COMMENTARY/ANALYSIS
If you thought freight rail service was bad, we learned recently that it could pose a real threat to the upcoming elections this fall because of the railroads’ failure to deliver in time the kind of paper needed for ballots.
That revelation came near the end of a two-hour House of Representatives committee hearing in late May, where members of the Surface Transportation Board (STB) found themselves pressured to act more swiftly and firmly in getting the railroads to correct lingering issues that have contributed to the nation’s struggle with supply chain issues and growing inflation.
At the hearing, Rep. Rodney Davis (R-IL), who is a leader in bipartisan House efforts to assure fair and efficient elections across the country, revealed that the special kind of paper needed for machines to count the ballots is in short supply because of the rail crisis. This is especially important because more voters are now 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.
“Printing is an essential industry, and nothing highlights its essential nature more than the fact that, without printing, faith in our democratic process and elections are at risk,” said Ford Bowers, CEO of the Printing United Alliance, when he discussed the matter with Davis and other House Administration Committee members at an elections roundtable in mid-March.
The paper shortage also extends to the type of paper needed for such items as voter registration forms, envelopes, voter guides as well as those ubiquitous “I Voted” stickers handed out to voters at polling places.
One stumbling block for STB efforts aimed at addressing this issue is the fact that at present paper and forest products are exempted from STB regulation. Although the board has opened a proceeding to lift that and some other commodity exemptions, that has not been completed. However, Martin Oberman, STB chairman, told Davis that the board is prepared to deal with the issue quickly when approached directly by the shippers involved.
“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,” Oberman said, noting that he already has heard from the forest products and paper industries about the lack of rail service in general.
“If there are concerns, 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.”
It also is true that food and other essential supply shortages have been traced to the railroad service crisis. This includes chemicals needed to produce fuel for vehicles and clean water, along with fertilizer shipments and grain that has filled grain silos and is being piled on the ground, as well as equipment and supplies needed to keep assembly lines from shutting down, something that already has happened in a number of cases. Some rail critics have said the crisis is reaching the point where it could endanger national security.
According to committee member Rep. Hank Johnson (D-GA), you can add to all that the potential inhumane treatment of animals because of the rail crisis. During the hearing, he revealed that the U.S. Department of Agriculture (USDA) sent him a letter asserting that herds of dairy livestock and other animals are in real danger of starving to death because of the railroad delivery failures of animal feed shipments and the skyrocketing prices the crisis has created.
House and Senate Respond
Last April, the STB held two days of hearings where shippers from a broad range of industries 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 late May hearing held by the House Subcommittee on Railroads, Pipelines and Hazardous Materials, Oberman announced that the board’s proceeding to require reciprocal switching—which would allow shippers to request that a railroad permit another railroad to run equipment over its tracks—should be issued by the end of the year.
He also said the STB has ordered detailed reporting by the Class 1 railroads about their operations and what they are doing to address the crisis. To address the crisis it also is preparing to issue direct service orders where they are needed most. In fact, the board has created a new office to deal with rail service complaints that come in, he said.
“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) at the subcommittee hearing, which was called to address legislation reauthorizing the STB, the successor to the old Interstate Commerce Commission. In addition to serving on the subcommittee, DeFazio also is chair of its parent body, the powerful House Committee on Transportation and Infrastructure.
He told Oberman and the other four board members present that when it comes to the rail crisis, “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 rail 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 had been in communication with top officials at the White House just the day before. He observed that the Biden administration is “well aware of it and are extraordinarily concerned” about the rail crisis and is looking at what 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 the measure of success of freight rail in this country,” as DeFazio put it.
The chairman was referring to the Precision Scheduled Railroading (PSR) operations model that was adopted by all but one of the North American Class 1 railroads over the past five years under pressure from hedge fund managers and other investors who see it as a way to grow profits and increase share values by engaging in companywide programs of extreme cost cutting.
DeFazio did not mince words when referring to E. Hunter Harrison, the late head of CSX Transportation who is credited with the invention of PSR which has spread to 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 this extreme cost-cutting extended to a deep slashing of employee payrolls. More than 45,000 operating, maintenance and other personnel who are needed to run a railroad lost their jobs, and those who remained have been leaving in droves because of the excessive pressure they are under to do their jobs while lacking adequate 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 because of the COVID-19 pandemic. Oberman and other critics have pointed out that after this happened, rail management failed to build back employee ranks even after rail traffic returned to 97% of its pre-COVID levels by the end of 2020.
The staffing problem existed long before COVID struck because of PSR, Oberman 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 Democratic and Republican senators who also urged him to take additional action to protect rail shippers. Senators Kevin Cramer (R-ND) and Tammy Baldwin (D-WI) are credited with organizing the letter-writing effort.
"We are very concerned over the significant rail service disruptions occurring throughout the U.S. freight rail network,” the May 23 letter stated. “Reports from rail customers, including our manufacturers, farmers, ranchers and energy producers, indicate reliable rail service is not being provided in many situations. Similarly, shippers have little recourse or alternative options to get their goods to market.”
The senators added, "Given the impact of these rail service disruptions, STB’s oversight role is more critical now than ever. As railroads work to address existing challenges through service restoration plans, 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.”
Cited in the letter as being in agreement with the senators’ position are the National Grain and Feed Association, National Mining Association, American Chemistry Council and Growth Energy.
