Date: Thursday, December 29, 2022
To say that 2022 was an eventful year for the U.S. and Canadian freight railroads would be an understatement. U.S. freight railroads made national news at least twice this year amid speculation that union members would go on strike over disagreements on what should be included in a new labor agreement, while both U.S. and Canadian railroads sought to improve rail service and become more nimble players within the supply chain network.
Here are some of the big news stories of this past year:
Labor issues come to forefront
The challenges in reaching and ratifying labor agreements between the major freight railroads and their unions highlighted some of the issues that the industry is facing with its craft workforce. On one hand, the railroads are competing with other industries to attract and retain people and talent. On the other hand, the industry is also grappling with low morale among some union members who feel that recent operational changes have caused the railroads to do more with less, leaving union members who have stayed to feel stretched thin.
The national negotiations and most recent bargaining round may have ended, but issues about how to establish sick leave and attendance policies that promote a better quality of life will likely be discussed at the local level in the next several months.
Railroads stymied by subpar rail service
Toward the end of 2022, the argument that the industry’s head count reductions had a direct role in deteriorating rail service entered more forcefully into public debate. Earlier this month, the chairman of the Surface Transportation Board was seeking to bring that connection more to light during a hearing on Union Pacific’s increased use of embargoes over the past five years.
Rail service has improved since STB’s hearing in April looking at why service metrics have deteriorated, and the Class I railroads have said they have beefed up efforts to recruit more workers. But the jury is still out among shippers on whether rail service can meet their needs, especially following a year in which both UP and BNSF issued embargoes to relieve congestion on their networks.
Surface Transportation Board gets active
In the midst of rail service problems, a silver lining for shippers is that they have a Surface Transportation Board that appears to be taking an active role in addressing how to improve rail service for the benefit of the industry. The STB most recently issued decisions on rulings addressing small rate disputes, and the board asked the Class I railroads to send them data in order to demonstrate improvements with hiring initiatives and service metrics.
While STB has held numerous public hearings, not just on rail service but on mergers and acquisitions within the rail industry (see below), congressional leaders and other stakeholders questioned during the year whether STB should be given more authority to address shipper issues. That could be a continued focus in 2023.
Canadian regulators seek industry improvements
While the Canadian Class I railways might not have had the service issues that their U.S. counterparts may have had, Transport Canada is considering some measures related to rail service and rail safety. The federal agency is considering collecting more rail service data to improve supply chain visibility — something that some shippers support — and it is calling for major Canadian railways to install positive train control on their networks.
Mergers and acquisitions still an element of the industry
Rail service issues and labor strife may have had the spotlight for much of the year, but M&A activity continued in 2022 as well.
Among the Class I railroads, CSX sought for federal approval to acquire New England short-line railroad Pan Am Railways, and CSX received that approval and subsequently completed the acquisition. Canadian Pacific and Kansas City Southern went before STB multiple times to discuss their proposed merger. In the CP proceedings particularly, questions about maintaining access to interchange points were brought up by the other Class I railroads.
One broader issue that was raised during these proceedings was how the freight railroads should accommodate passenger rail, namely Amtrak, should these mergers proceed. Per federal law, the Class I railroads must give passenger rail priority in using Class I-owned railroad tracks. This interaction between Amtrak and the Class I railroads was also seen in Amtrak’s proceeding requesting STB grant permission to establish Gulf Coast service between New Orleans and Mobile, Alabama.