AAR President and CEO Jefferies addresses myriad freight rail issues at RailTrends

When describing 2020, at last week’s virtual RailTrends conference, which was hosted by Progressive Railroading Magazine and independent railroad analyst Tony Hatch, Association of American Railroads (AAR) President and CEO Ian Jefferies called it an odd and challenging year, with some definitive caveats.

“I do think it is worth emphasizing what the industry went through, from March to present day,” he told the audience, which was comprised of rail and intermodal carriers, shippers, and analysts, among other industry stakeholders. “We are certainly better off than airlines and some other industries, which saw upwards of a 30% traffic drop off within a very short amount of time. And what we are seeing now is certainly a snap-back I am not sure anyone saw coming but is certainly welcome to see. We hope that carries on through the end of the year. The traffic mix that is driving it is tweaked a bit, but certainly the industry has proven resilient. It is something I am immensely proud of.”

And Jefferies added that he was also proud that the railroad sector did not have to turn to Washington, D.C. for any type of pandemic-driven bailout, noting how rail is a well-capitalized industry built to ride out crises along these lines.

He said the focus for railroads was to ensure its employees were able to work in a safe manner through some targeted waivers with the Federal Railroad Administration to enact some social distancing policies within its workspaces. Those waivers were used sparingly but helped to keep the sector from missing a beat and to serve communities. What’s more, he pointed to how DHS established freight rail workers as critical infrastructure employees in mid-March as key, with AAR’s security team leading the charge in getting that designation.

Conversely, though, he said that the sector experienced some furloughs in tandem with traffic reductions, too, adding AAR was thrilled that rail employees were made eligible for enhanced employment benefits through the CARES Act. And he added that AAR member carriers have been able to bring some people back to work and look forward to continuing that trend, as traffic hopefully continues to improve.

Election impact: When assessing where things stand now that the election is in the rearview mirror, Jefferies said that the industry is ready, willing, and able to work with whomever is in charge, as AAR has good relationships with both sides of the aisle.

“Both sides have areas they care about more than others, but railroading has traditionally been a pretty bipartisan exercise, not to say we don’t have our challenges, but, when it comes to Congress, we feel pretty good about a divided government,” he said. “That tends to drive moderation and predictability. For example, with corporate tax policy, we expect a largely stable environment over the next two years, given the likely divide in the House and the Senate.”

A big focus for the sector has to do with surface transportation authorization, according to Jefferies.

He pointed to how the AAR was not thrilled with the House’s proposed surface transportation authorization this year, calling it “unfortunate” that House leadership took a very divided and partisan approach to how it pursued surface reauthorization.

“I am hopeful we are chalking that up to election year politics, but when we looked at that bill there were numerous troubling provisions, primarily a two-person crew mandate, which we have been fighting very hard against, prohibitions on the Mexican crew paradigm that has been set up and really opened up the flow of commerce across the border in Mexico, increased throughput, and decreased block crossings in Laredo and really provided a benefit for all sides,” he said.

Looking ahead, Jefferies said that the sector is going to take a very forward-looking approach and work hard to work with the House to hopefully take a more moderate and bipartisan approach to a new surface reauthorization in the House.  

“I thought it was telling that the railroads have strong concerns and were very vocal, but the states highway transportation association came out with reservations about that bill, and those were the folks that reaped the benefits of funds,” he said. “We are hoping that the House takes a step back and recalibrates to the middle. We are ready for compromise and prepared to work hard, but there are certain red lines that we will work hard against to make sure they don’t end up in a final bill.”

On the Senate side, Jefferies expects a more moderate piece of legislation, adding that, at the end of the day, he is hopeful the next surface transportation authorization comes out in a good spot.

“Whether or not there is going to be another COVID stimulus bill is the current debate,” he said. “There are a lot of benefits coming to an end here, and I think, for the industry, we are not seeking anything directly. We thrive as the economy does…so stimulus that stabilizes and supports the economy, I think, is a good thing…and hopefully we see folks come together early into next year.”

STB: As for the Surface Transportation Board now at five members Jefferies said that having a full five-member slate, for the STB, is something AAR has been pushing for over the years.

“We think the Board benefits from having a full slate, so, for the moment, we have a five-member board for the first time since it was expanded to five,” he said. “The STB has been very engaged on a number of issues…like our concerns over the Final Offer Rate Review proposed rule. In my opinion, the fact that we have five members is certainly going to cause the Board to take a step back, with two members having to get ‘schooled up’ on everything the Board has been engaged on and that does not happen overnight, it is a pretty steep learning curve for economic regulation matters. I think it will probably create a board that is a bit more deliberative, more cautious. It is a lot harder to get five folks on board for something than three, if the goal is consensus, with the Board generally trying to work to get consensus.”

Trade: Looking at trade, Jefferies said that freight railroads have not traditionally been involved in trade until North American Free Trade Agreement (NAFTA) negotiations started, while saying he is pleased with NAFTA’s successor, the United States Mexico Canada Agreement (USMCA).

“I think we are looking forward, hopefully, to more normal trade relations around the globe, when the U.S. is involved,” he said. “In our opinion, fair, free trade is a must…42% of rail movements are based on international flows, so we want to see fair open trade and goods moving. A Biden administration will certainly bring a little more certainty there.”

Climate Change: Jefferies also talked about climate change, something he said railroads have not been engaged on historically.

“I anticipate we will be much more engaged and forward-leaning on that issue, and I think we have a lot to offer as part of the solution…given the immense reduction in emissions moving by rail versus competitive truck traffic,” he said. “Given the environmental issues and challenges that are being sought by the administration or Congress, I think we can play a very productive role. Look for us to be more historically involved than we have been before in the coming years.”