It’s possible that I shall make an ass of myself. But in that case one can always get out of it with a little dialectic. I have, of course, so worded my proposition as to be right either way (K.Marx, Letter to F.Engels on the Indian Mutiny)
Deal that prevented rail strike still needs worker support
JOSH FUNK
OMAHA, Neb. (AP) — A last-minute deal prevented a railroad strike for now, but many rail workers remain unhappy with working conditions, including some who protested outside their workplaces Wednesday ahead of votes to approve the new contracts.
Handfuls of workers gathered outside railyards across the country in pickets organized by a newly formed workers group separate from the 12 unions that negotiated the deals last week with the major U.S. freight railroads. The protesters expressed dissatisfaction with the deals, just as the unions are trying to explain the potential benefits they negotiated to their roughly 115,000 members ahead of contract votes.
Fears about the dire economic consequences of a rail strike that could cripple all kinds of businesses that rely on railroads to deliver raw materials and finished goods prompted the Biden administration to jump into the middle of the contract talks last week and urge both sides to reach an agreement. The contract talks included Union Pacific, Norfolk Southern, BNSF, CSX, Kansas City Southern and a number of other railroads, so the entire country would have been affected by a strike.
Nearly a dozen BNSF workers gathered near Minot, North Dakota, Wednesday with homemade signs declaring “We demand more!!” and “We will not back down.” Another group of a half dozen workers stood outside their worksite in Olathe, Kansas, with signs saying “Railroad greed driving inflation" and “Greedy railroads harming nations supply chain.”
Workers' concerns about time off and demanding attendance policies at the railroads took center stage in the negotiations. In the end, the unions that represent engineers and conductors secured a promise of three extra unpaid days off for workers to attend doctors' appointments without being penalized and improved scheduling of days off to go with the 24% raises and $5,000 in bonuses that a special board appointed by President Joe Biden recommended this summer for the five-year deals.
It remains to be seen whether those concessions are enough to get workers to vote for these deals. A branch of the International Association of Machinists and Aerospace Workers union rejected a deal last week that didn't include those extra days off, so they are back at the table now working on a new pact. Two smaller unions did approve their deals, but the nine other unions will be counting their votes at various times over the next two months.
The two biggest unions that held out the longest — the Brotherhood of Locomotive Engineers and Trainmen union that represents engineers, and the Transportation Division of the International Association of Sheet Metal, Air, Rail and Transportation Workers union that represents conductors — aren't expected to report the results of their votes until mid November. Members of those unions are still waiting to see all the details of the deals that Biden announced last Thursday because lawyers are still finalizing everything before the full agreements get released.
That puts any potential for a strike out beyond the midterm elections, which mitigates the potential political impact of the talks for Biden and the Democrats. If any of the unions do reject their contracts, Congress could still be forced to step in.
Recently retired engineer Marilee Taylor, who left the railroad in Chicago after more than 30 years earlier this year when BNSF imposed the strictest attendance policy in the industry, said she doesn't think the tentative agreements do enough to address the schedule and workload concerns after the major railroads eliminated nearly one-third of their workforces over the past six years. Unions say the railroads' strict policies make it hard to take any time off without a penalty.
“The issue remains we're working fatigued," said Taylor, who is active with the Railroad Workers United coalition that urged workers to go on strike. "The safety of ourselves, our coworkers and the people that we serve — whose communities we run through — are at risk .... These conditions are losing many, many workers who cannot maintain 90% of their every breathing moment in service or at the behest of the railroad.”
Norfolk Southern engineer Hugh Sawyer said it's hard to tell how many workers will ultimately vote for these deals because they might decide these agreements are the best they can get, although he said he's not hearing many people happy with them. Even if they remain frustrated, workers may not be willing to go on strike and risk having Congress intervene and impose a contract on them that could be worse than what the unions agreed to.
“We’re sick and tired of the way we’re treated out there,” said Sawyer, a 34-year veteran of the railroad who serves as treasurer of the Railroad Workers United group that includes workers from all the unions. “There's a lot of anger out there.”
One example of the schedule challenges rail workers face is that Sawyer just had outpatient surgery done earlier this week on one of his days off, but he has no idea when he'll be able to schedule an appointment to have the stitches removed from his head next week because he'll be on call then and doesn't know when he'll be working.
“It's just ridiculous,” he said.
Saturday, September 25, 2021
Burnaby Trans Mountain worker 'knocked unconscious' amid tree-sit protest: police
RCMP in Burnaby are using a lift bucket to reach Trans Mountain protesters.PPSTMX/Twitter
Two people were arrested and one worker was injured Friday as Burnaby RCMP attempted to clear more protesters from a Trans Mountain site, said police.
The first demonstrator was arrested around 9:30 a.m. after trespassing into a fenced area on private property owned by BNSF Railway, in violation of a court ordered injunction stating they could not obstruct, impede, or otherwise prevent access to Trans Mountain work sites.
Around noon, Burnaby RCMP officers returned to the area, located west of North Road and south of Highway 1, responding to reports that a Trans Mountain worker had been injured after being struck on the head by a branch near an occupied tree-sit.
“The worker was knocked unconscious and has been taken to hospital for treatment of his injuries, including a possible concussion,” said police in a news release. “It appears the branch fell on the worker while the protester was repelling between tree-sits.”
RCMP officers trained in high-angle rescue were called to the area. The demonstrator from the tree-sit safely came down on his own around 3:20 p.m.
The demonstrator was arrested at the scene. The incident remains under investigation, police said.
Protesters have been occupied trees in this forested area along the Brunette River for more than a year as Trans Mountain looks to cut more than 1,300 trees.
Zain Haq, 20, who was arrested, said in a news release: “The future of life on this planet is at stake. We must put a moratorium on all new fossil fuel infrastructure … This twinned pipeline poses tremendous risk locally, and globally once the product is burned. The consequences of inaction are catastrophic. As a young person, I am motivated to do whatever I can to dampen the horrors of the not-so-distant future: mass starvation, breakdown of ecosystems, mass extinction, etc.”
Two arrested in separate incidents at Trans Mountain protest in Burnaby Friday
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Trans Mountain worker struck by branch during tree-sit, sent to hospital with possible concussion
CBC News ·
A protester climbs a tree at Lost Creek in Burnaby on Thursday, Aug. 12, 2021. (Maggie MacPherson/CBC)
Two demonstrators were arrested in Burnaby on Friday during separate incidents at a Trans Mountain work site, one of which sent a Trans Mountain worker to hospital.
According to Burnaby RCMP, the first person was arrested at 9:30 a.m., after trespassing onto private property owned by BNSF Railway. This was in violation of a court-ordered injunction stating demonstrators could not obstruct or impede access to Trans Mountain work sites.
RCMP were called back to the area at noon, after receiving reports that a Trans Mountain worker had been struck on the head by a branch near an occupied tree-sit. The worker had been knocked unconscious and was taken to hospital to be treated for a possible concussion.
Police say the branch fell on the worker while a protester was rapelling between tree-sits.
Officers trained in high-angle rescue were called to the area, and the protester came down on his own at 3:20 p.m.
The protester was then arrested. Police are still investigating.
Protesters have been engaged in a tree-sit in a conservation area along the Brunette River since Aug. 3, 2020, with the goal of blocking construction on the Trans Mountain pipeline expansion. The blockade remains as of today, and several nearby tree-sits have been established.
Chris Campbell / Burnaby Now - Sep 24, 2021 | Story: 346714
Photo: Twitter/PPSTMX
Another person was arrested Thursday as police continue to clear out people occupying trees in Burnaby to protest the Trans Mountain pipeline expansion project.
The demonstrator had trespassed into a fenced area on private property owned by BNSF Railway, in violation of a court injunction stating they could not obstruct, impede, or otherwise prevent access to Trans Mountain work sites.
Video showed one person being carried away by police on Thursday.
“The demonstrator was given the opportunity to leave the area voluntarily, but chose not to,” said police. She was safely arrested just before 10 a.m.
“Burnaby RCMP would like to take this moment to remind those who are involved in ongoing demonstrations that police are an impartial party and are there to ensure the safety of everyone involved,” said a police news release.
Earlier in the week, a person occupying one of the trees in Burnaby was arrested. Police in tactical gear are using a lift bucket machine to reach protesters in the trees.
On Friday morning, the group Protect the Planet – Stop TMX said two people had “locked themselves down to the ground” at the tree-occupation site, located west of North Road and south of Highway 1 in Burnaby.
“This is a tactic also used at Fairy Creek, known as a soft block,” said a news release from the group, adding that they expect more people to be arrested today.
The aim is to prevent Trans Mountain workers from cutting the trees. The project will see more than 1,300 trees cut down in the area.
SFU Burnaby students to launch Trans Mountain protest march as arrests continue
An RCMP officer lifted up to arrest a person occupying a Burnaby tree.Cornelia Naylor
A group of SFU students and faculty have pledged to march from the Burnaby Mountain campus down the hill to protest the Trans Mountain pipeline expansion project.
People are invited to gather at 4:30 p.m. at the UniverCity Town Square to hear speakers, followed by the march at 5 p.m. that will end up at the intersection of Gaglardi Way and University Drive.
As organizer and SFU student Hanieh Shakeri explained, “We are organizing this march to bring attention to the dangers of the TMX pipeline, and especially the unsafe situation that SFU students have been placed in by the presence of the tank farm so close to our campus. We hope that SFU will show their commitment to student safety by putting pressure on the government to halt the TMX pipeline project.”
Written byDavid Nahass, Financial Editor , RAILWAY AGE
RAILWAY AGE, FINANCIAL EDGE, SEPTEMBER 2021 ISSUE: For investors, industry watchers and rail consumers, August was either the most interesting or frustrating month to date in the reality dating show, “I Want to Buy a Class I Railroad.”
For those of you not keeping score, here are the highlights:
• Aug. 10:Canadian Pacific (CP) raises its bid for Kansas City Southern (KCS) to approximately $300 per share, covering roughly half of the spread between its original bid and that of CN. KCS subsequently rejects CP’s bid. Surface Transportation Board (STB) Chairman Martin Oberman indicates the STB will issue its decision on the CN-KCS voting trust by Aug. 31, extending the original Aug. 16 date.
Surface Transportation Board Chairman Martin Oberman
• Aug. 13: KCS pushes back its shareholder meeting to Sept. 3, 2021.
• Aug. 30: Activist hedge fund TCI Fund Management Ltd. ups its stake in CN to 5.2%, becoming a “beneficial owner.”
• Aug. 31: STB rejects the CN-KCS voting trust, citing, among many reasons, that the voting trust does not serve the public interest and—more telling—a CN-KCS merger would generate downstream effects. TCI, reiterating what it said in May, demands the resignation of CN Board Chair Robert Pace and CEO JJ Ruest. CP reaffirms its Aug. 10 offer.
• Sept. 1: KCS adjourns its shareholder meeting and says it is considering CP’s sweetened deal.
Let’s parse one or two specifics about the situation. First and foremost is CP CEO Keith Creel and his dance with the flames of success and failure. In May’s Financial Edge, Creel was called out for having too much pride (“I’m not increasing CP’s bid”) and trying to be too clever (offering $275 a share and then—oops!—being immediately bested by CN’s $325 offer). Creel waged a political and propaganda war (as expected) to outline the superiority of the CP proposal vs. the CN proposal.
Until Aug. 31, Creel was running the risk of being too clever for this chess board. CP’s “split it down the middle” indicated that it realized something every investor knew back in April—pride be damned. The voting trust rejection alone was not going to be enough for investors to award KCS to CP for $275 a share vs. the CN proposal.
CP’s increase from $275 to $300 provides just enough carrot ($25 per share) to sway voters who had been concerned about the stick’s (STB’s) rejection of the CN voting trust. Strategically, the timing of CP’s move looked like it was hatched to line up with the STB rejection of the CN voting trust.
However, now that some dust has settled and STB has rejected the CN voting trust, the pieces on the board clearly favor CP.
— Recent decisions have shown a few things: Chairman Oberman achieved his goal of looking judicial and thoughtful and of enforcing a new style of STB management; proxy services demonstrated their protection of “shareholder value”; and CP demonstrated that it was not outwitted on the big stage. —
Pride is not nearly as important as success, and Keith Creel has shown the difference between being savvy and thoughtful vs. being loud and overconfident. In a classic rope-a-dope, a well-positioned Creel responded to the CN bid with a just-right price increase. This, combined with an executable strategy, may be stronger than the CN $325. Creel turned the possibility of being dismissed for being too clever by relying heavily on early STB support, into being just clever enough. As the kids say, “That is fire!”
The increase in price from $275 to $300 per share gave the STB the freedom to reject the CN voting trust at a shareholder cost of $2.6 billion vs. $5.2 billion. This provides plenty of cover for STB. No one, least of all politicians, likes to give the impression that they are messing with the myth of the free market.
The pieces on the board favor CP. CN’s road to completion looks like a dead end. Yet, probability analysis is a finicky thing easily disrupted by a multitude of circumstantial agendas. The decisions in the final days showed a few things: Chairman Oberman achieved his goal of looking judicial and thoughtful and of enforcing a new style of STB management; proxy services demonstrated their protection of “shareholder value”; and CP demonstrated that it was not outwitted on the big stage.
Finally, CN’s failure to acquire KCS will not portend its merger with another Class I railroad to bring the world back into “balance.” CN has no second act in this performance.
In the end, the STB is the straw that stirs the M&A drink. This places extra emphasis on whether the STB is making decisions in the best interest of rail transportation consumers, railroad shareholders or in the STB itself (STB was sued by CN in April 2021). Once the dust settles, Wilner’s call for greater transparency should be the resonance that survives.
— CN’s failure to acquire KCS will not portend its merger with another Class I railroad to bring the world back into “balance.” CN has no second act in this performance. —
As for CN’s future with an activist hedge fund as a beneficial owner, the emphatic rejection of the CN voting trust by the STB and the “power move” by TCI to turn the CN executive suite upside-down and shake it violently virtually assured (at least on the surface) that CN would not be able to pull off a KCS acquisition under any circumstances, whether via appeal or by offering concessions to appease the regulators. If TCI doesn’t have faith in the existing management team—clearly stating, “The CN board must take responsibility for the company’s recent underperformance and failure,” and going as far as to propose a new CEO, Jim Vena—how can that management team have been trusted to negotiate concessions that would satisfy the volatile mix of customers, competitors, regulators and railroads?
In moments of crisis, people are often directed to “look inward,” evaluate key decisions and adapt to a new normal. But when the unforgiving cold of deep space sucks the air out of the room, and you’re about to be blasted out with it, it’s a better strategy to look for a safe landing spot.
Written byFrank N. Wilner, Capitol Hill Contributing Editor, RAILWAY AGE
News Item: The Surface Transportation Board (STB) has found that among seven Class I railroads, five—BNSF, CSX, Kansas City Southern, Canadian Pacific (CP)-owned Soo Line, and Union Pacific—were revenue adequate for 2020. Norfolk Southern and CN-owned Grand Trunk Western were within a fraction of a percentage point of making the cut.
Revenue adequacy means a railroad earns enough to cover total operating costs, including depreciation and obsolescence, plus a competitive return on invested capital sufficient over the long term to attract capital to maintain a railroad’s large and costly infrastructure, including locomotives and rolling stock.
Back when railroads were serially revenue inadequate, even by better-trusted Wall Street calculations, many a scrap dealer stood in the bid line—a dismembered carcass appearing more valuable than the whole.
Indeed, when the Chicago, Rock Island & Pacific Railroad went bust and was liquidated in 1980, its largest single stockholder, Henry Crown, was quoted in the March 5, 1980, New York Times that he “recognized many years ago that the Rock Island was worth more dead than alive.”
No more, no more. Just follow the money trail. Notwithstanding a COVID-infected 2020 that spread gloom across wide swaths of the global economy, five Class I railroads still were deemed by the STB to be revenue adequate—the other two so barely short of the achievement that non-math majors wouldn’t recognize the difference.
Little wonder that railroads have become a siren call to investment funds and each other. CSX and Norfolk Southern shelled out $13.6 billion above market value for Conrail in 1998, while non-railroad holding company Berkshire Hathaway paid $22 billion above market value to acquire BNSF in 2010.
Other investment funds—although unsuccessful in bagging their railroad prey—similarly performed a version of the peacock mating ritual, flashing plumes of colorful currency during courtship. Who knows what the final acquisition premium will be for mini-Class I Kansas City Southern once its hungry-for-profit shareholders decide between CP and CN? Already, KCS is owed a $1 billion break-up fee from CN following the STB’s rejection of CN’s proposed voting trust.
While acquisition premiums deliver impressive paydays for stockholders of the target railroad, it is shippers who stand to suffer. The transfer of cash—including if the transaction is aborted and break-up fees are paid—may initiate a period of deferred maintenance and a delay of capital investment essential to medium- and long-term service quality.
Especially at risk are captive shippers—those lacking effective transportation alternatives to rail—as they may receive less rate relief or be precluded altogether from challenging the reasonableness of rail freight rates increased as a result of an acquisition premium being paid.
More precisely, the acquisition premium increases the investment base used by the STB to determine variable costs. As the investment base rises, the ratio of revenue (the freight rate) to variable costs (R/VC) decreases, and rates below 180% of variable costs are immune from shipper challenge. An increased investment base also lowers a railroad’s return on investment, which adversely impacts revenue adequacy.
Captive shippers endure a triple whammy when acquisition premiums are paid:
• First, there is the risk that maintenance will be deferred and capital investment delayed owing to cash shortages or a need to reward investors with dividends and buybacks.
• Second, as the R/VC ratio decreases, regulatory relief becomes more limited.
• Third, an acquisition premium can cause an otherwise revenue adequate railroad to appear revenue inadequate and immune from protection as provided by a 1985 ICC decision (still in force) known as Coal Rate Guidelines. The guidelines included a Revenue Adequacy Constraint—that upon achieving revenue adequacy, a railroad is constrained from taking further rate increases unless it demonstrates its need for higher revenue, the harm it would suffer if it could not collect higher revenue, and why a shipper should pay higher rates.
So, what might an aggressive STB do to protect captive shippers?
For one, where an acquisition premium is paid, the STB can order the inflated investment base reduced by the amount of the acquisition premium. In fact, the STB did just that following Berkshire Hathaway’s 100% acquisition of BNSF—but only for three years owing to a regulatory anomaly.
Unlike the unfolding CP or CN and KCS transaction, the Berkshire Hathaway transaction was immune from regulatory approval so long as Berkshire Hathaway owned no other railroads. When it was discovered it already owned two short lines, the STB ordered the investment base adjusted downward by the amount of the acquisition premium for a three-year period, pending sale of those short lines—at which time the transaction again became immune and the investment base increased, over a four-year phase-in period, to reflect the acquisition premium.
The practice of including acquisition premiums in a railroad’s investment base followed 1987 recommendations of a congressionally created Railroad Accounting Principles Board (RAPB). But the STB has in the past detoured from GAAP (Generally Accepted Accounting Principles), as in ignoring the positive impact on revenue adequacy of a $1.5 trillion tax cut enacted by Congress in December 2017. Prior to the RAPB’s recommendations, historical costs (when assets were first dedicated to public service) were used to compute a merged railroad’s investment base rather than acquisition costs. Notably, the Federal Energy Regulatory Commission (FERC) does not allow an acquisition premium to result in higher rates, absent a demonstration of offsetting customer benefits.
Alternatively, the STB can eliminate the impact of acquisition premiums in determining market dominance—the threshold for advancing a captive shipper’s rate reasonableness complaint.
Or, the STB could create a corresponding customer benefit to offset the negative shipper impact of acquisition premiums. It can condition merger approval on systemwide competitive access to assure two-railroad competition at sole-served terminals. In fact, when CP sought to acquire Norfolk Southern in 2015, CP CEO E. Hunter Harrison said he was open to allowing competing railroads to utilize the merged railroads’ track to reach sole-served customers and would quote line-segment rates in bottleneck situations.
Meanwhile, there lurks another bogeyman—legislation bringing railroads more fully under the antitrust laws and shifting to the Department of Justice authority to rule on rail merger applications.
In 2001, after the STB imposed a 15-month rail-merger moratorium to allow it to write New Merger Rules—an action that aborted a proposed merger between BNSF and CN—BNSF CEO Robert D. Krebs told an annual meeting of the Transportation Research Forum, “Several years ago … I favored shifting jurisdiction over railroads to the Justice Department. Today, I wish I’d worked harder to make that happen.”
Then in March 2009, attorneys general from 20 states signed a letter urging Congress to revoke the railroads’ antitrust exemption where STB oversight exists, and grant federal agencies and state attorneys general authority “to challenge anticompetitive business practices and mergers and acquisitions in the railroad industry.”
Revenue adequate railroads must now further contend with activist STB Chairman Martin J. Oberman, who told a North American Rail Shippers conference in Chicago Sept. 8 that the statute guiding STB actions “mandates that the STB consider the best interests” of the shippers and the public “as well as railroad owners.”
The urgency of hearing directly from other STB members is more pronounced, given Oberman’s other comments Sept. 8, which were nothing less than a change-agent’s dagger aimed at Class I railroads. Citing STB data, Oberman said that since 2010, Class I railroads paid out $53 billion more in stock buybacks and dividends ($191 billion) than was spent on infrastructure ($138 billion).
“Where would rail customers, rail workers and the public be if a meaningful portion of that $191 billion had been re-invested in expanding service and making service more predictable and reliable?” asked Oberman rhetorically—and, to railroad ears, surely sounding much like Sen. Bernie Sanders (I-Vt.) suggesting redistribution of wealth.
Since partial economic deregulation of railroads in 1980—and probably even before, during the age of more heavy-handed regulatory oversight—no ICC or STB chairman has taken to a bully pulpit to disgorge such anti-railroad rhetoric. With lame-duck Republican Begeman awaiting a Democratic successor, Karen Hedlund, giving Democratic Chairman Oberman’s STB a 3-2 Democratic majority, railroads are on notice from Oberman’s strong signal to revisit, reconsider and revise their business plan.
Postscript: Another relevant voice—although no longer an STB member—is Democrat Debra L. Miller (2014-2018), currently director of the University of Kansas Public Management Center. In conversations Sept. 9 with this writer, Miller said:
“During my time at the Board, I grew concerned that the rate regulation process is so flawed that there is no path to fixing it. In order to even begin the process, a shipper has to vacate its contract shipping rate and accept a tariff rate. Not only will the tariff rate be substantially higher than the contract rate, making it a very costly change, but railroads can easily raise the tariff rate without the need of any approval, so the shipper has to put itself in a very financially vulnerable position before even beginning the rate review process.
“And we should be clear that the process requires shippers to build a hypothetical stand-alone railroad at today’s costs, or what has been termed replacement cost. How can anyone build a railroad today and compete with a railroad that was built over the past 150 years? They can’t.”
Apprehend the echo of Bob Dylan—“The times they are a-changin.’”
Frank N. Wilner is Railway Age’s Capitol Hill Contributing Editor. His seventh book, “Railroads & Economic Regulation,” will be published in early fall by Simmons-Boardman Books. For two decades, Wilner was the principal drafter of rail industry policy positions and congressional testimony at the Association of American Railroads. He later held a White House appointment as a chief of staff at the STB and was director of public relations for the United Transportation Union and its successor, the Transportation Division of the International Association of Sheet Metal, Air, Rail and Transportation Workers. A former president of the Association for Transportation Law, Logistics and Policy, Wilner also edited its law journal. He has written for the Heritage Foundation and was a columnist for the Cato Institute’s Regulation magazine. He earned undergraduate and graduate degrees in economics and labor relations at Virginia Tech. Among Wilner’s other books are “Understanding the Railway Labor Act,” “Railroad Mergers: History, Analysis, Insight,” and “Amtrak: Past, Present, Future.”
Public Ownership of Rail Is on the Agenda. Here’s What It Could Look Like.
Last year’s catastrophic East Palestine train derailment has spurred calls from a rank-and-file labor group for public ownership of rail infrastructure. We spoke to an expert about what that could look like in the US, which is dominated by for-profit rail.
Nearly one year ago, on the night of February 3, 2023, a Norfolk Southern freight train carrying hazardous materials derailed in East Palestine, Ohio. Videos of the smoke and fire released by the nearly two-mile-long train went viral, and residents in the community reported severe health effects.
The rail disaster triggered an outcry: Why did this happen, and what can any of us do about it? Soon, there were articles detailing the alarming state into which the country’s railroads have fallen: accidents are up, and oversight is hard to come by. Plus, there is a severe squeeze on rail workers, many of whom lack sick days of any kind and are effectively always on call.
Railroad Workers United (RWU), a caucus of rank-and-file workers spanning all thirteen national rail unions, recently released a video offering one answer to the rotten state of US rail. “Putting America Back on Track: The Case for Public Rail Ownership” opens in East Palestine, with a resident of the area showing the viewer photos he took the night of the Norfolk Southern derailment. The video goes on to make the case for public ownership of rail, which has been a focus for RWU over the past year.
As Ross Grooters, RWU cochair and a union locomotive engineer, toldJacobin, the workers came out with the demand amid their ugly contract fight in 2022, which ended with Joe Biden intervening to quash a potential rail strike.
“It became really clear between the contract negotiations and the fact that the railroad companies are making obscene amounts of money operating the railroads purely for the purpose of extracting wealth from what should be critical infrastructure, that the only way for rail to work would be outside the for-profit model that it exists in currently,” said Grooters.
So RWU passed a resolution endorsing the campaign. The case has been articulated by RWU members in several publications, from Jacobin to In These Times to FreightWaves, but with the release of RWU’s film, I wanted to hear more about the models under debate, so I called up Maddock Thomas, who is writing a policy paper on public rail ownership for RWU. We spoke about the current structure of rail ownership, alternative public models, and which country has the most functional rail system. Our conversation has been lightly edited for length and clarity.
The Consequences of Private Ownership
ALEX N. PRESS
RWU’s video lists some of the antisocial consequences of private rail ownership: problems for communities, issues for the economy, and of course, rail disasters like we saw in East Palestine. As the film puts it, “some industries are just too important to be kept in private hands.” Can you list some of the consequences that follow from private ownership of rail?
MADDOCK THOMAS
Safety is on a lot of people’s minds now, post–East Palestine. The number of railroad accidents per millions of miles traveled has been trending down over the larger time scale of the past fifty years, in part because we don’t have as many trains or as many train lines running. But since 2013, we’ve gone from 2.4 rail accidents per million miles for Class One railroad to just over 3 accidents per million miles. That’s almost a 30 percent increase in the accident rate.
That can largely be traced to the advent of precision scheduled railroading (PSR), which is neither precise nor scheduled nor really railroading, as people like to joke. The focus is on longer trains at all costs and cutting crews, cutting maintenance. Union Pacific recently announced furloughs of 1,350 maintenance workers, saying that for financial reasons, they are moving all their maintenance to 2024. That’s something you don’t want to hear when a rail line goes through your community.
The role of PSR is really evident when you look at the accident rate. Norfolk Southern has gone from 2 to 4.5 accidents per million miles between 2013 and 2022; the rates for CSX and Union Pacific have also risen. BNSF, the only rail operator not to adopt PSR, didn’t see that same increase. They’ve had around 2.25 accidents fairly consistently for the past decade. So there’s a clear change in railroading that has led to the decrease in safety.
There’s also the issue of service and how workers are being treated. The idea of the railroad as a good job is fading as the treatment of rail workers has gotten worse and worse. The Federal Railroad Administration conducted a study on fatigue which found that nearly 40 percent of locomotive engineers and conductors are highly fatigued and almost 90 percent of engineers and conductors reported that it is the irregular work hours that contribute to fatigue. You can receive a call at any time in the night and be told that you have two hours to get on the train. That’s disastrous for someone’s ability to see their family and to have a life outside of work.
The total rail employment has also cratered. One of the ways that rail companies try to make more money is by laying off workers. We went from a peak in 2015 of around 210,000 rail workers to around 150,000 now. They laid off a ton of people during COVID and haven’t been able to hire them back, which has put a strain on everyone that remains on the rail.
The State of Rail in the United States
ALEX N. PRESS
What is the current structure of ownership in rail, and how has it changed over time?
MADDOCK THOMAS
We’ve seen massive consolidation throughout the twentieth century. We functionally have a duopoly on the East Coast and the West Coast. In the east, we have Norfolk Southern and CSX. In the west, we have BNSF and Union Pacific. All of those are publicly traded corporations save for BNSF, which is owned by Warren Buffett’s Berkshire Hathaway.
The Class One railroads are the really big railroads that most of the interstate traffic in the United States travels on. They’re privately owned and operated, but “for profit” doesn’t do it justice, because the railroad companies will refuse profitable traffic if it is not as profitable as it could be. So there are those major four corporations in the United States.
Then you have Class Two and Three railroads. Those are smaller, and a lot of them are owned now by conglomerates, the largest of which is Genesee & Wyoming, which owns dozens of railroads across the United States. Those that aren’t owned by conglomerates are generally owned by local businesspeople or municipalities. These lines were sold off after the deregulation that followed the Staggers Rail Act in 1980, when it became much easier to sell off Class One lines that weren’t as profitable and weren’t main lines.
There’s more public rail ownership in the United States already than you’d think, because as a result of deregulation, a lot of the Class Ones started trying to cut service and sell off some of these smaller lines — which, though not immensely profitable, were critical to a lot of communities, especially rural communities, and for agriculture. Every state except Hawaii has some sort of publicly owned rail line.
Those are rarely operated by the state, but they’re owned by the state and contracted out to be operated or leased to one of those other Class Two or Three short-line operators to continue to provide service. The state provides funding for the infrastructure and improvements so that you still have real service to this community that otherwise would have been cut off.
One of the better-known and best-operated railroads is the municipally owned Madison Railroad in Madison, Indiana. They took an abandoned rail line from Conrail and have revitalized their local community and brought a good number of industries to town because they have a publicly owned and operated railroad.
Looking back at US history, federal land grants led to a lot of the transcontinental railroads. We gave free land to different railroad corporations with the condition that they just build the railroad. According to some estimates, 10 percent of the land mass of the United States was given away for free to rail corporations along with federally backed debt to fund the construction.
ALEX N. PRESS
You mentioned the Staggers Rail Act of 1980, which deregulated rail. What’s the story behind that?
MADDOCK THOMAS
After World War II we had the advent of the highway system, which was a huge public investment. It was essentially an enormous subsidy for trucking companies because suddenly they had excellent infrastructure systems that they didn’t have to pay for themselves. It was very cheap for them to operate and compete with railroads, whereas the rail lines were privately operated and had to pay for all their own infrastructure.
Railroads started going bankrupt as industry declined by the 1950s, particularly in the northeastern United States. The most famous and controversial example is the New York Central and the Pennsylvania Railroad, which were for a long time considered the two greatest railroads in the world.
By the 1950s, the United States was going to lose a lot of passenger rail services, commuter rail services, and freight service to a lot of communities in the Northeast and in other parts of the country if something wasn’t done. Though there are a lot of downsides to deregulation, the regulation that was happening on the railroad was in a number of ways antiquated and suffocating them.
After the Penn Central merger went through and Penn Central went bankrupt, Conrail was created by the federal government to take over its remnants plus the New Haven and a number of other rail lines from Pennsylvania up to New England, even stretching out to Chicago. Conrail was an enormous conglomerate and it was really successful at what it did, even though it required cutting some lines, which were then turned into short lines. It saved railroading in the Northeast and eventually became profitable, which was their goal.
The moment it became profitable, Congress sold it off because it was never intended to be a long-term solution but rather a stopgap measure to save the railroads. But in order to make Conrail viable — and fulfill something that the other railroads had been asking for for a long time — they got rid of the powers of the Interstate Commerce Commission (ICC), which was one of the most important federal bodies for the better part of a century.
The Staggers Act essentially eliminated the ICC and allowed railroads and their customers to negotiate freight rates themselves. Supposedly this allowed for competition in the rail industry, but it also allowed for massive consolidation. That’s how we get two railroads on each coast now.
The Public Ownership Option
ALEX N. PRESS
What would public ownership look like in the United States?
MADDOCK THOMAS
There are different perspectives on this, but a publicly owned railroad would have to be a service-first railroad: for passengers but also businesses across the United States, from rural agriculture to factories near port cities. Doing so would require a massive shift.
The plan put forth by railroad workers about a century ago entails having the federal government buy out the railroads, and then having a railroad corporation governed by a board composed of one-third appointed for the public interest by the president, a third by management, and a third by union employees.
The rates charged would be a certain amount of the operating cost plus a percentage of the capital costs: the maintenance and the bonds. But if they were able to reduce the operating costs, rather than keeping that money and buying back shares or giving dividends to shareholders, as we see now, those cost saving would be distributed to the public in the form of decreasing freight rates — making it cheaper to transport things by rail, which would then attract customers off of the roads, which would be better for congestion, for the environment, for smog, etc.
It could also be used for further improvements for service, perhaps to fund electrification, as well as faster rail service for passengers by improving track quality. The first priority would be improving the infrastructure and service. We just don’t see that happening with today’s railroads.
There’s also the model of open access, which is very popular right now. Internationally, it comes along with the neoliberal trend towards everything needing to be a market, but it’s popular in the United States, including among a number of people in RWU. This model is of the railways as a steel highway in that it would be publicly owned infrastructure, with access based on different levels of access charges to different rail operators to provide competition for service.
I think a public rail system that would work for the United States is somewhere in the middle of those two models. From the research I’ve done on New Zealand, on British rail, and on the current liberalization, which is what they’re calling this open-access movement in the European Union, I’m skeptical that open access alone can be a model for the United States. The rail corporations would love not having to pay for the maintenance on the railroads and just operate trains on the few lines that are super profitable.
If we allow open access, you’re only going to have competition on the few lines that are super profitable, which are primarily bulk commodities — coal, stone, and the like — and intermodal containers. You’re not going to see service to any of the industry that’s less profitable and predominantly located in rural communities.
You’re going to need a public operator, not as an operator of last resort but as a guaranteed competitor in the model of public service first, and if you want to compete with that, you’re welcome to try and put your service forward. But we need to have a guarantee that rail service will be available on our national network and can’t just come and go as different operators enter and exit the market, which has been a problem with privatization in the UK.
The other issue there is that historically, when you separate infrastructure from operations, a number of studies have concluded that you get much worse maintenance. So that is a concern if we have a federally owned infrastructure that is not also in some way affiliated with an operator that operates over those rail lines. It may be slightly different if we have publicly owned infrastructure, because a lot of times that separation has happened through privatization, such as in Europe or the UK or New Zealand, but it is something that we have to be concerned with.
ALEX N. PRESS
You’ve mentioned the UK, Europe, and New Zealand. What is the most functional rail system in the world?
MADDOCK THOMAS
A lot of people would point to Switzerland, which has SBB [Swiss Federal Railways], a large state operator that provides a superb service to both passengers and freight operators. They also have regional rail lines that might be owned in some cases by private enterprises but predominantly by regional governments.
Switzerland is excellent in passenger service, with some of the most punctual and frequent service in the world. It’s very highly electrified, which has benefits for the environment, but it’s also just way better operationally: it’s cheaper to operate, it accelerates faster, it uses less energy, and the vehicles themselves last way longer because there aren’t explosions happening every few seconds inside of your motor.
There are a number of other railways that are fairly well operated. The Chinese national railway is pretty well operated. India’s national railway is doing an incredible job investing in infrastructure: they’ve gone from very minimally electrified, with a goal of being 100 percent electrified by 2025. Right now, they’re at over 80 percent. One of the most common criticisms of electrification in the United States is that you can’t fit double-stacked containers, but India has electrified, dedicated, double-stacked container corridors, and they work. So India is a good model of a successful naturally integrated plan for both passenger and freight rail.
All of these countries have issues and of course, India and the United States are at different points developmentally — so you’d think with the wealth of our nation and the amount of infrastructure we’ve built in other areas like our highways, we could have done that decades ago.
But we don’t have the national coordination or foresight that comes from that publicly owned system. Instead, we have a bunch of separate rail operators who don’t want to make those investments unless they’re subsidized.