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Class I railroad officials have a two-day-long hearing before the federal Surface Transportation Board (STB) to prepare for later this month.

Reports from shippers to STB regarding poor service — the latest being a letter directly from the National Grain and Feed Association, a group representing more than 8,000 facilities — as well as a letter from Transportation Division President Jeremy Ferguson regarding precision scheduled railroading (PSR) and the self-inflicted worker shortages that have come with it have led up to the April 26 and 27 hearing.

The board, an independent and bipartisan federal agency charged with the economic regulation of various modes of surface transportation, primarily freight rail, announced the meeting April 7 in the light of indications of poor performance data.

“Rail network reliability is essential to the Nation’s economy and is a foremost priority of the Board. In recent weeks, the Board has heard informally from a broad range of stakeholders about inconsistent and unreliable rail service. The Board has also received reports from the Secretary of Agriculture and other stakeholders about the serious impact of these service trends on rail users, particularly with respect to shippers of agricultural and energy products. These reports have been validated by the Board’s weekly rail service performance data.”

Board Chairman Martin Oberman went into additional detail about how job cuts in particular have hampered the carriers.

“I have raised concerns about the primacy Class I railroads have placed on lowering their operating ratios and satisfying their shareholders even at the cost of their customers.  Part of that strategy has involved cutting their work force to the bare bones in order to reduce costs,” he said. “Over the last six years, the Class Is collectively have reduced their work force by 29% – that is about 45,000 employees cut from the payrolls.

“In my view, all of this has directly contributed to where we are today – rail users experiencing serious deteriorations in rail service because, on too many parts of their networks, the railroads simply do not have a sufficient number of employees.”

Carriers summoned to appear include BNSF Railway Company, CSX Transportation, Inc., Norfolk Southern Railway Company, and Union Pacific Railroad Company. Executive-level officials from the other three Class Is also were invited to attend, as were labor organizations and shippers.

The hearing will take place at the Board’s headquarters in Washington, D.C., with each session beginning at 9:30 a.m.

On Friday, April 1, the SMART Transportation Division sought Surface Transportation Board Administrator Martin Oberman’s intervention in ending the precision scheduled railroading (PSR) onslaught that has caused continual havoc in the United States’ supply chain and gutted the rail workforce.

SMART-TD President Jeremy Ferguson detailed the anti-worker attendance policies implemented by the nation’s largest freight rail carriers while echoing concerns expressed March 24 by the head of the National Grain and Feed Association (NGFA), a group representing more than 8,000 facilities and firms that provide goods and services to the nation’s grain, feed, and processing industries.

“We believe intervention from the STB is critically warranted and necessary to right the ship,” Ferguson wrote. “Simply put, the railroads cannot sustain the same level of production they had to prior to the advent of PSR given the number of drastic cuts they’ve made across their systems.”

Railroads have cut thousands of workers since the onset of PSR in 2017, placed thousands of locomotives in storage and have been running longer and slower trains to drive down their operating ratios (OR). NGFA President Mike Seyfert said this has led to “significant service disruptions,” for its represented companies served by BNSF, Union Pacific and Norfolk Southern, in particular.

“The service issues that our member companies are raising indicate that the problem is a network problem affecting entire regions of the country,” Seyfert said. “NGFA members have done as much as possible to keep animals fed, but the ability to stretch resources is exhausted.”

Rail carriers such as the Warren Buffett-owned BNSF, the Union Pacific and Norfolk Southern enjoyed record profits in 2021, even as rail traffic and carloads fell short of previous high marks. A main source of this revenue has been through tens of thousands of workforce cuts implemented well before and during the COVID-19 pandemic. With the service difficulties reported by NGFA, rail carriers have been doing less with less and reaping higher rewards at the expense of customers and workers.

“Not only has morale dropped to an all-time low, but employees are leaving the industry in unprecedented numbers,” Ferguson wrote to Oberman. “The freight rail network is at a breaking point. It cannot sustain any more reductions. Substantial changes must be made and they must be made quickly.”

According to union-collected data, Ferguson wrote, more than 500 employees have quit the industry since BNSF implemented a points-based policy Feb. 1. The “Hi-Viz” policy requires workers to be available to work 29 out of 30 days a month in order to avoid punitive deductions on their attendance records that eventually would lead to suspension and dismissal.

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The SMART Transportation Division is comprised of approximately 125,000 active and retired members of the former United Transportation Union, who work in a variety of crafts in the transportation industry.

Rep. DeFazio

WASHINGTON – Chair of the House Committee on Transportation and Infrastructure Peter DeFazio (D-Ore.) sent a letter to the Surface Transportation Board (STB) opposing the approval of a trust for the proposed merger of the Canadian National (CN) and Kansas City Southern (KCS) railroads. In his letter, DeFazio stated that approving the trust is not in the public interest and would reduce competition.
“A single holding company responsible for this traffic would likely change rail traffic patterns in the significant areas of parallel service overlap and that would reduce the rail service options these 300 customers currently enjoy,” Chair DeFazio wrote in his letter. “I am also troubled that this combination of Class I railroads serving all three nations in North America will exacerbate U.S. job losses from cross-border trade agreements that prioritize profits over people and inflict harm on worker’s rights, consumer safety, and the environment.”
In April 2021, Chair DeFazio issued a statement after Canadian Pacific (CP) and CN each made separate multi-billion dollar offers to buy KCS, warning that the bidding war that ensued for the railroad threatened to usher in a new round of consolidations in the rail sector, ultimately threatening jobs and affecting shipping in the U.S.
DeFazio’s full letter to STB can be found below and here.
 

 
July 26, 2021
Ms. Cynthia Brown
Chief, Section of Administration
Office of Proceedings
Surface Transportation Board
395 E Street, S.W.
Washington, DC 20423
Re: Finance Docket No. 36514, Canadian National Railway Company, et al. – Control – Kansas City  Southern Railway Company, et al.
Dear Ms. Brown:
I am writing to express opposition to the voting trust proposed by Canadian National Railway Company (CN) in its proposed merger with Kansas City Southern Railway Company (KCS). I am concerned that this proposed trust is not in the public interest. The trust would reduce competition and prejudice the outcome of the Surface Transportation Board’s merger proceeding.
In its May 14, 2021, submission to this docket, the Antitrust Division of the U.S. Department of Justice explained how voting trusts reduce competition both in general for railroad mergers and in particular to the consideration of a voting trust for CN and KCS. In general, putting two formerly competitive businesses under a single holding company immediately reduces the parties’ incentives to engage in competition. While the Surface Transportation Board regularly allowed railroad trusts throughout the many railroad consolidations of the 1980s and 1990s, the board has made the requirements to approve a voting trust more stringent since 2001 as part of an overall reform of merger rules. Now, according to 49 CFR 1180.4(b)(4)(iv), applicants must demonstrate that trusts would be in the public interest. Approving a CN-KCS trust would signal to the rest of the rail industry that the STB is engaging in business as usual, despite the requirement to consider the public interest, and could launch a new round of mergers.
Specifically with regard to the potential for a CN-KCS trust, I am concerned that approximately 300 current customers overlap on the CN and KCS networks. A single holding company responsible for this traffic would likely change rail traffic patterns in the significant areas of parallel service overlap and that would reduce the rail service options these 300 customers currently enjoy. I am also troubled that this combination of Class I railroads serving all three nations in North America will exacerbate U.S. job losses from cross-border trade agreements that prioritize profits over people and inflict harm on worker’s rights, consumer safety, and the environment.
I trust that the Surface Transportation Board will look at the specific facts of this action and conclude that approving a trust is too much, too soon. Too much authority in one company to somehow keep two companies competing against each other that have significant service overlap and too soon because allowing the trust creates a new floor purchase price for any other potential competitive bidders for KCS railroad. 
Sincerely,
Peter A. DeFazio

On May 27, the chair of the federal Surface Transportation Board (STB) Martin J. Oberman reached out to all Class I CEOs asking them whether the carriers are prepared to reverse the workforce cuts they have made in anticipation of handling an economic rebound as the coronavirus pandemic wanes.

Oberman

“I am specifically requesting that you also address whether you have any long-term plans, including your hiring plans for 2021 and 2022, to reverse any of the diminishing workforce levels which have resulted from your strategies in recent years,” Oberman said in his letter.
Rail employment data collected by the board indicate that since the onset of the COVID-19 pandemic in March 2020, that overall Class I rail employment has declined from 127,867 to 115,485, a reduction of 12,382 jobs. Train and engine personnel employment has been reduced by Class Is by nearly 5,000 workers from 51,801 in March 2020, to 46,951 in April 2021, the latest month for which STB data is available.
Oberman expressed concern that recent rail service problems reported by some shippers may relate to that broader trend of rail labor reductions over the last several years in addition to the furloughs and quarantines brought about by the COVID-19 pandemic.
“I recognize that these rail service challenges, at least to some extent, have been related to workforce reductions resulting from COVID-19 cases, quarantines, and furloughs based on the temporary decline in demand and the resultant adjustments made by railroads in nearly every facet of their businesses,” he wrote. “But I am also concerned by the extent to which these service issues may be related to or exacerbated by a broader trend of rail labor reductions that has been occurring over the past several years.”
Precision Scheduled Railroading (PSR), adopted by CSX under the helm of the late E. Hunter Harrison, has become an acceptable operating scheme among the largest U.S. railroads focused on reducing operating ratios by lengthening trains and emphasizing cost reductions by slashing employment, reducing the time available for inspections and mothballing equipment, as reported by The Associated Press and VICE Magazine.
From an economic perspective, Oberman said the STB has received some significant reports of flaws in the Class Is’ service model.
“Although many shippers have reported that railroads are providing consistent and dependable service, the Board has also received concerning reports from a meaningful number of rail customers of subpar performance, including missed switches, railcars delayed at intermediate yards or interchanges, extended out-of-route movements, and prolonged dwell at origin for some unit train traffic,” Oberman observed. “Additionally, we have been made aware of instances of significant congestion at various intermodal facilities, which has resulted in delayed train arrivals and disruptions to container availability.”
A review of share prices since Harrison was placed atop CSX by a hedge fund in March 2017, shows that shares for most of the Class I carriers have more than doubled since March 2017, except for Canadian National and BNSF (which is privately owned).
Conversely, STB rail employment data from April 2021, indicate that overall Class I employment has declined by nearly 34,000 jobs from 149,323 in March 2017, while train and engine personnel employment has gone down by 12,240 jobs from 59,191 in March 2017.
SMART Transportation Division President Jeremy Ferguson said he was pleased to see STB Chairman Oberman and the board taking an active role in protecting rail shippers and making sure T&E crews are properly staffed.
“This is a good first step in getting people back to work and getting the rail workforce to an adequate level,” President Ferguson said. “Let’s get our members some relief so they’re able to receive adequate rest and a quality of life they deserve.”
Link to STB article regarding the letters.
Link to STB site with Oberman’s letters to carrier executives.

Canadian Pacific’s acquisition of the Central Maine & Quebec Railway (CM&Q) was approved by the federal Surface Transportation Board (STB) on May 1, and will take effect June 18, 2020.
The purchase from Fortress Transportation and Infrastructure Investors LLC, officially by the wholly owned Soo Line subsidiary of CP, was originally announced Nov. 20, 2019, and with approval now gives the Class I carrier trackage and facilities running from St. Jean, Quebec, Canada, to Searsport, Maine.
In a filing with the STB, CP said it plans to upgrade CM&Q’s system to Class III standards with an investment of up to $75 million. STB members had no objections to the acquisition and dismissed comments and conditional requests by Springfield Terminal Railway Company, among others.
CM&Q owns approximately 244 miles of rail lines in Vermont and Maine and has operating rights across another 57 miles, according to the STB. The Canadian portion of CM&Q has about 237 miles of track which also will be transferred in the sale.
SMART Transportation Division represents 52 members on the CM&Q in the Transportation, Mechanical and Engineering Departments who belong to GO-049, which is represented by General Chairman Rick Lee.
Read the STB’s decision.

Just before the start of the new year, deals that resulted in the Genesee & Wyoming (G&W) and the Central Maine & Quebec (CM&Q) changing hands were finalized.
The Surface Transportation Board in November cleared the way for Brookfield Asset Management and GIC, a Singapore wealth fund, to acquire Genesee & Wyoming, which controls Class II and III railroads in 41 states and, if considered collectively, has holdings that qualify it as a Class I carrier with more than 13,000 track miles.
A review by the Committee on Foreign Investment in the United States (CFIUS) permitted the acquisition to be finalized, and completion of the deal was announced Dec. 31. G&W is now a private entity and its stock is no longer traded publicly.
In the case of Canadian Pacific’s acquisition of CM&Q, the federal Surface Transportation Board still must sign off on the deal, which was announced Nov. 20, to make it official. Financial terms were finalized on Dec. 30, CP announced.
Once approved by the STB, CP’s purchase from Fortress Transportation and Infrastructure Investors LLC would give the Class I carrier trackage and facilities from St. Jean, Quebec, Canada, to Searsport, Maine.
SMART Transportation Division represents 52 members on the CM&Q in the Transportation, Mechanical and Engineering Departments who belong to GO-049, which is represented by General Chairman Rick Lee. CM&Q owns 481 miles of rail lines primarily in Quebec and Maine.

Disregarding comments by the SMART TD New York Legislative Board to the contrary, the Surface Transportation Board (STB) has granted an exemption to Brookfield Asset Management and DJP XX LLC that clears the way for their acquisition of short-line/regional railroad operator Genesee & Wyoming.
Genesee & Wyoming controls Class II and III railroads in 41 states and, if considered collectively, its holdings qualify it as a Class I carrier with more than 13,000 track miles.
The notice, published in the Federal Register Nov. 1 after a 3-0 vote by the board, concludes a postponement of the $8.4 billion acquisition put forth by the STB in late July. The acquisition, when completed, will make G&W a privately held company.
Brookfield Asset Management owns and operates assets in the utilities, transport, energy and data infrastructure across North and South America, Asia Pacific and Europe while DJP XX LLC is a subsidiary of GIC, a global investment firm that manages Singapore’s foreign reserves.
In early September, an attorney representing New York State Legislative Director Samuel J. Nasca filed reply comments asserting that the notice of exemption should be rejected or revoked because of the magnitude and nature of the transportation involved.
Nasca’s filing expressed concern regarding the role of foreign interests, including GIC, which would own 27% of equity in DJP XX and has links to the government of Singapore, and was not listed on the exemption application to the STB. He also identified Brookfield as controlling rail investments in Brazil — more than 10,000 km of rail tracks and stated that GWI controls rail carriers that are located in other countries including Canada, Australia and the United Kingdom and are not subject to Board jurisdiction.
Moreover, Nasca argued, employees could face negative ramifications if the deal went through.
“A number of the GWI carriers operate in or through New York State, and are represented by SMART/TD in collective (bargaining). Those GWI carriers not so represented by SMART/TD are nevertheless important for SMART/TD employees as such carriers interchange traffic with other GWI-represented carriers, or with other carriers outside the GWI family,” his filing stated. “Accordingly, SMART/TD employees stand to be adversely affected by Brookfield management decisions revising the structure of GWI or taking actions which may divert business to other units of the Brookfield organization.”
The board disregarded the concerns expressed for workers, about foreign interests and about the scale of the acquisition as well.
“SMART/TD-NY’s comments about the magnitude and nature of the transportation at issue do not support rejection of the notice or revocation of the exemption,” the board stated in the Federal Register notice.
STB member Marty Oberman, while voting to approve the exemption, did express some reservation about the magnitude of the exemption, stating in the Federal Register filing:
“This is by far the largest and most geographically diverse collection of railroads impacting the U.S. freight network ever to be processed as a class exemption under the Board’s existing regulations,” Oberman wrote. “In my opinion, this proceeding raises significant questions regarding whether transactions of this magnitude were contemplated when the class exemption regulations were adopted, and therefore raises questions as to whether it is appropriate for such major transactions to be eligible under those regulations in the first place.”
The proposed acquisition of G&W is expected to close by the end of 2019 or early 2020 pending review by the Committee on Foreign Investment in the United States (CFIUS).
Read Sam Nasca’s filing that opposes the exemption.
Read the entire Federal Register notice here.

A notice of a meeting of the Surface Transportation Board’s (STB) Rail Energy Transportation Advisory Committee (RETAC) appeared in the Federal Register April 30.
The meeting, which is open to the public, is scheduled for 9 a.m. Wednesday, May 15, at STB headquarters, 395 E. Street SW, Washington, D.C. 20423.
The stated purpose of the meeting is to continue discussions regarding rail performance, capacity constraints, infrastructure planning and development, and the effective coordination among suppliers, carriers and users of energy resources. Items potentially on the agenda include a performance measures review, industry segment updates, a presentation on energy transportation logistics and a roundtable discussion.
RETAC was formed in 2007 to provide guidance to the STB on issues concerning the transportation of coal, ethanol and other biofuels by rail.
Click here to read more from the Federal Register.

A number of candidates to transportation-related oversight posts in the federal government whose nominations were returned to President Donald Trump in early January have been renominated to those posts.
Thelma Drake has been renominated to be the administrator of the DOT’s Federal Transit Administration (FTA) and Lynn Westmoreland, Joseph Gruters and Rick Dearborn are again under consideration for positions on the Amtrak board of directors.
SMART Transportation Division opposes the nomination of Westmoreland, whose voting record as a U.S. representative shows he has a long history of voting against Amtrak funding.
“As a longtime member of the House Transportation and Infrastructure Subcommittee on Railroads, Pipelines, and Hazardous Materials, Westmoreland has a hostile voting record against Amtrak, which includes efforts to eliminate federal funding for Amtrak entirely. In addition, Westmoreland has been an original cosponsor of the ‘National Right-to-Work Act’ on multiple occasions, which would significantly weaken our ability to collectively bargain. For these reasons, we oppose his nomination as it would undermine the core mission of Amtrak and its employees,” we reported when his nomination was initially introduced in October 2017.
Also renominated by the president are Michelle Schultz to the Surface Transportation Board (STB), and Michael Graham and Jennifer Homendy to the National Transportation Safety Board (NTSB). Homendy is currently serving a term on the board that runs out at the end of 2019.
Two nominations also were made to highway oversight positions — Heidi King to administer the National Highway Safety Administration (NHTSA) and Nicole Nason to administer the Federal Highway Administration (FHA).
These nominations will be considered by U.S. Senate subcommittees before potential advancement for consideration by the full Senate.

Six nominees to transportation-related agencies were confirmed by the U.S. Senate via unanimous consent Jan. 2, including three Railroad Retirement Board members.
Johnathan Bragg, Thomas Jayne and Erhard R. Chorle were all confirmed to the RRB.
Bragg, the labor member of the board and national vice president of the Brotherhood of Railroad Signalmen (BRS), will complete a term that expires this August and then commence a five-year term. Chorle, an Illinois attorney, will serve as RRB chairman with his term expiring in August 2022, and Thomas Jayne, a senior general attorney for BNSF, will represent management for a term that expires in August 2023.
Two vacancies on the Surface Transportation Board (STB) were also filled with the confirmations of Patrick Fuchs, who was a senior staff member of the Senate Commerce Committee, reporting to Chairman John Thune (R-S.D.), and Martin J. Oberman, a former chairman of Metra, as members. They each will serve five-year terms. The board now will have three of its five seats filled.
Finally, Joel Szabat was confirmed as the federal DOT’s Assistant Secretary for Aviation and International Affairs.