Ashley Landis/AP Photo
A Union Pacific train engine sits in a rail yard on September 14, 2022, in Commerce, California.
After the disastrous Norfolk Southern train derailment in East Palestine, Ohio, in February, a bipartisan rail safety bill gained momentum among Rust Belt senators, with Sherrod Brown (D-OH), J.D. Vance (R-OH), and John Fetterman (D-PA) as co-sponsors. But between insistent corporate lobbying, resistance from small-government Republicans (perhaps intended to deny Brown a signature win going into a tough re-election campaign), and the difficulties of bipartisan cooperation in a divided moment, negotiations over the bill now appear to be all but dead. At a press briefing on Wednesday, Fetterman excoriated his co-sponsor Vance for feigning interest in the bill while focusing his attention on “silly performance art” such as a ban on mask mandates.
But despite this inability to move forward on rail safety, an important advancement that could change the freight rail industry was unveiled on Thursday.
The Surface Transportation Board proposed a new rule that would ensure that shippers have competitive options between rail carriers when their cargo orders are routinely delayed. Under the STB’s proposed rule, shippers facing extensive delays for cargo orders can file petitions to enforce what’s called a reciprocal switching arrangement. The policy forces the rail carrier under contract with a shipper to transfer its own tracks to a competitor, allowing the cargo delivery to arrive on time.
The reciprocal switching rule would revive a long-dormant authority previously enforced routinely by the Interstate Commerce Commission until the regulatory body was gutted in the 1990s. (The STB replaced that commission, with weaker authorities.) It would take a significant step toward creating an open-access railroad infrastructure, undercutting rail monopolies’ power. And it might even provide some aid to the recurring safety crisis.
The rule also follows through on the directives delegated to the board in President Biden’s competition order in 2021, which placed significant emphasis on consolidation in railroads.
A reciprocal switching policy would address concerns from shippers across industries, such as corn, chemicals, and other commodity goods, many of which have reported widespread delays since the pandemic. In numerous complaints submitted to the STB, shippers have documented a complete meltdown in service from the tight oligopoly of railroad firms, all while freight rates have increased. Many raised these objections during an STB hearing in 2022 regarding the breakdown in service.
In one prominent example, Foster Poultry Farms, one of the largest chicken growers and processors in the Western U.S., told the STB that it nearly had to euthanize millions of its birds because of extensive delays in feed shipments from Union Pacific Corp. Because Union Pacific has a de facto monopoly over the rail lines and service in that region, Foster had few options to turn to.
In part, the source of the service problem has been chronic understaffing by railroad barons, part of the cost-cutting regime that’s taken hold in the industry in recent years known as precision scheduled railroading (PSR). This entails running fewer service lines to only the most profitable destinations and sometimes even stripping out rail tracks altogether in order to slash costs and maximize profits for Wall Street shareholders.
Layoffs and understaffing were one permutation of this PSR tyranny and became a major driver for labor frustrations that nearly led to a rail strike at the end of 2022 during contract negotiations. They also increased danger on the rails, as understaffed trains can lack the manpower to avoid derailments.
Reciprocal switching won’t directly fix the rail labor issue, but it can at least begin to shift the incentives by forcing railroads to improve service or face losing contracts to a competitor. A rail industry forced to compete might provide better quality and more safety, for both shipments and workers.
The rule proposes certain criteria to evaluate when a carrier’s service quality is poor enough to qualify shipping customers to demand a reciprocal switching change. Those include either when a carrier consistently fails to deliver cargo expeditiously for more than 70 percent of orders or when the delays from a carrier increase by a given percentage around 20 to 25 percent.
The railroad industry has been staunchly opposed to mandated reciprocal switching in the past, and fought a similar switching proposal in 2016. The industry appears poised to fight the final rule this time around as well.
In an official statement, Ian Jeffries, the president and CEO of the Association of American Railroads, first praised the nixing of past proposals and then issued caution about the current rule.
“Any switching regulation must avoid upending the fundamental economics and operations of an industry critical to the national economy—that Congress saved once by partially deregulating—and be subject to the highest level of scrutiny,” said Jeffries.
While working successfully to water down and derail railroad legislation in Congress, the Association of American Railroads will now have another fight on their hands at the executive level.
