Business groups take aim at chronic rail disruptions after strike threat

President Biden, rail workers unions and railroads avoided a nationwide shut down last week that would have devastated an already ailing U.S. economy. But business groups argue that there is more to be done to address poor rail service, which they say has magnified red-hot inflation. 

Retailers, farmers, carmakers and other rail customers are lobbying Congress to pass legislation that aims to cut down on chronic disruptions. 

Shippers are seizing on Washington’s newfound scrutiny of railroads — an industry lawmakers have largely ignored for decades — after a contract dispute between carriers and labor unions nearly wreaked havoc on U.S. supply chains. 

“There’s a lot of folks who are now aware of just how important railroads are to our economy,” said Chris Jahn, president of the American Chemistry Council, which represents firms that primarily transport products to manufacturers by train. “And now with a spotlight on them, they’re finding out that things are not what they could be or what they should be.”  

Freight rail transports nearly one-third of all U.S. cargo, including 20 percent of chemicals, 20 percent of grain shipments, 75 percent of new cars and huge amounts of crude oil, coal and lumber.  

But shippers say their goods often don’t arrive on time, or at all in some cases, creating ripple effects throughout the economy that reduce supply and drive up prices.   

On average, roughly 70 percent of railcars reached their destination on time since May, when the Surface Transportation Board (STB) began requiring railroads to submit performance data. Railroads fulfilled 87 percent of pickups and deliveries over the same four-month period.   

The leading freight carriers laid off nearly 30 percent of their workforce over the last six years, with most of the cuts coming before the pandemic. That left them unprepared for the recent explosion in demand for goods.   

The Freight Rail Shipping Fair Market Act, unveiled by House Democrats last month, would provide the STB with new funding and authority to establish minimum service standards, incentivize more efficient shipping practices, speed up dispute resolutions and block price hikes during rail emergencies, among other measures.   

Dozens of influential lobbying groups representing shippers, including the American Petroleum Institute and the American Farm Bureau Federation, are teaming up to back the bill, arguing that it would boost the STB’s efforts to streamline railroad service.  

“Service failures are contributing to higher prices and supply chain disruptions for food, fuel, and countless other products,” the Rail Customer Coalition wrote in a recent letter to lawmakers. “The proposal contains many common-sense provisions that would improve service and create a more balanced system for railroads and their customers.”  

The bill’s introduction has sparked a lobbying battle that pits railroads against their biggest customers.   

The Association of American Railroads argues that the measure wouldn’t do anything to help address an economy-wide shortage of workers. The group told lawmakers that the STB is already pursuing similar goals, such as increased competition and transparency in the freight rail industry, through the rulemaking process.  

Railroads note that Martin Oberman, the STB’s own chairman, has pushed back on legislation to dictate the board’s direction in an effort to keep politics out of railroad policy debates.   

“As you can see, the board has a number of tools in its existing statutory arsenal to enhance rail service,” Oberman told lawmakers in May. 

The railroad reform bill is also drawing intense pushback from conservative groups with close ties to GOP leaders. They argue that government intervention over freight rates would ultimately reduce private investment in railroads. 

“In short, the bill substitutes bureaucratic whim for free market negotiation,” more than 20 conservative organizations, including the Club for Growth and Americans for Prosperity, wrote in a letter to lawmakers last week. “That is a recipe for disaster.” 

Supporters don’t expect the bill to pass before the midterms, as lawmakers have a limited number of days left before leaving for the campaign trail. 

Another roadblock is a lack of Republican support. The railroad reform legislation doesn’t yet have any GOP co-sponsors, complicating its path to Biden’s desk.    

Earlier this year, Congress passed a similar bill to crack down on ocean carriers that was backed by many of the same agricultural and retail interests. But that measure primarily impacted foreign firms and was introduced with bipartisan support.   

Companies that rely on railways have long complained that only a handful of freight railroads dominate the industry. Most refiners and chemical plants are only served by one railroad, leaving them with few options when their local carrier doesn’t have enough capacity.  

They say that the lack of competition, combined with severe underinvestment in workforce and rail infrastructure, saddles shippers with sky-high rates that are passed on to consumers.   

“We do not have a free market economy in the railroad space,” Jahn, of the American Chemistry Council, said. “We’d love to give the railroads more business. But the status quo is unacceptable and needs to change now.”