Market Matters Blog

Over 25 rail-shipper groups, representing all industries using rail cars to ship products, and all rail-worker unions gave the Surface Transportation Board (STB) no-holds-barred testimonies during the Urgent Issues in Freight Rail Service hearings April 26 and 27 at the STB's headquarters in Washington, D.C. The four Class I railroads in the hot seat were the BNSF Railway Company, CSX Transportation, Inc., Norfolk Southern Railway Company and Union Pacific Railroad Company. They also presented testimonies during the hearings.

In the April 7 notice of the hearing, STB Board Chairman Martin Oberman said, "This hearing is not just about where we are but also about where we are going. The Board expects the railroads to explain the actions they will take to fix these issues. The Board will also consider stakeholder views on how it can use its authority -- including measures to address emergencies, increase transparency, and promote reliable service -- to ameliorate problems on the network."

The two-day hearing started off with testimony from Secretary of Transportation Pete Buttigieg. He noted in his testimony that the agriculture industry is being "significantly impacted by the railroad's service delays, especially when it comes to obtaining the necessary amount of fertilizer and chemicals that are critical for the growing season." Buttigieg also asked the STB to expand its current data collection to require improvement plans from railroads. He asked the railroads to invest more in the rail workforce since "turnover is still far above normal levels."

"The fact that the secretary is here this morning indicates the seriousness of the problems that have instigated this hearing," Oberman said. Oberman noted that Buttigieg was the first secretary of transportation to testify before the STB in more than 20 years.

The first shipper group to speak was led by Mike Seyfert, president and CEO of the National Grain and Feed Organization. Seyfert noted NGFA consists of more than 1,000 grain, feed, processing, exporting and other grain-related companies operating more than 8,000 facilities. "Its membership includes grain elevators; feed and feed ingredient manufacturers; biofuels companies; grain and oilseed processors and millers; exporters; livestock and poultry integrators, and associated firms that provide goods and services to the nation's grain, feed, and processing industry," said Seyfert.

Seyfert reminded the STB that in a March 24 letter to Chairman Oberman, the NGFA wrote t their preference was "to seek commercial solutions between individual rail customers and their rail carriers." Seyfert said, "However, the recent rail service challenges impacting entire regions of the country have led us to the board to seek help."

"We are aware of origin grain elevators being restricted on their loadouts because loaded trains are occupying their rail sidings," said Seyfert. "There are instances of origin grain elevators needing to turn away grain sales from farmers because they are full. Some NGFA member companies have put grain on the ground to keep taking deliveries from producers. Feed mills and integrated livestock and poultry operations have experienced instances in which trains have not arrived and scheduled feed deliveries have been unable to be made to producers."

Seyfert noted, "When NGFA members cannot load a train because a crew is out with COVID, they will be charged demurrage by the rail line, and if they cannot unload a train due to COVID, they will pay demurrage and face the risk of penalties or loss of contracts with their own customer."

"However, if the railroad cannot deliver or move a train due to COVID -- or any other reason -- NGFA members cannot charge and are not entitled to any demurrage from the railroad," Seyfert added.

NGFA estimates the combined costs to the grain industry due to lost revenues and additional freight expenses in the first quarter of 2022 at more than $100 million. "Depending on the market position of the grain industry participant, these extra transportation costs are either borne by the participant, reflected in the grain basis paid to the farmer, or passed onto the consumer," Seyfert noted.

The NGFA recommended to the STB that they expedite the additional first mile, last mile data reporting requirements and add trip-plan reporting. NGFA said they also recommend requiring reports to the STB and directly to individual shippers; explaining this data would help shippers and receivers more efficiently plan operations and more accurately gauge when contingency plans are needed.

"We also encourage the board to develop guidance on the board's expectations for rail carriers in meeting their statutory obligation to provide service upon reasonable request. Exactly what is meant by the 'common carrier obligation' has long been undefined. The service issues highlighted by NGFA members and others testifying today indicate the time has come to put real meaning in that definition," said Seyfert.

Another NGFA recommendation to the STB is to implement financial incentives for railroads to perform more efficiently using the same methods they use to incentivize their customers, a sentiment repeated over and over by other shipper groups throughout the two-day hearing.

Seyfert ended his testimony by saying he "recognizes these are not challenges with easy answers, and there is not a single, individual tool in the toolbox that can solve them all. We encourage the STB to use all the tools available to you to improve service. If there are tools you need that you do not have, we encourage you to make that known to the Congress and the appropriate committees of jurisdiction."

Here is a link to the entire NGFA testimony: https://www.dropbox.com/…

RAIL LABOR UNIONS TESTIFY

Greg Regan, president of Transportation Trades Department, AFL-CIO (TTD), told the STB the employees represented by TTD-affiliated unions are on the front lines of the freight rail network and have been sounding the alarm on the state of the rail industry for years.

"As members of the board are aware, the deployment of Precision Scheduled Railroading (PSR) has resulted in fundamental changes to how freight rail operates, and with what capacity and reliability it can deliver service," said Regan. "At the core of the PSR ethos is deep cuts to its workforce.

PSR railroads endeavor to operate with such minimal headcount as to frequently imperil their own ability to operate and maintain their business.

"Despite the claims made by the Class I carriers, it is simply impossible to provide an equivalent level of service after eliminating a third of the workforce in less than a decade. These cuts have guaranteed that adequate crews will be unavailable, that equipment and infrastructure will not be adequately maintained and that critical inspections will be deferred. TTD categorically rejects the absurd claim that the hard work of those 45,000 employees had no demonstrable impact on the quality of service offered by Class I railroads."

Regan added, "While the elimination of jobs across all crafts of the freight rail network has undoubtedly contributed to operational breakdowns and service degradation, TTD notes that a number of shippers have specifically cited a lack of available crews as a major component of reduced service quality. Railroads have long engaged in a concerted effort to cut headcount to the absolute bone. They have created a degraded safety culture that has driven away long-time employees, and in many cases second or third-generation railroaders, who have chosen to walk away from what were 'jobs for life' in previous generations."

Here is a link to Regan's informative and impassioned testimony to the STB: https://ttd.org/…

SMART Transportation Division President Jeremy Ferguson and three members of the union testified before the STB on the devastating effects PSR has had on customers and labor alike. SMART Transportation Division is the largest railroad union in the United States, representing almost 40,000 freight railroad employees.

Ferguson testified, "As president, my No. 1 priority is the safety of my members, and my second priority is job security for them. Job security comes in the form of the shippers' satisfaction with our service. Unfortunately, these priorities have been jeopardized by the railroads' PSR initiatives which, in turn, are having a subsequent, dire effect on the shippers we serve. As professionals, it is painful to watch our shippers get bad service or no service at all, much higher rates, destroyed product and equipment and in some cases having to resort to shipping by truck whenever possible.

"BNSF's most recent absenteeism policy known as "Hi-Viz," was unilaterally imposed upon its employees on Feb. 1 of this year. The policy only allows for a worker to have one day off a month and penalizes them for sick time or for needing to take care of their family when a medical emergency arises. It also assesses discipline, or, at the very least, disincentivizes our members from utilizing family medical leave and receiving necessary rest."

As of current count, Ferguson said BNSF has lost more than 1,000 employees due to voluntary, mid-career resignations over their new attendance policy. "In a panic, to stop the public relations nightmare from happening, the railroads have finally conceded that an extraordinary workforce shortage exists."

As for PSR, Ferguson said, "Members of the board, it is impossible for me to depict, in its entirety, the breadth of PSR and just how harmful it is to this nation's supply chain, as it has far too many tentacles. PSR has not only restricted the number of locomotives and employees in service, but it has also limited the shipments available to the customers it services. Because the railroads are trying to do more with less, they are dictating the terms for the cars that they will provide and the products they will carry, regardless of what the shipper's needs might be. Looking to the future under PSR, the horizon doesn't get any brighter."

Here is a press release from SMART with Ferguson's testimony along with the other three union members: https://smart-union.org/…

Ferguson said it is no surprise that the NGFA has filed complaints, and it is not a surprise that every other shipper group represented at the hearing has followed suit. "Checks and balances are desperately needed in the railroad industry, and common carrier obligations must be enforced," added Ferguson. "I ask the board to please heed the warnings of my members and the shippers that are beholden to the railroads' services."

Here is a link to the speakers at the hearings on April 26 and 27: https://www2.dtn.com/…

Here is a link from the UP website with an explanation of PSR: https://www.up.com/…

Here is a link to the STB related press releases and the testimonies and comments to the STB about the rail service issues found under "Recent Filings": https://www.stb.gov/…

Here is a link to a DTN story about First Mile/Last Mile: https://www.dtnpf.com/…

Mary Kennedy can be reached at mary.kennedy@dtn.com

Follow her on Twitter @MaryCKenn

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