STB extends temporary service metrics reporting for Class I railroads

Earlier this week, the Washington, D.C.-based Surface Transportation Board (STB), an independent adjudicatory and economic-regulatory agency charged by Congress with resolving railroad rate and service disputes and reviewing proposed railroad mergers, issued a decision, calling for continued monitoring of freight rail service.

In its decision, entitled “Urgent Issues In Freight Rail Service—Railroad Reporting,” STB explained that rail network reliability is essential to the U.S. economy and a foremost priority for the STB itself.

“The Board has heard from a broad range of stakeholders about the impact of recent rail service problems on rail users, including the significant challenges rail users have experienced because of inconsistent and unreliable rail service from BNSF Railway Company (BNSF), CSX Transportation, Inc. (CSXT), Norfolk Southern Railway Company (NSR), and Union Pacific Railroad Company (UP) (collectively, the Four Carriers), such as 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,” said STB. “Prior to and during this proceeding, the Board has received reports from the Secretary of Transportation, the Secretary of Agriculture, members of the U.S. Congress, and other stakeholders about the serious impact of these service trends on rail users, particularly shippers of agricultural and energy products.”

STB went on to say that it will continue to closely monitor weekly rail service performance data, noting that, in recent weeks, that data from NSR is currently not meeting one-year targets for service improvement, with BNSF and UP meeting some of their one-year targets and CSX currently meeting all of its one-year targets.

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.

STB officials explained that going back over the last year, it has heard from industry stakeholders regarding inconsistent and unreliable rail service, explaining that “in recent weeks, rail service has become more unreliable, with most stakeholder concerns focusing on crew shortages and inability to move trains. What’s more, they added that it has received reports of other challenges, including: 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 service. STB noted that these recent service issues have highlighted its need to provide shippers with the opportunity to receive swift action in order to ensure the nation’s freight rail traffic continues to move.

An analysis of the hearings in a Morgan Stanley research note highlighted how Class I railroad executives noted that efforts like running shorter trains would exacerbate current crew shortages, while DOT Secretary Pete Buttigieg said that while there was not a lot the STB could do about crew shortages, railroads need to invest in workers to keep the economy moving, while turnover remains above normal levels.

STB Chairman Martin Oberman made his case for how hiring alone won’t fix the current service issues.

“If we’re relying only on hiring, I don’t see you being able to get there in 30, or 60, or 90 days,” he said. “We’re going to miss the planting season, we’ve got fuel problems.”

In comments provided to LM last April, Association of American Railroads (AAR) President and CEO Ian Jefferies said that railroads speaking at the STB hearing 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.”

In a recent interview with LM, 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 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.”