Posts Tagged ‘reciprocal switching’

New Reciprocal Switching Rule Seen as Likely

March 18, 2022

The U.S. Surface Transportation Board conducted two days of hearings this week on the prospect of implementing a new rule regarding reciprocal switching arrangements.

An analysis of the hearings by Trains magazine concluded that the STB appears likely to implement a reciprocal switching rule because its members seemed to react well to complaints by shippers of high rates and poor service while expressing skepticism of Class 1 railroad arguments that new reciprocal switching rules would hinder their operations, make service worse and reduce the investments they make into their companies.

Trains said regulators seemed to lean toward believing that reciprocal switching would be beneficial to shippers by creating more competition.

The STB has a reciprocal switching rule in place, but it has seldom been invoked because it forces shippers to prove that the sole railroading serving them engaged in anticompetitive conduct.

The STB has proposed a new rule that would require shippers to show reciprocal switching is in the public interest or would result in competitive rail service.

During the hearings shippers and their trade associations consistently spoke in favor of reciprocal switching while executives of Class 1 railroads, including Norfolk Southern and CSX spoke against it.

The shipper groups cited case after case in which their members have suffered from unreliable and poor rail service.

In their eyes, these problems could be mitigated if not resolved by introducing more competition.

One attorney representing scrap metal shippers said shippers have lost bargaining power when it comes to negotiating contracts with railroads.

The railroads demand a minimum volume commitment but seldom provide shippers with any service commitments.

Another shipper said it receives better service at facilities that have access to more than one Class 1 railroad.

For their part, railroad representatives argued the STB already has ways of addressing unreasonable rates and service problems that preclude the need for new reciprocal switching rules.

The railroads contend that reciprocal switching arrangements will worsen rather than improve service by adding complexity to operations by increasing dwell and transit times.

CSX Chief Financial Officer Sean Pelkey also argued that reciprocal switching could discourage investment and thus limit the growth of rail traffic because railroads would not be certain they could retain traffic gained over the long term.

The article can be read at https://www.trains.com/trn/news-reviews/news-wire/stb-seems-likely-to-move-ahead-with-a-new-reciprocal-switching-rule/

DOJ Favors Reciprocal Switching Rule

March 9, 2022

The U.S. Department of Justice has submitted a brief to the U.S. Surface Transportation Board that is largely in favor of the Board promulgating rules to allow reciprocal switching.

The STB will hold hearings on the matter on March 15-16. The proposed reciprocal switching rule has languished on the agency’s agenda since 2016 but changes in the Board’s membership has revived interest in the issue.

The STB is considering allowing certain shippers with access to just one railroad to seek a reciprocal switching agreement with another railroad that is nearby.

The railroading providing direct service to the shipper would be required to interchange cars to the nearby railroad for a fee to be set by regulators.

The DOJ brief described the proposed STB rule as “a well-tailored first step” toward increasing competition.

The brief said the rule would increase the likelihood of direct competition, is not overly burdensome, and would minimize the need for complex rate regulation.

It noted that Canadian National and Canadian Pacific are already familiar with reciprocal switching, which is practiced in Canada and known as interswitching.

AAR Seeks Support in STB Switching Case

February 18, 2022

The Association of American Railroads posted on its website this week a letter that it is asking the public to sign to express opposition to reciprocal switching.

The U.S. Surface Transportation Board will conduct hearings March 15-16 on a proposed rule to establish standards for reciprocal switching arrangements.

That would involve the STB ordering a railroad that is the sole rail service provider to a shipper to handle cars for a second railroad.

The latter would need to have an interchange with the sole rail service provider within a prescribed physical distance of the shipper, in this case 30 miles.

The sole rail provider would be paid a fee by the second railroad that would be determined by regulators.

AAR opposes reciprocal switching, which it seeks to frame as “forced  switching,” saying it would undercut rail revenues and result less use of rail for shipping because it “presents both short-term disruption to an already strained supply chain and long-term harm if it leads to fewer transportation options for businesses and more congestion on public infrastructure — not to mention diminished passenger rail service.”

Supporters of reciprocal switching say its benefits would include enhancing competition.

AAR Calls Reciprocal Switching a ‘wealth transfer’

February 16, 2022

Ahead of hearings next month by the U.S. Surface Transportation Board on a proposed rule to allow reciprocal switching, the Association of American Railroads has described the practice as a wealth transfer.

The STB plans to conduct hearings on March 15-16 on a long dormant proposal to promulgate reciprocal switching regulations.

The concept has triggered controversy since it was initially proposed in 2016 with freight railroads and their shippers divided in their views on the issue.

The rule the STB is considering would require a railroad with sole physical access to a shipper to transfer cars from that shipper to a second railroad at a junction point with the latter.

The second railroad would be required to pay a per-car switching fee to the sole access carrier with that fee being determined by the STB.

Reciprocal switching orders would only be issued in cases in which a shipper can prove to regulators that reciprocal switching is feasible and necessary to enhance competition.

In a filing with the STB, AAR, which describes reciprocal switching as “forced switching,” called the proposed rule misguided and wants it abandoned.

“Forced switching is not in the public interest. It is a wealth transfer to more profitable entities,” the AAR said.

The filing also contended that reciprocal switching would exacerbate supply chain problems and suggested it would only benefit large industrial shippers.

STB Won’t Extend Reciprocal Switching Proceeding

January 29, 2022

The U.S. Surface Transportation Board has denied a request by the Association of American Railroads to delay the proceedings in a reciprocal switching inquiry.

The STB said on Friday it would continue its planned schedule for the review, including public hearings that begin on March 15.

AAR had sought to extend the schedule for the proceeding by 75 days.

In its decision, the STB said it found “that the amount of notice and time for preparation provided was sufficient and that AAR’s alternative request for extension of the comment deadline would hinder the ability of the Board and the hearing participants to review parties’ submissions before the hearing.”

NS Talks With STB About Reciprocal Switching

January 7, 2022

Norfolk Southern has responded to a series of questions posed by the U.S. Surface Transportation Board regarding reciprocal switching regulations that the Board is considering adopting.

The Class 1 carrier did not outright oppose such a regulation but raised a number of concerns about it, including the adverse effects it could have on operations and differential pricing.

Reciprocal switching would mandate that a railroad with sole physical access to a particular shipper allow another carrier to switch the shipper’s cars to a junction point with the competing railroad.

The practice, which has been common in Canada for several years, has been supported by many shippers as a way to increase competitiveness.

Railway Age reported that NS and STB officials met in December to discuss proposed reciprocal switching regulations.

Similar meetings have been held in the past year between STB officials and those in various shipper organizations.

During their meeting with the STB, NS executives said reciprocal switching might be justified if a railroad was engaging in anticompetitive conduct and refusing to provide customers an efficient route for their freight.

However, NS said that remedies to such scenarios already exist under existing law and the STB already has mechanisms in place “to test the lawfulness of rates.”

It also said instituting reciprocal switching might serve the public interest in a few isolated cases.

Further information about the meeting and the position  that NS adopted in the article at https://www.railwayage.com/regulatory/ns-stb-talk-reciprocal-switching/

STB Sets Hearings on Reciprocal Switching

December 29, 2021

The U.S. Surface Transportation Board will hold public hearings on March 15-16 on proposed reciprocal switching regulations.

The hearings will be held in Washington at STB headquarters and streamed live online on the agency’s website.

The proposed regulations were first announced in July 2016 and would require railroads to establish switching arrangements by competing companies for certain shippers.

Those competing companies do not physically reach a shipper(s) and would be required to pay the host railroad a switching fee.

The proposed regulations have already received extensive comments from shippers, railroads and others but the STB said in a news release that “there have been significant changes in and affecting the freight rail industry” and therefore hearings are being held.

Those wishing to address the Board must notify it by Jan. 27, 2022. Written comments should be submitted by Feb. 14, 2022.

More information about the hearings can be found at https://dcms-external.s3.amazonaws.com/DCMS_External_PROD/1640705404954/50995.pdf

Shipper Coalition Seeks Reciprocal Switching

July 31, 2021

A coalition of railroad shippers is seeking new federal rules that would allow reciprocal switching.

The group, known as the Rail Consumer Coalition, made their plea in a letter to the U.S. Surface Transportation Board.

Shippers n the coalition account for more than half of U.S. freight traffic and claim to generate three-quarters of the revenue earned by Class 1 railroads.

They include firms in the manufacturing, agricultural, and energy sectors and include trade associations for the automakers, chemical producers, forest product and paper manufacturers, as well as rail shipper groups such as the National Industrial Transportation League.

In their letter to the STB, the coalition said rail freight rates adjusted for inflation have risen 43 percent since 2004 because of railroad industry consolidation.

“Given the dramatic concentration of market power in the railroad industry, rethinking policies designed for a different era is both timely and smart,” the coalition wrote to federal regulators.

“Reciprocal switching would help empower rail customers such as farmers, manufacturers and energy providers to choose a carrier that provides the best combination of rates and service.”

The letter went on to say greater market choice would change shipper-railroad relationships and lead to resolutions of rate and service issues.

Reciprocal switching would allow a facility served by one railroad to seek service from a second railroad via interchange.

It has long been a goal of carload rail shippers. The STB launched a reciprocal switching investigation in 2016, but it has yet to lead to any action by regulators.

The Association of American Railroads opposes reciprocal switching, which it has labeled forced access.

“Any STB action mandating forced switching would put railroads at a severe disadvantage to freight transportation providers that depend upon tax-payer funded infrastructure,” AAR CEO Ian Jefferies said. “Such a rule would degrade rail’s significant benefits to both customers and the public by throttling network fluidity, disincentivizing investment, increasing costs to shippers and consumers, and ultimately diverting traffic onto trucks and the nation’s already troubled highways.”

AAR officials have described freight rates as fair market rates.

STB Chairman Martin J. Oberman in recently remarks has expressed an interest in taking up reciprocal switching and others measures that might increase competition among railroads.

STB Proposing Competitive Switching Rule

July 29, 2016

The U.S. Surface Transportation Board is accepting comments through Sept. 26 on a proposed rule that would allow shippers to switch cargo among railroads if a shipper can show the arrangement is “practicable and in the public interest” or “necessary to provide competitive rail service.”

STBKnown as reciprocal or competitive switching, the STB rule would allow a railroad that does not own tracks leading to a shipper’s facility to access those tracks by paying a fee to the owning railroad. This often done in the form of a per-car switching charge.

The STB was acting in response to a petition filed by the National Industrial League in 2011 asking the board to modify the standard for mandatory reciprocal or competitive switching.

The NIL wants certain captive shippers in terminal areas to be granted access to a competing railroad if there is a working interchange within 30 miles.

A competitive switching arrangement, though, would not be ordered if either railroad proves that it isn’t feasible or safe, or would unduly hamper either one’s ability to serve customers.

The Association of American Railroads opposes the rule change, calling it “a step backward from the deregulatory path that has allowed railroads to make the capacity investments required to meet customer demand and further modernize a nationwide rail network that benefits shippers and consumers.”

The AAR has argued that STB rules protect rail shippers as railroads voluntarily switch traffic under the current system. If freight can get from its origin to final destination only if it is carried by two or more railroads, then by law the railroads must cooperate to move the shipments.