Rail shippers and carriers still at an impasse regarding reciprocal switching

While all logistics services providers and carriers and carriers strive for harmonious relationships, things do not always work out as planned.

That essence was captured by Bruce Carlton, president and CEO of the National Industrial Transportation League (NITL) at last week’s Rail Trends conference in New York, sponsored by Progressive Railroading magazine and independent railroad analyst Tony Hatch.

“Shippers and railroads sometimes agree, and sometimes we don’t,” said Carlton.

This was particularly applicable to the NITL’s petition filed with the United States Surface Transportation Board (STB), requesting that the STB adopt new rules regarding reciprocal switching between Class I railroad carriers, formally known as Petition for Rulemaking to Adopt Revised Competitive Switching Rules, EP 711.

This proposal would require a Class I rail carrier to enter into a competitive switching arrangement whenever a shipper—or group of shippers—demonstrates that certain objective operating conditions exist. NITL officials said in mid-2011 that the League is asking the STB to eliminate existing competitive access rules and precedents as they apply to reciprocal switching and replace them with the following conditions:
-the shipper’s or receiver’s facilities for which switching is sought are served by only one Class I rail carrier;
-there is no effective inter- or intramodal competition for the rail movements;
-there is (or can be) a “working interchange” between a Class I rail carrier and another Class I within a “reasonable distance” of the shipper’s facilities; and
-the proposal states that a competitive switching agreement shall not be imposed if either rail carrier can establish that the arrangement is not feasible, or unsafe or, that it would unduly hamper the ability of either carrier to serve its shippers.

“From our perspective, this would introduce a measure of head-to-head competition, between the Class I railroads in the U.S.,” said Carlton. “This petition is built on a discussion of competitive switching and the rights, privileges, and responsibilities that are wrapped around the whole subject of switching.”

In reviewing the NITL petition, Carlton said that the Department of Transportation’s Surface Transportation Board (STB) asked the NITL and the railroads good questions regarding what the subsequent impact would be on shippers and Class I railroads—in terms of those who could and could not take advantage of switching—were the NITL’s requests to be granted.

Carlton said these were not easy questions to answer, adding that the STB provided NITL access to the confidential waybill sample it controls with limited visibility of its data.

“This is about competition, it is not about regulation or re-regulation,” said Carlton. “We continue to say and we do want a strong, profitable, well-functioning freight railroad industry. Shippers need it and depend on it and it is a mutual goal with our railroad friends.”

The NITL meanwhile is continuing to work on replies for the STB relating to the petition, with a deadline of March 31, which Carlton said is likely to be followed by a “long pause” as the STB pours through NITL’s and the railroads comments on this matter. 

Association of American (AAR) Railroads President and CEO Ed Hamberger agreed with Carlton in that the STB’s questions regarding EP 711 were spot on.

“Like NITL, we will be doing our best to try to show what the impact would be, not just from a revenue standpoint from a freight rail perspective but also on efficiency and the effect on service,” he said. “I am told that to spot a car after it is loaded and to bring it back into service on a single line can be as few as six discrete moves to that car. If you have mandatory reciprocal switching, that can grow to 16-to-20 moves. Each one of those moves is an opportunity for something to go wrong, and each move takes time and equipment and personnel and clogs up rail yards. We believe that EP 711 would have an adverse impact on revenues and operations.”