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Too Big To Rail: Railroads, Safety, and Accountability

Image: Creator: NTSBGov | Credit: via REUTERS

Four high-profile American freight rail derailments in four weeks — three of which involved rail cars carrying hazardous materials, with multiple chemical spills and fires — sounds like a lot. In fact, trains go off the rails in America’s railroad network about 20 times a week on average, so there have probably been dozens in February aside from the ones that made the news.

Unfortunately, America’s rail workers are all too familiar with the consequences of how the railroad industry has been operated over the past 30 years. Precision scheduled railroading (PSR) has made the difference. PSR is a business model focused on reducing overhead costs and generating returns for shareholders. Similar to many other business models driven by financialization, it’s effectively  a scheme by giant railroad operators to cut staff and backup resources, push the remaining equipment and personnel to the breaking point, and funnel as much of the cash as possible to Wall Street. And by increasing market concentration even further, the recently approved rail merger between Canadian Pacific (CP) and Kansas City Southern (KCS) promises to make the situation even more dire — for railroad workers, for the communities our rail lines pass through, and for the American economy.

After half a century of consolidation, America now has only seven Class I railroads, which own virtually all the long-distance track and operate almost all the freight traffic. Four of them alone control 83 percent of U.S. rail freight. And if the pending $30 billion CP-KCS merger is approved by the U.S. government’s Surface Transportation Board, the Big Seven will become only six.

In a January letter to the Surface Transportation Board, the U.S. Justice Department expressed “serious concerns about increasing consolidation” in the freight railroad industry that would result from the CP-KCS merger. In light of “the recent supply chain disruptions that have wreaked havoc on American consumers and businesses,” DOJ noted that the new combined railroad could deny commercial customers access to cost-effective and time-efficient routings, bar other railroads from interconnecting or raise their costs, and make anti-competitive coordination among railroads easier.

But the competitive risks of the merger are only part of the problem. The pursuit of profits through concentrated market power has led the large railroads to prioritize their shareholders, paying out more in buybacks and dividends (almost $200 billion) in the past dozen years than they spent on infrastructure improvements. The cash underinvestment in working conditions and safety has been paralleled by operational disinvestment, notably the shift to PSR.

Under PSR, to squeeze more money out of their railroads, these big companies have cut service to the bone while raising prices — at great cost to everyone but themselves. PSR forces workers into extended runs, on tight timetables, on longer and heavier trains. If the railroads got their way, those massive trains would be operated by a single crew member, rather than the current two. And that has led directly to the perilous state of the railroad freight network today — to conditions in which workers say trains are “more dangerous and harder to handle.”

Employee headcount across the rail freight industry has been cut by 28% due to PSR, according to a report from the nonpartisan Government Accountability Office. Freight customers say service under PSR is less reliable, and that’s because employees and equipment are being pushed to their physical limits, with no room in the system for mechanical failure, employee time off, or error of any kind. In the words of transportation consultant Karl Ziebarth, when something goes wrong, like a mechanical failure, “you can all of a sudden have a very expensive derailment.”

At the same time, the tight schedules and the length of trains inevitably means that following safety protocols may be impossible. As a Norfolk Southern employee put it, under PSR “the workers are exhausted, times for car inspections have been drastically cut, and there are no regulations on the size of these trains.” Jared Cassity, who works for a railroad union, says that railcar inspections often must be completed in under 60 seconds, not nearly enough time to identify and address problems.

The direct cause of February’s derailments are still under investigation. Regardless of the ultimate cause, it’s unlikely it could have been flagged in under a minute. But there’s no question that the dangers multiply as the length of trains, the weight of their cars, and the complexity of their cargoes increase. Average train length on the U.S. freight network has increased by 25% in ten years. The Norfolk Southern train had 150 cars and weighed 18,000 tons. During the incident, around 50 cars derailed. About 20 of those cars were likely carrying dangerous materials, including 14 carrying vinyl sulfide, all of which were on or near fire. (For reference, inhaling vinyl sulfide can be toxic.) A Norfolk Southern employee told CBS News that the train’s length had led to at least one breakdown in the days before the derailment, and said that, had the train not been so unusually large, “it’s very likely the effects of the derailment would have been mitigated.”

In the wake of the recent derailments, many have called for tighter government safety regulation. And it’s true that the Trump administration, bowing to Big Seven rail lobbyists, repealed a 2015 safety regulation that required electronic braking — similar to ABS on a car — to be installed on trains carrying certain types of hazardous cargo.  Steven Ditmeyer, a former senior official at the FRA, thinks that this enhanced braking system, had it been installed, would have mitigated most of the catastrophic effects of the Norfolk Southern derailment.

It’s certainly worth questioning why Pete Buttigieg’s Department of Transportation did not move to revisit the rule in the past two years. While reversing the deregulatory carnage of the Trump administration takes (a lot of) time, starting that rule writing process as early as possible is of paramount importance: Buttigieg is up against the clock because of the 2024 election and will be hard pressed to implement all the necessary safety measures before the next inauguration. Also, while Buttigieg asking Congress for more authority to levy fines and punish corporate misconduct is a positive step, it remains concerning that he is not using the full extent of his existing powers.

But, while more stringent regulation is certainly warranted, regulations and enforcement merely exist to align incentives – because, ultimately, safe conditions depend on what management decides to do. In their pursuit of PSR, safety is exactly what the Big Seven railroads aren’t providing. In their Environmental Impact Statement, the Surface Transportation Board found that the CP-KCS merger would increase hazardous cargo transportation along 141 of the 178 affected rail segments, totaling 5,800 miles of track in 16 states. The Board found that the merger, outside of organic growth, would lead to nearly 2 million new hazardous train cars moving across the country a year,  a staggering sum given the fallout of just 11 derailed hazmat cars in the East Palestine accident. And as PSR results in ever-longer and ever-heavier trains running on tight schedules, those increased hazardous cargoes are all at increased risk of derailment.

More industry concentration makes effective regulation harder. As firms increase in size, they gain more and more of a resource advantage over their regulators. One behemoth corporation can often hire more lawyers and cultivate more relationships with lawmakers in order to obfuscate enforcement measures than multiple smaller ones could. Even when efficiency gains may be real (far less frequently than claimed), the true consequence is not lower prices, but more corporate influence peddling and stock buybacks (which the railroads are infamous for).

Since 1980, the United States has gone from thirty-three Class I railroads down to only seven. As concentration increases, PSR is pursued ever more zealously; the entire point of mergers is to increase economies of scale. In practice that means investing even less money back into workers, equipment maintenance, and safety. If the companies didn’t think they could further decrease marginal operating costs, they wouldn’t want the merger. The CP and KCS merger is particularly dangerous because it will result in the only railroad with lines stretching from Canada to Mexico, which gives it a stranglehold on freight between the two countries. That further reduces incentives to maintain equipment and have adequate staff. If there’s no one else who can cater to the market, they can get away with the bare minimum. That translates to worse safety situations, higher prices, worse services, and worse working conditions.

To preserve economic competition, protect railroad workers, and safeguard the tens of millions of Americans living alongside our 140,000 miles of track, we need to halt the decline in safety and service standards that the freight railroads’ embrace of precision scheduled railroading has led to. At a minimum, the Surface Transportation Board needs to decline to approve the merger between Canadian Pacific and Kansas City Southern — and then we need the FRA, and Congress, to put into place stricter safety and operating regulations.

Dylan Gyauch-Lewis is a researcher at the Revolving Door Project.

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