Rail Roundup: Train crews, shippers’ views, shareholders choose

Union must include crew size in negotiations

An arbitrator has determined that the International Association of Sheet Metal, Air, Rail and Transportation Union-Transportation Division (SMART-TD) must resume negotiations over train crew size and staffing, according to the National Railway Labor Conference (NRLC), a group that represents the freight railroads.

The arbitrator determined that standard moratorium language in decades-old labor agreements does not bar negotiations over crew size on freight trains, NRLC said. SMART-TD represents train conductors.

“This ruling allows the railroads and SMART-TD to move forward with negotiations over all aspects of train crew size and staffing,” said Brendan Branon, chairman of the NRLC and the National Carriers’ Conference Committee, the bargaining representative for the major U.S. freight railroads. “The industry looks forward to working collaboratively with SMART-TD to address these critical issues.”

NRLC contends that it was to negotiate over crew size because the freight rail industry seeks to use new safety and operational technologies to facilitate the redeployment of train conductors. The group says the use of positive train control has enabled the railroads to redeploy a conductor from riding in the locomotive cab to being on the ground.

The current bargaining round began on Nov. 1, 2019, but negotiations stalled following an August 2020 court ruling that said the train crew size issue should be arbitrated, NRLC said.

In a response to the Wednesday ruling, SMART-TD said on its website, “The ruling does not eliminate any current crew consist provision or requirement. The only thing it does is to open the door for bargaining to occur.” Negotiation impasses mandate mediation per the Railway Labor Act, and there could also be opportunities for the president or Congress to intervene, according to SMART-TD.

Rail Customer Coalition urges STB to pursue reciprocal switching

The Rail Customer Coalition (RCC), an 80-member group representing shippers in the manufacturing, agricultural and energy industries that utilize freight rail, is pressing the Surface Transportation Board to address reciprocal switching as a means to encourage more rail competition.

Its request comes as RCC released an economic report on Thursday that suggests that an increasing share of Class I railroad revenue comes from rail traffic where there are no competitive options.

“Given the dramatic concentration of market power in the railroad industry, rethinking policies designed for a different era is both timely and smart,” RCC said in a Wednesday letter to STB. “Reciprocal switching would help empower rail customers such as farmers, manufacturers and energy providers to choose a carrier that provides the best combination of rates and service. Furthermore, greater market choice would fundamentally change shipper-railroad relationships and help facilitate informal solutions to rate and service issues.

“We urge the board to finalize reciprocal switching rules and to consider further steps that will at long last provide shippers with greater access to competitive rail service. The board should also finalize workable rate-relief procedures for shippers that lack competitive transportation options and scrutinize potential rail mergers to ensure the public interest is protected. Such actions will help fully achieve the Staggers Act’s vision of a healthy and competitive freight rail system,” the letter continued.

RCC’s request comes as President Joe Biden issued an executive order that called on STB and Chairman Marty Oberman to address rail service issues, including competition and reciprocal switching, as well the effects of mergers and acquisitions on rail stakeholders.

“The executive order encourages the board to strengthen its reciprocal switching rules and to consider other rulemaking to strengthen competitive access. … The board has been working on such pro-competitive actions for the last decade and has laid the groundwork necessary to move expeditiously to adopt final rules,” RCC said.

Meanwhile, the report produced for RCC by Escalation Consultants, “Economic analysis: consolidation and increasing freight rail rates,” contends that freight rail rates and rail industry revenue from monopoly pricing have been climbing higher.

Among the report’s findings were that shippers’ real rates increased by 43% between 2004 and 2019, while real railroad costs grew by 8%. The report also said rates for the largest U.S. railroads jumped more than twice as fast as inflation and rates for long-haul trucking.

The report also said for major commodity groups, revenue from potentially noncompetitive rates rose 230%, while revenue from competitive rates grew by 24%. Furthermore, half of railroad revenue in 2019 was generated from noncompetitive rates, compared with 24% in 2004, according to the report.

Escalation Consultants analyzed STB’s commodity revenue stratification reports for eight groups: farm products, food products, wood products, pulp and paper products, chemicals, stone and glass products, metal products and transportation equipment.

ASLRRA praises progress on bipartisan infrastructure proposal

The American Short Line and Regional Railroad Association (ASLRRA) praised actions by the U.S. senators to produce a bipartisan infrastructure proposal. The proposal includes the Surface Transportation Investment Act, which was introduced on June 10.

“We congratulate the Senate for taking this momentous step forward in advancing such a sweeping infrastructure proposal – and we applaud the spirit of bipartisanship, hard work and compromise that allowed for this moment to happen,” ASLRRA said. “While more details are still to come and many will be debated in the days ahead, the deal holds great promise for the short line freight rail industry, the thousands of customers we serve in critical industries such as agriculture and manufacturing throughout the country, and for America’s economic future. We urge the Senate to move swiftly to finalize and pass an infrastructure bill.”

FreightWaves reported Wednesday that a bipartisan group of senators negotiating with President Biden boosted new funding for highway and port infrastructure each by $1 billion from an initial framework announced in June, according to a fact sheet released by the White House.

The “Bipartisan Infrastructure Deal” increases new funds for roads, bridges and major projects from $109 to $110 billion, with port infrastructure investment increasing from $16 billion to $17 billion.

The $550 billion in total new funding in the package dropped by $29 billion from the $579 billion June framework, with $10 billion of the decrease shaved off public transit, which was cut from $49 billion to $39 billion.

The deal invests $66 billion in rail to eliminate the Amtrak maintenance backlog, modernize the Northeast Corridor and bring world-class rail service to areas outside the Northeast and mid-Atlantic. Within these totals, $22 billion would be provided as grants to Amtrak, $24 billion as federal-state partnership grants for Northeast Corridor modernization, $12 billion for partnership grants for intercity rail service, including high-speed rail, $5 billion for rail improvement and safety grants, and $3 billion for grade crossing safety improvements.

Canadian Pacific wants KCS shareholders to say no to CN merger agreement

Canadian Pacific is asking Kansas City Southern shareholders to hold off voting to approve CN’s proposed takeover of KCS.

KCS (NYSE: KSU) shareholders will hold a special meeting on Aug. 19. CP (NYSE: CP) said it filed a proxy statement asking KCS shareholders to vote against the proposed CN-KCS acquisition for the time being. By holding off their approval, KCS shareholders will have the opportunity to gather more information about the acquisition, including federal regulators’ view of the merger.

Rivals CP and CN (NYSE: CNI) are both seeking to acquire KCS. CP and KCS announced their plans in March to merge, but then CN put forth a competing bid and KCS opted to go with CN’s bid instead in May.

Should KCS approve the merger, the agreement between KCS and CN says that KCS would no longer be permitted to consider any alternative proposals, according to CP. This would mean that KCS would be locked into its agreement to merge with CN until Feb. 21, 2022, the end date under the CN merger agreement, CP said.

“CP has always said it wanted to do a friendly deal with KCS and that remains true,” CP President and CEO Keith Creel said. “CP would have preferred not to appeal directly to KCS’ stockholders, but given the impending vote on CN’s proposal, we believe we have no choice. What we are doing here is simply contesting the vote on the CN-KCS proposal because a ‘yes’ vote now would lock KCS stockholders in until February 2022, instead of their being free to consider other, better, options.

“We want to ensure KCS stockholders are aware that a vote today, without the benefit of an STB decision on the CN voting trust proposal and without a chance to consider other proposals until the spring of next year, would not be in their best interests,” Creel said.