing the STB with new responsibilities regarding
Amtrak.
Second, the on-time performance of Amtrak trains has
deteriorated due to some host railroads ignoring Amtrak's
statutory preference rights over freight trains.
And third, some railroad mergers have had lasting service
impacts on Amtrak train performance, and have even jeopardized
the continued operation of certain Amtrak routes.
Therefore, given what has happened over the past 26 years,
and how your constituents are often delayed or ignored by some
freight railroads, it is critical that the STB be equipped with
the tools and the resources necessary to help ensure a modern,
well-functioning passenger rail network in America.
While my written testimony includes a number of STB-related
reauthorization proposals, I would like to highlight three
particular items for this subcommittee to consider.
First, the STB passenger rail program. In the IIJA,
Congress explicitly said that the STB shall establish a
passenger rail program, and hire up to 10 additional employees
to assist the Board in doing this important work. Now that the
IIJA is law, we need Congress to provide the STB with the
Federal funds necessary to hire the staff to focus on its
responsibilities with respect to passenger rail, such as
conducting investigations into substandard performance.
That brings me to the second priority I would like to
highlight. It is important to clarify that when a complaint is
brought to the Board to look into substandard on-time
performance, the Board will not just treat it as another
adversarial proceeding, but rather actively investigate the
causes and remedies for that poor performance. This will
strengthen an enforcement tool that already exists, and clarify
the key role that the Board can and should play in remedying
chronic on-time performance issues.
And finally, to complement the authority the STB has to
investigate substandard performance, the U.S. Attorney General
has the authority to bring a case to enforce provisions of the
Rail Passenger Service Act, including the preference law.
However, as you may expect, the Department of Justice is very
busy with a number of other pressing matters. And
unfortunately, DOJ has brought only one preference case in 49
years. Therefore, in order to ensure freight railroads are not
ignoring the law and delaying your constituents, Amtrak is
requesting that we be provided with the ability to also bring a
case to district court when our rights are being violated by a
host railroad.
I want to thank Chairman DeFazio for his hard work on this
issue, and for including preference enforcement in the Moving
Forward Act. As we know, this important provision was
ultimately not included in the IIJA. But we cannot give up this
fight.
I also want to thank Chairman Payne for introducing a
stand-alone bill, H.R. 2937, the Rail Passenger Fairness Act.
And I ask members of this subcommittee to support this critical
piece of legislation if they are tired of their constituents
being delayed by certain freight railroads.
With these additional tools and resources, Amtrak believes
our passengers and your constituents could finally have the
service that they deserve.
Now, before I end, I want to stress one really important
point. There is absolutely no reason why this Nation cannot
have both a world-class freight rail network and a modern,
expanded intercity passenger rail service. Amtrak wants both to
succeed. There are many examples of Amtrak and our State
partners working cooperatively with host railroads to deliver
performance improvements and network expansion with publicly
funded investments that benefit all rail users. We have
supported rail mergers that will benefit Amtrak performance and
facilitate service expansion, like the proposed CP/KCS merger.
With this subcommittee's help, we believe that building a
system that works for both freight and passenger rail is
possible.
Thank you for all your support thus far, and for your time
this morning. I look forward to your questions.
[Mr. Newman's prepared statement follows:]
Prepared Statement of Dennis Newman, Executive Vice President of
Strategy, Planning, and Accessibility, National Railroad Passenger
Corporation (Amtrak)
Good morning, Chairman Payne, Ranking Member Crawford, and Members
of this Subcommittee. Thank you for inviting me to testify on behalf of
Amtrak about the reauthorization of the Surface Transportation Board
(STB). My name is Dennis Newman, and I am Amtrak's Executive Vice
President, Strategy, Planning, and Accessibility.
The Need for STB Reauthorization
When Congress was drafting the ICC Termination Act of 1995 (ICCTA)
that created the STB, passenger rail issues were not top of mind. The
ICCTA made no mention of Amtrak. The 15-part Rail Transportation Policy
the ICCTA directed the STB to follow in exercising its regulatory
powers did not say anything about passenger rail.
Perhaps that is not surprising. At the time the STB was created,
its recurring role with regard to passenger rail was limited to
resolving, under 49 U.S.C. 24308(a), the relatively infrequent disputes
between Amtrak and its host railroads over terms and conditions for
Amtrak's access to their lines and issuing orders to allow Amtrak
trains to operate in an emergency under 49 U.S.C. 24308(b). Railroad
mergers were viewed as necessities to rid the industry of excess
capacity and combine financially precarious railroads with stronger
ones that did not affect passenger rail.
Many things have changed in the ensuing 26 years. First, several
statutory changes have given the STB important new responsibilities
regarding Amtrak:
Section 213 of the Passenger Rail Investment and
Improvement Act of 2008 (PRIIA) gave the STB power to investigate poor
on-time performance of Amtrak trains and enforce Amtrak's longstanding
right to preference over freight trains.
PRIIA also shifted from the U.S. Department of
Transportation to the STB the responsibility for resolving disputes
between Amtrak and its host railroads over the operation of Amtrak
trains at accelerated speeds under 49 U.S.C. 24308(d), and over
Amtrak's operation of additional trains under 49 U.S.C. 24308(e).
Section 11204(a) of the Fixing America's Surface
Transportation (FAST) Act of 2015 gave the STB ongoing responsibility
for adjudicating disputes regarding application of the cost allocation
methodology for state-supported trains developed pursuant to Section
209 of PRIIA.
Second, the on-time performance of Amtrak trains operating over our
host freight railroads has deteriorated, driven by the fact that some
host railroads are ignoring Amtrak's statutory preference over freight
trains. During Amtrak's Fiscal Year 2021, only 52% of passengers on our
long-distance routes arrived at their destinations on time, seven
percentage points worse than the year before. Only one of our 15 long-
distance routes, and just 12 of 26 state-supported routes, met the
standard of 80% customer on-time performance established by the FRA's
metrics and standards during 2021.
And third, while railroad mergers and line sales have helped large
U.S. freight railroads achieve record profits, implementation of many
mergers has triggered rail service meltdowns with lasting adverse
impacts on Amtrak train performance and in some cases has jeopardized
the continued operation of Amtrak routes.
The Surface Transportation Board (STB) plays an essential role both
in meeting national transportation needs and in Amtrak's fulfillment of
its statutory goals and directives. Approximately 97% of Amtrak's
22,300 route-mile network is on rail lines owned by freight railroads
and regional transportation authorities. Over 70% of Amtrak's train-
miles in pre-pandemic 2019 operated over the lines of these host
railroads.
Absent agreements between Amtrak and its host railroads, it is the
STB that determines whether and on what terms Amtrak may operate its
National Network of state-supported and long-distance routes over host
railroad lines, and the compensation Amtrak must pay for those
operations. While nearly all such operations are conducted pursuant to
negotiated agreements, it is Amtrak's ability to obtain STB
adjudication of disputes that ensures such agreements are reasonable,
and that existing and additional Amtrak services can operate. The
statutory and other changes since enactment of the ICCTA that I have
described have greatly increased the STB's importance to passenger
rail. Few things are more important to the continued operation,
performance, and expansion of Amtrak's National Network than a well-
functioning and adequately funded STB.
The IIJA
For Amtrak and passenger rail, the reauthorization of the STB could
not come at a more opportune time. The Infrastructure Investment and
Jobs Act (IIJA) enacted in November will transform intercity passenger
rail service to a much greater extent than any previous legislation
since Amtrak's creation more than 50 years ago. The IIJA provides the
significant, multiyear federal funding requested by the Administration
and long supported by many members of this Subcommittee: $58 billion in
advance appropriations over the next five years for investment in
Amtrak and intercity passenger rail. That funding will allow us to
begin the modernization of Amtrak's assets and initiate significant
expansion of Amtrak's route network.
The IIJA directs the Federal Railroad Administration (FRA), in
consultation with Amtrak and other stakeholders, to establish a
Corridor Identification and Development Program to identify specific
corridors for improvement and expansion of intercity passenger rail
service. It also tasks FRA with leading a two-year study of long-
distance service expansion.
Amtrak's participation in the corridor development effort will be
informed by Amtrak Connects US, a vision for developing and expanding
corridor services throughout the United States over the next 15 years
that Amtrak released last April. Amtrak Connects US identified 39 new
corridors with high demand and potential for intercity passenger rail
service, and an additional 25 existing corridors that are prime
candidates for service expansion. Many of these corridors are in fast
growing states and regions that Amtrak's current route network does not
serve well, or in many cases at all, today. Amtrak's current network is
about the same size as it was in 1971, even though the U.S. population
has increased by roughly 120 million since that time.
The enactment of the IIJA will greatly increase the importance of
the role the STB plays with respect to Amtrak and its existing and
future operations over host railroad lines. Access to all host railroad
lines on reasonable terms, without lengthy delays or exorbitant and
unjustified demands for capital investments when Amtrak seeks to
operate additional trains, is an essential prerequisite to using the
funding provided by the IIJA to grow our network.
Reauthorization Proposals
I would like to focus my testimony on several issues affecting
Amtrak that we believe should be addressed as the Committee develops
its STB reauthorization bill. Thanks to the Committee's work,
provisions addressing some of these matters were included in the Moving
Forward Act, the infrastructure bill adopted by the House last year,
but unfortunately were not part of the IIJA that ultimately became law.
Enforcement of Amtrak's Preference Rights
A high level of on-time performance on trains operating over
Amtrak's host railroads is crucial to attracting customers and
realizing the benefits of public investments in rail. Although Amtrak's
statutory preference over freight trains has been the law since 1973,
it has increasingly been ignored by host freight railroads because
there has been no means to enforce it. Only the U.S. Attorney General
is empowered to bring a case to enforce provisions of the Rail
Passenger Service Act, including the preference law provision. In the
49 years since enactment of the preference provision, the U.S.
Department of Justice has brought only one case to enforce Amtrak's
preference rights.
Section 213 of the Passenger Rail Investment and Improvement Act of
2008 (PRIIA), codified at 49 U.S.C. 24308(f), gave the STB authority to
conduct investigations of Amtrak routes with poor on-time performance;
to determine whether the cause was the host railroads' failure to give
preference to Amtrak trains; and to award damages and other relief to
Amtrak where that was the case. By giving the STB authority to enforce
preference, Congress intended to remedy the lack of enforcement
problem. Unfortunately, that did not happen for two reasons.
First, the Association of American Railroads (AAR), acting on
behalf of its freight railroad members, launched what became a decade-
long legal challenge to the constitutionality of Section 213's grant of
preference enforcement power to the STB. While that challenge
ultimately failed, it effectively prevented the STB from exercising its
investigatory and enforcement powers during the more than 13 years
since PRIIA's enactment.
Second, the STB was never given the resources necessary to
investigate and take action against preference violations. Funding was
never appropriated for the additional STB staff positions that Section
24308(f) authorized. As a result, when Amtrak did bring complaints of
preference violations to the STB, which were ultimately withdrawn due
to the AAR's legal challenge, the STB was forced to treat them as
adversarial adjudicatory proceedings rather than investigations by STB
staff as Section 213 contemplated. The protracted litigation resulting
from this approach benefits poor performing railroads that seek to drag
out legal proceedings while Amtrak passengers continue to experience
delays and makes preference violation complaints extremely expensive to
pursue.
Amtrak is gratified that the STB is finally empowered to begin
exercising the authority it was given by PRIIA Section 213 to
investigate substandard Amtrak on-time performance and to take action
if poor performance is a result of preference violations. However, when
that happens, there is nothing to prevent freight railroads from
launching yet another legal challenge to the STB's authority. In the
meantime, Amtrak passengers will continue to suffer unnecessary and
protracted delays when freight railroads violate the law and give
preference to their freight trains over Amtrak trains. In the interest
of providing effective relief to Amtrak and its passengers as soon as
possible, Amtrak recommends that the STB reauthorization bill:
Ensures that the STB's Passenger Rail Program, created by
Section 22309 of the IIJA and authorized for ten full-time staff
positions, is adequately funded, preferably by specifying that at least
five percent of the total funding appropriated for the STB in each year
the bill authorizes is to be made available to fund salaries,
investigations, and other activities of that program;
Authorizes Amtrak to seek enforcement of its preference
rights in federal court, as did the Moving Forward Act and the Rail
Passenger Fairness Act sponsored by Rail Subcommittee Chairman Payne,
which we deeply appreciate;
Specifically directs the STB to conduct investigations
rather than initiate adversarial proceedings when Amtrak or another
authorized party files a complaint alleging a preference violation with
the STB;
Specifies that, at any time during a preference
investigation, the STB may utilize its authority under 49 USC
1321(b)(4) to issue injunctive orders where the facts warrant and as
necessary to avoid irreparable harm to Amtrak passengers from
continuing preference violations; and
Specifically provides that, under the broad power Section
213 confers upon the STB to award relief for preference violations, the
STB may require that rail lines on which continuing preference
violations are found be dispatched jointly by the railroad and Amtrak
or by an independent third party.
Operation of Long Freight Trains
The implementation of so-called ``Precision Scheduled Railroading''
by many Class I railroads has, among other things, led to the operation
of very long freight trains, some more than three miles in length. In
many cases, these trains are too long to fit in most passing sidings on
the single-track rail lines that are predominant on the national rail
network. Amtrak trains are often required to follow long freight trains
at slow speeds for considerable distances, sometimes a hundred miles or
more, before these behemoths reach a siding long enough to accommodate
them. When two very long freight trains are operating in opposite
directions, they can effectively shut down a rail line. The operation
of such trains also produces lengthy grade crossing blockages, and
concerns have been expressed that they can create safety risks.
To address these problems, Amtrak believes that the STB
reauthorization bill should require that railroads that operate very
long freight trains develop Long Train Operating and Safety Plans and
submit them to the STB and FRA for review and approval following public
comment. These plans would be similar to the plans for implementation
of positive train control that railroads are required to submit to FRA,
and the approach followed in regulating heavy trucks that are allowed
to operate on designated highways after obtaining special permits. The
plans would detail how the railroad would ensure safe operation of long
trains, and the operational practices and/or infrastructure investments
railroads would implement so that the operation of these trains would
not negatively impact passenger rail service or communities.
Consistent Application of Federal Railroad Laws
Passenger and freight railroads over which the STB has regulatory
jurisdiction are subject to a number of important federal laws
governing railroads, including the Railway Labor Act and the Railroad
Retirement Tax Act. Although Amtrak is exempt from most STB regulation,
Congress specified in the Rail Passenger Service Act that Amtrak is
also subject to these federal railroad laws.\1\
---------------------------------------------------------------------------
\1\ 49 U.S.C. 24301(c)
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However, as a result of a 2012 STB decision determined by a single
vote,\2\ intercity passenger railroads that operate within a single
state are deemed not to be part of the interstate rail network--even
though they operate over the interstate rail network on tracks shared
with and owned by STB-regulated railroads--as long as they do not
connect with Amtrak. It makes no difference whether, like the applicant
in the 2012 case, these railroads connect directly with interstate and
international airlines and cruise lines, or benefit from federal
railroad loans and federal railroad grant programs. As a result, these
railroads are not subject to STB jurisdiction, or to the federal
railroad laws that apply to Amtrak and to passenger and freight
railroads that are subject to STB jurisdiction.
---------------------------------------------------------------------------
\2\ All Aboard Florida--Construction and Operation Exemption, STB
FD No. 35680, Decision served Dec. 21, 2012.
---------------------------------------------------------------------------
Congress should eliminate this loophole. All railroads operating
intercity passenger rail service over the interstate rail network
should be subject to federal railroad laws. A federal regulatory scheme
that discourages other intercity passenger railroads from connecting
with Amtrak contravenes current federal transportation policy reflected
in the IIJA. It also gives a few for-profit passenger rail companies an
unfair advantage over railroads subject to federal railroad laws and
deprives the employees of these companies of the rights and benefits
enjoyed by other railroad employees.
Railroad Mergers
The statutory provisions governing the STB's review of railroad
mergers and line sales and leases predate the STB. They are largely
unchanged since enactment of the Staggers Act in 1980, when federal
policy encouraged railroad mergers to rationalize the railroad network
and alleviate the railroad industry's severe financial distress.
Additionally, they do not specify that the STB must consider impacts on
passenger rail when reviewing rail mergers.
Indeed, the statutory provisions that apply to mergers not
involving two Class I railroads have essentially been construed to
require the STB to rubber stamp such transactions absent severe anti-
competitive effects, regardless of whether a merger is in the public
interest. Some have even asserted that the STB is also prohibited from
imposing conditions on mergers that are required by the public interest
to avoid harm to passenger rail service or to ensure safe operations.
Since enactment of the ICCTA in 1995, implementation of railroad
mergers has produced rail service meltdowns that have lasted for many
months or years. Like freight shippers, Amtrak passengers have been
severely impacted by the resulting rail network gridlock, which has
triggered multi-hour delays on some routes on nearly every trip. On
many routes, the performance of Amtrak trains has never fully recovered
to pre-merger levels. In at least two cases, a railroad merger or rail
line lease has produced changes in freight traffic flows or track
maintenance responsibility that threatened the continued operation of
Amtrak routes.
While the STB revised its regulations governing mergers between
Class I railroads almost 20 years ago to reflect the vastly changed
condition of the railroad industry, the old statutory provisions
governing railroad mergers remain on the books. When the STB is
reauthorized:
Impacts on passenger rail service should be added to the
statutory criteria the STB is required to consider in reviewing all
railroad mergers and line sales/leases;
The STB's authority to impose conditions on all
transactions to protect passenger rail service and safety should be
reaffirmed; and
The STB should be empowered to disapprove any railroad
merger, line sale, or lease transaction that is not in the public
interest.
Rail Transportation Policy
The preservation, improvement, and expansion of passenger rail
service should be added to the Rail Transportation Policy, codified at
49 U.S.C. 10101, that guides the STB's actions.
Operation of Additional Trains
I also wanted to mention briefly the STB's authority, codified at
49 U.S.C. 24308(e), to issue orders requiring host railroads to allow
the operation of additional Amtrak trains.
Nearly a year ago, Amtrak for the first time initiated a proceeding
under that provision, seeking an order that would allow restoration of
state-supported Amtrak service between New Orleans and Mobile. The
second of two STB hearings in that proceeding will take place in early
April, and the STB will issue a decision thereafter. We are gratified
by the support for Amtrak's position in that case that was expressed at
the first hearing last month by the FRA and members of Congress from
both parties, particularly Chairman DeFazio who testified at the
hearing.
Congress enacted Section 24308(e) in 1980 to provide Amtrak with an
``expedited procedure'' to add additional trains in the face of some
host railroads' ``intransigence'' and demands for ``inordinate capital
improvements.'' \3\ The enactment of the IIJA last year, with its focus
on service expansion and unprecedented funding to make it a reality,
reaffirmed that Congress intends for Amtrak to be able to expand its
network without impedance or unnecessary delay. After the STB issues
its decision in the pending case, we will advise the Committee if we
believe any further legislative action is necessary to effectuate
Congress's intent.
---------------------------------------------------------------------------
\3\ House Rep. No. 96-839, Mar. 20, 1980, p. 21; House Conf. Rep.
No. 96-1041, May 20, 1980, p. 42.
---------------------------------------------------------------------------
Developing a World Class Freight and Passenger Rail Network
Finally, I wanted to debunk the myth that improvement and expansion
of Amtrak service will result in the degradation of freight rail
service. Those who assert that either seek to mislead or are unfamiliar
with the U.S. railroad network.
Improving our nation's rail network is not a zero-sum competition
between passengers and freight. There is absolutely no reason why this
nation cannot have both a world class freight rail network and modern,
expanded intercity passenger rail service.
Amtrak wants both freight and passenger rail to succeed. Amtrak and
shippers have the same interest in freight railroads providing good
service and maintaining their infrastructure. We know that some freight
railroads, driven by a myopic focus on operating ratios and short-term
financial performance, are not making the infrastructure investments
they should be making. It also bears noting that the freight railroads
that are providing good service to Amtrak, as measured by Amtrak's Host
Railroad Report Card that ranks Class I railroads based upon relative
minutes of host railroad-responsible delays to Amtrak trains, are not
generally the railroads whose service freight shippers are complaining
to the STB about.
Another reason why freight railroads and freight shippers should
welcome expansion of Amtrak service is the public investment in rail
infrastructure that passenger rail service brings to the table. Over
the last few decades, Amtrak, our state partners, and the federal
government have invested billions of dollars in public funding to add
capacity and upgrade tracks, signals, and other infrastructure on the
freight railroad-owned lines over which Amtrak operates. One recent
example is the $3.7 billion that the Commonwealth of Virginia and
Amtrak have recently committed for passenger rail-driven infrastructure
investments along CSX's Washington-to-Richmond/Petersburg rail corridor
and for acquisition of CSX rail lines and right-of-way throughout
Virginia. Virtually every regional and short line railroad over which
Amtrak operates has benefited from significant public funding to
upgrade tracks and other infrastructure that it would not have received
otherwise.
Amtrak accounts for only approximately 4% of train miles on Class I
railroads. That percentage would not significantly increase even if all
of the expansion contemplated in the Amtrak Connects US vision occurred
over the next 15 years, and that expansion would be accompanied by huge
investments of IIJA and other public funding in freight railroad-owned
lines to accommodate the additional Amtrak service. Amtrak expansion,
and the investment in the U.S. rail network it will bring, can provide
a ``win/win'' for Amtrak and its passengers and for freight railroads
and their shippers.
Conclusion
I thank the members of the Subcommittee for your time today and for
your support for Amtrak. We look forward to your work to develop an STB
reauthorization bill that serves the interests of Amtrak passengers and
all rail users.
Mr. DeFazio. OK, I thank the gentleman.
We would now turn to Mr. Ian Jefferies, president and CEO
of the Association of American Railroads.
Mr. Jefferies, you are recognized for 5 minutes.
Mr. Jefferies. Chairman DeFazio, Ranking Member Crawford,
members of the committee, thank you for the opportunity to be
here before you today.
The past few years have reinforced a key truth: railroads
are an integral part of not only domestic commerce, but also
global supply chains. This is no accident. For decades,
railroads have invested heavily in their top-rated
infrastructure, people, and technology, operating 24/7 to keep
goods moving.
The numbers tell the story: average annual investments of
$25 billion a year, the train accident rate down 31 percent
since the year 2000, and record or near-record volumes of
intermodal containers, chemicals, grain, and others in the year
2021. Rail transportation also reduces overall emissions,
accounting for just 2 percent of transportation-related
greenhouse gas emissions, while moving 40 percent of goods. And
Class I freight rail employees earn total compensation more
than 30 percent higher than the average U.S. employee.
As we discuss the STB and economic regulation, let me be
clear about one key point: the current regulatory structure
makes sense. Rail rates are 44 percent lower than they were in
1980. And true, rates are modestly higher than they were years
ago, today roughly equal to where they were in 1990, 32 years
ago. According to the Bureau of Labor Statistics, since 2017
through the end of 2021, the cost to ship by rail has risen at
a level of approximately half that of long-haul trucking, even
though trucks compete on infrastructure subsidized by taxpayer
expense.
The focus at the STB should be a policy environment to meet
projected future freight movement needs without sacrificing the
industry's ability to make progress towards safety and
environmental goals. DOT projects a 50-percent increase in
freight by 2050. The more of that freight that moves by rail,
the better for the environment, for congestion, and for highway
degradation. But sufficient capacity is critical to meet this
demand.
As the statute states, railroads must be able to earn the
necessary revenues for the infrastructure and investment needed
to meet the present and future demand for rail service. The
current market-based regulatory framework, developed on a
bipartisan basis, has been fundamental to the railroad's
ability to meet demands to date. This system provides the
requisite balance. Railroads can compete for business with an
appropriate regulatory backstop where markets fail.
Therefore, the current push by some for the STB to enact
re-regulatory policies, like forced switching, is backwards-
looking and wrongheaded. Make no mistake: forced switching
would undermine fluidity, disincentivize investment, and
increase emissions, all at a time when supply chains are still
experiencing disruptions from the pandemic. Railroads already
switch traffic today, where it makes sense, and customers can
petition for a switch if a railroad shows anticompetitive
conduct. The current proposal at the Board would remove that
standard, transforming switching from a remedy into a right.
Some point to rail profitability as justification for a new
regulation. This is absurd. Penalizing success is bad public
policy and shortsighted, especially when that success has led
to consistently high investment levels back into our networks,
levels that far exceed other industries represented here today
as a percentage of revenue. And that level of investment is
necessary to meet forecasted demand.
While some members of the fewest largest trade groups might
benefit in the short term from forced access, many customers
would be harmed, as would the health of the overall rail
network. Fortunately, the public record shows broad opposition
from leading economists from rail labor, from passenger rail,
environmental advocates, and State and local leaders. Most
notably, I sincerely thank the 41 committee members represented
here today, both Democrats and Republicans, who wrote to the
STB in opposition to a forced switching rule, or urged extreme
caution in this area.
Re-regulation proponents argue that the STB's rate
adjudication processes are cumbersome, time consuming, and
expensive. Then Congress should encourage the STB to identify
commonsense measures that would streamline rate case
procedures, while also remaining consistent with underlying
economic principles and statutory requirements. At the same
time, Congress should push the STB to implement cost-benefit
analyses to its proceedings, as nearly all other agencies
currently do to understand the real-world impacts of their
deliberations.
In closing, railroads operate in a highly complex and
dynamic market, and we continue to work toward the top-line
goals of policymakers, specifically maximizing goods movement,
and doing so safely. Now is not the time for ill-conceived
policy changes that would result in a decrease in freight
fluidity and investment. Thank you for your time.
[Mr. Jefferies' prepared statement follows:]
Prepared Statement of Ian Jefferies, President and Chief Executive
Officer, Association of American Railroads
On behalf of the members of the Association of American Railroads
(AAR), thank you for the opportunity to testify on these important
matters related to the Surface Transportation Board (STB). AAR's
members include the seven Class I freight railroads and many other
railroads that together account for the vast majority of U.S. freight
railroad mileage, revenue, employees, and traffic. Amtrak is also a
member of AAR, as are various commuter railroads that, in aggregate,
account for more than 80 percent of U.S. commuter railroad trips.
Freight railroads form an integrated, continent-wide network and
provide a 24/7 critical link in our nation's supply chains. Freight
railroads are doing their part to maintain network fluidity and ensure
there is sufficient capacity to deliver the goods upon which our
economy depends through significant investments in their infrastructure
and equipment, development of innovative technologies, cooperation with
customers and supply chain partners, and operational enhancements.
Overreaching, unnecessary regulations by the STB put our nation's
rail advantage at risk. Congress must continue to make clear that a
return to an unbalanced regulatory environment for railroads would
ultimately diminish the quality of rail service and undermine the
efficiency of supply chains.
Freight Railroads Are Proud of Their Contributions to Our Nation
America's freight rail network spans close to 140,000 route-miles,
serving nearly every industrial, wholesale, retail, and resource-based
sector of our economy. Unlike trucks, barges, and airlines, freight
railroads operate almost exclusively on infrastructure they build,
maintain, and improve themselves. Since 1980, freight railroads have
spent roughly $765 billion of their own--not taxpayer--funds on capital
expenditures and maintenance related to infrastructure and equipment.
It takes an enormous amount of money to keep our freight rail network
in best-in-the-world condition--more than 40 cents of every revenue
dollar since 1980, which is six times more than the average U.S.
manufacturer.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
``Crumbling'' might describe some forms of U.S. infrastructure, but
not freight rail. The American Society of Civil Engineers recognized
the impact of the industry's investments in its 2021 assessment of U.S.
infrastructure by again awarding rail the highest grade of all
infrastructure.\1\ These investments have helped the rail industry meet
the nation's freight transportation demand during recent supply chain
dislocations. In fact, a report released by the Northwestern University
Transportation Center found that railroads recently showed significant
agility in their response to rises in intermodal traffic throughout the
COVID-19 pandemic.\2\
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\1\ https://infrastructurereportcard.org/
\2\ https://www.transportation.northwestern.edu/research/featured-
reports/us-railroad-covid19-report.html
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Freight railroads could not be successful without the skill and
professionalism of their employees, who are heavily unionized and among
America's most highly compensated workers. In 2020, the average U.S.
Class I freight rail employee earned total compensation of $135,700. By
contrast, the average compensation of a U.S. employee in 2020 was
$87,000, just 64 percent of the rail industry's compensation.
Freight Rail Will Play a Critical Role in Meeting Future Demand and
Other Goals
Railroads have played a critical role in America's growth and
development for more than 190 years. In the years ahead, railroads will
be called upon to do even more. Consider:
The Federal Highway Administration and Bureau of
Transportation Statistics recently estimated that demand for freight
transportation will increase by 50 percent by 2050.\3\ Railroads will
continue to work to ensure they have sufficient capacity and capability
to meet this demand.
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\3\ https://www.bts.gov/faf
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To combat climate change, our nation must reduce its
greenhouse gas emissions. On average, railroads are three-to-four times
more fuel efficient than trucks, meaning moving freight by rail reduces
greenhouse gas emissions by up to 75 percent. Railroads are not resting
on these laurels, however, and are working with their suppliers to
develop and further incorporate a variety of alternatives to
traditional diesel fuel--including the use of batteries, renewable
fuels, biofuels, and hydrogen fuel cells--that could further reduce the
industry's carbon footprint.
Moving freight by rail is extremely safe. From 2000 to
2021, the train accident rate fell 33 percent; the rail employee injury
rate fell 49 percent; and the grade crossing collision rate fell 23
percent. Maintaining and improving safety will always be the industry's
top priority, and railroads will not stop in their efforts to
continually reduce the occurrence of accidents and injuries.
In a typical year, highway congestion costs Americans
$166 billion in wasted time and fuel. However, a single train can take
the freight of several hundred trucks off of our nation's highways and
significantly reduce congestion.
The affordability of freight rail saves rail customers
billions of dollars each year. Average rail rates (measured by
inflation-adjusted revenue per ton-mile) were 44 percent lower in 2020
than in 1981.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Today, more than 70 percent of the miles traveled by
Amtrak trains are on tracks owned by other entities--mainly freight
railroads. In addition, approximately half of America's commuter rail
systems operate at least partially on rights-of-way owned by freight
railroads.
Balanced Regulation of the Freight Rail Industry is Crucial
Railroads work constantly to improve the safety, efficiency, and
competitiveness of their operations, and Congress can help railroads
reach their shared goals through oversight of the STB's rate and
service regulatory efforts.
Throughout history, the degree of government control over rail
operations has tremendously impacted the industry's vibrancy and
effectiveness. Prior to the enactment of the Staggers Act of 1980,
excessive regulation--some of which is similar to the re-regulation
being proposed today--was preventing railroads from earning adequate
revenues and competing effectively in the freight transportation
market. Congress recognized the need for a new regulatory scheme that
allowed railroads to establish their routes and tailor rates based on
market conditions and demand. Importantly, however, the Staggers Act
did not completely deregulate railroads. The STB retained authority to
set maximum rates if a railroad was found to have ``market dominance''
over a particular movement and the rate was determined to be
unreasonable. The STB was also permitted to take other actions if a
railroad engages in anti-competitive behavior. Effectively, under
today's balanced regulations, the market is allowed to govern, unless
and until it is determined to have failed.
The balanced economic regulation included in the Staggers Act was
necessary for railroads' very survival. Since the passage of the
Staggers Act, railroad capital spending has increased dramatically,
resulting in greater efficiency, improved safety, better service, and
sharply lower average rates. These improvements are exactly what
Congress hoped for.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Railroads' progress back to financial health doe doesn't mean the
need for regulatory balance has gone away. A return to pre-Staggers
unbalanced regulation would put railroad health back at serious risk.
The industry would not disappear overnight, but over time the
industry's infrastructure would deteriorate, needed new capacity would
not be added, and rail service would become slower, less responsive,
and less reliable--all at a time when supply chain fluidity needs to be
increased, not throttled.
The lessons learned from the industry's recovery post-Staggers Act
were acknowledged in late 2020 when more than 1,000 public figures--
Democrats and Republicans--signed a letter in support of protecting the
current balanced regulatory framework.\4\ Signatories included a
bipartisan group of eight former U.S. Secretaries of Transportation,
more than 550 state and local officials, more than 200 business
leaders, nearly 90 think tanks, and 25 former administration officials
and congressional leaders.
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\4\ https://gorail.org//wp-content/uploads/Staggers-Anniversay-
Letter-to-STB.pdf
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Some now claim that railroads are doing so well financially that
they can, in essence, ``afford'' more onerous regulations and that the
STB should effectively transfer the financial benefits of the
railroads' hard- and long-fought financial stability to certain
shippers. Penalizing success is bad public policy. Additionally, it is
worth noting that rail industry rate increases trail the price
increases of other industries, including many of the shipper industries
who are among railroads' most strident critics. In fact, changes in
producer price indexes, which measure the average selling prices for
outputs of industries, show that freight railroads' 20.3 percent
increase over the past 5 years is far below price increases implemented
in many comparable freight transportation and shipper industries,
including long-distance trucking (46.8 percent).
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Under the misleading call for more ``competition,'' some of these
same shippers support re-imposing excessive, counterproductive
regulations on railroads. While only two of these re-regulatory
proposals--forced switching and final offer rate review--are discussed
below, those and many others would, in one way or another, put price
controls on railroads and limit the ability of railroads to reinvest in
their networks, simply to increase shippers' profits. If successful,
these re-regulatory changes would make it much more difficult for
railroads to provide the safe, efficient, and reliable service their
customers and our economy need to prosper. The lesson learned from
comparing the pre- and post-Staggers freight railroad industry in this
country is not stale: more regulation does not result in healthy
railroads.
Forced Switching
The STB will be holding a hearing next week to consider a proposed
reciprocal or ``forced'' switching regulation that would require a
railroad to use its own tracks and equipment to hand over freight to a
competing railroad. For example, in the figure below, suppose firm 1
wants freight shipped to firm 2. Railroad 1 could handle the move all
by itself (on infrastructure that it invested in and maintains
precisely to serve firm 2), or the freight could move on railroad 2
from point A to point B, then be switched at point B and carried by
railroad 1 to firm 2.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Longstanding precedent holds that a railroad will not be required
by the STB to switch traffic with another railroad unless that railroad
is determined to have engaged in anti-competitive conduct. Absent such
a showing, railroad 1 could choose to handle the shipment from firm 1
to firm 2 by itself, or it could agree to a joint movement with
railroad 2. Regardless of which option railroad 1 chooses, however,
rail customers would remain protected by the STB from unreasonably high
rates and anti-competitive conduct.
However, the STB is now proposing to remove the requirement that a
shipper show a railroad engaged in anti-competitive conduct before the
STB can order a railroad to switch certain traffic with another
railroad. This would transform forced switching from a remedy for
railroad abuses of market power into a right enjoyed by shippers. While
a few industry groups might benefit in the short term from this open-
ended restructuring of the rail industry, most would be harmed--all in
the pursuit of the STB providing a few what the free market would
not.\5\ Congress should urge the STB to not implement its forced
switching proposal for numerous reasons.
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\5\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1644418195748/303762.pdf (The Small Business & Entrepreneurship
Council, in a letter to the STB, noted: ``Forced switching would
undermine the efficiency of the rail system, and raise costs for
customers . . ., including small businesses, and consumers overall.
This regulatory measure would allow large companies, who simply do not
wish to pay market rates for shipping, and competitors to lobby so that
government would mandate that railroads hand over traffic to
competitors.'').
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Forced Switching Would Harm Operational Efficiency and
Network Fluidity
Railroads have built their networks and honed their routing
practices over decades, investing huge amounts of capital to maximize
network fluidity and efficiencies. These efforts have benefited rail
customers tremendously through improved service, asset utilization, and
cost effectiveness.
Switching railcars is costly and time-consuming and increases the
accident and injury risk exposure for rail employees who perform such
tasks.\6\ If switching were mandated by the STB to occur more
frequently and wherever a customer desires, interchanges would be
required to occur in areas where such activity is not efficient and
where appropriate infrastructure investments have not been made. This
would seriously disrupt traffic patterns, clog rail yards, and impact
the functionality of supply chains.\7\
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\6\ For additional information on the switching of railcars, please
visit: https://www.youtube.com/watch?v=pH0oafZKiDY&t=1s.
\7\ For additional information on railroads' efforts to address
supply chain challenges, please visit: https://www.aar.org/supply-
chain.
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The Intermodal Association of North America, which represents the
combined interests of the intermodal freight industry, shared these
concerns in a letter to the STB, emphasizing that the outcomes of
forced switching, such as ``a decline in rail infrastructure, decreased
network velocity, a deterioration in domestic intermodal service, and
an adverse impact on intermodal's ability to compete with over-the-road
trucking[,]'' are ``troubling given the supply chain challenges that
continue, both domestically and internationally.'' \8\ Ultimately,
forced switching would undermine freight railroads' efforts to work
with customers and other transportation modes to find solutions to
supply chain challenges, add significant, unnecessary complexity to
rail operations, and harm the efficiency and quality of rail
service.\9\
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\8\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1644526735279/303789.pdf
\9\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1644851310562/303812.pdf (Dr. Michael Mandel, Chief Economist and Vice
President of the Progressive Policy Institute, in a letter to the STB,
also raised similar concerns: Forced switching would ``divert resources
away from the optimization of supply chains. Railroads would have to
give a high priority to moving goods in a way that met the reciprocal
switching requirements, rather than lowering costs and speeding goods
to their ultimate customers. The result would be more supply chain
disruptions, and higher inflation.'')
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Forced Switching Would Create Disincentives for Railroads
to Invest in Their Infrastructure
Forced switching would create disincentives for railroads to invest
in their networks and equipment, as railroads could then be mandated to
use those same assets for the benefit of other railroads. To remain
competitive in the freight transportation market and better serve
customers, railroads must continually improve their networks by making
significant investments in infrastructure, equipment, training, and
technology. Forced switching will ultimately harm the quality of rail
service at a time when the benefits of freight rail--including cost
effectiveness and environmental responsibility--are more important than
ever.
Forced Switching Would Increase Transportation-Related
Greenhouse Gas Emissions
Forced switching would add countless unnecessary rail movements,
which would increase emissions. Furthermore, the resulting operational
inefficiencies may cause rail customers to shift freight from rail to
more carbon-intensive modes of transportation, such as trucking. This
would mean more greenhouse gas emissions and more congestion on
already-crowded highways. The National Wildlife Federation,
ConservAmerica, Third Way, and the Conservative Coalition for Climate
Solutions also raised these concerns in a letter \10\ urging the STB to
exercise caution when considering new regulations in order to ensure
additional freight does not shift from the most environmentally
friendly way to move freight over land--rail.\11\
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\10\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1644942581038/303853.pdf
\11\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1643216781771/303587.pdf (In a recent filing with the STB, the American
Consumer Institute (ACI) also expressed concerns regarding a potential
increase in greenhouse gas emissions due to an increased shift to road
transportation. ACI concluded that the STB should withdraw this forced
switching proposal until it collects and publishes an empirically based
analysis of the costs and benefits, including to consumer welfare,
public safety, and rail investment, of implementing such a proposal.)
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Forced Switching Would Distort Competition in Freight
Transportation Sector
While proponents say this proposal would have a very limited impact
on rail operations, expert analysis has found that an estimated 76 to
92 percent of all regulated carload traffic--millions of carloads each
year--could be eligible for forced switching under the proposal the STB
is currently considering.\12\ Because the proposal has such broad
application and rail customers' impetus for pursuing forced switching
is obtaining below-market rates for rail service, implementation could
result in sharp reductions in rail revenue--not due to a loss in
traffic stemming from fair market competition, but instead from
governmental intervention and interruption of competition in the
freight transportation market.
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\12\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1644958413241/303903.pdf, pp. 67-70
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Inadequate earnings would put America's best-in-the-world freight
rail network at serious risk. Railroads compete fiercely in intermodal
markets and with trucks, barges, and other modes. And as previously
discussed, to remain competitive, railroads must earn sufficient
revenues to continually make significant investments in infrastructure,
equipment, training, and technologies, including locomotives that use
low- or no-carbon alternatives to traditional diesel fuel, such as
batteries, hydrogen fuel cells, biodiesel, and renewable diesel. By
reducing revenues and adding significant operational complexities,
railroads would be less competitive for the broad base of business
needed to make these investments. If railroads are unable to make such
infrastructure investments, there could be cascading impacts on the
health of the rail network.
Forced Switching Ignores the Intense Competition Railroads
Face Every Day
A fundamental tenet of the economics of competition says that where
competition exists, there should be no regulatory intervention. Today,
the vast majority of rail freight movements are subject to strong
competitive forces: competition from other railroads, trucks, and
barges,\13\ product competition,\14\ and geographic competition.\15\ In
addition, railroads are navigating technological, regulatory, and
structural changes that have disrupted the freight transportation
market and will continue to do so (e.g., autonomous and/or platooned
trucks).
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\13\ For additional information on competition faced by railroads,
please visit: https://www.aar.org/article/railroads-face-fierce-
competition/.
\14\ This includes the substitution of one product for another in a
production process (e.g., generating electricity from natural gas
instead of coal).
\15\ The ability to obtain the same product from, or ship the same
product to, a different geographic area. For example, clay used for
taconite pelletization in Minnesota is available from Wyoming mines
served by one railroad and from Minnesota mines served by another.
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To give an idea of the intense competition railroads face every
day, consider the freight transportation markets for intermodal,
chemical, and grain shipments, which are the three largest rail
markets, together accounting for around 50 percent of rail revenue.
Intermodal is the movement of shipping containers and truck trailers by
rail. By definition, every intermodal unit carried by rail could
theoretically move solely by truck. Rail also accounts for just 19
percent of chemical transport, behind trucks and waterborne carriers,
while railroads account for 25 percent of grain shipments, less than
half of the share of trucks. These are hardly the market shares one
would expect for a transportation mode that did not face strong
competition.\16\
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\16\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1644440817654/303765.pdf (A large coalition, led by the Competitive
Enterprise Institute and supported by organizations like Americans for
Prosperity, Club for Growth, and Heritage Action for America, sent a
letter to the STB stating, ``At a time when the question of competition
policy is a matter of significant national debate, it is odd that the
[STB] seeks to remove any discussion of competitive effects from this
aspect of rail regulation.'' The letter also urges the STB to withdraw
this proposal, noting ``the [STB] has made no findings of
anticompetitive practices that would justify any mandated switching.'')
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Forced Switching Would Impact Passenger Railroad Operations
The majority of the train-miles operated by Amtrak and other
passenger and commuter railroads are on tracks owned by other
entities--almost always freight railroads. As previously noted,
implementation of forced switching and the resultant increase in
interchanges of railcars would add operational complexity to, and
undermine the efficiency and fluidity of, freight rail operations. This
increased network congestion would also impact intercity passenger and
commuter railroads that rely on fluidity to stay on schedule.
Furthermore, if railroads are unable to make sufficient investments to
maintain and improve the health of their networks, the service offered
to customers by intercity passenger or commuter rail would also be
impacted.
Metra \17\ and California's Rail Corridors Linking Everyone
(CIRCLE),\18\ an organization made up of the Capitol Corridor Joint
Powers Authority (CCJPA), the Los Angeles-San Diego-San Luis Obispo
(LOSSAN) Rail Corridor Agency, and the San Joaquin Joint Powers
Authority, have all urged the STB to ensure freight rail operations
remain as efficient and fluid as possible in order to maintain on-time
performance and encourage continued and new investments in passenger
rail networks, especially during a time of historic federal investment.
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\17\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1644592484755/303799.pdf
\18\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1644442887130/303778.pdf
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Freight Railroads Appreciate Congress' Efforts to Protect
the Health of Their Networks
Congress should be concerned with the impacts stemming from the
STB's implementation of forced switching.\19\ The railroads appreciate
the 91 Republican \20\ and 39 Democratic \21\ members of the House of
Representatives, including Ranking Member Graves and 40 of this
Committee's 69 members, who have already urged the STB not to take any
regulatory action that would undermine the ability of railroads to make
their annual capital infrastructure investments and emphasized that
such investments are essential for railroads to continue to compete in
a dynamic freight transportation market, enhance safety, and offer more
cost-effective, efficient, and sustainable service.
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\19\ For additional information on forced switching, please visit:
https://www.aar.org/article/freight-rail-forced-access/ and https://
dcms-external.s3.amazonaws.com/DCMS_External_
PROD/1644958413241/303903.pdf.
\20\ https://www.aar.org/wp-content/uploads/2022/02/Final-STB-EO-
Letter-July-2021.pdf
\21\ https://www.aar.org/wp-content/uploads/2022/02/8.30.21-
Surface-Transportation-Letter-on-Climate-and-Freight-Rail.pdf
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Adjudication of Small Rate Cases
In September 2019, the STB published a proposal, referred to as
``final offer rate review'' (FORR), in an attempt to address what
shippers alleged to be inadequate access to rate adjudication processes
for small rate cases. Under this proposal, after a short discovery
period, a complaining shipper and the relevant railroad would
simultaneously submit ``final offers'' for the rate at issue. In
preparing their offers, the parties would be free to choose any
methodology to support their proposed rate.
Despite protections in the law requiring a hearing on the maximum
lawful rate, the STB would simply select one of the offers.\22\ The STB
has declined to elaborate on a paradigm or framework that would guide
its decisionmaking. As far as the railroads are aware, no other U.S.
industry is required by the government to utilize binding final offer
arbitration to establish maximum rates. In fact, a similar proposal by
one agency--the U.S. Forest Service--was struck down in court.\23\
Congress should urge the STB to reject FORR for several reasons.\24\
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\22\ The process is similar to ``baseball-style arbitration.''
\23\ Stone v. U.S. Forest Service, 2004 WL 1631321 at *3 (D. Ore.
July 16, 2004) (``In essence, this was a `baseball-arbitration'-style
procedure, in which the decisionmaker simply chooses between the two
reports, even though the actual fair market value may be somewhere in
between those two values.'').
\24\ For additional information on FORR, please visit: https://
www.aar.org/article/final-offer-rate-review-forr/ and https://dcms-
external.s3.amazonaws.com/DCMS_External_PROD/1642196240931/303531.pdf.
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FORR Would Remove Market-Driven Principles from the STB's
Review of Challenged Rates
Similar to forced switching, FORR would represent a radical
departure from longstanding STB standards and precedent. Historically,
the STB has judged the reasonableness of a challenged rate and, if such
rate was found to be unreasonably high, prescribed a maximum rate after
a full hearing that gives proper consideration to a variety of
statutorily-required factors. Under its FORR proposal, however, the STB
would disregard these factors entirely and simply select whichever of
the two proposed rates the STB felt was the ``more reasonable''--not a
``reasonable'' rate necessarily, just more reasonable than the rate
proposed by the other party. This means FORR could produce results that
are totally divorced from statute and market-driven outcomes and
principles.
FORR Conflicts with Governing Law
During adjudication of rate cases, the STB is required to provide
due process to both railroads and shippers and protect their statutory
rights to a ``full hearing,'' \25\ which requires an adjudicator with
full decisionmaking powers, not one who must choose only one of the two
options presented by the respective parties. Moreover, the rule of law
requires clear legal standards that are known in advance, not standards
that are developed ad hoc and inconsistently applied.
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\25\ See 49 U.S.C. Sec. Sec. 10704, 10707; 5 U.S.C. Sec. 556.
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FORR Is Not Limited Solely to Small Rate Cases
The STB claims that FORR is intended to provide a means for rail
customers to bring ``small'' rate challenges, and the proposal
arbitrarily caps available relief at $4 million per case. However, FORR
would not prevent large shippers from simultaneously filing numerous
cases, resulting in railroads facing liability well in excess of $4
million. There is simply no justification for expanding a highly
expedited and simplified process to effectively include large rate
disputes.
Congress Should Work with the STB to Find a Better Solution
Congress should encourage the STB to identify solutions that
provide an additional simplified, expedited dispute resolution
procedure for rail customers with small rate disputes, while also
remaining consistent with underlying economic principles and statutory
requirements. A potential option is the STB's November 2021 notice of
proposed rulemaking to establish a new voluntary arbitration program
for small rate cases. If structured properly, this new procedure could
offer cost savings and flexibility to stakeholders. Freight railroads
agree that a workable voluntary arbitration program could be a
potentially game-changing addition to the menu of options currently
available for resolving small rate disputes.
Incorporate Cost-Benefit Analysis into STB Regulatory Procedures
While executive agencies have long been required by the Office of
Management and Budget to conduct cost-benefit analyses prior to
promulgating significant rulemakings, the requirement to implement this
best practice for regulatory analysis does not apply to independent
agencies, such as the STB. In March 2019, AAR petitioned for the
incorporation of cost-benefit analysis into the STB's rulemaking
procedures, contending that such analyses would require the STB to
explain the purpose of proposed regulatory actions and more fully
examine potential impacts, including economic consequences and negative
impacts on railroad operations and supply chain fluidity. Additionally,
a formal cost-benefit analysis requirement would ensure that the STB's
rulemakings fulfill its statutory objectives. Since requesting public
comment in November 2019, the STB has taken no further substantive
action on AAR's petition.
Freight railroads appreciate the letter sent by 52 members of the
House of Representatives,\26\ including Ranking Member Graves, urging
the STB to incorporate a thorough cost-benefit analysis in its
rulemakings. The letter further noted that the STB should ``align its
rulemaking proceedings with the best practices of the federal
government'' and ``impose new regulations only where made necessary by
compelling public need and after thoroughly weighing the costs and
benefits of any proposed actions.''
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\26\ https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/
1581692685264/300377.pdf
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This petition is a common-sense reform that the STB should be eager
to undertake, as it will only lead to better outcomes for all
stakeholders. Furthermore, these changes would bring the STB in line
with other federal agencies with power to substantially impact national
commerce, such as the Federal Communications Commission, which
voluntarily adopted new regulations that require cost-benefit analysis.
New and Expanded Passenger Rail Service
America can and should have safe, effective passenger railroads and
a safe, productive freight rail system. Mutual success, however,
requires cooperation and recognition of the challenges faced during any
negotiation for new or expanded passenger rail service. While each
project is unique, projects have a better chance of success if certain
principles are understood.
First and foremost, safety must always be the top priority. If any
infrastructure improvements necessary to meet safety standards are
identified, those projects must be completed prior to the commencement
of service.
Second, current and future capacity needs of freight and passenger
railroads must be properly considered and balanced. To ensure this,
host freight railroads must be part of the planning process from the
start. Congress recognized this in the Infrastructure Investment and
Jobs Act's (IIJA) new Corridor Identification and Development Program
by requiring that consultation with host railroads be weighed when
awarding grants. Such actions are essential to ensure freight railroads
can meet the estimated 50 percent growth in our nation's freight
transportation demand by 2050.\27\
---------------------------------------------------------------------------
\27\ https://www.bts.gov/faf
---------------------------------------------------------------------------
Third, expanding existing, or instituting new, passenger rail
service requires detailed planning and, usually, additional
infrastructure investment. Freight railroads should not be expected to
pay for the additional capacity necessary for passenger trains. In the
IIJA, Congress provided $21.75 billion to Amtrak for capital projects
on the Northeast Corridor and the National Network and $36.25 billion
specifically for projects to expand or establish new intercity
passenger rail routes. It is crucial that this funding be spent where
it has the greatest impact, and freight railroads are committed to
helping to ensure this happens.
Finally, parties must recognize that preference for Amtrak's trains
does not mean there will never be delays. Consider high occupancy
vehicle (HOV) highway lanes, which give preference to automobiles with
more than one person inside. In theory, motorists in HOV lanes should
get where they are going with little or no delay, but bad weather,
traffic, accidents, or other problems sometimes delay those motorists.
The same principle applies to the rail network. Amtrak is given
preference, but preference is not a guarantee.
Conclusion
``If it isn't broken, don't fix it'' should apply at the STB.
America's freight railroads save their customers, and ultimately
consumers, billions of dollars each year, while also reducing
greenhouse gas emissions, relieving congestion, and enhancing the
safety of the freight transportation sector. The existing system of
privately-owned freight railroads competing fairly in an increasingly
sophisticated freight transportation marketplace under balanced STB
regulation has served America incredibly well. It has produced what is,
by virtually any measure, the best national freight rail system in the
world.
Congress should ensure that the STB does not unwisely expand rail
regulation. Railroad performance and the efficiency of the nation's
supply chains will only suffer if railroads' ability to maintain,
replace, or improve their infrastructure, as well as provide safe and
reliable service, is hamstrung by excessive operational regulations.
Mr. DeFazio. I thank the gentleman.
And I would urge witnesses--I know you all have written
statements, but if you want to respond to anything that has
been stated by another witness in your 5 minutes, that would be
fine with me. It gets rather boring reading your statements
before the hearing, and then listening to you read your
statements again.
With that, I would turn to Dennis Pierce, president of the
Brotherhood of Locomotive Engineers and Trainmen.
You are recognized for 5 minutes.
Mr. Pierce. Good morning. Thank you, Chairman DeFazio,
Ranking Member Crawford, and members of the subcommittee. I
appreciate the opportunity to appear before you this morning.
My name is Dennis Pierce. I am president of the oldest trade
union in North America, the Brotherhood of Locomotive Engineers
and Trainmen. I am also president of the Teamsters Rail
Conference, of which BLET is the founding member. My comments
today will focus primarily on the Class I freight railroads.
But before I get into that, I think we should recognize
that our members also carry millions of passengers on Amtrak,
commuter, and intercity passenger railroads. We should not
forget that commuter rail carries 500 million passenger trips a
year in the most congested portions of the shared national rail
network.
I would like to start by telling you about the members of
the BLET. We are in the front row. We are watching why shippers
can't get their shipments. But our members are proud and hard-
working Americans. They work long and hard careers, moving
America's freight safely and efficiently. They are the ultimate
essential employee.
But there are numerous problems that are forcing our
members to reconsider their career choices right now: the way
they are being treated on a day-in and day-out basis. And the
way the railroads are being mismanaged, in our opinion, is
breeding misery and contempt for Class I railroads.
The root of these changes, as has already been discussed,
generally come from the business model known as Precision
Scheduled Railroading, which is neither precise, it is not
scheduled, and it is not railroading. Here is just one reason
why: the vast majority of our members do not work scheduled
jobs. That is a big misconception. They work on-call at
randomly chosen times dictated by rail management. In many
cases, they get little, if any, advance notice of when that
call will come.
In recent years, they have been subjected to harsher and
harsher attendance policies that demand they work day in and
day out. These policies subject our members to disciplinary
consequences, including termination, even if they take time off
because they are too tired or too sick to work safely. These
policies are destroying the lives of our members, even to the
point of destroying their families. These policies are part of
a fewer-employees-doing-more business model that is
understaffing the railroads and destroying the supply chain
with no regard to the impact on shippers.
In sum, today's Class I's operating model is requiring our
members to work longer trains, longer hours, longer round trips
with less time at home than they receive in their away-from-
home terminals and in hotels, in many cases. And if personal
issues come up that require them to be at home more than their
legal rest, they stand to be disciplined just to tend to their
family matters. But the workforce is stretched too far, and
there is no elasticity to handle even the slightest unplanned
event on the railroad, and those things happen daily.
The point here is that poor safety and operating practices
and burned out workers only lead to poor and inefficient
customer service. This is where the STB can come in.
We know the STB is here to ensure that service from the
railroads meets the needs of the customers. But PSR has thrown
the needs of the customers, as well as the needs of the
employees, out the window. In practical terms, PSR and PSR-like
strategies have led to furloughs, and most importantly, longer,
slower trains, clogged ports, and a workforce stretched to work
beyond the point of safe operations.
The current business model is to furlough employees and
just make everyone that is left do more. This business model is
delaying shipments, leaving store shelves half empty. We have
all seen it. But STB can play a role in changing these business
practices.
BLET believes that STB playing a more active role in
regulating railroads can help by handling service complaints in
a timelier and more effective manner. Addressing why shipments
don't show up on time, which our members see daily, and the
related impact on the Nation's supply chain is critical to the
U.S. economy.
One role for Congress would also be to better define the
common carrier obligation, so that the existing requirements
can be effectively enforced by the Surface Transportation
Board. This could also come with an attendant clarification
that Congress affirms that STB is both capable and responsible
for enforcement of the railroad's common carrier obligations.
BLET appreciates the opportunity to testify here today. My
written comments get into much more detail, including our
opposition to the so-called reciprocal switching. Congress and
STB should take an interest in what PSR is doing to shippers,
and because of the impact and the core impact to the shippers,
what it is doing to the employees of these railroads. And this
is where Congress can help give STB the legislative tools to
ensure that America's freight railroads provide a world-class
service.
Thank you, and I look forward to any questions you might
have.
[Mr. Pierce's prepared statement follows:]
Prepared Statement of Dennis R. Pierce, National President, Brotherhood
of Locomotive Engineers and Trainmen
Good morning, Chairman Payne, Ranking Member Crawford, and Members
of the Subcommittee. I appreciate the opportunity to appear before you
this morning.
My name is Dennis Pierce, and I am the National President of the
oldest trade union in North America, the Brotherhood of Locomotive
Engineers and Trainmen, which was founded in 1863 and represents 32,769
members. I am also the President of the Teamsters Rail Conference, of
which the BLET is the founding Union.
The subject of today's hearing is to get the ``Stakeholders Views
on Surface Transportation Board Reauthorization.'' I have several
comments and observations regarding the BLET's views on a national
scale. My comments today will focus on freight rail and mostly Class I
Freight Railroads. Our members also carry millions of passengers on
Amtrak, commuter, and intercity passenger railroads. We should not
forget that commuter rail carries 500 million passenger trips a year in
the most congested portions of the shared national rail network.
I want to tell you about the members of the BLET. These people are
proud and hard-working Americans. They have worked careers where pride
is derived from the role they play in moving America's freight safely
and on time. To call BLET members essential is as much a fact as
calling a spine essential to the skeleton. The service of all railroad
workers is the product that supports American commerce. But there is a
problem that is forcing our members to lose pride in their work. And
the pride in the service they provide America is being replace with the
misery and contempt they hold for their employers at the Class 1
Railroads in the country.
There was a sea change in the economic philosophy underpinning rail
service when Class 1 Railroads switched to a business model known as
Precision Scheduled Railroading (``PSR''). Do not be confused by the
term for this business model--it is not precise, not scheduled, and not
railroading, that is until you focus on the members I represent. They
are indeed being ``railroaded.'' The vast majority of our members do
not work scheduled jobs. They work on call at randomly chosen times
dictated by rail management, and in many cases, with little if any
advance notice of when that call will come. In recent years, they have
been subjected to harsher and harsher attendance policies that demand
they work day in and day out. These policies subject our members to
disciplinary consequences, including termination, even if they take
time off because they are too sick or too tired to work safely. The
policies are destroying the family lives of our members, even to the
point of destroying their very families.
This is all part of the railroad business philosophy of extreme
``leanness'', which means furloughing employees to rock-bottom staffing
and forcing the remaining employees to always work without scheduled
days off, without paid sick days and without access to true access to
FMLA to make sure that the work that should be done by a larger
workforce is done by a small but harried workforce. Our members still
believe in providing the best service to the customers who rely on rail
car pickup and delivery, but their opinions on how to accomplish that
are not wanted. Railroad work has always been hard, but hard workers
need time off with their families that they can count on. These
railroad operating employees are literally the ones who bring your
goods to you. If you bought it, our members brought it.
The Class 1 Railroads themselves have abandoned a customer service,
pro-growth business model in exchange for a short-term growth Wall
Street model. This involves pushing an operating ratio below 60% to
return the other 40% to investors, managers and CEO's--which results in
furloughs and risky operations.
Speaking of adding risk and strain to railroad operations,
railroads are running trains with typical lengths in excess of 3 miles
(15,000-17,000 ft.) and those trains can also weigh 15,000 tons or
more. Some trains have reached lengths of more than 20,000 feet long.
The trains are getting longer to facilitate making the work rolls
shorter. Twice the train length, half the employees, with new strains
added daily to an infrastructure not designed for this business model.
Simply put, PSR has transformed railroad companies into finance
operations that happen to own railroads. Safety professionals are being
supplanted by finance managers. Reporting unsafe conditions is
discouraged because it might cause a delay that could affect a
managerial bonus. The collateral damage to good service by railroads is
not news to this committee. The Transportation and Infrastructure
Committee has called for a study from the General Accounting Office
about PSR's effects because of the myriad of complaints from labor,
shippers, the public and the industry alike.\1\ Not all railroads, and
not all railroad managers, want to use this model. Some still want to
see their business grow because their customers are happy with their
service and their employees are happy to do their jobs and to work for
their employer. But over the past several years, it has been Wall
Street that calls the shots; managers who don't go along with this
approach leave or are forced out.
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\1\ https://transportation.house.gov/imo/media/doc/2021-5-
2%20Letter%20to%20GAO%20on%20PSR%20Study.pdf
---------------------------------------------------------------------------
Railroad Work for Operating Crews
Railroad Locomotive Engineers operate trains. Conductors or
Trainmen are the necessary second set of eyes and ears on the train,
and they broadly handle the rest of the train operations from the
ground when work on the train needs to be done. If there is an
unplanned event, and most trains and their equipment experience
unplanned events, the train must stop and be inspected. If that
inspection requires a walk to the rear of the train, the train is
stopped while the conductor dismounts the train and walks up to 3 miles
to the rear inspecting one side. The conductor then switches sides and
walks 3 miles back to the leading end of the train to inspect the other
side--a six-mile walk. If this happens multiple times in a tour of
duty, its simple math to figure how far a conductor might walk. This is
not like a walk on a road or sidewalk. It is a walk-through train
ballast (rocks) on uneven grades, often during the night, in darkness
in poor terrain and bad weather.
Railroad operating crews are subject to the federal Hours of
Service Law (``HOS'') that allows them to work up to 12 hours at a
time, but also allows for ``limbo time,'' a concept invented for
railroad operating crews by the Supreme Court of the United States.\2\
This is important because even though a railroad crew can work 12
hours, that doesn't mean they get to go home after that. It is normal
for them to be forced to wait until the railroad provides them with a
ride to get off the train. They often wait for this transportation in
remote areas for hours, before being picked up. This then begins
another period riding in a vehicle to their final terminal. It is not
rare for operating crews to experience total on-duty times of 18 hours
or more. They are then routinely forced to wait for hours in the
cheapest hotel available before being called to repeat that same trip
to get home, in many cases days after they left home, only to be forced
to repeat that cycle as soon as they are legally rested to do so. It
has been said that railroad work was ``a decent living, but a terrible
life.'' This is why.
---------------------------------------------------------------------------
\2\ Brotherhood of Locomotive Engineers v. Atchison, Topeka & Santa
Fe R. Co., 516 U.S. 152 (1996).
---------------------------------------------------------------------------
With wages stagnating while profits skyrocket, and Class 1 rail
carriers refusing to come to the bargaining table with fair contract
offers, engineer positions are fast becoming underpaid and overworked
jobs. Railroaders are fed up with the job cutting and conscription-like
attendance policies where they are forced into the terrible choice of
either working sick or working tired, or getting fired. Your money or
your life. Hedge fund railroading is bad for the employees, but the
point here is that poor safety practices and burnt-out workers only
leads to poor and inefficient customer service. Our members want to
strike, and I do not blame them. The only reason they haven't is
because of the law and court orders. However, our members are sick and
tired of railroads not being held to the same high standards under the
law as their employees (our members) are held. Railroads act this way
because they are virtual and geographical monopolies. If you don't like
the service on Railroad A, there is not a Railroad B down the street.
It is a take it or leave it proposition for the customer/consumer. What
about competition and the market forces of capitalism, one might
inquire--not on the nation's Class 1 Railroads. There are too many
barriers for entry to start up your own railroad to compete. This is
where the STB comes in.
STB Can Help With Service Standards
We know the STB is here to ensure that service from the railroads
meets the needs of their customers. But PSR has become a pejorative in
the industry and carries with it negative connotations only, and
rightfully so. Rail management weaned on pro-growth strategies saw
their years of training and attempts to be a better business and
provide for shippers discarded for short term cost cutting and asset
extraction.
In practical terms, PSR and PSR-like strategies have led to
furloughs, very long trains, clogged ports, and a workforce forced to
work beyond the point of safe operations. Operational problems happen
daily, such as trains too long to receive proper air-brake testing, and
trains so long that they cannot be safely doubled from one yard track
to the other because the yard tracks are physically not long enough.\3\
Some rail yards have been closed completely and employees furloughed
because the rail carriers have lost interest in providing the switching
operations necessary to deliver cars to shippers on time.
---------------------------------------------------------------------------
\3\ Doubling a train over involves pulling train cars out of on
track far enough so the train may then make a reverse move to couple to
another group of train cars in another track to constitute a complete
train that can then be air tested and inspected.
---------------------------------------------------------------------------
All things considered, the strict adherence to PSR and like
business models only serves to cause serious service delays to shippers
and end of the line customers by deferring or skipping maintenance and
inspections, furloughing employees, and closing yards. Whenever there
is an upturn in business, or an unexpected event that affects
operations, the capacity of the system cannot handle the increases or
impediments. The only answer the railroads have consistent with their
business model is to make everybody work more, thus their harsh
attendance policies forcing employees to do just that. In fact,
railroads are now part of the great resignation in this country. On
just one class one, over 600 well paid and highly trained employees
have resigned in recent weeks as opposed to be threatened with their
jobs if they will not or cannot work every time the railroad calls.
People cannot work all the time; and machines cannot be made to run
without maintenance and inspections. This is a vicious cycle that will
only be stopped by a catastrophic accident. We do not want to see that
happen and we are here to tell the Congress that the STB can play a
role.
Recommendations
BLET believes that STB being responsible to regulate railroads can
help by handling service complaints in a timelier and more effective
manner without the worry that it would be interfering in commerce;
rather, the Board would be helping commerce and the free flow of
products carried by railroads. The Staggers Act and the Interstate
Commerce Commission Termination Act of 1995 are not sufficient to
protect employees, customers, and shippers against a railroad business
model where endless cost cutting--at everyone's expense except the
railroad itself--is the only plan.
We do not have all the answers on how to accomplish this but
suffice to say the rail carriers have shown no interest in our
opinions, even though we see events daily that prevent shippers from
receiving their goods when they should. That said, some suggestions
might be to better define the common carrier (49 USC 11101) obligation
so that the existing requirements can be effectively enforced by STB.
This could also come with an attendant clarification that Congress
affirm that STB is both capable and responsible for enforcement of the
railroad's common carrier obligations.
There are limits that railroad unions see as well to STB's role. We
do not see STB to have the authority to be involved in any collective
bargaining issues or mandating terms of a collective bargaining
agreement. But we think that mandating and enforcing good service will
result in proper employment levels which will support good rail
service.
Proposed Changes: Reciprocal Switching
BLET is also not in favor of certain proposals being considered by
Congress involving the so-called concept of ``reciprocal switching.''
This for many reasons. Among them:
We do not support legislation or regulation that expands or
provides additional rights to rail carriers for ``reciprocal
switching,'' because it departs from longstanding rules and precedent
under our collective bargaining agreements. The detrimental effects on
rail employees from potential ``reciprocal switching'' legislation
should outweigh the perceived benefits from ``reciprocal switching''
that do not actually exist. Also, there are currently regulated means
for shippers to use short lines using trackage rights requests.
Another problem with reciprocal switching is that such arrangements
could be used to avoid the imposition of protective conditions related
to trackage rights approvals when existing workers are adversely
affected.
From an operational standpoint, there is no need for any additional
rights for shippers to get their goods from railroad A to railroad B.
Currently, to get their traffic from one railroad to another all a
shipper would need to do is an interchange at a location(s) where it is
possible.
In addition, conferring any new rights to a rail carrier will not
change the geographical layout and/or the conditions necessary to
perform an interchange between rail carriers.
The use of the term ``reciprocal switching,'' is a misnomer because
interchanges are not the same thing as switching. The proper term for
getting a shipment from one railroad to another is called an
interchange. Interchanges only can occur where it is physically
possible in a location with the proper rail infrastructure (e.g., an
interlocking, wye). Neither trackage rights nor ``reciprocal
switching'' change who is the controlling railroad operator is, i.e.,
dispatching delivery movements will always be managed by the owning
railroad; so, allowing access to another railroad will not remedy
whatever problems there are with the railroad that owns and controls
the tracks.
BLET appreciates the opportunity to testify. We know well the STB
cannot remedy safety problems or problems governed by other federal
agencies like the Federal Railroad Administration or Department of
Labor. It does not weigh in on collective bargaining issues and we do
not ask it to. What we want from STB is to lay out strong markers for
adequate service, and to have a clear law that can be enforced for
making customer service quality a priority. All of the safety issues,
risks of longer trains, taxed to the max employees, monopolistic
behavior--all of them can be a drag on service. This is where STB
should concern itself and this is where Congress can help give STB the
legislative tools to ensure that America's freight railroads provide
world class service again.
Thank you.
Mr. DeFazio. I thank the gentleman for his statement.
We now turn to Brad Hildebrand, member, the National
Industrial Transportation League, and former vice president of
Cargill--Global Rail and Barge Lead.
Mr. Hildebrand. Good morning, distinguished members of the
House Railroads, Pipelines, and Hazardous Materials
Subcommittee.
My name is Brad Hildebrand. I am a member of NIT League,
and a recently retired vice president of Cargill Incorporated,
where I worked for 39 years, spending the last 10 years leading
Cargill's global rail and barge modes. I have also served on
two different STB committees: the National Grain Car Council,
where I was chair from 2013 to 2015; and the Rail Energy
Transportation Advisory Committee.
I appreciate the opportunity of addressing NIT League's
views on the reauthorization of the STB. As a member of NIT
League, whose members include large and small rail shippers, we
hope that Congress will give our recommendations thoughtful
consideration.
A lot has been said about Precision Scheduled Railroading
over the last 5 years. PSR is an operating methodology that has
been championed by Wall Street to push railroads to improve
their operating ratios and increase their bottom lines. I would
be happy to take questions about PSR later, but, simply put,
the STB needs greater statutory authority to provide effective
oversight of the freight rail industry. This is especially true
in today's inflationary market.
The implementation of PSR among nearly all Class I
railroads has simply heightened the problem with the lack of
railroad-to-railroad competition. A main statutory goal of the
Staggers Act of 1980 is to instill competition. Today we find
ourselves in a highly consolidated rail industry with, at best,
duopolistic railroad behaviors and expectations.
NIT League is pleased that the Board is once again
considering its reciprocal switching proposal. It has taken
over 10 years to get to this point. NIT League asks that, one,
Congress encourage the Board to reach a final reciprocal
switching decision as expeditiously as possible; and two,
encourage additional avenues, such as gateways for the Board to
consider, that would facilitate railroad-to-railroad
competition.
Along with reciprocal switching, NIT League would like to
point out the issues with bringing rate cases before the Board.
Despite various provisions in the STB Reauthorization Act of
2015, rate cases are long, expensive, and risky for all
shippers. It is encouraging that the Board is considering its
proposed Final Offer Rate Review. Unfortunately, no significant
action has been taken to reduce the burden and cost of bringing
a large rate case to the Board. There are no current rate cases
outstanding before the STB, none. This signals that the system
is broken and needs attention.
For those shippers that are brave enough to bring a rate
case to the STB, they have experienced the Board taking years
to reach a decision, while having to spend thousands, if not
millions, of dollars to conduct a case. I have personal
experience where my former employer, Cargill, along with North
American Freight Car Association, has a pending empty mileage
case before the Board that started 7 years ago. Shippers have
become so discouraged that they have about given up bringing
cases to the Board.
An area that we would like to see incorporated in the
reauthorization is to provide statutory definition clarifying
the common carrier obligation. With no clear definition, the
railroads are reducing service, demarketing lines and
commodities, and dictating terms and conditions that meet the
railroad's goals.
Adding more frustration is that the railroads do not incur
any penalties when their service fails shippers. Having clarity
around the definition of what it means to be a common carrier,
combined with the STB developing a standard by which to measure
common carrier service performance, should add accountability
to the railroads to provide a level of service, as required by
statute.
In addition, we ask Congress to increase the level of fines
the Board can assess when a railroad does not meet their common
carrier obligation.
NIT League asks Congress to consider removing commodity
exemptions. We strongly believe that all movements falling
under the Board's jurisdiction should have the opportunity to
seek redress and relief without having to go through the
existing protracted process of seeking a revocation of the
exemption.
In conclusion, it takes a long time for the STB to issue a
ruling. When they do issue a decision, NIT League believes
these decisions have gone in the railroads' favor. It is as if
the chickens need to convince the guard dog about what the fox
is doing to them, all the while long the fox does what foxes do
when given the chance.
Let me repeat that: The fox does what foxes do when given
the chance.
Thank you for your time and consideration of our
recommendations.
[Mr. Hildebrand's prepared statement follows:]
Prepared Statement of Brad Hildebrand, Member, National Industrial
Transportation League, and Former Vice President, Cargill--Global Rail
and Barge Lead
Introduction
Chairs Peter DeFazio and Donald Payne, Ranking Members Sam Graves
and Rick Crawford, and Members of this Subcommittee, thank you for
holding today's hearing, ``Stakeholder Views on Surface Transportation
Board Reauthorization,'' and for the opportunity to submit these
written comments on behalf of the National Industrial Transportation
League (NITL).
I am Brad Hildebrand, a longstanding Member of NITL. I also appear
before you today as a former Vice President of Cargill--Global Rail and
Barge Lead, Member of the Surface Transportation Board's (STB or Board)
Rail Energy Transportation Advisory Committee and Member of the
National Grain and Feed Association's Rail Arbitration Rules Committee.
Let me begin by acknowledging your leadership and efforts in
realizing the Surface Transportation Board Reauthorization Act of 2015,
P.L. 114-70, which was the first time the Board had been reauthorized
since 1998. This law has helped the Board to operate more efficiently
in several aspects, but most notably, by expanding the size of the
Board from three Members to five Members allows the agency to become
more functional and collaborative.
Especially considering the Act expired on September 30, 2020, this,
combined with the continued consolidation of the railroad industry and
in the environment of Precision Scheduled Railroading (PSR), it is the
right time for these discussions with all stakeholders including the
Board, shippers, receivers, rail carriers, and the customers we all
serve.
Competition
There is a lack of robust railroad-to-railroad competition in our
industry. There are only seven Class I railroads with four of them
responsible for moving 90% of our nation's freight. We are also facing
the strong probability of that number being reduced to six Class I
railroads with the pending merger of the Canadian Pacific and Kansas
City Southern railroads. Given the exemption that the railroad industry
enjoys from certain anti-trust protections, combined with post-merger
duopolies that now exist in the western and eastern parts of the
country, this creates an environment where the railroads can exert
substantial market power over their customers who operate facilities
served by only one railroad.
A free-market economy works best if there is vigorous competition.
Where a market has become highly concentrated due to a series of
mergers, it is incumbent upon the government, and in this case the STB
per the Rail Staggers Act of 1980, to instill or facilitate competition
in the marketplace. For instance, the Board is considering revising its
decades-old reciprocal or competitive switching rules in its EP Docket
No. 711 (Sub.-1), Reciprocal Switching. The Board's current reciprocal
switching rules were adopted more than 30 years ago when the rail
industry was struggling financially. The STB has never granted a
reciprocal switching request, and no new requests have been made for
decades, because it is impossible for a shipper to meet the
requirements due to the high legal standard--an insurmountable barrier
in seeking relief. Not only does NITL strongly support the Board's
efforts in this proceeding, but NITL was the organization who filed the
initial petition before the Board in 2011 requesting the Board to adopt
new reciprocal switching rules to give meaning to the provision in the
Staggers Rail Act of 1980 that authorizes the Board to grant reciprocal
switching arrangements that are ``practical and in the publics best
interest'' or ``necessary to provide competitive rail service.'' \1\.
Some railroads claim that, even where direct rail competition is
lacking, there is ample competition via truck, and/or, by water barge
or even air. While competition offered by other transportation modes is
vital to our supply chain, it often cannot replace the need for
railroad-to-railroad competition when a manufacturing or other facility
is configured for rail shipments, or their customer requires rail
deliveries.
---------------------------------------------------------------------------
\1\ 49 U.S.C. Sec. 11102(c).
---------------------------------------------------------------------------
Many shippers are prohibited from shipping by truck, water, or air
due to numerous factors including commodity type, location, and
infrastructure investments already made or needed to support rail. It
is not easy to change transport options for each mode of transportation
requires its own infrastructure and there are needs unique to each
commodity. Shippers invest in their infrastructure to support freight
rail transportation, based in large part, on what the rail carriers
require to service our facilities--plant, manufacturing facilities,
distribution centers, and the like.
A lack of competition also impacts investments in capacity which
affects the fluidity of the overall network. NITL members are
experiencing various problems, including but not limited to,
bottlenecks, under or over utilized gateways, missed switches, and
doubling of trains. Then railroads' PSR routing decisions or protocols,
elimination of hump yards, reduction in crews and other personnel,
combined with factors beyond railroads' control such as weather events
or natural disasters, have prevented the railroads from responding
adequately or proactively to mitigate ahead of time.
Lastly, the current regulations and practices/protocols of the
railroads substantially limit shipper gateway options thereby further
constraining rail-to-rail competition.
Service
NITL deeply appreciates the STB's consideration in a pending
rulemaking in Ex Parte No. 767, First Mile/Last Mile Service, of the
need for Class I railroads to report First-Mile/Last-Mile (FMLM) data,
in the aggregate, to the Board.
Service problems experienced by shippers often occur during the
FMLM segments of the journey. The League strongly believes that
adoption of a FMLM service standard and reporting requirements is
warranted and would be beneficial to rail customers, the railroads, and
the Board. Adopting such a standard and metrics would improve
transparency that would facilitate supply chain planning and meaningful
dialogue between railroads and their customers to address service
shortcomings, and it would be a crucial tool for the Board to monitor
local rail service.
NITL, joined by several other aligned shipper groups, initially
expressed this concern to the Board almost two years ago, and requested
that the Board require the Class I railroads, in the aggregate, to
submit FMLM data. Without this data, the Board, shippers, receivers,
and other stakeholders:
Do not have a complete picture of the overall functioning
of the rail network that shippers need for planning and operational
purposes.
Lack data to assess whether any service problems are
specific to them or broader in scope, and whether service is improving,
deteriorating, or remaining stable over time.
NITL asks that Congress encourage the Board to complete, as
expeditiously as possible, its consideration of requiring the
submission of FMLM data, in the aggregate, from the Class I railroads.
Rates
Captive shippers pay higher rates because they lack an effective
competitive option. The STB has, various rate reasonable remedies that
it can use, but these do not work very well, and are applicable to a
modest minority of shippers. Thanks in large part to the Act, and the
recommendations made in the STB's 2019 Rate Reform Task Force Report,
the Board is making some efforts to address this problem through its
Final Offer Rate Review proposal that is also being considered in
conjunction with a rail carrier-proposed voluntary arbitration process.
The Board, however, has yet to take further action to flesh out its
revenue adequacy constraint, rate reasonableness methodology or an
alternative to the Stand-Alone Cost (SAC) test for larger rate cases.
It is important to note, that per the STB's quarterly reports to
Congress, there are no pending rate cases before the Board which
signals that shippers continue to be wary of filing rate cases because
the current processes are too long and expensive with continued
uncertainty of the outcome.
Common Carrier Obligation
One area where Congress can assist the Board with addressing
service challenges is to clarify the definition of railroads' ``common
carrier obligation.'' Currently, the statute requires railroads ``to
provide transportation or service on reasonable request.'' \2\ The
``reasonableness'' standard, however, is elusive. Although it requires
railroads to provide a level a service that meets a shipper's
reasonable needs, in practice, railroads have been able to provide
service that is poor while still asserting that they are meeting the
``common carrier obligation.'' The railroads have been able to
circumvent their obligation to service the needs of the shipping public
by using pricing to prioritize what commodities they prefer to serve
while ``demarketing'' others. With service performance continuing to be
unreliable and unsatisfactory to many shippers, the League believes
that now is an appropriate time for Congress to re-evaluate the meaning
of the ``common carrier obligation'' to ensure that it applies not only
to service refusals but also material service reductions and
deficiencies, combined with consequences when it is not met.
---------------------------------------------------------------------------
\2\ 49 U.S.C. Sec. 11101(a).
---------------------------------------------------------------------------
STB already has the statutory authority to impose fines or
penalties. NITL suggests Congress expand the criteria for when the
Board can assess fines or penalties that would allow shippers to
recover appropriate damages to the extent the Board finds that
railroads are not fulfilling their common carrier obligations, in the
aggregate, as well as individually and are not providing adequate and
economical service to their customers.
In addition, the Board under current statutory authority, can
assess a penalty up to $8,700 per violation. The amount is not enough
unless STB were to have the statutory authority to apply this to each
carload, or each day that a carload is delayed.
Commodity Exemptions
NITL passionately believes that all commodities, whose freight rail
movements fall under the purview of the STB, have the opportunity to
seek redress and relief from the Board. Today, that does not exist as
certain commodities are ``exempt.''
The STB has the authority to revoke exemptions so long as the
revocation standard in the statute is met. How that authority is
ultimately interpreted is still an open question. STB initiated a
rulemaking to review certain commodity exemptions in 2016.\3\ However,
that proceeding has languished at the Board for too long, while denying
many shippers of exempt commodities with direct access to the STB's
remedies and procedures. NITL asks Congress to encourage the STB to:
---------------------------------------------------------------------------
\3\ See STB Docket Ex Parte 704--Review of Commodity, Boxcar, and
TOFC/COFC Exemptions.
---------------------------------------------------------------------------
Promptly complete its consideration of commodity
exemptions in its pending proceeding, EP Docket No. 704, Notice of
Proposed Rulemaking, Review of Commodity, Boxcar, and TOFC/COFC
Exemptions. It is important to note, however, that this proceeding only
involves five to six commodity groups and there are many other exempt
commodities for which a review is warranted.
Interpret its revocation authority more broadly given
today's far more concentrated market conditions than existed when the
exemptions were adopted and the railroads' financial health.
Other options should Congress choose a different approach, would be
to 1) require that all exemptions be periodically reviewed by the STB
every five years or 2) revoke all exemptions by a date certain unless
the railroads can show that the exemption is still warranted.
Railroad Industry's Strong Financial Standing
On a positive note, one aim of the Staggers Rail Act of 1980 has
been achieved: restoring the financial stability of the railroads.
However, the resulting lack of railroad-to-railroad competition,
enhanced by the impacts of PSR, has contributed to the current state of
the railroads incredibly strong financial health.
Under PSR, the railroads have sought to improve their operating
ratios by reducing capital expenditures and lowering overhead costs.
The improved operating ratios also have resulted in high returns
spurring an excess in capital, which the railroads have distributed
through repeated dividend increases to their stockholders, and via
sizeable stock buybacks. Rather than investing in their networks to
improve service, the railroads (as mentioned earlier) are reducing
capacity and focusing on rewarding their investors.
One measure of the financial health of a Class I rail carrier is
the Board's annual determination of ``revenue adequacy.'' The Board's
website provides information on the number of Class I carriers that are
deemed ``revenue adequate'' from 2000 through 2020 where there is a
trend of a growing number of Class I railroads not only achieving
``revenue adequacy'' but maintaining it.
For 2020, the most current year for which determinations are
available, six railroads were deemed ``revenue adequate: BNSF, CSX,
Grand Trunk Corp., KSC, Soo Line, and UP. The railroads' improved
financial performance and the increasing number of carriers that are
achieving revenue adequacy justify the Board shifting its policies from
those that are designed to help the railroads achieve revenue adequacy
to those that place an increasing emphasis on the national policy ``to
allow, to the maximum extent possible, competition and the demand for
services to establish reasonable rates for transportation by rail.'' 49
U.S.C. Sec. 10101(1).
STB Operations
The Staggers Rail Act of 1980 configured the STB as an adjudicatory
agency. This, combined with an objective of restoring the financial
stability to the railroads, resulted in the burden of proof being the
responsibility of the shippers in nearly all the Board's functions. It
is in fact fundamental to how the Board operates. Especially given the
financial health of the railroad industry, NITL encourages Congress to
consider statutory changes which would require the burden of proof to
rest with the railroads pertaining to service and rate complaints.
While NITL appreciates the demands placed on the Board, especially
given its ever growing profile and areas of responsibility, the
frustration continues in how long it takes the STB to reach decisions.
The quarterly report to Congress on the status of major STB
proceedings, as required by the Act, is helpful. And the STB's efforts
to help streamline rate cases for particularly smaller cases combined
with its efforts addressing service complaints, are helpful. It is
suggested for Congress, however, to consider instilling timelines or
deadlines for not just initiating a formal proceeding but for
completing one. The number of resources that it takes a shipper--from
the burden of proof and proceeding process standpoints--more often than
not serve as a deterrent for all shippers to seek redress or relief
from the Board. Another suggestion is for Congress, through both the
authorization and appropriation process, is to provide the necessary
funding for professional staff and administrative support.
Length and Funding Levels of Next Authorization
NITL recommends that the next authorization be a minimum of five
years at funding levels commensurate with the previous enacted Fiscal
Year (FY) appropriation levels.
We support the Board receiving the highest possible annual
authorized and appropriated funding levels because the:
Demands placed on the STB are unprecedented given its
regular adjudicatory responsibilities in addition to pending rail
merger proceedings--all of which pose significant service and rate
issues for captive shippers, and questions concerning the structure of
a freight rail industry that promises to be even more consolidated than
what it is today.
Number of formal and informal railroad performance
service complaints are increasing.
Continued reliance on data transparency, including access
by all stakeholders, remains where continued data and analytical
capabilities are needed by the Board to enhance its evidence-based
decision-making.
Board is charged with implementing the new passenger On-
Time Performance Standards for passenger rail.
Board operating with a full complement of Members.
Thank you for holding this hearing and your continued consideration
of my comments on behalf of NITL. I am happy to answer any questions
you may have and look forward to this discussion continuing.
__________
Attachment
[Mr. Hildebrand submitted an attachment to his prepared statement
which is retained in committee files and available online at https://
docs.house.gov/meetings/PW/PW14/20220308/114465/HHRG-117-PW14-Wstate-
HildebrandB-20220308-SD001.pdf]
Mr. DeFazio. I thank the gentleman for his statement.
And with that we would move to our final witness, Herman
Haksteen, president, Private Railcar Food and Beverage
Association.
Mr. Haksteen, 5 minutes.
Mr. Haksteen. Thank you very much, and thank you to the
subcommittee for holding this extremely important hearing. My
name is Herman Haksteen. I am the president of the Private
Railcar Food and Beverage Association. We call it PRFBA.
My aim this morning is to shine some light on railroad
performance, service, and financial burdens that are being felt
by PRFBA members, and to strongly support the STB and its role,
and perhaps more active role, in railroading today.
PRFBA was formed in 2016. We have 18 global food and
beverage companies that make up 100 percent of our membership.
They are all major rail shippers and, uniquely, they all own
rail assets. PRFBA members have railcars, and have invested
millions of dollars in rail infrastructure. That uniquely makes
them more committed to rail, and less able to simply move to
other modes of transport when things in railroading aren't
going so well. If a decision was made to go to another mode,
that means parking millions of dollars of assets, which is
seldom a wise decision.
However, given service of late, many of our members find
themselves having to do that. PRFBA members have skin in the
game, and, because of that, we deserve to be treated as such.
The underlying issue, in our opinion, is competition. When
there is a lack of competition--notably railroad-to-railroad
competition, for those that need that clarified, and especially
at single-serve facilities or captive shippers, as they are
called--the railroads are free to provide any service level at
any cost. A good example of that was during the rollout of PSR,
and what the railroads did to their shippers. Where there is a
lack of competition in a free market economy, it is incumbent
upon the Government--in this case, through the Surface
Transportation Board, per the Staggers Act--to intervene.
PRFBA members are not alone. Obviously, as the chairman
pointed out when we started this morning, everybody has
concerns today. But we don't need to look at concerns. We can
look at the real facts that the railroads are not clearly
presenting, and that is, the market is speaking.
Unfortunately, freight is moving from rail to truck, and
this is negatively impacting not only our supply chains, but
our environment and our infrastructure. The results of a
shipper survey published by Morgan Stanley that just came out
in January said 30 to 40 percent of shippers surveyed are
moving some or a significant portion of their freight volume
from rail to truck. Data published by the American Trucking
Associations indicates that, from 2017, the beginning of PSR,
to 2021 final results, truck tonnage grew by 3\1/2\ percent,
while rail tonnage shrunk by 5.1 percent.
Interestingly enough, even the AAR's own website publishes
rail traffic information. A quick look at their website shows
that, since PSR in 2017, rail carload traffic in the United
States has shrunk by 11 percent. Even if you add in intermodal,
rail traffic overall, in tonnage, has still shrunk by 5
percent.
Assuming that most of this traffic is moving to truck, as
the data would suggest, and using a very conservative measure,
which would be three trucks for every railcar, this migration
is adding 4\1/2\ million truckloads of shipments onto our
highway every year. That additional volume is wearing out the
infrastructure faster, it is creating unnecessary greenhouse
gases, and it is impacting today's transportation capacity.
Our Nation's rail advantage is hemorrhaging. The simple
fact that rail volume is down and truck volumes are up
illustrates that there is something wrong. That cannot be
refuted. And the extra cost that our shippers are incurring
because they are having to ship in other modes is a
contributing factor of today's inflation.
When there is a lack in the marketplace of competition, and
our railroad volumes are plummeting, it is incumbent upon the
Government--and, in this case, the Surface Transportation
Board, per the Staggers Act of 1980--to help us out.
The railroads are financially strong.
The Staggers Act in 1980 had two primary objectives:
instill competition, stabilize the financial health of the
railroads. They have certainly done the latter. We now need the
help with the competition.
Railroad financials are public information. I quickly
called up the fourth quarter results at the end of 2021, and it
is amazing. And even in their financial results, they blatantly
show all seven Class I railroads had reduced volume in the
fourth quarter of 2021, and all seven increased their revenue
and increased their revenue per carload. They are shipping
less, and taking more.
New authorization--PRFBA supports a multiyear authorization
at the highest levels for the Surface Transportation Board.
We echo the concerns of the other folks, and we are
thankful that you had this hearing. If you have any questions,
I am happy to answer.
[Mr. Haksteen's prepared statement follows:]
Prepared Statement of Herman Haksteen, President, Private Railcar Food
and Beverage Association
Introduction
Chairs Peter DeFazio and Donald Payne, Ranking Members Sam Graves,
and Rick Crawford, and Members of this Subcommittee, thank you for
holding today's hearing, ``Stakeholder Views on Surface Transportation
Board Reauthorization,'' and for the opportunity to submit these
written comments on behalf of the Private Railcar Food and Beverage
Association (PRFBA).
I am Herman Haksteen, President of PRFBA. My aim this morning, is
to shine a light on railroad performance, service, and financial
burdens that are being passed on to PRFBA members, discuss how the
Surface Transportation Board (STB or Board) are addressing these
concerns, and make recommendations on what Congress can do to help
stakeholders moving forward.
PRFBA is comprised of 18 global food and beverage companies and
manufacturers headquartered in North America. All our members own or
lease rail car equipment. These members include PepsiCo, Inc., Molson
Coors Beverage Company, KraftHeinz Food Company, General Mills, Inc.,
McCain Foods USA, Inc, Sysco Corporation, Bonduelle America, Boardman
Foods, Inc., G3 Enterprises, Inc., JD, Irving/Cavendish Farms, The
Martin-Brower Corporation, Lamb Weston Holdings, Inc., Univar
Solutions, Darigold, Inc., Kellogg Company, Land O' Lakes, Inc.,
National Sugar Marketing, LLC, and Leprino Foods. They are major rail
shippers--some are captive--that rely on the railroads to distribute
their food and beverage products that are vital to the health and
welfare of our nation. These companies are responsible for feeding
America. Without adequate rail service, their food and beverage
products may not be available in all regions, at all times, and will
carry a higher price to the end consumer.
PRFBA began in January 2016 because these companies were
experiencing rail transportation challenges. PRFBA provided, and still
provides, the forum for them to meet regularly to discuss opportunities
and solutions to rail service issues. The membership collaborates with
other aligned trade associations and stakeholders regarding industry
changes, and proposed legislation and regulations that directly impact
the food and beverage transportation needs of PRFBA members and the
industry. Also, PRFBA meets with the Class I North American Railroads
and the consumer group at the Surface Transportation Board where group
discussions are held on rail service issues unique to its membership.
PRFBA provides its members with a forum to work together to make rail
work better within their supply chains.
PRFBA members own or lease railcars. As such, they absorb costs
associated with equipment ownership, operation, and maintenance.
Investing millions of dollars in rail cars also greatly restricts these
members from other transportation modes. If a decision is made to
change modes, it means ``parking'' assets which is seldom a wise
financial decision. PRFBA members have skin in the game and deserve to
be treated as such.
It is important to note that PRFBA started before the
implementation of Precision Scheduled Railroading (PSR). Many of the
service and cost issues back then were being experienced due to a lack
of railroad-to-railroad competition. But with PSR implementation--
notably the reduction of workforce, serving yards, and switch days has
resulted in PRFBA member companies dealing with the worst service and
the highest rail costs in recent history. As Fortune 500 companies,
PRFBA members are relying on their association to express their growing
concerns and seek help from Congress and the Administration to get our
railroads back on track.
Lack of Competition
When there is a lack of competition, notably in this case a lack of
railroad-to-railroad competition, and especially at single served
facilities (or captive shippers), the railroads are free to provide any
service level at any costs. To improve railroad financials, the
railroads are even reducing capacity by limiting equipment
availability. When there is reduced capacity, rates increase, service
suffers, and railroad margins rise. When there is a lack of competition
in a free market economy, it is incumbent upon the government, in this
case the Surface Transportation Board (STB or Board) per the Staggers
Rail Act of 1980, to intervene.
Today, there are only seven Class I railroads where four of them
move 90 percent of our nation's rail freight. Of these four Class I
rail carriers, two are predominately located in the east and 2 in the
west. However, most customer locations served by these carriers are
single carrier served locations. This is a far different market from
when the Staggers Rail Act of 1980 was enacted, when there were 40
Class I railroads. PRFBA member companies have been adversely impacted
by the consolidation of the rail industry and their increasingly
captive status in many locations.
The probability of further consolidation of the rail industry,
where there are merger applications before the Board including a
combination of two Class I railroads, inherently will bring on even
more monopolistic, or, at best duopolistic behaviors within the
railroad industry.
PRFBA members are not alone when it comes to the current issues of
our remaining Class I carriers. The market is speaking and
unfortunately more freight is moving from rail to truck, which is
negatively impacting not only our supply chains, but our environment
and infrastructure are paying a heavy price also.
The results of a shipper survey published by Morgan Stanley in
January of 2022 suggests that over the past year (depending on the
quarter), 30-40% of shippers surveyed were moving some or a significant
portion of their freight volume from rail to truck.
Data published by the American Trucking Association (ATA) indicates
that from 2017 to 2021 total truckload tonnage grew by 3.5%, domestic
air freight tonnage grew by 24.2% while rail tonnage declined by 5.1%.
Interestingly, the Association of American Railroad's (AAR) own
data, as presented on its website, shows a grimmer picture. Since the
start of PSR in 2017, total carload traffic in the United States has
shrunk by 11% when compared to 2021. Even when including intermodal
traffic, 2021 rail volume was down 5% from 2017 as shown in the chart
below:
Rail Volumes in Millions
[AAR numbers]
------------------------------------------------------------------------
Carload Intermodal Total
------------------------------------------------------------------------
2017................................. 13.5 14 27.5
2018................................. 13.6 14.4 28.1
2019................................. 12.9 13.7 26.7
2020................................. 11.3 13.4 23.7
2021................................. 12 14.1 26.1
----------------------------------
Change 2017-2021................... -1.5 0.1 -1.4
----------------------------------
% Total Change................... -11.11% 0.71% -5.09%
------------------------------------------------------------------------
Assuming that most of this traffic migrated to truck as the data
would indicate, at a 3-1 conversion for carload traffic, this migration
to truck has added 4.5 million truck load shipments onto our highways.
This additional volume is wearing out our infrastructure faster and
creating unnecessary additional greenhouse gases.
This does not match with the policy objectives of the Biden
Administration and some Members of Congress as possibly one way to
address climate change challenges and enhance safety on our nation's
highways.
It is important to note, that the increase in truck volume only
pertains to those limited number of shippers who can transport their
products by truck. Many shippers, however, have significant barriers to
shipping by truck (or even water/barge and air) due to numerous factors
including commodity type, location, and infrastructure investments
already made to support a rail supply chain. For shippers that can
change to another mode(s), it is not easy to change transport options--
each mode of transportation requires its own infrastructure and there
are needs unique to each commodity. Shippers invest in their
infrastructure to support freight rail transportation, based in large
part, on what the rail carriers require to service those facilities or
what service the railroads offer to provide via their sales and
marketing efforts. When shippers make the difficult decision to change
modes, it is often a last resort to meet an immediate customer need.
These changes add huge costs resulting in higher prices for the end
consumer.
The simple fact that freight rail volume is down, and truck volumes
are up, helps illustrate that something is wrong with our freight rail
network, and the additional shipping expenses can be contributing
factors to our current inflation concerns.
When there is a lack of competition in the marketplace, combined
with the railroads' exemption from most antitrust protections, it is
incumbent upon the government--in this case the STB per the Staggers
Rail Act of 1980--to instill competition. PRFBA asks Congress to
consider these three areas, affected by a lack of competition, when
developing the next STB authorization:
Maintenance, Service and Rates
Maintenance. It is expected that private car owners will incur
maintenance costs. But due to the limited railroad-to-railroad
competition, railroads are free to make decisions that increase their
profits and pass costs back to railcar owners and shippers. PSR
operational decisions which include longer trains and more gravity fed
hump yards, increase the wear and tear on the rail cars. Cryo Trans (a
business I ran up until 2020) is the largest owner and lessor of food
grade refrigerated and insulated food cars. Cryo Trans saw a 52%
increase in car maintenance costs when comparing 2021 to 2017. During
that same time, Cryo Trans also experienced a 330% increase in cars
that were completely destroyed.
Service. A lack of railroad-to-railroad competition and profit
driven decisions also impacts service. Some PRFBA member companies are
experiencing record poor service levels ranging from missed switches,
reduced switching service days, bunching caused by longer trains,
bottlenecks primarily driven from a reduction of serving yards and
crews to the reduction of cars and locomotives, which all have led to
longer transit times and irregular service.
Longer transit time reduces the utilization of rail cars. For
operators of private cars, this results in a significant financial hit.
Depending on the car type, this expense ranges from $50 to $300, per
day, per car. For a shipper with 250-cars, this can add $75,000 per day
to that shipper's operating budget.
Reduced service days has resulted in shippers having to acquire
their own switching equipment (track-mobiles) to reduce the impact on
operations. The capital required to acquire track-mobiles is
significant as is the training costs associated with the operations of
this equipment.
Current service levels have strongly impacted On-Time Performance
(OTP). One PRFBA member manually tracks the Class I OTP of the five
Class I railroads providing it service throughout the United States.
OTP is based on the railroads ability to deliver a car ``door-to-door''
within a day of the service schedule the railroads had previously
agreed to. These results speak for themselves in the following chart:
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Feb March April May June July Average
Rail Jan 2021 2021 2021 2021 2021 2021 2021 Aug 2021 Sep 2021 Oct 2021 Nov 2021 Dec 2021 2021
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
BNSF............................................................... 83.4% 68.3% 57.2% 85.0% 89.5% 83.7% 96.0% 100.0% 65.0% 75.0% 88.0% 55.0% 78.8%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
UP................................................................. 69.3% 61.3% 83.3% 85.4% 81.2% 83.1% 67.1% 78.0% 67.0% 62.0% 60.0% 56.0% 71.1%
NS................................................................. 37.9% 41.4% 67.4% 74.2% 52.6% 76.6% 68.3% 95.0% 75.0% 67.0% 56.0% 50.0% 63.5%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
CSX................................................................ 50.4% 65.1% 47.6% 84.3% 58.0% 84.2% 81.2% 23.0% 63.0% 49.0% 33.0% 25.0% 55.3%
CN................................................................. 100.0% 56.0% 92.0% 91.0% 75.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 92.8%
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Service in the way of OTP is mostly experienced or ``felt'' by
shippers at the first mile or last mile (FMLM) segments of a freight
rail movement. The railroads, however, are not required to report this
data to the Board. (The STB does, however, require in Docket No. EP 724
(Sub-No. 4) United States Rail Service Issues--Performance Data
Reporting, FMLM for unit trains and intermodal service only.) In 2020,
PRFBA joined with several other aligned shipper groups in requesting
that the Class I railroads provide, in the aggregate, to the Board FMLM
data.
Considering the STB has jurisdiction to provide oversight of these
segments of the journey, it is nearly impossible for it to do so
because without this data, the Board simply does not know ``what it
does not know'':
No complete picture of the overall functioning of the
rail network that shippers need for planning and operational purposes.
No assessment of whether any service problems are
specific to them or more generally, whether they are being singled out
for any service problems, and whether general service is improving,
deteriorating, or remaining stable.
No determination if railroads are properly executing
their common carrier obligation.
PRFBA is pleased that the Board is beginning to consider requiring
the reporting of FMLM data in EP Docket No. 767, First Mile/Last Mile
Service. It would be helpful if Congress would encourage the Board to
reach a final decision on this as quickly as possible requiring the
collection of FMLM data by the Class I railroads, in the aggregate.
In a second effort, the Board is considering revising its decades-
old reciprocal or competitive switching rules, requirements, and
processes, in EP Docket No. 711 (Sub.-1), Reciprocal Switching. It has
been decades since the STB has granted a reciprocal switching request
because it is nearly impossible for a shipper to meet the current
requirements. Due to railroads' effective stalling tactics, this
proceeding has stalled for about a decade, or stalled for 40 years if
you consider that the Staggers Rail Act of 1980 provided for
competitive switching.
The Board proposal would allow PRFBA members and other shippers
with access to only a single rail carrier to request before the Board
that the carrier provide a switch for freight to be moved by a nearby
rail carrier. This proposal would provide two paths for shippers to use
when making the request before the Board: 1) switching must be
practicable and in the public interest or 2) be necessary to provide
competitive rail service.
It would be helpful for Congress to urge the Board to reach a
decision on its reciprocal switching proposal as expeditiously as
possible. Shippers who meet the proposed criteria should have this
option in seeking competitive service and rates.
Rates and associated rail costs. It is inherent that when there is
a lack of competition, rates and passed down costs increase especially
for captive shippers.
Railroads, particularly when not encumbered by competition, can add
demurrage fees and accessorial charges freely, further increasing the
total cost of using rail. Several years ago, PRFBA's members
participated in STB's proceedings regarding demurrage and accessorial
charges. Shippers, including PRFBA members, were dealing with the
railroads using demurrage charges, not as a method to incentivize
customers to become more efficient or meet their performance
expectations, but rather, raising fines and fees against shippers,
imposing impossible-to-follow rules, and sending auto-invoicing fines
without the railroads investigating if shippers were at fault. The
amount of revenues being generated by the railroads was excessive to
the point where some argued demurrage and accessorial charges were
being used as revenue generators for the railroads rather than
incentivizing shippers' behavior. Again, the lack of railroad-to-
railroad competition, combined with PSR operating decisions that are
made with little to no communication with the shippers, fosters this
type of railroad behavior.
PRFBA appreciates the decisions the Board reached when issuing its
1) Final Statement of Board Policy in Docket No. EP 757, Policy
Statement on Demurrage and Accessorial Rules and Charges; 2) Final Rule
in Docket No. EP 759, Demurrage Billing Requirements; and 3) Final Rule
in the Supplemental Notice of Proposed Rulemaking (SNPR) in Docket No.
EP 759, Demurrage Billing Requirements. These new billing requirements
went into effect on October 1, 2021. Shippers have been receiving and
reviewing these new bills. While the railroads are providing the
required new billing information, there are several problems which need
Congressional, targeted fixes and accompanying policy modifications:
Clarify that demurrage bills are to be sent to the
shippers when railroads demonstrate that the shippers' behavior was the
driver of the demurrage and not railroad service problems.
Provide 30 days for shippers to pay demurrage bills. The
15 days allowed today by some railroads does not provide enough time
for shippers to contest, research, and negotiate with railroads over
questionable fees especially when the bills may be months old.
Increase the number of ``free days'' allowed to unload
and load rail cars and unit trains. This fix ties into the PSR
practices discussed earlier. Due to reduced train crews, elimination of
hump yards, increasing train lengths, and the lack of fluidity in the
rail network, cars tend to get ``bunched-up'' at pivotal points along
the route. As an example, a PRFBA member can receive, without advanced
notice or even coordination from the railroads, 15 cars rather than 5
cars. It takes additional equipment and crews (which are not always
readily available) for the PRFBA member to load, unload and turn around
the rail cars where the typical 48 hours for loading and 72 hours for
unloading is not nearly enough time before demurrage fees kick-in
especially when the need for shippers to have more time is because of
the railroads' poor service.
Consider reverse demurrage, in that the railroads will
pay the private car owners a daily fee when those private rail assets
are held up due to railroad operating issues or allow charge backs to
the railroads for daily car hire fees to offset the cost of additional
transit days experienced by car owners.
These problems again correspond to the need for the Board to
require the Class I railroads to provide FMLM data, in the aggregate,
to the STB as PRFBA and other shippers have requested and as the Board
is considering.
Railroads Are Financially Strong
The Staggers Rail Act of 1980 had two primary objectives: instill
competition and stabilize the financial health of the railroads. As
discussed above, the first has yet to be accomplished--competition has
not only deteriorated but it continues to weaken. When looking at the
second objective, it has been met--the railroads and their shareholders
are enjoying significantly strong financial health because of a lack of
railroad-to-railroad competition and PSR.
Under PSR, the railroads have sought to improve their operating
ratios by reducing capital expenditures and lowering overhead costs.
The improved operating ratios also have resulted in high returns
spurring an excess in capital, which the railroads have distributed
through repeated dividend increases to their stockholders, and via
sizeable stock buybacks. Rather than investing in their networks to
improve service or reduce rates, the railroads are reducing capacity
and focusing on rewarding their investors.
One measure of the financial health of a Class I rail carrier is
the Board's annual determination of ``revenue adequacy.'' The Board's
website provides information on the number of Class I carriers that
have been deemed ``revenue adequate'' from 2000 through 2020 where
there is a trend of a growing number of Class I railroads not only
achieving ``revenue adequacy'' but maintaining it.
For 2020, the most current year for which determinations are
available, six railroads were deemed ``revenue adequate: BNSF, CSX,
Grand Trunk Corp., KCS, Soo Line, and UP. Kansas City Southern has been
acquired by a Canadian Pacific Railway and at a massive premium.
A second measure of the financial health of the railroad industry
is noted with their respective publicly available quarterly earnings
reports. Per information pulled from the Class I's respective website,
the following chart illustrates the financial strength of the railroads
despite the reductions in railcar volume, while at the same time,
driven by Wall Street, the railroads are increasing their profits every
year.
4th QTR 2021 Year-to-Year Percentage Change of Class 1 Railroads
[Publicly Available Financial Results]
----------------------------------------------------------------------------------------------------------------
BNSF CSX NS UP KCS CN CP Average
----------------------------------------------------------------------------------------------------------------
Volume in Carloads............. -3.10% -1.80% -3.60% -3.90% -0.30% -10.00% -9.90% -4.40%
Total Revenue.................. 10.70% 21.30% 10.80% 11.50% 7.80% 2.70% 1.40% 11.30%
Revenue per Carload............ 13.00% 13.00% 15.00% 14.70% 7.10% 13.60% 12.50% 12.70%
Operation Ratios............... 61.30% 57.60% 60.40% 57.40% 60.10% 57.90% 57.50% 59.00%
----------------------------------------------------------------------------------------------------------------
Common Carrier Obligation
Railroads are conveniently using the ``common carrier obligation''
to ``get away with'' poor service and high rates mainly because there
is: 1) no clear definition of the ``common carrier obligation;'' 2) no
standard for which to measure it by; or 3) no meaningful consequence to
the railroads if the obligations are not met. As such, PRFBA asks
Congress to clarify via statute, the definition of ``common carrier
obligation.''
In theory, it means that railroads are to provide service on
reasonable request--railroads are to provide a level a service that
meets a shipper's reasonable needs. Considering there is no clear
statutory definition, railroads have been able and continue to provide
service that is poor even though asserting that they are meeting the
``common carrier obligation.'' The railroads have been prioritizing
what commodities to serve while ``demarketing'' others and still
claiming they are meeting the ``common carrier obligation.''
Along with a statutory definition clarification, it would be
helpful for Congress to direct the STB to develop a standard by which
railroad service performance can be measured. This ties in to how
important it is that the Board is beginning to consider requiring the
Class Is to report, in the aggregate, FMLM data. PRFBA appreciates, to
a point, that the Board would need some flexibility in applying a
statutorily clarified definition with a standard that includes not just
FMLM data, but other elements for meeting the common carrier obligation
which might vary from one railroad to another and from one shipper to
another. As such, the STB should be encouraged to also review and
evaluate the extent to which railroad operating, financial, investment,
marketing, and other business practices may be impairing the ability of
and incentives for railroads to fulfill their common carrier
obligations, in the aggregate, and provide adequate and economical
service to their customers.
STB already has the statutory authority to impose fines or
penalties. PRFBA suggests Congress should expand the situations when
the Board can assess fines or penalties that would allow shippers to
recover appropriate damages to the extent the Board finds that
railroads are not fulfilling their common carrier obligations, in the
aggregate, as well as individually and are not providing adequate and
economical service to their customers.
In addition, the Board, under current statutory authority, can
assess a penalty up to $8,700 per violation. This is far from
consequential or punitive. Congress needs to consider establishing a
higher penalty amount(s) and allowing the STB to apply a penalty to
each carload and/or each day a carload is delayed. Another option for
Congress to consider is to statutorily provide larger penalties tied to
the overall level of service. This might have to be applied to both
contract movements and movements that fall to the jurisdiction of the
STB for if not, the railroads might use contracts to avoid their common
carrier obligation.
New Authorization
PRFBA supports a multi-year authorization and at the highest
authorization and appropriation funding levels possible. Our nation
relies on a strong, vibrant freight rail industry--which includes the
railroads, shippers, receivers, and other stakeholders--to bring food
products to our homes and business in a cost-effective and reliable
manner.
Along with the PRFBA recommendations discussed in this written
testimony, PRFBA also encourages you to consider the results, once
released, of the study underway on the impacts of PSR being conducted
by the General Accountability Office (GAO). PRFBA sincerely thanks you,
Chair DeFazio, and you, Chair Payne, for requesting the GAO conduct
this study last Spring in preparation for the new authorization.
Conclusion
Thank you for holding this important hearing. On behalf of PRFBA,
we are asking for Congress to take further steps that will provide the
STB with the necessary authority--either clarifying existing authority
or granting new authority--to provide effective oversight of the
freight rail industry in today's environment, to further help the STB
streamline its processes so it can act faster to provide our shippers
with a fair marketplace. I am more than happy to answer any questions
you might have.
Mr. DeFazio. I thank the gentleman. With that we would now
turn to questions.
It seems like, in listening to the panel, we have one
panelist presenting the view that all is well, the STB does not
need enhanced powers, and the rail industry is just doing
wonderfully well. In fact, they did, over the last 10 years, on
an inflation-adjusted basis, buy back almost $200 billion worth
of stock. So, I guess, from the perspective of Wall Street, and
CEOs whose salaries are tied to the stock price and bonuses,
everything is great. But all the other panelists are presenting
a very disturbing view.
I would just like to know what the number-one thing the STB
could do, succinctly, from each of the panelists. And then, if
you can be succinct, then I will ask Mr. Jefferies to respond.
So, quickly, Mr. Jahn.
Mr. Jahn. Thank you, Mr. Chairman. Succinctly, reciprocal
switching. So, as I said in my testimony, right now we are in a
situation where three-quarters of our members do not have a
competitive option. And so, providing that option would reduce
rates significantly.
I'd also note that there is something called the Rail
Customer Coalition. That is 80 trade associations representing
9 million jobs and $5 trillion worth of economic activity in
ag, in energy, and in manufacturing. And they all support
taking that action.
Mr. DeFazio. Well, I guess I'll interrupt. I was hoping we
would move more quickly.
But Mr. Jefferies' group has said forced switching is
intended to lead to rate reductions. Without a plausible
explanation for nonspeculative, competition-driven public
benefits, these rate reductions are nothing more than a wealth
transfer from the railroads to the shippers. And another, it
says forced switching is not a public interest wealth transfer
to more profitable entities.
Anyone else want to put up their highest priority, quickly?
Mr. Haksteen. If I may, PRFBA would like to support
reciprocal switching. And we believe the ability for the STB to
have enough power to be able to make these positive changes as
quickly as possible, we absolutely--100 percent, reciprocal
switching.
And for those who say it doesn't work, let's check with the
two Class I's that operate in Canada. It has worked fine there
for many years.
Mr. DeFazio. OK. We have got substantial agreement here.
Anyone on the panel--other than the freight railroads--have a
different view of the number-one priority?
Mr. Hildebrand. [Inaudible.]
Mr. DeFazio. What?
Mr. Hildebrand. Yes, Brad Hildebrand, NIT League.
Mr. DeFazio. Yes.
Mr. Hildebrand. One of the things that I think our members
would like to see is the changing of the responsibility to
prove guilt, if you will.
Today, as I mentioned in my testimony, we have to prove to
the STB, as shippers, that the railroad is doing something
unreasonable to us. We would like that flipped around. Given
the profitability and the viability of the railroads today, we
think the railroads should be the ones that have to defend what
they are doing in their rates as being reasonable and
competitive, versus us having to prove to the STB that they are
unreasonable or uncompetitive.
Mr. DeFazio. OK, thank you. Actually, that is done with
other monopoly industries. For instance, utilities are
regulated in that manner.
Just one quick point. Two people have made the point about
interswitching in Canada, and it works, but we hear here it
would be a disaster. Can Mr. Jahn or Mr. Hildebrand, can you
just briefly comment on Canada's provisions?
Mr. Jahn. Yes, I would be happy to jump in there.
Mr. Chairman, competition drives every single other segment
of our economy. It drives innovation. It drives investment. We
have seen that in Canada. As we've mentioned, those companies
have increased their revenue and profits, and improved their
operational efficiency while doing interswitching. And they
have said that publicly.
The last thing I will say is a study recently came out and
said competitive rates in the United States are up 24 percent
in the last 15 years. Noncompetitive rates are up 230 percent.
And so, that is why we are looking for competitive switching.
Mr. DeFazio. OK, thank you.
Mr. Jefferies. Mr. Chairman, may I comment on the----
Mr. DeFazio. It has got to be real quick. I have only got a
few seconds left. Go ahead.
Mr. Jefferies. Yes, glad to. So, the Canadian rail system
was built and designed with switching in mind, and the number
of potential switches in Canada are remotely minuscule,
compared to the number of potential switches in the regime that
the STB is proposing.
Right now, switches can be ordered with the showing of
anticompetitive conduct. That is the way it should be. It
should not be a right to take one railroad's private property,
give it to another for use at below-market rates.
Mr. DeFazio. OK, thank you. My time has expired. I turn now
to Mr. Crawford for his questions.
Mr. Crawford. Thank you, Mr. Chairman. I am going to direct
this question to Mr. Jefferies.
We understand that the STB is reviewing a rule on
reciprocal switching. How could reciprocal switching impact
freight railroads' ability to transport goods and keep the
supply chain moving?
Mr. Jefferies. So, right now, again, the railroads enter
into switches on a voluntary basis, when it is planned out,
when it is part of a strategic need. A shipper can also
petition the STB for a switch when there is a demonstration of
anticompetitive conduct.
Adding switches adds complexity to the rail network. It
undermines fluidity. It adds complications. It potentially, if
forced, if it becomes a right versus a remedy to some sort of
wrongdoing, it creates a disincentive to investment. If I have
a plant, and I know at any given time my competitor could be
given access to that plant, that doesn't give me a lot of
reason to make the long-term investments necessary.
Forced switching would provide a remedy or a right--a
right--to a handful of large shippers at the behest of them,
and at the cost of other customers and constituents across the
entire rail network. That is why rail labor has opposed. Mr.
Pierce and I probably aren't going to see eye to eye on a lot
of things today. That is one area where we do have a common
agreement, common understanding, and common policy view.
The environmental crowd has opposed. Passenger rails have
opposed. Right-leaning groups have opposed. Left-leaning groups
have opposed. Intermodal associations have opposed. It is not
just Class I railroads who see this as a bad idea. It is
practically every user of the freight rail system, save a few
large shipper groups out there. It just doesn't make sense for
the overall vibrancy and health of the system.
Again, a switch can be ordered if a railroad is
demonstrated to be acting in an anticompetitive way, and that
is the appropriate measure, not because a shipper wants a
backdoor way to a rate cut.
Mr. Crawford. One of the policy suggestions in the Biden
administration's recent supply chain report is to encourage the
STB to require railroads to provide additional rights-of-way to
passenger rail. How would that impact freight movement on the
supply chain?
Mr. Jefferies. So, let me start. I want to be clear. I
completely agree that we can have a healthy freight rail
network and a healthy passenger rail network, and that is done
best when all sides sit down together, agree on the mutually
agreed to outcome, agree to the resources required, agree to
who is going to apply those resources. We have win-win
situations all over the country.
But I have to say that including a recommendation that
increasing the amount of passenger rail on the Nation's freight
railroads would somehow help alleviate supply chain problems is
preposterous, and it really begs the question the work that
went into this report. It is silly, it is silly. And that is
not an antipassenger rail statement. It is just preposterous to
think that adding passenger trains somehow helps the overall
supply chain.
Mr. Crawford. I appreciate your comments.
Mr. Chairman, I yield back the balance of my time.
Mr. Payne [presiding]. The gentleman yields back, and now I
will give myself 5 minutes for questioning.
Let's see. There are a number of groups that are an
important part of this conversation, and have sent in their own
views on STB's reauthorization. I have four statements that I
would like to enter into the record.
The first comes from the Brotherhood of Maintenance of Way
Employes Division; the Brotherhood of Railroad Signalmen; the
International Association of Sheet Metal, Air, Rail and
Transportation Workers Mechanical Division; and the National
Conference of Firemen and Oilers.
The second comes from the Portland Cement Association.
The third comes from the Freight Rail Customer Alliance.
And the fourth comes from The Fertilizer Institute.
I want to thank these groups for submitting statements for
the record.
Without objection, so ordered.
[The aforementioned statements submitted by Hon. Payne are
on pages 76-94.]
Mr. Payne. Mr. Hildebrand, one of my top priorities as
chairman of this subcommittee is to remove barriers in the rail
sector. A complex and archaic rate challenge process is one of
those barriers.
Can you elaborate on how STB processes could provide a
level playing field for all shippers?
Mr. Hildebrand. Well, one of the things that the STB is
working on right now is Final Offer Rate Review, or what they
call FORR. That is a streamlined approach to help improve the
accessibility of small rate cases. And we would definitely like
to see the Board push that forward.
Now, the--certain five of the seven Class I's have come up
with their own arbitrary system to look at small rate cases.
The Board is also considering that. We believe that, as a
shipper, you should have the right to choose either FORR or
whatever comes out from the AAR in the final ruling. We should
have the right to pick which way we want to go.
But clearly, that opens up an opportunity for us to bring
what we call small rate cases to the Board for them to rule on.
We would definitely like them to rule faster, as I said in my
testimony, than what they are ruling today. Clearly, it is
taking way, way too long to get a decision. So, I don't know if
that is staffing or other issues that are slowing them down,
but whatever we can do to streamline processes to help expedite
cases to be heard and decided would be greatly appreciated by
those of us that are in the shipping public.
Mr. Payne. Absolutely. And the technology exists now that
some of these archaic systems should still not be in place. And
I hope this is an opportunity to move forward in those areas.
Mr. Pierce and Mr. Jahn, I have serious concerns about the
effect of Precision Scheduled Railroading, not only for the
impacted workers, but also for the shippers that have to move
their cargo. Running longer trains raises the possibility of
safety concerns and could decrease the role of rail in the
Nation's supply chain.
Can you both explain how PSR has affected your work in the
rail sector?
And how do you think Congress should act in response?
Mr. Pierce, let's begin with you.
Mr. Pierce. Thank you, Chairman Payne. I think it is really
simple to explain.
Twice the train length, twice the amount of time to build
that train, twice the amount of time to put that train away. If
there is an unplanned emergency, twice the amount of time to
walk that train. Now, we are running trains in excess of 2 to 3
miles on any given day. [Inaudible] members, if they are forced
to walk that train, are out there, literally, for hours on end,
just walking to the rear of the train and walking back. Radio
communications don't work that well that far. It has become a
safety issue.
At the same time, the railroad is, literally, shutting
itself down by running trains that do not fit their physical
plant. We park shorter trains to run longer trains, and then we
[inaudible] because the trains that have the other crews that
are parked don't have enough time to get to their terminal. All
of this impacts the shipping. All of it prevents the cars from
getting to where they need to go. It is as though the railroads
don't really care if those cars ever get there, is our
viewpoint.
And just one last thing. There is no suggestion box for the
employees to tell the railroad what they think they could do
better. It doesn't exist. I appreciate the opportunity to bring
those issues here. We see it every day, what could be done more
efficiently that is not happening right now.
Mr. Payne. Thank you.
Mr. Jahn?
Mr. Jahn. Thank you, Mr. Chairman. What we say about
Precision Scheduled Railroading is that it is doing less with
less.
Our experience there is that rates go up and velocity goes
down. So, just to give you one example, we have got a member
company that has got multiple facilities in the Southeast. At
one plant, they have lost 110 million pounds of production in
14 months, and another site has lost 5\1/2\ million pounds of
production over 6 months. These are lost sales, not only for
our members--and exacerbate the inflation and the supply chain
challenges we have--but they are also lost sales for the
railroad, and I think that is really important. We can't ship
what we can't make, and what is worse is we have no recourse
under the current system.
So, I want to thank you, Mr. Chairman. I want to thank
Chairman DeFazio, as well. I know you have requested a GAO
report on Precision Scheduled Railroading, and we look forward
to the results of that report. Thank you.
Mr. Payne. Thank you, as we do, as well.
Mr. Newman, as railroad subcommittee chairman and long-time
passenger rail advocate, I want to ensure that the American
people feel the full benefits of the historic funding the IIJA
invests in our rail network. Doing so requires cooperation from
all partners, since so much of the freight and intercity
passenger rail systems overlap.
Can you describe the significance of the proceeding pending
before the STB to restore Amtrak's gulf coast service?
Mr. Newman. Yes, thank you, Chairman.
Mr. Payne. And we would ask you to submit that for the
record, because my time has expired.
Mr. Newman. OK.
Mr. Payne. Next we have Mr. Davis.
Mr. Rodney Davis of Illinois. Thank you, Mr. Chair. Great
to see the witnesses, albeit I can't wait until we get a time
when we are here in the same room again, running hearings like
we used to have, prior to the pandemic.
My first question is actually for Mr. Jefferies and Mr.
Jahn. The railroads talk about rates decreasing more than 40
percent since the Staggers Act. However, Mr. Jahn has testified
that rates have increased 30 percent in the past 20 years.
Obviously, this seems contradictory. My question to both Mr.
Jefferies and Mr. Jahn is about rates.
Have they been increasing or decreasing?
And do you predict rates will increase or decrease in the
coming years?
Mr. Jefferies, go ahead.
Mr. Jefferies. Well, thank you for the question, and I
could not agree more. I wish we were doing this hearing in
person. I look forward to the opportunity to do that soon.
So, when you think about rates, since 1980, rail rates are
down 40 percent--44 percent, to be exact. The number Mr. Jahn
used, I think, is from 2002, 2004, something along those lines
that says rail rates are up 30 percent. And in my opening
statement, I acquiesced that rates have increased in recent
years. We are back to the levels that rates were in 1990, 32
years ago.
And folks talk about the year 2017. Somebody mentioned
that, I think, as this onset of PSR. Since December 2016
through December 2021, rail rates have increased roughly 20
percent writ large. That is about half that of long-haul
trucking and, quite frankly, half that of many of the
industries represented today. So, yes, rates are back to where
they were in 1990.
Mr. Rodney Davis of Illinois. Well, thank you, Mr.
Jefferies.
Mr. Jahn?
Mr. Jahn. Thank you, Congressman. So, rail rates did fall
significantly in the 1980s and 1990s. However, that has long
since reversed. Again, as Ian said, since 2001, rail rates have
risen twice as fast as both long-haul trucking and inflation.
I think the most important thing here, though, is what we
are talking about, and I want to be really clear about this. On
competitive routes, rates have gone up relatively little over a
relatively long amount of time--24 percent over the past 15
years. In noncompetitive situations, captive shippers--three-
quarters of our member companies are captive--those rates have
gone up 230 percent over that same time. So, it is really
important to understand, when we are talking about rates
overall versus competitive and noncompetitive rates.
And so, what has happened is, after massive consolidation
in the industry, railroads have leveraged their market power to
extract higher prices and shift costs to their customers.
Mr. Rodney Davis of Illinois. I thank you, Mr.----
Mr. Jefferies [interrupting]. One quick point on that,
Congressman Davis, I think it is important to note that no
shipper went from two to one railroad as the result of a merger
at any point. And so, this is thrown around a lot, but, due to
merger conditions, no one ever lost access to a second shipper
because of a merger.
Mr. Rodney Davis of Illinois. Well, thank you. Thank you
both. I got another question for both of you. If you could
answer real quick, because I need some time to address an
Amtrak issue that I ask about every time that I have somebody
from Amtrak on at a hearing.
But Ian and Chris, most shippers have said that they
support reciprocal switching. But AAR has said it will slow
operations and harm shippers.
Mr. Jahn, why would shippers--really quickly, why would
they support something that will harm them?
Mr. Jahn. We wouldn't support something that will harm
them. In fact, again, a similar system has worked in Canada for
decades.
Secondly, we have our own financial interest for the system
to work quickly and smoothly. And so, we are not looking for
something to gum up the works.
And third, the STB ultimately has the control of this
process. They don't have to approve that application. They have
the opportunity to deny it if we apply for it.
Mr. Rodney Davis of Illinois. All right.
Mr. Jefferies, would you like to explain, from your point
of view, why shippers will be harmed?
Mr. Jefferies. Sure, absolutely. Because it undermines
fluidity, disincentivizes investments, and opens up one private
company's network for use by another at the behest of a
shipper.
I would say that there are large shippers that are pushing
for this, and might benefit in the short term. But the
stakeholder group of concern is much, much broader than that,
including--UPS filed in 2016 an opposition; rail labor has
filed an opposition; intermodal associations filed an
opposition; environmental groups; passenger rail has filed an
opposition. So, the list goes on and on and on.
And again, the Board can act on a reciprocal switch request
right now. But there has to be a demonstration of
anticompetitive conduct, and we think that is the appropriate
hurdle. Thank you.
Mr. Rodney Davis of Illinois. Thank you, Mr. Jefferies.
I don't need a response for this from Mr. Newman or Mr.
Jefferies, but once again the Amtrak line from Chicago through
Champaign, Illinois, down to Carbondale has the worst on-time
performance. We have been dealing with the short shunt issue
with CN and Amtrak. I have been told numerous times in hearings
here by both Amtrak and the rail industry that, ``We have got a
solution, we are working it out.'' Still, I don't have an
update as to when this is going to be completed.
What technology is going to be utilized, and when can we
begin to see progress? I certainly hope that I can get together
with both of you in the future to figure this out, because I
don't want to go through another hearing where we still don't
have answers.
Thank you, I yield back.
Mr. Payne. The gentleman's time has expired. And let's hear
from the gentleman from New Jersey, Mr. Malinowski.
Mr. Malinowski. Thank you. Thank you, Mr. Chairman. Thanks
to our guests and witnesses.
Mr. Jefferies, it is good to see you again. I want to zoom
out with you a little bit--no pun intended--and talk about
capitalism. I am a capitalist. I think it is safe to assume
that you are, as well.
Like you, I think that balanced regulation is the goal that
we should be striving for here. And I recognize as part of that
discussion that our Class I railroads are not nonprofits. You
are in the business of succeeding financially, and I want you
to succeed financially.
But to me, responsible capitalists do certain things. They
serve their investors, obviously, and your member companies
have clearly been doing a very good job serving their investors
in the last few years. But responsible capitalists also serve
their customers. They serve their employees, they treat them
well, they treat them with respect. That is how you run a good,
sustainable business. And based on what we have heard here
today from your customers, from your employees, I think some of
your companies are falling short here. And that is unfortunate,
because it gives this system of capitalism that we all support
a bad name.
Let me raise a couple of specific issues.
Employees and employment. Before the hearing, I looked at
some of the transcripts of fourth-quarter earning calls from
some of your companies. And what they are all telling Wall
Street right now is that they don't have the workers they need,
and that this is causing operational challenges. It is causing
some of the supply chain difficulties that we are all
experiencing in the economy.
So, I want to ask you, do you think that might have
something to do with the fact that, between 2015 and 2019, the
Class I railroads, as part of this unyielding, maximalist
pursuit of efficiency, eliminated 29,000 jobs, 17 percent of
their workforce?
Mr. Jefferies. So, you are absolutely right that workforces
were down going into the pandemic. If you look at rail service
metrics, they were actually pretty strong going in the
pandemic. But certainly the pandemic created an economic shock
that no one saw coming. Additional layoffs were necessary, due
to the 30-percent decrease in rail traffic. Fortunately, demand
has come back, it came roaring back, and that is why railroads
have been hiring across all crafts for the past 12 months.
And are we where we want to be? No. Hiring continues. And I
think you would be hard-pressed to find an industry that isn't
having challenges bringing people on board.
Mr. Malinowski. Well, it is certainly true. But I think,
again, one of the arguments that we might have had in that
period before the pandemic is that you need some slack in the
system, that you don't want to cut down to the bare bones on
the basis of sort of an efficiency-first philosophy, because
you couldn't predict the pandemic, but anyone can predict that
there will be crises, there will be crises in the future that
we can't predict.
So, I mean, wasn't that a mistake, in effect, from a
forward-planning, long-term thinking point of view?
Mr. Jefferies. So, I don't want to--different railroads
were in different places during that timeframe. And so, I can't
speak for each individual railroad's decisions on what the
appropriate employment base was for that railroad, for its
network.
But I can tell you, regardless of their requisite employee
bases, everyone went through challenges and has gone through
challenges over the past 3 years, as has every industry. And
the important thing is that all railroads are actively hiring
where appropriate, in regions where they need to bring on more
employees. And they are taking additional steps, signing
bonuses and the like, to make these careers attractive, because
we do need the next generation of railroaders.
We are a fully collectively bargained industry, as you
know. Wages and benefits are roughly $135,700 per employee, on
average. So, these are good jobs. But it is also not a job that
you can just hire somebody and they are on the street the next
day. These are very skilled types of jobs----
Mr. Malinowski [interrupting]. Well, exactly, which is why
I think probably laying off that many skilled workers in the
name of efficiency was a mistake.
With the time I have left, if I could just ask you to
address the stock buyback issue, as well. I mean, the Class I's
have spent about $150 billion on rail infrastructure since
2010. That is fantastic. But in that same period, nearly $200
billion in stock buybacks. Like----
Mr. Jefferies [interrupting]. So, I will----
Mr. Malinowski [continuing]. Explain that aspect of
capitalism to us, because it doesn't make sense for my maybe
old-fashioned view of how capitalism should work.
Mr. Jefferies. So, respectfully, I can't comment on
individual investor decisions or investment decisions, but what
I can say is that our industry, despite what you have said,
continues to invest 18 percent of revenues back into their
capital plant, which far exceeds most of our peer industries.
Mr. Malinowski. Well, thank you. I mean, we are making
enormous public investments, as well, in infrastructure that
you are using. And when we see numbers like that, it does give
me pause.
I yield back, Mr. Chairman.
Mr. Payne. Thank you. The gentleman yields back. Now we
will hear from Mr. Weber.
Mr. Weber of Texas. Thank you, Mr. Chairman, I appreciate
that. My question is going to be for Chris Jahn.
A loaded question, I guess, Chris, all the interruptions in
supply chain across the country. Of course, as you know, Texas
is huge on energy and other things, we produce a lot of
chemicals. How have your members been affected by that
interruption?
Mr. Jahn. We have been significantly impacted, and that has
been a significant challenge.
Earlier I had detailed an example where we had one member,
in just one instance in the past year, has lost over 110
million pounds of production at one plant, and there were 6
million pounds of production at another plant, which not only
cost them sales, but also cost the railroad sales, because we
can't sell what we can't ship.
Mr. Weber of Texas. Right. So, now I guess the question is,
are there any potential shipper concerns with Amtrak's apparent
intent to expand its services on freight lines across the
national network?
I know you have had that discussion. I have had to be off
the line for a minute and back online for a minute, so, forgive
me if it is redundant. Any concerns about that, Chris?
Mr. Jahn. So, anything that stresses what is already an
overstressed rail network is a concern for us.
And so, the rail network has had challenges over the past
few years. COVID has made an even more significant challenge.
Putting another challenge on top of that seems to us to be a
poor strategy.
Mr. Weber of Texas. What would you say is the percentage
that the interruption in supply chains has impacted across you
all's--across the country, I am sure, but all of your American
Chemistry Council folks?
Mr. Jahn. Yes, so, it really depends, Congressman, it
depends on where you are.
So, some railroads have performed better than others, in
terms of their performance. And so, again, I have highlighted
some places in the Southeast where we have had particular
problems. I would not say that there is anywhere, though, that
is up to snuff.
Mr. Weber of Texas. I am sorry, thank you for that. So,
what is your response to concerns voiced by the freight
railroads to the reciprocal switching rule?
Mr. Jahn. So, again, we have got a--two things I guess I
would say.
One--and something I have not said yet before--is
reciprocal switching was expressly contemplated by Congress in
the Staggers Act. This is not something that is new. And under
the Staggers Act it calls for competition among rail carriers
to the extent possible. We are not getting that.
So, what we need, then, is reasonable rates when
competition doesn't exist. And so, what we are trying to do is
create further competition. And so, that is not something new.
That is not something that is--we haven't tried in Canada
already. We have talked about that previously. That has worked
effectively there. And the system works, and railroads have
grown.
And finally, it is an opportunity for the railroads
themselves to get more traffic, and more of our work. We want
to give them more business, if they are more competitive.
Mr. Weber of Texas. Let me see if I can get myself unmuted
here. Well, thank you for that.
And then, finally, recommendations you might have for any
potential STB reauthorization.
Mr. Jahn. Yes. So, I think a couple of things we would look
at to make sure that the STB has enough staff, and enough
financial resources to give them the ability to do a better job
on collecting data. Those are a couple of things I would point
to.
Mr. Weber of Texas. OK. Well, with that I am done my
questions.
Mr. Chairman, I ask unanimous consent to get into the
record an American Fuel and Petrochemical Manufacturers letter
dated March 8, 2022, to you, Mr. Chairman, and the rest of the
group, that says, ``Stakeholder views on Surface Transportation
Board reauthorization.''
[No response.]
Mr. Weber of Texas. Mr. Chairman?
Mr. Payne. Without objection. I am sorry.
[The letter submitted by Hon. Weber of Texas is on pages
97-99.]
Mr. Weber of Texas. Thank you. That is all right, thank
you. I yield back.
Mr. Payne. And eight other conversations going on behind
me.
OK, we next have Mr. Moulton for 5 minutes.
Mr. Moulton. I thank you, Mr. Chairman. I would like to
begin with Mr. Newman.
Mr. Newman, you have an impressive background, and
difficult work, obviously, for Amtrak. I wanted to ask you a
question about passenger rail that actually extends a little
bit beyond Amtrak.
The STB, of course, has authority beyond Amtrak, as written
into the law. For example, the STB has ruled that Texas
Central, the high-speed rail project between Dallas and
Houston, with which Amtrak has a ticketing agreement, will
qualify as part of the interstate rail network and fall under
STB jurisdiction.
Can you tell me what role can STB reauthorization play in
supporting private high-speed rail projects like Texas Central
and Brightline West?
Mr. Newman. Well, thank you for the question, Congressman
Moulton.
From Amtrak's standpoint, we are very much interested in
being able to see improvements and increases in intercity
passenger rail in whatever provider might be able to be
providing that service. So, to the extent that there is a need
or recourse to the STB to encourage the growth of intercity
passenger rail for other operators, we think that that would be
appropriate.
Mr. Moulton. Mr. Jefferies, over to you. Thank you very
much for your thoughtful response to my questions for the
record after our full committee's hearing on North American
supply chain issues last November.
You probably recall that I asked how to shift more freight
from highway to rail, which I think many people on the
committee have acknowledged would be good for congestion, good
for the environment, good for efficiency, if it is done well.
Do you agree that regulation of the freight rail industry
by the STB should not inhibit, and in fact, should perhaps
bolster this goal of shifting more traffic to rail?
Mr. Jefferies. I could not agree more with that statement.
Absolutely.
Intermodal traffic is over half rail traffic right now.
That is going to continue to grow. It should continue to grow,
when you look at the consumer demand we are seeing in this
country. Last year, over the first 6 months of 2021, freight
rail moved more intermodal units than they had at any 6-month
period in their history.
But we want to take on more, because we think it is good
for the environment, it is good for congestion, it is good for
highway degradation, and, quite frankly, a good public policy
goal. So, absolutely.
Mr. Moulton. So, you have also noted in your response that
capacity is key, and there are capacity constraints on the
roads today.
I have to say that when you see these numbers, that you
have invested $150 billion in capacity infrastructure
improvements, but, as Mr. Malinowski pointed out, $200 billion
in stock buybacks, that doesn't make us feel that you are
striking that balance right, because if you put that $200
billion into capacity, think about how much more we could have.
How do you think about prioritizing that balance?
Mr. Jefferies. So, when you are making an investment into
the rail network, you are making a 50-year, if not 100-year,
investment. And so, you need to invest not only for the demand
today, but, of course, keep making those long-term investments.
I can't comment on investor relations decisions, but what I
can say is that sustained level of investment that freight rail
has been able to put back into its networks has resulted in an
infrastructure that is the highest rated by the American
Society of Civil Engineers. It is an investment level that far
exceeds most other industries in the U.S., with 18 percent of
revenues going back into the capital plant.
Mr. Moulton. No, and----
Mr. Jefferies [interrupting]. And----
Mr. Moulton [continuing]. Mr. Jefferies, I appreciate those
numbers, and you have shared them before.
I am just trying to make the point here that you may not be
able to comment on investor decisions, as you frame it, but
those investor decisions or investor relationship decisions
affect your relationships with your customers, too, when you
can't deliver the service that you could if you were able to
put more into the infrastructure.
I am impressed with freight rail infrastructure. My point
is that I think it could be better. And I want to make sure
that the STB finds its role in helping to incentivize that,
because I want to see you grow your business even further. And
while there is a tremendous focus on efficiency, I do share the
concern of many members of this committee that we are not
focused enough on growth, and I am not quite sure how we get
there.
One of the things that you also said--when we were talking
about Precision Scheduled Railroading--is that it doesn't have
a one-size-fits-all meaning. And obviously, if you are
improving efficiency, if you are getting cars to their
destination with less switching, more direct routes, that is
all good. But when we hear from shippers, as we have this
morning on the committee, that there are others who are not
getting the service that they need, they are actually seeing
their service go down, I wonder whether we are really finding
the right definition for Precision Scheduled Railroading here.
If it is not really helping grow the business, just making what
we have more efficient, is that really the ultimate goal?
Mr. Jefferies. Well, I think it is a--service is absolutely
a top-line goal. Safety is the top-line goal. Service is a top-
line goal. And we need to serve our entire customer network. We
look to do that every day.
Now, are there areas where there are challenges?
Absolutely. And I would probably ascertain that every industry
is facing challenges in certain parts of its network right now.
But----
Mr. Payne [interrupting]. Thank you.
Mr. Jefferies [continuing]. At the end of the day, we have
got to try to serve all the customers we can, and growth is
absolutely a key priority.
Mr. Moulton. Thank you, Mr. Chairman.
Mr. Payne. Thank you. And next we will have the
distinguished gentleman from Tennessee, Mr. Burchett.
Mr. Burchett. Thank you, Mr. Chairman. And I appreciate
Ranking Member Dusty Johnson, the pride of T.F. Riggs High
School. He was the captain of the debate team and the wrestling
team. Quite a combination, quite a combination.
Mr. Jefferies, my district in east Tennessee is served by
the Knoxville and Holston River Railroad, and that is a short
line railroad that connects both the CSX and Norfolk Southern.
Can you talk about how forthcoming STB regulations might impact
short line railroads?
Mr. Jefferies. Sure, absolutely. I would also say remind me
never to get involved with the guy who is a wrestler and a
debate champ, but----
Mr. Burchett. He will talk you to death while he is beating
your head in the ground.
[Laughter.]
Mr. Jefferies. Exactly. But more importantly, to your
question, I can tell you that the short line railroad industry
has filed an opposition, and will be testifying in opposition
of the reciprocal switching proposal that is pending before the
STB.
Ninety percent of issues short lines and Class I's are
aligned on. Certainly, there are areas where one is perhaps
more important to the other. But when it comes to STB issues,
by and large, the short lines see eye to eye with the Class I's
on some of the larger re-regulatory efforts that have been
proposed, or could be considered over--at the Board.
Mr. Burchett. OK, thank you. Some of the witnesses today
suggested that the STB's reciprocal switching rule could
actually increase competition within the rail industry and
lower shipping costs. What do you make of that? Is that
accurate, or inaccurate?
Mr. Jefferies. I would say it is wholly inaccurate.
The push for forced access, reciprocal switching, whatever
you want to call it, is simply forcing one railroad to open up
its network at the behest of a shipper. And that is not
competition, that is just a wealth transfer, a Government-
directed wealth transfer, and it doesn't make sense.
Mr. Burchett. All right.
Mr. Newman, what do you think the difference is between
State-supported and long-distance service?
Mr. Newman. I am sorry, Congressman, could you--the
difference between State-supported and long distance in what
dimension?
Mr. Burchett. I would assume in reference to Amtrak.
Mr. Newman. I didn't quite hear the question.
[Pause.]
Mr. Newman. Sorry, so, the question was, what is the
difference between State-supported and long distance?
Mr. Burchett. Yes, sir.
Mr. Newman. Yes, OK. Our--yes. So, routes that are over 750
miles are our long-distance services. Those under 750 miles are
the ones that we operate as State-supported service. And we,
therefore, contract and arrange with a State or a set of States
for the operation of the service.
Mr. Burchett. OK. Well, is Amtrak--are you all planning on
expanding the rail service?
I know you are in 20 States, is that correct, over the next
15 years? Is that what I read?
Mr. Newman. Well, we currently serve 46 States.
Our vision for expanding passenger rail, which we
introduced last year, Amtrak Connects US, looked to identify a
number of corridors, which we think are good opportunities for
the expansion of intercity passenger rail. There were roughly
20 new corridors laid out there. So, there is that number 20,
as well as increased service--I am sorry, 29--increased service
on another 34 existing corridors.
Mr. Burchett. OK. I guess what I am getting at is, when you
all expand in these States, and I know you are looking for
funding by the States, are you going to ask for a decrease in
appropriations for Amtrak to match that, or will it be on top
of that?
Mr. Newman. No, we would not be looking for a decrease in
appropriations. Under IIJA, we have got now the--that provides
funding for expansion for the capital that is needed for
expanding our network.
And although we do contract with States, and States do
provide support for our State-supported services, our annual
appropriations are still needed to fund our ongoing operations,
both with our long-distance and State-supported service, and
our Northeast Corridor.
Mr. Burchett. Do you ever see in the future at any time
that Amtrak will actually cash flow?
Mr. Newman. Well----
Mr. Burchett [interrupting]. A simple yes or no.
Mr. Newman. I think, in the near future, it is--no, and it
is very difficult to say.
Mr. Burchett. Thank you, Mr. Chairman. I yield back none of
my time.
[Laughter.]
Mr. Payne. Thank you, the gentleman from Tennessee. Now we
will have Mr. Auchincloss for 5 minutes of questioning.
Mr. Auchincloss. Thank you, Chairman. [Inaudible] to
discuss tangible ways [inaudible] issues that are [inaudible]
consumer, businesses and [inaudible]. Those issues in the
Massachusetts Fourth Congressional District are represented in
today's panel with 350 jobs in my district, making up a portion
of the American Chemistry Council.
Mr. Jefferies, I would like to begin with a few questions
for you, and really about the intersection between rail and the
ports. We are all familiar with the challenge with port
congestion, and how that congestion can ripple through the
ports onto the rail system. What has been the biggest cause of
congestion [inaudible] in containers on the railroads, and how
can the STB help address that?
Mr. Jefferies. Thank you, Congressman. Either on my end or
your end you broke up a little bit at the end of the question,
so, I believe the question was about congestion at the ports,
and supply chains, and what can be done to help address that.
Mr. Auchincloss. I apologize, yes. What has been the
biggest cause of congestion in moving containers onto
railroads, and how can STB help address that?
Mr. Jefferies. Sure, absolutely. So, I would say there is
maybe not one cause. The supply chain challenges kind of run
the gamut throughout the entire integrated supply chain, going
from, whether it is a factory in Asia to the ocean carrier
waiting off the coast to be able to be unloaded, trans-loaded
to rail, and so forth.
So, I think we are seeing a number of different issues,
some of it at the port, some of it at the rail yard, although
we have been able to work through a decent amount of it, and a
lot of that is well documented. It is lack of short-haul
truckers, it is lack of chassis. It was--and depending on where
you are, still is--a breakdown of hours available to work.
Railroads operate 24/7, always have, continue to, always
will. Not every aspect of the supply chain works 24/7. We did
see the news over the fall that the Ports of L.A. and Long
Beach did expand, but we need a supply chain that is
functioning at full throttle across the board.
Warehouse space continues to be a major challenge. You have
got to have a place to take containers once they get on to the
rail. Once they get to the yard, you have got to have truckers
to pick them up, you have got to have chassis for the container
to go on. You have got to have a warehouse to take it to.
And so----
Mr. Auchincloss [interrupting]. But Mr. Jefferies, in
particular, can you just talk about what you think the STB
could do for any of these specific issues that you are raising?
Mr. Jefferies. Sure. I think the STB and the administration
writ large is taking the appropriate approach of getting people
in the room together, and talking about what are solutions that
interested parties can take, because most of this is private to
private to private.
Mr. Auchincloss. Right.
Mr. Jefferies. And so, there has been some success there.
Mr. Auchincloss. Yes.
Mr. Jefferies. And that stakeholder engagement has been
completely appropriate, in my opinion.
Mr. Auchincloss. What is your view on on-dock rail, and
what role do you think it can play in lessening future port
congestion?
Mr. Jefferies. I think it can play a very productive role,
and certainly some of the port infrastructure programs that
have come out of the infrastructure bill provide opportunities
for additional buildout.
Of course, most of the ports are public, or public-private
partnerships. But when you are able to build out on-dock rail
onto a spur, you can immediately put that on the train, versus
going from ship to truck to train. You can take it inland into
an intermodal yard, where it can be transferred, and get rid of
some of that gridlock and traffic at the port itself.
And frankly, that means more containers are going on train,
versus going on truck. And we think that is a good public
policy goal. It is more business for the railroads. It is more
jobs for Mr. Pierce's employees and our employees. And it is
good for environment, good for degradation, good for
environmental justice, good for any number of things.
Mr. Auchincloss. On this point about environmental efforts,
can you expand more on how you are working to modernize freight
rail with electric and hydrogen-powered locomotives?
And maybe just take 15 seconds, because I--or 30 seconds,
because I want to close with a question for Mr. Hildebrand.
Mr. Jefferies. Absolutely, great question. So, railroads
are exploring battery electric, hydrogen power, increased use
of biofuels. You have seen reports of revenue service
activities going on across different railroads. One railroad
just bought 20 battery electric locomotives to use in
switching.
I will say the infrastructure bill includes a number of
programs coming out of DOE that will provide funds for R&D and
to furthering those objectives and those goals.
It is going to be a long-term process, not overnight, but
something we are all excited about, and it is going to be
necessary in order to meet our emissions goals.
Mr. Auchincloss. And Mr. Jefferies, would you be willing to
follow up on the record with some more about what you are
doing, as an industry, on that front?
Mr. Jefferies. Absolutely. I would be more than happy----
Mr. Auchincloss [interposing]. Great.
Mr. Payne. Fifteen seconds.
Mr. Auchincloss. All right. Final question: Mr. Hildebrand,
is your organization updating your members about funding
opportunities, including in the Bipartisan Infrastructure Law,
for grade crossing improvement programs? And if not, will you?
Mr. Hildebrand. I can't speak to that, I am sorry.
Mr. Payne. The gentleman's time has expired.
Mr. Auchincloss. I yield back.
Mr. Payne. Now we will hear from Mr. Johnson for 5 minutes
of questioning.
Mr. Johnson of South Dakota. Thank you very much, Mr.
Chairman. Let's start with Mr. Jefferies.
Mr. Hildebrand, in his testimony, raised the issue that
some commodities are exempt from a number of the STB
provisions. He suggests there could be, every 5 years, a review
of those exemptions. What are your thoughts, is that workable?
Mr. Jefferies. Well, I would say there needs to be a
demonstrated need for it. And right now, an entity can apply to
have its commodity exemption revoked or removed. And so, that
strikes me as the appropriate process for that.
Exemptions are there for a reason, because there is a
significant level of competition between modes, and unless
proven otherwise, it doesn't make a lot of sense, in my
opinion, at least, to just revoke those without cause.
Mr. Johnson of South Dakota. And you just alluded to this,
but just from an educational perspective, was the rationale--
because I think it was in the Staggers Act that these
exemptions were allowed--is it that there was a high level of
intermodal competition with this fresh dairy and fresh meat,
those sorts of ag products?
Mr. Jefferies. Right, it is competition-based.
Mr. Johnson of South Dakota. Yes, very good. OK, so, how
about for Mr. Hildebrand?
Mr. Jefferies, in his testimony, suggested that new
regulations by the STB could be subject to a cost-benefit
analysis, as is the case with a number of other Federal
agencies. Mr. Hildebrand, any reaction to that?
Mr. Hildebrand. Yes. So, while, in principle, whatever
happens should make reasonable cost-benefit analysis, and
should clear certain hurdles, so, on a surface, not a big
issue. But I think this is just the AAR trying to delay and/or
prolong some of the things that the Board is trying to get
accomplished.
And if I may, real quick, about reciprocal switching, this
isn't new in the United States, folks. This has been going on
for many, many years. We are using it today.
Mr. Johnson of South Dakota. Mr. Hildebrand, I am sorry, I
have got to cut you off, because I think reciprocal switching,
we have talked a lot about that today. I want to get to some of
the areas that haven't been uncovered yet.
I will give you an opportunity, Mr. Hildebrand, if you
wanted to add anything more to what Mr. Jefferies said about
your suggestion of doing the commodity exemption review every 5
years. He suggested it was unnecessary.
Mr. Hildebrand. We think it is very important that a path
forward that is much easier than what is involved today to open
up and remove exemptions is necessary.
I mean, what do you have to lose, if you are trying to
compete for business today? What are they hiding from? What are
they afraid of?
This should be a process that is allowed by the Board to
bring things for the removal of an exemption.
Mr. Johnson of South Dakota. A number of the witnesses
talked a fair amount about the Final Offer Rate Review pending,
or the rule promulgation by the STB. I don't know that we have
had as much discussion, anywhere near as much discussion, on
the voluntary arbitration process rule promulgation. And so,
maybe we will start with Mr. Jefferies, and then go to Mr.
Hildebrand, and then it can be an all-play with the time we
have left.
What do your all's organizations think about that pending
rule?
Mr. Jefferies. So, I think it is widely noted that several
Class I railroads proposed a paradigm for an alternative
dispute resolution program through voluntary arbitration for
smaller rate cases. Recognizing that, the rate case process is
less accessible for some smaller shippers.
And we are encouraged that the Board reacted to that, and
has put out a potential proposal that takes a lot of those
ideas. I think the important thing is--and this aligns with STB
Chairman Oberman's goals, as it allows private parties to work
out disputes, and work out situations.
Our challenge with the FORR proposal is that the STB is
absolving itself of determining what the maximum reasonable
rate is. It is either picking the rail suggestion or the
shipper suggestion. And quite frankly, it usurps its own
statutory authority, and it doesn't have statutory authority to
be a baseball-style arbitrator.
So, we think voluntary arbitration is appropriate. We are
willing to make commitments. We are staying in the program,
we----
Mr. Johnson of South Dakota [interrupting]. And Mr.
Jefferies, I have got to cut you off, because I do think that
the FORR has been pretty well covered.
Mr. Hildebrand, your thoughts on the voluntary arbitration
process?
Mr. Hildebrand. Yes. So, the problem with that one is that
they want to keep it confidential. So, if you file one of these
cases under this provision, it will never see the light of day.
So, we will never see how many of these things are out there,
what is the decision, what is the rationale. They want to keep
this confidential. That is why we object to it.
Mr. Johnson of South Dakota. So, you don't think that would
be helpful to small shippers, and that is sort of the value
proposition.
Mr. Hildebrand. It will not be helpful, because I don't
think we will use it. Why would we use it, if we don't know
anything about what has happened before, what kind of decisions
were rendered? People are not going to use it.
Mr. Johnson of South Dakota. Thank you, Mr. Chairman. I
will yield back.
Mr. Payne. The gentleman yields back. I now have the
gentlelady from Nevada, Ms. Titus, for 5 minutes.
Ms. Titus. Thank you, Mr. Chairman.
And let me say thank you to the railroad industry for your
help in trying to get the supply chain problems in line. And
you have been on the front lines yourselves throughout this
pandemic, and we appreciate that. And you have done it while
causing much less pollution than some of our trucking friends.
So, thank you to the railroads for that.
I have a question for Mr. Newman and Mr. Pierce.
Mr. Newman, you mentioned in your testimony that current
statutory provisions governing the STB's review of mergers is
essentially rubber-stamped. And since the 1980s we have gone
from 33 railroads to 7, and it may soon be 6. So, I would ask
you how that process works, how those mergers have affected
passengers.
And then, Mr. Pierce, as we push for more profit for the
railroads from Wall Street, how have these mergers affected our
railroad workers, and what can we do, as we look to revise or
reestablish or reauthorize this agency, to protect those
workers?
Mr. Newman. Well, thank you for the question, Congresswoman
Titus.
And with the--we have seen in the past, situations where
the mergers have caused increased traffic, and therefore,
delays. I mean, in some cases in the past there have been--
really were meltdowns as a result of the mergers. That really
took quite a while for our passenger traffic to recover from
those delays.
So, our concern is that the STB have the ability to take
the public interest into account, and ensure that the public
interest standard is a component of the STB's review, as well
as that the STB have the ability to make directives to ensure
that passenger rail is able to operate successfully in the wake
of mergers.
Ms. Titus. Thank you.
Mr. Pierce?
Mr. Pierce. Thank you. I think, if you look back at the
history of the big merger push of the late 1990s, there has
[inaudible] said, there were multiple meltdowns, a lot of
missteps in trying to integrate workforces, integrate what were
once competing railroads into a single unit.
With the two primary ones on the landscape coming forward
with the CP/KCS and the CSX acquisition of Pan Am, we have been
very involved with the STB about trying to make sure that the
protective conditions that the STB has the right to impose are
included in any decisions to make sure that the workers get a
fair shake when it comes to how these railroads are merged into
a single entity.
Ms. Titus. Well, I am glad to hear that, because it is not
all just about profit. It is about safety, as well.
And speaking of safety, what about this tendency to put
together small trains into one long train that is carrying
mixed cargo?
If there is a derailment or an accident, the exposure to
the environment and to the people living nearby, as well as the
people on the train--I don't know, Mr. Jefferies, do you want
to address that?
Mr. Jefferies. Sure. So, I think, when you look at train
length versus incident, there has not been any correlation
there. The leading cause of incidents is either human factors,
track-caused incidents. In 2021, we had the lowest number of
track-caused incidents in the history of the industry.
But, I think it is important to note that, again, when
train lengths are--massively vary in length, and over 90
percent of trains operating on any given day are under 7,500
feet long. Are there some that are longer? Absolutely. But
railroads have the infrastructure, design the infrastructure in
order to meet the needs of a train length, whatever that might
be.
Ms. Titus. Do you think it would make a difference in the
length of train for the number of people who are working on
that train?
Mr. Jefferies. Well, Congresswoman, as you know, you are, I
think, referring to efforts to mandate two people physically
located in the cab of the locomotive at all times.
Ms. Titus. Mm-hmm.
Mr. Jefferies. We are vociferously opposed to that. We
don't think it makes sense, from a safety standpoint. We
proposed potential alternative models, where you have crew also
stationed outside of the train along the right-of-way. Should
there be an unplanned event, that crew person is there, with
the tools necessary in order to investigate it.
Also, working a planned schedule, predictable hours.
My point being, I don't think it makes sense to mandate any
sort of current operating paradigm in perpetuity into the
future, because you never know what is going to evolve over
time, in order to allow for innovation, competitiveness, and
related. Thank you.
Ms. Titus. Thank you.
Mr. Pierce, you want to weigh in on that?
Mr. Pierce. Yes, we----
Mr. Payne [interrupting]. Quickly.
Mr. Pierce [continuing]. We adamantly disagree with Mr.
Jefferies on the safety aspects of two-person crews. The extra
set of eyes and ears in the cab of locomotives is essential to
a safe railroad operation, and there is no data that shows that
assigning those employees on the ground is going to come with
an equal level of safety.
Ms. Titus. Thank you.
Thank you, Mr. Chairman. I yield back.
Mr. Payne. Thank you. The gentlelady yields back. Next we
will hear from Mr. Nehls for 5 minutes.
[Pause.]
Mr. Payne. Mr. Nehls?
Mr. Johnson of South Dakota. Sheriff, we can't hear you.
[Pause.]
Mr. Payne. We will go to Mr. Balderson.
Mr. Balderson. Well, good morning, still--it is still
morning. Mr. Chairman, thank you, and thank you all for being
here. My first question is for Ian Jefferies.
Mr. Jefferies, thank you. In your testimony you note, ``To
remain competitive, railroads must earn sufficient revenues to
continually make significant investments in infrastructure,
equipment, training, and technologies,'' and that, ``If
railroads are unable to make such infrastructure investments,
there could be cascading impacts on the health of the rail
network.''
Can you expand on the unintended consequences that forced
switching could have on the infrastructure investments your
members make every year?
Mr. Jefferies. Sure, I would be happy to, thank you. As
this committee well knows, freight rail uses almost entirely
its own funds to invest and grow and maintain its capital
network. And when you have a potential switching regime that
would require one railroad to open up its private assets to
another at the behest of a shipper, it can result in a
disincentive to maintain that network if you can't get a return
on investment that supports continued investment. And that is
not good for the rail network writ large, it is not good for
most rail shippers. And quite frankly, it is not good for the
highways, it is not good for the environment, it is not good
for passenger rail.
And so, our longstanding point is and will continue to be
that we need a system that allows us to earn adequate revenues
to invest back into the network. We have got to grow. Growth is
absolutely key in order to meet the freight movement needs of
this country today and into the future.
And the STB has backstops in place. It has great dispute
adjudication processes. It has service remedy options. Can they
be improved? Perhaps. We have offered ways to streamline these
processes. I know shippers have, as well. But let's improve
what tools are there, versus continuing to add additional
tools, ill thought-out tools, that will result in undermining
the fluidity and health of the freight rail network.
Mr. Balderson. Thank you for that. My next question is for
Mr. Jahn.
And I understand you and your members have different
opinions on this issue than Mr. Jefferies and his members. But
as rail customers and users, do you share any concerns that the
proposed changes to reciprocal switching could impact future
rail investments and their infrastructure or technology?
Mr. Jahn. No. The short answer is no.
So, look, competition drives investment in every sector of
the economy, and that would be true here, as well. Railroads
would have the incentive to earn its business going forward,
and would have to invest and innovate, as our members do, in a
globally competitive market. And so, we would be looking for
the same thing to happen here, with this reciprocal switching
proposal that has been pending for years at the STB, and
already works effectively in Canada.
Mr. Balderson. OK, thank you very much.
Mr. Chairman, I yield back my remaining time. Thank you,
both of you. I appreciate it.
Mr. Payne. Thank you. Next we have the gentlelady from
California, Mrs. Napolitano.
Mrs. Napolitano. Thank you, Mr. Chair.
Mr. Newman, we were just recently notified that Amtrak will
continue to operate several long-distance routes and reduce
frequencies through at least May, and likely into a peak summer
season. We are told that Amtrak has insufficient staff and
cannot operate 7-day service, as required by the American
Rescue Plan Act.
As Omicron recedes, and the Nation begins to travel
substantially more in the summer, Amtrak needs to fully restore
its most popular [inaudible] everyday service. What is holding
Amtrak back, and what are they doing to restore full service as
soon as possible?
What methodology of recruitment are you using to bring back
your laid-off employees and recruit new employees?
Mr. Newman. Well, thank you for the question, Congresswoman
Napolitano. And we are very much interested in getting our
service back to full frequency as quickly as possible, as you
stated, and, of course, to be able to operate safely.
As you stated, we are, at the moment, challenged for staff,
and we have really kicked up our recruiting efforts. We have,
actually, long ago recalled all employees who were laid off.
So, that is not our issue. But we have more than doubled the
amount of our staff in talent acquisition. We have got stepped-
up efforts in recruiting at trade fairs, at trade schools. We
have got referral incentives for employees to refer other
employees so that we can get more folks on staff.
As well as bringing in more people, we are also working on
retention. So, we have got incentives to keep employees from
retiring, and stay with us. So, while we would like to get that
service restored--we definitely do want to get that service
restored as quickly as possible----
Mrs. Napolitano [interrupting]. How soon do you think----
Mr. Newman [continuing]. It will take a bit of time.
Mrs. Napolitano. How soon do you think you will restore the
service?
Mr. Newman. I think we will have better visibility here in
the next month or two. As much as we are hiring, we also have
got to get people through training, get equipment----
Mrs. Napolitano [interposing]. I understand.
Mr. Newman [continuing]. That needs to be checked, so----
Mrs. Napolitano [interrupting]. Well, then would you mind
letting some of us know, so that we can get the word out that
you are recruiting?
Mr. Newman. Yes, yes. Thank you. We can actually give you
some good information on what we are up to, and we will keep
you informed as we move forward. So, thank you.
Mrs. Napolitano. Thank you very much. The next question
will be for everybody.
I have heard from businesses in my district that have been
long customers of the railroad. My constituents' businesses
have said railroad service has become less reliable and less
efficient. The businesses contend the railroads don't provide
on-time delivery and effective schedules they were used to for
many years.
The businesses also mentioned that, when they have customer
complaints, railroads don't have enough customer service staff
as they used to have to answer the questions.
My question for all witnesses is, why is this happening?
Mr. Haksteen. If I can answer the question--this is Herman
Haksteen from the Private Railcar Food and Beverage Shippers
Association--I believe it is happening because the railroads
have reduced their workforce, and reduced their resources by so
much that they are unable, simply unable to keep up with the
current demand.
And what your constituents are telling you is clearly
evident in all the other facts, which is freight is moving from
the rail to truck because the railroads can't service their
customers.
Mrs. Napolitano. Yes, and Mr. Jefferies, then----
Mr. Haksteen [interrupting]. It is simply----
Mrs. Napolitano [continuing]. Thank you very much. I am
running short of time.
But Mr. Jefferies, I understand from a report that you have
less employees and you have more cargo than many years prior.
Why haven't you been able to uptick your labor force?
Mr. Jefferies. Well, certainly the past few years have been
a challenge. We have been actively hiring across all crafts
throughout the railroads and regionally, where appropriate, and
continue to do that. And we will continue to work until we have
the workforce that we feel is appropriate to meet demand out
there.
Talent is fiercely--there is fierce competition for good
talent out there, and our workforce is highly skilled, highly
trained, and we need folks that are up for the task and are
willing and able to put in the time necessary, because it is an
industry that requires a high level of dedication, skill, and
commitment. And we are proud of the employees that we have, and
we are always looking for more, especially today.
Mrs. Napolitano. Well, Mr. Jefferies, same thing I told Mr.
Newman. If you let us know that you have openings, we might be
able to get you some recruits. Thank you.
Mr. Jefferies. Thank you.
Mrs. Napolitano. I yield back.
Mr. Payne. The gentlelady yields back. We now have Mr.
Stauber for 5 minutes of questioning.
Mr. Stauber. Thank you, Mr. Chair, and thank you all for
coming today to speak a little bit about your industries, and
about how the STB reauthorization should look.
As you all know, we are in a state of crisis when it comes
to our supply chains and inflation. Each is tied to the other
in many ways. So, there is no reason that a family should be
stressed about how to feed their families as the cost of
groceries continues to skyrocket, and we are met with bare
shelves at the store. The shippers, the rail industry, and our
union workforce is working to keep food on the table and get
products across the country in a timely fashion.
We know that the rail industry is one of the most efficient
parts of our supply chain. However, we also know that
Government regulation and overreach has made this job harder.
Whether this falls within the STB reauthorization or not--and
this question is for anyone--what could we do tomorrow to
alleviate some of your biggest Government-related stressors
that make your jobs more difficult?
Mr. Stauber. Any of the panelists.
Mr. Jefferies. I will take a first crack on that. I think
it is all about modernizing the regulatory structure. And
that--as I say, that might mean something to Mr. Jahn than it
does to me, when it comes to the STB.
But, operationally, we need to promote innovation, we need
to promote technological deployment. That is going to result in
more efficiency. That is going to result in a higher level of
safety. It is not anti-worker. It is evolving the way that the
business operates, in an appropriate way that allows it to
maintain competitiveness.
We need an economic regulatory regime that promotes
investment that works for shippers where there is a market
failure, and does so in a way that is timely and relatively
less burdensome than it perhaps is today, yet grounded in core
economic principles.
Mr. Stauber. Thank you.
Mr. Jahn. I would----
Mr. Stauber. Anybody else want to take a shot at that? Go
ahead.
Mr. Jahn. Congressman, if I could, so, I would agree with
Mr. Jefferies, that we do need to modernize and update the
regulatory system. With all due respect, we have been trying
for 40 years to make a broken system work. It is time to turn
the page and try something new. In our view, that is reciprocal
switching. That has been well discussed already.
But the whole point under the Staggers Act is to increase
competition among rail carriers. That is what we are trying to
do here. So, that would be the immediate step that has been
pending at the STB for 6 years now.
Mr. Stauber. Thank you.
Mr. Haksteen. If I can please add to that, this is Herman
Haksteen.
Getting effective oversight to make that competition to
create a free=market-type environment needs to happen.
And to your point, what can we do quickly? I think we need
to remove some of the barriers so that the STB can give us that
effective oversight.
Mr. Hildebrand. And I would jump in real quick, if I may.
Just streamline the processes we have to go through. If we are
bringing up issues and/or concerns and/or problems, let's
figure out how to streamline these things to make this more
efficient for everybody.
Mr. Pierce. Mr. Congressman, if I may----
Mr. Stauber. Yes, go ahead.
Mr. Pierce [continuing]. One of the challenges--we talk a
lot about staffing. And even while Mr. Jefferies may be right,
that certain railroads are having trouble finding employees,
certain railroads still have people furloughed while they are
forcing others to work more.
Adding insult to injury, while you are offering incentives
to hire, the Nation's Class I railroad employees have been 2
years without a contract. They worked through a pandemic. The
railroads are reporting record profits, and it is an insult to
everyone that you are going to pay new employees more than the
ones that got you through the crisis without a contract.
So, there are all sorts of things that could be done to
alleviate the staffing problems.
Mr. Jefferies. Mr. Pierce is representing the ongoing
collective bargaining process that both sides have been in and
continue to negotiate in.
Mr. Stauber. Well, thank you very much. I think that--go
ahead. Was there another witness? Go ahead.
Mr. Newman. Sorry, Congressman. Dennis Newman from Amtrak.
And I was just going to say, from a little different
perspective, from our standpoint, being able to have the
funding at the STB for the passenger rail office so that
efficient investigation of any performance issues that may be
brought, I think, would be helpful.
Mr. Stauber. Well, thank you very much, as my time winds
down. I appreciate those comments, and it is something that I
think colleagues on both sides of the aisle within this
committee are hearing.
So, I think that we need to work to alleviate some of these
concerns, and just bring certainty to the industry. And I thank
you all for participating today and sharing your knowledge and
expertise.
Mr. Chair, I yield back.
Mr. Payne. Thank you. Next we'll hear from Mr. Lynch for 5
minutes of questioning.
Mr. Lynch. Thank you, Mr. Chairman. I really appreciate it.
I, for one, I am very grateful to our rail workers,
especially these last 2 years. It has been very, very
difficult. They have been on the front lines, and they have
performed magnificently on behalf of the American people in
doing what they can to alleviate the supply chain problems that
we have had.
I am deeply disappointed in the layoff that we experienced
early on. As a former union president myself, I can tell you,
when you have layoffs in an industry, that is a red flag to
anyone who is looking to begin a career in that industry,
because it signals instability.
And I also think that the rate of consolidation in rail has
also limited our opportunity to attract more workers. They see
Wall Street making more of the decisions to squeeze out
employees. I think it has had a detrimental effect on the
quality of life for those employees. And also, I worry about
our ability to attract the next generation of rail workers.
President Pierce, you have been--look, I have negotiated
plenty of collective bargaining agreements during my career as
an iron worker, and also as a labor attorney. Can you talk to
us about the fact that we have lost so many skilled employees?
Some of them are still furloughed, yet we have another
effort of bringing new people into the industry. Can you talk a
little bit about the perspective of our regular rail workers,
and what they are dealing with on a daily basis?
Mr. Pierce. Thank you, Congressman. I think it is a very
critical part of what is wrong with the supply chain, and what
is wrong with staffing.
As I said, our membership has been--and this is all rail
unions, this isn't just mine--they have all been without a
contract for over 2 years, while the [inaudible] records made--
I mean, record profits. Every profit report that came out this
spring has been best ever, and the employees see that. And the
new people that want to go to work in a good industry see that.
The continuing attack on the second person on the train,
how do you hire conductors when you are telling them you want
to get rid of them? That is counterproductive.
Add to this these policies that the railroads are adopting
as part of PSR, forcing workers to work more, taking over their
family life at the expense of laying someone else off.
It is absurd to me that there is any doubt as to why people
are not interested in hiring out at the railroads right now.
They are having a hard time, even at job fairs. Ten people take
the job, only five show up when they find out what it looks
like. And that is my job, that is our job, as unions, to try to
improve on that. But we need a willing partner across the
table. And for 2 years we have sat across the table with no
willing partners to try to address these concerns.
Mr. Lynch. Yes. I am not in on the negotiations, obviously,
but you would think, with all of the money that we have
collectively in Congress sent to our rail operators, that that
inducement would encourage them to be a little bit more kind to
our employees.
And also, we have seen that on the passenger side in my own
district, where we gave the rail authority in Massachusetts
about $1.5 billion, and they turned around and laid off 50
conductors. We got that turned around, belatedly. But there
just seems to be a disconnect between what we are all trying to
do and some of the policies that we have observed.
From a safety standpoint, President Pierce, how important
is it to have that second employee on that train, especially
given the length of some of these trains?
Mr. Pierce. I think it is critical. I think the second set
of eyes and ears, the ability to, I think, address issues that
happen on the fly--grade crossing accidents, derailments--these
are things where the ground crew goes back in short order to
make sure that we are addressing these catastrophes as fast as
we can.
There is no replacement for that, where you put someone on
the ground in a truck, and he can even get to the remote
locations that conductors walk to every day from the head end
of a train that is out there, right where the accident occurs.
So, it is just one of many ways.
This is a cost-cutting mechanism. It is fewer people doing
more work, and it has nothing to do with the safe operation, in
our opinion.
Mr. Lynch. Thank you very much. Well, I have family that
are involved in rail, and they have got a long history there.
And hopefully, you will have greater success. I just--I want to
urge the rail operators to sit down and bargain in good faith
with our brothers and sisters in the rail unions.
Mr. Jefferies. May I comment quickly before----
Mr. Lynch. Mr. Chairman, I yield back.
Oh, I am sorry, sure, if I have time.
Mr. Payne. Quickly.
Mr. Jefferies. Very quickly.
One, I am not the negotiator. We have a separate
organization that does that. Of course, we are negotiating in
good faith. That is a long, gradual process. It works well
under the Railway Labor Act.
Number two, even in 2016, under the Obama administration,
there was a proposed two-person crew requirement. In the
beginning of the rule it stated there is no data to show that
this will improve safety.
And three, just as a reminder, we don't take direct funds
from the Federal Government. We are almost entirely privately
financed, owned, and maintained. But your point is well taken
there, and we certainly supported the infrastructure bill.
Thank you for your time.
Mr. Lynch. Thank you.
Mr. Payne. Thank you. The gentleman yields back. And next
we have Mr. Nehls for 5 minutes.
Mr. Nehls. Thank you, Mr. Chairman.
First off, I would like to thank all of you for being here.
You can consider me a friend. I support the rail industry and
appreciate everything you have done throughout this pandemic,
and you do a great job for America. My question is really
focused more to Mr. Newman.
And I have a gentleman here. This is Special Agent Michael
Garbo [indicating photograph]. Special Agent Garbo was killed
on October 5th, 2021. He worked for the DEA. And he was
searching an Amtrak train heading from L.A. to New Orleans when
the train stopped in Tucson, Arizona. He was doing a search of
that train and found some illegal substances, illegal drugs, on
that train. And obviously, the suspect didn't like it and ended
up getting in a firefight with Agent Garbo and took his life.
This caused me to pause and look at security apparatus, the
security on our rail system, and specifically Amtrak. And I
believe that Amtrak lacks basic security protocols, making it
appealing to drug traffickers and other criminals. And it is
possible to board a train without ID, and take on bags without
any sort of screening. And the reason I say that is I have
staff and others that have jumped on an Amtrak train from DC
here out to New York, and they have never been asked for an ID.
They can buy a ticket, but they are not asked for an ID. As a
matter of fact, they can take bags on that train, and none of
those bags are scanned.
And I think the American people would find this very, very
difficult to understand, that when you jump on an airplane,
they want everything but a blood sample, but you can jump on an
Amtrak train and not need any identification whatsoever, and
carry on bags without being scanned. And I find that very
concerning.
In the Infrastructure Investment and Jobs Act, Congress has
allocated over $50 billion--with a ``b,'' $50 billion--to
Amtrak. And Mr. Newman, you state in your testimony that Amtrak
will use that funding to begin the modernization of Amtrak's
assets and initiate significant expansion of Amtrak's route
network. Could you tell the committee today if Amtrak is
planning on using any of the $50 billion-plus to make basic
security improvements, invest in the Amtrak police, or make the
Amtrak experience safer for passengers by deterring crime on
trains and in stations?
Mr. Newman. Well, Congressman, thank you very much for the
question. And the short answer is yes, so that the--some of the
funding that was made available to us through the IIJA is
available for us to use on modernizing and upgrading our
systems, including our safety and security systems.
And we similarly are very interested in making improvements
in the safety and security of our trains. Our Amtrak Police
Department cooperates and works extensively with Homeland
Security, TSA, and Federal and local security authorities to
make sure that we have got good cooperative practices in place,
that we are well coordinated, and that we can do everything
that we can to ensure the safety of your constituents, our
passengers, and the traveling public.
Mr. Nehls. But your current practice doesn't support that,
because you can jump on a train from here to New York and not
have an ID. True or false?
Mr. Newman. You can jump on a train----
Mr. Nehls [interrupting]. That is true. You can jump on a
train without having an ID, because it takes place every day.
Mr. Newman. We do have----
Mr. Nehls [interrupting]. And you can jump on----
Mr. Newman. [continuing]. Open access----
Mr. Nehls [interrupting]. A train with bags, with bags
loaded with drugs or whatever, you don't know what is in it,
and you can jump on a train without having any bag scanned.
That is true, too.
Mr. Newman. That is similar to----
Mr. Nehls [interrupting]. And you stated that you got the
$50 billion, and that money could be used for safety and
security enhancements, but you don't really have a plan in
place.
Well, I want to try to help you. I mean, I am concerned
about America. I am concerned about our southern border. Mr.
Newman, if you think about our southern border and the amount
of substances and drugs coming through our southern border
because we really have no border security, I think Amtrak is
actually enabling the problem, because individuals with those
drugs that get through our southern border can jump on one of
your trains, and you don't need an ID, you can be Billy Bob,
you can be anybody you want. You can jump on that train with
your drugs, your substances, and move it throughout the entire
country, because you're in several States.
Mr. Newman. Congressman----
Mr. Nehls [interrupting]. I think the American people
should be concerned about this. I want to be proactive, instead
of being reactive.
Mr. Payne. OK, we----
Mr. Newman [continuing]. Congressman, I would be happy to
get you more information, and discuss with you, and hear your
ideas, give you information about what we currently do, what
security practices we have in place, and talk about----
Mr. Nehls [interrupting]. So, my last comment is that I am
drafting legislation and I want to work with you. It is called
the Passenger Rail Security Improvements Act of 2022, and I am
planning on introducing it this month. That would improve
Amtrak's ticketing and baggage processes to make it more
difficult to bring illegal drugs on board. It is not going to
inconvenience your riders or hamper Amtrak's operation, but I
think it is important that Amtrak uses the resources it has
been given to modernize its security. So, I want to work with
you on this.
And so, would you like to sit down with me at some point in
time, and talk about this legislation?
Mr. Newman. Yes, sir. We would be happy to.
Mr. Nehls. That is great.
Mr. Newman. We would welcome that.
Mr. Nehls. We will be reaching out to you. Thank you, Mr.
Newman.
Mr. Payne. The gentleman's----
Mr. Nehls [interrupting]. I yield back.
Mr. Payne [continuing]. Time has expired.
That concludes the hearing for today. I would like to again
thank each of the witnesses for your testimony today.
I ask unanimous consent that the record of today's hearing
remain open until such time that our witnesses have provided
answers to any questions that may have been submitted to them
in writing, and that my opening statement be put into the
record, as well.
[Hon. Payne's prepared statement is on pages 75-76.]
Mr. Payne. I also ask unanimous consent that the record
remain open for 15 days for any additional comments or
information submitted by Members or witnesses to be included in
the record of today's hearing.
Without objection.
This brings the subcommittee to adjournment.
[Whereupon, at 12:12 p.m., the subcommittee was adjourned.]
Submissions for the Record
----------
Prepared Statement of Hon. Donald M. Payne, Jr., a Representative in
Congress from the State of New Jersey, and Chair, Subcommittee on
Railroads, Pipelines, and Hazardous Materials
Good morning.
As we approach the reauthorization of the Surface Transportation
Board, today is an opportunity to hear from stakeholders and to
determine what, if any, additional authorities are needed to improve
rail service across the country.
The STB is a unique federal agency that is the primary economic
regulator of freight railroads.
Among other powers, it can set maximum rates that freight railroads
can charge shippers in response to complaints, and has the exclusive
authority to approve mergers between railroads.
Shippers play a critical role in the national supply chain by
making the goods being transported across the country.
For instance, in my district alone, there are shippers who produce
everything from plastics to orange juice, automotive components, and
other critical goods that are used by Americans every day.
Shippers rely on the STB to resolve disputes with railroads, and it
is critically important that STB has the tools necessary to keep cargo
moving.
I, myself, have asked the STB for help with the railroads on behalf
of small shippers in my district, especially those who are minority and
women-owned and may be not as large as their competitors, that need a
level playing field to bring rate case challenges before the STB.
Currently, those who wish to bring rate challenges in most cases
must use an archaic method of creating a hypothetical railroad to prove
that a rate charged by a railroad is unreasonable.
This methodology is time consuming and expensive, with the STB's
Rate Review Task Force concluding in April 2019 that many small
shippers find rate cases too complex and costly to pursue.
This is further evidenced by the fact that since 1996, there have
only been 51 rate cases brought before the STB and zero in the last
three years.
Based on the stories we will hear today of the frustration shippers
have with their railroad service, zero official complaints does not
mean everything is fine.
Rather, there is a barrier to smaller shippers being able to bring
these challenges.
I have made it a priority of my Chairmanship of this subcommittee
to remove barriers that minority and women-owned businesses face in the
rail sector.
Having an archaic rate challenge process that primarily benefits
the railroads does not sound right to me.
I commend the STB for beginning to take action to make other
options available and will be exploring legislative options to make STB
oversight more accessible.
Another issue that I am concerned about is the use of Precision
Scheduled Railroading, or PSR, by freight railroads.
This practice claims to make railroading more efficient by running
fewer trains, but I have significant concerns that it reduces safety by
cutting the number of workers and creating very long trains that can
stretch for a mile or longer.
According to the STB, at the end of last year, the Class I railroad
workforce was nearly a third less the size it was in 2015.
This reduction in workforce came, largely before the COVID-19
pandemic struck, and its weakness was on display at a very inopportune
time.
Instead of having a robust and flexible workforce to absorb supply
chain disruptions, PSR apparently created its own worker shortage when
workers were needed the most.
In 2019, this committee held a shippers roundtable where shippers
expressed concerns that PSR could impact service reliability and
ultimately question railroads' ability to meet common carrier
obligations.
Chairman DeFazio and I have requested a GAO study on the effects of
PSR. I am eagerly awaiting the results of the study.
These are only a few of the issues that will come up at today's
hearing.
One other specific issue I would like to hear more about is
feedback on the STB's efforts to enforce Amtrak's legal right to access
so we can develop more intercity passenger rail corridors as we
discussed in this committee in December and Amtrak's preference on
railroads so that Amtrak trains can run on-time.
It is my hope to hear from witnesses about all the things the STB
is doing right and how Congress can further enhance its authorities to
ensure that freight railroads are meeting their legal obligations.
I thank the witnesses for being here today and I look forward to
their testimony.
Prepared Statement of Hon. Sam Graves, a Representative in Congress
from the State of Missouri, and Ranking Member, Committee on
Transportation and Infrastructure
Thank you, Chair Payne, and thank you to our witnesses for being
here today.
The STB exercises authority over railroad commercial practices,
including shipping rates and disputes between shippers and carriers.
This year alone, the STB has before it multiple important issues,
including a proposed rule on reciprocal switching and a proposed merger
of two Class One railroads, as well as the potential resumption of
Amtrak service on the Gulf Coast.
The Surface Transportation Board Reauthorization Act of 2015 was
the STB's first authorization in almost 20 years, and authorized
funding through fiscal year 2020.
Despite not being reauthorized, the STB has continued to receive
funding through continuing resolutions. The FY 2022 appropriations bill
passed last year would provide a full year of funding for the agency.
It is important to hear from stakeholders on ways that the STB can
be improved to meet their needs and to operate efficiently and
effectively in the coming years.
I look forward to hearing more from our witnesses on these issues.
Thank you, Chair Payne. I yield back.
Statement of the Brotherhood of Maintenance of Way Employes Division/
IBT; Brotherhood of Railroad Signalmen; International Association of
Sheet Metal, Air, Rail and Transportation Workers Mechanical Division;
and National Conference of Firemen and Oilers, 32BJ/SEIU, Submitted for
the Record by Hon. Donald M. Payne, Jr.
The Brotherhood of Maintenance of Way Employes Division/IBT;
Brotherhood of Railroad Signalmen; International Association of Sheet
Metal, Air, Rail and Transportation Workers Mechanical Division; and
National Conference of Firemen and Oilers, 32BJ/SEIU \1\ commend the
Subcommittee for holding hearings concerning reauthorization of the
Surface Transportation Board. With the railroad industry suffering from
the Class I railroads' implementation of their new cost-cutting
business model (which includes so-called ``Precision Scheduled
Railroading'') the holding of hearings on STB reauthorization is indeed
timely. The STB is the agency charged with overseeing and regulating
railroads and enforcing certain statutory rail service requirements,
but as the statute is currently written, the STB is not well-equipped
to adequately perform those functions in the context of the new
operating model.
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\1\ These unions represent railroad workers employed in various
rail industry craft and classes on all of the Class I freight
railroads; and on Amtrak, commuter railroads, and short line and
regional railroads. In particular, BMWED and BRS represent railroad
employees who construct, inspect, maintain and repair railroad track
and right of way, bridges and structures; signal and communication
systems; SMART MD and NCFO represent railroad employees who inspect,
maintain, repair, and fuel locomotives and perform other work in rail
shops.
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I. Summary
In recent years, the Class I railroads have changed the way they
operate trains, interact with shippers, maintain their property and
equipment, and staff their operations. Part of this derives from
implementation of so-called Precision Scheduled Railroading (``PSR'');
but the changes have been made organization-wide. There is an across-
the-board effort by the railroads to reduce operating ratios (operating
expenses as a proportion of operating income--lower ratios yield higher
profits) to historic lows by ruthlessly cutting costs (and thereby
dramatically increasing profits, shareholder value, and executive
compensation). During this period, shipper complaints escalated, and
communities expressed concerns about reductions in service and longer
trains. Reductions in employment have exacerbated the service problems
caused by the new business model. Congress should move expeditiously to
reauthorize the STB; in doing so, Congress should clarify and better
define the common carrier obligation and ensure that the Board has the
tools and resources to enforce that obligation.
II. Effects of the New Business Model on Employees and Service
Since 2015, Class I employment has been reduced by about 30%. In
addition to furloughs that have dramatically reduced the size of the
work force, railroad workers are retiring earlier than the planned and
are quitting mid-career at unprecedented rates; and furloughed workers
are declining recalls because they know that once the railroad has
cleared whatever backlogs it has, or handled any surge in demand, they
will be furloughed again, because the new business model dictates a
minimal work force. Before implementation of the new business model,
furloughed employees rarely declined recall to service. And employees
with 8, 10, 15 years of service rarely quit; now that is commonplace
because the jobs have been degraded by the railroads, as the workers
are told to do more with less, are pressured to cut-corners on
inspection and maintenance, and are being required to work frequent and
consecutive double-shifts because the railroads are having difficulty
hiring and retaining workers.
Lately, as they are criticized for their service, the railroads
have tried to use the pandemic and tightness of the labor market
generally to explain the worker shortages. This is a canard. The work
force was substantially reduced before the pandemic. First the
railroads ruthlessly cut junior workers (the future of the industry)
then they ran off many senior workers \2\. The railroads also reduced
the work force even more during the pandemic. Employment is down 20%
since the start of the pandemic but carloadings are only down 3%; in
essence 80% of the pre-pandemic work force is responsible for moving
and supporting movement of 97% of the pre-pandemic freight. As a result
profits are up 8%. So the Class I's continued to cut employment in
excess of reductions in traffic and thereby again increased profits.
The recently announced record profits are not the result of growth or
better railroading, but of reducing costs.
---------------------------------------------------------------------------
\2\ One Class I railroad chief operating official told a group of
union officers that anyone who complains that they cannot properly do
their job with the workload assigned to them is probably in the wrong
business.
---------------------------------------------------------------------------
The railroads claim that are trying to hire, but their hiring can't
keep up with the departures of senior workers who are fed up with their
conditions of employment. So the carriers have been unable to increase
their workforces from the rock bottom levels they reached as demand
increased and service problems followed. And even if they could hire to
keep up with the numbers of departing workers, they would be replacing
experienced, skilled workers with trainees. The railroads also complain
that they are hiring but new hires are leaving after a few weeks. They
say that don't understand why that is happening or criticize the work
ethic of younger workers. But they fail to acknowledge that they have
degraded jobs that were once ones people aspired to; and that they have
assigned workloads and schedules that people find intolerable; all
while they refuse to increase employee compensation and benefits. The
worker shortage the Class I's face is entirely of their own making. The
excuses and prevarications they offer are disingenuous and should be
disregarded.
As common carriers, it is the responsibility of the railroads to
maintain work forces sized to be sufficient not only for when
everything is going well, but also when frequently encountered, and
infrequent but anticipatable, events occur (such as snow, polar
vortexes, heavy rains, seasonal demand like harvest time in the Fall
and demand for petroleum products in the Winter). That means having
enough Signalmen to respond to malfunctioning crossings and switch
engines; enough Maintenance of Way employees to respond to right of way
washouts, track obstructions and heat-buckled rails; enough shopcraft
workers to do complete inspections and maintenance of equipment,
especially when fleets of locomotives and cars have been reduced and
much equipment has been mothballed; enough Dispatchers to handle all
train movements, particularly as the railroads run longer trains and
pack more cars into the same physical space; and enough operating
employees so when there are delays which cause train crews to reach
their Hours of Service limits, there are backup crews that can continue
to move the trains to customers, and enough yard and local crews to
bring cars from terminals to shippers.
The reductions in railroad workforces have dramatically affected
the ability of the Class I railroads to meet reasonable customer
demands for service--after all, it is the workers who provide and
support the service. The railroads claim that all is fine, that their
service has never been better. But their workers know it is not; and
the cascading shipper complaints refute the railroads's contentions. In
their filings with the STB, shippers have related their problems to job
cuts by the Class I's. Shippers have cited reductions in yard and local
crews (who do the actual pickup and delivery of cars in and near
terminals), and the long trains which mean more cars being managed by
fewer employees. They also complain about more bad order cars that
result from less rigorous inspections and that there is no longer
anyone they can contact regarding service issues. Shippers from whom
the railroads cannot reap maximal profits face steeper costs when
shipping by rail, or are subjected to service conditions or
requirements that discourage them from using rail transportation, even
if they have structured their businesses to ship by rail. These are not
shippers who can only be served at a loss; the railroads can make a
profit serving these shippers, just not the level of profits desired by
Wall Street. This is at odds with the common carrier obligation and the
prior business model, where railroads sought to grow the business and
increase profits by increasing revenue. Now the goal is to shrink the
business and cut costs.
The STB has sent letters to railroads seeking explanations for
service problems and initiated several proceedings related to service
problems and shipper complaints. The unions cannot recall any like
inquiries or proceedings in the 15 years between complete
implementation of the major merger and control transactions and
adoption of the new business model.
III. What Exactly Is the New Business Model?
The new business model is based on extensive across-the-board cost-
cutting to reduce operating costs in derogation of the railroads'
common carrier obligations, and without regard to the impact of the
strategy on employees or the quality of service to customers. Adoption
of this approach is not driven by railroading imperatives or a desire
to grow the business. It is driven by finance interests; by corporate
officers, shareholders, predatory hedge funds and so-called
``activist'' investors who seek to extract value from these essential
enterprises. This is readily apparent because adoption of this model
was first promoted by investors at CP and CSXT (Pershing Square, Mantle
Ridge) who installed Hunter Harrison to implement the cost-cutting
business model. This business model was initially rejected by US rail
managements (NS fought a hostile takeover by CP, the CSXT Board
resisted until Mantle Ridge was able to install its Directors, BNSF's
Matt Rose mobilized the industry against the CP takeover of NS and
famously resisted the model as bad for the industry--instead he
advocated growth). The so-called ``activist investors'' who promote the
new model do not want to increase profits by ``growing the business''.
They want to increase the profit margin and are happy to shrink the
business and limit their customers to those that can be served most
profitably.
While the railroads refer to their new way of doing business as a
new mode of operations called Precision Scheduled Railroading, PSR is
just one aspect of the larger cost-cutting business model. This is
demonstrated by the overall reduction in engineering forces
(Maintenance of Way workers and Signalmen) who inspect, maintain and
repair the tracks, rights of way, structures and signal systems. If PSR
was just a change in operations, it would not involve a reduction in
engineering forces. Nor would it lead to a reduction in the number of
Dispatchers whose jobs in juggling the movements of longer trains have
become more complicated, not less complicated. The overall reduction in
inspection and maintenance of the tracks, right of way, structures,
signal system, and equipment (locomotives and cars) is not related to
changes in operations. Maintenance of way and signal territories have
been expanded as the engineering work force has been reduced;
Maintenance of Way workers and Signalmen report that they are hard-
pressed to do all the inspection and maintenance work required for
their territories and that they have been required to defer needed
repairs. Locomotive Mechanics and Carmen report that they are being
rushed through inspections of locomotives and cars, with railroads
moving equipment out for service before inspections are completed.
These changes have nothing to do with efficient operations and
everything to do with cost-cutting to boost profits.
Thus, PSR itself is not the problem; it is a symptom of the
problem. PSR is just branding. It is designed to sound scientific, but
it is just brutal cost-cutting. It is not ``precise'' it is just
forceful; it is really inflexible scheduled railroading. It converts a
model where the railroads as common carriers worked with their
customers (the shippers) on pickups and deliveries, to one where the
shippers have to conform their operations, their work days, their
organization of supplies in and product out, to the railroad's
preferences and algorithms. The industry has gone from a ``customer
service'' model to a ``customer serves us'' model. PSR then is just a
manifestation of a business model designed to extract value from the
railroad for the benefit of its shareholders to the detriment of
customers and employees, and long term to the detriment of railroads
themselves once the so-called ``activist investors'' move on.
IV. How Did This Happen?
The changes in the industry occurred as a result of the combination
of extreme deregulation followed by industry consolidation authorized
by the STB. The Staggers Act and ICC Termination Act substantially de-
regulated the railroads, but the ICC/STB then authorized consolidations
of the major railroads. The result was two major carriers east of the
Mississippi, two major carriers west of the Mississippi and two
carriers running down the center of the country. All of these
transactions were expressly authorized by the ICC and STB as ``in the
public interest''.
In approving the major merger and control transactions of the 1990s
that reduced the number of Class I carriers to a mere handful, the ICC
and STB relied on Staggers Act amendments and the de-regulatory
mandates of the Staggers Act and ICCTA. Those transactions were
approved based on the notion that shippers and the public would benefit
from the consolidations. The railroads asserted, and the ICC and STB
agreed, that the mega-carriers would provide better and faster service
through longer-end-to-end runs, reduced interchanges, and greater
system velocity; that efficiencies would be achieved that would result
in savings that would be passed along to shippers and the public in
general; and that the economies of scale available to larger carriers
would allow for increased investment in rail infrastructure.
In the post-Staggers minimal regulation environment, after the big
merger and control transactions were consummated, the profits of the
new mega-carriers soared. And for a while, the railroads followed-
through on their representations that service would improve, and
infrastructure investments would increase. But several years ago, hedge
funds and private equity interests took note of railroad profitability
and the very light nature of the regulatory regime.
Once the finance interests realized that they could take control of
these railroads and drive operating ratios down without loss of
business, or a regulatory response, they forced implementation of
policies to drive down costs and increase earnings for short term
gains. As rail carriers that pursued this path saw their operating
ratios decline, and their stock prices increase, other railroads
adopted similar business models. Shipper complaints escalated. The STB
held hearings and tinkered with complaint programs, but it seemed to be
of the view that there was little it could do under the post-Staggers
de-regulatory regime.
So the problems with the new business model are a feature, not a
bug. Shippers, communities, legislators, and employees are distressed
and looking for solutions. A key question is: whether the public
interest is being served as envisioned in the merger and control
decisions under the carriers' new operating model? The unions submit
that the answer is plainly--no. The unions signatory to this statement
believe that Congress, should recognize that the consequences of the
combination of deregulatory drift, and government approval of the
transactions that created the current mega-Class I carriers, require
changes to the STB and the statute it administers so they are
appropriate for the industry that exists today, not the industry that
existed in 1980 or 1996.
V. Recommendations
The Unions recommend that Congress move as quickly as possible to
reauthorize the STB. In doing so Congress should clarify and better
define the common carrier obligation, and bolster the STB's ability to
enforce that obligation. The common carrier obligation is about
service; it requires provision of reasonable and adequate service; but
it is a somewhat amorphous concept rooted in British common law.
Clarifying and fleshing out the obligation will benefit all industry
stakeholders. First and foremost, shippers will be able to measure
railroad performance against some more definite criteria, and they will
be better positioned to pursue complaints of poor service. Railroads
will benefit because they will have a better sense of their service
obligations and will be able to resist forces pushing for relentless
cost-cutting by citing more clear statutory service obligations. And
rail workers will benefit because a pendulum swing back to more of a
customer service philosophy will mean increased employment and an
emphasis on working well and conscientiously, rather than fast and
within constraints inconsistent with good railroading. Congress should
also make sure that the Board has the tools and the staff necessary for
it to perform its function of ensuring that the service provided by
railroads satisfies the common carrier obligation; and that service is
consistent with the commitments made by the railroads, and with the
service expectations of the Board and the public when the Board
approved the merger and control transactions that created the mega-
carriers we have today.
The Class I railroads will likely charge that the modest measures
proposed by the Unions will recreate the regulatory regime of the 1970s
that they blame for damaging the industry. But the pre-Staggers
regulatory regime was not the proximate cause of the harm to the
railroads. Government creation of the interstate highway system and
government support for the aviation system were the principal causes,
and the effect of those policies then rendered a rail regulatory regime
designed when there was no modal competition with railroads, and in
response to railroad domination of transportation, inappropriate for
the times. Additionally, the recommendations of the Unions concerning
STB reauthorization would not reinstate the heavy regulatory regime
that existed pre-Staggers. The Unions only propose clarification and a
more detailed description of an existing statutory obligation. And just
as it would be inappropriate to recreate the statutory environment of
the 1940s-1970s, it would be inappropriate to retain a statutory
environment designed in 1996, when the industry today is much different
from the one that existed prior to the big merger and control
transactions that made the industry what it is today.
The Class I's will also presumably argue, as they have elsewhere,
that Congress and the Board should not involve themselves in service
issues, that these problems can all be resolved in the ``marketplace''.
But the Class I railroads are not actors in a free and open market.
Today's Class I's are duopolies that exist as a result of ICC/STB
approvals of consolidations of previously separate carriers. The merger
and/or control transactions that created every one of the Class I
railroads required ICC or STB approval based on findings that the
transactions were consistent with the public interest. Furthermore,
ICC/STB approval of those transactions came with exemption from anti-
trust law and all other laws (including the Railway Labor Act) as
``necessary'' to the ``carry[ing] out'' of those transactions. 49
U.S.C. Sec. 11321. It should be remembered that the current Class I
railroads would never have been allowed to come into existence (and
never would have been able to ignore anti-trust restrictions and
Railway Labor Act requirements) if the railroad industry existed in the
sort of open market environment the railroads pretend they are part of
when they protest any plan for the STB to respond to service issues.
When the railroads conjure the specter of failing railroads as a
result of clarifying, and delineating elements of, the existing common
carrier obligation, it should be noted that between 2004 and 2020
profits for the Class I railroads increased by 536%, stock prices for
the three publicly traded Class I's increased by 1046%, with
shareholder return on investment up 1374%. And since 2007, the publicly
traded carriers have spent over $72 billion for stock buy-backs. Over
this same period, wages have increased only 56% (14% adjusted for
inflation). Rates for shippers have increased over that same period,
but they are still below pre-Staggers and 1990s rates in real dollars.
(Rail compensation since 1980 is up less than 2% in real dollars). And
Union Pacific recently told investors that it just had its best year
ever; BNSF this past week announced that its last year produced record
profits. So, any alarms from the Class I's about potential disaster if
their service obligations are clarified and the common carrier
obligation better enforced should not be credited.
Finally, there are some who argue that the current problems can and
should be remedied by competitive fixes, like reciprocal switching. But
such changes would have the effect of undercutting existing collective
bargaining agreements; and they would not even work as desired in the
real world of railroad operations. But, even if the optimistic
assumptions of proponents of required reciprocal switching are
realized, that will have only minimal impact on the overall problem of
decline in the quality of rail service. Instead, the railroads should
be accountable to provide the quality of service historically required
of, and provided by, rail common carriers; the quality of service that
was promised in the mega-merger and control transaction applications of
the 1990s, assumed in the ICC/STB decisions approving those
transactions, and that existed prior to the railroads' implementation
of the new cost-cutting business model. Rather than restructuring the
industry or statutorily mandating rules that would alter products of
transactions that were deemed to be in the public interest, Congress
should clarify existing service requirements and give the STB the
resources to see that the service provided by the Class I's is
consistent with the common carrier obligation and with what was
promised when the big merger and control transactions were authorized.
Respectfully,
Brotherhood of Maintenance of Way Employes Division/IBT.
Brotherhood of Railroad Signalmen.
International Association of Sheet Metal, Air, Rail and
Transportation Workers Mechanical Division.
National Conference of Firemen and Oilers, 32BJ/SEIU.
Letter of March 4, 2022, from Sean O'Neill, Senior Vice President of
Government Affairs, Portland Cement Association, Submitted for the
Record by Hon. Donald M. Payne, Jr.
March 4, 2022.
The Honorable Donald Payne,
Subcommittee Chair,
Railroads, Pipelines, and Hazardous Materials Subcommittee, Washington,
DC 20515.
The Honorable Rick Crawford,
Subcommittee Ranking Member,
Railroads, Pipelines, and Hazardous Materials Subcommittee, Washington,
DC 20515.
Dear Subcommittee Chair Payne and Ranking Member Crawford:
The Portland Cement Association (PCA), which represents the
majority of U.S. cement manufacturers, appreciates the opportunity to
submit a statement for subcommittee's hearing entitled Stakeholder
Views on Surface Transportation Board Reauthorization. We welcome the
occasion to share the perspective of our members on rail operations and
interactions with the Surface Transportation Board (Board).
Portland cement is a manufactured powder that is the primary
ingredient in concrete. Portland cement acts as the bonding agent in
concrete, similar to the role of flour in cake mix. As an essential
construction material and a basic component of our nation's
infrastructure, portland cement is utilized in virtually all
construction applications, including highways, streets, bridges, bike
lanes, mass transit, airports, schools, offices, homes and other
commercial and residential buildings, dams, and water resource systems
and facilities. The low cost and universal availability of portland
cement ensures concrete remains one of the nation's most essential and
widely used construction materials.
Approximately 87 million metric tons of cement were produced
domestically in 2020 at the 100 cement manufacturing plants in 34
states.\1\ There are distribution centers in almost every state. That
volume will continue to grow as the economy recovers from the COVID-19
pandemic as well as seeks to implement the substantial levels of
investments made by the Infrastructure Investment and Jobs Act.
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\1\ https://pubs.usgs.gov/periodicals/mcs2021/mcs2021-cement.pdf
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The cement industry is regional in nature. Most cement
manufacturing plants are located near large limestone deposits, the
principal ingredient in producing portland cement. In recognition of
the regional nature of the cement industry, it is critical that there
are reliable and cost-effective transportation options. The average
cement shipments range between 250 and 300 miles. Truck transportation
is not economically viable beyond 100 to 125 miles. As such, the cement
industry relies on railroads to deliver our product to the marketplace
beyond the economical range of trucks. Several cement plants also have
access to water transportation for domestic shipments. These plants
look to barge, rail and trucks to transport their product. In summary,
domestic cement manufacturers have historically relied heavily on rail
transportation to move the majority of shipments between cement plants
and distribution terminals, and that reliance has only grown in the
recent years.
Most bulk cement shipments are from the manufacturing plants to the
more than 300 regional distribution terminals, where the cement is then
delivered by truck to the distribution network consisting primarily of
local contractors and ready mixed concrete producers. It is critically
important to PCA members that the railroads provide reliable,
efficient, and cost-effective service to meet the widespread and
growing demand for our product. What is critical to note is that eighty
percent of cement manufacturing plants are captive to a single
railroad. Due to the absence of competition, these plants are charged
substantially higher rates and often receive less reliable service.
Conversely, cement plants served by more than one railroad generally
have lower rates and more reliable service.
PCA members almost universally experienced a decline in rail
service when Class I railroads moved to precision scheduled railroading
(PSR). With challenges already facing the logistics of consistent
service, this shift has resulted in a significant increase in missed
switches and increased demurrage billings. This has led to increased
costs to cement manufacturers not only through increased demurrage but
lost sales. One single anecdotal example represents the potential
magnitude of this difficult situation. Due to poor rail service to one
terminal location, a specific shipper lost between 60,000 to 100,000
tons of annual volume. This amount would be enough to build as many as
3,000 standard-sized homes. Many of our members have seen their rail
service further decline over the last two years with staffing cuts and
challenges associated with the COVID-19 pandemic. While large parts of
the economy were impacted by the various restrictions, construction in
many cases remained in place as an essential activity, and in some
cases volumes and demand increased as projects were accelerated due to
reduced traffic levels. Coupling a reduction in service through
staffing, PSR and continued or increased demand, has left cement
shippers in some very difficult situations.
Compared to other commodities shipped by rail, cement is a small
percentage of any Class I rail carrier's business. None of our members
can put together a whole train of cars for shipment. PCA members point
to this as contributing to the especially poor rail service they
experience, which is patently inequitable. Class I rail carriers should
provide the same service to all customers, and this is something the
Board should recognize in rulings taken related to smaller shippers.
Under law, the Board has the authority to exempt a person, class of
persons, or a transaction or service from the protections of the
statute. Of note, hydraulic cement has been exempted from Board
oversight for nearly 27 years.\2\ In making the exemption decision, the
Board noted that the transportation of hydraulic cement was
competitive, with intramodal, intermodal, and geographic competition
existing in many markets. At the time, the feeling of the Board was
that rates were at competitive levels.
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\2\ Rail General Exemption Authority--Exemption of Hydraulic
Cement, Ex Parte No. 346 (Sub-No. 34) (ICC served July 26, 1995), 1995
WL 438371 at *4 (``Hydraulic Cement Exemption Decision'').
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However, in the more than quarter century since this exemption went
into effect, the combination of vigorous competition both within the
rail industry and between different modes of transportation has
diminished to the point of irrelevance. Over this time, cement
manufacturers have unfortunately become increasingly dependent upon
rail transportation. Much has changed in the cement industry with
significant energy improvements at production facilities. For example,
in 1974, there were 179 cement manufacturing plants compared to the
approximately 100 today. In 1974 the average capacity of a cement plant
was 500,000 tons annually compared to one million tons currently. This
demonstrates that while the cement industry continues to be regional in
nature, the distance our members are shipping their product has
increased and has led to greater reliance on Class I railroads to meet
these shipping needs.
Under statute, the Board is given the authority to oversee freight
railroads' rates and practices under circumstances specified in the
statute. Due to the exemption of Board oversight for hydraulic cement,
cement manufacturers are not able to take advantage of this oversight.
For more than ten years, the cement industry has been involved in a
case petitioning the Board to revoke the exemption of Board oversight
of hydraulic cement shipments, as a result of these historical dynamics
facing the industry. During this time, the cement industry has provided
the Board ample evidence of how the shipping needs of the cement
industry have changed. Specifically, that cement manufacturers do not
have a cost competitive alternative to Class I railroads to move their
product from manufacturing plants to terminals. We hope the Board would
move forward with a favorable ruling to revoke the exemption of Board
oversight of hydraulic cement.
Additionally, hydraulic cement is not unique in being exempt from
Board oversight. Reauthorization of the Surface Transportation Board
should require the re-evaluation of all exemptions in place and a
process for reviewing exemptions on a regular basis to evaluate whether
competitive, intramodal and intermodal shipping options exist. This
concept could inform the basis of legislative action requiring the
Surface Transportation Board to enact an exemption review based on a
set of objective criteria at a statutorily determined interval. A five-
year period, similar to reviews conducted by other agencies for various
programs, is in our opinion a reasonable interval this review can be
conducted by the Board.
Finally, it is important for PCA to acknowledge that there are some
actions taken by the Board that benefit all shippers, even those that
are exempt from Board oversight. For example, with the move to more
precision scheduled railroading many of PCA members have experienced an
increase in demurrage billing. We appreciate the Board in 2020
releasing a policy statement clarifying the principles the Board would
consider in evaluating the reasonableness and accessorial rules and
charges. As part of this, we appreciate that the Board clarified that
rail carrier demurrage rates and policies are subject to Board
regulations even if they involve the shipment of exempt commodities,
including hydraulic cement.
In closing, thank you again for the opportunity to share the cement
industry's perspective on our rail service and actions the Surface
Transportation Board can and should be taking. If you have any further
questions, please feel free to contact Sean O'Neill, PCA's Senior Vice
President of Government Affairs.
Sincerely,
Sean O'Neill,
Senior Vice President of Government Affairs, Portland Cement
Association.
Statement of Emily Regis, Vice President, Freight Rail Customer
Alliance, Submitted for the Record by Hon. Donald M. Payne, Jr.
Introduction
Chairs DeFazio and Payne, Ranking Members Graves and Crawford, and
Members of the Subcommittee, thank you for holding today's hearing,
``Stakeholder Views on Surface Transportation Board Reauthorization,''
and for the opportunity to submit these written comments.
I am Emily Regis. I am the Fuels Resource Manager for Arizona
Electric Power Cooperative, Inc., or AEPCO, a nonprofit rural electric
generation and transmission cooperative in Arizona. We serve six member
nonprofit distribution cooperatives that provide retail electric power
to more than 400,000 residences and business in Arizona, California,
and New Mexico, predominately in lower income areas. AEPCO relies on
the Union Pacific Railroad, BNSF Railway, and a short line to deliver
coal for our power plants. As things stand now, we cannot keep the
lights on unless the railroads deliver the coal.
I also serve as Vice President of the Freight Rail Customer
Alliance or FRCA. FRCA represents large trade associations for more
than 3,500 electric utility, agriculture, chemical and alternative fuel
companies, and their customers in all 50 states. FRCA's members, like
AEPCO, depend on railroads to be able to run their businesses and serve
their customers. In addition, I serve as President of the National Coal
Transportation Association (NCTA), an association of coal consumers,
producers, and service providers. I also currently serve as a Member,
representing the small utility sector, of the Rail Energy
Transportation Advisory Committee of the Surface Transportation Board
(Board or STB).
In addition, I had the privilege of participating on behalf of FRCA
during the subcommittee's Railroad Shippers Roundtable that was held in
2019. That informal roundtable discussion and this hearing are
important public venues to 1) learn more about the longstanding
challenges facing freight rail shippers and 2) what Congress, the STB,
and stakeholders, can do to support freight rail. It is a vital
component of our nation's economy as a key element in the supply chain.
It is relied upon by farmers to deliver crops to market and by
utilities and propane suppliers to receive the fuel we need to serve
our customers. Freight rail also enhances our global competitiveness.
Thank You
To begin, FRCA appreciates your leadership in realizing the Surface
Transportation Board Reauthorization Act of 2015 (Act), P.L. 114-110,
which marked for the first time since 1998 that the Board was
reauthorized. The reauthorizing law: (1) provided much-needed reforms
to the Board's process to address numerous historical shortcomings
experienced by the Board and industry stakeholders; (2) improved the
Board's transparency; (3) helped the Board operate more expeditiously
and efficiently; and (4) better enabled the Board to strike a more
equitable balance among the interests of its diverse stakeholders. The
Act also expanded the size of the Board from three Members to five
Members to allow the agency to become more functional and
collaborative. Considering that the Act expired on September 30, 2020,
FRCA again welcomes this opportunity to share its members' experiences
and views as you develop the next STB authorization.
FRCA also thanks Chairs DeFazio and Payne for requesting the
Government Accountability Office (GAO) to conduct a study on the
impacts of Precision Scheduled Railroading (PSR). The results of this
study, once finalized and released, promise to assist all stakeholders
in developing the next STB authorization.
These submitted written comments will discuss: 1) continued rail
carrier service performance problems that some FRCA members and many
other shippers continue to experience, and 2) offer some suggestions on
how Congress can assist the Board in better utilizing its existing
statutory authority or by granting additional statutory authority to
address those problems more effectively.
Need for a Balanced Approach if Differential Pricing Is To Work
FRCA wishes to make clear that is not calling for reregulation or a
return to the pre-Staggers Act era. To the contrary, the largely
captive shippers that are FRCA members appreciate the need for
differential pricing and a vigorous and healthy railroad industry. We
agree that one size does not fit all.
But there is a need for balance so that markets can work. When
railroads face neither effective competition from other railroads, nor
effective oversight, shippers and the economy suffer. In 1980 there
were 40 Class I railroads. Today there are only seven Class I carriers
moving 90% of our nation's freight with several pending new mergers
before the Board including two Class I carriers and in an era of PSR.
When there is a lack of competition in the marketplace, more
specifically, the lack of competition between rail carriers where
railroads enjoy immunity from most anti-trust protections, it is
incumbent upon the Federal government, in this case the STB per the
Staggers Rail Act, to facilitate competition.
FRCA also deeply appreciates the efforts of STB Chairman Oberman
and the Board to address the lack of competition and poor service in
the railroad industry, particularly since the emergence of PSR. For
instance, FRCA appreciates the Board's consideration in a pending
rulemaking of the need to have Class I railroads report First-Mile/
Last-Mile (FMLM) data, in the aggregate, to the Board. Such FMLM data
is critical for measuring the end-to-end service being provided by the
common carrier railroads.
Without that data, shippers and the Board: 1) lack insight into the
overall functioning of the rail network that shippers need for planning
and operational purposes; 2) lack data to assess whether any service
problems are specific to them or more general, whether they are being
singled out for any service problems, and whether service is improving,
deteriorating, or remaining stable generally; 3) are hamstrung in
assessments of the extent to which railroads are properly discharging
their common carrier obligation. Requiring submission of the data
should not unduly burden the railroads in so far as they must
necessarily already collect, monitor, and utilize the data, especially
to the extent they seek to adopt and utilize the principles of PSR.
While the Board does require the submission of significant railroad
performance data pursuant to United States Rail Service Issues--
Performance Data Reporting, Docket No. EP 724 (Sub-No. 4), the data
does not include the FMLM component except in so far as it is
incorporated in the rail origin to rail destination data for unit
trains and intermodal service.
FRCA also appreciates that the challenges the pandemic poses for
railroads, as it does for all of us that depend on employees working in
close proximity with each other to operate large, complicated physical
assets. Nonetheless, railroad service and volumes appear to have been
disproportionately affected, notwithstanding what should be significant
advantages, particularly in the ability to operate long trains with
only two train crew members.
Lack of Railroad Competition--Higher Rates for Shippers
In general, captive shippers pay higher rates because they lack an
effective competitive option. The STB has, various rate reasonable
remedies available in theory, but they work for only a modest minority
of shippers. Thanks in large part to the Act, and the recommendations
made in the STB's 2019 Rate Reform Task Force Report, the Board is
making some efforts to address this problem through a Final Offer Rate
Review process that is also being considered in conjunction with a rail
carrier-proposed voluntary arbitration process. In addition, the Board
issued a Final Rule on Market Dominance which was in response to
another recommendation in the Rate Reform Task Force Report ``to
develop a standard for pleading market dominance that will reduce the
cost and time of bringing a rate case.'' The Board may also be renewing
its competitive access efforts in reciprocal switching, which FRCA
strongly supports, but the railroads have been able to stall those
efforts for now eight years, or over forty when one considers that
reciprocal switching was part of the Staggers Rail Act of 1980.
The Board, however, has yet to take further action to flesh out its
revenue adequacy constraint, rate reasonableness methodology or on
alternatives to the Stand-Alone Cost (SAC) test for larger rate cases.
The railroad industry and markets have changed vastly since 1980, and
updates to these three elements are needed so that shippers can have
viable options to obtain rate relief, especially when the stand-alone
cost methodology is a poor fit for their circumstances. With PSR, the
railroads have reduced and eliminated their ability to respond to
challenges and opportunities to save costs. But rates have gone up, not
down, as service has been reduced and compromised.
Lack of Railroad Competition--Financial Health of Railroads
The railroads always highlight to their investors their reduced
operating ratios. Those reductions have not been achieved from growing
volumes or improving service. Instead, they result from raising rates,
reducing quality of service, and lowering costs, often on the backs of
their workers. Under these circumstances, operating ratio reductions
reflect how service reductions, not cost savings, are being passed
through to customers.
A goal of the Staggers Rail Act of 1980 was to restore financial
stability to the U.S. rail system. By all accounts, this goal has been
achieved. The railroads have not needed to raise new equity in decades
and have excellent debt capital at favorable interest rates. Under PSR,
the railroads have sought to reduce their capital expenditures. The
railroads' high returns have led to excess capital, which they have
sought to distribute through repeated dividend increases as well as
sizeable stock buybacks. Rather than invest in their networks to
improve service, the railroads have sought to reduce capacity and
focused instead on rewarding their investors.
One measure of the financial health of a Class I rail carrier is
the Board's annual determination of ``revenue adequacy.'' The Board's
website provides information on the number of Class I carriers that
have been deemed ``revenue adequate'' from 2000 through 2020. For the
period form 2014-2020, substantial segments of the railroad industry
have achieved revenue adequacy under the Board's measure, and some have
done repeatedly:
2014, 2015, and 2016: Four.
2017: Five.
2018: Three.
2019: Five.
2020: Six (BNSF, CSX, Grand Trunk Corp., KSC, Soo Line,
and UP).
Only Kansas City Southern (KCS) failed to achieve revenue adequacy
in any of those years, and it has now been acquired into voting trust
by Canadian Pacific Railway and at a massive premium. The Board's
revenue adequacy findings confirm the railroads industry's accumulation
of substantial railroad strength.
However, FRCA has long been concerned that the Board's annual
determinations of ``revenue adequacy'' for Class I carriers do not
reflect the true health of the overall railroad industry and its
individual carriers. FRCA believes that the health of the rail carriers
is actually much stronger than what the figures and pattern from above
illustrate.
In a competitive environment, this would not happen. Volumes would
flow to competitors with lower rates or better service, and the cost
savings would be passed through to consumers. The lack of effective
competition among railroads is why the railroads are able to raise
rates, lower costs, degrade service, and increase their margins and
profits.
The resulting service problems can be more severe than the rate
problems that result from the lack of effective service. In particular,
many electric utilities across the country have, for the past 18 months
or so, faced difficult weather conditions, natural disasters, and an
increase in natural gas prices (for those utilities that can burn
natural gas) that has forced utilities to burn more coal. However,
despite the need for more coal, utilities have been hit with poor rail
carrier service performance resulting in unpredictable coal deliveries
which in turn increases costs. While AEPCO and most other coal-burning
utilities can stockpile coal, doing so costs money. The variability of
service means that a utility can never know if its stockpile is too big
or small. In addition, the quality of coal is compromised when the
stockpile is too big or not big enough.
To provide an indication of the inadequacy and lack of
predictability in service FRCA, along with NCTA and the National Rural
Electric Cooperative Association (NRECA) have the results from its 4th
Utility On Time Performance (OTP) Metric Survey. It should be noted
that these results include both plants and utilities that are captive
to a single railroad and those that have the ability to receive service
from two carriers. In other words, the service problems are hardy
confined to captive shippers, but extends to those that are sometimes
called ``competitively-served.''
The data collected covers July 2021 through December 2021
representing 28 plants that ship coal in the United States on the Union
Pacific Railroad, BNSF Railway and the Norfolk Southern. Coal Supply
regions represented in the data include, the Southern Powder River
Basin (SPRB), and Northern Powder River Basin (NPRB), Rockies, Northern
Appalachia (NAPP), Central Appalachia (CAPP) and Illinois Basin (ILB):
----------------------------------------------------------------------------------------------------------------
Coal Regions SPRB NPRB Rockies NAPP CAPP ILB Other
----------------------------------------------------------------------------------------------------------------
Plants.................................... 14 4 2 1 1 4 2
----------------------------------------------------------------------------------------------------------------
Service
The utilities that responded to the survey reported the following:
92% reported rail service issues that have impacted their
company's coal transportation.
60% reporting railroad service as worse than it was in
2019 and 2020.
64% of those respondents also reporting that their
company had to modify its operations in the second half of 2021 because
of railroad service issues, disruptions, and delays.
1. Utilities responded to specific questions about how
their operations have been impacted by railroad
service issues:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Costs
Of those utilities that responded, over 90% reported that railroad
service issues have increased costs for their utility. The utilities
were asked how much they estimate that railroad service issues in 2021
have increased costs in general for their company.
30% of the utilities reported cost increases of between
$100,000 and $ 1 M.
50% reported cost increases of between $1 M and $10 M.
20% reported cost increases of over $10 M to $20 M.
2. The utilities were asked what specifically they
attribute these cost increases to:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
3. The utilities were also asked what type of railroad
service issues they experienced:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Nominations
Another area that can be challenging for both utility shippers and
railroads is the nomination process. Utilities provide the railroads
with information on volume nominations (anticipated supply needs) and
their required train loading schedule for each month, utilities are
required to provide a trainload or volume nomination request to the
railroad via online interactive planning tools on each railroad's
website.
For the six-month period of July-December 2021, the chart below
shows that for the 28 plants that responded the number of trainloads
they were short of their trainload nominations each month:
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
To provide a full year comparison, the chart below shows the
utilities that participated in the survey for the January thru July
2021 period, combined with the 3rd Utility OTP Metric Survey results
covering July through December 2021 survey, shows the percentage of
nominated trainloads received by plants and not received.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Transit Time
For the six-month period of July-December 2021, this survey also
collected monthly utility railroad performance metrics to show mine to
plant transit time by railroad and mine source by month. The carriers
and mine regions serving the participating plants were reported as
follows:
------------------------------------------------------------------------
Railroads UPRR BNSF NS Multi
------------------------------------------------------------------------
Plants.......................... 6 17 3 2
------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Mine Region SPRB NPRB Rockies ILB NAPP CAPP
----------------------------------------------------------------------------------------------------------------
Plants.............................................. 16 4 2 4 1 1
----------------------------------------------------------------------------------------------------------------
1. The chart below represents the group of plants shipping
coal from the SPRB coal region reporting the
percentage of forecasted trainload nominations
received as equal to, 10% better, 10% worse, 20%
worse and 30% worse than their forecast nominated
trainloads.
----------------------------------------------------------------------------------------------------------------
SPRB Plants (16) Equal to 10% Better 10% Worse 20% Worse 30% Worse
----------------------------------------------------------------------------------------------------------------
July........................................... 31% 6% 19% 25% 19%
Aug............................................ 38% 6% 19% 6% 31%
Sept........................................... 6% 6% 44% 19% 19%
Oct............................................ 6% 6% 50% 6% 31%
Nov............................................ 25% 6% 13% 44% 13%
Dec............................................ 19% 6% 25% 38% 13%
----------------------------------------------------------------------------------------------------------------
2. The chart below represents the group of plants shipping
coal from the NPRB coal regions:
----------------------------------------------------------------------------------------------------------------
NPRB Plants (4) Equal to 10% Worse 20% Worse 30% Worse
----------------------------------------------------------------------------------------------------------------
July........................................ 50% 50% 0% 0%
Aug......................................... 25% 25% 25% 25%
Sept........................................ 50% 25% 25% 0%
Oct......................................... 25% 0% 75% 0%
Nov......................................... 0% 50% 50% 0%
Dec......................................... 25% 25% 0% 50%
----------------------------------------------------------------------------------------------------------------
3. The chart below represents the group of plants shipping
coal from the ILB coal regions:
----------------------------------------------------------------------------------------------------------------
ILB Plants (4) Equal to 10% Worse 20% Worse 30% Worse
----------------------------------------------------------------------------------------------------------------
July........................................ 50% 0% 0% 50%
Aug......................................... 0% 25% 0% 75%
Sept........................................ 0% 0% 0% 50%
Oct......................................... 0% 0% 0% 75%
Nov......................................... 0% 0% 25% 75%
Dec......................................... 0% 0% 0% 100%
----------------------------------------------------------------------------------------------------------------
4. Two plants shipping coal from the Rockies reported their
forecasted nominations received as the following:
--------------------------------------------------------------------------------------------------------------------------------------------------------
Rockies (2) July Aug Sept Oct Nov Dec
--------------------------------------------------------------------------------------------------------------------------------------------------------
Plant A........................................... 20% Worse 20% Worse Equal to Equal to 30% Worse 30% Worse
Plant B........................................... Equal to 10% Worse 10% Worse 20% Worse 20% Worse 20% Worse
--------------------------------------------------------------------------------------------------------------------------------------------------------
5. One plant shipping coal from NAPP reported its forecast
nomination as 30% worse than forecasted for July,
August, September, October, and December and equal
to its forecast in November 2021.
Comments from Shippers
Along with the plant forecasted trainload nominations received
questions, the survey also collected comments from shippers about their
respective experiences with the carriers over the six-month period July
through December 2021. Some of those comments are listed below.
1. Railroads seem to be worried about velocity and reducing set
count on their systems. Unfortunately, even if you gain velocity and
reduce equipment it still takes the same amount of crews to move
forecasted coal and they all seem to be short
2. The number of permits (trainload nominations) would have been
higher however the railroad elected to park half of my rail fleet which
reduced the number of permits they could satisfy
3. Service issues related to locomotive power problems and lack of
crews have been ongoing for several months.
4. Lack of crews may be the biggest issue, our railroad will leave
an unloaded train on our site for up to 2-3 days until another set is
unloaded, then they send a crew to double the trains and depart.
5. Communication was terrible.
6. Even though our railroad service was not great in 2021, our
communication with the railroads was great. They were all forthcoming
with their challenges, even giving us frequent updates on their efforts
to hire new staff and get them trained. We could tell they were doing
the best they could and were prioritizing our shipments over other
traffic.
7. Increased bunching of trains caused us to incur costs to add
coal to our stockpile and then pull coal off our stockpile more than in
the past.
8. All 4 major providers had issues with crews, power, and
communication in 2021. Reduction in employees that worked the 24-hour
desks resulted in terrible communication and lack of crews kept trains
sitting.
Bottom line is that July 2021-December 2021 was an incredibly
challenging time for many utilities who were experiencing railroad
transportation service issues in receiving coal supply to power plants.
Suggestions for Congress
Absent effective competition, we need effective oversight and truly
streamlined processes. We are not asking for the Board or Congress to
micromanage service. We are asking for backstops that can be enforced.
As you and your Congressional colleagues consider the next
authorization of the STB, FRCA asks that you consider the following:
1. Common Carrier Obligation
The common carrier obligation, to provide service on reasonable
request, is supposed to require that carriers provide a level of
service that meets a shipper's reasonable needs. But it has not been
serving that function, as railroads have been providing service that is
both poor and unreliable, For example, UP's most recent monthly
announcement (CN2022-4, February 4, 2022, https://www.up.com/customers/
announcements/customernews/allcustomernews/CN2022-4.html) showed trip
plan compliance of 68% for manifest (reflecting an improvement of 6
percentage points) and 78% for intermodal. That's inadequate, and it is
based on internal calculations that are not disclosed to the shipper,
the Board, or the public.
We believe the common carrier standard needs to be something
meaningful, with consequences to apply that is not met. In the
reauthorization, FRCA recommends a statutorily clarified definition of
``common carrier obligations'' and calls upon the Board to:
Review and evaluate the extent to which railroad
operating, financial, investment, marketing and other business
practices may be impairing the ability of and incentives for railroads
to fulfill their common carrier obligations, in the aggregate, and
provide adequate and economical service to their customers, including
those shipping or receiving under contracts or exempt transportation
arrangements.
Collect data needed for that evaluation, including data
regarding first-mile/last-mile service issues and the extent to which
shipper and receiver investment in railroad infrastructure is not
efficiently utilized by the railroads (which the Board is in its
initial consideration stages in Ex Parte No. 767, First Mile/Last
Mile).
Impose fines and other penalties or allow shippers to
recover appropriate damages to the extent the agency finds that
railroads are not fulfilling their common carrier obligations in the
aggregate as well as individually and are not providing adequate and
economical service to their customers, including those shipping or
receiving under contracts or exempt transportation arrangements. In
terms of a fine or a penalty, current statute generally limits the
Board's penalty authority to about $8,736 per violation. That is too
little, unless applied to each carload or each day each carload is
delayed.
An alternative is larger penalties tied to the overall level of
service. Legislation might be needed to establish such penalties and to
include contract and exempt movements in the assessment. Otherwise,
railroads might use contracts to evade their common carrier obligation.
Another option for Congress to consider, is awarding damages to the
injured shipper, but that almost never happens and would likely turn
into a protracted and expensive proceeding for the shipper.
2. Rates
FRCA suggests that the next authorization encourage the Board to
continue its proceedings on Revenue Adequacy and when determining a
revenue adequate constraint commensurate with current market
conditions, the Board shall consider but not limited to:
Viable and effective revenue adequacy constraint is
needed as part of the Board's oversight.
Continued recognition that rail carriers need
differential pricing to cover their costs and serve as many shippers as
possible. But once rail carriers recover their costs and achieve
revenue adequacy, allowing further unrestrained rate increases, does
not guarantee further infrastructure investment but rather, punishes
captive shippers. (The Board's predecessor, the Interstate Commerce
Commission, recognized this in 1985.)
Measuring revenue adequacy based on whether a rail
carrier's return on investment exceeds the cost of capital can be a
reasonable approach, but other measures should be considered.
Not including the use of ``replacement cost
methodologies'' when determining rail carrier revenue adequacy.
The measurement period should be of a fixed length--five
years is sufficient.
Rate increase constraint should be a key element of a
revenue adequacy constraint.
A shipper to use the simplified road property investment
analysis in a simplified SAC case against a revenue adequate rail
carrier.
Continued development of the Report's recommended use of
Incumbent Network Cost Analysis (INCA) in a simplified SAC case.
3. Commodity Exemptions
The elimination of commodity exemptions should also be considered.
When the exemptions were adopted, tariffs and contract summaries needed
to be filed. Those requirements ended over twenty-five years ago.
Exemptions are a solution to a problem that no longer exists.
4. Length and Funding Levels
FRCA recommends that the next authorization be a minimum of five
years at funding levels commensurate with the previous enacted Fiscal
Year (FY) appropriation levels for the STB.
The highest possible annual authorized and appropriated funding
levels for the Board is made more acute by the:
Unprecedented demand placed on STB's regular activities
and resources given the pending rail merger proceedings before the
Board--all of which pose significant service and rate issues for
captive shippers, and questions concerning the structure of a probable
more consolidated freight rail industry.
Implementation of the On-Time Performance Standards for
passenger rail.
Number of formal and informal railroad performance
service complaints
Continued reliance on data transparency and access by all
stakeholders let alone additional data and analytical capabilities to
continue enhancing the Board's evidence-based decision-making.
Board operating with a full complement of Members.
Thank you for holding this hearing, allowing FRCA to submit its
comments, and for your continued consideration. We are happy to answer
any questions you may have and look forward to the dialogue continuing.
__________
Attachment
[Ms. Regis submitted an attachment to her statement which is
retained in committee files and available online at https://
movecoal.org/shared-files/1895/FRCA-House-Comments-3-8-22-Combined.pdf,
``Attachment to Written Comments.'']
Letter of March 8, 2022, from Corey Rosenbusch, The Fertilizer
Institute, Submitted for the Record by Hon. Donald M. Payne, Jr.
March 8, 2022.
The Honorable Donald M. Payne Jr.,
Chairman,
Subcommittee on Railroads, Pipelines, and Hazardous Materials, B376
Rayburn House Office Building, Washington, DC 20515.
The Honorable Rick Crawford,
Ranking Member,
Subcommittee on Railroads, Pipelines, and Hazardous Materials, B376
Rayburn House Office Building, Washington, DC 20515.
The Honorable Peter A. DeFazio,
Chairman,
Committee on Transportation and Infrastructure, 2251 Rayburn House
Office Building, Washington, DC 20515.
The Honorable Sam Graves,
Ranking Member,
Committee on Transportation and Infrastructure, 2264 Rayburn House
Office Building, Washington, DC 20515.
Via Electronic Mail
Re: Hearing on Surface Transportation Board Reauthorization
Dear Chairman Payne, Ranking Member Crawford and Committee Chairman
DeFazio and Ranking Member Graves:
Thank you for holding today's hearing regarding ``Stakeholder Views
on Surface Transportation Board Reauthorization.'' The Fertilizer
Institute (TFI) appreciates the opportunity to share information on the
freight rail marketplace and the critical role of the Surface
Transportation Board (STB or Board).
TFI represents companies that are engaged in all aspects of the
fertilizer supply chain in the United States. The fertilizer industry
ensures that farmers receive the nutrients they need to enrich the soil
and, in turn, grow the crops that feed our nation and the world.
Fertilizer is a key ingredient in feeding a growing global population,
which is expected to surpass 9.5 billion people by 2050. Half of all
food grown around the world is made possible through the use of
fertilizer, hence its importance to farmers and food production.\1\
---------------------------------------------------------------------------
\1\ Stewart, W.M., Dibb, D.W., Johnston, A.E. and Smyth, T.J.
(2005). ``The Contribution of Commercial Fertilizer Nutrients to Food
Production.'' Agron. J., 97: 1-6.
---------------------------------------------------------------------------
The U.S. fertilizer industry generates more than $130 billion in
economic benefit each year and supports approximately 487,000 American
jobs.
Statement of Interest
Nearly 44% of all fertilizers produced globally, or more than 200
million tons of material, are exported annually. Moving this material
from production facilities to farms requires virtually every mode of
transportation and a carefully orchestrated system of logistics to
serve farmers on a just-in-time basis. While all fertilizer touches a
truck at least once before it reaches the farm, in terms of ton-miles,
over half of all fertilizer moves by rail year-round throughout the
United States. In the agricultural sector, fertilizer appears to rely
on rail the most.\2\
---------------------------------------------------------------------------
\2\ ``The Importance of Highways to U.S. Agriculture.'' U.S.
Department of Agriculture. Page 13. December 2020.
---------------------------------------------------------------------------
TFI works closely with the rail industry and regulators to promote
safety for employees, the public, and first responders. We want the
rail industry to be successful because its success is essential to our
success.
Freight Rail Marketplace and STB Oversight
The rail industry has changed a great deal over the past 40 years
following enactment of the Staggers Rail Act of 1980. For example,
years of rail industry consolidation have resulted in just four
railroads handling over 90 percent of the freight rail traffic in the
United States. Now two-thirds of rail stations are served by just one
railroad. Moreover, the rail cars used to transport shipper commodities
are now approximately 73% owned, leased, and maintained by shippers.\3\
In 1985, only 30% of rail cars were owned, leased, and maintained by
shippers.\4\ This shift is quite relevant as it pertains to the
efficient (or inefficient) utilization of shipper assets.\5\
---------------------------------------------------------------------------
\3\ ``Petition for Rulemaking to Adopt Rules Governing Private
Railcar Use by Railroads.'' Docket No. EP 768, Surface Transportation
Board.
\4\ Roman, Jay. ``STB's Annual Rail Rate Index Study: A Deeper
Dive.'' Railway Age. January 27, 2022.
\5\ 100% of tank cars are owned, leased, and maintained by
shippers.
---------------------------------------------------------------------------
As we approach a half century of the Staggers Act, it is important
to recognize its success and work constructively to modernize oversight
of the rail marketplace to reflect the substantial changes that have
taken place.
The STB is the primary regulatory agency responsible for rail rate
and service matters. Practical regulatory reforms that improve STB
oversight of the rail marketplace are desperately needed. The very
first of 15 enumerated rail transportation policies in the Staggers Act
is ``to allow, to the maximum extent possible, competition and the
demand for services to establish reasonable rates for transportation by
rail.'' \6\ Yet this has been the least successful of these policies
due to rail consolidation that has reduced the number of rail
competitors and regulatory policies that have prevented application of
those provisions in the Staggers Act that were intended to facilitate
greater competition. STB modernization can help promote competitive
freight rail service to make U.S. manufacturers and farmers more
competitive in the global marketplace.
---------------------------------------------------------------------------
\6\ 49 U.S.C. Sec. 10101(1)
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From 2005 to 2017, rail rates for carloads of anhydrous ammonia,
the building block of all nitrogen fertilizers and one of the most
efficient sources of nitrogen for farmers, increased 206 percent. This
is three times more than the increase in the system-wide average rail
rate per car. As it stands now, rate and service cases are so
expensive, cumbersome and time consuming that fertilizer shippers do
not have an effective forum to adjudicate such extreme increases in
rail rates. The lack of meaningful oversight further distorts the
market and the costs of this distortion are paid by the fertilizer
industry, farmers, and everyone who consumes food.
The Transportation Research Board stated that the STB's rate review
procedures are ``unusable by most shippers.'' \7\ The STB's current
rate review standards were put in place for coal shippers more than
three decades ago when the railroad industry was quite different and
over two dozen railroads competed across the country. While rail
industry fortunes have changed a great deal, the rate review process
has not. Rate and service cases at the STB typically take five years at
a cost of more than $5 million. The time and expense to file a rate
case does not work.
---------------------------------------------------------------------------
\7\ ``Modernizing Freight Rail Regulation.'' Committee for a Study
of Freight Rail Transportation and Regulation. Transportation Research
Board (Special Report 318). 2015, Page 191.
---------------------------------------------------------------------------
Much to the credit of the entire Board and that of current Chairman
Oberman and former Chairman Begeman, in recent years, the Board has
initiated a number of efforts to reform its outdated oversight
mechanisms. Likewise, the Board is also taking steps on long-pending
updates for reciprocal switching,\8\ which is an important way to
promote more competition in the rail industry and more closely reflect
the system in Canada that already allows Reciprocal Switching.\9\ The
Board's forthcoming March 15-16 hearing on Reciprocal Switching is
helpful and TFI urges Congress to be supportive of STB's efforts on
this matter. It is critical that the Board finalize the Reciprocal
Switching rulemaking.
---------------------------------------------------------------------------
\8\ Does the AAR Fear Competition? Railway Age, March 2, 2022.
\9\ Known in Canada as Interswitching.
---------------------------------------------------------------------------
Rail Service Challenges and Statutory Changes
Rail service is not always bad. However, all too often, this is a
serious challenge for the fertilizer industry. Rail carrier
implementation of large cost-cutting initiatives, such as precision
scheduled railroading (``PSR''), have disrupted rail service to many
shippers. PSR has made it more difficult and expensive to ship
fertilizer.
Most recently, rail carrier cycle times amongst all or most Class I
carriers have been substantially slower in the first quarter of this
year. TFI attributes the erosion of cycle times to a combination of (1)
implementation of PSR, which appears to have eliminated too much rail
carrier personnel, thus compromising rail carrier operational
elasticity and (2) COVID-related infections causing rail labor to be
unavailable. COVID infections, for example, would be less of a problem
if there were more back-up crews.
Poor cycle times and service has resulted in costly, inefficient
utilization of shipper assets. This has negatively affected the ability
of TFI's members to ship fertilizer and pre-position the essential
product for the busy Spring planting season. When rail service
deteriorates--which is increasingly common--shippers often do not have
enough cars to ship the product volumes that need to move. This forces
shippers and producers to curtail production and raises costs on
everyone, except for the rail industry, which is now the leading profit
industry in the country.
As rail carriers divested themselves from rail car ownership, they
have also divested themselves out of the inherent incentives that
encourage the efficient use of rail cars.\10\ This is a significant
cost for shippers and there is little to no statutory nor regulatory
remedies for it.
---------------------------------------------------------------------------
\10\ As previously cited, shippers own or lease 73% of the cars
that are used to ship commodities.
---------------------------------------------------------------------------
The Board's oversight regarding PSR and associated changes in
demurrage and accessorial fees has been greatly appreciated. Likewise,
TFI is pleased to be engaging with the Board as part of its proceeding
on first-mile/last-mile service and data (Ex Parte 767).
While demurrage and accessorial charges are increasingly levied on
shippers, there is almost no accountability when it comes to rail
carrier first-mile/last-mile service. TFI recognizes the role that
appropriate and fair demurrage charges have on rail network fluidity.
Reciprocity is also needed. Under the current system, rail carriers
have little incentive to provide reasonable and consistent rail
service, hence the frequent concerns (and periodic crises) voiced by
shippers on this topic. Congress should consider statutory changes that
would enforce the same principal on railroads, as poor rail service and
inefficient utilization of shipper-owned assets is a serious cost for
all consumers.
Conclusion
STB modernization is critical to U.S. manufacturers and farmers.
Especially following PSR, rail carriers no longer seem to have enough
staff to consistently fulfill their obligations to shippers. These
``obligations'' are not just about ``shippers.'' These are obligations
to the American public and our nation, which gave at no-cost to
railroads 10% of U.S. land (183 million acres \11\) so they could build
a national network.
---------------------------------------------------------------------------
\11\ Grant, Michael J. ``Railroad Land Grants.'' Encyclopedia of
the Great Plains. 2011.
---------------------------------------------------------------------------
Policymakers and regulators should continue the thoughtful work
that is needed to modernize rail marketplace oversight so that this
critical part of our nation's supply chain and economic security does
not languish at the short-sighted hands of Wall Street.\12\
---------------------------------------------------------------------------
\12\ Ziobro, Paul. ``A Revolution Sweeping Railroads Upends How
America Moves Its Stuff.'' Wall Street Journal. April 3, 2019.
---------------------------------------------------------------------------
Thank you again for holding today's hearing and for the opportunity
to submit this statement. TFI looks forward to working with Congress to
strengthen our nation's supply chain, including the STB's statutory
authorities and oversight. Should you have any questions, please reach
out to Justin Louchheim of my staff.
Sincerely,
Corey Rosenbusch,
The Fertilizer Institute.
Post-Hearing Comments From Witness Brad Hildebrand, Submitted for the
Record by Hon. Donald M. Payne, Jr.
Introduction
Chairs Peter DeFazio and Donald Payne, Ranking Members Sam Graves
and Rick Crawford, and Members of this Subcommittee, thank you for
providing this opportunity for me, Brad Hildebrand, to submit
additional comments following the March 8, 2022, hearing, ``Stakeholder
Views on Surface Transportation Board Reauthorization,'' on behalf of
the National Industrial Transportation League (NITL).
Reciprocal Switching
It was troublesome that much of this congressional hearing focused
on the Surface Transportation Board's (Board or STB) reciprocal
switching proposal given that the Board held a two-day public hearing
on March 15 and 16, 2022 (EP 711 (Sub.-1), Reciprocal Switching.
Further, it was disappointing that the witness testifying on behalf of
the Association of American Railroads (AAR) claimed that this is a
backdoor venue for shippers to force a reduction in railroad rates. The
railroads are treating reciprocal switching as if it will be an
existential threat to their business.
The AAR is correct that there is a process in place for shippers to
request a competitive switch. However, this decades-old STB procedure
does not work as it requires shippers to demonstrate anticompetitive
conduct which is legally unattainable to reach. As such, shippers have
not and are not bringing competitive switch requests to the Board under
the current rules.
The STB proposal is about enhancing competition. It offers two new
paths for shippers to request a competitive switching remedy from the
Board that is 1) Practical and In the Public Interest or 2) Necessary
to Provide Competitive Rail Service.
The AAR's dialogue during the hearing pointed out several
misconceptions about the Board's proposal. First, the AAR wants us to
believe that the operations of its entire network would be severely
jeopardized because the thousands of switches that its members would be
forced to make to accommodate the interchanging of traffic with a
competing railroad. On the contrary, the burden of proof would rest
with the requesting shippers to demonstrate there is an established
working interchange between the two rail carriers. Second, the
requesting shippers would have to prove that the switching request
falls under one of the above-mentioned paths and the respective
criteria is met. It is NITL's belief that should the proposed
reciprocal switching process become a Final Rule, there would not be a
wholesale move for every shipper across the country to request a new
reciprocal switch--as stated in AAR's continued messaging. Under the
Board's proposal, it will still be a long and costly process for
shippers to pursue. Shippers would want to be certain that their
request for opening-up competition to their facility would meet all of
STB's criteria before they make this kind of financial commitment.
Should the Board's proposal become a Final Rule, there mere fact that
exists, could hopefully result in competitive service and competitive
rates without shippers having to go to the Board in the first place.
This competitive driver is not present under the current rule.
Final Offer Rate Review
I appreciate this opportunity to clarify NITL's position on the
Board's proposed Final Offer Rate Review (FORR). NITL supports the FORR
in EP 755, Final Offer Rate Review and EP 655, Expanding Access to Rate
Relief. These rules would establish a series of procedural deadlines
intended to allow the STB to issue a decision 135 days after a rate
complaint is filed when dealing with cases in which the shipper seeks
rate relief of $4 million or less. The railroad and the shipper would
each be required to submit a final offer (as in baseball-style
arbitration). This is only after the STB has determined that the
railroad has market dominance over the shipment(s) in question. The STB
would only be allowed to select one of the offers without modification.
NITL encourages the Board to swiftly issue a Final Rule on its FORR
proposal.
In addition, NITL opposes the Small Alternative Voluntary
Arbitration proposal put forth by several Class I railroads in a July
2020 petition filed before the Board. NITL finds several objectionable
elements of this proposal including 1) an exemption from FORR for five
years; 2) confidentiality of the results of the arbitrator's decision;
and, 3) rail carriers would have the right to withdraw from the program
under certain circumstances, such as if the Board adopts a material
change to its existing rate reasonableness methodologies or creates a
new rate reasonableness methodology after a shipper or railroad has
opted into the program.
NITL views this rail carrier proposed Small Alternative Voluntary
Arbitration process as NOT voluntary for shippers and was an 11th hour
attempt by the railroads to further stall the STB's consideration of
its FORR proposal.
Commodity Exemptions
NITL would like to re-affirm its request to Congress that it
requires the Board to eliminate all exemptions for commodities and to
do so in a streamlined, transparent process. As NITL stated in its
submitted written comments, we ask Congress to encourage the STB to:
Promptly complete its consideration of commodity
exemptions in its pending proceeding, EP Docket No. 704, Notice of
Proposed Rulemaking, Review of Commodity, Boxcar, and TOFC/COFC
Exemptions. It is important to note, however, that this proceeding only
involves five to six commodity groups and there are many other exempt
commodities for which a review is warranted.
Interpret its revocation authority more broadly given
today's far more concentrated market conditions than existed when the
exemptions were adopted and the railroads' financial health.
Other options should Congress choose a different approach, would be
to 1) eliminate all exemptions by a date certain unless the railroads
can show that the exemption is still warranted or 2) require that all
exemptions be periodically reviewed by the STB every five years.
It is important to remind Congress, that if a commodity or a class
of commodities are ``exempt'' that means that those shippers that ship
these commodities cannot seek service or rate redress or relief from
the Board unless the shippers first go through a tedious, time
consuming, and costly process before the Board requesting that the
exemption be revoked. In that process, the shipper is required to
demonstrate before the STB that a market dominant rail carrier makes
these movements. If shippers have successfully demonstrated market
dominance before the Board, then the shippers can pursue informal or
formal service or rate complaints or cases.
AAR is correct, and as just stated, there is already a process in
place before the Board for exempted commodities to seek revocation.
However, given the continued consolidation of the rail network and
utilization of Precision Scheduled Railroading, exempted commodities
are an answer to a problem that no longer exists.
Enhanced Statutory Authority
As you continue thinking through and developing the next STB
authorization, NITL requests that Congress keeps in mind the second
major commitment of the Staggers Rail Act of 1980: instill railroad-to-
railroad competition in the marketplace. The Board needs additional
statutory authority and tools to not just facilitate railroad-to-
railroad competition, but to move the pendulum closer to the middle
where all stakeholders can effectively operate in a competitive
environment. The burden of proof should not always be placed on the
shippers to achieve a fair and balanced hearing before the Board or
before Congress.
NITL believes that if carriers are deemed revenue adequate by the
Board, then they should be the ones having to prove to the STB that
their service performance, rates, terms, and fees are reasonable.
Formal rate and fee cases need to be heard and decided within a maximum
two-year period. During this time, the Board should be allowed to put
an injunction on the contested railroads' rates, terms, fees, or
service practices while the case is being heard by the Board. It is
simply not right that the railroads can continue to collect what
shippers are asserting to be as unreasonable rates and fees. Currently,
it is extremely difficult to near impossible for shippers to seek an
injunction on these rates and fees. Shippers would need to prove that
the railroads' action(s) would put their business into serious peril if
not jeopardy. Conversely, if the Board had the statutory authority to
issue an injunction, combined with a case completion time deadline,
would facilitate the finalization of Board decisions.
While the STB has made some progress on considering alternate
economic proposals or models to the three methods that are currently
available for large shippers to pursue formal rate cases [Stand-Alone
Cost (SAC), Simplified SAC, and Three Benchmark], Congress needs to
provide statutory authority to the Board allowing it to shift the
burden of proof from shippers to railroads. As I said in my oral
remarks during the hearing, there are no new pending rate cases before
the Board. This is NOT because shippers are happy with the status quo,
it is because these methods are too complex and too expensive for
shippers to fight with the burden of proof on the shippers.
Conclusion
Thank you for your continued leadership on freight rail shipper
issues and consideration of our reauthorization proposals. NITL looks
forward to continuing this important dialogue.
Letter of March 7, 2022, from Michael Johnson, President and Chief
Executive Officer, National Stone, Sand, and Gravel Association,
Submitted for the Record by Hon. Donald M. Payne, Jr.
March 7, 2022.
The Honorable Donald Payne, Jr.,
Chairman,
House Committee on Transportation and Infrastructure, Subcommittee on
Railroads, Pipelines, and Hazardous Materials.
The Honorable Rick Crawford,
Ranking Member,
House Committee on Transportation and Infrastructure, Subcommittee on
Railroads, Pipelines, and Hazardous Materials.
Dear Chairman Payne and Ranking Member Crawford:
The National Stone, Sand, & Gravel Association (NSSGA) respectively
submits this letter to thank Chairs Peter DeFazio and Donald Payne,
Ranking Members Sam Graves and Rick Crawford, and the Members of the
Subcommittee on Railroads, Pipelines and Hazardous Materials
(Committee) for holding this important and timely hearing on
``Stakeholder Views on Surface Transportation Board (STB)
Reauthorization'' on March 8, 2022. NSSGA strongly supports the funding
of the STB to ensure it can properly and effectively carry out its
statutory duties.
NSSGA is the leading voice and advocate for the aggregates
industry. Our members are stone, sand, and gravel producers and the
equipment manufacturers and service providers who support them. NSSGA's
member companies produce more than 90 percent of the crushed stone and
70 percent of the sand and gravel consumed annually in the United
States. Aggregates are the building block that builds towns and cities
and the connections in between. The industry is synonymous with
infrastructure but more than that. Aggregates play a crucial role in
everything we touch--roads, railways, bridges, tunnels, water supply,
sewers, electrical grids, and telecommunications.
As a result, NSSGA members will play a crucial role in the success
of the Infrastructure Investment and Jobs Act (``IIJA'') that became
effective on November 15, 2021. The IIJA will help rebuild America's
roads, bridges, and rails. It will strengthen supply chains by making
long overdue improvements for the nation's ports, airports, rail, and
roads. The aggregates industry will supply the materials needed to make
these projects happen.
Fully funding the STB to ensure it can properly regulate the rail
industry is vital to the U.S. infrastructure and our members' ability
to supply construction materials. Rail service delays create shortages
and drive the cost of needed aggregates for important infrastructure
projects, including highways, flood control, water supply, and other
environmental improvement projects. The aggregates must then be
supplied from other sources, which requires transporting over a longer
distance and increasing cost, and increased emissions.
The current state of the rail industry has left customers captive
to service provided by a single railroad, and given the nature of the
rail industry, there is no possibility of new rail entrants to provide
competition. The rail industry is highly consolidated, having only 7
Class I railroads compared to 40 in 1980, with the possibility that
only 6 will exist by 2023. The consolidation of the industry has given
railroads even less competition, creating, as some economists have
pointed out, a duopoly in the East and the West. U.S. Railroads have
also adopted the rail operating model called Precision Scheduled
Railroading over the last five years, which has resulted in poorer
service and higher rates for its customers. This model has had a direct
impact on the aggregates industry and our ability to supply needed
construction materials to projects.
The STB is the economic regulator of the U.S. freight rail industry
and serves as a crucial backstop when railroads have market dominance.
Without a fully functioning STB, railroads would be free to charge
captive rail shippers more unreasonable rates and engage in
unreasonable practices. Also, railroads could provide inadequate
service to shippers who rely on rail without any repercussions if
proper regulation is not in place. The STB presently is working on
practical solutions to address the problems that currently exist in
freight rail: (a) a proposed rule change on reciprocal switching to
improve competition in freight rail; (b) a program to monitor rail
service at the first and last mile of a route; and, (c) a new rate case
process called Final Offer Rate Review, which will make the rate case
process more accessible and useable for shippers. The U.S. needs a
funded and functioning STB to continue this important work.
In conclusion, the NSSGA strongly supports the STB's mission and
urges Congress to fully fund this agency, so its member companies can
obtain these critical transportation services that are needed to build
our infrastructure and sustain our communities. NSSGA encourages
Congress to support STB regulatory reforms and to enact its own laws
which will level the playing field between railroads and their
customers.
Sincerely,
Michael Johnson,
President and CEO, National Stone, Sand, and Gravel Association.
cc: Members of the House Committee on Transportation and
Infrastructure, Subcommittee on Railroads, Pipelines, and Hazardous
Materials
Letter of March 8, 2022, from Chet M. Thompson, President and Chief
Executive Officer, American Fuel and Petrochemical Manufacturers,
Submitted for the Record by Hon. Randy K. Weber, Sr.
March 8, 2022.
The Honorable Peter A. DeFazio,
Chairman,
Transportation and Infrastructure Committee, 2165 Rayburn House Office
Building, Washington, DC 20515.
The Honorable Donald M. Payne, Jr.,
Chairman,
Subcommittee on Railroads, Pipelines, and Hazardous Materials,
Transportation and Infrastructure Committee, 2165 Rayburn House
Office Building, Washington, DC 20515.
The Honorable Sam Graves,
Ranking Member,
Transportation and Infrastructure Committee, 2164 Rayburn House Office
Building, Washington, DC 20515.
The Honorable Rick Crawford,
Ranking Member,
Subcommittee on Railroads, Pipelines, and Hazardous Materials,
Transportation and Infrastructure Committee, 2164 Rayburn House
Office Building, Washington, DC 20515.
RE: Stakeholder Views on Surface Transportation Board Reauthorization
Dear Chairman DeFazio, Ranking Member Graves, Subcommittee Chair
Payne, and Subcommittee Ranking Member Crawford:
On behalf of the American Fuel & Petrochemical Manufacturers
(AFPM), thank you for your leadership and commitment to improving the
competitiveness and efficiency of the United States freight rail
system. All stakeholders would benefit from a healthier and more
competitive and dependable freight rail system, and the Surface
Transportation Board (STB) has a key role in achieving these goals. STB
reauthorization is a top priority for AFPM and rail shippers, and this
forum provides an opportunity for rail shippers to highlight potential
topics for consideration in future legislation.
AFPM is a trade association representing virtually all the U.S.
refining and petrochemical manufacturing capacity. Our members produce
the fuels that drive the U.S. economy and the chemical building blocks
integral to millions of products that make modern life possible. Rail
transportation is vital to our members, as well as to manufacturers and
customers downstream that depend on our products. Refineries and
petrochemical manufacturers across the country rely on the rail network
as an essential part of their supply chains.
Consolidation within the rail industry has left just four railroads
in control of 90 percent of U.S. rail traffic. Due to this
consolidation, rail shippers, including AFPM member companies, face
escalating rates, service challenges, a lack of competitive options,
and ineffective means to resolve commercial disputes with railroads. In
fact, 75 percent of refiners and petrochemical manufacturers today are
served by only a single railroad. With limited competition, freight
rail rates have continued to increase whereas railroad costs have
remained relatively flat.
Further, the widespread introduction of Precision Scheduled
Railroading (PSR)--a railroad operational method focused on maximum
asset utilization and reduction of operating ratios--has exacerbated
rail competition issues and caused a shift in railroad focus from
serving rail customers to maximizing profits. According to a recent
report from Escalation consultants:
Real rates rose more than 43 percent, while railroad
costs only increased by 8 percent between 2004-2019.
Revenue from non-competitive rates increased 230 percent,
while revenue from competitive rates only increased 24 percent.
In 2019, half of all Railroad revenue was generated from
non-competitive rates.
Rail rates have increased 2.4x more than truck rates.\1\
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\1\ See Rail Rates Climb Higher as Competition Gets More Scarce
(freightrailreform.com)
AFPM commends the STB for actively addressing the root causes of
many of these challenges and tackling important rail competition
issues. That said, STB reauthorization provides an opportunity to
further update government policies that have not kept pace with these
post-consolidation changes and have left many rail customers without
access to competitive transportation options or an effective way to
resolve problems with rates and service. Competition among railroads,
or at least the realistic threat of competition, can serve as an
important safeguard against inadequate service or unreasonably high
prices. When considering STB reauthorization, AFPM supports reforms
that:
Increase Competitive Options--STB should adopt policies
that will promote greater access to competitive rail service, such as
reciprocal switching (STB Docket No. EP 711-1). Congress expressly
granted the STB authority to require reciprocal switching in the
Staggers Rail Act of 1980, which is needed now more than ever to spur
greater competition within captive rail markets.
Reform Outdated Policies--Current rate dispute processes
are too complex and expensive to be a viable option in most cases.
Congress clearly described and reaffirmed that the STB is intended to
provide multiple avenues for rail shippers to dispute potential unfair
rates.\2\ Future STB reauthorization should consider additional options
to dispute rates and encourage the adoption of both Final Offer Rate
Review (Docket No. EP 755) and Voluntary Arbitration (Docket No. EP
765).
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\2\ Public Law 104-88, 109 Stat. 803, 810 and Public Law 114-110,
129 Stat. 2228.
---------------------------------------------------------------------------
Foster a Strong Rail Network--Market forces and sensible
federal policies are needed to ensure everyone benefits from a healthy,
affordable, and dependable freight rail system. STB reauthorization
should consider reporting requirements that would provide critical
insight into the health of the rail network. This could include first
mile and last mile data reporting (STB Docket No. EP 767) as this data
has the potential to identify rail network bottlenecks.
AFPM thanks the subcommittee for its time and consideration of all
stakeholder viewpoints on STB reauthorization. AFPM emphasizes the need
for a fair and competitive rail market for the energy and petrochemical
industries and the U.S. economy and the important role the STB plays in
ensuring equitable and competitive rail markets. AFPM shares Congress's
goal of ensuring the flow of commerce on our nation's rail system and
looks forward to continued collaboration. AFPM and our members
appreciate your consideration of these reauthorization priorities.
Sincerely,
Chet M. Thompson,
President and CEO, American Fuel and Petrochemical Manufacturers.
Appendix
----------
Question from Hon. Donald M. Payne, Jr., to Dennis Newman, Executive
Vice President of Strategy, Planning, and Accessibility, National
Railroad Passenger Corporation (Amtrak)
Question 1. Can you describe the significance of the proceeding
pending before the STB to restore Amtrak's Gulf Coast service?
Answer. The STB's decision in the Gulf Coast case will have a major
impact on whether Amtrak, USDOT and our state partners will be able to
carry out Congress' direction, reflected in the Infrastructure
Investment and Jobs Act (IIJA), to significantly expand Amtrak service.
In order to do that, Amtrak must be able to restore or add additional
routes and trains on host railroad-owned lines, without unreasonable
delay or inordinate demands for capital investments, as Congress
intended when it enacted the ``Additional Trains'' provision of the
Rail Passenger Service Act (49 U.S.C. 24308(e)).
Questions from Hon. Eric A. ``Rick'' Crawford to Dennis Newman,
Executive Vice President of Strategy, Planning, and Accessibility,
National Railroad Passenger Corporation (Amtrak)
Question 1. Please identify and explain any concerns Amtrak has
about reciprocal switching.
Answer. While it is possible that increases in reciprocal switching
could affect rail network congestion, we believe that the current
Surface Transportation Board is cognizant of this issue and do not
anticipate that it would adopt policy changes that would negatively
impact the rail network. Other factors, such as the failure of some
host railroads to fulfill their statutory obligations to give Amtrak
trains preference over freight and to allow operation of additional
Amtrak trains, and operational changes (such as operating freight
trains too long to fit in sidings on single track lines) made by some
freight railroads in recent years to implement so-called ``Precision
Scheduled Railroading,'' have had a much greater impact on rail network
congestion and the performance of Amtrak trains than we anticipate
might result from any changes in reciprocal switching policies.
Question 2. Does Amtrak have any advice for the Surface
Transportation Board (STB) when it comes to finalizing the 2016
proposed reciprocal switching rule or abandoning the rule altogether?
Answer. No. We believe that the current Surface Transportation
Board is well equipped to address this issue.
Question 3. Is it possible for reciprocal switching to potentially
cause track congestion and service disruptions that would impact on
time performance for Amtrak's trains?
Answer. Please see response to Rep. Crawford's question 1 above.
Question 4. What percentage of Amtrak's ridership prior to COVID
was tied to state supported services versus the National Network and
the Northeast Corridor? What portion of ridership has returned?
Answer. State supported services accounted for 47.5% of Amtrak's
systemwide ridership in FY19, the last full fiscal year before COVID.
As of March 2022, ridership on state supported services is at 77.6% of
pre-COVID levels (vs March FY19), and systemwide ridership is at 81.9%
of pre-COVID.
Question 5. How does Amtrak work with its freight partners when it
wants to establish a new service?
Answer. When Amtrak proposes to operate new or expanded passenger
rail service on a host railroad, it notifies the railroad. The host and
Amtrak thereafter engage in discussions regarding the proposed
operation. If Amtrak and the host cannot reach agreement, we seek to
resolve differences under the terms of our operating agreement or at
the Surface Transportation Board. Recent examples of agreements for new
services between Amtrak (or Amtrak and a state partner) and host
railroads include the agreements for additional frequencies between
Chicago, IL and Milwaukee, WI and Chicago and St. Paul, MN, and new
service between New Orleans and Baton Rouge, with Canadian Pacific, and
with CSX and the Commonwealth of Virginia for major increases in
service between Washington and Richmond and elsewhere in Virginia.
Question 6. Recently the Governor of Pennsylvania announced an
agreement between Amtrak and Norfolk Southern on expanding passenger
rail in the state. Please explain the agreement and specifically
indicate whether it will require infrastructure investment and whether
Pennsylvania utilized a study to assess current and future capacity
needs.
Answer. The recently announced agreement to expand passenger
service in Pennsylvania is between Norfolk Southern and the
Commonwealth's Department of Transportation, not Amtrak. Public reports
indicate that the Commonwealth will invest nearly $171 million dollars
in specific NS infrastructure. Amtrak was not involved in any capacity
studies that may have been performed.
Question 7. Occasionally Congressional members reference the
agreement between CSX, Virginia, and Amtrak as an example of what can
be accomplished when all parties work together. Did this effort require
an assessment or a study on capacity?
Answer. The agreement among CSX, Amtrak and the Commonwealth of
Virginia is part of a $3.7 billion investment that includes
construction of a new bridge across the Potomac River; Virginia's
purchase of 350 miles of right-of-way and 225 miles of track from CSX;
and construction of additional track that will allow near hourly Amtrak
service between Washington and Richmond; increased service between
Richmond and Petersburg and Newport News; and a 75% increase in
Virginia Railway Express Fredericksburg Line service. Capacity was
assessed as part of the planning for that investment before Amtrak
became involved.
Question 8. Canadian Pacific recently announced it would work with
state and local governments, Amtrak, and other interested parties to
restore service between New Orleans and Baton Rouge, Louisiana. State
level opposition to investing in infrastructure upgrades stymied these
plans in the past. What changed and who will pay for infrastructure
upgrades?
Answer. While we defer to our partners in Louisiana state and local
government to speak authoritatively to their position on this service,
it is our understanding that Louisiana's current governor, John Bel
Edwards, is a strong supporter of the service.
A combination of federal grant funding, such as grants included in
IIJA (e.g. Federal-State Partnership for Intercity Passenger Rail and
Restoration Enhancement Grant program funds), and state and local funds
will likely be used to make any necessary infrastructure upgrades.
Question 9. Who pays for the infrastructure required when a new
service is established? Can a new service can be established without
further infrastructure investment? Please explain how Amtrak considers
the needs of the current users when establishing new services. Please
provide specific methodologies and examples.
Answer. New service can be established without infrastructure
investment where there will be no unreasonable impairment of freight
transportation of the rail carrier. Whether additional infrastructure
should be considered to support operation of a new or expanded Amtrak
service depends upon many factors. The cost of any infrastructure that
Amtrak, its state partners, and the rail carrier agree on has typically
been funded by the Amtrak state partner that proposed the new or
expanded service and/or federal grants; in some cases, Amtrak has also
provided or committed funding. Under federal law (49 U.S.C. Sec.
24308(e)), the host railroad has the burden of demonstrating that the
additional Amtrak trains would impair unreasonably its freight
transportation, and that additional infrastructure may be necessary as
a result.
Question 10. What is the difference between starting a new service
versus restarting a service? Why did Amtrak not reinstate the Gulf
Coast line after Hurricane Katrina in 2005? Why the 17-year lag on this
route?
Answer. The differences between starting a new service and
restarting a service depend upon the specific services at issue. Amtrak
did not reinstate Sunset Limited service between New Orleans and
Jacksonville/Orlando following Hurricane Katrina because the hurricane
damaged Amtrak stations along the Gulf Coast and the service provided
by the Sunset Limited had ceased to be viable due to extremely poor on-
time performance, attributable primarily to freight train interference,
that had eroded ridership, reduced revenues, required significant
lengthening of schedules, and increased costs and equipment
requirements. Amtrak has been attempting for over a decade to reinstate
service on the Gulf Coast line but this proved to be impossible due to
the lack of cooperation and agreement by the host railroads.
Question 11. In relation to the Gulf Coast route proposal, the
proposed trip time is about three hours and 20 minutes and the average
speed is less than 50 miles per hour. How competitive is the proposed
passenger rail service relative to other transportation modes?
Answer. Amtrak and our sponsoring state partners believe that this
service will be competitive. Train travel is often not the fastest
alternative door-to-door, but its inherent safety, comfort, and ability
for passengers to relax, work, or eat and drink more comfortably than
other modes of travel make it a highly popular alternative. The average
speed on many very successful Amtrak corridor services is less than 50
mph. For example, the Pacific Surfliner (2.8 million passengers in
FY19); the Capitol Corridor (1.8 million passengers in FY19) and the
Downeaster (557,000 passengers in FY19).
Question 12. Amtrak Connects US map identifies a vision for state-
supported corridors. Do you have a similar vision, or plan to create a
vision, for the long-distance, national network?
Answer. Section 22214 of the Infrastructure Investment and Jobs Act
directs the Secretary of Transportation to lead a comprehensive study,
to be completed by November 2023, on increasing long distance service.
Amtrak plans to participate in and support the DOT study. Decisions
regarding expansion of long distance service will be based upon the
study's findings and future federal appropriations to Amtrak. Amtrak
intends to continue operating its current long distance network into
the future subject to ongoing federal appropriations, and has launched
a comprehensive effort to develop a proposal for replacing the fleet
operating the long distance network leveraging funding opportunities
also made possible by the IIJA.
Question 13. Amtrak has proposed to introduce four daily trains
between New Orleans, Louisiana, and Mobile, Alabama, without any
infrastructure. Has Amtrak done any analysis that shows that the
proposed passenger trains will consistently meet the Federal Railroad
Administration (FRA) on-time performance metrics for intercity
passenger trains? Please provide supporting data and analysis.
Answer. Since federal law (49 U.S.C. 24308(c)) requires that Amtrak
trains be given preference over freight transportation, the proposed
Amtrak trains will be able to meet the FRA on-time performance metrics
for intercity passenger trains if the host railroads give them
preference as law requires. There is no requirement that Amtrak
affirmatively demonstrate this. Amtrak, the state members of the
Southern Rail Commission and the federal government are prepared to
invest over $60 million for infrastructure along the Gulf Coast
corridor.
Question 14. According to an Amtrak Inspector General report, after
Amtrak settled with the Department of Justice (DOJ) for $2.5 million
that Amtrak does not anticipate being in compliance with the American
Disabilities Act (ADA) within the new timeline. Is that accurate, and
if you miss the timeline again will another taxpayer funded DOJ
settlement be needed?
Answer. The provisions of the DOJ settlement agreement applicable
to station compliance will be in effect until December 2030, but the
agreement does not establish a specific deadline for completing all
stations compliance work. It is theoretically possible for DOJ to
assert new claims after the expiration of the settlement agreement, but
that is highly unlikely.
Question 15. Will Amtrak keep its commitment to the State of
Nevada, the County and the City of Elko, and Amtrak's passengers on the
California Zephyr, which connects San Francisco to Chicago, and
complete the station safety improvements agreed to by Amtrak in its
letter dated January 28, 2013, to the City of Elko pursuant to its
Accessible Stations Development Program?
Answer. Yes. Amtrak's ADA Stations Program (ADASP) team is working
on designs which are at 90% after a significant period of review by
Union Pacific Railroad (UPRR) and finally coming to an agreement.
Amtrak has in the meantime contracted with a local transportation
company to provide connectivity to both platforms to accommodate
customers with a disability.
Question 16. Will Amtrak support and update (if necessary) its
Memorandum of Understanding between it and the City of West Wendover,
Nevada dated February 11, 2015, to provide passenger service for the
city along the California Zephyr route and logistically support the
city's design and construction of a new passenger rail station?
Answer. In 2015, Amtrak agreed to stop at West Wendover, Nevada on
the California Zephyr route. Amtrak informed Union Pacific Railroad of
our desire to do so, but the project came to a halt when UP informed
Amtrak and the city that a station track would be required to avoid
Amtrak stopping on the mainline. This was an unusual demand since
Amtrak trains routinely stop at passenger stations on host railroad
mainlines, but UP insisted. This significant additional cost changed
the financial characteristics of the project. Amtrak continues to
support this project and will connect with the city manager of West
Wendover and UP to determine whether the parties' positions have
changed since 2015. Amtrak will work with the city to review and update
the MOU as necessary and discuss station/platform design.
Question 17. Should Amtrak ensure that a state funding partner
supports appealing to the STB for host railroad on-time performance
relief before seeking formal action? If not, why? Outside of STB
action, are there other options available to both Amtrak and state
partners to work with host railroads on on-time performance related
issues?
Answer. The statute gives multiple parties the right to go to the
Board, including entities for which Amtrak operates intercity passenger
rail. While Amtrak has the independent right to bring a case to the STB
regarding State-supported service, we would always consult with and
seek the input of our partners before filing an action under 213.
Going to the STB is a last resort, and we believe that direct
negotiations with the railroads and targeted investments to improve
train movement in certain areas is a good course of action that can
improve on-time performance.
Questions from Hon. Jesus G. ``Chuy'' Garcia to Dennis Newman,
Executive Vice President of Strategy, Planning, and Accessibility,
National Railroad Passenger Corporation (Amtrak)
Question 1. Mr. Newman, what will be the impact to intercity
passenger rail and our ability to spend the $66 billion from the
Infrastructure Investment and Jobs Act (IIJA) to expand passenger rail
services if Amtrak does not win the current case at the Surface
Transportation Board on the Gulf Coast rail service?
Answer. The Gulf Coast case is the first time the STB has been
asked to resolve the issue of Amtrak's right to expand intercity
passenger service free from unreasonable delay and inordinate demands
by the host railroads. In order for Amtrak, USDOT and our state
partners to carry out Congress' direction, reflected in the
Infrastructure Investment and Jobs Act (IIJA), to significantly expand
Amtrak service, there must be a remedy available when an amicable
resolution cannot be reached with the host railroads.
Question 2. Mr. Newman, it has taken over a decade to get to this
point on restoring the Gulf Coast rail service after its suspension
following Hurricane Katrina in 2005. That timeline follows multiple
Congressional directives to restore the Gulf Coast Rail service,
including the creation of the Gulf Coast Working group that included
the two host freight railroads.
What steps can Congress take to shorten the negotiating process of
restoring passenger rail service between Amtrak and the freight
railroads when the freight railroads choose to seek to appeal Amtrak's
invocation of Amtrak's right to start passenger rail service on a host
railroad's tracks?
Answer. The ``Additional Trains'' provision of the Rail Passenger
Service Act, 49 U.S.C. 24308(e), that authorizes the Surface
Transportation Board (STB) to issue orders requiring host railroads to
accommodate additional Amtrak trains was intended to allow Amtrak to
add or restore service in an expeditious manner without inordinate
demands by host railroads for capital investments. Following years of
unsuccessful negotiations with host railroads over restoration of Gulf
Coast service, Amtrak initiated a proceeding under that provision for
the first time last year, seeking an order that would allow Amtrak to
restore service between New Orleans and Mobile. After the STB issues
its decision in that proceeding, we will advise the Subcommittee
whether we believe legislative action is necessary to effectuate
Congress' intent.
Question from Hon. Jesus G. ``Chuy'' Garcia to Dennis R. Pierce,
National President, Brotherhood of Locomotive Engineers and Trainmen
Question 1. Mr. Pierce, in your testimony you note the harm from
Precision Scheduled Railroading to workers, including recent attendance
policies implemented by railroads as a result of PSR.
Congresswoman Marie Newman and I recently sent a letter to the BNSF
railroad which implemented their Hi-Viz policy earlier this year. We
asked BNSF to address concerns about the Hi-Viz policy that unions
raised to Rep. Newman and myself.
Can you explain the BNSF Hi-Viz attendance policy and why your
members and others have strong concerns?
Answer. The BNSF Hi-Viz attendance policy is just one more
outgrowth of PSR style railroading. At its core, the policy forces
employees to work additional shifts short of termination, all part of a
concerted effort to force fewer employees to do more work. Like similar
policies on CSX and Union Pacific, these policies have been forced upon
the employees, with all the Class 1 Rail Carriers refusing to negotiate
with our Union on these workplace issues.
As background, the vast majority of BLET's members do not work
scheduled jobs, nor do they have scheduled days off. They work on-call
at randomly chosen times dictated by rail management, and in many
cases, with little if any advance notice of when that call will come.
In recent years, our members have been subjected to unfairly punitive
attendance policies that demand they work around the clock every day.
Like a similar policy on CSX and Union Pacific, the BNSF Hi-Viz
attendance policy subjects our members to disciplinary consequences,
including termination, even if they take time off because they are too
sick or too tired to work safely. The policies are destroying the
family lives of our members, even to the point of destroying their very
families.
These policies are also understaffing the railroads and destroying
the supply chain with no regard for the impact on shippers.
The workforce is stretched too far, and there is no elasticity to
handle even the slightest unplanned events, and they happen daily.
While the Union Pacific policy assesses points when employees are
unable to report for work, the BNSF Hi-Viz attendance policy is a
point-based system that starts each employee with 30 points, and then
deducts points when employees are unable to report for work. Point
accrual is capped at thirty and if any employee exhausts all their
points they are subject to discipline or possible dismissal. This
forces an employee into a disciplinary situation just for trying to
take time off. As noted above, these same employees are on call 24/7
and are now being forced to work day after day, never having access to
scheduled days off.
Congress should be very concerned about the impact that policies
like Hi-Viz have on the Nation's supply chain. This is not just a BNSF
issue. Most, if not all, Class 1 Railroads have draconian attendance
policies that put workers at risk for working in heightened states of
fatigue. These policies also force workers to report for work when they
are ill, as there are few if any exceptions to point deductions or
points assessed when too sick to work safely.
Policies like these have led to thousands of rail workers either
resigning or being terminated just to have some quality of life outside
of work. Compounding the rail carriers' inability to hire new employees
is the fact that the Unionized employees of Class 1 Rail Carriers have
not had a negotiated wage increase since July 1, 2019, almost three
years ago. Even with Rail Carriers reporting record earnings, they have
stonewalled the Unions at the national bargaining table for well into
the third year, refusing to recognize the contribution that these
employees make to the nation's supply chain. These Rail Carriers do not
care if, or how, they negatively impact the supply chain, but the
entire nation pays the price when goods do not arrive on store shelves
when they should.
Questions from Hon. Eric A. ``Rick'' Crawford to Dennis R. Pierce,
National President, Brotherhood of Locomotive Engineers and Trainmen
Question 1. Please identify and explain your organization's
position and opinion on reciprocal switching. Would you advocate for
any revisions should the proposed rule be reconsidered?
Answer. I have attached BLET's submission to the Surface
Transportation Board opposing additional rules allowing for so-called
reciprocal switching.\\ In short, the reciprocal switching
changes being discussed are not the ``silver bullet'' for shippers that
some claim they are. Railroad infrastructure is not like the Nation's
highway system. In most cases, only one rail carrier has rail access to
any given shipper. Allowing shippers to force an additional rail
carrier onto that singularly owned railroad does not change that the
owning railroad will still manage the operation of the involved rail
line. In many cases, the rail line is too congested to get any shipment
to the shipper. We know this because rail carriers already have STB
regulated ``trackage rights'' in certain instances where one rail
carrier runs over the rails of another to service a customer. In many
cases, the last train moved by the owning railroad is the train
operated by the foreign carrier operating on trackage rights. Adding
another layer of access at the whim of a shipper does guarantee any
improvements to customer service.
---------------------------------------------------------------------------
\\ Editor's note: BLET's submission to the Surface
Transportation Board is retained in committee files.
Question 2. Will the reciprocal switching rule impact the movement
of goods and the supply chain?
Answer. As noted in my previous response, allowing additional rail
carriers onto another rail carrier's rail lines does not guarantee any
improvement to the movement of the nation's goods. Regardless of who
delivers the rail cars, it is the owning railroad that may park a 3-
mile-long train on top of the only access point to a given shipper for
days on end. Railroads are not like highways, and current rules
governing where cars are interchanged between rail carriers come with
the tools, if enforced, that better address customer service without
adding any new rules. In reality, the bigger problem for shippers is
that PSR style railroading doesn't actually seem to care if or when any
shipper gets its rail cars delivered. Self-imposed employee shortages,
coupled with the complete mismanagement of the current workforce and
the operation of the owning roads will not be improved by what is being
proposed.
Question from Hon. Eric A. ``Rick'' Crawford to Brad Hildebrand,
Member, National Industrial Transportation League, and Former Vice
President, Cargill--Global Rail and Barge Lead
Question 1. Please identify and explain your organization's
position and opinion on reciprocal switching. Would you advocate for
any revisions should the proposed rule be reconsidered?
Answer. The National Industrial Transportation League (NITL)
supports the reciprocal switching proposal as issued by the Surface
Transportation Board in 2016, in EP Docket 711 (Sub.-1), Reciprocal
Switching.
There is a lack of robust railroad-to-railroad competition in our
industry. There are only seven Class I railroads with four of them
responsible for moving 90% of our nation's freight. We are also facing
the strong probability of that number being reduced to six Class I
railroads with the pending merger of the Canadian Pacific and Kansas
City Southern railroads. Given the exemption that the railroad industry
enjoys from certain anti-trust protections, combined with post-merger
duopolies that now exist in the western and eastern parts of the
country, this creates an environment where the railroads can exert
substantial market power over their customers who operate facilities
served by only one railroad.
A free-market economy works best if there is vigorous competition.
Where a market has become highly concentrated due to a series of
mergers, it is incumbent upon the government, and in this case the STB
per the Rail Staggers Act of 1980, to instill or facilitate competition
in the marketplace.
The Board's proposed reciprocal switching rules is one avenue where
the agency can instill competition in the marketplace. The STB proposal
is about enhancing competition. It offers two new paths for shippers to
request a competitive switching remedy from the Board that is 1)
Practical and In the Public Interest or 2) Necessary to Provide
Competitive Rail Service.
The Board's current reciprocal switching rules were adopted more
than 30 years ago when the rail industry was struggling financially.
The STB has never granted a reciprocal switching request, and no new
shipper requests have been made for decades, because it is impossible
for a shipper to meet the current requirements due to the high legal
standard--an insurmountable barrier in seeking relief. As such, NITL
was the organization who filed the initial petition to request new
reciprocal switching rules to the Board in 2011. NITL, along with the
support of other shipper organizations, asked the Board to give meaning
to the provision in the Staggers Rail Act of 1980 that authorizes the
Board to grant reciprocal switching arrangements that are ``practical
and in the publics best interest'' or ``necessary to provide
competitive rail service.'' \1\
---------------------------------------------------------------------------
\1\ 49 U.S.C. Sec. 11102(c).
---------------------------------------------------------------------------
Adding to the elements that drove NITL to file its initial petition
in 2011 is today's market environment that include:
The financial health of the rail industry today is strong
if not thriving--but only to the benefit of Wall Street and railroad
shareholders.
As noted above, the industry is highly concentrated with
the probability of even more consolidations in the near-term.
Nearly all Class Is began and continue to implement a new
railroad operational method, Precision Scheduled Railroading (PSR) or
at a minimum some version of it, which continues to result in dismal,
costly problems for shippers.
The bottom line is that shippers continue to suffer dismal service
and increasing rates--especially those shippers who are only served by
one carrier. The STB's proposed reciprocal switching rules is one way
the Board can foster competition in the marketplace.
Some railroads claim that, even where direct rail competition is
lacking, there is ample competition via truck, and/or, by water barge
or even air. While competition offered by other transportation modes is
vital to our supply chain, it often cannot replace the need for
railroad-to-railroad competition. Many shippers are prohibited from
shipping by truck, water, or air due to numerous factors including
commodity type, location, and infrastructure investments already made
or needed to support rail. It is not easy to change transport options
for each mode of transportation requires its own infrastructure and
there are needs unique to each commodity. Shippers invest in their
infrastructure to support freight rail transportation, based in large
part, on what the rail carriers require to service our facilities--
plant, manufacturing facilities, distribution centers, and the like.
As NITL stated previously, it does not share the messaging or
opinions of the railroads notably expressed by the Association of
American Railroads about the Board's competitive switching proposal.
First, the operations of the railroads' entire network would NOT be
severely jeopardized because the thousands of switches that its members
would be forced to make to accommodate the interchanging of traffic
with a competing railroad. On the contrary, the burden of proof would
rest with the requesting shippers to demonstrate there is an
established working interchange between the two rail carriers. Second,
the requesting shippers would have to prove that the switching request
falls under one of the above-mentioned paths and the respective
criteria is met. It is NITL's belief that should the proposed
reciprocal switching process become a Final Rule, there would not be a
wholesale move for every shipper across the country to request a new
reciprocal switch. Under the Board's proposal, it will still be a long
and costly process for shippers to pursue. Shippers would want to be
certain that their request for opening-up competition to their facility
would meet all of STB's criteria before they make this kind of
financial commitment. Should the Board's proposal become a Final Rule,
there mere fact that exists, could hopefully result in competitive
service and competitive rates without shippers having to go to the
Board in the first place. This competitive driver is not present under
the current rule.
Again, thank you for the opportunity to respond to this QFR. NITL
looks forward to this important dialogue continuing.
Questions from Hon. Eric A. ``Rick'' Crawford to Herman Haksteen,
President, Private Railcar Food and Beverage Association
Question 1. If the STB were to be reauthorized, how might this
impact your route operations model?
Answer. Regarding the first question, PRFBA supports:
Multi-Year--Congress needs to continue developing a reauthorization
and working towards a final measure as soon as possible especially
considering the STB Reauthorization Act of 2015, P.L. 114-10, expired
on September 30, 2020.
Highest Possible Authorized Levels--PRFBA recommends that the
authorization levels be commensurate with the recently enacted FY
appropriation levels (including the level proposed in the
Administration's FY 2023 Budget). This is needed because the: 1)
demands placed on the STB are unprecedented given its regular
adjudicatory responsibilities in addition to pending rail merger
proceedings--all of which pose significant service and rate issues for
captive shippers, and questions concerning the structure of a freight
rail industry that promises to be even more consolidated than what it
is today; 2) number of formal and informal railroad performance service
complaints are increasing; 3) continued reliance on data transparency,
including access by all stakeholders, remains where continued data and
analytical capabilities are needed by the Board to enhance its
evidence-based decision-making; 4) Board is charged with implementing
the new passenger On-Time Performance Standards for passenger rail;
and, 5) Board operating with a full complement of Members.
GAO Study on PSR--PRFBA encourages Congress to consider the
results, once released, of the study underway on the impacts of
Precision Scheduled Railroading (PSR) being conducted by the General
Accountability Office (GAO). This study, requested last Spring,
promises to help guide further discussions as Congress, the Board, and
interested stakeholders debate, develop, and realize the next STB
reauthorization.
Common Carrier Obligation--Railroads are conveniently using the
``common carrier obligation'' to ``get away with'' poor service and
high rates mainly because there is: 1) no clear definition of the
``common carrier obligation;'' 2) no standard for which to measure it
by; or 3) no meaningful consequence to the railroads if the obligations
are not met. As such, PRFBA asks Congress to clarify via statute, the
definition of ``common carrier obligation.''
In theory, ``common carrier obligation'' means that railroads are
to provide service on reasonable request--railroads are to provide a
level a service that meets a shipper's reasonable needs. Considering
there is no clear statutory definition, railroads have been able and
continue to provide service that is poor even though asserting that
they are meeting the ``common carrier obligation.'' The railroads have
been prioritizing what commodities to serve while ``demarketing''
others and still claiming they are meeting the ``common carrier
obligation.''
Along with a statutory definition clarification, it would be
helpful for Congress to direct the STB to develop a standard by which
railroad service performance can be measured. This ties in to how
important it is that the Board is beginning to consider requiring the
Class Is to report, in the aggregate, FMLM data. PRFBA appreciates, to
a point, that the Board would need some flexibility in applying a
statutorily clarified definition with a standard that includes not just
FMLM data, but other elements for meeting the common carrier obligation
which might vary from one railroad to another and from one shipper to
another. As such, the STB should be encouraged to also review and
evaluate the extent to which railroad operating, financial, investment,
marketing, and other business practices may be impairing the ability of
and incentives for railroads to fulfill their common carrier
obligations, in the aggregate, and provide adequate and economical
service to their customers.
STB already has the statutory authority to impose fines or
penalties. PRFBA suggests Congress should expand the situations when
the Board can assess fines or penalties that would allow shippers to
recover appropriate damages to the extent the Board finds that
railroads are not fulfilling their common carrier obligations, in the
aggregate, as well as individually and are not providing adequate and
economical service to their customers.
In addition, the Board, under current statutory authority, can
assess a penalty up to $8,700 per violation. This is far from
consequential or punitive. Congress needs to consider establishing a
higher penalty amount(s) and allowing the STB to apply a penalty to
each carload and/or each day a carload is delayed. Another option for
Congress to consider is to statutorily provide larger penalties tied to
the overall level of service. This might have to be applied to both
contract movements and movements that fall to the jurisdiction of the
STB for if not, the railroads might use contracts to avoid their common
carrier obligation.
Demurrage--PRFBA appreciates the decisions the Board reached when
issuing its 1) Final Statement of Board Policy in Docket No. EP 757,
Policy Statement on Demurrage and Accessorial Rules and Charges; 2)
Final Rule in Docket No. EP 759, Demurrage Billing Requirements; and 3)
Final Rule in the Supplemental Notice of Proposed Rulemaking (SNPR) in
Docket No. EP 759, Demurrage Billing Requirements. These new billing
requirements went into effect on October 1, 2021. Shippers have been
receiving and reviewing these new bills. While the railroads are
providing the required new billing information, there are several
problems which need Congressional, targeted fixes and accompanying
policy modifications:
Clarify that demurrage bills are to be sent to the
shippers when railroads demonstrate that the shippers' behavior was the
driver of the demurrage and not railroad service problems.
Provide 30 days for shippers to pay demurrage bills. The
15 days allowed today by some railroads does not provide enough time
for shippers to contest, research, and negotiate with railroads over
questionable fees especially when the bills may be months old.
Increase the number of ``free days'' allowed to unload
and load rail cars and unit trains. This fix ties into the PSR
practices discussed earlier. Due to reduced train crews, elimination of
hump yards, increasing train lengths, and the lack of fluidity in the
rail network, cars tend to get ``bunched-up'' at pivotal points along
the route. As an example, a PRFBA member can receive, without advanced
notice or even coordination from the railroads, 15 cars rather than 5
cars. It takes additional equipment and crews (which are not always
readily available) for the PRFBA member to load, unload and turn around
the rail cars where the typical 48 hours for loading and 72 hours for
unloading is not nearly enough time before demurrage fees kick-in
especially when the need for shippers to have more time is because of
the railroads' poor service.
Consider reverse demurrage, in that the railroads would
pay the private car owners a daily fee when those private rail assets
are held up due to railroad operating issues or allow charge backs to
the railroads for daily car hire fees to offset the cost of additional
transit days experienced by car owners.
Commodity Exemptions--PRFBA believes that all commodities, whose
freight rail movements fall under the purview of the STB, should have
the opportunity to seek redress and relief from the Board. PRFBA
recommends Congress eliminate commodity exemptions.
Today, that does not exist as certain commodities are ``exempt''
and the current revocation standard that must be met by shippers,
remains ambiguous, lengthy, and costly for shippers. STB initiated a
rulemaking to review certain commodity exemptions in 2016.\1\ However,
that proceeding has languished at the Board for too long, while denying
many shippers of exempt commodities with direct access to the STB's
remedies and procedures.
---------------------------------------------------------------------------
\1\ See STB Docket Ex Parte 704--Review of Commodity, Boxcar, and
TOFC/COFC Exemptions.
---------------------------------------------------------------------------
Moreover, when the exemptions were adopted, tariffs and contract
summaries needed to be filed. These requirements ended over twenty-five
years ago. Exemptions are a solution to a problem that no longer
exists.
Question 2. Please identify and explain your organization's
position and opinion on reciprocal switching. Would you advocate for
any revisions should the proposed rule be reconsidered?
Answer. Regarding the second question, PRFBA strongly supports the
reciprocal switching proposal announced by the Board in 2011, Docket EP
711 (Sub No.-1), Reciprocal Switching.
When there is a lack of competition, notably in this case a lack of
railroad-to-railroad competition, and especially at single-served
facilities (or captive shippers), the railroads are free to provide any
service level at any costs. To improve railroad financials, the
railroads are even reducing capacity by limiting equipment
availability.
A lack of railroad-to-railroad competition with the strong
probability of continued rail industry consolidation moving forward,
profit-driven operational decisions (such as PSR) benefiting Wall
Street and rail carrier shareholders, and the financial strength of the
railroads all impact shipper service. Some PRFBA member companies are
experiencing record poor service levels ranging from missed switches,
reduced switching service days, bunching caused by longer trains,
bottlenecks primarily driven from a reduction of serving yards and
crews to the reduction of cars and locomotives, which all have led to
longer transit times and irregular service.
When there is reduced capacity, rates increase, service suffers,
and railroad margins rise. When there is a lack of competition in a
free market economy, it is incumbent upon the government, in this case
STB per the Staggers Rail Act of 1980, to intervene. The Board's
proposed changes, again announced in 2016, to the existing reciprocal
switching rules is one venue for the STB to instill competition in the
marketplace.
It has been decades since the STB has granted a reciprocal
switching request because it is nearly impossible for a shipper to meet
the current requirements. Due to railroads' effective stalling tactics,
this proceeding has stalled for about a decade, or stalled for 40 years
if you consider that the Staggers Rail Act of 1980 provides for
competitive switching.
The Board proposal would allow PRFBA members and other shippers
with access to only a single rail carrier to request before the Board
that the carrier provide a switch for freight to be moved by a nearby
rail carrier. This proposal would provide two paths for shippers to use
when making the request before the Board: 1) switching must be
practicable and in the public interest or 2) be necessary to provide
competitive rail service. Both options would instill competition in the
marketplace for a free-market economy can only function when there is
competition.
Again, PRFBA appreciates this opportunity to respond to the
presented QFRs and looks forward to this important dialogue continuing.
File and source
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