STB Won’t Stay Rate Arbitration Proposal

The U.S. Surface Transportation Board has denied a request by four Class 1 railroads to stay implementation of an agency rule issued last month establishing an arbitration mechanism to settle small rate disputes.

The arbitration program would only become effective if all Class 1 railroads agreed to participate.

CSX, Norfolk Southern, Union Pacific, and the U.S. operating subsidiaries of Canadian National asked the board in late December to delay the deadline for Class 1 railroads to agree or disagree to participate in the arbitration program.

The rule establishing the arbitration program is to take effect on Feb. 3.

The STB has described the arbitration program as one of two approaches it is taking to create new “rate reasonableness” proceedings that regulators contend will streamline the process for shippers and railroads to resolve smaller rate disputes.

The STB gave Class 1 railroads 50 days from the publication of the rule in the Federal Register to commit to participating in the arbitration program for five years. The rule was published in early January.

If all seven Class 1 carriers agree to that, they will be exempt from the Final Offer Rate Review rate challenge process.

Smaller rates are defined by the STB as rate disputes worth up to $4 million in relief over two years.

Under the new FORR procedure, if regulators find a rate to be unreasonable, they “will decide the rate by selecting either the complainant’s or the defendant’s final offer, subject to an expedited procedural schedule that adheres to firm deadlines.

Under the arbitration program, Class I rail carriers would commit for a period of five years to arbitrate rate disputes, under a similarly expedited schedule.

FRA Warns Class 1s on Training Programs

Federal Railroad Administration head Amit Bose has warned Class I railroad CEOs that the agency will commence enforcement actions against them if their companies fail to follow the agency’s recommended improvements to their engineer and conductor training and certification programs.

In a letter to the CEOs, Bose said a review of the training programs by FRA staff has found that revisions made by the Class 1 carriers barely made incremental program toward correcting deficiencies that FRA inspectors identified.

Some programs have been reviewed by the FRA several times.

“To encourage full compliance please be advised that FRA is committed to pursuing enforcement action if a railroad’s resubmitted certification program continues to fail to address the deficiencies identified by FRA.”

Railroads Continue to Prepare for Work Stoppage, Senators Introduce Bill to Impose Contract Terms

As railroads begin to embargo traffic ahead of a possible national railroad strike and/or lockout that could begin as early as Friday, legislation has been introduced in the Senate to settle the dispute.

Amtrak said it would suspend service on four long-distance routes in advance of a possible railroad work stoppage.

The Senate resolution would force railroad labor unions and railroads to accept the recommendations made last month by a presidential emergency board.

It was introduced by Sens. Richard Burr (R-North Carolina) and Roger Wicker (R-Mississippi).

Negotiations for a new contract have been ongoing for more than two years with unions representing locomotive engineers and train conductors at loggerheads with management over wages, benefits and work rules.

To date, eight of the 12 railroad labor unions have reached tentative contract agreements with the National Carriers Conference Committee, which represents railroad management in the negotiations.

Those agreements have been described in statements issued by the two sides as generally following the recommendations of the PEB.

The PEB issued its recommendations on Aug. 16 and under federal law strikes and/or lockouts are prohibited for 30 days following that. The 30-day cooling off period will expire at 12:01 a.m. on Friday.

Amtrak said it will suspend service today on the routes of the Southwest Chief, Empire Builder, California Zephyr and portions of the route of the Texas Eagle.

The latter involves the Los Angeles to San Antonio segment of the Texas Eagle route, which overlaps with the route of the Sunset Limited.

The passenger carrier said suspensions could expand to all routes outside the Northeast Corridor by the end of the week.

The Amtrak statement said suspensions being imposed today will ensure that the affected trains can reach their endpoint terminals before a strike and/or lockout begins.

Although neither Amtrak or its workers are parties to the railroad labor negotiations, the passenger carrier uses track owned by freight railroads where a strike and/or lockout may occur.

In the event of a strike and/or lockout, Amtrak said it would continue operating trains that wholly use track that it owns or is owned by public agencies.

This includes the Northeast Corridor between Boston and Washington; the line between New Haven, Connecticut, and Springfield, Massachusetts; the Empire Corridor between New York and Albany-Rensselaer, New York; and the Keystone Corridor between Philadelphia and Harrisburg, Pennsylvania.

An Amtrak statement said passengers affected by service suspensions due to the labor dispute will be contacted and offered the opportunity to change their travel dates or offered a full refund of their fare without any cancellation fees.

In a related developments, Class 1 railroads have begun embargoing certain types of shipments starting today.

Norfolk Southern told its shippers that it will stop accepting intermodal and automotive traffic.

The NS notice said it will close the gates for loaded or empty intermodal units at its terminals as of noon Tuesday and would also stop accepting traffic at on-dock port facilities and privately owned intermodal terminals.

The notice said the gates would remain open for intermodal pickup until further notice. Customers using railroad-operated EMP and TMX containers will be unable to make reservations after 12:01 a.m. on Tuesday. They will be able to return empty containers to NS terminals as normal until further notice.

Automotive traffic gates will close at 5 p.m. on Tuesday, with an embargo on auto traffic beginning at 12:01 a.m. on Wednesday.

The railroad also said it is planning “for the orderly lay down of trains in the bulk network” and will contact customers moving bulk commodities in unit trains with specific details.

CSX has also began on Monday an embargo of “high hazardous, toxic by inhalation and poisonous by inhalation” cargo.

Class 1 Carriers Embargoing Traffic in Advance of Possible Railroad Strike Later This Week.

With the prospect of a railroad strike looming late this week, Class 1 railroads said over the weekend they are implementing plans to park hazardous materials starting today (Sept. 12).

Norfolk Southern said it would begin parking trains that did not include hazardous cargo as early as Tuesday.

The Class 1 carriers began sending notices to shippers last Friday to warn them of potential service disruptions should a strike occur.

In a joint statement, leaders of the SMART Transportation Division and the Brotherhood of Locomotive Engineers called the moves by a carriers scare tactics.

“The railroads are using shippers, consumers, and the supply chain of our nation as pawns in an effort to get our unions to cave into their contract demands knowing that our members would never accept them,” the union presidents wrote.

The Association of American Railroads said in a statement that among the hazardous materials that railroads are sidelining in anticipation of a strike are chlorine, which is used to purify drinking water, and chemicals used in fertilizer.

“Railroads are taking all measures necessary to handle sensitive cargo in accordance with federal regulations to ensure that no such cargo is left on an unattended or unsecured train in the event of a work stoppage due to an impasse in labor negotiations,” AAR said.

The AAR statement said the anticipatory actions being taken by railroads do not mean a work stoppage is certain.

BNSF asked its shippers to contract members of Congress “to let them know the impact a rail service interruption would have on your business and your customers.”

Some railroad industry observes believe that the Sept. 16 deadline to reach new agreements might be extended because eight railroad labor unions have reached tentative agreements and extending the deadline would give members of those unions additional time to complete the ratification process.

STB Says 5 Class 1 Railroads Revenue Adequate

Five Class 1 Railroads have been found by the U.S. Surface Transportation Board to have been revenue adequate for 2021.

The five are  BNSF, CSX, Norfolk Southern, Soo Line (the U.S. affiliate of Canadian Pacific) and Union Pacific.

This means regulators have determined that the railroads achieved a rate of return on net investment was equal to or greater than the agency’s calculation of the average cost of capital for the freight rail industry, which for 2021 is 10.37 percent.

By railroad the 2021 return on investment figures for U.S. Class 1 carriers were BNSF:13.19 percent; CSX: 15.51 percent; Grand Trunk Corp. (the U.S. affiliate of Canaadian Natiional): 7.79 percent; Kansas City Southern: 8.25 percent; Norfolk Southern: 13.18 percent: Soo Line: 13.51 percent; and Union Pacific: 17.03 percent.

Class 1 Employment Up in July

Class 1 railroad employment rose slightly in July the U.S. Surface Transportation Board reported this week.

The STB report said the 116,407 Class 1 employees in the United States as of mid-July was 0.13 percent higher than the number employed the previous month.

The July 2022 workforce was 0.64 percent higher than it was in July 2021 levels.

Three out of six employment categories posted month-to-month increases including executives, officials and staff assistants, up 0.97 percent to 7,838 employees; professional and administrative, up 0.47 percent to 9,905; and transportation (train and engine), up 0.36 percent to 48,252.

Seeing declines were maintenance of equipment and stores, down 0.33 percent to 17,324 employees; maintenance of way and structures, down 0.26 percent to 28,417; and transportation (other than train and engine), down 0.09 percent to 4,671.

On a year over year comparison executives, officials and staff assistants were up 7.06 percent while train and engine was up 1.59 percent.

Seeing decreases were professional and administrative, down 1.8 percent; transportation (other than train and engine), down 1.27 percent; maintenance of equipment and stores, down 1.11 percent; and maintenance of way and structures, down 0.34 percent.

STB Worried About Grain Shipment Disruptions

The U.S. Surface Transportation Board has expressed concern that Class I railroads will be unable to handle this year’s harvest season grain shipping demands.

Regulators sent a letter dated Aug. 18 to the top executives of the Class 1 carriers that also said it awaited their comments during an Aug. 25 meeting of the National Grain Car Council in Kansas City, Missouri.

“The board is particularly interested in your reports related to your preparedness to meet the demands of the fall harvest as it begins to ramp up in September and extends through the turn of the year,” the letter said in part.

“In light of current challenges affecting the four largest Class I railroads, the board is concerned about the Class I railroads’ ability to meet grain shipping needs and is highly focused on whether railroads will have sufficient crew, locomotive, equipment and capacity resources along key corridors supporting domestic and international markets.”

The letter also said regulators want to hear during the Kansas City meeting from shippers, short line and rail-car industry representatives about the matter.

Rail PEB Seems to Split Differences in Report

The presidential emergency board appointed to recommend a settlement of the contract talks between Class 1 railroads and their unions has decided to split the differences.

Various news reports, including those by Trains magazine and the Reuters news agency, said the PEB is recommending that the railroads drop their demand that conductors be removed from locomotive cabs but also recommended pay increases that are well below what the unions were seeking.

If both sides agree to adopt the PEB recommendations, workers would receive a 22 percent pay hike over the life of the contract as well as $1,000 in service recognition bonus payments per year over the five years of the contract. The two sides could also agree to use the PEB findings as a basis for a new contract agreement.

The unions, which represent 115,000 railroad workers, had reportedly sought a 28 percent pay increase while the carriers offered 16 percent.

The PEB’s recommended pay increase works out to between 4 percent and 7 percent a year through 2024. Workers would receive back pay increases of 3 percent for 2020 and 3.5 percent for 2021.

Workers should receive an additional paid day off each year, the PEB recommended.

As for health care benefits, the PEB recommended what it termed modest changes that would include no reductions in benefits or a shift in cost-sharing, aside from a previously agreed upon 15 percent employee contribution per month.

The recommendations called for railroads and their unions to continue negotiating over the scheduling of work shifts for train and engine workers and if no agreement can be reached submitting the issue to binding arbitration.

Along those lines, the PEB recommended that the matter of making conductors ground-based positions be negotiated at the local rather than national level.

By federal law, work stoppages are prohibited for the next 30 days. If one or both of the parties in the contract impasse rejects the PEB findings, they will be free to either strike, in the case of the unions, or lock out workers in the case of railroad management.

If one or both of those occur, Congress could step in and impose a settlement.

Contract talks began in early 2020. By law, railroad contracts never expire but can be amended from time to time.

Historically, contract talks often take years to resolve. The last national railroad strike occurred in 1992.

The three-member PEB was appointed by President Joseph Biden in July and given a month to investigate the contract situation and issue recommendations for a settlement.

An article about the PEB recommendations can be found at the website of Trains magazine at https://www.trains.com/trn/news-reviews/news-wire/presidential-emergency-board-issues-rail-contract-recommendations-meant-to-avert-strike/

The article includes a link to download the PEB report.

Chemical Shippers See No Meaningful Improvements in Rail Freight Service

The American Chemistry Council last week said that efforts by Class 1 railroads to improve their freight service have yet to yield any “meaningful service improvements.”

The trade group said it reached that conclusion after surveying its members. It shared results of that survey with the U.S. Surface Transportation Board.

Nearly half of the respondents (46 percent) said that during July “rail delays/service challenges had gotten worse since the fourth quarter of 2021.”

Just 7 percent of respondents said service has improved. When the ACC asked the same question of its members in March, 39 percent said service has worsened.

In the most recent survey, 90 percent of respondents said they had experienced “longer transit times for rail service” while 66 percent reported having experienced missed switches, 64 percent said they had experienced reduced service days, 59 percent said they had incurred increased demurrage charges and 59 percent said they had seen increased rates.

Oberman Says RRs Need to Pay Crews More

U.S. Surface Transportation Board Chairman Martin J. Oberman appears to be putting his thumb on the scales in favor of labor unions in their negotiations for a new contract with the nation’s major railroads.

In an interview with Trains magazine, Oberman said rail freight service is suffering because BNSF, CSX, Norfolk Southern, and Union Pacific are not paying enough to retain and recruit train crews.

“There is a price that will get you enough workers,” Oberman told Trains during the interview, which was conducted before a congressional hearing. “I don’t know what that price is. But everything has a price.”

Oberman said during the interview that federal regulators have no plans to mandate crew levels even though he linked those to the quality of service that railroads provide.

However, he made it clear his belief that paying crews more money would alleviate the crew shortages that the carriers say are the root cause of their service issues.

“If you need another 400 crews to move those trains that are sitting out there, pay whatever price you need to get them,” Oberman told Trains. “Don’t come in and tell me it’s hard to hire. And it’s not like they can’t afford it. They’re paying out billions and billions every year in stock buybacks. You could use some of that to get the workforce you need.”

During hearings held by the STB last spring to investigate the ongoing rail freight service issues, Class 1 railroad executives argued the crew shortages are due to factors that are largely out of their control.

Specifically, the executives said, workers who were furloughed during a recession triggered by the COVID-19 pandemic didn’t return to work once recalled. The railroad executives also cited higher than normal attrition rates among its work force and a tight labor market.

Some executives even talked about it being tough to hire conductors due to the nature of the job involving working outdoors at all hours in all kinds of weather, and being away from home a lot.

Wages and benefits have been a major sticking point in labor negotiations over the past three years with unions reportedly seeking more money than the carriers are willing to pay.

By some reports, the unions are seeking a 31 percent wage increase while the railroads have offered 17 percent over a five-year period.

The dispute is now being reviewed by a presidential emergency board that will make non-binding recommendations for a settlement.

If either side rejects those recommendations, they would be free to engage in a strike or lockout a month after the PEB issues its findings.

Although railroads have raised the wages of their new conductors and offered signing bonuses to new hires and retention bonuses to existing train operating personnel, Oberman told Trains those financial incentives are falling short and that railroad employment has yet to reach pre-pandemic levels.

“The railroads are not offering sufficient rewards – a combination of quality of life and compensation – to keep people there,” he said. “There’s a price at which people will stay.”

The story can be read at https://www.trains.com/trn/news-reviews/news-wire/stb-chairman-says-higher-pay-would-help-solve-railroad-crew-shortages/