Railroad Delays Criticized
This story appears in the Sept. 15 print edition of Transport Topics.
Senate leaders and rail customers last week lambasted railroads for unresolved delays that continue to tie the U.S. freight network in knots, slowing truck, automotive and grain shipments along with it.
“The situation continues to get worse,” said Sen. Jay Rockefeller (D-W.Va.), who chairs the Senate Commerce Committee. He co-sponsored a bill last week with Sen. John Thune (R-S.D.) to raise the Surface Transportation Board’s oversight power.
In addition to the criticism at a Sept. 10 hearing, the Hub Group, a prominent user of rail service, last week said intermodal delays contributed to lower quarterly profits.
Statistics show that during 2014, freight rail hasn’t worked well. Nationwide, freight trains ran 11% slower year-over-year during a three-week period starting in mid-August, continuing a pattern that began in the winter, according to figures provided by companies to the Association of American Railroads.
Trains at BNSF Railway, pilloried for slowed grain trains at a Surface Transportation Board hearing earlier in September, ran 10% slower in recent weeks from a year earlier, with a seven-day period ending Aug. 15 showing the slowest trips of 2014.
BNSF, the largest truck-rail carrier, isn’t alone. Norfolk Southern and CSX Corp., the two largest haulers of new vehicles, both have run trains 13% slower in recent weeks. Union Pacific had the smallest speed decline at 7%.
Automakers are among the hardest hit by the slowdowns.
“My members have been seeing systematic problems that have been worsening,” said Shane Karr, a vice president at the Alliance of Automobile Manufacturers. “They threaten the broader economy as well.”
He cited a lack of railcars to load new vehicles and delays en route, resulting in as many as 200,000 vehicles that were stranded monthly between March and June.
“Many of my companies are looking at this world and are not seeing service improvements in the near future,” Karr said. “They are moving to lock in alternative forms of transportation.”
Specifically, he said, automakers are seeking more truck transport, despite hurdles such as inadequate supply of equipment and higher costs.
Truckers also are expressing concerns.
“Rail service has affected us,” said Judy McReynolds, CEO of ArcBest Corp., at a Sept. 9 investor conference, noting delays have persisted for months. As a result, she said, some freight has been shifted off the rails to the ABF Freight System unit and to purchased truck service permitted under a Teamsters contract. ArcBest ranks No. 13 on the Transport Topics list of the 100 largest U.S. and Canadian for-hire carriers.
Curtis Whalen, who heads American Trucking Associations’ Intermodal Motor Carrier Conference, outlined problems faced by intermodal truckers.
“While they experienced the same winter weather issues as truckers, there has been an extended problem with rail service,” he told TT. “Rail service has been inconsistent, which has made it difficult to coordinate and manage service.”
Whalen said he has been told anecdotally that shippers have slowed down the conversion of highway freight to intermodal, adding that the extent of the shift is difficult to document.
Edward Hamberger, CEO of the Association of American Railroads, defended the industry.
“We did not see the traffic surge coming,” said Hamberger. “It takes time to build capacity where the marketplace says we need to do it.
“This industry recognizes that our customers are not getting the service to which they have become accustomed. It is our responsibility to get back to the level we need to get back to,” he added.
When Rockefeller asked Hamberger, “Why can’t your companies do more for customers?” and chastised railroads for making record profits, the AAR official responded by disputing the senator’s financial comments.
In fact, Hamberger said, railroads’ return on invested capital is below the U.S. average.
“Railroad transportation challenges have affected the economy nationwide,” said Thune, the committee’s ranking minority member, who worried that predicted record crops such as corn wouldn’t be moved in a timely fashion. “I have never seen producers so concerned.”
One of those producers in his home state, Jerry Cope of Rapid City, South Dakota, said “railroads are our lifeline. Without them, our farmers don’t have an economy and don’t have a life.”
Cope, vice president of Dakota Mill and Grain, dramatized the situation by saying the cost of shipping grain to the Pacific Northwest is double the price of the ocean journey to Korea, if producers can get cars.
“We need the railroads at the table, and we need them to have skin in the game,” Cope said, urging that carriers should be forced to pay financial penalties if they fail to meet commitments.
Meanwhile, the Senate bill directs STB to shorten its timetable for deciding cases, gives the agency the ability to initiate investigations and would add two commissioner slots to the three-member group.
Calvin Dooley, CEO of the American Chemistry Council, praised the senators’ measure as “a very good bill that does address numerous longstanding issues” that vex chemical shippers. Among those issues are full-fledged rate challenges that can cost $5 million and take 3½ years to decide, he said.
