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Should the freight rail industry be overhauled?

By Admin

Reported by Joanna Marsh for Freightwaves.

Service disruptions at the Class I railroads have come to a head in recent weeks, and shippers and the unions representing rail workers are clamoring for changes to the freight rail industry of a magnitude to match the disruptions.

Some examples of subpar rail service: Excessive dwell times at the origin, resulting in the doubling of transit times between the Midwest and West Coast for grain shippers and tardy arrivals that pressure flour and feed mills and ethanol plants to temporarily cease operations or curtail production.

Meanwhile, the National Grain and Feed Association estimates that the combined cost to the grain industry of revenue losses and additional freight expenses was over $100 million in the first quarter of 2022.

The Surface Transportation Board is considering short-term measures — such as the submission of rail service improvement plans — to address these issues. These measures would potentially provide immediate relief to shippers and could be deployed within a 30-to-60-day time frame.

However, the board, the railroads and rail’s stakeholders are under pressure to tackle tough questions in ways that could more comprehensively affect how the railroads run their operations. These questions also touch on the long-term health and viability of freight rail in a transportation sector bent on an automated future.

“There’s probably no elegant solution to structurally fix rail service, but we are all tired of going down this road and something needs to change,” said Rick Patterson, a railroad analyst with Loop Capital Markets and one of many witnesses testifying at a two-day hearing last week before STB to discuss rail service.

Service disruptions over the past year occurred at a time when there is significant momentum to alter the way the railroads operate. Global supply chain disruptions as a result of the COVID-19 pandemic have exposed weaknesses in U.S. freight transportation infrastructure. Ports were overwhelmed with container boxes, chassis and other equipment were in short supply, and the railroads and the broader supply chain industry grappled with COVID-19-related staffing shortages.

U.S. Transportation Secretary Pete Buttigieg drove home the complexity of the issues.

“There is no single step available to deliver ideal freight rail service overnight,” Buttigieg told the board, adding that the federal infrastructure law enacted last year is “a historic opportunity to transform both freight and passenger rail for the better.”

But just as the problems are complex, so too are the answers.

For starters, there are shipper remedies that the board is considering. These include:

  • Requiring the Class I railroads to submit rail service improvement plans, including anticipated recovery timelines. These plans would also address the headcount needed to expand rail service.
  • Gathering rail intermodal metrics as part of STB’s data collection requirements.
  • Collecting first-mile and last-mile data to provide visibility on those segments.
  • Creating penalties for inefficient use of privately owned railcars.
  • Amending the rules surrounding reciprocal switching and final offer rate review.

Some of these remedies, such as the submission of rail service plans, could be required easily; others, such as reciprocal switching, are more contentious.

Some stakeholders believe that definition should be clarified further to provide transparency on what kinds of requests and levels of service qualify as reasonable.

Said Greg Regan, president of the Transportation Trades Department (TTD) of the AFL-CIO, “The ambiguous nature of the requirement has meant that railroads have operated with the understanding that the STB is unlikely to wield its authority” and regulate more aggressive actions aimed at the rail industry.

Read more here.