Bipartisan Senate duo re-introduces ‘Reliable Rail Service Act’

A new piece of bipartisan legislation focused on railroad service was re-introduced earlier this week in the United States Senate by Tammy Baldwin (D-WI) and Roger Marshall (R-KS).

Entitled, the “Reliable Rail Service Act” (S.2071), this legislation addresses the unreliable service and high cost of shipping for American businesses, according to the senators.

What’s more, this legislation comes at a time when freight railroad service has received a fair amount of attention in recent years, for various reasons, including: crew shortages, unfilled car orders, delays in transportation for carload and bulk traffic, missed switches, and increased origin dwell time for released unit trains, among others.

“Rail shippers are facing worsening service, significant service disruptions, and sky-high prices, all while profits for the nation’s largest railroads are at record highs,” said Senators Baldwin and Marshall. “In short, railroad customers, including farmers, energy producers, and manufacturers, are left with unreliable and reduced service options at higher prices. This reality was made clear during an emergency Surface Transportation Board (STB or Board) hearing in April 2022. Dozens of rail shipper and labor groups laid out in stark terms the unacceptable level of rail service impacting communities and consumers throughout the country. They also noted the insufficient actions taken by many of the Class 1 freight railroads to improve service. Indeed, the STB found service improvement plans required by many of the Class 1 railroads following this hearing to be “woefully deficient.”

A key driver of the “Reliable Rail Service Act” is the common carrier obligation, which the Senators said lacks a clear definition. And they added that a Transportation Research Board report stated that the common carrier service obligation remains poorly defined. They also cited a need to more clearly define it, given how it has taken on greater importance related to today’s market conditions, increased railroad consolidation, and railroad operating decisions, which they said have resulted in reduced freight rail network capacity.

A fact sheet provided by the Senators said that the main objective of the legislation, includes statutorily clarifying the common carrier obligation and establishing specific criteria for the STB to consider when determining whether a rail carrier has violated its obligation.

And criteria the STB would be required to consider in its assessment, as per the legislation includes:

• impacts or reductions or changes in the frequency of transportation or service;
• availability and maintenance of reasonable local schedules and delivery;
• impacts of reductions in employment levels;
• impacts of reductions in equipment; and
• whether the service reasonably meets the local operational and service requirements of the requestor

“The Reliable Rail Service Act gives the Board necessary statutory clarity along with significant discretion and flexibility to account for variations unique to local rail carrier and shipper circumstances, which will provide transparency for all stakeholders while improving STB’s oversight to help address our nation’s freight railroad supply chain challenges and lower costs for consumers,” said Senators Baldwin and Marshall.

As previously reported, freight railroads have been under a watchful eye by the STB. That was made clear in a recent decision it issued, entitled “Urgent Issues In Freight Rail Service—Railroad Reporting,” explaining that rail network reliability is essential to the U.S. economy and a foremost priority for the STB itself.

STB said that various stakeholders have indicated there have substantial increases in problems arising from tight car supply and unfilled car orders, delays in transportation for carload and bulk traffic, increased origin dwell time for released unit trains, missed switches, and ineffective customer assistance. And it added that the data for key performance indicators, including velocity, terminal dwell, first-mile/last-mile service, operating inventory, and trip plan compliance “show that railroad operations remain challenged generally,” adding that “at this time, therefore, continued monitoring is needed.”

“AAR opposes S. 2071. It is unnecessary and would hurt customers,” said Association of American Railroads (AAR) President and CEO Ian Jefferies in a statement provided to LM. “Rail service metrics are improving, the industry is hiring and the supply chain challenges of the pandemic are receding. The current standard provides the flexibility customers and railroads need in a dynamic market. Central-planning-style regulation disregards decades of success and would push railroads backward.”

Jefferies previously told LM that freight railroad carriers have made it clear that service must be restored to a level their customers deserve and expect.

“This starts with addressing the labor shortage affecting the broad economy and railroads specifically,” said Jefferies.” Multiple railroads presented clear plans and goals for hiring new train and engine employees to get headcount levels in line with market demand for rail services – which remains strong. They are also adding power where appropriate and coordinating with customers. The industry has always understood its critical role in serving the U.S. economy. It is confident in its abilities to work alongside customers to remedy issues as the year progresses. While the AAR appreciates continued engagement with the policymakers, it must be said that both the Surface Transportation Board and Congress should proceed strategically and cautiously, particularly when considering structural policy shifts. Disruptions in service should not be used to justify long-sought measures such as forced switching, as such market intervention would only complicate network operations further at a time when the focus is resorting freight fluidity. While proponents may now argue new STB regulation will improve service, their longstanding justification for these policies has been to drive down rates to below-market rates. Policy should strike a balance and disregard the whims of opportunism.”

Jefferies explained that the railroads remain highly focused on service, noting that the freight rail sector is hiring across the board, with the industry’s employee base at its highest level in more than three years.

“I think it's no secret things kind of got caught short there, coming out of the pandemic with a dramatic traffic uptick, and we have been working over the last year-and-a-half to get right sized there,” he said. “There is still some work to do in various pockets of the country, but I think you're seeing [some] service metrics improve as a result of that.”

Anthony Hatch, principal of New York-based ABH Consulting, explained that Class I railroad service metrics appear to be showing signs of improvement, with the exception of Norfolk Southern whom is still dealing with the impact of the its East Palestine, Ohio derailment in early February.

“One of the key things we have been watching is the number of crews that have graduated and put in the field,” he said. “They are not done in dealing with crew shortages. In a network business, shortages in one specific area are hard to cover, as people cannot be easily moved around, as they are regionally trained. That can back things up in areas even where there is enough crew capacity. The reduction in demand has helped with some of this, too. There is definitely business the railroads lost, because they could not handle it, due to service-related reasons.”

In May, the STB called for the continued monitoring of freight rail service, continuing to closely monitor weekly rail service performance data. And it observed that the data for key performance indicators, including velocity, terminal dwell, first-mile/last-mile service, operating inventory, and trip plan compliance “show that railroad operations remain challenged generally,” adding that “at this time, therefore, continued monitoring is needed.”

The impetus for this STB decision goes back to hearings it held on railroad service in April 2022.

Prior to the hearing, STB issued a notice of proposed rulemaking (NPRM) that “amend emergency service rules to provide relief for shippers in situations that require immediate relief.”

STB added that a key part of this proposal is to clarify it may act on its own initiative to direct emergency rail service and to also establish what it called an accelerate process for acute service emergencies.