STB’s Primus makes his case for railroad service upgrades at NEARS fall meeting

In a recent speech given at the Northeast Association of Rail Shippers (NEARS) fall conference in Portland, Maine, Robert Primus, a member of the 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, told the railroad carrier and shipper attendees that the biggest concern in the sector is railroad service levels.

Primus explained that there are a number of longstanding service concerns that have been around before he joined the STB earlier this year, with some going back decades even.

“[These issues] have challenged the railroad network and have impeded the network’s ability to grow beyond existing customers and ultimately grow its reputation beyond that of its main competitor…trucking.”

Trucking, by comparison, he said, has always had a great reputation for reliability, service, and on-time performance, which are things that the railroad network really has to look at and think about if the network is going to rise up to meet both thew challenges of today, but also the challenges facing the network and the economy as well, in the supply chain, in the years to come.

“That is something, in my conversations with railroads and shippers, that has left a bitter taste for them,” he said. “And I know it limits the efficiency and effectiveness of our national rail network. It is something I feel we really need to get to the heart of, too. In my own estimation, I think that service has taken a bit of a back seat to operating ratios, profits, buybacks, and stock dividends.”

Taking that a step further, he explained that the ownership of Class I railroads are doing quite well financially, but that comes with the caveat there is concern that it is happening amid these service concerns.

“I really want to see improvements in service, and I look forward to not working against the railroads but with the railroads and the shipping community as well on ways we can address this and improve our ability to address these service issues and to make it better and not have the same problems and issues come back to the Board over and over again,” he said.

Primus said he thinks one of the things that has contributed to railroad service issues is PSR, also known as Precision Scheduled Railroading. PSR was created by late railroading legend E. Hunter Harrison whom passed away in December 2017, when he was running CSX. PSR requires cargo to be ready when rail cars arrive for loading or risk being left behind, a practice that served also both CP and CN well under his leadership, with both companies seeing multiple positive results in the form of lower operating ratios, improved service, record amounts of reinvestment into networks, as well as creating significant shareholder value.

On a conceptual basis, Primus said he views PSR as a good thing, by definition, in that it should increase and augment service levels.

“I think we have had a rough road in the implementation [of PSR], and I think the folks that receive the short end of the stick most of the time are members of the shipping community, and we have to address that,” he said. “The rail customers should not have to suffer because of this. We have to work with all parties to try to resolve it and bring about better service.”

What’s more, Primus pointed to other PSR-related challenges, including where the sector stands on labor, citing how there has been a 20% reduction in the railroad labor workforce over the last five years at Class I railroads. This, he said, needs to be addressed, in order to see how it is impacting service levels and reliability.

Things like service interruptions and a look at what type of investments being put into the rail network going forward, in the form of billions of dollars, are viewed as adequate, relevant, and forward-thinking, in terms of where they need to be in the future.

“We need to be honest in looking at those [service] numbers and be real about where we hope the industry and the network is going and where we can benefit and how we can benefit from that investment,” he said. “We have a lot in front of us and a lot to do. I am excited about the opportunity. I hope we can get some of the older issues—and the issues that have been around for decades—off the stove…and help to better the network.