ILTA Monthly Newsletter

ILTA Testifies on Urgent Issues in Freight Rail Service

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On April 27, ILTA’s Vice President for Government Relations, Michael Stroud, testified on behalf of ILTA at a special hearing of the Surface Transportation Board on Urgent Issues in Freight Rail Services. In its testimony, ILTA stressed that it supports policies that enhance the efficiency and reliability of supply chains. Specifically, ILTA provided comments to the STB previously in December 2021 on the issues of first-mile/last-mile and the discussion of Precision Scheduled Railroading (PSR).

Stroud noted that ILTA Members are a vital part of the supply chain for liquid products, and the impacts of PSR on ILTA members are significantly impacting the national supply chain. Delays and processing errors of railcars enroute to destinations can have cascading consequences with profound impacts on shippers and receiving facilities. Under PSR, it is common to have missed switches, partial switches or incorrectly performed switches, which have both immediate impacts and cascading ripple effects.

As an illustration of the poor service resulting from PSR, ILTA observed that many of its members have been embargoed by several Class 1 carriers, due to labor shortages resulting in fewer than 50% of rail switches occurring within their prescribed scheduled time window. These missed switches and unpredictable schedules have also led to massive inefficiencies for Terminal operators. The inefficiencies include wasted human capital hours and financial capital for products and cargo not being delivered or picked up timely. These performance failures also have major impacts to ILTA members and their customers – rail shippers.

Further, ILTA reported that unreliable rail services result in significant reductions in certain product availability, thereby negatively impacting product deliveries by Terminals. In addition to the comments filed by ILTA in December 2021, which are incorporated by reference here, there have been recent negative impacts to ILTA members. In some instances, there have been reported uses of Force Majeure clauses to avoid contractual obligations, due to product not being available for Terminal customers. The impacts have hit customers and shippers across all commodity classes, forcing them into inefficient and more expensive solutions to try to make ends meet, while the railroads continue to use the unreliable PSR system to reduce the railroads’ costs while negatively burdening and impacting the national supply chain. Ultimately, PSR is negatively impacting the national supply chain and its stakeholders that rely on rail services. As a result of ILTA’s members’ observations, there is a vital need to implement objective criteria and predictable and reliable metrics to honestly evaluate PSR’s success or failure.

The Surface Transportation Board announced plans for the two-day hearing on April 7, to receive testimony on recent rail service problems and recovery efforts involving several Class I carriers.

Witnesses called by the Board included direct executive-level officials, including operating and human resources officials, of BNSF Railway Company, CSX Transportation, Inc., Norfolk Southern Railway Company, Union Pacific Railroad Company, Canadian National Railway Company, Kansas City Southern Railway Company, and Canadian Pacific Railway Company. Other carriers, rail customers, labor organizations, and other interested parties were permitted to testify on recent service issues.

In its announcement, the Board indicated the hearing was a response to informal reports it had received over recent weeks from a broad range of stakeholders about inconsistent and unreliable rail service. The Board has also received reports from the Secretary of Agriculture and other stakeholders about the serious impact of these service trends on rail users, particularly with respect to shippers of agricultural and energy products. These reports have been validated by the Board’s weekly rail service performance data.

For these reasons, the Board determined that the service issues may have reached a level requiring action by the Board. Given the serious nature of the service issues reported to the Board, in addition to providing as much visibility as possible to all aspects of the current service issues, the Board noted that it expects the information provided at the hearing to inform any potential future Board actions to ameliorate the problems that have been reported.

In announcing the hearing, Board Chairman Martin Oberman said:

“During my time on the Board, I have raised concerns about the primacy Class I railroads have placed on lowering their operating ratios and satisfying their shareholders even at the cost of their customers. Part of that strategy has involved cutting their work force to the bare bones in order to reduce costs. Over the last 6 years, the Class Is collectively have reduced their work force by 29% – that is about 45,000 employees cut from the payrolls. In my view, all of this has directly contributed to where we are today – rail users experiencing serious deteriorations in rail service because, on too many parts of their networks, the railroads simply do not have a sufficient number of employees.

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.”

For the complete ILTA’s testimony, please visit the ILTA website. Please contact Michael with any questions.


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