The state of the railroads

George Washington delivered the first annual message as president to a joint session of Congress on Jan. 8, 1790. Most presidents since have followed his example, which has become known as the State of the Union, though many were presented as written reports rather than delivered in person.

During his recent State of the Union address Feb. 7, President Joe Biden spoke for some time before declaring, “I have come here to fulfill my constitutional duty to report on the state of the union, and here is my report.”

The state of the union is a concern for all Americans, and so is the state of the railroad industry. The possible rail strike and the train derailment in East Palestine, Ohio, are two issues within the rail industry that grabbed headlines and national attention. By themselves, they answer the question of why the state of the railroads is so important, but underlying these two very public concerns are other critical and foundational issues worthy of exploration.

First, the strike

Consider these statistics provided by the Association of American Railroads (AAR), Washington: Freight railroads account for roughly 40 percent of U.S. long-distance freight volume (measured by ton-miles)—more than any other mode of transportation. However, they account for just 0.5 percent of total U.S. greenhouse gas emissions, according to Environmental Protection Agency (EPA) data, and 1.9 percent of transportation-related greenhouse gas emissions.

The Federal Highway Administration forecasts total U.S. freight movements will increase from around 19.3 billion tons in 2020 to 25.1 billion tons in 2040—a 30 percent jump.

These figures show why there was such concern when a strike threatened to shut down the rail industry last year. There are 12 railroad unions, each with its own agreement, and all it takes is for one union to strike to shut down the entire network as no other union will cross another’s picket line.

Railroad employees are some of the highest-paid in the labor force, so pay was not the key issue in the negotiations. Working conditions themselves became the problem, including sick days, or as they are now commonly called, paid time off (PTO). The impasse was so great that even after the Biden administration stepped in to force workers to continue, it took an act of Congress to resolve the issue when the Senate voted Dec. 1, 2022, to block the rail strike and implement tentative agreements.

Next, the derailment

Nearly three dozen cars from a Norfolk Southern (NS) train with 150 total railcars derailed Feb. 3 near East Palestine, Ohio. Eleven of those cars carried hazardous vinyl chloride used in the production of polyvinyl chloride (PVC). Cars carrying other hazardous materials also derailed, with one containing butyl acrylate that was completely leaked. These chemicals can cause serious health problems.

Reports of hundreds and even thousands of animals and fish dying or being seriously harmed surfaced. Some have referred to this as a mini-Chernobyl, describing it as the worst environmental disaster in recent history. Evacuations were ordered, and the EPA, National Transportation Safety Board, NS and others came to and remain on the scene. Cleanup of the land and water and of NS’ reputation, will continue for some time.

Bureau of Transportation Statistics data show in the 20 years ending 2021, an average of 1,582 derailments occurred annually. In the 10 years ending 2021, the average was 1,268. Derailments occur primarily from one of three factors—human error, a track in need of repair or a railcar issue (mechanical failures or imbalanced loads, for example). In the East Palestine derailment, it appears it was a mechanical issue with a faulty wheel bearing on one railcar. Though derailments have declined, any derailment resulting in such devastation is concerning, especially if it was easily preventable.

Is there a common thread or underlying cause continuing the friction between rail labor and management and to serious incidents such as the one in East Palestine? I suggest there is a connection to the operating strategy of all Class I railroads known as Precision Scheduled Railroading (PSR). By now this should be a very familiar term. (See the article “Striving for consistent, reliable and predictable rail service,” from the April 2021 issue of Recycling Today.)

Issues persist

Why am I once again singling out PSR as part of the problem? Among all other actions taken, PSR strategy reduces the workforce considerably and creates longer trains.

Note the statistic cited above from the AAR—the average tons per train has increased 40 percent since 2000. While the organization implies this is because of increased tonnage capacity per car, it also makes sense that it also is because of longer trains.

Reports have been rampant that the average car inspector was allowed three minutes to physically inspect all cars in a train at every inspection point. One change under PSR to speed up the trains was to cut that in half to 90 seconds. Can an inspector conduct a proper evaluation of each car that quickly? Did one inspector miss that wheel bearing issue at some point when he or she should have caught it? And if the inspectors had another 90 seconds per car, would they have seen it? I am not an inspector, so I can’t say. But I have read other inspectors who claim this is one of the issues.

Putting the two together, workers often feel they are being asked to do much more with much less. That can cause frustration and lead to a desire for PTO and better working conditions. To get that, they rely on their unions to negotiate for improvements. The result can be unions that are prepared to strike, and labor that contends safety is being sacrificed for time and expedience.

The year ahead

In addition to the issues of labor discontent that lead to strikes and the spotlight on the East Palestine derailment, the railroads face several other issues this year. All this must be put in light of the coronavirus pandemic shutdown in 2020 and the resulting struggle all industries have endured to rebuild their workforces.

Railcar supply still is constrained, and rail operations have yet to provide the promised significant improvement in equipment use. Ask any leasing company, almost all of which have nearly 100 percent of their fleets leased out—no one wants to return cars, and scrapping railcars remains at high levels.

Another looming issue is the merger of Canadian Pacific Railway and Kansas City Southern. Normally a merger spells trouble, sometimes causing significant problems in the outset. This would be an instance where a merger works and benefits most.

Also, railroads continue to be the most environmentally friendly means of transport, as well as one of the most capital-intensive industries that invests significantly back into its own infrastructure. Overregulation can stifle this reinvestment and must be balanced.

Railroads face significant blowback from labor over their massive cost reduction and the perception by their labor force that quality of life and working conditions continue to decline. One major derailment has put them all in the spotlight, raising questions about sacrificing safety for alleged efficiency.

Overall, service remains below expectations and has yet to justify the PSR strategy implemented to attempt to improve it. Outside forces, including weather, government regulation and the pandemic, upset plans and require agility to change and adapt as needed—all within an industry that typically is slow to change and turn.

The author is president and CEO of Iron Horse Logistics, based in Aurora, Ohio, and a board member of the North East Association of Rail Shippers. He can be reached at dennis@ihlogistics.com.