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Rail Service Crisis Heats Up

The freight railroad service crisis has gotten so bad that it has attracted the attention of powerful congressional and Biden administration officials. At a recent hearing in Congress, it was revealed that it is fueling inflation, threatens to starve livestock and is preventing delivery of paper for ballots to be cast in elections around the country.

At a House committee hearing in late May, members of the Surface Transportation Board were pressed to act swiftly in making the railroads to correct issues that have left a nation struggling with widespread supply chain failure and that it is a factor in burgeoning inflation.

“We’re at a point of crisis and we have to deal with that crisis meaningfully. This is contributing to inflation,” said Rep. Peter DeFazio (D-OR), said at the hearing held in late May by the House Subcommittee on Railroads, Pipelines, and Hazardous Materials.

In addition to serving on the subcommittee, DeFazio chairs its parent body, the powerful Committee on Transportation and Infrastructure.

He told STB Chairman Martin Oberman and the other four board members present that when it comes to the rail crisis, there is no time to waste, “You are the people who can stop it. We have to act more quickly, and you have to act more decisively because we have to protect the freight rial system in this country. Your testimony suggests that you have

all the powers you need. If that is the case, then use them. We need to re-instill competition.”

DeFazio also said he communicated with top officials at the White House the day before. He observed that the Biden administration is “well aware it and are extraordinarily concerned” about the rail crisis and is looking at steps they can take by executive order “to deal with this mess that has been created by the leeches on Wall Street. Stock buyback dividends can’t be he measure of success of freight rail in this country.”.

Rep. Rodney Davis (R-IL), a leader in bipartisan House efforts to assure fair and efficient elections, revealed at the hearing that the special kind of paper needed for machines to count the ballots is in short supply because of the rail crisis.

More voters are relying on paper ballots as distrust in computerized voting machines has grown – 92% of voting jurisdictions will use paper ballots this year, up from 72% in the 2018 mid-term elections.

The paper shortage also extends to paper needed for voter registration forms, envelopes, voter guides and those ubiquitous “I Voted” stickers.

The STB exempts paper and forest products from regulation. Although the board has opened a proceeding to lift that and other commodity

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exemptions, it is still pending. However, Oberman said the board is prepared to deal with the issue quickly when approached directly by shippers.

“We have the ability to lift exemptions for the purposes of a specific case, and we have done that in a pending matter involving a different commodity,” he said, noting he had heard from the forest products and paper industries about lack of rail service in general.

“If there are concern, those shippers can come to us right now for relief and for the purpose of lifting the exemption. We will listen and they won’t have to wait for the overall rule if they have a valid complaint of lack off service.”

This spurred STB member Karen J. Hedlund to interject: “We are worrying about world famine, now you are telling us that we should be worried about saving our democracy.”

Among the essential supply shortages traced to the railroad service crisis are chemicals needed to produce fuel for vehicles and clean water, fertilizer, grain that filled grain silos and is being piled on the ground, and shipments needed to keep assembly lines from shutting down, something that already has happened. Some critics say the crisis is reaching the point where it could endanger national security.

Subcommittee member Rep. Hank Johnson (D-GA), said you can add potential inhumane treatment of animals to the rail crisis. He revealed that the U.S. Department of Agriculture sent him a letter claiming that herds of dairy livestock and other animals are in real danger of starving because of the lengthy delays in animal feed shipments and skyrocketing feed prices created by the crisis.

In April, the STB held two days of hearings where shippers outlined in great detail how bad the rail service crisis has gotten, and they predicted it will get much worse unless the government steps in.

At the House hearing in May, Oberman announced that the board’s proceeding to allow reciprocal switching should be issued by the end of the year.

He also said the STB has ordered detailed reporting of data by the railroads and about how they are addressing the crisis and will issue service orders where needed most to address the crisis. In fact, the board created a new office to deal with rail service complaints that come in, Oberman noted.
Rail services problems have been traced to the Precision Scheduled Railroading (PSR) operations model adopted by North American Class 1 railroads over the past five years under pressure from hedge fund managers who saw it as a way to grow shareholder value through extreme cost cutting.

DeFazio did not mince words when referring to E. Hunter Harrison, the late head of CSX credited with the invention of the PSR model later copied by the other Class 1 railroads over the past five years.

“The evil ghost of Hunter Harrison lives on,” DeFazio declared. “The legacy of this man is disgusting. He has addicted the CEOs of the railroads to watching the tickers on Wall Street and using their resources to benefit their shareholders and not run railroads like railroads.”

A major issue driving the deteriorating rail service is that the widespread cost cutting also included a deep slashing of employee payrolls. More than 45,000 operating, maintenance and other personnel lost their jobs. Those who remained began leaving in droves because of excessive pressure they are under due to the lack of adequate backup staff.

Railroad management has tried to blame the service crisis on not being able to recruit and train enough employees to replace the additional 20% of their workforce who were laid off between March and June 2020 due to the Covid 19 pandemic. Oberman pointed out that rail management failed to build back employee ranks after rail traffic returned to 97% its pre-Covid level by the end of 2020.

He explained, “When it comes to rail employment, it has become clear to me that they don’t have a cushion You wouldn’t send a football team out on the field without a backup quarterback What the railroads have done is just that. They had no backup so when there was Covid, when there was any disruption on the job, the trains stopped running.”

Around the same time as the House hearing, Oberman received a letter from a group of 21 Democrat and Republican senators pressing the STB to take action to protect rail shippers.

“We are very concerned over the significant rail service disruptions occurring throughout the U.S. freight rail network,” the May 23 letter said. “We urge the STB to examine all constructive options towards ensuring reliable, consistent rail service is available to shippers across the U.S. rail network.”

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