The freight rail industry pulled out all the stops attacking reciprocal switching during two days of hearings held in mid-March by the Surface Transportation Board, but the STB members didn’t seem to be all that impressed by the performance.
Since the introduction of Precision Scheduled Railroading in the United States five years ago, most of the Class I railroads have adopted this operations model, which quickly resulted in widespread service deterioration that persists to this day, accompanied by the imposition of exploitative high-cost demurrage and accessorial fees.
The upshot is that railroads abandoned the prime regulatory concept of the common carrier obligation. Widespread labor, equipment and facilities cutbacks damaged service but led to lower operating ratios, a result that made hedge funds and other investors happy since such severe cost-cutting yielded higher returns while destroying service levels.
Shippers’ requests for the introduction of reciprocal switching predate the PSR era. A petition filed by the National Industrial Transportation League with the STB years before the first American PSR model was adopted had been consigned to the back burner at the board for years.
Last year, new board chairman Martin J. Oberman, brought the reciprocal switching proposal forward, confronting the Class I railroads opposition head on. During the March hearing, he expressed the hope that it would make railroads “up their game” and work harder to resolve service problems.
During the two days of hearings, board members heard a litany of complaints about service failures and other bad practices. Unfortunately, many of them were still the same as complaints heard years ago by the STB and Congress.
At the March hearing, shippers echoed earlier accounts of skyrocketing rail costs and service failures leading to closed plants and shut down assembly lines.
The railroads’ arguments against reciprocal switching are that would be far too disruptive and costly, diverting money that otherwise would be invested in much needed capital improvements and result in discouraging investor interest.
That was somewhat undermined by the hearing’s revelation that the railroads had been engaging in this sort of switching of cars between different rail lines for quite some time, basically whenever it suited them to do so.
It also was acknowledged by the railroads that multiple reciprocal witching arrangements currently exist at some rail terminals shared by different companies as the result of past rail mergers.
At present, any shipper can ask for a reciprocal switching arrangement, but the rail line doesn’t have to provide it unless the shipper can prove an anticompetitive situation exists, which would be a tall order, eat up too much time, and cost a small fortune in lawyers’ fees.
In addition to widespread shipper support, the Biden Department of Justice also has thrown its weight behind the concept, which is an ominous sign for rail companies that operate regional monopolies.
Oberman indicated that the board would handle reciprocal switching requests on a case by case basis to prevent individual rail terminals from being overwhelmed. He believes the process could turn out to be unwieldy for rail operators if shipper requests for the service mount in too large numbers.
Oberman also said he is leaning toward the imposition of a two-tiered system. In one, the railroads would be required to offer switching at terminals where it currently exists or can be offered, where it currently exists due to merger-related conditions or voluntary agreements with some shippers.
The second tier would exist for rural shippers. Reciprocal switching would be required within a mileage-based radius which would be intended to bring them closer to interchanges.
