Last in a three-part series
During the week that leaders in the House of Representatives were struggling to push approval of the Infrastructure Investment and Jobs Act over the finish line, CSX and Norfolk Southern fired another shot across Amtrak’s bow.
The two Class 1 passenger carriers asked the U.S. Surface Transportation Board to dismiss a case brought by Amtrak last spring seeking to have regulators compel the freight carriers to host a new rail passenger service between New Orleans and Mobile, Alabama.
The Gulf Coast corridor proposal is a harbinger of what lies ahead for other proposed new Amtrak services that could be funded by the IIJA. It is a sobering cautionary tale.
Funding for operating and capital expenses is already in place for the 150-mile New Orleans-Mobile route that until August 2005 hosted Amtrak’s tri-weekly Sunset Limited between Los Angeles and Orlando, Florida.
CSX, which owns most of the route, has been dragging its feet on the proposed New Orleans-Mobile service for more than five years. At one point it demanded $2 billion in route infrastructure work.
In their STB filing, CSX and NS said they would withdraw their opposition to the new service if Amtrak pays for 14 capacity improvement projects the carriers say are needed.
In a fit of hyperbole, the Class 1 carriers said Amtrak service without these improvements would cause “systematic failure” to their freight service, most notably adversely affecting first mile, last mile freight service to shippers. These assertions would be comical were they not so serious.
For years Amtrak’s host railroads have demanded expensive infrastructure improvements as the price of agreeing to service expansion, including daily service for the Sunset Limited and Cardinal, or new service on a now freight-only route.
Many a service expansion has been stymied due to these demands for capital improvements, which Amtrak usually cannot afford.
The underlying conflict before the STB is about more than whether passenger trains are going to operate between New Orleans and Mobile and how much Amtrak and its state partners will have to pony up for infrastructure improvement projects.
Ultimately, it is about rules and whose interests those rules favor.
Amtrak and rail passenger advocates want rules that provide an easier path to service expansion in the face of host railroad resistance.
The host railroads want to maintain the status quo of being able to dictate the terms of access. They dislike having to deal with political pressure seeking to force them to accept passenger trains that they view as having the potential to interfere with their freight operations. They dislike having foisted upon them something they view as contributing nothing to their primary reason for being, namely providing transportation of freight.
I’ve written about this issue before and you can follow this link to read more: https://wordpress.com/post/akronrrclub.wordpress.com/61853
If Amtrak loses the STB Gulf case or gets a mixed decision that could curtail how much service expansion it is able to achieve.
But even a favorable decision for Amtrak may not be enough. NS and CSX and/or the Association of American Railroads are likely to go to court to seek to overturn that ruling or get it modified. They have the resources to litigate for as long as it takes to get the rules that they want.
From a rail passenger advocate perspective, the STB case is about serving the public interest. Rail passenger advocates make the assumption that additional intercity rail passenger service by definition does that.
From a host railroad perspective, the STB case is about maintaining control of its own property and protecting its competitive position in the transportation industry.
This is not to say host railroad resistance can’t be overcome. It is matter of on whose terms these disputes will be settled and how much that will cost. It is why the STB case could be critical to the success of the Amtrak ConnectsUS plan.
There are other potential obstacles standing in the way of passenger rail expansion.
The Amtrak ConnectsUS plan is predicated on state and/or local governments taking over the operating expenses of the new corridors described in the plan.
Amtrak has proposed paying up to 90 percent of those costs initially and fronting money for capital projects to establish stations and do host railroad-demanded infrastructure work.
The Amtrak share of operating costs will eventually reach zero over a six-year period.
A key question is whether Amtrak or the FRA will move ahead on projects in which the state(s) to be served by a new route fail to commit to picking up their share of a route’s operating costs.
The Amtrak ConnectsUS plan seems built on the belief that once the new services are up and running the states served will recognize their value and provide funding. Amtrak seems to be hoping that public pressure will lead to continued state funding of the service by the states served.
But what if they don’t? Many of the proposed new corridors are in states that have never funded Amtrak service. Why would they want to do so now?
The American Recovery and Investment Act of 2009 contained $8 billion in grants for high-speed rail projects that did not require a state match.
In January 2010 Ohio received a $400 million grant to launch the 3-C Quick Start project.
In that year’s gubernatorial election, Republican John Kasich actively campaigned against the 3C project and Republicans who controlled the Ohio General Assembly expressed concerns about Ohio having to pay $17 million for operating costs.
After defeating incumbent Ted Strickland, a Democrat, Kasich killed the 3-C project. Ohio Republican legislative leaders in a move that was not well publicized at the time created rules that made it highly unlikely that Ohio would be able to use the federal grant to establish the 3-C Quick Start project.
The U.S. Department of Transportation took back the grant minus the $2 million Ohio had already spent. That money was disbursed elsewhere, primarily to California.
Ohio was not alone in spurning ARIA funding for rail passenger service. Projects in Florida and Wisconsin also were killed by incoming Republican governors.
The rules for grants the FRA will be awarding from IIJA funds have yet to be written although the IIJA enabling legislation establishes some criteria as described earlier in this series.
It is not difficult, though, to image that what happened in Ohio in 2010 could happen again when it comes to developing new passenger service envisioned by the Amtrak ConnectsUS plan.
Some new passenger services may result from IIJA funding, but the scope of expansion might be more modest than what rail advocates are envisioning.
Another obstacle could arise in 2023 when the 118th Congress is seated.
Just as what happened in Ohio in 2010, the 2022 election season is likely to feature candidates pledging to repeal or restrict how funds from the IIJA are used. Passenger rail could find itself in the cross hairs of those attacks.
Historically, the party that holds the White House in a president’s first term loses seats in Congress in the next mid-term election.
With Democrats holding paper-thin margins in the House and Senate, it would not take much for Republicans to gain control of one or both chambers in the 2022 elections.
If that happens, the environment for passenger rail in the 118th Congress likely will be quite different than it has been in the 117th Congress.
As pointed out in the first installment of this series, realizing the full potential of the IIJA on passenger rail service expansion will require appropriation of funds by Congress.
It is difficult to imagine a GOP-Controlled Congress being receptive to spending billions on new rail passenger service.
Republicans tend not to favor expansive and expensive government programs. Many GOP members of Congress identify as fiscal conservatives and they often oppose government-funded passenger rail of any kind.
Some of Amtrak’s fiercest and most persistent critics are conservative think tanks and many GOP members of Congress align with their views when it comes to transportation policy.
President Joseph R. Biden will still be sending appropriation proposals to Congress in January 2023 and 2024 and his administration probably can be counted on to recommend friendly budgets for passenger rail.
Yet Congress will have the final say on how much money passenger rail receives. A Republican-controlled Congress will not be inclined to give Biden any victories he can point to if he seeks re-election in 2024.
It’s not that all Republicans are opposed to intercity passenger rail. Amtrak’s national network has survived as long as it has because enough GOP representatives and senators have voted in favor of continued funding for it. Some of them have advocated for maintaining the existing Amtrak service in their states.
Republicans and Democrats have philosophical differences when it comes to how to spend public money and what to spend it on. There is nothing sinister about that. It is just a divergence of viewpoints about the role of government at the federal, state and local levels.
This includes differing views on the role government has to play in transportation policy and what modes of transportation should benefit the most from government investment.
But even putting that aside, there are limitations as to how much either party is willing to spend on rail passenger service.
In the 50 years of Amtrak’s existence, many Democratic administrations and Democratic-controlled chambers of Congress have failed to provide the type of reliable dedicated funding of rail passenger service that advocates and Amtrak have sought.
It is one thing to marshal political support to maintain the status quo of the existing intercity rail network and quite another to build support for the type of expansive additions to the network that rail passenger advocates favor.
There just seems to be too many forces that have kept intercity rail passenger service from developing into something more than a boutique form of transportation. The IIJA has not vanquished those forces.
The passage of the IIJA and its historic levels of passenger rail funding may thus turn out to be an aberration rather than a transformation to a new world order in which the nation’s rail passenger network undergoes a substantial expansion to resemble something from the 1950s.
There is too much entrenched opposition from interests who fear passenger rail’s gains will come at their expense.
This dynamic be can be seen at the state level where lawmakers must approve a balanced budget every year and passenger rail funding is weighed against the importance of other needs.
Those competing interests were on vivid display in Ohio in 2010 in the controversy over the 3-C Quick Start project.
Aside from a potentially hostile political environment and host railroad intransigence, the success of passenger rail programs funded by IIJA are linked to how well or how poorly the law is implemented.
The potential of the IIJA to influence rail passenger service is a long game and over the course of it there are bound to be changes in priorities among Amtrak managers, members of key congressional committees, and state and local transportation agencies.
Those changes will affect what does and doesn’t get done.
At this point there is much anticipation and expectation among rail passenger advocates about what could happen now that the IIJA is in place.
But expectations are not reality. It is a lesson passenger advocates know all too well. For once there is reason to be optimistic that good things are going to happen. From a passenger rail perspective, some good things will happen with IIJA funding.
It is just that what IIJA is able to achieve may not be as far-reaching as many passenger rail advocates want to believe.
It is far from a sure thing that we are on the cusp of a new era or a second rail revolution.
They’re ‘Mad as Hell’ But Are Going to Have to Take it a Little Bit Longer
May 1, 2022As I read the various accounts of the two days of hearings conducted by the U.S. Surface Transportation Board last week about the shoddy service that Class 1 railroads have been giving their customers, I thought about Howard Beale, the fictional television evening news anchor in the 1976 black comedy drama Network.
One of the most iconic moments in Network occurs when Beale tells his viewers, “I’m as mad as hell and I’m not going to take it anymore.”
That prompts thousands of them to go to a window of their home and shout the phrase to no one in particular. It might have made them feel better in the moment, but did little, if anything, to address the underlying causes of their frustration and anger.
A lot of shippers and railroad workers channeled their inner Howard Beale during the STB hearings.
Although none of them used the “mad as hell” phrasing while addressing the STB, many were just that although more in control of their emotions than was Beale.
Another Beale rant perhaps best summarized the likely outcome of the hearings.
Beale, whose rants had led to his being given his own TV show in front of a live audience, tells viewers that television is an illusion that promotes fantasies that can never be realized.
Many, if not most, of those who testified before the STB have their own fantasies that are unlikely to be realized. That is not to say that bits of pieces of them won’t come to fruition.
The STB hearings served two primary purposes. They were a forum for shippers and others to vent about how Class 1 railroads are behaving these days.
Shippers told tales of woe about how poor and unreliable service has adversely affected their own businesses. Some warned of severe effects to the U.S. economy if things don’t improve.
The STB hearings provided validation for those concerns even as there was widespread agreement that there are no easy and quick fixes to railroad service problems.
The second purpose of the hearings was an opportunity for those who testified to push their pet agendas.
Shippers want more regulation of the railroad industry, particularly in the realm of rate regulation.
Unions want to preserve jobs, which have vanished at a precipitous rate as Class 1 railroads have furloughed thousands in the name of operating more efficiently. Railroad workers also want relief from increasingly restrictive attendance policies such as the controversial Hi Viz scheme implemented by BNSF earlier this year.
The railroads want to preserve the status quo, which has enabled them to make handsome profits, but they also want one-person crews.
CSX CEO James Foote implored regulators to allow railroads to operate with one person crews.
The Class 1 railroads want to remove most conductors from aboard trains in favor of roving ground-based conductors who would be responsible for multiple trains within a defined territory.
“Let us run trains with one employee and this problem is solved,” Foote said in reference to operating crew shortages.
Staffing aboard trains is one of many points of conflict between unions and management in the current round of contract talks that have drug on since early 2020.
Aside from a handful of tense exchanges with STB members, the railroad executives who testified during the two days of hearings were the antithesis of Howard Beale.
They spoke in a measured and calm manner, acknowledging their service is lacking in quality, but did so only because they could not easily deny that.
The railroad executives took responsibility for the service woes but refused to blame them on their own behavior.
Repeatedly, the Class 1 executives said the service problems are occurring because of crew shortages that they insisted they are doing everything they can to address.
That is a standard strategy that companies under attack for poor performance rely upon. Concede nothing and blame external forces that you seek to frame as being largely beyond your control.
Examples of the latter include fallout from the COVID-19 pandemic and a tight labor market.
It is not as though these things haven’t played a role. It is just that they are not the only forces at work causing service issues.
None of the railroad executives acknowledged having given in to the pressure of Wall Street investors who have pushed railroads to cut costs in order to drive up profits.
The executives argued that the precision scheduled railroading model makes them more efficient and showed no inclination to jettison the practice of operating fewer and longer trains.
Another tactic the Class 1 railroads used during the hearings was to deny the severity of the problems identified by their adversaries. In some instances, the executives suggested some of what witnesses were saying was simply not true.
A lot of what witnesses said during the STB hearings should not be taken at face value. It is not as though the speakers were telling falsehoods, but they were not always giving a complete picture either.
It is true that some witnesses were more credible than others in giving a reasonably complete overview of the root causes of the service problems.
To get that complete picture you have to consider the totality of the testimony while taking into account that all speakers were promoting their self interests which at times are in conflict with the self interests of Class 1 railroad management.
Promulgating self interests often leads speakers to exaggerate threats to their well being and to understate the consequence of their own behavior.
Nothing that Class 1 railroads have done in adopting PSR makes them unique among North American corporations.
Chances are that all or nearly every shipper who complained about poor rail service also has engaged in the type of cost cutting and business decision making that Class 1 railroads have practiced.
Many, if not most, railroad shippers are publicly-held companies that also are subject to pressures from Wall Street investors.
One underlying problem is with shippers who can’t easily switch to other forms of transportation because they are moving bulk commodities that are most efficiently and/or less costly to move by rail than truck, water or air. Gettig good rail transportation can be a dilemma for shippers even in the best of circumstances.
Railroads know that even if you’ll never hear a Class 1 executive say it.
In an analysis published in advance of the STB hearings, Trains magazine columnist Bill Stephens argued that the service problems of recent months by Class 1 railroads are nothing new. He cited a litany of past service meltdowns caused by weather and other calamities that unfolded long before PSR became a thing.
A similar point was made by a Wall Street analyst who researches railroad performance. He told regulators that every so often good service deteriorates into poor service, particularly when the operating climate becomes less than ideal.
Could railroads be better prepared for service downturns? Yes. Will they be? Probably not if the cost of doing so is more than they want to spend on operations.
There is little the STB can do in the short term in response to what it heard during the two-day hearings other than offer sympathy and empathy to shippers and workers while taking railroad executives to task for some of the meaningless and vague promises they’ve made in the past year about improving their service.
There is a long list of actions the STB lacks the authority to take and/or is reluctant to take for legal, practical and philosophical reasons.
The STB is not going to order railroads to stop practicing PSR. It is not going to order railroads to stop furloughing workers, and it won’t be telling them how many workers to keep on their payrolls.
What the STB can and might do is issue emergency orders to railroads to move certain types of freight by whatever means possible.
Regulators can and might promulgate or change existing rules on such things as reciprocal switching. This is where the underlying pet agendas of the various parties come into play.
The witnesses were laying groundwork for what they hope are future regulatory changes. As the old adage says, don’t let a crisis go to waste.
STB member also can keep the spotlight shining directly on railroad executives and their actions.
Class 1 railroad executives are aware of these potential moves and oppose all of them. Railroad executives may not like all facets of the status quo, but for the most part it serves them well.
Presumably the service woes will eventually ease although some underlying problems are likely to linger. The carriers might make some changes in an effort to show they are doing something other than trying to hire and train additional workers.
In the short run, shippers and unionized railroad workers may be mad as hell, but they have little recourse but to continue taking it while seeking to achieve fantasies that are unlikely to come to pass, at least in the manner that they envision them. Howard Beale, it seems, was on to something.
Commentary by Craig Sanders
Tags:class 1 railroads, commentaries on transportation, freight service issues, Howard Beale, On Transportation, posts on transportation, U.S. Surface Transportation Board
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