CHAMPAIGN, Ill. – Weeks after calling for a study of the potential for increased service along Amtrak’s Chicago to Carbondale route, U.S. Sen. Dick Durbin is holding a hearing in Champaign Wednesday on freight train interference along the corridor.
The meeting between Surface Transportation Board Chairman Dan Elliott, Amtrak board member Tom Carper and local officials is scheduled for 3 p.m. at the Illinois Terminal in downtown Champaign. The Illinois Terminal is the local Amtrak station.
U.S. railroad regulators have ordered BNSF Railway and Canadian Pacific Railway to hasten shipments of grain from a backlog that has frustrated farmers and people who run grain elevators.
The Surface Transportation Board, in a decision late Friday, required the two railroads to publicly disclose every week plans to address the delays, which have forced some in the upper Midwest to heap grain on the ground after running out of storage space because of autumn’s massive harvests. Others just can’t get grain moved out of elevators or are doing so at higher prices.
Surface Transportation Board Chairman Daniel Elliott III yesterday announced Deb Miller has been sworn in as the 12th board member since the agency was formed in 1996.
She will serve a term that expires on Dec. 31, 2017. President Barack Obama nominated Miller for the STB post in September 2013 and the Senate confirmed the appointment on April 9. A Democrat from Kansas, Miller will fill the seat formerly held by Francis Mulvey, whose term expired.
PIERRE, S.D. (AP) – A federal oversight board told Canadian Pacific Railway and BNSF Railway that they have until Friday to report their plans to ensure delivery of fertilizer shipments for spring planting of U.S. crops.
The Surface Transportation Board’s decision Tuesday comes in response to a hearing it held last week on recent service problems in the nation’s rail network. Farmers and representatives of agriculture producers told the board that delays in fertilizer delivery could disrupt planting.
Federal Railroad Administration chief Joseph Szabo testified April 10 before members of the Surface Transportation Board regarding the negative impact service degradation on the nation’s railroad network could have on rail safety and Amtrak on-time performance.
His prepared oral testimony follows:
Chairman Elliott and Vice Chairman Begeman, on behalf of Transportation Secretary Anthony Foxx, thank you for the opportunity to testify today about the negative impact service degradation in our Nation’s rail network can have both on rail safety and on Amtrak’s on-time performance.
Let me first talk about FRA’s top priority – rail safety.
Over the past decade, our-data based oversight and enforcement has helped the industry achieve a 47 percent decrease in both train accidents and derailments, and a 35 percent decrease in highway-rail grade crossing accidents.
By most measures, Fiscal Year 2013 was the safest year on record. But we owe it to the public to always do better.
And that’s why the railroad’s weekly metrics showing railroad performance declines among Class I carriers are a big concern to us.
As railroad performance declines, rail velocities diminish, cars on line increase, terminal dwell time increases – and above all, our experience tells us, safety can suffer, too.
We learned this with the significant service degradation Union Pacific/Southern Pacific faced about 15 years ago – when we testified before the Board – as an example of how quickly operating conditions can change and affect safety.
Experience tells us there can be a safety breakdown, for example, when it comes to the ability of supervisors to perform their jobs, as a consequence of additional work pressures.
Ineffective crew utilization can lead to employee fatigue. And in order to ensure adequate rest, crews need absolute predictability as to when they go to work.
And, as a railroad rushes to gain the upper hand on service issues, it becomes necessary to hire new employees. Without adequate training that instills the proper safety culture, the number of accidents is likely to rise.
As large of a role as the Nation’s freight railroads have in serving our Nation’s businesses and economy, no concern must ever come before safety.
That’s why we have been monitoring this service situation closely and meeting with railroad CEOs to gain assurances that the carriers are operating in the safest manner.
In BNSF’s letter to the Board in response to the Western Coal Traffic League’s request for a proceeding concerning rail service problems, the railroad announced that it will be hiring 5,000 employees in 2014 to relieve these service pressures.
While laudable, it is imperative that the railroad undertake the proper training to ensure that the railroad operates in the safest manner.
We also have noticed a marked increase in delays to Amtrak trains and an associated degradation in on-time performance.
DOT and FRA provide financial assistance to Amtrak to partially fund its operations and capital investments, and work to support Amtrak’s efforts to enhance its passenger rail services. For these reasons, Amtrak’s financial performance is of great interest to us.
And in keeping with our nationwide mandate to improve the safety of passenger and freight railroads, we focus closely on the safety of Amtrak’s facilities, equipment, and transportation operations.
It should be noted that Amtrak has set ridership records in 10 out of the last 11 years – and last year was relied upon by more than 32 million travelers. So, service issues that ultimately delay intercity passenger trains have many negative implications for travelers, Amtrak, and the transportation network as a whole.
Late trains may cause travelers to miss connections or abandon their travel plans entirely. Reduced ridership and additional operating delays cause Amtrak immediate and, potentially, long-term financial harm.
A slower, less efficient passenger rail network reduces travel options for some and may put more strain on other modes of transportation, as well.
DOT and FRA closely monitor the on-time performance of Amtrak services, because even just a few months of poor performance have the potential to cascade into long term problems.
Over the past twelve months, we have witnessed a steady decline in timeliness of Amtrak trains, particularly those that operate over the freight rail network.
Only about 63 percent of Amtrak’s Long Distance trains reached their endpoint on time between March 2013 and February 2014 – 12 percent worse than the previous 12 months.
From December 2013 to February 2014, half of all Long Distance trains were late to their final destination.
On-time arrivals to intermediate stations on Long Distance routes were even less frequent, at 48 percent over the last 12 months and just under 40 percent this past December through February.
Shorter, State Corridor trains did not fare much better, with nearly a quarter, 22 percent, of all such trains arriving late over the past 12 months.
Amtrak’s on time performance has been a long-term interest of this Department and of Congress – and Amtrak tracks and reports all train delays to the FRA.
For February 2014, the month for which data was most recently reported to FRA, delays attributable to the host freight railroad were the highest in over 5 years. The largest category of Amtrak delays in recent months has been host freight train interference.
Such a designation is based on the Amtrak conductor’s immediate observable cause.
The extreme delays to Amtrak and other users of the network are a symptom of a fragile network that is strained and struggling to react.
Thank you for providing DOT the opportunity to comment in the proceeding. I would be happy to answer questions.
The Surface Transportation Board announced today that it will hold a public hearing on April 10, 2014, to provide interested persons the opportunity to report on recent railroad service issues, review proposed solutions to existing service problems, and discuss additional options to improve service.
The Board has been closely monitoring the rail industry’s performance metrics and is concerned about service problems across the nation’s railroad network, particularly on the Canadian Pacific Railway Company (CP) and BNSF Railway Company (BNSF) systems. The Board Members have written to and met with the leadership of BNSF and CP to discuss these concerns.
The Board’s Office of Public Assistance, Governmental Affairs and Compliance has been working with affected parties to better understand the problems shippers are facing and to help facilitate service solutions. Board staff recently held a meeting in North Dakota with shippers from multiple states and the agency anticipates additional meetings in other affected areas.
The Board will hold a public hearing beginning at 9:30 a.m. on Thursday, April 10, 2014, in the Board’s Hearing Room at the agency’s headquarters located at 395 E Street, S.W., in Washington, D.C. The Board will direct BNSF and CP to appear at the hearing, and the agency encourages impacted shippers and other Class I carriers to appear as well. The hearing will be open for public observation.
WASHINGTON – The nation’s freight rail industry this week will outline for the Surface Transportation Board (STB) the various negative impacts of a proposal to force non-market based requirements on railroads at the request of the National Industrial Transportation League (NITL). The proposal calls for the STB to override market forces by forcing Class I railroads to turn over to their competitors substantial portions of rail traffic which moves across tracks they own and have spent billions to build, maintain, and upgrade so taxpayer’s don’t have to.
Specifically, the NITL proposal would give a small group of shippers the right to demand that in some cases where one railroad serves their facility, the serving railroad must transfer or “switch” loaded rail cars to competitors. In addition to increased operating and infrastructure costs, other impacts of the proposal would include things such as: an increase in the number of locomotives and rail cars needed; increased dwell and delay time; increased fuel use; reduced network efficiency; and increased risk for employee injury due to additional handling and switching requirements.
“This proposal is a solution looking for a problem,” Association of American Railroads (AAR) President and CEO Edward R. Hamberger stated. “Railroads already voluntarily switch traffic when it makes economic sense for all parties.”
Hamberger also noted that other existing STB regulations provide various options if a shipper believes its rates are unreasonable. In fact, of the 46 shipper complaints filed with the STB since 1996, 37 of the complaints were decided in favor of shippers or settled through commercial negotiations.
“Freight railroads are among those American industries with very high fixed costs, as they operate on infrastructure they own, maintain and continuously upgrade,” Hamberger said. “Since 1980 alone, average inflation adjusted rail rates are down 42 percent, while railroads have spent more than $550 billion to build, maintain and upgrade track, signals, bridges, tunnels, and equipment. But this proposal would undermine the benefits all rail customers have seen thanks to these investments, and would all but ensure a return to the days when most rail customers were unhappy.”
Under the NITL proposal, the freight rail industry could lose about 13 percent of its annual net income – roughly equivalent to what the industry spent in 2010 on capacity expansion projects designed to benefit all shippers. If the proposal were adopted, it would ensure that railroads could not recover all of their fixed costs, which would lead to postponed maintenance, deferred capital upgrades and expansion programs, service quality declines, and negative impacts to all shippers.
“Railroads work with their customers and find market-based solutions that serve American businesses all across the country, and help ensure freight rail lives up to its mission to power our economy,” Hamberger said. “This proposal ultimately would serve the interest of a small group of shippers, but have far-reaching and long-term negative impacts on all rail customers. As American businesses and our economy are coming back from the recession, we just can’t afford to get this wrong.”
President Barack Obama has nominated former Kansas Secretary of Transportation Deb Miller to the Surface Transportation Board, reportedly replacing George Bush-appointee Francis Mulvey.
Miller, a Democrat, was the Kansas secretary of transportation from 2003 to 2012, making her the first female and longest serving transportation secretary of that state. She was appointed by former Gov. and current Health and Human Services Secretary Kathleen Sebelius and then retained by Republican Gov. Sam Brownback.
Miller is currently a senior associate at Cambridge Systematics, a transportation consultancy firm located in Cambridge, Mass. The company’s clients include the Federal Highway Administration, Federal Transit Administration, Federal Motor Carrier Safety Administration, 44 state transportation agencies, Amtrak, CSX, Norfolk Southern and the Long Island Rail Road.
Before being appointed secretary, Miller was the director of planning and development at KDOT from 1986 to 1997 and was previously a planner at HNTB Infrastructure Solutions.
She graduated magna cum laude from Kansas State University in 1976 with a bachelor of arts degree in sociology.
The STB is an economic regulatory agency that Congress charged with resolving railroad rate and service disputes and reviewing proposed railroad mergers.
The board is authorized to have three members, appointed by the president and confirmed by the Senate, each with a five-year term of office.
WASHINGTON – Individuals choose bank savings accounts based on the interest rate offered, assuming the investment is secure because no depositor has ever lost their principal on a Federal Deposit Insurance Corp. (FDIC) backed account.
By contrast, corporate investors must consider risk of their principal along with an anticipated rate of return on their investment. Investors are more likely to invest in and/or lend to a firm displaying long-term financial sustainability.
For railroads, long-term financial sustainability is measured by revenue adequacy – earnings that cover the cost of paying investors competitive returns as well as covering the cost of efficient railroad operation.
Congress has instructed the U.S. Surface Transportation Board (STB) to make annual determinations of railroad revenue adequacy. For 2009 (the most recent STB determination of revenue adequacy), the STB determined that no major railroad was revenue adequate. A 2010 determination will be made soon.
To determine revenue adequacy, the STB annually measures a railroad’s profitability against its cost of holding and attracting investors.
The STB calculation estimates the average rate of return needed to persuade investors to provide a railroad with capital for new equipment; to maintain existing track, bridges, signal systems and other capital assets; and to fund capacity expansion. That profit must also allow the railroad to pay investors a competitive return.
Thus, only when the railroad’s rate of return on investment equals or exceeds its cost of capital is the railroad considered revenue adequate. The profits of large corporations may look immense in terms of total dollars, but investors and economists measure profit based upon return on investment. For example, a $5,000 interest payment by a bank on a savings account may seem huge, but if the $5,000 is paid on a $500,000 savings account, the return to the investor is but 1 percent and may cause the investor to shift banks in search of a better return.
This week, the STB determined that the 2010 cost of capital for railroads was 11.03 percent, up almost 6 percent (or sixth-tenths of one percentage point) from the 2009 cost-of-capital when no railroad was determined to be revenue adequate.
It will be November before the STB uses the higher cost-of-capital benchmark to determine if any railroad achieved revenue adequacy in 2010. To achieve revenue adequacy, a railroad’s profit for 2010 will have to have met or exceeded 11.03 percent. In 2009, for example, one of the most profitable railroads — Union Pacific — posted a return on investment almost two percentage points below the threshold for revenue adequacy.
Meanwhile, major railroad stocks are well off their 52-week highs, suggesting investor concern over the ability of railroads to sustain their recent levels of profitability.
The price of CSX common stock is down 30 percent from its 52-week high; Kansas City Southern is down 18 percent from its 52-week high; Norfolk Southern is down 21 percent from its 52-week high; and Union Pacific is down 23 percent from its 52-week high. BNSF is now held privately and its stock is not traded.
WASHINGTON – The UTU has won a victory on behalf of 12 train and engine employees represented by the UTU and employed by Manufacturers Railway, a 124-year-old subsidiary of brewer Anheuser-Busch for which Manufacturers performs switching services in St. Louis.
In March, the carrier sought permission from the U.S. Surface Transportation Board (STB) to discontinue operations, and asked the agency not to impose so-called labor protection (actually income protection) for workers who would be put in unemployment lines as a result of the discontinuance.
The railroad’s case rested on a long-standing policy of the board and its predecessor, the Interstate Commerce Commission, not to impose labor protection when an entire system is abandoned.
The UTU Law Department intervened, telling the STB that Manufacturers had provided the agency with “misleading information” with regard to the intended cessation of operations.
Rather than abandon its system, the UTU told the STB that Manufacturers, in its own press release, had said it intended, in fact, to transfer those rail operations to a third party that would operate over the railway’s tracks and yard, which would remain under Manufacturers Railway and Anheuser-Busch ownership.
“It is clear,” said the UTU, that Anheuser-Busch intends the transaction as “a means to get around the labor protection which should rightly be imposed,” and that Anheuser-Busch “stands to benefit financially from this transaction by contracting out the rail switching operations and reducing its labor expense.”
The STB agreed, and ruled that so-called Oregon Short Line labor protection be granted as a condition of the discontinuance of operations by Manufacturers Railway.
The protection provides for six years of income protection – as opposed to a guarantee of employment — for all adversely affected employees of Manufacturers Railway.
CHAMPAIGN, Ill. – Weeks after calling for a study of the potential for increased service along Amtrak’s Chicago to Carbondale route, U.S. Sen. Dick Durbin is holding a hearing in Champaign Wednesday on freight train interference along the corridor.
The Surface Transportation Board announced today that it will hold a public hearing on April 10, 2014, to provide interested persons the opportunity to report on recent railroad service issues, review proposed solutions to existing service problems, and discuss additional options to improve service.
WASHINGTON – The nation’s freight rail industry this week will outline for the Surface Transportation Board (STB) the various negative impacts of a proposal to force non-market based requirements on railroads at the request of the National Industrial Transportation League (NITL). The proposal calls for the STB to override market forces by forcing Class I railroads to turn over to their competitors substantial portions of rail traffic which moves across tracks they own and have spent billions to build, maintain, and upgrade so taxpayer’s don’t have to.