Rail/Intermodal
The Surface Transportation Board took a step closer to finalizing its reciprocal switching proceeding this week when it issued a notice of proposed rulemaking (NPRM) that would establish rules and reporting requirements for the Class I carriers. The NPRM would allow shippers to access reciprocal switching as a remedy only in cases where the shipper could show that service is inadequate.
STB is asking for comments to be submitted by mid-October on the proposed rules with replies due by the middle of November. The board likely wants to issue a final rule before early 2024 when Chairman Martin Oberman and member Patrick Fuchs will each reach the end of their terms. It is unclear whether either or both are interested in being renominated to their position.
The reciprocal switching petition has long been a priority for Oberman, so it is no surprise that it gained traction in the final few months of his term. The NPRM seeks comment on several aspects of the board’s proposal, including whether each carrier should have its own threshold for determining whether it is providing adequate service.
STB’s proposal also would establish new public reporting metrics around first-mile/last-mile service, and compliance with trip plan-estimated arrival times issued to shippers. It also would require the board to provide shippers with their specific on-time performance data if the shipper requests it and would make permanent the existing temporary reporting measures that are set to expire in December. The board said it would defer a decision on extending the existing reporting requirements until the reciprocal switching rulemaking is complete.
The NPRM suggests that the board is using service to broaden its regulatory remedies, although there appears to be some momentum on the board to use it to push competition as well. Board member Robert Primus said in a concurring opinion that he would prefer to see the board more forcefully add reciprocal switching to its toolkit of regulatory remedies for competition as well as service.
Service & Volume
Service levels have deteriorated in recent weeks back toward historical averages. These levels will be tested in the wake of several weather-related disruptions that have created backlogs across the North American rail system. It will also be a test of the carrier’s hiring plans as monthly employment figures show most have slowed or ended their aggressive hiring programs of the last year or so.
Carriers were already under the spotlight to increase service levels, but that pressure has only intensified once carriers have been put on notice through the proposed rulemaking that service could determine regulatory outcomes. Historical averages are unlikely to be adequate to satisfy shippers or the board in terms of their expectations relative to what constitutes satisfactory service.
Carload volumes rose in the latest week due to the economically sensitive freight categories. But grain has not shown any sign of an early harvest bump in loadings. Grain traffic remains locked in around 25,000 carloads per week, where it has stayed for much of the last few months. It is expected that the harvest will generate a noticeable bump in loadings, but so far it has not materialized. All eyes are on grain as it was warm in Canada and across much of the Midwest which could dent volumes.
The other major carload bulk sector – coal – is also struggling, which could constrain overall carload growth in the next few months. Coal is not experiencing typical third-quarter restocking demand despite a hot summer in Texas and many parts of the Midwest that boosted electricity generation demand.
